Coloplast A/s Class B · OMXCOP:COLO_B
Coloplast A/s Class B — H1 2016/17 Earnings Presentation
63 slides from Coloplast A/s Class B's earnings presentation, 2017
Slide 1: Leading intimate healthcare – Roadshow presentation H1 2016/17
Leading intimate healthcare Roadshow presentation H1 2016/17
Slide 2: Forward-looking statements
Forward-looking statements The forward-looking statements contained in this presentation, including forecasts of sales and earnings performance, are not guarantees of future results and are subject to risks, uncertainties and assumptions that are difficult to predict. The forward-looking statements
Slide 3: LEAD20 – an update on our direction towards 2020
LEAD20 – an update on our direction towards 2020 Superior products and innovation Unique user-focused market Unparalleled efficiency approach SenSura® Mio Innovation Excellence Hospital Assortment Production ramp-up directly from Launched in 2017 Hungary/China: SenSura® Mio Convex + 500,000 enrolmen
Slide 4: Coloplast delivered Q2 organic growth of 7% and 32% EBIT margin
Coloplast delivered Q2 organic growth of 7% and 32% EBIT margin in constant currencies Q2 Highlights Revenue growth +6% • Q2 organic growth of 7% (8% in DKK) Reported revenue (DKKm) +5% • The acquisition of Comfort Medical Organic growth +8% 7,636 7,256 contributed ~2% growth to revenue Reported gro
Slide 5: H1 organic growth of 6% impacted by inventory reductions at US distributors
H1 organic growth of 6% heavily impacted by inventory reductions at large distributors in the US in Q1 H1 16/17 revenue by business area H1 16/17 revenue by geography Business Reported revenue Organic growth Share of organic Geographic Reported revenue Organic growth Share of organic area DKKm growt
Slide 6: Ostomy Care grew 7% organically in Q2
Ostomy Care grew 7% organically in Q2 and continues to be driven by SenSura® range and Brava® accessories Performance Comments • H1 organic growth of 7% (5% in DKK). Q2 organic growth of 7% • The acquisition of Comfort Medical contributed ~1% growth to revenue in Ostomy Care in H1 and ~2% growth in
Slide 7: Continence Care grew 8% in Q2
Continence Care grew 8% in Q2 driven by SpeediCath® Compact catheters in particular in UK, US and France Performance Comments • H1 organic sales growth of 6% (5% in DKK). Q2 organic growth of 8% • The acquisition of Comfort Medical contributed ~2% growth to revenue in Continence Care in H1 and ~3% g
Slide 8: Urology Care grew 14% in Q2
Urology Care grew 14% in Q2 driven by market share gains in Women’s Health Performance Comments 15 • H1 organic growth of 11% (12% in DKK). Q2 organic growth of 14% 14 • Growth in Q2 driven by the US, but also Europe and France in particular • Strong growth and market share gains for US Women’s Heal
Slide 9: WSC negatively impacted by lower momentum in Emerging markets
WSC negatively impacted by lower momentum in Emerging markets as well as a strong skin care quarter last year Performance Comments • H1 organic sales growth of 0% for WSC (0% in DKK), Q2 organic growth for WSC of negative 4% 9 8 • H1 organic growth of 5% for Wound Care in isolation, and positive 2%
Slide 10: H1 operating margin of 33% in constant currencies
H1 operating margin of 33% in constant currencies and 32% in DKK Comments Performance • EBIT before special items grew 5% in DKK (8% in constant currencies) to DKK 2,472m with a reported margin of 32% (33% in constant currencies) 0.5 compared to 33% last year 32.7 32.5 -0.2 • Gross margin of 68% in
Slide 11: FCF adjusted for Mesh settlements, Comfort Medical and tax in line with last year
FCF adjusted for Mesh settlements, acquisition of Comfort Medical and tax payments was in line with last year Performance Comments • Free cash flow was negative DKK 648m compared to positive DKK 27 1,186m in H1 2015/16 26 • EBITDA DKK 147m higher 20 20 20 4,023 • NWC-to-sales of 26%, 2%-points highe
Slide 12: Unchanged financial guidance for 2016/17
Unchanged financial guidance for 2016/17 Guidance 16/17 Guidance 16/17 (DKK) Long term ambition Sales growth 7-8% (organic) 7-8% 7-9% p.a. 33-34% (constant EBIT margin ~33 +50-100 bps p.a. exchange rates) CAPEX (DKKm) ~700 4-5% of sales Tax rate ~23 Page 12
