2006 growth supported by strong fourth quarter
Kortrijk, Belgium, 14 February, 2007 - Barco (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three- and twelve-month periods ended 31 December, 2006.
For 4Q06 sales were euro 222.5 million. Orders were euro 195.9 million. EBIT (before goodwill impairment) was euro 26.8 million.
Sales for Fiscal Year 2006 were euro 750.8 million and orders euro 817.7 million, leading to a book-to-bill ratio (orders divided by sales) of 1.09. EBIT was euro 60.7 million.
Barco CEO, Martin De Prycker, commented on these results: “Sales for the full year 2006 grew by 5.4% while orders rose 12.0%. Growth in 2006 was driven by strong organic growth in the medical, events, control rooms, digital cinema, presentation and avionics markets. The book-to-bill ratio was 1.09.“
“In 2006 we successfully continued our strategy of strengthening the product portfolios in some of our markets, such as the medical and defense markets, and we are planning to do the same in other markets. Focusing on operational excellence has resulted in a more streamlined organization.”
“Gross profit margin improved slightly to 41.3% versus 41.0% in 2005. The operational profit margin improved to 8.1% compared to 7.3% in 2005, despite the significant impact of the program to replace a new product in the media market.”
“2006 was also the year in which we sold two units which previously formed part of the Manufacturing Services division. The Prints unit went to the Belgian private company Elprinta and the Electronic Manufacturing unit to the listed company IPTE. We intend to divest the remaining mechanical unit in the course of 2007. As we want Barco to fully focus on visualization for selected professional markets, we have decided to investigate the possibility to divest the BarcoVision division and to set up a new market-oriented divisional structure as of 1 January 2007.”
“For 2007 we expect sales to grow stronger organically than in 2006, but not yet double digit. We plan to increase profitability through higher operational efficiency. In this respect I can announce the appointment of Piet Berkhout as President Global Operations and Supply Chain. He brings a broad experience in translating technology opportunities into successes, mastering the full supply chain.”
CONSOLIDATED RESULTS FOR THE QUARTER
Fourth Quarter 2006 Financial Highlights1 : • Orders were flat at euro 195.9 million, leading to a book-to-bill ratio of 0.88 versus 0.94 in 4Q05.
• Sales reached euro 222.5 million, up 6.0% year-over-year and exceeded the expected range of euro 207 to 217 million.
• EBIT was euro 26.8 million, in the mid range of management’s expectations, up 40.6%. In 4Q05 EBIT was euro 19.1 million. EBIT margin was 12.0% in 4Q06 versus 9.1% in 4Q05.
• Current earnings per share of euro 1.70 versus euro 1.22.
• Goodwill impairment of euro 11.5 million, mainly on the acquisition of Voxar.
• Net income down 40.8% to euro 8.1 million, from euro 13.7 million.
• Net earnings per share decreased to euro 0.67, from euro 1.12 in 4Q05.
Sales and Orders
Sales for the quarter were euro 222.5 million, above management’s expectations of euro 207 to 217 million, and showed a 6.0% year-on-year increase. Growth came mainly from BarcoView (12.6%) and Control Rooms (24.3%). In 4Q06 the Media & Entertainment division had a decrease in sales due to the exceptionally high sales level in the same period the year before. The Presentation & Simulation and the BarcoVision divisions added respectively 6.8% and 3.1% year-on-year. Sales in Manufacturing Services grew by 20.8% in 4Q06.
Sales to Europe, Middle East and Africa represented 43.7% of consolidated sales, while 35.3% of sales were realized in the Americas and 21.0% in Asia Pacific.
Orders in 4Q05 orders were euro 195.9 million, flat compared to the same quarter the year before.
The book-to-bill ratio was 0.88 compared with 0.94 for 4Q05.
Book-to-Bill Ratio 
Gross Profit & Margin
Gross profit increased year-on-year by 6.4% to euro 92.4 million. Gross profit margin remained stable at 41.5% compared to 41.4% in the year-ago quarter.
Operating Results before Interest, Taxes and Goodwill Impairment (EBIT)
EBIT increased 40.6% year-on-year to euro 26.9 million, in the mid range of management’s expectations.
EBIT margin increased to 12.0% from 9.1% in 4Q05.
Other operating income was euro – 2.9 million compared to euro -5.4 million in 2005. It consisted mainly of the cost for the replacement program of a new product in the media market.
Other non-operating expenses include a euro 1.4 million loss on the sale of two business units of the Manufacturing Services division and euro 0.4 million in interest cost.
Income Taxes Taxes were euro 5.4 million compared to euro 3.3 million in 4Q05.
Current earnings per share
Current earnings (net result before goodwill impairment and before net impact of divestments) per share for the quarter increased to euro 1.70 from euro 1.22 for 4Q05.
