Strong Q2 growth and profit confirm successful strategic reorientation of Barco
Second Quarter 2007 financial highlights1 on the basis of continuing operations2 :
- Orders totalled euro 183 million, a rise of 7.3% compared to the same period in 2006.
- Sales amounted to euro 192.3 million, an increase of 15.6%.
- Gross profit rose by 7.7% to euro 74.9 million from euro 69.6 million the year before.
- EBIT increased by 21.1% to euro 15.7 million, while EBIT margin rose to 8.2% from 7.8% in 2Q06.
- Current earnings per share were euro 1.05 compared with euro 0.85 the year before: an increase of 23.5%.
- Net income was euro 14.3 million, a rise of 26.8% from euro 11.3 million in 2Q06.
- Net earnings per share were euro 1.19; in the same period the year before they were euro 0.93.
1 Unless 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, 2007, and the equivalent three-month period ended June 30, 2006.
2 Following IFRS rules comparison must be made on the basis of “continuing operations”. This means that the results of the divisions Barco Manufacturing Services and BarcoVision are shown as a separate line (“results from discontinued operations”) and added to the net results of the continuing operations. All financial data appearing further in this announcement will be based on “continuing operations” for 2Q06 as well as for 2Q07, unless otherwise indicated.
Second Quarter 2007 financial highlights on the basis of reported results:
Kortrijk, Belgium, 25 July 2007 – Barco n.v. (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three- and six-month periods ended June 30, 2007.
Referring to the 2Q07 results on the basis of “continuing operations”, Barco CEO, Martin De Prycker, commented: “Comparing sales year-on-year shows a strong increase of 15.6%, despite the decline of the USD versus the euro of 7.4% year-on-year. This growth is supported by almost every division with the Media & Entertainment Division doing particularly well.”
“Order intake remains on a growth path with an increase of 7.3%, with an important contribution of the Security & Monitoring division.”
“Gross profit increased by 7.7% to euro 74.9 million, despite a significant negative impact of the declining USD versus the euro. Growth in EBIT was 21.1% up to euro 15.7 million and EBIT margin was 8.2% versus 7.8% the year before. Net income increased by 26.8% from euro 11.3 million to euro 14.3 million.”
“The good evolution in orders and sales in the second quarter of 2007 strengthens our confidence in reaching the full year target of sales growth between 6 and 9%, supporting the expected growth in profit compared to 2006.”
Referring to the upcoming sale of BarcoVision to the Itema Group for euro 72 million, Herman Daems, Chairman of the Board of Directors, added: “The board will carefully evaluate ways to enhance shareholder value by examining the appropriate structure of the current and future balance sheet, taking into account the proceeds of the sale. The anticipated net gain on this transaction is between euro 43 and 45 million.” He added that the Board will communicate further on this process by the end of 2007.
CONSOLIDATED RESULTS FOR THE QUARTER
Sales & Orders
Sales for the quarter increased by 15.6% year-on-year to euro 192.3 million, despite the decline of the USD versus the euro of 7.4% year-on-year. With a growth in sales of nearly 45% the Media & Entertainment Division was the largest contributor to total sales growth of Barco in 2Q07. Overall orders increased by 7.3%, pushed by a growth of close to 19% in the Security & Monitoring Division.
Sales to Europe, Middle East and Africa represented 47.2% of consolidated sales, while 32.9% of sales was realized in the Americas and 19.9% in Asia Pacific.
The book-to-bill ratio was 0.95 compared with 1.03 for 2Q06.
Book-to-Bill Ratio: last year rolling forward
Gross Profit & Margin
Gross profit increased 7.7% to euro 74.9 million from euro 69.6 million in 2Q06, despite the negative impact of the decline of the USD versus the euro. Gross profit margin was 39.0% versus 41.9% in 2Q06, as the Media & Entertainment Division represented a larger proportion of total sales of Barco in 2Q07 than the year before. This division typically has lower gross profit margins than the other divisions of the group but also the operating expenses of this division are lower. For 2Q07 the EBIT margin of the Media & Entertainment Division was more than 10%.
