Significant growth in orders and sales over 2005 and earnings in line with expectations

Fiscal year 2005 Financial Highlights [1]:
• Orders increased by 11.8% to euro 730.4 million year-over-year. The book-to- bill ratio was 1.03 compared to 0.97 in 2004.
• Sales reached euro 712.0 million, a 6.0% increase year-over-year.
• EBITA before non-recurrent costs was down to euro 60.5 million. EBITA margin was 8.5% versus 10.6% in 2004. After non-recurrent costs EBITA was euro 52 million.
• Net income down 18.5% to euro 38.6 million, from euro 47.3 million.
• Current earnings per share of euro 3.25 versus euro 4.66 in 2004.
• Net earnings per share decreased to euro 3.15 from euro 3.86.
• Fully diluted earnings per share down to euro 2.97 from euro 3.62 the prior year.


Barco CEO, Martin De Prycker, commented: “Strong order levels throughout 2005 led to an increase of 11.8% for the full year. Sales grew with 6% in 2005. With growth levels of 21.4% in orders and 8.8% in sales, 4Q05 did particularly well. Growth in 2005 was mainly organic growth realized in the medical, events, control rooms and digital cinema markets. We ended the year with a net cash position of euro 22 million.”

“In 2005 management increased its focus on increasing operational excellence, which is leading to a more streamlined organization. In Europe sales & service back office functions are now being centralized in the divisional HQs, resulting in improved project management and customer service. In the U.S. all resources of the Media & Entertainment division is being concentrated in Sacramento, California. In Georgia the Kennesaw and Duluth activities are being consolidated in Duluth, thus bringing together valuable experience and creating bigger teams of specialists devoted to customers. Furthermore we are also reorganizing operations in our defense business units in the U.S. and France. This streamlining has weighed on our profitability, with non-recurrent costs of euro 8.5 million. EBITA before non-recurrent costs was euro 60.5 million, which means a margin of 8.5%.”

“Throughout 2005 we were able to increase gross profit margin, which had taken a dip to 39.6% in 1Q05. For 2005 gross profit margin was 41.0%, still lower than 43.2% in 2004, but clearly moving in the right direction. Too high inventory levels during 2005 led to higher stock write-offs of euro 5.5 million, which had a negative impact on our gross profit margin.”

“The actions we took to improve inventory showed first success, with reduced inventory compared to end 2004, despite higher anticipated sales. An improved sales and operations planning will also ensure that excessive inventory situations as in mid 2005 are avoided.”

“The streamlining started in 2005, to continue in 1H06. Full savings will be reached upon completion of these reorganization schemes, as of 2H06. On an annual basis these savings will be between euro 4 and 6 million.”

“For 1Q06 we expect orders to grow from euro 172 million in 1Q05 to euro 180 to 190 million. For sales we anticipate euro 165 to 175 million or 10% growth at the middle of the range. Expectations for EBITA lie between euro 5 and 10 million versus euro 6.4 million in 1Q05. At the middle of the range this means an increase of 17% compared to the EBITA of 1Q05.”

“We will also continue our strategy of adding more high mid range products in some of our markets, like we have done successfully in the medical market.”



CONSOLIDATED RESULTS FOR FISCAL YEAR 2005


Sales and Orders

Sales grew 6% to euro 712.0 million. This increase was realized to a large extent by the growth with 7% in both the Control Rooms and BarcoView divisions. The Media & Entertainment division increased its sales with 17%. In the Presentation & Simulation and BarcoVision divisions sales decreased respectively by almost 2% and 3%.

Sales to Europe, Middle East and Africa represented 47.7% of consolidated sales. 33.5% of sales were realized in the Americas and 18.8% in Asia Pacific.


Orders increased by 11.8% in 2005 compared to 2004, with Control Rooms increasing its orders by 18.7% and Media & Entertainment by 25%. Orders in both the Presentation & Simulation and in the BarcoView divisions grew by almost 9%, while BarcoVision had a decline in orders of 7.3%.

