In 2009 Barco deals decisively with its challenges
Regulated information
Kortrijk, Belgium, 10 February 2010 - Barco (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three- and twelve-month periods ended 31 December, 20091.
Commenting on the results of 2009, Eric Van Zele, President and CEO, said: “In the wake of the economic crisis and the global credit crunch, Barco had no other option but to deal decisively with the new realities of the markets it was serving. Demand for products and systems in the events and out-of-home media markets imploded. So we needed to right-size and clean up our assets and resources deployed in this division. This included taking provisions for all known liabilities and selling-off or writing-off all excess inventories and capitalized research & development expenses. Furthermore impairment of goodwill on acquisitions done in previous years proved necessary and operating expenses had to be cut drastically. This explains why Barco's 2009 focus was on generating the cash needed to guide the company safely through turbulent times and through many costly change processes.”Whereas incoming orders for 4Q09 were down 18.4% to 166.5 million euro, Barco's total order book still stood at 331.4 million euro, which is only 5.7% less than one year before. It is worth noting that reported orders do not (yet) include any longer term frame agreements for digital cinema projectors, valued at more than 150 million euro over the next three years.
Sales for the quarter were 180.6 million euro, which is 13.1% less than in 4Q08. Sales for the quarter included more than 35 million euro of digital cinema projector sales. EBITDA for the quarter was slightly negative at minus 1.2 million euro compared to 14.1 million euro positive in 4Q08. EBITDA was negatively impacted by substantial non-cash bookings exceeding 14 million euro for warranty provisions and inventory write-offs. Quarterly EBIT was minus 54.1 million euro post additional provisions for restructuring and impairment.
Sales for the entire year 2009 totaled 638.1 million euro, down 12.0% from FY08 levels. Sales included more than 100 million euro of shipments of digital cinema projectors, up from 37 million euro in 2008. EBIT for FY09 was minus 29.5 million euro before restructuring and impairment charges, which is 38.4 million euro less than in FY08. Further restructuring and impairment charges on goodwill, R & D and inventories amounted to 39.4 million euro, bringing net income to minus 59.9 million euro.
Free cash flow on the other hand was 59.4 million euro positive. One third of this cash generation originated from operations, whereas two thirds can be related to reductions in working capital. Trade receivables decreased by 33.5 million euro from 74 days end 2008 to 67 days at the end of 2009. Inventories were reduced by 42.8 million euro or 23% to 146.3 million euro.
Annualized operating expenses for the company were reduced by 53.6 million euro or 18% compared to 2008.
Barco's net cash position at the end of 2009 stood at 23.5 million euro, up 56.3 million euro from a net financial debt position of minus 32.8 million euro at the end of 2008. The 23.5 million euro net cash includes proceeds from the Voxar divestiture and payments for the FIMI acquisition.
Nevertheless the Board of Directors of Barco is of the opinion that the company's cash can best be left in the company to fund future investments in profitable growth. Hence the board will submit its recommendation to the general assembly not to pay a dividend over 2009.
Looking ahead at 2010 Mr Van Zele suggested that the drastic clean-up and right-sizing actions he took in 2009 would enable Barco to emerge as a much stronger and better company in 2010. He expressed confidence about continued solid growth in the digital cinema and medical imaging markets whilst Barco would also further capitalize on good economic conditions and promising growth prospects in emerging geographical markets. With the introduction of several LED enabled new product platforms Barco further aims at restoring its technical leadership position in the traffic & surveillance markets and plans to finally reduce its large order backlog in simulation, avionics and defense. Combined with continued progress in operational excellence and the introduction of many mid segment offerings, the company is well positioned for growth and a return to healthy levels of profitability (EBIT) in 2010.
CONSOLIDATED RESULTS FOR THE QUARTER
Fourth Quarter 2009 Financial Highlights on the basis of continuing operations:
• Order book at the end of December 2009 was 331.4 million euro. This is a decrease of 5.7% compared to the order book of 351.3 million euro the year before. Order intake decreased by 18.4% to 166.5 million euro.