Goodwill Impairment
An impairment of euro 11.5 million was taken, mainly on the goodwill of Voxar, acquired in 2004, as the market for 3D diagnostic software develops slower than anticipated.
Net Income Net income for the quarter decreased by 40.8% to euro 8.1 million from euro 13.7 million for 4Q05. Net margin for the quarter was 3.6% down from 6.5% the year before.
Net earnings per ordinary share (EPS) were euro 0.67, down from euro 1.12 in 4Q05. Fully diluted net earnings per share decreased to euro 0.63 from euro 1.05.
CONSOLIDATED RESULTS FOR FISCAL YEAR 2006
Fiscal year 2006 Financial Highlights2 : • Orders increased by 12.0% to euro 817.7 million year-over-year. The book-to- bill ratio was 1.09 compared to 1.03 in 2005.
• Sales reached euro 750.8 million, a 5.4% increase year-over-year.
• EBIT was up 16.7% to euro 60.7 million from euro 52.0 million in 2005. EBIT margin was 8.1% versus 7.3% the year before.
• Current earnings (after taxes, before goodwill impairment and before the impact of divestments) up 19.4% to euro 47.5 million from euro 39.8 million in 2005.
• Current earnings per share of euro 3.91 versus euro 3.25 in 2005.
• Goodwill impairment of euro 13.1 million, mainly on the acquisition of Voxar.
• Net income down 13.7% to euro 33.3 million, from euro 38.6 million..
• Net earnings per share decreased to euro 2.76 from euro 3.15.
Sales and Orders Sales grew 5.4% to euro 750.8 million, higher than the top range of euro 745 million expected by management. All divisions except BarcoVision and Manufacturing Services contributed to this organic growth, with year-on year increases between 5.2% for BarcoView and 15.1% for the Media & Entertainment division.
Sales to Europe, Middle East and Africa represented 48.9% of consolidated sales. 33.1% of sales were realized in the Americas and 18.0% in Asia Pacific.
Orders in 2006 increased 12.0% over those of 2005, with growth in all divisions ranging from 1.3% in Presentation & Simulation to 27.2% for BarcoView.
The 2006 book-to-bill ratio was 1.09 compared to 1.03 in 2005.
Gross Profit & Margin Gross profit rose to euro 310.4 from last year’s euro 292.2 million the year before. Gross profit margin rose to 41.3% from 41.0%.
Operating Results Before Interest, Taxes and Goodwill Impairment (EBIT) EBIT increased by 16.7% to euro 60.7 million, from euro 52.0 million in 2005. EBIT margin was at 8.1% up from 7.3% a year ago.
With respectively 7.4, 9.2 and 16.0% of total sales general and administration expenses, research & development and sales and marketing investments remained fairly flat compared to 2005.
Other operating income of euro – 4.9 million consisted mainly of provisions for replacement programs of a new product in the media market.
Other non-operating result Other non-operating result of euro 2.4 million includes euro 1.4 million loss on the divestment of two business units of the Manufacturing Services division and euro 1.0 million in interest payments.
Income Taxes Income taxes amounted to euro 11.8 million including a positive effect of euro 0.3 million on the divestment of two units of the Manufacturing Services division. Income tax represents 20.3% of current pre-tax earnings.
Current Earnings per Share Current earnings (net result before goodwill impairment and before net impact of divestments) per share for the year reached euro 3.91 compared with euro 3.25 in 2005.
Goodwill Impairment
An impairment of euro 13.1 million was taken, mainly on the goodwill of Voxar, acquired in 2004, as the market for 3D diagnostic software develops slower than anticipated.
Net Income Net income fell to euro 33.3 million from euro 38.6 million in 2005. Net earnings per ordinary share (EPS) fell to euro 2.76 from euro 3.15. Fully diluted net earnings per share were euro 2.61, compared with euro 2.97 in the prior year.
Capital Expenditures (CAPEX) Capex for the year, excluding capitalized R & D, came to euro 12.3 million.
DIVIDEND The Board of Directors will propose to the Annual General Shareholders’ meeting of 26 April, 2007, to increase the dividend to euro 2.30 from euro 2.15 the previous year. This would bring the pay-out ratio to over 80 %.
OUTLOOK FOR 2007
The following statements are forward looking and actual results may differ materially.
For 2007 Barco expect sales to grow stronger organically than in 2006, but not yet double digit. The markets in which significant organic growth is expected in 2007 are the medical, control rooms, events and digital cinema markets. Further growth is also expected in North America and Asia Pacific.
Full focus will be put on selected professional visualization markets by divesting the Mechanical unit of the former Manufacturing Services division and the BarcoVision division.
Barco plans to increase profitability through higher operational efficiency.
DIVISIONAL RESULTS FOR FISCAL YEAR 2006 BarcoView
Sales at BarcoView increased 5.2% versus 2005. Growth in the medical market was very strong, both in PACS (Picture Archiving and Communication Systems) and in modality. In 3D software sales were flat. Avionics continued to grow thanks to the strong order book built up over a number of years. In the defense market sales slightly declined.
