Barco confirms earlier trading update on 2008 results
Regulated information
Kortrijk, Belgium, 4 February 2009 - Barco (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three- and twelve-month periods ended 31 December, 2008. 1
Incoming orders booked in 4Q08 were at 203.9 million euro, up 11.1% compared to 4Q07. Sales declined to euro 207.9 million, down 6.6% compared to the same period of 2007. EBIT for the quarter was minus 24.2 million euro after restructuring and impairment provisions. Before the same provisions EBIT was minus 2.0 million euro.
Sales of continuing operations for the entire fiscal year 2008 were 725.3 million euro, down 1.5% to FY07, whereas incoming orders declined with 2.7% to 762.6 million euro in FY08. EBIT for FY08 was 8.9 million euro before restructuring and impairment charges, down almost 50 million euro from FY07. Restructuring and impairment charges booked amounted to 26.7 million euro.
Working capital was reduced with 35.8 million euro and net debt with 20 million euro to 32.8 million.
As previously announced the Board of Directors of Barco will propose to the Annual Shareholders’ meeting not to pay a dividend over 2008. Due to the global financial uncertainty and the company’s weak results Barco opted to pursue a conservative financial profile.
Just as so many other companies Barco was confronted with a severe and sudden weakening of its businesses during the second half of FY08. This drop in revenues was particularly severe and abrupt in the corporate presentation and events segments as most of Barco’s customers put a complete stop on their marketing spending. Since these segments had historically been very strong contributors to the company’s profits, their sudden decline forced Barco to implement drastic cost reduction measures and to rethink its go-to-market strategies. As a result of all this, EBIT for the year fell sharply by almost 50 million euro.
Newly-appointed Barco CEO, Eric van Zele, commented: “The current economic environment prompted us to be decisive about preserving the long term financial and strategic health of the company. Substantial provisions of almost 27 million euro for cost reductions were booked and capitalisation rules for R&D expenses were tightened. We further embarked on a major effort to reduce working capital requirements and intend to continue to declare war on discretionary spending and all hidden costs related to lack of operational efficiency. We have narrowed our short term focus on liquidity and an improved cash position and realized a net debt reduction of 20 million euro by end 2008. Our focus in 2009 will remain on reducing net debt.”
In 2008 Barco also divested from non-core activities such as BarcoVision (bought by Itema of Italy) and the company’s maritime safety & security activities, which were sold to Thales of France. In 1Q09 Barco also closed the divestment of its Voxar business unit to Toshiba Medical Systems. Mr Van Zele added:” With these divestments and all other cost-reduction measures, we will have taken some 36 m euro of operating expenses out of the company to restore profitability even at reduced levels of revenues.”
Referring to Barco’s order book, which at the end of FY08 remained surprisingly healthy and was some 15% higher than at the end of FY07, Mr Van Zele said: ”This confirms that our traditional businesses in the Medical and Security & Monitoring divisions remain solid and steady. We are cautiously optimistic about their performance in FY09 although visibility remains rather poor.”
He added: ”Moving cautiously into what promises to be a very challenging FY09, we intend to continue to streamline our operations where necessary, improve our management systems and processes and move even more aggressively and creatively into new market niches where we can lead and generate growth.”
CONSOLIDATED RESULTS FOR THE QUARTER Fourth Quarter 2008 Financial Highlights on the basis of continuing operations:
- Order book at the end of December 2008 was 351.3 million euro. This is an increase of 15.6% compared to the order book of 303.8 million euro the year before. Order intake increased with 11.1% to 203.9 million euro.
- Sales reached 207.9 million euro, down 6.6% year-over-year.
- Gross profit declined with 18.6 % to 68.6 million euro from 84.3 million euro the previous year.
- EBIT was minus 2.0 million euro before restructuring and impairment charges, versus 27.1 million euro in 4Q07. After restructuring charges EBIT was minus 24.2 million euro.
- Net income was minus 25.6 million euro, from 19.5 million euro the previous year.