Slide 13: Coloplast Meet the Management Event 2017
Coloplast Meet the Management Event 2017 18 August 2017 in London – SAVE THE DATE! The purpose of the event is to provide institutional investors and financial analysts with the opportunity to meet the Executive Management as well as selected key representatives from Coloplast. The event will be a c
Slide 14: Introduction to Coloplast
Leading intimate healthcare Introduction to Coloplast
Slide 15: Coloplast has four business areas all with global sales presence
Coloplast has four business areas all with global sales presence Group revenue 2015/16 by segment Group revenue 2015/16 by geography X = Coloplast’s global market position Emerging markets 15% Continence Ostomy Care Care 41% 35% DKK DKK Other #1 14.7bn #1 developed 14.7bn markets 22% European market
Slide 16: Coloplast specializes in intimate healthcare needs
Coloplast specializes in intimate healthcare needs Who are our typical users How do we help them? People who have had their intestine redirected to an SenSura® Mio opening in the abdominal wall Ostomy bag Ostomy Care People in need of bladder or bowel management SpeediCath® Continence Flexible male
Slide 17: Intimate healthcare is characterized by stable industry trends
Intimate healthcare is characterized by stable industry trends Drivers Limiters Earlier detection and Growing elderly Surgical and cure, eventually 1 Demographics population increases 1 medical trends reduces addressable customer base for market for Coloplast Coloplast products treatment products Ex
Slide 18: Strong market positions in Europe and great potential outside Europe
Coloplast has strong market positions in Europe and great commercial potential outside Europe Europe Developed Emerging Ostomy Continence Urology Wound Care Addressable market 15-16bn ~12bn ~10bn 17-19bn 4-5% 5-6% 3-5% 3-5% Size in DKK Growth in % Coloplast 40 - 50% 45 - 55% 10 - 20% 5 - 15% regiona
Slide 19: New strategy will drive growth across 4 major themes
Coloplast’s new strategy will drive revenue and earnings growth across 4 major themes 1 Superior products & innovation 2 Unique user focused market approach 3 Unparalleled efficiency 4 Strong leadership development Page 19
Slide 20: Innovative product launches and heavy investment in Consumer activities
We have launched innovative products across business areas and invested heavily in Consumer activities Continence Care Ostomy Care Consumer Care Consumer Wound Care Urology Care focus Page 20
Slide 21: Efficiency gains across Global Operations and Business Support
We will continue to push for efficiency gains across Global Operations and Business Support Global operations Business support • Efficiency improvement in the subsidiaries, HQ and business support centre 1. Reduce risk of supply 2. Improve quality of daily • Subsidiaries to focus on commercial prior
Slide 22: Expansion relies on our organisation and leadership development
Expansion relies on our organisation and strong leadership development is key to support growth Our organisation will grow … … and it will be even more important to hire for a career and not a job ~3,000 Build our internal Hire externally for key leadership new positions leadership pipeline competen
Slide 23: Up to DKK 2bn in new investments towards 2020
The strategy will commit up to DKK 2bn in new investments towards 2020 Key strategic initiatives Geographical focus areas Innovation US UK Wound care Pacific Consumer Emerging Markets Page 23
Slide 24: Profitability uplift driven by scalability and efficiency
Profitability uplift to be driven by scalability and efficiency improvements Gross margin development, in % of revenue Cost item Development, in % of revenue -0.7%-points 28.8 28.5 28.3 28.5 28.1 28-29 Distribution +1.7%-points 67.6 68.7 68.5 68.3 66.6 -1.8%-points 5.6 4.6 4.3 4.0 3.8 ~4 Admin +0.4%
Slide 25: We will continue to deliver strong free cash flows