The book-to-bill ratio over 2005 was 1.03 versus 0.97 in 2004.


Gross Profit & Margin

Gross profit at euro 292.2 million remained stable year-on-year. Gross profit margin declined by 2% to 41.0% during the same period, partly due to changes in the product mix and stock write-offs.


Operating Results Before Interest, Taxes and Amortization of Consolidation Goodwill (EBITA)

EBITA before non-recurrent costs decreased by 15.2% to euro 60.5 million, from euro 71.4 million in 2004. EBITA margin was at 8.5% from 10.6% a year ago.
Non-recurrent costs, mainly consisting of restructuring costs, totaled euro 8.5 million.


General and administration expenses remained relatively flat at 7.4% of sales. The same is true for investment in research & development at 9.5% and sales and marketing investments at 16.1% of sales.

Due to restructuring costs other operating income was euro - 4.9 million versus euro 5.9 million in 2004.


Other non-operating expense

Other non-operating result was euro 2.0 million compared to euro -0.2 million in 2004, thanks to the divestment of Barco’s assets in Mania.


Income Taxes

Income taxes decreased to euro 10.3 million from euro 14.7 million year-on-year.

Current Earnings per Share

Current earnings (earnings before goodwill impairment, other non-operating income and tax impact related to the above) per share for the year were at euro 3.25 compared with euro 4.66 in 2004.


Net Income

Net income declined to euro 38.6 million, from euro 47.3 million in 2004. Net earnings per ordinary share (EPS) decreased to euro 3.15 from euro 3.86. Fully diluted net earnings per share were euro 2.97, compared with euro 3.62 in the prior year.


Capital Expenditures (CAPEX)

Capex for the year, excluding capitalized R & D, was euro 12.4 million.


DIVIDEND

The Board of Directors will propose to the Annual General Shareholders’ meeting of 3 May, 2006, to increase the dividend to euro 2.15, i.e. at the level of the previous year. This would bring the pay-out ratio to 68.3%.

OUTLOOK FOR 1Q06
The following statements are forward looking and actual results may differ materially.

For 1Q06 Barco expects orders to grow to euro 180 to 190 million from euro 172 million in 1Q05. For sales Barco anticipates euro 165 to 175 million or a growth of 10% at the middle of the range. Expectations for EBITA are in the range of euro 5 to 10 million versus euro 6.4 million in 1Q05. At the middle of the range this means an increase of 17.2% compared to the EBITA of 1Q05.



CONSOLIDATED RESULTS FOR THE QUARTER

Fourth Quarter 2005 Financial Highlights [2]:

• Orders were up 21.5% at euro 196.5 million, leading to a book-to-bill ratio of 0.94 versus 0.84 in 4Q04. Management expected orders for the quarter between euro 175 and 185 million.
• Sales at euro 210.0 million, up 8.8% year-over-year and above the expected range of euro 195 to 205 million.
• EBITA before restructuring costs was euro 25.5 million, in the high end of the range of euro 22 to 27 million anticipated by management. EBITA margin was 12.2% versus 12.6% in 4Q04. Restructuring costs totaled euro 6.4 million.
• Net income down 15.4% to euro 13.7 million, from euro 16.2 million.
• Current earnings per share of euro 1.22 versus euro 1.65.
• Net earnings per share decreased to euro 1.12, from euro 1.32 in 4Q04.
• Fully diluted earnings per share down to euro 1.05, from euro 1.24 the prior year.


Sales and Orders

Sales for the quarter were euro 210.0 million, well above management’s expectations of euro 195 to 205 million, and 8.8% year-on-year increase. The main growth came from the Media & Entertainment division with 46.8%. The Presentation & Simulation and the BarcoView divisions added respectively 5.8% and 3% year-on-year, while sales at BarcoVision declined by 20.3%.

