Group topline – solid order intake but lagging conversion to sales
Barco’s first half order intake was significantly above 2H20 and 1H20 driven by strong demand growth for Healthcare and Entertainment and continued to demonstrate quarter-to-quarter improvements. However, the conversion of orders to sales was hindered by prolonged pandemic induced restrictions (Entertainment and Enterprise) and, to a lesser extent, component shortages (Entertainment and Healthcare).
For the second quarter, sales were up 13% versus the first quarter and improved month by month as the global economy began to re-open.
As of the end of 1H21 orderbook was at a record level of 391 million euro.
Division topline performance – uneven recovery
In the Entertainment division all segments posted quarter-over-quarter improvements in both orders and sales. This reflects continued momentum in China and the restarting of immersive experiences in the rest of the world. Orders for the first half were up with 32% year-over year while sales were still below the first half of last year which included a strong first quarter.
Enterprise saw the continuation of gradual improvements in orders in the second quarter compared to the first quarter in both the Corporate and Control Rooms segments. However, sales were flat as a result of delayed project execution and hindered demand due to slow office re-openings across Europe, APAC and the Americas.
Orders for Healthcare were 18% higher for the first half compared to last year reflecting the resumption of healthcare investments in the diagnostic imaging and surgical markets, while sales were flat excluding currency effects.
Protecting profitability and strong cash flow generation
EBITDA margin for the first half was 7.5% of sales, 2.5 percentage points below 1H20 and 4 percentage points higher than 2H20.
Barco further reduced indirect costs by 4.6% for the first half of 2021 versus last year (and 19% versus 1H19) by extending cost containment measures while sustaining investments in strategic projects.
Gross profit margin improved 2.7 points versus the second semester of last year but was 2.7 percentage points lower than the first semester of last year, reflecting mainly higher freight costs and product mix effects.
Free cash flow for 1H21 was 35 million euro compared to -51 million euro last year, on the strength of working capital improvements compared to 1H20.
Quote of the CEO, Jan De Witte
“I’m pleased to see the health of our end market demand and competitive positioning reaffirmed in a strong order intake and an exceptional orderbook level for the first half of the year. The combination of an uneven recovery in economic activity and supply chain constraints has caused sales to continue to lag orders.
I am confident that Barco will continue to generate steady improvements as markets further recover and office reopenings accelerate although supply chain constraints may temper the growth acceleration,” said Jan De Witte, CEO.
“The first half performance also confirms our say-do related to operational execution, sustained customer focus and continued progress in strengthening our competitive position by expanding and renewing our product offerings.”
Outlook 2021 - current
The following statements are forward looking, and actual results may differ materially.
Assuming further recovery of economic activity and accelerating orders to sales conversion toward the end of the year, management is confident that sales for the year will show a marked increase versus last year with a full year EBITDA margin higher than the first semester EBITDA margin.