We will continue to deliver strong and attractive free cash flows … Taxation Net working capital CAPEX2 Reported tax rate Operating working capital in % revenue Depreciation in % of revenue CAPEX in % of revenue CAPEX DKKm 4.3% 4-5% 1) 3.5% 27.8% 25.7% 23.9% 24.1% 23.8% ~24% 2.3% 2.7% 1) 22.5% 23.0%
Slide 26: Attractive cash returns despite large investments
… and attractive cash returns despite large investments in commercial and expansion activities Coloplast cash distribution to investors Comments Dividends paid out in the year (DKKm) Share buy-back (DKKm) Pay-out ratio (%)* • Coloplast returns excess liquidity to shareholders in the form of dividend
Slide 27: Long-term guidance will continue to deliver strong value creation
Our long-term guidance will continue to deliver strong value creation Revenue growth EBIT margin annual organic annual improvement 7–9% 50–100 bps Page 27
Slide 28: Coloplast can continue to deliver stable shareholder returns
In sum, we believe Coloplast can continue to deliver stable shareholder returns through ... 32% Comments • Stable market trends in our Chronic Care business 16% • Strong retention program and innovative DtC activities 10% 6% • Increased focus on growing the business outside Europe 9% 6% • Additional
Slide 29: Appendices
NEW SenSura® Mio Hospital Assortment Leading intimate healthcare Appendices
Slide 30: The Coloplast share (COLO'B-KO)
The Coloplast share (COLO’B-KO) Share Capital Ownership Coloplast share listed on Nasdaq Copenhagen since 1983 ~126 billion DKK (~19 billion USD) market cap @ ~585 DKK per 11% share (incl. A shares) 7% 2% Two share classes: 46% • 18m A shares carry 10 votes (family) • 198m B shares carry 1 vote (fre
Slide 31: Capital structure
Capital structure Comments Performance • Overall policy is that excess liquidity is 0.6x returned to shareholders through a 0.2x combination of dividends and share buy- -0.3x -0.3x -0.2x backs -0.3x -0.4x • Interest bearing debt will be raised in connection with a major acquisition or to 1,593 suppo
Slide 32: Key Value Ratios
Key Value Ratios Profitability drivers Free Cash Flow drivers 36.8 36.1 36.6 36.3 35.4 35.8 33.4 34.1 32.4 31.5 31.7 31.9 31.3 30.6 29.4 28.8 28.5 28.5 28.3 28.1 28.1 26.2 23.9 24.1 23.8 23.1 22.2 22.5 5.9 5.6 4.6 4.0 4.3 3.8 3.9 3.8 4.3 4.4 4.4 3.1 3.4 2.5 3.1 3.3 3.1 3.5 3.8 4.1 3.2 10/11 11/12 12
Slide 33: Coloplast revenue development by business area
Coloplast revenue development by business area Ostomy Care Urology Care 5,935 13 5,567 12 4,849 5,091 10 7 11 9 9 9 9 9 8 7 7 3,056 8 6 7 5 5 5 1,497 1,124 1,199 1,359 5 828 12/13 13/14 14/15 15/16 YTD 16/17 12/13 13/14 14/15 15/16 YTD 16/17 Continence Care Wound & Skin Care 16 13 10 10 9 9 5,019 5,
Slide 34: Coloplast revenue development by geography and total
Coloplast revenue development by geography and total Europe Other Developed Markets 19 14 8,843 9,213 7,749 8,221 9 10 8 4,655 2,945 3,177 1,745 8 2,395 2,479 6 6 5 5 6 5 6 6 6 4 4 2 12/13 13/14 14/15 15/16 YTD 16/17 12/13 13/14 14/15 15/16 YTD 16/17 Emerging Markets Coloplast group 24 23 21 14,681
Slide 35: Segment operating profit
Segment operating profit Chronic Care Urology Care Wound & Skin Care Ostomy and Continence Care 39 38 38 40 34 34 60 61 61 60 60 38 36 35 35 218 205 167 188 155 177 1,696 1,750 1,706 1,737 171 1,603 133 133 130 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 15/16 15/16 15/16 16/17 16/17 15/16 15/16 15
Slide 36: We invest to pursue growth opportunities and recalibrate if needed
We invest to pursue growth opportunities and monitor previous investments, recalibrating if needed We are executing on our mature markets investments We are recalibrating some investments to new realities Expansion in Breakthrough in Expansion in Expansion in Expansion in Expansion in UK US Brazil R
Slide 37: US Mesh litigation – Overview of current financial impact
US Mesh litigation – Overview of current financial impact P&L Balance Cash flow Assets Actual/Expected cash flow, DKKbn 1.2 1.2 2013/14 2014/15 2015/16 Restricted cash, DKKbn 0.8 EBIT (before special items) 4,147 4,535 4,846 0.6 0.6 0.5 Special items -1,000 -3,000 - 750 0.3 EBIT 3,147 1,535 4,096 0.