Sales to Europe, Middle East and Africa represented 44.6% of consolidated sales, while 34.5% of sales were realized in the Americas and 20.9% in Asia Pacific.

Orders in 4Q05 orders were euro 196.5 million, an increase of 21.5% compared to the same quarter the year before.

The book-to-bill ratio (orders divided by sales) was 0.94 compared with 0.84 for 4Q04.

Book-to-Bill Ratio





Gross Profit & Margin

Gross profit increased year-on-year by 6.2% to euro 86.9 million. Gross profit margin was 41.4% compared with 42.9% in the year-ago quarter, mainly due to an increased write-off of stocks. On a sequential basis, gross margin improved by 1.2%, from 40.6% in 3Q05.


Operating Results before Interest, Tax and Amortization of Consolidation Goodwill (EBITA)

EBITA before restructuring costs increased 5.3% year-on-year to euro 25.5 million, in the high end of expectations of euro 22 to 27 million. Costs for restructuring in North America and Europe totaled euro 6.4 million.

EBITA margin decreased to 12.2% from 12.6% in 4Q04.

As a percentage of sales general & administration expenses, sales and marketing spending and investment in research & development remained approximately at the same levels as the year before, with respectively 6.2%, 14.6% and 9%.

Due to restructuring costs other operating income was euro -5.4 million compared to euro 0.3 million in 2004.


Other non-operating expense

The divestment of Barco’s assets in Mania led to other non-operating income of euro 2.1 million versus – 0.1 million in 2004.


Income Taxes

Taxes were at euro 3.3 million compared to euro 3.6 million in 4Q04.


Current earnings per share

Current earnings (earnings before goodwill impairment, other non-operating income and tax impact related to the above) per share for the quarter decreased to euro 1.22 from euro 1.65 for 4Q04.

Net Income

Net income for the quarter decreased by 15.4% to euro 13.7 million from euro 16.2 million for 4Q04. Net margin for the quarter was 6.5% from 8.4% the year before.

Net earnings per ordinary share (EPS) were euro 1.12, compared to euro 1.32 in 4Q04. Fully diluted net earnings per share decreased to euro 1.05 from euro 1.24.



DIVISIONAL RESULTS FOR THE QUARTER

BarcoView

Sales at BarcoView increased by 3% year-on-year. The medical and avionics markets did very well with high double digit increases. The ongoing growth in all 3 segments of the medical market Barco is active in, PACS, modalities and 3D software, confirms Barco’s market leadership. In the defense & security market and in traffic management, Barco saw a decrease in sales.

The book-to-bill ratio for the quarter was 0.72. Order level was stable compared to 4Q04, with the medical market doing very well, Avionics remaining at high levels, but with a negative impact from the defense & security and the traffic management markets.

Gross profit margin at BarcoView was 51.8% versus 51.1% the year before, despite higher sales of high mid range medical products. In 3Q05 gross profit margin was 44.9%. EBITA margin was at 13.5% compared to 22.9% the year before, mainly because of weaker results in the defense & security and traffic management markets.


Barco Media & Entertainment

Sales grew by almost 47% in 4Q05, thanks to good sales in the events market, following the successful introduction of new products and a considerable growth in digital cinema, illustrating a further penetration in cinema theaters. Sales in the media market remained flat compared to 4Q04.

The fourth quarter book-to-bill ratio for the division was 1.13. The division showed a strong order growth of 62%, with a clear increase in market share in the events market. Orders in the digital cinema market remained at the high 4Q04 levels.

Gross profit margin was at 22.8% versus 27.5% the year before, due to a different product mix, stock write-off and exceptional warranty cost, caused by premature aging of a third party component. The profit margin was a –1.0 % compared to –7.1% in 4Q04 and –3.1% in 3Q05, but still weak because of restructuring cost.


Barco Control Rooms

With euro 34.2 million sales Barco Control Rooms kept sales at the same high as in 4Q04. Sales were good worldwide in all market segments.

