Weak second quarter
Good order intake
Euro 30 million cost reduction plan to improve results
Regulated information
Second Quarter 2008 financial highlights1 on the basis of continuing operations2 :
- The order book at the end of June 2008 amounted to euro 332.6 million compared to euro 322.4 million the previous year. Order intake totaled euro 185.4 million, up 2% compared to the same period in 2007. At constant currencies growth would have been 10%.
- Sales amounted to euro 179.6 million, a decrease of 6% but a marginal growth of 1% excluding currency evolution.
- Gross profit declined by 16% to euro 62.4 million from euro 74.7 million the previous year.
- EBIT before restructuring and currency impact declined by 34%. Restructuring cost was euro 1.6 million. Currency impact was euro 3.6 million. After restructuring and currency impact EBIT was euro 5.0 million, down 68% year-on-year. EBIT margin was 2.8% compared to 8.1% in 2Q07.
- EBITDA was euro 20.5 million, a margin of 11.4%. In 2Q07 EBITDA was euro 28.5 million, a margin of 14.9%.
- Net income was euro 4.6 million, down 68% from euro 14.3 million in 2Q07.
- Net earnings per share were euro 0.39 compared to euro 1.19 for the same period the previous year.
A euro 30 million cost reduction plan is being implemented to improve the bottom line and cope with inflation and the economic slowdown.
Second Quarter 2008 financial highlights on the basis of reported results*: 
* Including BarcoVision
Kortrijk, Belgium, 23 July 2008 – Barco n.v. (NYSE Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three-month period ended June 30, 2008.
Referring to the 2Q08 results Barco CEO, Martin De Prycker, commented: “The second quarter results were weak, even though at constant currencies we did grow sales marginally by 1%. The strong performance of the Security & Monitoring and Medical divisions could not fully compensate for the decline in sales in the Media & Entertainment division and in Other Markets.”
Mr De Prycker stated that management expects the economic uncertainty to continue, making it imperative to reduce costs. He explained: “A cost reduction plan of euro 30 million is being implemented. This plan is composed of manpower reductions, the streamlining of the business portfolio and cost containment actions. It will result in an improvement of EBIT in 2009 and offset inflation.” As to the second half of 2008 he said: “We expect to take a one time restructuring cost of around euro 20 million in 2H08. Notwithstanding the current economic circumstances, we expect a significant improvement of the EBIT level before restructuring in 2H08 compared to 1H08, thanks to the good order intake, the cost reduction plan and the introduction of a number of new products.” In this respect Mr de Prycker also referred to the order intake in the second quarter: “Growth year-on-year was 2% despite the negative currency impact. In addition, we are currently working on a number of large contracts.”
Pointing at the recent acquisition of Austin based High End Systems Mr De Prycker said that this company had already contributed positively to sales and profit in the second quarter. He further added that the impact on 2008 EPS is estimated to be positive.
CONSOLIDATED RESULTS FOR THE QUARTER
Sales & Orders Excluding currency evolution sales for the quarter increased by 1% year-on-year to euro 179.6 million, despite the decline of the USD versus the euro of 16 % year-on-year. After currency impact there was a decrease of 6%. The strong sales performance of the Security & Monitoring division and to a lesser extent of the Medical division, could not fully compensate for the decline in sales sustained by the other divisions.
Overall order intake was solid with an increase of 2% compared to 2Q07. Order intake was particularly high in the Media & Entertainment division with an increase of 10.7% compared to 2Q07.
Sales to Europe, Middle East and Africa represented 45% of consolidated sales, while 36% of sales was achieved in the Americas and 19% in Asia Pacific. Compared to 2Q07 sales grew in the USA by 4.6%. Sales in the Middle East dropped sharply year-on-year as sales in 2Q07 benefited strongly from large shipments to Dubai.
The book-to-bill ratio was 1.03 compared with 0.95 for 2Q07.
Order book progress
Gross Profit & Margin Gross profit decreased by 16% to euro 62.4 million from euro 74.7 million in 2Q07, due to currency impact, price pressure and product mix.
