Second quarter sales and EBITA up year-on-year
Second Quarter 2006 Financial Highlights1 :
•Sales at euro 186.0 million, 5.1% up year-on-year and well within management’s expectations of euro 182-192 million.
•Gross profit margin increased from 42.3% in 2Q05 to 42.6% in 2Q06. In 1Q06 it was 41.1%.
•EBITA at euro 16.1 million, up 4.1% from euro 15.5 million in 2Q05. EBITA margin remained stable year-on-year at 8.7%. With euro 9.3 million, EBITA margin was at 5.4% in 1Q06. 2Q06 EBITA was negatively impacted by other operating results.
•Net income at euro 11.3 million, considerably up from euro 7.4 million in 1Q06. In 2Q05 net income was euro 11.7 million.
•Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the average number of shares outstanding) were at euro 1.05 versus euro 0.96 the year before and euro 0.61 in 1Q06.
•Net earnings per share of euro 0.93, compared with euro 0.95 in 2Q05 and euro 0.62 in 1Q06.
Kortrijk, Belgium, 25 July 2006 – Barco n.v. (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three- and six-month periods ended June 30, 2006.
Barco CEO, Martin De Prycker, commented: “In the second quarter of 2006 year-on-year sales growth was continued, be it at a reduced level versus the previous quarter. This growth was supported by all main divisions. With an increase of 3.4% order intake followed the same trend as the evolution in sales. At euro 192 million order intake was slightly below our expectations, as some large orders shifted into the third quarter. In 2Q06 the book-to-bill ratio was 1.03. In particular the medical, events and digital cinema markets did very well, in sales as well as in order intake. EBITA increased by 4.1% versus the year before. At euro 16.1 million, it resulted in a stable margin of 8.7% year-on-year. EBITA was at the lower end of management’s expectations of between euro 15 and 20 million, due to a negative impact of other operating results.”
Mr De Prycker added: “Sales in Europe, Middle East and Africa grew from 49.7% of total sales in 1Q06 to 53.2% in 2Q06. Sales in the Americas represented 31.7% of total sales in 2Q06, down from 33.4% in the previous quarter. In the Asia Pacific region there was a temporary decrease in the percentage of total sales from 16.9% in 1Q06 to 15.1% in 2Q06. However, in this region orders increased in 2Q06 versus the previous quarter, to 17.3% of total order intake.”
As for the 3Q06 outlook, Mr De Prycker stated: “Sales are expected to be between euro 172 million and 182 million. For EBITA we put forward a range between euro 10 and 15 million.”
CONSOLIDATED RESULTS FOR THE QUARTER
Sales & Orders
Sales for the quarter increased by 5.1% year-on-year to euro 186.0 million, well in line with management’s expectations of euro 182-192 million for the quarter. All divisions increased their sales, with the exception of Barco Manufacturing Services, due to the shift of internal demand for subcontracting to Asia since the second quarter of 2005. The highest growth in sales was recorded in the division Media & Entertainment, with 28%.
Sales to Europe, Middle East and Africa represented 53.2% of consolidated sales, while 31.7% of sales was realized in the Americas and 15.1% in Asia Pacific.
Orders increased by 3.4% to euro 192.0 million, from euro 185.6 million in the year ago period.
The book-to-bill ratio was 1.03, compared with 1.05 for 2Q05.
Book-to-Bill Ratio 
Gross Profit & Margin
Gross profit increased 5.9% to euro 79.2 million from euro 74.8 million in 2Q05. Gross profit margin was 42.6% versus 42.3% in 2Q05 and 41.1% in 1Q06. Gross profit margins at the level of the main divisions remained relatively stable with year-on-year changes within a 1% range.
Operating Results (EBITA)
EBITA increased by 4.1%, to euro 16.1 million, or 8.7% of sales. This compares to euro 15.5 million and 8.7% of sales for 2Q05. In 2Q06 EBITA was negatively impacted by other operating results.
Research and development expenses increased year-on-year from 9.2% to 9.6% of sales. Sales & marketing costs decreased from 16.7% to 16.4% of sales. In some countries investments were made in stronger sales and marketing teams, but on the other hand there was a reduction of costs following the consolidation executed in the European sales and marketing organizations. General & administration expenses also decreased, from 7.9% to 7.3% of sales.
Other operating results were euro minus 1.2 million. This was mainly due to currency fluctuations and exceptionals. In 2Q05 other operating income was euro 1.2 million.
Goodwill impairment
Goodwill impairment of euro 1.6 million was booked on the Voxar acquisition (September 2004) as the 3D clinical software market is not developing as fast as was expected.
Income Taxes
Income taxes decreased from euro 3.4 million to euro 3.2 million year-on-year.
Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the weighted average number of shares outstanding) for the quarter were at euro 1.05 versus euro 0.96 the year before.
Net Income
Net income for the quarter improved sequentially from euro 7.4 million in 1Q06 to euro 11.3 million in 2Q06 or a net margin of 6.1%. In 2Q05 net income was 11.7 million.
