Barco returns to profitable growth
Kortrijk, Belgium, 21 April 2010 - Barco (Nyse/Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three month period ended 31 March, 2010.
First quarter 2010 financial highlights:
• Barco's order book at the end of March 2010 stood at 382.6 million euro. At the end of March 2009 the order book was 366.5 million euro. Order intake for the quarter increased 36.8% to 216.2 million euro up from 158.0 million euro a year earlier.
• Sales of 176.1 million euro were up 21.7% from 144.7 million euro in 1Q09.
• Gross profits grew 52.7% to 59.3 million euro up from 38.9 million euro the previous year. Gross profit margin was 33.7%. In 1Q09 it was 26.8% and in 4Q09 it was 21.4%.
• EBITDA was 18.7 million euro compared to 7.3 million euro in 1Q09.
• EBIT was 5.3 million euro versus minus 6.0 million euro in 1Q09. EBIT margin was 3.0% compared to minus 4.2% in 1Q09.
• Net income for the quarter was 4.1 million euro compared to minus 0.9 million euro the year before.
• Net earnings per share were 0.34 euro compared to minus 0.07 euro in 1Q09.
• Free cash flow at the end of the quarter was minus 0.3 million euro compared to 36.6 million euro the year before.
Referring to the results of 1Q10, Mr Van Zele, President & CEO of Barco, said that he was very pleased with the results achieved. He added: “These results illustrate that we have taken the right measures to deal decisively with the crisis of 2009 and that we have repositioned Barco for profitable growth in the years to come.”
Mr Van Zele further stated that demand for Barco's products in the medical division grew strongly in 1Q10 and that orders booked in the digital cinema division exceeded management's expectations. As for the other divisions he said: “All other divisions have implemented programs aimed at meeting their long term 10/10/20 targets (10% growth; 10% EBIT margin; 20% ROCE) and I am happy to report that all six divisions have again turned EBITDA positive.” Mr Van Zele also referred to free cash flow and said: “Free cash flow at the end of 1Q10 was slightly negative. However, this is due to a controlled increase in working capital to support growth of the company.”
Mr Van Zele concluded by saying: “I am cautiously optimistic about Barco's performance for the remainder of 2010.” He added that it is management's expectation that Barco's top line and EBIT in 2010 will be significantly better than in 2008, the last year prior to the crisis year 2009. Sales in 2008 were 725.3 million euro and EBIT was 8.9 million euro. He said that the medical division would contribute well to this growth, both organically and through the acquisition of FIMI. The strongest growth in revenue however, is expected from the digital cinema division. Mr van Zele stated that the previously communicated forecast of 150 million euro sales in 2010 will be exceeded. He further said that Barco was gearing up to significantly increase capacities in digital cinema and that strong growth was to be expected for shipments in the second half of 2010. “This will have a positive impact on the results of the company”, he added.
New reporting structure
As of 2010, Barco's activities are organized in two business groups or segments. Each business group is responsible for the management of its global business.
The business group Media & Entertainment and Simulation (MES) comprises the former Media & Entertainment division, with events, out-of-home media and digital cinema, and the simulation business of the former Avionics & Simulation division. The events and out-of-home media markets today are now respectively referred to as Video Lighting Solutions (VLS) and Digital Signage.
The other business group, Monitoring & Control and Medical (MCM), brings together the former Security & Monitoring division, with traffic, surveillance & monitoring, defense, medical and the avionics business of the former Avionics & Simulation division.
The results of 1Q10 are reported in this press release in line with this new structure and prior-year financials have been restated.
Change in reporting frequency
The board of directors has decided to change the frequency of the company's financial reporting as of 3Q10. This means that on 20 July 2010 Barco will give full results 3 months and 6 months ended 30 June 2010. As of 3Q10 however, Barco will give an Intermediary Report for the 1st and 3rd quarters instead of full results for these quarters.
CONSOLIDATED RESULTS FOR THE QUARTER
Sales and Order Intake
Sales for the quarter were 176.1 million euro, a 21.7% year-on-year increase. There was growth in all divisions except for simulation and traffic, surveillance and monitoring (TSM), the latter remaining at about the same level of sales as the year before. The medical, digital cinema and avionics markets realized healthy growth, and so did the VLS division.