Operating Result (EBIT) EBIT before restructuring and currency impact was euro 10.2 million, a decline of 34%. After restructuring cost of euro 1.6 million and currency impact of euro 3.6 million EBIT declined by 68% to euro 5 million. At euro 5 million the EBIT margin was 2.8% versus 8.1% the previous year.
As a percentage of sales, research & development expenses increased year-on-year from 8.6% to 10.7% of sales. Sales & marketing costs increased from 15.3% to 16.6% of sales. General & administration costs increased from 6.5% of sales to 6.8%.
Other operating results were euro 3.9 million compared to euro minus 0.8 million in 2Q07. Half of the difference between other operating results in 2Q08 and 2Q07 comes from reversing provisions, while the remainder was made up of positive currency exchange results and grants.
Income Taxes Income taxes decreased from euro 2.9 million to euro 0.8 million year-on-year.
Net Income Net income for the quarter decreased by 67.8% from euro 14.3 million in 2Q07 to euro 4.6 million in 2Q08. The net margin in 2Q08 was 2.6% versus 7.5% the year before.
Net earnings per share (EPS) for the quarter were euro 0.39, down from euro 1.19 in 2Q07. Fully diluted net earnings per share were euro 0.36, compared to euro 1.12 in the same period the year before.
DIVISIONAL RESULTS FOR THE QUARTER Media & Entertainment Division Sales at the Media & Entertainment Division declined 27% year-on-year. At constant currencies the decline would have been 21%.
Orders increased by 11%. In the events market orders were lower than the year before, due to currency impact. However, order intake is positively impacted by the introduction of new LED products. This increases confidence for 2H08. The media market had a strong increase in orders. Following the Virtual Print Fee (VPF) model slowly gaining momentum, also the digital cinema market had a strong increase in orders year-on-year.
At the end of 2Q08 the order book totaled euro 69.2 million.
EBIT margin was 1.1% versus 10.6% the year before.
Initial cost reduction measures are being implemented in July.
New product introductions will be coming up to speed in 2H08.
Security & Monitoring Division Sales grew 22%. At constant currencies growth would have been 31%. Growth was most outspoken in the defense and traffic & surveillance markets.
Orders declined by 14% after currency impact. Nevertheless order intake was good in the defense and utilities markets. In the traffic & surveillance market Barco’s leadership position was confirmed. Order intake grew in the Asia Pacific region.
At the end of 2Q08 the order book totaled euro 119.9 million.
EBIT margin was 7.7% versus 0.1% in 2Q07, thanks to a higher sales and cost containment.
New products are now being introduced and will be up for deliveries in 2H08.
Streamlining of the business portfolio is also being looked at.
Medical Imaging Division Sales in the Medical Imaging division increased by 6 % after currency impact. At constant currencies growth would have been 16%. Sales growth in the PACS market was very strong, mainly in the APAC region. Also in the modality market sales were slightly higher than the year before.
Order intake for the Medical Imaging division grew by 1% after currency impact, driven by growth in the Americas.
At the end of 2Q08 the order book totaled euro 43.0 million.
EBIT margin was 10.6% compared to 13.4% in the same period of the year before. This decrease is caused by the lower gross margin due to price pressure.
Market coverage will be broadened in 2H08 as new products will be launched. Initiatives are also taken to further outsource manufacturing to low cost countries.
Other markets
Sales in Other Markets dropped by 22% after currency impact. This would have been a decline of 14% at constant currencies. The simulation market had a lower order intake and lower sales compared to 2Q07. This was mainly due to the unavailability of LCOS products. Order intake remained flat in the presentation market but sales declined. In the avionics market orders and sales continue to grow. The first shipments of simulation projectors with new LCOS panels have started in the beginning of 3Q08. This will help to substantially increase orders and sales in 2H08.
At the end of 2Q08 the order book of euro 100.5 million was strong, particularly in both the simulation and avionics markets.
EBIT margin was minus 15%, down from 7.2% in 2Q07, as the lower gross profit could not offset the high investments in product development for the simulation and avionics markets.
Initial cost reduction measures are being implemented in July.
