Slide 1 Turning the trend Analyst & Investor Day Kuurne, 12 September 2008 Slide 1.
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Transcript of Slide 1 Turning the trend Analyst & Investor Day Kuurne, 12 September 2008 Slide 1.
Slide 1
Turning the trendTurning the trend
Analyst & Investor DayAnalyst & Investor Day
Kuurne, 12 September 2008
Slide 1
Slide 2
IntroductionIntroduction
Martin De PryckerMartin De PryckerCEOCEO
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 3
IntroductionIntroduction
Barco has gone through a lot of changes since 2000– Focus on fewer but faster growing markets– With truly global presence for sales, R&D and operations– But achieved lower results than shareholders were used to
Lower results caused by:– Macro-economic evolutions beyond our control– Issues we can address ourselves
Shareholder value is key– Top line growth– Profit margin improvement– Efficient use of capital
How to realize this is the subject of Barco’s 2008 Analyst & Investor Day
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 4
Barco todayBarco today
Distribution of salesEnvironmentKey metrics
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 5
Media & Entertainment
36%
Security & Monitoring
30%
Medical Imaging17%
Other Markets17%
Sales 2007: € 747 mSales 2007: € 747 m (continuing operations)(continuing operations)
Americas34%
APAC20% EMEA
46%
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 6
Environment - Society trendsEnvironment - Society trends
Strong focus on health and personal well-being– Cost of healthcare, lifetime expectancy, screening campaigns, ...
Increasing budgets for leisure and entertainment– Sports, games, events, theme parks, …
Feeling secure in an unsafe world – 9/11, border control, city life, …
Urban and global mobility– Traffic congestion, motorway toll, airspace congestion, …
Environmental awareness – Utilities, inspection, ...
Energy supply investments– Oil exploration, power plants, pipelines, …
Communication boom & higher user-generated content exchange
– BlackBerry, mobile video, wireless, …
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 7
Environment - Customer trendsEnvironment - Customer trends
Increased specialization and complexity– Amount of images to be visualized on the increase– Higher resolution– Real-time
Ongoing digitization, away from ‘analog’– Medical softcopy– Cinema– Advertising & branding– Digital cameras
Intelligent decision-making support– Productivity & efficiency increase (e.g. auto-alerts)– Operators rely on smart solutions for instant decision-making
Shortened product life cycles– Reduced time to market– Increased use of commodity components and systems
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 8
Environment - Economic trendsEnvironment - Economic trends
Unfavorable currency evolution in recent years
Worldwide economic uncertainty slows down growth
Credit crisis delays capital investments in certain markets
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 9
Key metrics Key metrics (continuing operations)(continuing operations)
P12M 2007 2006
€m Change €m Change €m
Sales* 743 (1)% 747 +10% 681
Gross Profit 279 (4)% 290 +5% 276
% Sales 37.5% 38.8% 40.6%
R&D 74 +7% 69 +14% 61
% Sales 9.9% 9.2% 8.9%
Sales & Marketing 117 +2% 114 +2% 112
% Sales 15.7% 15.2% 16.5%
G&A 50 0% 50 +6% 47
% Sales 6.7% 6.7% 6.9%
Other Operating (Inc)/Exp (8) (1) 5
EBIT 46 (19)% 58 +13% 51
% Sales 6.2% 7.7% 7.5%
Net income 35 (21)% 45 +68% 27
% Sales 4.7% 6.0% 3.9%
Working capital 236 231 186
ROCE** 7.4% 9.4% NA
* Excluding currency impact sales P12M would have grown 7%** ROCE : Earnings before interest, after tax, over average capital employed
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 10
ObservationsObservations
Top lineGross profit and fixed cost evolutionBottom lineWorking capital evolution
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 11
Top line - Focus on growth marketsTop line - Focus on growth markets
600
541
642
681
747
712672
624
810
751
0
100
200
300
400
500
600
700
800
900
'03 '04 '05 '06 '07
Salesreported
Salescontinuing
In m€
+9.7%
+5.4%
+6.0%
+10.9%
+7.9%
CAGR 8.4% (6.5%) despite declining USD
+7.7%
+7.0%
+6.1%
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 12
Gross profit & fixed cost evolutionGross profit & fixed cost evolution
Gross profit erosion from 44% (2003) to 39% (2007)– Product mix change– Dollar evolution and our inability to sufficiently increase
dollarization– Price pressure from US based competition
Fixed costs reduced from 34% (2003) to 31% (2007) as percentage of sales
– R&D, S&M and G&A reduction as % of sales but increase in absolute figures
Fixed cost reduction insufficient to offset grossprofit erosion