Net earnings per ordinary share (EPS) for the quarter were euro 0.93, down from euro 0.95 in 2Q05. In 1Q06 net earnings per ordinary share were euro 0.62. Fully diluted net earnings per share were euro 0.88, compared to euro 0.90 in the same period the year before.
CONSOLIDATED RESULTS FOR THE SIX MONTHS
Sales
Sales increased with 8.3% year-on-year to euro 358.0 million, a growth coming from the divisions Presentation & Simulation, Media & Entertainment and BarcoView. The division Control Rooms had sales at the same level as in 2Q05, while BarcoVision had a decrease of close to 5% in 1H06, despite an increase of 7% in 2Q06. The most outspoken growth was in Media & Entertainment with 38.6%. The BarcoView division increased its sales with 8.0% and Presentation & Simulation with 5.7%.
Gross Profit & Margin
Gross profit increased with 10.6% year-on-year from euro 135.6 million to euro 150.0 million. Gross margin increased from 41.0% to 41.9%.
Operating Results (EBITA)
EBITA increased by 16.0% year-on-year to euro 25.4 million. EBITA margin went up to 7.1% from 6.6% the year before.
At 9.6% of sales expenses for research & development remained relatively stable year-on-year. Sales & marketing and general & administration costs went down in percentage of sales, respectively from 17.5% to 16.9% and from 8.2% to 7.8%.
Other operating result decreased from euro 4.2 million to euro minus 1.9 million. Main reasons are currency fluctuations and non-recurrent items.
Goodwill Impairment
Goodwill impairment of euro 1.6 million was booked on the Voxar acquisition (September 2004) as the 3D clinical software market is not developing as fast as was expected.
Income Taxes
Income taxes increased year-on-year to euro 5.1 million from euro 4.8 million.
Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the weighted average number of shares outstanding) increased to 1.66 versus euro 1.36 for 1H05.
Net Income
Net income increased year-on-year to euro 18.8 million. In 1H05 it was euro 16.6 million. Net earnings per ordinary share (EPS) were up to euro 1.55 from euro 1.35 for the first half of 2005. Fully diluted net earnings per share for the first half of the year were euro 1.46 compared with euro 1.27 in the year ago period.
Balance Sheet
At the end of 1H06 Barco had a net cash position of euro 2.1 million, compared to a net cash position of euro 22.0 million at 31 December 2005. In 1H06 euro 26.1 million was paid in dividend and euro 6.6 million was spent on the share buy-back program. On 30 June 2006 accounts receivable were at euro 175.2 million, compared to euro 173.7 million at the end of June 2005. Inventory was at 167.0 million versus euro 167.8 million on 30 June 2005. Capex for the first half of 2006 was euro 6.3 million.
OUTLOOK FOR 3Q06
The following statements are forward looking and actual results may differ materially.
Sales for 3Q06 are expected to range between euro 172 and 182 million, versus euro 171.5 million in 3Q05.
EBITA is expected in the range of euro 10 to 15 million, versus euro 11.1 million the year before.
DIVISIONAL RESULTS FOR THE QUARTER
BarcoView
Sales at BarcoView rose 2.7% year-on-year. With a growth year-on-year of 27.4% Barco’s market leadership in the Medical market is once more reaffirmed. Deliveries in Defense & Security were lower than the year before, which was also the case for Traffic Management. Sales in Avionics grew with almost 80%.
The book-to-bill ratio for BarcoView for the quarter was at 1.02, with a significant increase in orders in the medical market compared to the one year ago period. Orders in Avionics were lower than the very high order intake in 2Q05, following the 2005 Le Bourget Airshow. In Defense & Security orders stabilized at the level of 2Q05. Some smaller orders came in, which are laying the foundation for new future business. In the Traffic Management market order intake decreased as projects were further delayed into 2007.
The gross profit margin went slightly down to 45.4% from 46.3%, mainly due to a shift in the product mix. At 9.5% the EBITA margin remained stable year-on-year, but increased versus the 8.7% margin of 1Q06.
Barco Media & Entertainment
Sales increased by 27.8% compared to 2Q05, driven by a substantial growth in the events and digital cinema markets. Sales in the media market were lower than in the same period of last year.
The book-to-bill ratio for the division was at 1.06. Orders in the media market were up almost 8% despite a more selective market approach. Order growth in the events market was over 40% while orders almost doubled in Digital Cinema.
Gross profit margin increased sequentially from 31.1% in 1Q06 to 31.9 in 2Q06. In 2Q05 it was 34.5%. EBITA margin was 2.9%, compared to 5.9% in 2Q05 and 4.4% in 1Q06. However, EBITA margin for 2Q06 was negatively hit by currency fluctuations and exceptionals for euro 3 million. Without this non-recurrent cost the margin would have been 8.2%.
Barco Control Rooms
In 2Q06 sales grew by 2.7% year-on-year. This is a lower growth rate than the year before, but a larger backlog (+ 12%) compared to the end of 2Q05 has been built up for the second half of 2006.