Operating Results (EBIT)
EBIT increased by 21.1%, to euro 15.7 million, or 8.2% of sales. This compares to euro 13.0 million and 7.8% of sales for 2Q06.
As a percentage of sales research & development expenses decreased year-on-year from 9.4% to 8.6% of sales. Sales & marketing costs decreased from 17.1% to 15.3% of sales. General & administration costs also showed a relative decrease, from 6.9% of sales to 6.5%.
Other operating results were euro minus 0.8 million compared to euro minus 1.0 million in 2Q06.
Income Taxes
Income taxes increased from euro 2.5 million to euro 2.9 million year-on-year on higher earnings.
Current earnings per share
Current earnings per share for the quarter were at euro 1.05 versus euro 0.85 the year before.
Net Income
Net income for the quarter improved by 26.8% from euro 11.3 million in 2Q06 to euro 14.3 million in 2Q07. The net margin in 2Q07 was 7.4% versus 6.8% the year before.
Net earnings per ordinary share (EPS) for the quarter were euro 1.19, up from euro 0.93 in 2Q06. Fully diluted net earnings per share were euro 1.12, compared to euro 0.88 in the same period the year before.
DIVISIONAL RESULTS FOR THE QUARTER
Media & Entertainment Division
Sales at the Media & Entertainment Division rose 44.9% year-on-year, driven by strong growth in the events and media markets. Orders grew by 10% year-on-year with double digit
growth in events. The media market showed a flat order intake in 2Q07 and the digital cinema market had lower orders than the year before. However, indications in the digital cinema market remain positive for market growth in 2H07 and in 2008.
The book-to-bill ratio for the division was at 0.81.
Gross profit increased by 34.9%. EBIT margin was 10.7% versus 2.9% the year before, with a good contribution from the media market.
Security & Monitoring Division
Sales declined by 4.7% as some big projects for control rooms shifted to 2H07. On the other hand sales showed first, be it still moderate, growth again in the defense market. Orders grew double digit, mainly thanks to growth in the defense and control room markets.
The book-to-bill ratio was high at 1.23.
Gross profit decreased by 9.6%. EBIT margin was 0.1% versus 6.1% in 2Q06. Reasons for the decline are the lower sales volume and the strong negative impact of the decline of the USD versus the euro.
Medical Imaging Division
Orders and sales were weaker in the PACS market, due to lower sales in the USA. In the modality market orders were flat compared to 2Q06, but sales were higher.
The book-to-bill ratio was at 0.89.
Gross profit rose 13.4%. EBIT margin was 13.4%. This is lower than the 16.7% margin of 2Q06, due to higher investments in the development of new products and in sales.
Other markets
The simulation market had higher orders and sales in 2Q07, while the opposite was the case in the presentation market. In the avionics market orders were higher than the year before but sales were lower.
Gross profit remained stable. EBIT margin was 7.3%, down from 8.9% in 2Q06. Presentation & Simulation did a lot better than the year before, but this could not compensate for the decline in gross profit and EBIT in Avionics. The decline in EBIT for Avionics was due to large investments in the development of new products.
CONSOLIDATED RESULTS FOR THE SIX MONTHS
(based on continuing operations)
Sales & Orders
Sales increased with 8.2% year-on-year to euro 348.7 million, a growth coming mainly from the Media & Entertainment Division. Orders grew by 15.4% with the biggest contributions from the Security & Monitoring and Media & Entertainment divisions.
The book-to-bill ratio was 1.16 compared to 1.09 the year before.
Gross Profit & Margin
Gross profit increased with 2.8% year-on-year from euro 132.8 million to euro 136.5 million, despite the negative impact of the decline of the USD versus the euro. Gross profit margin decreased from 41.2% to 39.1%, an evolution which is due to the larger proportion of total sales of Barco in 2Q07 of the Media & Entertainment Division, which typically has lower gross profit margins than the other divisions of the group. But operating expenses are also lower in this division.