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 13
Bottom line - EBITBottom line - EBIT
69.1 71.4
52.1
51,1
57.5
0
10
20
30
40
50
60
70
80
'03 '04 '05 '06 '07
7.7%
7.5%
7.3%
10.6%11% 60.7
EBITContinuingwithmargin %
In m€
68.3
8.4%
8.1%
EBITReportedwithmargin %
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 14
Working capital evolutionWorking capital evolution
Increase from 31% (2003) to 41% (2007) as percentage of sales mainly due to significant inventory growth in 2007
Root causes:
– Bullish sales forecast did not materialize in some markets in 2007 and 2008
– Supply chain not reactive enough
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 15
Turning the trendTurning the trend
How to further grow top line? How to improve profit margin?How to improve working capital usage?
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 16
Top line growthTop line growth
Focus marketsMarkets with high growth potential
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 17
Top line growth Top line growth (1)(1)
Barco has focused its growth on four large markets with significant growth potential:
Out of Home MediaEvents Digital CinemaVideo & Lighting Integration
Traffic & Surveillance utilities & processesBroadcast & TelecomDefense
Soft Image DisplayModality OEM SolutionsAdvanced visualization
Avionics
Flight simulation
Automotive
Media & Entertainment
Security & Monitoring
Medical Imaging
Avionics & Simulation
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 18
Top line growth Top line growth (2)(2)
Focusing on profitable growth markets
Acquiring strategic activities– High End Systems (06/2008)– …
Selling non strategic activities– BarcoVision (expected to close end 09/2008) – Maritime Safety & Surveillance -> Thales (01/09/2008)– …
m€Market size
2007CAGR07-11*
Barco sales 2007**
Market share 2007
Media & Entertainment 1,529 9% 316 21%
Security & Monitoring 1,350 6% 232 17%
Medical Imaging 475 8% 130 27%
Avionics & Simulation 885 6% 91 10%
* 2008-2009 CAGR will be lower than average due to economic slowdown** Restated for new divisional structure
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 19
Top line growth Top line growth (3)(3)
Highlight: 5 markets which could deliver up to 50% of Barco’s growth over the next years
m€
Market size2007
CAGR07-11
Barco Sales 2007
Market share 2007
Digital Cinema 151 10-50% 36 29%
Out of Home Media 176 23% 26 15%
Video & Lighting Integration 350* 16% 30 9%
Medical modality 215 9% 23 11%
Broadcast 277 14% 16 6%
*TAM 2008
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 20
Digital cinema - Business environmentDigital cinema - Business environment
More than 100,000 screens to be digitized over the next 10 years. Conversion driven by
– Additional revenues– 3D movies (next year 13 releases)– Cost savings by studios
Digital cinema integrators use Virtual Print Fee (VPF) to solve the issue of unbalanced business model
– Studios benefit from cost savings – Exhibitors make the investments
Digital cinema integrators (DCIP, AIX, XDC, AAM, …) make progress
– Need VPF approval from studios– Financing: slower than anticipated due to credit crisis
Future scenarios will range between– Moderate growth: investments done by exhibitors without
VPF– Strong growth: system integrators get VPF and financing
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 21
Digital cinema - Business strategyDigital cinema - Business strategy
Continue to invest in digital cinema to be ready when kick start happens
– Sales & Marketing: push/pull– R&D: expand/cost down product portfolio– Manufacturing: further prepare mass roll-out– Service: expand service organization for installation and
maintenance
Defend our market position in EMEA & APAC and expand our position in North America
Barco sales growing 10-50% from € 36 m (2007)
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 22
Out of home media - Business environmentOut of home media - Business environment
Digitization in billboard market started in 2007 in NA and China
Barco introduced dedicated LED billboard, designed and manufactured in China
– Currently extensive trials with top customers in North America
– Meaningful presence for Barco in this market from 2009 onwards
EMEA & APAC starting up at a slower pace
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 23
Out of home media - Business strategyOut of home media - Business strategy
Fully exploit cost-effective China product base
Offer dedicated ROI-maximizing and CO2-minimizing digital outdoor systems to the out of home media industry in US, Europe and China
Further build out industry-knowledgeable lean sales and service teams
Growing from € 26 m (2007) to € 60m (2010)