Slide 38: Exchange rate exposure and hedging policy
Exchange rate exposure and hedging policy Financial guidance for 2016/17 12 months exposure from 10% Hedging Policy initial exchange rate drop To achieve the objective of a stabile Profit 50 before Tax we hedge: DKK GBP USD HUF EUR 0 Average exchange rate • Balance sheet items in foreign currency 20
Slide 39: Mesh litigation timeline
Mesh litigation timeline Sept. 9, 2014: Verdict vs Feb. 7, 2016: July 23, 2012: May 2, 2014: Sept. 5, 2014: BSC Mar. 5, 2015: Verdict for Bard/BSc Verdict vs Bard Feb. 28, 2013: Feb. 2014: Coloplast provision Verdict vs Ethicon TX State Verdict vs Ethicon MO State Court CA State Court: Verdict vs Et
Slide 40: Health reform landscape
Health reform landscape • France: Reimbursement pressure on WC, OC and CC. • U.S.: Healthcare reform implementation ongoing Reimbursement review of OC and CC in 2016/17 • Brazil: Macroeconomic and political challenges • UK: Efficiency savings under NHS reform • Russia: Macroeconomic and political ch
Slide 41: CARE helps increase retention and product compliance
CARE helps us increase retention and improve product compliance for in excess of 500,000 enrolled consumers We co-develop CARE content with CARE is a personal and “high- Global program with shared local clinicians touch” program infrastructure Advisors available on phone Clinically validated content
Slide 42: With our DtC marketing program we reach into the community
With our DtC marketing program we reach into the community We operate in numerous channels to expose our service …and with the reach we get several benefits and product offering… Expose innovative products Ensure product accessibility Ensure successful experience Page 42
Slide 43: The generic model for distribution and reimbursement of our products
The generic model for distribution and reimbursement of our products Prescription & Insurance Product Payer Reimbursement price Distribution Prescription & Insurance Consumer $ Product DtC Marketing • Campaigns • Community • Relationships • Information Coloplast Page 43
Slide 44: Comfort Medical – a direct-to-consumer business model
Comfort Medical – a direct-to-consumer business model Business model Comfort Medical has an inflow of patients from 3 different sources: • On December 20, 2016, Coloplast acquired Comfort Medical for a cash consideration of USD 160m equal to approx. DKK 1.1bn on a cash and debt-free basis Inside Sal
Slide 45: Introducing Ostomy Care
Introducing Ostomy Care Disease areas Key products Distribution of • Colorectal cancer (est. 45%) revenues* • Bladder cancer (est. 10%) • Diverticulitis (est. 15%) Urostomy • Inflammatory bowel disease (est. 10%) Ileostomy • Other (est. 20%) Colostomy Customer groups • Nurses, mainly stoma care nurs
Slide 46: Introducing Ostomy Care Accessories
Introducing Ostomy Care Accessories Market fundamentals Key products Brava® is a range of ostomy accessories designed to • Market size of DKK 2bn reduce leakage or care for skin, to make our end- • Market growth of 6-8% • Market share 25-30% Brava® Protective Seal users feel secure. Brava® was laun
Slide 47: Introducing Continence Care
Introducing Continence Care Disease areas Key products Distribution of revenues • Spinal Cord Injured, SCI Intermittent catheters • Spina Bifida, SB Urine bags • Multiple Sclerosis, MS Male ext. catheters • Benign prostatic hyperplasia, BPH & prostatectomy patients Bowel management • Elderly Custome
Slide 48: Introducing Bowel Management
Introducing Bowel Management Disease areas Market dynamics Faecal incontinence + Growing awareness (management products only) + Huge underpenetrated and Customer groups unserved population + New devices addressing the many • Spinal Cord Injured, SCI • Spina Bifida, SB unmet needs • Multiple Sclerosi
Slide 49: Introducing Urology Care
Introducing Urology Care Treatment (surgical) of urological disorders Disease areas Key products Distribution of revenues • Urinary incontinence • Pelvic organ prolapse Men’s health • Erectile dysfunction Women’s health • Enlarged prostate • Kidney and urinary stones Single use devices Customer grou
Slide 50: Introducing Wound Care
Introducing Wound Care Disease areas Key products Distribution of revenues (WSC) Chronic wounds Biatain® range • Leg ulcers Comfeel® range • Diabetic foot ulcers • Pressure ulcers Skin Care Wound Care other Customer groups Contract manufacturing & call points Biatain® Silicone Biatain® Ag Hospitals