• Sales reached 180.6 million euro, down 13.1% year-over-year.
• Gross profit declined with 32.2 % to 46.5 million euro from 68.6 million euro the previous year.
• EBITDA was minus 1.2 million euro compared to 14.1 million euro in 4Q08.
• EBIT was minus 14.7 million euro before restructuring and impairment charges, versus minus 2 million euro in 4Q08. After restructuring and impairment charges EBIT was minus 54.1 million euro compared to minus 23.9 million euro the year before.
• Net income including net income from discontinued business was minus 50.9 million euro. In 4Q08 it was minus 25.6 million euro.
• Net earnings per share were minus 4.26 euro compared to minus 2.14 euro in 4Q08.
• Free cash flow at the end of the quarter was 4.5 million euro compared to 30.7 million euro the year before.
Sales and order intake
Sales for the quarter were 180.6 million euro, a 13.1% decrease year-on-year. All divisions had a decline in sales except for the Media & Entertainment division, which could keep its sales flat thanks to the digital cinema business quadrupling its sales in 4Q09.
Sales to Europe, Middle East and Africa represented 41.8% of total sales, while 27.6% of sales were realized in the Americas and 30.6% in the Asia Pacific region.
Order intake in 4Q09 was 166.5 million euro, a decrease of 18.4% compared to the same quarter the year before. Except for the Avionics & Simulation division, the order intake of which increased by 24.7%, the other divisions had declining order intakes compared to 4Q08. In the Medical Imaging division this was due to the intake of a significant order in 4Q08. Order intake in digital cinema quadrupled, but this important increase was not sufficient to offset the drop in the events and out-of-home media markets.
The order book at the end of the quarter was 331.4 million euro or 5.7% lower than at the end of 4Q08.
Evolution order book
| (in million euro) | 4Q09 | 3Q09 | 2Q09 | 1Q09 | 4Q08 |
| Order book | 331.4 | 342.4 | 336.7 | 366.5 | 351.3 |
Gross profit
Gross profit declined year-on-year by 32.2% to 46.5 million euro from 68.6 million euro the year before.
EBIT before restructuring and impairment
EBIT before restructuring and impairment charges decreased to minus 14.7 million euro from minus 2 million in 4Q08. EBIT after restructuring and impairment charges was minus 54.1 million euro compared to minus 23.9 million euro the year before.
Research & development expenses decreased year-on-year from 10.7% of sales to 9.9%. Sales & marketing expenses went down in absolute numbers but increased relatively from 14.8% of sales to 15.3%. General & administration went down from 7.3% of sales to 5.8%.
Other operating expense was minus 5.2 million euro. In 4Q08 it was minus 2.5 million euro.
Net income
Net income for the quarter decreased to minus 50.9 million euro from minus 25.6 million euro for 4Q08. These amounts include the net income from discontinued operations.
Net earnings per ordinary share (EPS) were minus 4.26 euro, down from minus 2.14 euro in 4Q08.
CONSOLIDATED RESULTS FOR FISCAL YEAR 2009
Fiscal year 2009 Financial Highlights on the basis of continuing operations:
• Order book at the end of December 2009 was 331.4 million euro, a decrease of 5.7% compared to the order book at 31 December 2008. Order intake decreased by 18.9% to 618.2 million euro year-on-year.
• Sales reached 638.1 million euro, a 12.0% decrease year-on-year.
• Gross profit was 176.3 million euro compared to 247.4 million euro the year before, a decrease of 28.7%.
• EBITDA was 24.1 million euro compared to 67.9 million in 2008.
• EBIT was minus 29.5 million euro before restructuring and impairment charges, or minus 4.6% of sales. 2008 EBIT was 8.9 million euro or 1.2% of sales. After restructuring and impairment charges 2009 EBIT was minus 68.9 million euro. Restructuring and impairment charges were 39.3 million euro, 33.2 million euro of which related to impairments.
• Net income was minus 64.2 million euro, from minus 21.4 million euro the year before.