Orders declined compared to 2Q05 due to competitive pressure in the broadcast market. Book-to-bill ratio was 0.96.
The Control Rooms division had a gross profit margin of 43.8%, up from 43.5% the year before and 40% in 1Q06.
Barco Presentation & Simulation
Sales for the division increased 1% compared to 2Q05, thanks to a 4% increase in sales in the presentation market. Simulation sales on the other hand, declined year-on-year as the shift towards a new technology for flight simulation is still ongoing. Sequentially however, sales improved in 2Q06. Flight simulation is still the most important application for Barco in this market.
The book-to-bill ratio was at 1.08, with order-intake in the simulation market lower than in the one year ago period and flat in the presentation market.
Gross profit margin improved to 42.5 in 2Q06 versus 41.7% in 2Q05 and 39.6% in 1Q06. EBITA margin improved sequentially from 1.3% in 1Q06 to 6.9%, which is at the same level as in 2Q05.
BarcoVision
Sales at BarcoVision were up 7.1% in 2Q06.
The book-to-bill ratio of 1.05 shows some recovery in the investment climate, China excluded. Still an important contract for system business was won in China, which helped to achieve the high book-to-bill ratio. Order intake increased by almost 12% compared to 2Q05.
Gross profit margin increased to 47.8% from 47.4% in the one-year-ago period and 45.5% in 1Q06. The EBITA margin was high at 13.0% compared to the 6.8% margin in 1Q06. In 2Q05 the EBITA margin was exceptionally high at 21.0%, thanks to the profitable sale of 2 buildings in the UK. Excluding this sale EBITA margin was 11.6% in 2Q05.
Barco Manufacturing Services
Sales in the Manufacturing Services division were lower than the year before because of a shift in production to Asian subcontractors, as more final assembly is done in India and China. Orders increased with more than 5% in preparation of high internal demand in 2H06.
The EBITA margin was 5.7%, much higher than the 0.2% margin in 2Q05 and 2.4% in 1Q06, thanks to the reduction in manpower and cost, resulting from the restructuring in the previous year.
SHARE BUY-BACK PROGRAM
In 1H06 Barco spent euro 6.6 million on buying back shares. The company now owns 475,847 of its own shares or 3.77% before dilution. The buy-back program started in 2003.
CONFERENCE CALL
Barco will hold a conference call with investors and analysts on July 25, 2005, starting at 4.30 p.m. CET (10.30 a.m. EST), to discuss the results for the quarter. The call will be hosted by the Company’s CEO, Martin De Prycker, Antoon Van Petegem, CFO and JP Tanghe, IRO.
An audiocast of this conference call will be available on the Company’s website www.barco.com by 8.00 p.m. CET (2.00 p.m. EST).
About Barco
Barco, a global technology company headquartered in Kortrijk, Belgium, designs and develops visualization products for a variety of professional markets. Barco has its own facilities for Sales & Marketing, Customer Support, R&D and Manufacturing in Europe, North America and Asia Pacific. For fiscal year 2005, Barco posted net sales of euro 712.0 million.
Barco’s ordinary shares are listed on the Brussels/Euronext stock exchange. Barco is a BEL 20 and a Next 150 company. Share information may be accessed on Bloomberg under the symbol BAR BB and on Reuters under BARBt.BR.
For more information and the full report “6 months ending June 30, 2006”, please visit the Company’s website at www.barco.com
LIMITED REVIEW REPORT OF THE STATUTORY AUDITOR ON THE INTERIM CONSOLIDATED FINANCIAL REPORT OF BARCO NV AS OF 30 JUNE, 2006 AND FOR THE SIX-MONTH PERIOD THEN ENDED
(Free translation)
We performed a limited review of the interim consolidated financial report of Barco NV as of 30 June, 2006 with a balance sheet total of EUR 700.130 thousand and a net income attributable to equityholders of the parent for the period of EUR 18.790 thousand. The interim consolidated financial report has been prepared in accordance with International Financial Reporting Standards.
The engagement has been performed in connection with the interim financial reporting of the company. We conducted our review in accordance with the relevant recommendation of the ‘Instituut der Bedrijfsrevisoren’ (Belgian Institute of Auditors). This review consisted primarily of the analysis, comparison and discussion of the financial information and consequently was less extensive than a full scope audit of the consolidated financial information.
Our review has not revealed any information that would lead to any material modifications to the interim consolidated financial report.
Kortrijk, 24 July, 2006
Ernst & Young Bedrijfsrevisoren BCV (B160)
represented by
Marc Van Hoecke
Partner
1Unless otherwise indicated, all financial and operating data discussed in this announcement are in accordance with IFRS and in million of Euro. Tables state figures in thousands of Euro, unless otherwise noted. Unless otherwise stated, all comparisons are between the three-month period ended June 30, 2006, and the equivalent three-month period ended June 30, 2005.
For more information, please contact
