Strong growth in sales and profit confirms outlook full year 2007
Barco submits to shareholders proposal to return euro 70 million through capital reduction
Third Quarter 2007 Financial Highlights1 on the basis of continuing operations2 :
- At the end of 3Q07 the order book was euro 347.2 million, an increase of 13.2% year-on-year. Order intake in 3Q07 totaled euro 204.5 million, 5.0% lower than the same period in 2006.
- Sales amounted to euro 173.1 million, an increase of 13.0%.
- Gross profit rose by 9.4% to euro 66.3 million from euro 60.6 million the previous year.
- EBIT increased by 15.0% to euro 8.2 million from euro 7.2 million, while EBIT margin rose to 4.8% from 4.7% in 3Q06.
- Net income was euro 8.5 million, a rise of 26.2% from euro 6.7 million in 3Q06.
- Net earnings per share were euro 0.70. In the same period of the previous year they were euro 0.54.
When communicating the results of 2Q07 the Board of Directors stated that it would 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 of BarcoVision.
The Board has reviewed all options and has come to the conclusion that a capital reduction is the best way to increase shareholder value. In this way the Board of Directors has decided to call an extraordinary General Shareholders Meeting to propose a capital reduction. The amount is estimated at euro 70 million. The capital reduction is expected to be finalized around mid 2008.
After this reduction of capital Barco maintains a very strong balance sheet. In this way, if and when needed, the company will be able to sustain a higher leverage so as to support internal and external growth and create higher shareholder return.
Third Quarter 2007 Financial Highlights on the basis of continuing operations:
Third Quarter 2007 Financial Highlights on the basis of reported results:
*Including all of Barco Manufacturing Services, so also sections divested end 2006.
Excluding these sections, EBIT in 3Q06 would have been euro 7.5 million.
Kortrijk, Belgium, October 24, 2007 – Barco n.v. (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three and nine month periods ended September 30, 2007.
Barco CEO, Martin De Prycker, commented: “On the basis of continuing operations sales grew by 13% in 3Q07. On a comparable currency exchange basis growth would have been 16.5%. Strong contributors were the Media & Entertainment division with a growth of nearly 26% and the Security & Monitoring division with more than 23%.”
Referring to profitability Martin De Prycker stated: “Despite a significant negative impact of the USD rate versus the euro, gross profit increased by 9.4% to euro 66.3 million. EBIT grew by 15.0% to euro 8.2 million, after a negative currency impact of around euro 3 million.”
Mr De Prycker continued with a statement on order intake: “In the third quarter the divisions Security & Monitoring and Medical did very well with respectively more than 15% and 13% growth. In this way these divisions contributed to an order book of euro 347 million at the end of September 2007. This is an increase of more than 13% year-on-year and the highest order book Barco ever had.”
“The all-time high order book increases our expectations for sales growth over 2007 to a range between 7 and 9%, better than our previous target of 6 to 9%, again despite the USD decline. We can also confirm our expectation of an increase in profit compared to 2006. On the reported business we expect an EBIT margin up to 9%. On the basis of continuing operations the EBIT margin may be slightly lower. One reason is a more significant negative currency impact on continuing operations. Furthermore the internal profit generated by the mechanical section of the Barco Manufacturing division, is no longer included.”
Mr De Prycker concluded: “Net income increased by 26.2% from euro 6.7 million to euro 8.5 million.”
CONSOLIDATED RESULTS FOR THE QUARTER
Sales & Orders
Sales for the quarter totaled euro 173.1million, 13.0% higher than in 3Q06 when sales were euro 153.2 million. Sales increased by 25.6% in the Media & Entertainment division and by 23.2% in the Security & Monitoring division. Sales remained flat in the Medical division and dropped 5.6% in the remaining markets, largely due to the shifting of some simulation projects to 4Q07.
Sales to Europe, Middle East and Africa (EMEA) represented 47.6% of consolidated sales, while 32.3% of sales were achieved in the Americas and 20.1% in Asia Pacific.
Orders were particularly good in the Security & Monitoring division with an increase of 15.4% and in the Medical division with 13.3%. The Media & Entertainment division had a decrease in orders compared to 3Q06. However, 3Q06 order intake in the media market included a very large order in Dubai.
The book-to-bill ratio was 1.18.
Evolution order book
Gross Profit
Gross profit increased by 9.4% to euro 66.3 million from euro 60.6 million in 3Q06, despite the negative impact of the decline of the USD versus the euro.
Operating Results (EBIT)
EBIT increased by 15.0%, to euro 8.2 million, or 4.8% of sales. This compares to euro 7.2 million, or 4.7% of sales for 3Q06. The negative currency impact on EBIT in 3Q07 amounted to around euro 3 million.
As a percentage of sales, research & development expenses remained fairly flat year-on-year at 10.4% of sales. Sales & marketing costs decreased from 17.4% to 15.5% of sales. General & administration costs remained flat at 7.0%.
Other operating results were euro minus 1.1 million compared to euro minus 0.2 million in 3Q06.
Income Taxes
Income taxes increased from euro 1 million in 3Q06 to euro 1.1 million in 3Q07 on higher earnings.
Net Income
Net income for the quarter improved by 26.2% from euro 6.7 million in 3Q06 to euro 8.5 million in 3Q07. The net margin in 3Q07 was 4.9% versus 4.4% the year before.
