Focus on cost reduction and working capital generates the cash needed to reposition the company for future growth
Kortrijk, Belgium, 22 April 2009 - Barco (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three-month periods ended 31 March, 20091.
Commenting on the results of 1Q09 Mr. Van Zele, CEO, stated that although EBIT for the quarter was still negative, net income was in fact slightly better than anticipated. Furthermore cash generation was substantially better than expected. The order book at the end of the quarter was 13.2% higher than at the end of 1Q08. This followed a strong recovery in order intake in March after a weak January and February order intake. Incoming orders in March 2009 were actually higher than in the same month the year before. He pointed out that the corporate events market continued to be weak, but that this decrease was offset to some extent by the very good order intake in digital cinema. Management clearly expects the digital cinema business to continue to grow over the next quarters.
Mr Van Zele emphasized that he had focused on cost reductions and working capital as well as on changing the organization to improve its effectiveness. This focus has indeed paid off well with free cash flow at the end of the quarter of 36.6 million euro compared to minus 2.9 million euro the year before. Including the cash from the divestment of Voxar, the medical advanced visualization business unit, cash generation in 1Q09 was nearly 60 million euro, a healthy base for future growth. As a result of this solid cash generation Barco was debt-free at the end of the quarter.
Further in line with expectations operating expenses also went down significantly with 14.3 million euro. Mr. Van Zele called this evolution sustainable over the next quarters.
Although EBITDA was positive, EBIT remained negative for the quarter, in part due to a substantial reduction in capitalized R&D.
Although the economic environment remains difficult, Mr. Van Zele sees reasons to be cautiously optimistic for the remainder of 2009. He expects to see further gains in productivity and hence in profitability as a result of his strong management focus on operational excellence. He also expects further successes in digital cinema to fuel a slow recovery in the Media & Entertainment division. On top of that Barco now has a very healthy balance sheet with a net cash position of 24.0 m euro.
CONSOLIDATED RESULTS FOR THE QUARTER
First Quarter 2009 Financial Highlights on the basis of continuing operations:
- Order book at the end of March 2009 was 366.5 million euro. This is an increase of 13.2% compared to the order book of 323.9 million euro the year before. Order intake for the quarter decreased by 19.4% to 158.0 million euro.
- Sales of 144.7 million euro, down 11.2% year-over-year.
- Gross profit declined by 36.2% to 39.0 million euro from 61.1 million euro the previous year.
- EBITDA was 7.3 million euro compared to 19.5 million euro in 1Q08.
- EBIT was minus 6.0 million euro versus 5.9 million euro in 1Q08. EBIT was partly affected by lower R & D capitalization to the amount of 4.8 million euro, compared to 1Q08.
- Net income including income from discontinued business was minus 0.9 million euro. In 1Q08 it was 6.6 million euro.
- Net earnings per share were minus 0.07 euro compared to 0.55 euro in 1Q08.
- Free cash flow at the end of the quarter was 36.6 million euro compared to minus 2.9 million euro the year before.
- Capital employed down 10%, driven by working capital reduction of 43.0 million euro compared to end 2008.
- Net debt position of 32.8 million euro at 31 December 2008 was turned into net cash position of 24.0 million end March 2009.
First Quarter 2009 Financial Highlights on the basis of reported results *:
* Including the medical advanced visualization business unit Voxar
The following financial data are based on “continuing operations”
Sales and Order Intake
Sales for the quarter were 144.7 million euro, an 11.2% year-on-year decrease. This was for a large part due to the weak performance of the corporate events business within the Media & Entertainment division, with corporations cutting back on marketing projects. Only the Avionics division did better than the year before.
Sales to Europe, Middle East and Africa represented 43.0% of consolidated sales, while 36.8% of sales were realized in the Americas and 20.2% in Asia Pacific.
Orders in 1Q09 were 158.0 million euro, a decrease of 19.4% compared to the same quarter the year before, due to the low level of order intake in the first 2 months of the quarter. In March however, order intake was up 2.3% compared to the same month the year before, with a good contribution from the Security & Monitoring and the Avionics and Simulation divisions.
The order book at the end of the quarter was 366.5 million euro or 13.2 % higher than at the end of 1Q08.
Evolution order book
Gross Profit
Gross profit decreased year-on-year by 36.2% to 39.0 million euro. Gross profit margin at 26.9% compared to 37.5% in the year ago quarter.
EBIT
EBIT decreased to minus 6.0 million euro from 5.9 million euro the previous year. EBIT margin was minus 4.2%. EBIT was partly affected by lower R & D capitalization to the amount of 4.8 million euro.
Research & development expenses increased year-on-year from 16.8 million euro to 17.2 million euro, or from 10.3% to 11.9% of sales. Sales & Marketing expenses decreased from 28.8 million euro to 21.7 million euro, respectively 17.7% and 15.0% of sales. General & administration also decreased from 12.2 million euro or 7.5% of sales to 10.3 million euro or 7.1% of sales.
Other operating income was 4.2 million euro. 1Q08 had other operating income of 2.6 million euro.
Income Taxes
In 1Q09 there was a positive tax impact of 1.3 million euro compared to a tax expense of 1.2 million euro in 1Q08.
Net Income
Net income for the quarter decreased to minus 0.9 million euro from 6.6 million euro for 1Q08. These amounts include the net income from discontinued operations. Net margin for the quarter was minus 0.6% from 3.6% the year before.
