Strong order growth for Barco products is not yet fully reflected in sales growth
Year-to-Date and Third Quarter 2006 Financial Highlights1 :
- YTD order intake up 16.5% to euro 621.8 million. In 3Q06 orders grew by 30.9% to euro 230.2 million, versus euro 175.9 million the year before.
- Sales YTD at euro 528.3 million, up 5.2% from the year before. 3Q06 sales at euro 170.2 million, down 0.7% year-on-year.
- Over the first 9 months of 2006 gross profit margin increased from 40.9% to 41.3%. In 3Q06 the margin decreased to 39.9% from 40.6%.
- EBITA increased YTD by 2.9% to euro 33.9 million. EBITA margin over this period was 6.4% versus 6.6% the year before. In 3Q06 EBITA was down 23.2% to euro 8.5 million, with EBITA margin at 5.0% compared with 6.4% in 3Q05.
- YTD net income increased by 1.1% to euro 25.2 million. In 3Q06 it was euro 6.7 million, down 19.2% from euro 8.3 million in 3Q05.
- Net earnings per share YTD of euro 2.09 versus euro 2.03 the year before. In 3Q06 net earnings per share were 0.54 compared with euro 0.68 in 3Q05.
Kortrijk, Belgium, October 25, 2006 – Barco n.v. (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three and nine month periods ended September 30, 2006.
Barco CEO, Martin De Prycker, commented: “With a growth of almost 31% orders were at an all time high in this quarter, resulting in a year-to-date increase of over 16%. Part of the very significant growth in the third quarter was the euro 24 million Dubai Mall order and an order in the medical market worth around euro 15 million. Furthermore smaller strategic orders in the avionics and simulation markets also lay the basis for ongoing business well into 2007 and beyond.”
About the sales volume Martin De Prycker stated: “In the first nine months of 2006 sales grew by more than 5%. While sales in most of our markets increased in the third quarter, sales evolution however, was hampered by two factors. The first was a strong decline in the defense and traffic management markets. In these markets we see that new projects are not yet generating sufficient volume while some other projects have been delayed by customers due to budget shifts. The second factor is some temporary supply chain issues. Because of this sales remained almost at the same level as in the third quarter of 2005. “
On the evolution of the gross profit margin, Martin De Prycker commented: “Gross profit year-to-date is up more than 6% compared to last year, with gross profit margin growing from 40.9% to 41.3%. In the third quarter we saw a decline year-on-year due to the lower sales volume in high gross profit margin markets like defense and traffic management. In this quarter we also saw operating costs increase because of investments in R&D on new breakthrough products for 2007 in the medical, events, simulation and control room markets. For the first nine months, EBITA nevertheless increased by 2.9%.”
Outlook for fourth quarter 2006 and full year 2006
For the fourth quarter of 2006 Mr De Prycker expects sales between euro 207 million and euro 217 million and EBITA in the range of euro 25 million to euro 30 million. For the full year 2006 this would lead to an EBITA margin between 8% and 8.6%.
For the full year 2006 Mr De Prycker added: “This year’s first nine months were characterized by a strong organic increase in orders, which we expect to continue also in 4Q06, anticipating a growth in orders of around 13% year-on-year. This will strongly increase our backlog for 2007, i.e. around euro 50 million more than last year. Sales for 2006 will range between euro 735 and 745 million versus euro 711 million in 2005, i.e. 4% higher. EBITA is expected between euro 59 and 64 million versus 52.5 in 2005, i.e. 17% higher.” Mr De Prycker also specified that all the above figures exclude the possible impact of the divestment of Manufacturing Services.
CONSOLIDATED RESULTS FOR THE QUARTER
Sales & Orders
Sales for the quarter were euro 170.2 million, about the same level as in 3Q05 when sales were euro 171.5 million. Sales increased in most markets. The defense and traffic management markets were the exception as new projects are not yet generating sufficient volume while some other projects have been delayed by customers due to budget shifts. In the division BarcoView this led to a drop in sales of 9%. A decline of 9% is also to be noticed in BarcoVision, while the divisions Control Rooms, Media & Entertainment and Presentation & Simulation grew respectively with 3%, 5% and 15% year-on-year. Deliveries to customers in 3Q06 were also hampered by temporary supply chain issues.