Market share to grow from 15% to 20% in 2010
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 24
Video & Lighting integration - Business environmentVideo & Lighting integration - Business environment
Convergence of video and lighting markets at– Product level– Customer level
Analog to digital transition within lighting– Digital lights, media servers, LED
Recently acquired High End Systems (Austin, Texas)– 44 m$ sales FY06/07
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 25
Video & Lighting integration - Business Video & Lighting integration - Business strategystrategy
Fully exploit product synergies with High End Systems
– Creative LEDs– Moving Luminaires
Offer Barco’s full portfolio of video and lighting products not only to the events customers, but also to the fixed installation markets
– Address the markets of corporate lobbies, hotels, theaters, airports, large shopping malls and architectural landmarks
– Further build on channels by establishing a network of system integrators
– Establish a partner program to provide system integrators with comprehensive product training together with product support infrastructure
Growing from around € 30 m (2007) to around € 70 m (2010)
Barco market share to grow from 9% to 12%
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 26
Medical Modality - Business environmentMedical Modality - Business environment
Custom imaging products for Modality Vendors (CT scanner, NMR, ultrasound,…)
Customers : Siemens Healthcare, Philips Healthcare, GE Healthcare, Toshiba Medical Systems, Trixell, Neusoft, Agfa, Fuji,…
Market identification for Barco competences– Custom Image Processing Boards: increased potential as
modality vendors outsource development and subcontract supply chain
– Digital X-Ray Detector Electronics: demand continues to grow – Medical Image Display: increased number of modality
products
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 27
Medical Modality - Business strategyMedical Modality - Business strategy
Further expand imaging modality customer base
Widen product portfolio of medical displays
Further concentrate on digital X-ray detector electronics while benefiting from a growing market
Further build out a business model with low-cost country manufacturing partners
Deploy an optimized supply chain for our modality customers
Barco sales growing from € 23 m (2007) to € 30+ m (2010)
Barco market share 11% growing to 13%
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 28
Broadcast - Business environmentBroadcast - Business environment
Broadcast market growing at significant pace thanks to– HD TV conversion– IPTV rollout– OPEX reduction
Multi-view display equipment– Strongly growing– Leading player worldwide– Reference customers: RTL/TVI, TF1, Guangdong TV, Technicolor, Eutelsat
Studio backdrop walls– Growing fast– Absolute market leader– Reference customers: NBC, CCTV, VTM, Al Jazeera, BBC
Reference monitors– Product introduced Q4– Raving reviews & awards won
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 29
Broadcast - Business strategyBroadcast - Business strategy
Lead evolution to network-centric broadcast production chain
– Obtain leading market position
Expand new product line of reference monitors– Resume leading market position– Promising reviews & awards at NAB show (April 08)
Harvest studio backdrop market– Remain undisputed leader
Growing from € 16 m (2007) to € 30+ m (2010) Barco market share 6% growing to 7%
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 30
Improve profit marginImprove profit margin
Dirk De ManDirk De ManCFOCFO
Cost reduction planIncrease R&D efficiencyIncrease operations efficiency
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 31
Cost reduction planCost reduction plan
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 32
Cost reduction plan - OverviewCost reduction plan - Overview
Analysis– Improvement of bottom line required– Anticipate further worsening of economic climate
Target structural fixed cost reduction of € 30 m (10% of cost) by end 2009
1. Exploit maximum internal synergies Exploit internal economies of scale End duplication of efforts and investments
2. Simplify organization structure Simplify division structure Simplify sales organization & improve productivity
3. Cost containment actions Reduce operational expenses
4. Sale of non strategic activities Be selective in market/product combinations Continue to invest in profit contributing activities
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 33
Cost reduction plan Cost reduction plan (1)(1)
Exploit maximum internal synergies
– Create one common operations organization Global purchasing Global manufacturing & supply chain Repair & spare parts