Net earnings per ordinary share (EPS) were minus 0.07 euro, down from 0.55 euro in 1Q08. Fully diluted net earnings per share decreased to minus 0.07 euro from 0.52 euro.
Balance Sheet
At the end of March 2009 Barco had a net cash position of 24.0 million euro, compared to a net debt position of 32.8 million euro on 31 December 2008. Barco did not buy back any of its own shares in 1Q092 . On 31 March 2009 accounts receivable were at 128.2 million euro, down 40.1 million euro compared to 31 December 2008. End March DSO was 80 days, down from 93 days the year before. Inventory was at 180.7 million euro, a decrease of 8.4 million versus end December 2008. Trade payables were 60.5 million euro, down 6.5 million euro from end December 2008. Capex for 1Q09, excluding capitalized R & D, was 1.2 million euro.
DIVISIONAL RESULTS FOR 1Q09
Media & Entertainment division
Sales and orders were down in the media & Entertainment division in 1Q09, due to low performance in the events and the out-of-home media markets. However, this was partially offset by very strong order intake and strong shipments in the digital cinema market.
The corporate events business is expected to continue to underperform in 2Q09 with possibly some recovery in 2H09.
Notwithstanding current low performance of the out-of-home media market, management remains confident of the huge opportunities in this segment and is looking into alternative business models for future growth.
Orders in digital cinema were five times as high as in 1Q08 and sales doubled, illustrating a speeding-up of the digitization of the cinema market and offering great opportunities for Barco, a leader in this market already today.
The order book at the end of March 2009 was at 87.5 million euro, up 39.1% from the year before.
Gross profit decreased strongly due to a drop in gross margin, resulting mainly from the continuing sales of slow-moving products and inventory write-offs in the events and out-of-home media segments. The reduction in cost was not sufficient to offset the lower sales volume. EBIT decreased to minus 10.3 million euro for the quarter. In March 2009 EBIT was close to break-even.
Security & Monitoring division
Both orders and sales went down in 1Q09 compared to the same period the year before. This is due to delays in decision making of the customers and not to cancellation of orders. Visibility on the business remains relatively good, specifically in government funded markets such as defense, security, utilities and traffic. Especially in these markets also the order book remains strong and so does the funnel of projects. More software and network enabled solutions are being offered, supporting the technology content of Barco's portfolio.
At 134.9 million euro the order book was 5.1% higher at the end of 1Q09 than the year before.
Gross profit decreased by 30.1% year-on-year due to the drop in sales volume and stock write-offs. Operating costs went down with more than 20% compared to 1Q08. This was partially offset however, by lower capitalization of R & D and higher inventory write-offs. EBIT for the quarter was close to break-even.
Medical Imaging division
Sales for 1Q09 were down compared to the same quarter the year before and so were incoming orders. However, 1Q08 had a couple of quite substantial orders. Except for the North American market were projects were indeed delayed, the division performed fairly well in line with expectations.
Nevertheless the order book at the end of March 2009 reached 52.2 million euro, an increase of 17.2% compared to end March 2008.
Gross profit was negatively impacted by lower sales volume at a lower gross margin. On the other hand, net costs in the Medical Imaging division were reduced by 1.6 million euro compared to 1Q08. As a result of this EBIT was lower than the year before but still reached a margin of 11.4% on sales.
Avionics & Simulation division
Order intake for the simulation activities as well as for avionics was down quarter-on–quarter. Sales were up for both business units.
The order book for the division was up 4.6% to 93.7 million euro.
Although gross profit went down slightly quarter-on–quarter, EBIT for the Avionics & Simulation division improved to minus 0.9 million euro from minus 2.5 million euro the year before.
OUTLOOK FOR 2009
The following statements are forward looking and actual results may differ materially.
Although the economic environment remains difficult, management is cautiously optimistic for the remainder of 2009. Further growth in productivity and hence in profitability is anticipated as a result of the strong management focus on operational excellence. A slow recovery in the Media & Entertainment division is expected to be fueled by further successes in the digital cinema market. On top of that Barco has a healthy balance sheet with a net cash position of 24.0 m euro, which is a solid base for future growth.
CONFERENCE CALL
Barco will host a conference call with investors and analysts on 22 April, 2009 at 4:30 p.m. CET (10:30 a.m. EST), to discuss the results for the quarter. Eric van Zele, CEO, Dirk De Man, CFO and JP Tanghe, IRO will host the call.
An audio cast of this conference call will be available on the Company's website www.barco.com at 8:00 p.m. Brussels time (2:00 p.m. EST).
ABOUT BARCO
Barco, a global technology company, 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.
Barco (NYSE Euronext Brussels: BAR) is headquartered in Belgium and is present in more than 90 countries with about 3500 employees worldwide.
For more information and the full report “3 month period ended 31 March, 2009”, please visit the Company's website at www.barco.com
1 Following IFRS rules comparison must be made on the basis of “continuing operations”. This means that the results of the medical advanced visualization activities of the business unit Voxar 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”, unless otherwise indicated. Barco divested Voxar to Toshiba Medical Systems Corporation, Tokyo, Japan, in 1Q09.
2 The company now owns 737,963 of its own shares or 5.82% before dilution. The buy-back program started in
2003. In 1Q09 Barco did not buy back any of its own shares.
For more information, please contact