Sales to Europe, Middle East and Africa (EMEA) represented 50.4% of consolidated sales, while 31.4% of sales were realized in the Americas and 18.2% in Asia Pacific. Compared to 2Q06 a recovery of the AsiaPac percentage of total sales is to be noticed.
Orders increased by 30.9% to euro 230.2 million, from euro 175.9 million in the year ago period, continuing a steady pattern of growth in order intake for the last 3 years. A couple of significant orders contributed to this high growth. Still, excluding these orders in the media and medical markets, order growth was still 9% compared to 3Q05. Particularly promising are some strategic orders in the avionics and simulation markets that offer a basis for ongoing business into 2007 and beyond.
The book-to-bill ratio was 1.35, compared with 1.03 for 3Q05.
Book-to-Bill Ratio 
Gross Profit & Margin
Gross profit decreased by 2.5% to euro 68.0 million from euro 69.7 million in 3Q05. Gross profit margin declined from 40.6% in 3Q05 to 39.9% in 3Q06. The reason for this decline is in the lower percentage in total sales of high gross profit margin markets like defense and traffic management.
Operating Results (EBITA)
EBITA decreased by 23.2%, to euro 8.5 million, or 5.0% of sales. This compares to euro 11.0 million, or 6.4% of sales for 3Q05. Leading to this decrease in EBITA was the lower gross profit margin in 3Q06 and an increase in operating costs because of investments in R&D on new breakthrough products to be released in 2007 in the medical, events, simulation and control room markets.
In absolute figures expenses for research and development increased by 7.4% year-on-year. General & administration expenses remained fairly stable, while sales & marketing costs went up 8.6%.
Income Taxes
Income taxes for 3Q06 were at euro 1.2 million or 15.6% of current income before taxes compared to euro 2.3 million or 21.5% of current income before taxes the year before.
Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the weighted average number of shares outstanding: 12,635,333) for the quarter were at euro 0.39 versus euro 0.59 the year before.
Net Income
Net income for the quarter declined year-on-year by 19.2% to euro 6.7 million, or a net margin of 3.9%, from euro 8.3 million for 3Q05, or a net margin of 4.8%. Net earnings per ordinary share (EPS) for the quarter were euro 0.54 versus euro 0.68 the year before.
Fully diluted net earnings (12,963,677 diluted shares outstanding) per share were euro 0.51 compared to euro 0.64 in 3Q05.
Balance sheet
At the end of 3Q06 Barco had a net debt position of euro 11.5 million, compared to a net cash position of 22.0 million on 31 December, 2005. On 30 September 2006 accounts receivable were at euro 191.0 million compared to euro 168.2 million at the end of September 2005. Inventory was at euro 174.8 million versus euro 162.9 million on 30 September 2005.
CONSOLIDATED RESULTS FOR THE NINE MONTHS
Sales & Orders
Sales increased by 5.2% year-on-year to euro 528.3 million. This was the result of sales growth in all major divisions of Barco, with the exception of BarcoVision, which saw its sales decrease by 6.1% compared to the same period in 2005.
Orders in the first nine months of grew by 16.5% to euro 621.8 million. The book-to-bill ratio was 1.18, compared to 1.06 in the same period of 2005.
Gross Profit & Margin
Gross profit at euro 217.9 million is up 6.2% compared to year to date gross profit on 30 September, 2005. Gross profit margin increased from 40.9% to 41.3%.
Operating Results before goodwill impairment (EBITA)
EBITA increased by 2.9% year-on-year to euro 33.9 million. EBITA margin was 6.4% of sales versus 6.6% the year before.
In percentage of sales expenses for general & administration, research & development and sales & marketing remained at approximately the same level as in the comparable period of 2005.
Income Taxes
Income taxes decreased year-on-year to euro 6.4 million or 19.2% of current income before taxes from euro 7.1 million or 22.1% of current income before taxes.
Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the weighted average number of shares outstanding: 12,635,333) increased to euro 2.21 versus euro 2.04 for the first nine months of 2005.
Net Income
Net income increased year-on-year by 1.1% to euro 25.2 million from euro 24.9 million in the same period of 2005. Net earnings per ordinary share (EPS) were euro 2.09 versus euro 2.03 the year before. Fully diluted net earnings per share (12,963,677 diluted shares outstanding) for the first nine months of the year were euro 1.98 compared with euro 1.92 in the year ago period.
