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MarketScreener Homepage  >  Equities  >  Euronext Bruxelles  >  Barco N.V.    BAR   BE0974362940

BARCO N.V.

(BAR)
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Real-time Estimate Quote. Real-time Estimate Tradegate - 10/30 03:00:38 am
13.185 EUR   0.00%
10/21BARCO : Results 3Q20 Presentation
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10/21BARCO : Trading update 3q20
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10/21BARCO N.V. : 3rd quarter earnings
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Barco : 1H20 Results Presentation

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07/16/2020 | 03:36am EDT

Results 1H20

Analyst & Investor call

Jan De Witte & Ann Desender

16 July 2020

PRELIMINARY NOTES

Safe harbor statement

This deliverable may contain forward-looking statements. Such statements reflect the current views of management regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Barco is providing the information as of this date and does not undertake any obligation to update any forward-looking statements contained in this deliverable in light of new information, future events or otherwise.

Barco disclaims any liability for statements made or published by third parties and does not undertake any obligation to correct inaccurate data, information, conclusions or opinions published by third parties in relation to this or any other deliverable issued by Barco.

Glossary

All definitions for Alternative Performance Measures (APM's) are available in the Glossary of the Half Year

Report and on the investor portal(www.barco.com/en/about-barco/investors)

2

AGENDA

  1. Exec Summary
  2. Group Results
  3. Divisional Results
  4. Navigating 2020 & beyond
  5. Q&A

3

RESULTS 1H20| EXECUTIVE SUMMARY

Topline @ -18% as pandemic impacts markets

Different dynamics: severe impact April/May for Entertainment and Enterprise … first signs of partial recovery in June; Healthcare up in 1H20

EBITDA margin @ 10% ; working capital peaking Impactful actions to adjust cost levels to topline reality, reducing indirect expenses by 15%y-o-y

Working capital peaks on high component & finished goods inventory levels

Navigating the crisis with focus on business continuity

Leveraging lessons from China, robust end-to-end supply chain

Balancing employees safety, business continuity and responsiveness

Longer term growth opportunities remain intact, but delayed

Pandemic with varied impact throughout the business

4

... center of gravity in 2nd quarter

COVID-19 IMPACT ON 2Q20

Division/Segment

Assumed Impact

2Q20

FY20

vs 2Q19

Entertainment

Material negative

-44%

Cinema

Material neg

--

Replacement

Material neg

--

New builds

Med neg

-

Service revenues

Med neg

-

Venues & Hospitality

Med neg

--

Events

Material neg

--

ProAV (fixed install)

Med neg

-

Simulation

Neutral

~

Enterprise

Med neg

-48%

Corporate

Med neg

--

Control Rooms

Med neg

--

Healthcare

Positive

+5%

Diagnostic Imaging

Positive

+

Surgical

Neutral

+

  • Group H1 and Q2 sales and orders drop entirely related to impactcovid-19
  • Evolutions for the year largely as anticipated, with some pronounced effects in Q2
    • Entertainment & Enterprise severely impacted in Q2; partial offset by growth in Healthcare
    • All regions
  • Timing effect throughout the quarter
    • Impact started to come in latter half of March - most severe in April & May - started to lessen in June aslock-downs began to be lifted
  • End-to-endsupply chain continued to operate without major disruptions, though higher transportation costs and inventories

BUSINESS RESILIENCE OVER 2Q20

I. Focus on health and safety of employees

  • Leveraging lessons from China
  • Safe working environment - limited impact on workforce
  • Reconfiguredlay-outs,tele-work and rotation policy, awareness and training, protective equipment
  1. Focus on market and customer continuity
  • Operations and Services managedstep-up and continued to operate without major disruptions
  • Accelerating digital connectivity solutions in Enterprise and Healthcare
  • Webinars and digital Marketing tools to keep customers/partners educated and engaged

6

  1. Mitigating impact on profitability with early cost containment actions
  • Freeze of discretionary spending
  • Aligning activity rate/costs to market realities, including temp unemployment, internal redeployments, scaling back temps, merit increase & bonus awards on hold
  • Shifting investment pattern on selected longer term initiatives
  • Cost-efficiencygain on UniSee LCM production (closing Taiwan factory)