Operating Results (EBIT)
EBIT increased by 5.8% year-on-year to euro 22.2 million. EBIT margin remained fairly stable at 6.4% versus 6.5% the year before.
As a percentage of sales expenses for research & development decreased from 9.4% to 9.2%. A similar evolution was seen in costs for sales & marketing and general & administration expenses, which respectively decreased from 17.5% to 16.3% and from 7.3% to 7.0% of sales.
Other operating expense decreased from euro minus 1.6 million to euro minus 0.8 million.
Income Taxes
Income taxes decreased year-on-year to euro 3.8 million from euro 4.1 million.
Current earnings per share
Current earnings per share for 1H07 increased to euro 1.47 versus euro 1.38 for 1H06.
Net Income
Net income increased year-on-year by 16.3% to euro 21.9 million. In 1H06 it was euro 18.8 million. Net earnings per ordinary share (EPS) rose to euro 1.81 from euro 1.55 for the first half of 2006. Fully diluted net earnings per share for the first half of the year were euro 1.71 compared with euro 1.46 in the year ago period.
Balance Sheet
At the end of 1H07 Barco had a net debt position of euro 24.0 million, compared to a net debt position of euro 12.4 million at 31 December 2006. In 1H07 a euro 18,3 million dividend payment was made and euro 6,1 million was spent on the share buy-back program3. On 30 June 2007 accounts receivable were at euro 194.2 million, compared to euro 175.2 million at the end of June 2006 and euro 218.6 million at 31 December 2006. Inventory was at euro 173.4 million versus euro 167.0 million on 30 June 2006 and euro 146.7 at 31 December 2006. Capex for the first half of 2006 was euro 7.1 million.
OUTLOOK FOR FULL YEAR 2007
The following statements are forward looking and actual results may differ materially.
The growth of sales of 8.2% and of orders of 15.4% in 1H07 supports the sales growth target for full year 2007 between 6 and 9% and the expected EBIT growth compared to full year 2006.
CONFERENCE CALL
Barco will hold a conference call with investors and analysts on July 25, 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, Martin De Prycker, Antoon Van Petegem, CFO and JP Tanghe, IRO.
An audio cast of this conference call will be available on the Company’s website www.barco.com before 8.00 p.m. CET (2.00 p.m. EST).
ABOUT BARCO
Barco, a global technology company, designs and develops visualization products for a variety of selected professional markets. Barco has its own facilities for Sales & Marketing, Customer Support, R&D and Manufacturing in Europe, North America and Asia Pacific.
Barco (Euronext Brussels: BAR) is active in more than 90 countries with about 3800 employees worldwide. Barco posted sales of euro 751 million in 2006.
For more information and the full report “6 months ending June 30, 2007”, please visit the Company’s website at www.barco.com.
REPORT OF THE STATUTORY AUDITOR TO THE SHAREHOLDERS OF BARCO NV ON THE REVIEW OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND FOR THE SIX MONTHS THEN ENDED
Introduction
We have reviewed the accompanying interim condensed consolidated balance sheet of Barco (the “Company”) as at June 30, 2007 and the related interim condensed consolidated statements of income, changes in equity and cash flows for the six-month period then ended, and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting (“IAS 34”) as adopted for use in the European Union. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.
Scope of Review
We conducted our review (“revue limitée/beperkt nazicht” as defined by the “Institut des Reviseurs d’Entreprises/Instituut der Bedrijfsrevisoren”) in accordance with the recommendation of the “Institut des Reviseurs d’Entreprises/Instituut der Bedrijfsrevisoren” applicable to review engagements. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the auditing standards of the “Institut des Reviseurs d’Entreprises/Instituut der Bedrijfsrevisoren” and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 as adopted for use in the European Union.
Brussels July 24, 2007
Ernst & Young Bedrijfsrevisoren BCVBA
Statutory auditor represented by
Marc Van Hoecke
Partner
3 The company now owns 615,063 of its own shares or 4.87% before dilution. The buy-back program started in 2003.
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