• Net income including net income from discontinued business was minus 59.9 million euro. In 2008 it was 18.2 million euro.
• Net earnings per share decreased to minus 5.02 euro from 1.53 euro.
• Free cash flow at the end of 2009 was 59.4 million euro compared to 20.1 million euro in 2008.
Sales and order intake
In 2009 sales decreased by 12% from 725.3 million euro to 638.1 million euro. This decline was for the larger part due to the events and out-of-home media businesses, the weak performance of which could not be fully offset by the very significant growth of 168.8% in the digital cinema market. In the difficult economic environment of 2009 all other divisions of Barco also had a drop in sales.
In 2009 the geographical distribution of total revenues clearly moved towards a more important share in the Asia Pacific (APAC) region, which was accounting for 23.3% compared to 18.9% the year before. In absolute numbers sales in the APAC region grew 8.5%, with particularly China and India contributing to this growth. On total sales for 2009 the Americas still accounted for 32.3% compared to 33.9% in 2008. However, in absolute numbers sales in the Americas declined by 16.1%. Europe, Middle East and Africa (EMEA) represented 44.4% of total sales. In 2008 EMEA stood for 47.2% of sales. In absolute numbers sales in the EMEA region went down 17.3%. Sales in the UK, Ireland, Spain and Italy were hit the hardest.
Order intake decreased by 18.9% in 2009 compared to 2008. Digital cinema was the only market with a growth in order intake: 186.2% year-on-year. Similar to sales the APAC region grew its share of order intake from 18.5% in 2008 to 24.8% of total order intake. In absolute numbers order intake in APAC grew by 9%, carried by a strong increase in China. Order intake in the Americas dropped from 31.6% to 28.3% in 2009, a drop of 24.7% in absolute numbers. The EMEA region went from 49% of total order intake to 44.9%, or a drop in absolute figures of 25.6%, driven by weak order intake in Spain and the DACH region (Germany, Austria and Switzerland).
The order book at the end of December 2009 was at 331.4 million euro compared to 351.3 million euro the year before.
Gross profit
Gross profit decreased by 28.6% from 247.4 million euro in 2008 to 176.5 million euro in 2009, largely due to the decrease in gross margin. The sales drop of 87 million euro had the highest negative impact on the gross margin, besides quality issues, low project margins and the sell-off of slow-moving products. Inventory write-offs of 20.5 million euro compared to 10.9 million euro in 2008 also had a negative impact on gross profit.
EBIT before restructuring and impairment
EBIT before restructuring and impairment decreased from euro 8.9 million in 2008 to euro minus 29.5 million, following the significant drop in gross profit. In 2009 amortization was 8 million higher than capitalization of research & development, which also contributed to the negative EBIT.
Over the year 2009 management reduced indirect cost from euro 301.1 million or 41.5% of sales to euro 247.5 million or 38.8% of sales. This cost reduction of 17.8% was achieved through restructuring and cost containment actions.
Research & development expenses decreased from 78.0 million euro or 10.7% of sales to 61.2 million euro or 9.6%. Sales and Marketing cost dropped from 116.2 million euro or 16.0% of sales to 96.9 million euro or 15.2% of sales. General and administration expenses were at 6.5% of sales or euro 41.7 million compared to 7.0% of sales or 51.1 million euro the year before.
Other operating income was 2 million euro compared to 5.9 million euro in 2008.
Net income
Net income for 2009 was minus 64.2 million euro, from minus 21.4 million euro the year before. Including net income from discontinued business, net income 2009 was minus 59.9 million euro compared to 18.2 million euro in 2008.
Free Cash Flow
Free cash flow at the end of 2009 was 59.4 million euro compared to 20.1 million euro in 2008.