IV. Managing cash, working capital and liquidity

  • Strength of Balance Sheet provides optionality
  • Absorbing temporary inventory peak and increasing receivables at end of June
  • Working down inventory &DSO-levels over 2H20

RESULTS 1H20 | REGIONS

Different lock-down restrictions accross geographic markets result in overall slow 2Q20

SALES

  • of group42%

AMERICAS |Sales13%

  • Cinema renewal wave and ProAv (events) investments stalled after good Q1 start
  • Out-of-officestalling ClickShare investments
  • Diagnostics strong on accelerated demand for home reading; adding strategic partners for Surgical digital OR

EMEA|Sales 22%

36%

  • Entertainment business drops, delaying and stalled investments
  • ClickShare sales weak duringout-of-office - portfolio expansion with conference products starts to see traction
  • Control Rooms exposed to oil & gas andlock-downpush-outs
  • Diagnostics growing strong with increased demand in Middle East

22%

ASIA PACIFIC |Sales19%

  • Q1 growth momentum in Entertainment stalled duringlock-downs in Q2; ProAV recovering in Q2
  • Both Corporate & Control Rooms confronted withpush-outs in Q2 across different countries
  • Healthcare growing well in APAC with existing customer base in SEA & Japan, expanding footprint in China

7

FINANCIAL HIGHLIGHTS | RESULTS 1H20

Topline reflect pandemic - Early cost containment measures result in 10% EBITDA margin - Working capital build up weighing on cash flow

  • Orders & saleshit by economic standstill / slow restart
    • Weak start of 2Q, first signs of recovery as of June
    • Order book @ € 317m, ~ vs YE19,8% yoy, no material cancellation
  • Gross profit margin1.1ppt, higher transport costs and mix effect
  • Opexadjusted downward, 15% yoy, discretionary spending cuts and adjusted activity levels in line with topline drop
  • EBITDA @ 10%of sales, 3.6ppts yoy
  • Free cash flownegative, with working capital peak, resulting from derisking supply chain disruptions and time lag in adjusting parts supply

8

GROUP EBITDA @ 10%

Profitability impacted by strong topline drop, partly mitigated with cost containment measures

13.6%

Opex*down -16%

of

sales

ENTERTAINMENT

Bad debt

10.0%

& result

of

ENTERPRISE

BarcoCFG

sales

Sales*down -19%

HEALTHCARE

1H19

1H20

9(*) excluding currency-impact

NET INCOME € 10.4M

1H20

1H19

19

EBITDA

40.7

67.6

(26.9)

% Sales

Change (ppts)

10.0%

13.6%

-3.6

Depreciations & amortizations

(20.3)

(19.3)

(1.0)

Impairments & Restructuring

(8.1)

(8.1)

EBIT

12.3

48.2

(35.9)

% Sales

Change (ppts)

3.0%

9.7%

-6.7

Interest income/(expense) net

0.8

2.3

(1.6)

Income taxes

(2.2)

(8.6)

6.4

Share in the result of joint ventures & associates

(0.4)

0.1

(0.5)

Non-controlling interest

(0.0)

1.0

(1.0)

Net income

10.4

43.1

(32.7)

% Sales

Change (ppts)

2.6%

8.7%

-6.1

Earnings per share

0.12

0.49

-0.37

10

(*) Liquid crystal module

  • EBITDA @ 10% sales, protected business health through timely cost measures
  • Impairment & restructuring costs (mainly non cash) related to the announced closing of the factory in Taiwan and decision to outsource the UniSee LCM(*)
  • Effective tax rate at 17% (~ 1H19)

CASH FLOW & BALANCE SHEET

Working capital build up weighing on free cash flow, caused by time lag on holding back incoming goods, impacting mid-year balance

  • Free cash flow €-51m (last year: € +42m)
    1. Gross operating cash flow € 36m, net after ~ € 4mpay-out of lay-off costs 'Fit to Lead' program (~€ 10m last year)
  • Working capital @ 10.9% of sales (1.6% last year)
    1. DSO high @ 82 days,30 days yoy, mainly linked to Entertainment (Cinema)
    1. Inventory& trade payables : result of focus to keep factories open, derisking supply chain (building buffer of incoming goods) (Feb-April) with time lag to see effects of adjusted purchasing
  • Net cash @ € 223.2m
    1. € 106m vs end 2019: negative FCF, dividends paid out and investment in Unilumin
  • ROCE @ 16% (down from 23% last year)