- Net income including net income from discontinued business was minus 24.9 million euro. In 4Q07 it was 20.2 million euro.
- Net earnings per share were minus 2.08 euro compared to 1.68 euro in 4Q07.
*FX: Foreign Exchange Rate
Fourth Quarter 2008 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 207.9 million euro, a 6.6% year-on-year decrease. This was due to the Media & Entertainment division, the corporate events business of which performed very weakly in the current economic environment with corporations cutting back on marketing projects. Sales at the Security & monitoring division remained flat in 4Q08. The other divisions all realized modest growth.
Sales to Europe, Middle East and Africa represented 45.2% of consolidated sales, while 33.2% of sales were realized in the Americas and 21.6% in Asia Pacific.
Orders in 4Q08 were 203.9 million euro, an increase of 11.1% compared to the same quarter the year before. The Medical division realized the highest contribution to this growth with an increase year-on-year of 96.4%. Orders at the Media & Entertainment division also increased with 18%. The other divisions remained relatively flat in order intake with the exception of the Presentation & Simulation division.
The order book at the end of the quarter was 351.3 million euro or 15.6% higher than at the end of 4Q07.
Evolution order book 
Gross Profit Gross profit decreased year-on-year by 18.6% to 68.6 million euro. Gross profit margin at 33.0% compared to 37.9% in the year ago quarter.
EBIT before restructuring and impairment EBIT before restructuring and impairment charges decreased to minus 2.0 million euro from 27.1 million euro the previous year. Restructuring cost was 22.2 million euro. EBIT margin before restructuring was minus 1.0%.
Research & development expenses increased year-on-year from 18.1 million euro to 22.2 million euro. Sales & Marketing expenses were 30.7 million euro compared to 28.9 million euro the year before. General & administration went up from 12.8 million euro to 15.2 million euro.
Other operating expense was minus 2.5 million euro. 4Q07 had other operating income of 2.6 million euro.
Income Taxes Taxes were 0.8 million euro compared to 5.4 million euro in 4Q07.
Net Income
Net income for the quarter decreased to minus 24.9 million euro from 20.2 million euro for 4Q07. These amounts include the net income from discontinued operations. Net margin for the quarter was minus 12.0% from 9.1% the year before.
Net earnings per ordinary share (EPS) were minus 2.08 euro, down from 1.68 euro in 4Q07. Fully diluted net earnings per share decreased to minus 1.96 euro from 1.60 euro.
CONSOLIDATED RESULTS FOR FISCAL YEAR 2008 Fiscal year 2008 Financial Highlight on the basis of continuing operations:
- Order book at the end of December 2008 was 351.3 million euro, an increase of 15.6% compared to the order book at 31 December 2007. Order intake decreased by 2.7% to 762.6 million euro year-on-year.
- Sales reached 725.3 million euro, a 1.5% decrease year-on-year. Without foreign exchange impact growth would have been 2.2%.
- Gross profit was 247.4 million euro compared to 280.8 million euro the year before, a decrease of 11.9%%.
- EBIT was 8.9 million euro before restructuring and impairment charges, or 1.2% of sales. 2007 EBIT was 58.7 million euro or 8.0% of sales. After restructuring and impairment charges 2008 EBIT was minus 17.8 million euro. Restructuring and impairment charges were 26.7 million euro, 7.6 million euro of which related to impairments.
- Net income was minus 21.4 million euro, from 45.8 million euro the year before.
- Net income including net income from discontinued business was 18.3 million euro. In 2007 it was 53.3 million euro.
- Net earnings per share decreased to 1.53 euro from 4.43 euro.
Fiscal Year 2008 Financial Highlights on the basis op reported results *:
* Including the medical advanced visualization business unit Voxar
The following financial data are based on “continuing operations” Sales and Order Intake Sales decreased with 1.5% to 725.3 million euro. At constant foreign exchange rates sales growth would have been 2.2%. The Security & Monitoring and the Medical divisions both grew with respectively 5.7% and 4.9%. Before currency impact growth in these two divisions would have been 9.4% and 10.2%. Sales at the division Media & Entertainment went down 13.1% and 3.8% in the remaining divisions.