Balance sheet
Trade receivables went down 33.5 million euro to million 134.8 million euro. DSO was reduced by 7% from 72 days end 2008 to 67 days end 2009. Trade payables were slightly above the 2008 year-end level. Inventories were down 23% to 146.3 million euro. Inventory turns improved from 2.2 turns at the end of 2008 to 2.7 turns at the end of 2009. As compared to the net debt position of minus 32.8 million euro at the end of 2008, the company's net cash position at the end of 2009 was 23.5 million euro. This net cash is the net balance after the divestiture of Voxar in February 2009 and the acquisition of FIMI end of December 2009. No dividend was paid in 2009 and neither were any shares bought back. Capex for 2009, excluding capitalized research & development, was 5.5 million euro.
DIVISIONAL RESULTS FOR FISCAL YEAR 2009
Media & Entertainment division
Compared to 2008 sales of the division decreased by 10.8% or 29.9 million euro to 246.9 million euro. This decrease was completely due to the weak performance in the events and out-of home media markets, the drop in sales of which was offset by growth in digital cinema for only two thirds. The economic downturn led to a decline of close to 50% in entertainment and corporate events and to an 80% decline in the digital billboard market, which suffered from a sharp drop in advertisement spending. Sales of the division grew by 21.8% in the APAC region but declined in both the EMEA region and the Americas. Sales in digital cinema were almost five times higher in the APAC region than the year before, with China and South East Asia doing very well. In the Americas sales in the digital cinema market almost doubled, while in the EMEA region they almost trippled.
Order intake for the division declined by 20.3% despite a strong growth of 44.3% in the APAC region, again with the Chinese market doing very well, particularly in digital cinema. One third of order intake in that market came from the APAC region, thanks to strong growth compared to 2008. Both other regions also had strong growth in digital cinema, which led to a total increase in order intake of 186.2% for 2009 compared to the year before.
The order book at year-end totaled 60.9 million euro compared to euro 80.2 million the year before.
Gross profit decreased 52.5% to 30.0 million euro. Contributing to this decrease was the lower sales volume, the sell off at low margins and the changed sales mix from high gross margin events products to digital cinema, which over the full year still had lower margins than
the events market had before the economic crisis. EBIT before restructuring and impairment went down to minus 44.5 million euro, a margin of minus 18.0% compared to minus 6.3% the year before. The substantial cost savings in operational costs of 21.5 million euro or 20% were not sufficient to realize a break-even for the division.
Free cash flow for the division was break-even, thanks to substantial improvements in working capital.
Total expenditures for research & development amounted to 6.9% of sales.
Security & Monitoring division
In 2009 sales decreased by 18.6% to 200.1 million euro from 245.8 million euro in 2008. Only the APAC region could show growth (2%), while sales in the EMEA region and the Americas decreased respectively by 27.0% and 29.4%. Order intake for the full year dropped 16.4% from 249.6 million euro to 208.7 million euro. By the end of the year markets seemed to stabilize and markets like utilities in emerging countries, surveillance and security even started to show some modest growth. Sales in the defense market were at about the same level as in 2008, while the order book in that business has grown by 25.7% compared to end 2008. The order book for the civil business of the division also increased by 7% compared to end 2008.
The order book at year-end for the Security & Monitoring division was at 144.0 million euro compared to 128.1 million euro the year before.
Gross profit decreased 26.3% to euro 71.9 million. This decrease is due to the drop in sales and very competitive markets, which lead to price pressure. The division was able however, to compensate this price pressure to a large extent by reducing the cost of goods sold. Reductions in operational expenses and strict operational cost control resulted in a decrease in operational costs of 16% compared to 2008. EBIT before restructuring and impairment decreased from 13.4 million euro or 5.4% of sales to 4.9 million euro or an EBIT margin of 2.5%.
Free cash flow for the division was 24.3 million euro, with good attention for working capital resulting in an improvement in DSO and inventory turns.
Total expenditures for research & development amounted to 12.1% of sales. One of the new products that was developed for release in 1Q10 is a new LED based control room projector. A new generation of controllers is also being rolled out.