11

DIVISIONAL RESULTS 1H20

12

ENTERTAINMENT

Q2 lock-down … expecting slow comeback in Cinema replacement & Events over Q4, and earlier for Cinema expansion & ProAV

1H

Cinema

Cinemas in lock-down; major releases pushed out to 2H20 & beyond; exhibitor cash concerns start to reside with different support programs

  • Replacement projects:stand-stillin Q2
  • Expansion opportunity:push-outs with deployment delays but no cancellations
  • Cinema Servicerevenues dipped during lockdown
  • One competitor exiting the market ; division strengthened market share and technology leadership (laser) ; securing new contracts

V&H

  • Events-sector significantly hit with event cancellations and push-outs globally over Q2 and Q3
  • ProAV-segment softer but more resilient ; lockdown delays but no cancellations; early recovery signs in China (as of Mar) and selected regions (as of June)
  • Simulationmore resilient with project shifts, offset by stronger demand for real-scale simulators
  • Gross profit margin remained stable for the division
  • EBITDA substantially lower reflecting strong negative leverage on fixed costs

2H

  • Theaters globallyre-openingJune-August, prior focus on occupancy rates & cash replenishment
  • Replacement opportunity:assuming prudent ramp up of theatresQ3-Q4;capital investment will trail
  • Expansion opportunity:expected to start seeing recovery
  • Cinema Servicerevenues expected to rebound
  • Events:slow pick-up expected in Q4
  • ProAV-segment showing more resilience and start recovery expected in line with easing of constraints
  • Simulationexpected to show steady performance

13

ENTERPRISE

Declines across all regions and in both segments but early signs of recovery during June

Corporate

Control Rooms

1H

  • ClickShareshowing softness as of mid-March and during the lockdown ; starting to see first recovery as of June, led by EMEA, mix CS Present & Conference
  • Seeding the market with the newly launchedClickShare Conference; well received by first users & channel
  • Resilient market (critical infrastructure/crisis management) but new projects in slow motion - but not stopped - Q2 stronger than Q1
  • Expanded value proposition (triple play and software) starts to showvalue-add and strengthens market position
  • Accelerating commercial efforts onweConnect(Virtual Class Room), demo-ing infrastructure globally and building funnel and steadily growing # of reference projects

2H

  • Gross profit margin stable for the division
  • EBITDA margin down mainly due to volume loss ClickShare
  • ClickShare Presentexpected to lead the rebound
  • ClickShare Conferenceexpected to start show traction in early phase after restrictions ease up
    • Accessible market increases with video- conferencing breakthrough; unlocking to drive hybrid meeting room collaboration
    • Channel sees ClickShare products as early catch up opportunity
  • Control Roomsmarket opportunity confirmed and expected to translate in pick-up in line with market recovery
  • Making progress in maturing and commercializing software & networking solutions ; expanding coverage into critical infrastructure and operations

14

HEALTHCARE

Solid growth in topline H1 and strong profitability step-up

Diagnostic

Surgical

1H

  • Strong growth in sales
    • diagnostic OEMs stepping up capacity
    • intensified demand forradiology(home-reading) solutions and modalitysolutions
  • Solid order growth and expanding strategic partnerships
  • Sales growth more modest in the first half with elective surgery postponed and deployments slower than anticipated

2H

  • Demetra launched in Europe, FDA clearance granted, commercial launch US postponed to 2H20
  • Synergi (Remote collaboration solution for oncology) launched in test markets resulting in first projects
  • Operating leverage on higher sales and strict discipline on opex, bring EBITDA margin to 16%, with continued investments in growth initiatives and "In China For China" program
  • Expecting to see diagnostics evolve to regular growth trends, on stable diagnostics markets in North America and Europe
  • Surgery: expecting to see uptake of growth in 2H20 on partial translation of 1H20 pushouts and strong order intake
  • China to steadily deliver on growth investments
  • Advancing collaboration with caresyntax®to solidifying surgery product & software propositions