DIVISIONAL RESULTS FOR THE QUARTER
BarcoView
Sales at BarcoView declined 9.1% year-on-year, due to a strong decline in the defense and traffic management markets as new projects are not yet generating sufficient volume while some others projects have been delayed by customers due to budget shifts. Sales grew in the medical market by over 14%, in line with the market growth. Avionics sales were at the same level as the year before.
The book-to-bill ratio for BarcoView for the quarter was at 1.5. Orders increased year-on-year by 42%. This was mainly due to a close to 50% growth in orders in the Medical market. Avionics performed very well too, with orders like a refurbishment program for business jets. Orders in the command & control markets of defense and traffic management improved as well compared to the same period the year before.
Gross profit margin decreased to 42% versus 44.9% in 3Q05, because of lower sales in the high gross profit margin markets of defense and traffic management. EBITA margin was at 2.7% compared to 10.0% in 3Q05, because the implemented cost reduction in defense and traffic management did not fully offset the lower gross profit margin and there was a cost increase due to inflation.
Barco Media & Entertainment
Sales grew 5.1% quarter on quarter. The Media market was somewhat weaker in sales than in the same period of 2005, as the focus was put on high margin projects. On the other hand the Events and Digital Cinema markets both increased their sales compared to the same period one year ago.
The book-to-bill ratio for the division was 1.72. Orders for the division increased by 58.5%. In Media the order intake was particularly good thanks to a euro 24 million contract in Dubai, creating a strong backlog for 2007. Orders in Digital cinema more than doubled compared to 3Q05, indicating the beginning of a definite shift to digital technology in the cinema theater market.
Gross profit margin was at 31.1%, better than 26.9% the year before. EBITA margin was 3.9%, up from the loss of 3.1% in 3Q05.
Barco Control Rooms
In 3Q06 sales grew worldwide by 2.9% year-on-year. This is a more moderate growth than the year before but a large backlog is preparing for a strong 4Q06.
Orders grew by 9.4% versus 3Q05. The book-to-bill ratio was 1.06.
At 41.0% gross profit margin was lower than in 3Q05 with 48.6%. The reason is that the division’s leading position is being challenged by competition, which results in price pressure. However, market performance remains strong and several actions are being executed to maintain a stable gross profit. EBITA margin was low at 6.0%, due to the lower gross profit, higher investment in sales & marketing and in R&D on video networking technology.
Barco Presentation & Simulation
The division saw its sales increase by 15.3% year-on-year, with growth both in the simulation market and in the presentation market.
Order intake was up 8.4%. Part of this increase is thanks to a strategic contract for a new technology projector for the simulation market. The book-to-bill ratio was at 1.0.
Gross profit margin declined to 41.1% from 44.2% in 3Q05, due to a shift in the product mix in the simulation market. EBITA margin, however, was better at 7.4% versus 2.9% in 3Q05.
BarcoVision
In BarcoVision both sales and orders decreased by close to 9% year-on-year. The book-to-bill ratio was 1.
Gross profit margin remained stable at 46.2%. EBITA margin was 6.2%, down from 8.2% the year before, due to the lower sales volume.
Barco Manufacturing Services
Sales were down almost 10%. Orders however, were up 55% year-on-year, in this way preparing for large internal deliveries in 4Q06.
The book-to-bill ratio was 1.38.
EBITA margin at 3.0% was much better than in 3Q05 with a loss of 5.8%. The reduction in man power and cost compared to last year, as part of the restructuring actions taken in 2005, contributed significantly to the improvement of the EBITA margin.
The negotiations with the 2 companies acquiring parts of the Manufacturing Services division are expected to be finalized by the end of 2006.
SHARE BUY-BACK PROGRAM
Barco bought back 15,878 shares during 3Q06, for a total value of euro 1.1 million. The company now owns 491,725 of its own shares through a share buy-back program started in 2003.
CONFERENCE CALL
Barco will hold a conference call with investors and analysts on 25 October, 2006, 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, Mr. Martin De Prycker, Mr. Antoon Van Petegem, Chief Financial Officer and J.P. Tanghe, IRO.
An audiocast of this conference call will be available on the Company’s website www.barco.com at 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.
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