Medical Imaging division
Sales in the medical imaging division declined by 10.6% to 113.6 million euro from 127.0 million euro in 2008. Sales in the APAC region were at almost the same level as the year before. In the EMEA region sales grew by 5.1% with a strong performance in France, Italy and the Nordic region. The sales volume declined by 22.8% in the Americas. Order intake for 2009 was down 26.0% from 138.5 million euro to 102.4 million euro. The larger part of this drop is due to a large bulk order in 4Q08. Business momentum remains on track in the medical market with good growth also in the lower end of the market.
The order book at year-end for the Medical Imaging division was at 42.7 million euro compared to 54.1 million euro the year before.
Gross profit declined by 14.9% to 44.2 million euro. This means a gross profit margin of 38.9% compared to 44.2% in 2008. Operational expenses are controlled very strictly by the division. EBIT before restructuring and impairment for the year was 12.6 million euro or a margin of 11.1%. For 2008 it was 15.5 million euro or a margin of 12.2%.
Free cash flow for the division was 20.2 million euro, also thanks to good control of working capital.
Total expenditures for research & development amounted to 8.9% of sales.
Avionics and Simulation division
Sales for 2009 declined by 9.1% to 84.9 million euro from 93.5 million euro in 2008. At 61.9 million euro sales were quite stable in the Simulation business. In the avionics business sales decreased by 21.1%, mainly due to customers delaying shipments. Order intake in the simulation market suffered from the slow-down in the virtual & augmented reality market due to the economic downturn in the automotive and to a lesser extent in the oil & gas markets. Order intake was down 17.4% year-on-year. In the avionics market it was down 13.2%. The cause of this decline was the economic downturn in commercial aviation with programs being postponed or cancelled.
The order book at year-end for the simulation market was at 27.0 million euro compared to 36.6 million euro in 2008. For the avionics market it was at 57.9 million euro compared to 53.8 million euro the year before.
Gross profit for the whole division declined by 12.9% to 30.2 million euro. This means a drop in gross profit margin of 1.5% to 35.7%. Cost reductions resulted in reduced losses in the avionics business, despite the decline in sales volume. Due to this negative EBIT before restructuring and impairment, EBIT before restructuring and impairment for the whole division was minus 2.6 million euro or a minus 3.0% margin. EBIT before restructuring and impairment in the simulation business however, was positive at 3.2 million euro compared to break-even in 2008.
Free cash flow for the Avionics and Simulation division was euro 20.2 million. In 2008 free cash flow for this division was euro minus 13 million.
Total expenditures for research & development amounted to 11.7% of sales.
DIVIDEND
The Board of Directors of Barco is of the opinion that the company's cash can best be left in the company to fund future investments in profitable growth. Hence the board will submit its recommendation to the general assembly not to pay a dividend over 2009.
MANAGEMENT FOCUS 2010
Looking ahead at 2010 management believes that the drastic clean-up and right-sizing actions taken in 2009 will enable Barco to emerge as a much stronger and better company in 2010. Management expresses confidence about continued solid growth in the digital cinema and medical imaging markets whilst Barco will also further capitalize on good economic conditions and promising growth prospects in emerging geographical markets. With the introduction of several LED enabled new product platforms Barco further aims at restoring its technical leadership position in the traffic & surveillance markets and plans to finally reduce its large order backlog in simulation, avionics and defense. Combined with continued progress in operational excellence and the introduction of many mid segment offerings, the company is well positioned for growth and a return to healthy levels of profitability (EBIT) in 2010.
CONFERENCE CALL
Barco will host a conference call with investors and analysts on 10 February, 2010, 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. 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 (NYSE Euronext Brussels: BAR) is headquartered in Belgium and is present in more than 90 countries with about 3100 employees worldwide.
© Copyright 2010 by Barco
1 Following IFRS rules comparison must be made on the basis of “continuing operations”. This means that the results of the medical advanced visualization activities of the business unit Voxar are shown as a separate line (“results from discontinued operations”) and added to the net results of the continuing operations. All financial data appearing further in this announcement will be based on “continuing operations”, unless otherwise indicated. Barco divested Voxar to Toshiba Medical Systems Corporation, Tokyo, Japan, in 1Q09.
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