15

NAVIGATING 2020 & BEYOND

16

COVID-19IMPACT| IMPACT GRID II - PROJECTION 3Q

Division/Segment

Assumed Impact

Assumed

Qualitative comments

evolution

FY20

3Q-vs-2Q

Entertainment

Material negative

~

Cinema

Material neg

~

Replacement

Material neg

Cinema's gradually coming out of lock-down but recovery likely slow until Q4;

~

New builds

Med neg

New builds to show some recovery as of 3Q

+

Service revenues

Med neg

Services to rebound as cinemas reopen

+

Venues & Hospitality

Med neg

+

Events

Material neg

Events business likely to remain slow in 2H20

~

ProAV (fixed install)

Med neg

ProAV expected to show steady recovery quarter-over-quarter

+

Simulation

Neutral

Simulation steady

~

Enterprise

Med neg

+

Corporate

Med neg

ClickShare Conference well positioned for hybrid operation with more

+

videoconferencing; back-to-office trend likely to be helpful

Control Rooms

Med neg

Control Rooms largely depending on recession recovery

~

Healthcare

Positive

~

Diagnostic Imaging

Positive

Healthcare expected to sustain steady y-o-y growth

~

Surgical

Neutral

+

17

~ : 3Q in line with 2Q ; +: 3Q better vs 2Q

NAVIGATING 2020

Protecting business health while chasing recovery

Absorb the shock

  • Pro-activelyleveraging lessons from China
  • Focus on employee health & safety and business continuity
  • Install new work methods
  • First spending level down
  • Stay connected with business partners and customers

Ensure business health

  • Adjust spending level and business activity to new market realities and opportunities
  • Reconsider timetable selected R&D & investment projects
  • Prep organization for new context

Recover, relaunch growth & strategic roadmap in a adjusted world

  • Adjust timelines & expectations to market/economic outlook
  • Pursue new strategic activities aligned to opportunities
  • Leverage strength/reserves to strengthen market position
  • Protecting business health to enable recovery when markets gradually resume activity
    • Containment actions remain in place for Q3
    • Timely & balanced management of activity rate aligned with expected market realities
    • Redeployments for growth areas where appropriate
  • Planning 2021 budget with a cost base no higher than 2019 group level to deal with market reality/uncertainty

18

OUTLOOK

"With its end market demand fundamentals intactbut delayed, solid orderbook, strong balance sheetand resilient business model, I am confident that Barco is capable of absorbing the business uncertainties ahead and remains well positioned for future profitable growth as economic activity gradually resumes."

Quote CEO, Jan De Witte

  • Outlook 2020
    • Since the pace of recovery in our markets (shape of recession, risk and impact of repeat lock- downs) remains uncertain, Barco will not reinstate guidance for 2020 at this time
    • Management expects that the second quarter will be the weakest quarter of the year and expects steadyquarter-over-quarter improvement during the second half of the year albeit with different dynamics across the portfolio
  • Preparing 2021
    • Based on management's current assessment of the quarterly progression for 2020, the company is planning to develop a 2021 budget with a cost base no higher than 2019 group level

19

Q&A

20

THANK YOU

21

22

Disclaimer

Barco NV published this content on 16 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 July 2020 06:35:02 UTC


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Financials
Sales 2020 783 M 914 M 914 M
Net income 2020 7,00 M 8,17 M 8,17 M
Net cash 2020 267 M 312 M 312 M
P/E ratio 2020 62,8x
Yield 2020 3,01%
Capitalization 1 162 M 1 355 M 1 356 M
EV / Sales 2020 1,14x
EV / Sales 2021 0,99x
Nbr of Employees 3 636
Free-Float 74,0%
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Mean consensus OUTPERFORM
Number of Analysts 3
Average target price 20,33 €
Last Close Price 13,19 €
Spread / Highest target 89,6%
Spread / Average Target 54,2%
Spread / Lowest Target 21,4%
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Managers
NameTitle
Jan de Witte Chief Executive Officer & Director
Charles Beauduin Chairman
Rob Jonckheere Senior Vice President-Global Operations
Ann Rita Desender Chief Financial Officer & Senior Vice President
Marc Spenlé Chief Digital & Information Officer
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