CONSOLIDATED RESULTS FOR THE SIX MONTHS Sales & Orders Sales decreased year-on-year by 1% after currency impact to euro 344.9 million. Orders decreased by 5% to euro 383.7 million, again after currency impact. The decline is fully due to a very large digital cinema order in 1Q07. Of the larger divisions the Medical Imaging division performed best in order intake.
The book-to-bill ratio was 1.11 compared to 1.16 the year before.
Gross Profit & Margin Gross profit decreased by 8% to euro 125.5 million. This decrease was due to currency impact, price pressure and product mix.
Operating result (EBIT) EBIT before restructuring and currency impact was euro 19.9 million, a decline of 9%. After restructuring cost of euro 1.6 million and currency impact of euro 7.3 million EBIT declined to euro 11.0 million, a decline of 49% versus 1H07. At euro 11.0 million EBIT margin was 3.2% compared to 6.3% for the same period the year before.
As a percentage of sales, research & development expenses increased year-on-year from 9.2% to 10.6% of sales. Sales & marketing costs increased from 16.4% to 17.3% of sales. General & administration costs increased from 7% of sales to 7.1%.
Other operating results were euro 6.4 million compared to euro 0.8 million the year before. The larger part of the difference between other operating results in 1H08 and 1H07 comes from positive currency exchange results, while the remainder was made up of grants and reversing provisions.
Income taxes
Income taxes decreased from euro 3.8 million for 1H07 to euro 2.1 million for 1H08.
Net income Net income for 1H08 decreased by 49% from euro 21.9 million in 1H07 to euro 11.2 million. The net margin for the semester was 3.2% compared to 6.3% the year before.
Net earnings per share (EPS) for the semester were euro 0.94, down from euro 1.81 in 1H07. Fully diluted net earnings per share were euro 0.88 compared to euro 1.71 in the same period the year before.
Balance Sheet
At the end of 1H08 Barco had a net debt position of euro 108.4 million, compared to a net debt position of euro 24.0 million at 30 June 2007. At 31 December 2007 the net debt position was 53.4 million.
On 30 June 2008 accounts receivable were at euro 179.8 million, compared to euro 194.2 million at the end of June 2007 and euro 202.4 million at 31 December 2007.
Inventory was at euro 223.6 million versus euro 173.4 million on 30 June 2007 and euro 204.0 at 31 December 2007.
Trade payables on 30 June 2008 were euro 74.9 million. On 30 June 2007 they were euro 84.9 million and euro 87.3 million at 31 December 2007.
Net working capital at the end of 2Q08 was euro 236.4 million, compared to euro 184.9 million the year before. On 31 December 2007 net working capital was euro 230.7 million.
Capex for 1H08 was euro 6.2 million excluding capitalized R & D cost.
In 1H08 Barco bought back 27,900 of its own shares
3 .
OUTLOOK FOR FULL YEAR 2008
The following statements are forward looking and actual results may differ materially. A euro 30 million cost reduction plan is being implemented. This plan is composed of manpower reductions, the streamlining of the business portfolio and cost containment actions. The plan will result in an improvement of EBIT in 2009 and offset inflation. A one time restructuring cost of around euro 20 million will be taken in 2H08. Despite the current economic circumstances, management expects a significant improvement of the EBIT level before restructuring in 2H08 compared to 1H08, thanks to the good order intake, the cost reduction plan and the introduction of a number of new products. In the second quarter growth year-on-year in order intake was 2% despite the negative currency impact. Moreover, the company is currently working on a number of large contracts.
CONFERENCE CALL
Barco will hold a conference call with investors and analysts on 23 July, 2008, starting at 4.30 p.m. CET (10.30 a.m. EST), to discuss the results for the quarter. The call will be hosted by Martin De Prycker, CEO, Dirk De Man, CFO and JP Tanghe, IRO.
An audio cast of this conference call will be available on the Company’s website
www.barco.com before 8.00 p.m. CET (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 is active in more than 90 countries with approximately 3600 employees worldwide.
The company is listed on NYSE Euronext Brussels (BAR). For more information and the full report “6 months ended 30 June 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