With a growth in orders of 21.8% the book-to-bill ratio came to 0.93, compared to 0.76 in 4Q04, ending 2005 with a stronger order book than the year before.

Gross profit margin increased to 48.3% versus 42.7% in 4Q04, thanks to improved operational efficiency in the total supply chain. EBITA margin was very good at 17.2% compared to 14.5% the year before.


Barco Presentation & Simulation

Barco Presentation & Simulation sales increased by 5.8% year-on-year, with strong sales in the simulation market, particularly in the virtual reality segment. A delay in the release of software resulted in lower sales in the presentation market.

Book-to-bill ratio was at 1.09. Orders grew 20%, following growth in both the simulation and the presentation markets.

Gross profit margin was 39.9% compared to 46.5% in 4Q04, due to increased inventory write-off. EBITA margin at 11.9% was lower than 13.1% in 4Q04, but up compared to 2.9% in 3Q05.


BarcoVision

Sales at BarcoVision were 20.3% lower year-on-year, due to the weakness of the textile market.

Orders were at a low level, 13% lower than in 4Q04, due to the ongoing weak investment climate in the textile market. The book-to-bill ratio was at 0.97.

Gross profit margin improved to 50.6% versus 47.8% the year before. Compared to 4Q04 EBITA margin of 18.1%, the margin was lower in 4Q05 at 10.9%. This was mainly due to the fact that the operational costs were not reduced in line with the sales decline, because of investments in new products.


Barco Manufacturing Services

Sales and orders for the quarter were lower than in 4Q04, due to a shift of some final production to Asia where local subcontractors are used.

EBITA margin was at -3.3% versus – 0.2%, due to lower volumes.

Manpower has been strongly reduced by early retirement schemes and reduction of temps.

Several options for the future of Barco Manufacturing Services are being evaluated.


CONFERENCE CALL

Barco will host a conference call with investors and analysts on 16 February, 2006, starting at 4:30 p.m. Brussels Time (10:30 a.m. EST), to discuss the results for the quarter. The call will be hosted by Mr. Martin De Prycker, Chief Executive Officer of Barco, Mr. Antoon Van Petegem, Chief Financial Officer and JP Tanghe, President Corporate Communication and Investor Relations.

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, an international company headquartered in Kortrijk, Belgium, provides visualization and display solutions for professional markets. Barco designs and develops solutions for large screen visualization, display solutions for life-critical applications and systems for visual inspection. The company is active worldwide and has its own facilities for sales & marketing, customer support, research & development and manufacturing in Europe, North America and Asia Pacific.

Barco’s ordinary shares are listed on the Brussels/Euronext stock exchange. Share information may be accessed on Bloomberg under the symbol BAR BB and on Reuters under BARBt.BR. Barco is a BEL 20 and a Next 150 company.

For more information and the full report “3 and 12 month period ended 31 December , 2005”, 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.


[1] Unless otherwise indicated, all financial and operating data discussed in this announcement are in accordance with IFRS and in million of Euro. Tables state figures in thousands of Euro, unless otherwise noted. Unless otherwise stated, all comparisons are between the twelve-month period ended December 31, 2005, and the equivalent twelve-month period ended December 31, 2004.

Figures for the twelve-month period ended December 31, 2004 were restated in line with new IFRS rules.

[2] Unless otherwise indicated, all financial and operating data discussed in this announcement are in accordance with IFRS and in million of Euro. Tables state figures in thousands of Euro, unless otherwise noted. Unless otherwise stated, all comparisons are between the three-month period ended December 31, 2005, and the equivalent three-month period ended December 31, 2004. Figures for the three-month period ended 31 December, 2004 were restated in line with new IFRS rules.

For more information, please contact

JP Tanghe
Senior Advisor to the CEO
Barco nv

Telephone +32 56/26 23 22
jp.tanghe@barco.com