Sales to Europe, Middle East and Africa represented 47.2% of consolidated sales. 33.9% of sales were realized in the Americas and 18.9% in Asia Pacific.
Order intake in 2008 decreased 2.7% compared to 2007. Growth in order intake in the Medical division compensated to a large extent for the decrease in all other divisions.
The order book was 15.6% higher at the end of December 2008: 351.3 million euro compared to 303.8 million euro the year before.
Gross Profit Gross profit decreased to 247.4 million euro from 280.8 million euro the year before. This 11.9% decrease is mainly due to gross margin erosion following competitive price pressure in markets with less deals to be made and sell-off of slow moving products.
EBIT before restructuring and impairment EBIT before restructuring and impairment decreased with 84.8% to 8.9 million euro, from 58.7 million euro in 2007. EBIT margin was at 1.2% compared to 8.0% the year before.
Research & development investments increased from 65.5 million euro in 2007 to 77.1 million euro or 10.6% of sales. Sales and marketing investments increased from 109.0 million euro to 116.2 million euro, 16% of sales. With 51.1 million euro compared to 48.4 million euro general and administration expenses went up to 7.0% of sales.
Other operating income was 5.9 million euro. In 2007 other operating result was minus 0.7 million euro.
Income Taxes Income taxes were nil compared to 10.4 million euro in 2007.
Net Income Net income for 2008 decreased to 18.3 million euro from 53.3 million euro in 2007. These amounts include the net income from discontinued operations. Net earnings per ordinary share (EPS) decreased to 1.53 euro from 4.43 euro. Fully diluted net earnings per share were 1.44 euro compared with 4.19 euro in the year before.
Balance Sheet At the end of December 2008 Barco had a net debt position of 32.8 million euro, compared to a net debt position of 53.3 million euro on 31 December 2007. In 2008 a 28.2 million euro dividend payment was made and 11.2 million euro was spent on the share buy-back program
2. On 31 December 2008 accounts receivable were at 168.3 million euro compared to 202.4 million euro at 31 December 2007. End 2008 DSO was 72 days, down from 80 days the year before. Inventory was at 189.1 million euro versus 204.1 million euro 31 December 2007. Capex for 2008, excluding capitalized R & D, was 9.7 million euro.
DIVISIONAL RESULTS FOR FISCAL YEAR 2008 Media & Entertainment division Sales decreased with 13.1% compared to 2007 to 242.1 million euro. Sales in EMEA were flat but sales in the Americas and APAC decreased by 11.7% and 29.4% respectively. The events and the media businesses suffered the most. The former in EMEA and North America, while APAC grew with 17.5% year-on-year; the latter in North America and APAC. In the events business the corporate segment in particular was impacted by drastic cuts in large corporations’ marketing spending. The strong decline in the media business was driven by lower advertizing spending and restricted financing, resulting in cuts in capital spending in the sector. Growth in the digital cinema market remained moderate in absence of large digital roll-out programs, again resulting from financing restrictions. The acquisition of High End Systems in June 2008 had a positive impact.
Order intake for the division was down 2%, with a major drop in APAC being compensated by a strong increase in EMEA and North America. The media business more than doubled its order intake in EMEA, with a very strong increase in the DACH region. The events business’s order intake went down 10% in North America, held its ground in EMEA and grew with 12.5% in APAC. For the digital cinema segment, order intake in EMEA was good with an increase of almost 50%, while order intake in North America tripled compared to 2007.
The order book at year-end totaled 73.1 million euro compared to 53.5 million euro the year before.
Gross profit decreased 21% year-on-year, mainly because slow movers in the events business were sold off at very low margins. EBIT went down from 19.6 million euro to minus 16.8 million euro. EBIT margin was minus 6.9% versus 7.0% the year before.
Total expenditures for research & development amounted to 6.8% of sales.
At the end of 2008 the Media & Entertainment division counted 788 employees worldwide compared to 720 end 2007. Included in the 2008 figure are the employees of High End Systems, acquired in June 2008.