Slide 51: Introducing Skin Care
Introducing Skin Care Disease areas Key products Product mix • Moisture associated skin damage Protectants & Antifungals • Incontinence Cleansing/Bathing • Skin folds & obesity Moisturizers • Prevention of skin impairments Textile Customer groups & call points Sween® EasiCleanse Bath® Hospitals Broa
Slide 52: Product market for US Skin Care
Product market for US Skin Care Market drivers/limiters US Skin Care at a glance + Aging and obese population • US market size estimated at DKK + CMS Value Based Purchasing + Increased focus on prevention 5-6bn with 4-5% growth + Increased importance of utilization • Market share: 7-9% management •
Slide 53: The Coloplast organisation
The Coloplast organisation Coloplast Group Chronic Care Strategic Business Units Chronic Care Strategic Business Units Ostomy Care Continence Care Wound Care Skin Care Urology Care Marketing Marketing ID SD Marketing Sales Sales Marketing Marketing R&D R&D Sales Sales R&D R&D Sales Regions R&D Globa
Slide 54: Coloplast Executive Management
Coloplast Executive Management Lars Rasmussen President, CEO • Born 1959 • With Coloplast since 1988 Anders Lonning-Skovgaard Allan Rasmussen Kristian Villumsen EVP, CFO EVP, Global Operations EVP Chronic Care • Born 1972 • Born 1967 • Born 1970 • With Coloplast since 2006 • With Coloplast since 199
Slide 55: Corporate responsibility – Member of UN Global Compact since 2002
Corporate responsibility – Member of UN Global Compact since 2002 and recognized externally THE INCLUSION OF COLOPLAST A/S IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF COLOPLAST A/S BY MSCI
Slide 56: Income statement
Income statement DKKm H1 2015/16 H1 2016/17 Change Revenue 7,256 7,636 5% Gross profit 4,959 5,202 5% SG&A costs -2,352 -2,445 4% R&D costs -248 -290 17% Other operating income/expenses 2 5 nm Operating profit (EBIT) 2,361 2,472 5% Net financial items -100 -35 -65% Tax -520 -560 8% Net profit 1,741
Slide 57: Balance sheet
Balance sheet DKKm 31 Mar 2015 31 Mar 2016 Change Balance, total 10,602 12,511 18% Assets Non-current assets 4,593 5,903 29% Current assets 6,009 6,608 10% of which: Inventories 1,455 1,742 20% Trade receivables 2,663 2,819 6% Restricted cash 634 796 26% Marketable securities, cash, and cash equival
Slide 58: Cash flow
Cash flow DKKm H1 2015/16 H1 2016/17 Change EBITDA 2,622 2,769 6% Change in working capital 597 -1,268 nm Net interest payments -7 -88 nm Paid tax -253 -255 1% Other -1,865 -600 -68% Cash flow from operations 1,094 558 -49% CAPEX1) -227 -262 15% PPE divested 0 45 nm Acquisition 0 -1,144 nm Securitie
Slide 59: Manufacturing setup
Manufacturing setup Production by country* 5% 5% Hungary Thisted China Minneapolis 20% Mørdrup Denmark Mankato US/France 70% Nyirbátor Tatabánya Sarlat COGS by cost type** 9% Salary - Direct 21% 13% Salary - Indirect Materials (RM &SFG) 8% Innovation & Depreciations & amortisations Competency Centre
Slide 60: Production sites
Production sites Denmark US Mørdrup Minneapolis • Adhesives production • Urology care products • Wound care products • Number of employees in production: ~100 • Ostomy care products • Continence care products • Pilot development work Adhesives, Continence care and Wound care • Number of employees in
Slide 61: Production sites
Production sites Hungary China Tatabánya Zhuhai • Ostomy care products • Continence care products • Adhesives • Ostomy care products • Continence care products • Machine building • Urology care products • Number of employees in production: ~1,000 • Number of employees in production: ~1,600 Tata • Po
Slide 62: Contact Investor Relations
Contact Investor Relations Holtedam 1 DK-3050 Humlebæk Denmark Ellen Bjurgert Rasmus Sørensen Anne-Sofie Søegaard Director, Investor Relations Senior Manager, Investor Relations IR Coordinator Tel. direct: +45 4911 3376 Tel. direct: +45 4911 1786 Tel. direct: +45 4911 1924 Office: +45 4911 1800 Offi
Slide 63: Our mission, values and vision
Our mission Making life easier for peoplé with intimate healthcare needs Our values Closeness... to better understand. - Passion... to make a difference Respect and responsibility... to 0 guide | US: Our vision Setting the global standard for listening and responding: Coloplast A/S - Ostomy Care / C