Net earnings per ordinary share (EPS) for the quarter were euro 0.70, up from euro 0.54 in 3Q06. Fully diluted net earnings per share were euro 0.67, compared to euro 0.52 in the same period the previous year.
DIVISIONAL RESULTS FOR THE QUARTER
Media & Entertainment Division
Sales at the Media & Entertainment Division rose 25.6% year-on-year, driven by growth in all three markets. The events market had double digit growth, which was somewhat lower than in the previous quarters, as the market is waiting for some new Barco products. Media had strongly increasing sales, as did digital cinema. Orders were lower than in 3Q06, mainly due to the very large order in Dubai in 3Q06.
The book-to-bill ratio for the division was at 0.93.
Gross profit increased by 20.2%. EBIT margin at 5.5% was better than the margin of 3.9% the previous year, thanks to the strong growth in sales.
Security & Monitoring Division
Sales increased by 23.2%. Control Rooms contributed strongly to this growth. The defense market is showing first growth, be it still moderate. Healthy growth was also recorded in the traffic management market. This market showed a strong increase in orders too and so did the control room markets for broadcast, power distribution and city surveillance, which led to a double digit growth in orders for the division.
The book-to-bill ratio was high at 1.09.
Gross profit increased 16.8% in 3Q07, thanks to the higher sales volume. EBIT margin was 3.9% versus minus 1.3% the year before, following the higher gross profit.
Medical Imaging Division
With a growth of 0.2%, sales remained fairly flat year-on-year. This was the case in the modality and the PACS markets. In the PACS market this was mainly due to lower US sales following the Deficit Reduction Act. Orders were high, thanks in particular to one large order, which is to be shipped over the next 12 months.
The book-to-bill ratio was at 1.62.
Gross profit rose 2.7% versus the same period the year before. EBIT margin was 9.3%. This is lower than the margin of 14.9% in 3Q06 due to the increase in investments in new product development and sales & marketing.
Other markets
Simulation sales were lower than the year before, as some projects shifted to 4Q07. Sales increased in the avionics market and were flat in the presentation market. Orders increased in the presentation and in the simulation markets. They were somewhat lower in Avionics.
EBIT margin was minus 1.1%, compared to 3.7% in 3Q06. This is due to the lower sales volume and large investments in new products.
CONSOLIDATED RESULTS FOR THE NINE MONTHS
(based on continuing operations)
Sales & Orders
Sales increased by 9.8% year-on-year to euro 521.9 million, a growth mainly originating in the Media & Entertainment Division. Orders grew by 7.6%, the Security & Monitoring and Media & Entertainment divisions being the most important contributors to this growth.
The book-to-bill ratio was 1.17.
Gross Profit
Gross profit increased by 4.9% year-on-year from euro 193.4 million to euro 202.8 million, despite the negative impact of the decline of the USD versus the euro.
Operating Results (EBIT)
EBIT increased by 8.1% year-on-year to euro 30.5 million. EBIT margin remained fairly flat at 5.8% compared to 5.9% the year before.
As a percentage of sales, expenses for research & development remained at 9.6%. The percentage of costs for sales & marketing went down from 17.5% to 16.1%. General & administration expenses represented 7.0% of sales compared to 7.2% of sales in 3Q06.
Other operating expense was euro 1.9 million, flat versus the previous year.
Income Taxes
Income taxes decreased year-on-year to euro 4.9 million from euro 5.2 million.
Net Income
Net income increased year-on-year by 20.2% to euro 30.3 million. In the same period of 2006 it was euro 25.2 million. Net earnings per ordinary share (EPS) rose to euro 2.51 from euro 2.09 for the first nine months of 2006. Fully diluted net earnings per share for the first nine months of the year were euro 2.38 compared with euro 1.98 the year before.
Balance Sheet
At the end of September 2007 Barco had a net debt position of euro 39.4 million, compared to a net debt position of euro 12.4 million on 31 December 2006. In the first nine months of 2007 a euro 27.1 million dividend payment was made and euro 7.8 million was spent on the share buy-back program 3. On 30 September 2007 accounts receivable were at euro 187.3 million, compared to euro 191.0 million at the end of September 2006 and euro 218.6 million on 31 December 2006. Inventory was at euro 196.3 million versus euro 174.8 million on 30 September 2006 and euro 146.7 on 31 December 2006. Capex for the first nine months of 2006 was euro 9.5 million.
OUTLOOK FOR FULL YEAR 2007
The following statements are forward looking and actual results may differ materially.
The high order book increases management’s expectations for a sales growth in 2007 between 7 and 9%, better than the previous target of 6 to 9%.
On the reported business an EBIT margin up to 9% is expected. On the basis of continuing operations the EBIT margin may be slightly lower. One reason is a more significant negative currency impact on continuing operations. Furthermore the internal profit generated by the mechanical section of the Barco Manufacturing division is no longer included.
CONFERENCE CALL
Barco will hold a conference call with investors and analysts on October 24, 2007, 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, Dirk De Man, CFO, Antoon Van Petegem, co-CFO and JP Tanghe, IRO.
An audio cast 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, 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 “9 months ended September 30, 2007”, please visit the company’s website at www.barco.com.
The accounting information taken up in this press release has not been reviewed by the statutory auditor.
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