Sales to Europe, Middle East, Africa and Latin America (EMEALA) represented 46.4% of consolidated sales, while 30.7% of sales were realized in North America and 23.0% in Asia Pacific. Sales in all 3 regions grew in absolute figures: in the same order as above respectively 23.9%, 9.0% and 38.2% year-on-year.
Order intake in 1Q10 was 216.2 million euro, an increase of 36.8% (of which over 29.5% organic) compared to the same quarter the year before. Compared to order intake in 1Q09 the digital cinema, medical and digital signage segments performed the strongest.
In order intake the APAC region took 28.2% of total, compared to 28.9% for the Americas and 42.9% for the EMEALA region. Growth in order intake for the APAC region was 66.6% compared to the year before. For North America it was 23.3% and for EMEALA 31.1%.
The order book at the end of the quarter was 382.6 million euro or 4.4% higher than at the end of 1Q09 and 15.4% higher than in 4Q09.
Evolution order book
| (in million euro) | 1Q10 | 4Q09 | 3Q09 | 2Q09 | 1Q09 |
| Order book | 382.6 | 331.4 | 342.4 | 336.7 | 366.5 |
Gross Profit
Gross profit increased year-on-year by 52.7% to 59.3 million euro. Gross profit margin was 33.7% compared to 26.8% in the year ago quarter and 21.4% in 4Q09, with stock write-offs under control.
EBIT
EBITDA was 18.7 million euro compared to 7.3 million euro the year before. EBIT was 5.3 million euro compared to minus 6.0 million in 1Q09. Good contributions to EBIT were generated by the medical, digital cinema, VLS, defense and avionics divisions.
Research & development expenses increased year-on-year from 17.2 million euro to 18.5 million euro, but decreased as percentage of sales from 11.9% to 10.5% of sales. Sales & Marketing expenses increased from 20.8 million euro to 24.7 million euro, respectively 14.3% and 14.0% of sales. General & administration expenses increased in absolute numbers from 10.3 million euro or 7.1% of sales to 10.9 million euro or 6.2% of sales.
Other operating income was 0.01 million euro. 1Q09 had other operating income of 3.5 million euro.
Income Taxes
In 1Q10 taxes were 0.9 million euro compared to a positive tax impact of 1.3 million euro in 1Q09.
Net Income
Net income for the quarter increased to 4.1 million euro from minus 0.9 million euro for 1Q09, which includedEuro 4.7 m proceeds from the Voxar divestiture. Net margin for the quarter was 2.3% from minus 0.59% the year before.
Net earnings per ordinary share (EPS) were 0.34 euro, up from minus 0.07 euro in 1Q09. Fully diluted net earnings per share increased to 0.32 euro from minus 0.07 euro.
DIVISIONAL RESULTS FOR 1Q10
Media & Entertainment and Simulation business group (MES)
Order intake in MES increased by 60.4% from 78.8 million euro in 1Q09 to 126.5 million euro in 1Q10. Main contributor to this growth in order intake is digital cinema. Order intake for MES increased both in the EMEALA and the APAC regions, while it was almost flat in North America. As to digital cinema, the order intake of 81.4 million euro is three times the order intake of the same period of the previous year, with strong demand from all three regions. The large Cinemark order (USA) was only partially recognized in the order intake figures of 1Q10, i.e. the part that is to be shipped in the next 3 months. Frame agreements are not included in the order intake either. Order intake in VLS declined compared to 1Q09 but grew significantly versus 4Q09. Demand is strong in the APAC region and Barco's new product offerings in the mid segment of the market, made available through the acquisition of assets from Element Labs, prove to be attractive in the market. In digital signage orders are quite strong in the APAC and EMEALA regions. The simulation business had a weakened order intake compared to the same period the year before, due to shipments being postponed in all of its market segments. Recovery in order intake is expected in 2Q10.
The order book at the end of March 2010 was 142.2 million euro.
Sales in MES increased by 9.0% to 76.2 million euro in 1Q10 from 69.9 million euro in 1Q09. Growth came from the EMEALA and APAC regions. In North America there was a decline in sales. In the digital cinema market sales increased by 50.2% versus 1Q09 but with 30.5 million euro they were lower than the 35.5 million euro realized in 4Q09. This is due to the switch from Series I to Series II digital cinema projectors and some delay in the component supply chain. These issues are expected to be solved by 2H10. In VLS sales were better than order intake, as they took benefit from short cycle business. Digital signage sales were lower than in 1Q09 due to customer deployment schedules. Sales were also lower in simulation in 1Q09, due to the slow order intake in 2009.