The strong 27.2% increase in orders resulted in a book-to-bill ratio of 1.16. This strong divisional performance is based on exceptional growth in orders in the medical and avionics markets, leading to an increased order book for 2007 and beyond. After a weak 2005 orders in the defense market picked up again with a year-on-year increase of 18.1%. The exception was the traffic management market with declining orders versus 2005, as some customers postponed major upgrade projects for air traffic management.
Gross profit margin at BarcoView fell to 44.4% from 47.1% due to a different product mix and price erosion in the market of traffic management displays. EBIT margin was 9.0% compared to 10.5% the year before, because of the lower gross profit margin. Still, sales volumes that outgrew indirect cost partially compensated for this lower gross profit margin.
Barco Media & Entertainment
Sales grew by 15.1% in 2006, thanks to a strong performance in the events market. Digital cinema’s 27.3% increase also contributed to divisional growth in sales, although orders grew faster than sales as the roll out of the new technology is not yet running at full speed, particularly outside the USA. Sales in the media market remained flat in 2006 compared to 2005.
Order growth in 2006 was 16.7%. Book-to-bill was at 1.12. Increased orders reflected the upward trend in the events market. The digital cinema market did very well in order growth, while orders in the media market remained flat year-on-year.
Gross profit margin slightly improved to 29.4% in 2006. Increased sales and growth in absolute gross profit in conjunction with a moderate growth in indirect cost should have led to a healthy growth in operational profit. However, EBIT margin was only 1.2% versus – 0.2% in 2005 because of exceptional items related to warranty issues associated with new products for the media market. Actions have been taken to avoid such issues in the future.
Barco Control Rooms Growth in sales in the Control Rooms division was 7.8% in 2006. All the division’s markets contributed to this growth. The division had some supply chain issues in 1Q06, which were, however, fully solved in the following quarters.
In 2006 orders grew at a moderate pace of 3.3%, following a very strong order growth in 2005. Europe, Middle East, India and China were the strongest geographical areas in 2006. Book-to-bill was 1.0.
The end of life of one of the Control Rooms products and the resulting inventory write-down reduced the gross profit margin from 45.3% in 2005 to 43.2% in 2006. At 12.9% EBIT margin remained relatively stable versus the 2005 profit margin of 13.1%. EBIT margin in 4Q06 was very high at 24.9%.
Barco Presentation & Simulation Sales in the Presentation & Simulation division rose 8.2%, mainly thanks to a healthy growth in the corporate AV (presentation) market where newly introduced products won acceptance. Overall 2006 sales in the simulation market were slightly down, recovering in the second half of the year from a weaker first half.
Book-to-bill ratio was at 1.02. Orders grew 1.3%, with the corporate AV market performing stronger than the simulation market, which was slow due to a shift in technology. It is clear however, that the newly developed LCOS-based projector for flight simulation is laying the foundation for future growth.
Gross profit margin was stable at 41.9%. EBIT margin rose to 8.4% from 6.8% in 2005, thanks to an increase in sales volume.
BarcoVision Sales at BarcoVision declined 4.0%, following a shift in the textile machine market from open-end to ring spinning.
Orders grew by 3.9%. Book-to-bill was 1.04.
Gross profit margin remained stable at 47.6%. EBIT margin at 11.3% was lower than the 14.0% margin achieved in 2005 given the positive effect of the sale of buildings in 2005.
Barco Manufacturing Services Sales declined by 7.5% due to a weaker first half of the year. In the second half sales recovered to a large extent.
Orders grew a strong 19.9% as the internal demand for new products picked up, especially in the second half of the year. Book-to-bill was 1.21.
EBIT margin increased to 4.4% from – 3.2% in 2005, thanks to a stringent cost reduction program and the restructuring program of 2005.
The sale of 2 of the division’s 3 business units was finalized in December 2006. Talks with parties interested in the third business unit have been initiated.
CONFERENCE CALL Barco will host a conference call with investors and analysts on 14 February, 2007, starting at 4:30 p.m. CET (10:30 a.m. EST), to discuss the results for the quarter. Mr. Martin De Prycker, Barco’s CEO , Mr. Antoon Van Petegem, CFO and JP Tanghe, IRO will host the call.
An audiocast 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 (Euronext Brussels: BAR) is headquartered in Belgium and is present 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 “3 and 12 month period ended 31 December, 2006”, please visit the Company’s website at www.barco.com
The accounting information included in this press release has not been reviewed by the statutory auditor. - FINANCIAL TABLES TO FOLLOW – (non-audited)
For more information, please contact
JP
Tanghe
Senior Advisor to the CEO
Barco nv
Telephone
+32 56/26 23 22
jp.tanghe@barco.com