– Unified field service/helpdesk processes
– One corporate marketing organization
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 34
Cost reduction plan Cost reduction plan (2)(2)
Simplify organization structure
– Simplify division structure Integrate Presentation business unit into Media & Entertainment division
sales channels Integrate Simulation and Avionics activities into Avionics & Simulation
Division
– Simplify sales organization & improve productivity Optimize sales force efficiency in smaller countries
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 35
Cost reduction plan Cost reduction plan (3)(3)
Cost containment actions
– Reduce R&D by being more selective and only start projects with higher return on investment
– Be more selective in marketing expenditure
– Maintain restrictive travel policy
– Cut cost and delay investment in supporting services
– Reduce number of locations
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 36
Cost reduction plan Cost reduction plan (4)(4)
Sale of non strategic activities
– BarcoVision (expected to close end 09/2008)
– Maritime Safety & Surveillance -> Thales (01/09/2008)
– …
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 37
R&D efficiencyR&D efficiency
Jan Willem BrandsJan Willem BrandsCTOCTO
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 38
Increase R&D efficiency - ObservationsIncrease R&D efficiency - Observations
R&D investments have been reduced as % of sales but not enough to offset gross profit margin erosion
Barco solutions are characterized by:– Differentiation on product performance– Small production series– Customized solutions– Dependence on key technology suppliers– Project focus
This requires that R&D :– Is driven by a true understanding of customers' needs– Has intimate knowledge of suppliers’ technology– Uses an effective light-weight development process
Improved global R&D presence– EMEA: 590– US: 152– APAC: 120
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 39
Increase R&D efficiency - ActionsIncrease R&D efficiency - Actions
Improve R&D efficiency– Roll-out improved product development process worldwide
Standardized tools & methods, streamlined planning & tracking
– Focus on key R&D parameters On-time performance Manufacturing stability Product maturity Design re-use
Save costs by sharing common services– Board design, reliability testing, product certification
Increase cooperation between divisions– Joint research programs & supplier contacts
OLED, seamless direct view, networked visualization
Get more benefit from our Intellectual Property Capitalize on our worldwide R&D presence
– Expand R&D sites with clear competence and growth potential
– Focus on growth in APAC
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 40
Operations efficiencyOperations efficiency
Piet BerkhoutPiet BerkhoutPresident Global Operations & Supply ChainPresident Global Operations & Supply Chain
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 41
Increase operations efficiency - ObservationsIncrease operations efficiency - Observations
Fragmented supply chain– Lack of integrated strategy on manufacturing and supply
chain (incl. purchasing)– Integrated into divisions (10 sites)– Strong local links between R&D and manufacturing
Supply chain not scalable enough to efficiently cope with increased volumes
Resulting in – Duplication in supply chain activities e.g. purchasing,
warehousing, logistics, manufacturing, …– No common processes and (IT) tools to manage the supply
chain– Inefficient use of working capital– Insufficient leverage on suppliers
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 42
Increase operations efficiency - Global spreadIncrease operations efficiency - Global spread
Sacramento
Duluth
KortrijkKuurne
Karlsruhe
NoidaBeijing
Location Main supply chain activities
Kuurne High end Projectors, LED Kortrijk LCD Displays Duluth (GA)Consoles, System Integration Noida Mid end Projectors Karlsruhe Configurable systems, SI Beijing LED Sacramento Image Processing Austin Special Lighting Toulouse System Integration Xenia (OH) System Integration
All these sites have (limited) manufacturing, purchasing, (test) engineering, logistics (incl. warehousing)
Austin
Toulouse
Xenia
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 43
Increase operations efficiency - ObservationsIncrease operations efficiency - Observations
Key figures for operations and purchasing
– Indirect cost of purchasing, manufacturing and logistics: € 52 m (7% of sales)
– Indirect labor: 530 FTEs
– Direct labor: 990 FTEs
– Inventories: € 224 m, of which 1/3 raw material and work in progress
– Cost of goods sold (including direct labor): € 320 m
– Non-product related spending: € 100 m