Security & Monitoring division Sales in the Security & Monitoring division increased by 5.7% to 245.8 million euro, with a strong growth of 13.9% in EMEA. The declining sales in North America (-8%) were fully compensated by the growth in APAC. Strong growth was realized in the defense market, mainly in other countries than the US. Traffic & Surveillance also did well, especially with air traffic control displays and several implementations of arrival management software. In the broadcast market sales slowed down.
Order intake for the division decreased by 5.2%, with North America as the weakest region. The best performing markets in the division were air traffic control and both naval and land-based defense.
The order book at year-end was at 128.1 million euro compared to 124.6 million euro at the end of 2007.
Gross profit increased with 2% year-on-year although the gross profit margin decreased from 40.8% to 39.3%. The higher sales volume was partially offset by the lower margin, due to price pressure and sales mix. EBIT margin was 4.8%. In 2007 it was 6.5%.
Total expenditures for research & development amounted to 10.4% of sales.
At the end of 2008 the Security & Monitoring division counted 1,014 employees worldwide compared to 1,155 end 2007.
Medical Imaging division Sales growth at the Medical Imaging division was 4.9% (from 121.1 million euro in 2007 to 127.0 million euro in 2008). The highest growth was realized in the Americas, whereas sales declined moderately in EMEA and APAC. Sales in softcopy imaging displays remained flat but a healthy increase of 19.4% was realized in the modality market with a very strong performance in North America.
Order intake for the division was up 4.8% where a strong increase in North America more than offset the decline in APAC. Order intake was flat in softcopy imaging displays, while it increased by 22% in the modality market, again with a very strong performance in North America.
The order book at the end of 2008 was at 54.1 million euro versus 38.8 million euro end of 2007.
Gross profit decreased 2.7% despite the good impact of sales growth. Main causes are margin pressure in the modality market and a significant currency impact due to the high US share in total sales of the division. EBIT margin for 2008 was 11.5% compared to 11.8% in 2008.
Total expenditures for research & development amounted to 10.2% of sales.
At the end of 2008, the Medical Imaging division counted 330 employees worldwide compared to 478 end 2007.
Other Markets Total sales for “other markets” decreased by 3.7%. Sales in the simulation market went down 7.8%, where a good increase in APAC was not enough to offset the decrease in EMEA and the Americas. In the avionics market sales went up 23.9% with a strong increase in North America. Sales in the presentation market declined by 11%. Within the framework of the cost reduction plan the presentation business unit was integrated into the sales channels of the Media & Entertainment division whereas the simulation business unit and avionics division were grouped in the newly formed Avionics & Simulation division.
Order intake in other markets decreased with 11.6%. Half of the decline was due to the presentation market.
The order book at the end of 2008 was at 97.7 million euro. End 2007 it was at 90 million euro.
Gross profit decreased 19.3% in 2008 compared to 2007. EBIT was minus 5.7 million euro compared to 7.1 million euro in 2007, due to high R & D costs, particularly in the Avionics division.
Total expenditures for research & development amounted to 16.7 % of sales.
At the end of 2008 other markets counted 400 employees compared to 536 end 2007.
DIVIDEND The Board of Directors will propose to the Annual General Shareholders’ meeting on 30 April 2009, not to pay a dividend over 2008.
OUTLOOK FOR 2009 The current world wide economic environment does not allow management to give any forecast as to 2009 results.
Moving cautiously into what promises to be a very challenging FY09, management intends to continue to streamline the company’s operations where necessary, improve management systems and processes and move even more aggressively and creatively into new market niches where Barco can lead and generate growth.
CONFERENCE CALL Barco will host a conference call with investors and analysts on 4 February, 2009, starting 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 (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 and 12 month period ended 31 December, 2008”, please visit the Company’s website at www.barco.com
For more information, please contact
JP
Tanghe
Senior Advisor to the CEO
Barco nv
Telephone
+32 56/26 23 22
jp.tanghe@barco.com