At 23.2 million euro gross profit for the MES business group was up 123.1% compared to the same period the year before. Gross profit margin was 30.5% compared to 14.9% in 1Q09.
MES EBIT for 1Q10 was at 1.6 million euro or a 2.2% EBIT margin on sales, compared to minus 8.8 million euro in 1Q09, driven by the strong top line growth, restored gross margins, and lower costs versus last year. EBIT margin in digital cinema was high single digit. Compared to last year the VLS division reported good progress and restored profitability.
Monitoring & Control and Medical business group (MCM)
Order intake in MCM increased by 13.1% from 79.9 million euro in 1Q09 to 90.3 million euro in 1Q10. This growth came from the medical business, the order intake of which increased by 63.5% (close to 17% excluding FIMI). Order intake was stable in the traffic, surveillance and monitoring business. There was a decline in order intake in defense and avionics but both these divisions are shipping from a strong backlog and they have a solid order book going forward. Order intake for MCM was almost flat in the EMEALA and APAC regions, while it increased strongly in North America.
The order book at the end of March 2010 was 240.4 million euro.
Sales in MCM increased by 33.0%, supported by all three regions. The medical, defense and avionics businesses contributed to this growth. Sales were flat in the traffic, surveillance & monitoring (TSM) market. Sales growth was particularly strong in the medical market at 58.8% and 19% excluding FIMI, carried by improving performance in the PACS, mammography and modality markets. The FIMI integration is well on track and there is a clear benefit from sales synergies with the medical division. In the TSM market the introduction of the new LED powered cubes is very promising.
At 36.1 million euro, gross profit for the MCM business group increased by 33.9% compared to 1Q09. Gross profit margin was 35.8% compared to 35.5% in the same period the year before.
MCM EBIT for the quarter was at 3.6 million euro, a 3.6% EBIT margin, compared to 2.8 million euro in 1Q09. The EBIT margin of the medical division was double digit. The FIMI acquisition is not yet contributing to EBIT due to acquisition accounting entries. Both the defense and avionics divisions have positive EBIT. TSM had a negative result, which is expected to be turned around in the next quarters of the year.
BALANCE SHEET
At the end of March 2010 Barco had a net cash position of 21.3 million euro, compared to a net cash position of 23.5 million euro on 31 December 2009 and a net cash position of 24.0 million euro on 31 March 2009. Barco did not buy back any of its own shares in the first three months of 20101 . On 31 March 2010 trade receivables were at 148.0 million euro, compared to 134.8 million euro at the end of December 2009. End March DSO was 76 days, down from 80 days the year before. DSO was 67 days end 2009. Inventory was at 178.7 million euro, an increase of 22.2% compared to 146.3 million euro end December 2009. Inventory turns were 2.3 at the end of 1Q10, compared to 2.4 the year before. Trade payables were 85.6 million euro, up 17.7 million euro from end December 2009. Capex for 1Q10, excluding capitalized development, was 2.7 million euro, compared to 1.2 million euro the year before.
OUTLOOK FOR 2010
The following statements are forward looking and actual results may differ materially.
Management expects Barco's top line and EBIT in 2010 to be significantly better than in 2008,the last year prior to the crisis year 2009. Sales in 2008 were 725.3 million euro and EBIT was 8.9 million euro. The medical division is expected to contribute well to this growth, both organically and through the acquisition of FIMI. The strongest growth in revenue however, is expected from the digital cinema division. The previously communicated forecast of 150 million euro sales in 2010 will be exceeded. Barco is gearing up to significantly increase capacities in digital cinema and strong growth is to be expected for shipments in the second half of 2010. This will have a positive impact on the results of the company.
CONFERENCE CALL
Barco will host a conference call with investors and analysts on 21 April, 2010 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 3100 employees worldwide.
For more information and the full report “3 month period ended 31 March, 2010”, please visit the Company's website at www.barco.com
1 The company now owns 737,963 of its own shares or 5.82% before dilution. The buy-back program started in 2003.
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