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 44
Increase operations efficiency - ActionsIncrease operations efficiency - Actions
One centrally managed manufacturing and purchasing organization, under new leadership, able to cope with larger production series in an efficient way
Target setting for 2009
– Reduce indirect cost of purchasing, manufacturing operations from 7% to 6% of sales
– Reduce number of suppliers and increase leverage on remaining supplier base to reduce cost of goods sold with
> € 10 m – Reduction of non product related spending such as travel &
lodging, facilities, consultants – Reduction of inventory through improved sales & operations
planning– Review efficiency of all operational sites– Further transfer production to low cost countries
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 45
Reduce working capitalReduce working capital
Improve inventory managementBetter cash collection (Customer to Cash)
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 46
InventoryInventory
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 47
Improve inventory managementImprove inventory management
Current actions– Integrate business and goods movement planning to pro-
actively manage inventories in line with demand – Further outsource and streamline specific in-house
manufacturing operations for board assembly, mechanical parts, coils & transformers and box build
– Sell off slow moving finished goods– Clean up raw material inventories to balance stocks
Next steps– Introduce uniform rigid inventory management process to
reduce inventories drastically (€ 50-70 m) by end 2009– Increase VMI (Vendor Managed Inventory) & shorten supply
chain by outsourcing– Clean up product portfolio, in particular (very) low volume
products– Improve hand-over of new products from R&D to Operations
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 48
ReceivablesReceivables
Dirk De ManCFO
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 49
Better cash collection - ObservationsBetter cash collection - Observations
Insufficient focus on cost of capital when negotiating terms & conditions with customers
Substantial amount of overdues due to diverse commercial, administrative and technical issues
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 50
Better cash collection - ObjectivesBetter cash collection - Objectives
Objective : reduce days outstanding of customer receivables by 20% of which 5 in 2008
Approach : Project team to tackle the full process from order generation to cash collection
– Phase 1 : EMEA (50% of AR)– Phase 2 : North America (34% of AR)– Phase 3 : Asia Pacific (16% of AR)
Methodology : – Alignment on a common process– Creation of reporting and KPIs – Training & tools deployed – Rigorous follow up in weekly meetings– Monthly working capital meetings with senior management
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 51
Better cash collection - Status todayBetter cash collection - Status today
Overall– Process designed– Roles and responsibilities assigned– Awareness created and training given– People recruited in key functions
Commercial– Clear goals defined for terms & conditions– Analysis-supported customer credit limit
Administration– Quality check of order input
Credit Collection– Closer follow up of outstanding overdues – Special efforts to reduce current outstanding (calling days)
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 52
Better cash collection - RBetter cash collection - Results to dateesults to date
Receivables Days Outstanding reduced by 3.4 % – Equivalent to € 15 m of cash
EMEA– Overdue receivables: reduction by 15%– Of which > 30 days: reduction by 30%
North America– Overdue receivables: reduction by 3%– Of which > 30 days: reduction by 32%
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 53
Key take awaysKey take aways
Martin De PryckerCEO
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 54
Key take awaysKey take aways
Growth potential is delayed only due to the economic slowdown
– Transition to new technologies will keep on happening– Barco visualization solutions will continue to improve the ROI
of our customers
Barco is taking drastic measures to improve cost structure and realize internal synergies, to structurally improve bottom line
Working capital improvements have been slow to kick in, but action plans are being implemented and will show results
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
Q&A
Slide 55
Q&A
Q&AQ&A
Introduction
Barco today
Observations
Turning the trend
Top line growth
Improve profit margin
Cost reduction plan
R&D efficiency
Operations efficiency
Reduce working capital
Inventory
Receivables
Key take aways
