Demant A/s · OMXCOP:DEMANT
Demant A/s — H1 2016 Earnings Presentation
32 slides from Demant A/s's earnings presentation, August 2016
Slide 1: Interim Report 2016
Interim Report 2016 August 2016
Slide 2: Agenda
Agenda • Key take-aways • Group highlights • Strategic initiatives • Group financials • Outlook 2016 • Q&A 2
Slide 3: Key take-aways
William Demant Key take-aways wr | <a id 4 § ay
Slide 4: Key take-aways H1 2016
Key take-aways H1 2016 16% revenue growth – mainly driven by retail Introduction of Oticon OpnTM late in the period Diagnostic Instruments and Hearing Implants challenged by difficult market conditions Continued commitments to R&D Execution on strategic initiatives 4
Slide 5: Group highlights
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Slide 6: The William Demant Group
The William Demant Group Change in local DKK million H1 2016 H1 2015 Change currencies Hearing Devices 5,096 4,343 17% 18% Diagnostic Instruments 515 507 2% 4% Hearing Implants 199 193 3% 6% Total 5,810 5,043 15% 16% Diagnostic Hearing Implants 3% • 16% revenue growth in local currencies Instruments
Slide 7: The William Demant Group
The William Demant Group Change in local DKK million H1 2016 H1 2015 Change currencies Europe 2,499 1,858 35% 35% North America 2,326 2,157 8% 7% Oceania 426 441 -3% 3% Asia 395 387 2% 4% Other countries 164 200 -18% -7% Total 5,810 5,043 15% 16% Asia 7% Other Countries 3% • High double-digit revenu
Slide 8: Global hearing aid market
Global hearing aid market Global market unit • Estimated global market growth rate growth > 4-5% slightly above the Group’s general expectations of 4-5% unit growth • The global average selling price (ASP) is still under pressure, mainly due to shifts in channels, fiercer competition and changes to
Slide 9: Hearing Devices
Hearing Devices • Our Hearing Devices business activity generated revenue growth of 18% in local currencies • Mainly driven by strong organic and acquired growth in our retail business of 43% • Solid unit growth of 10% in our wholesale business • Unfavourable product and country mixes prior to launc
Slide 10: Oticon Opn off to a strong start
Oticon OpnTM off to a strong start Oticon OpnTM “ Oh my gosh, it was like a new world and it wasn’t because things are louder, it’s because things are better.” “At dinner with multiple conversations going on, I was able to participate in whichever one I wanted to, even more than one at a time.”. “ “
Slide 11: Oticon Opn – status
Oticon OpnTM – status • Successfully launched in all main markets • Few technical fitting issues now solved • Tremendous interest in all channels • Cannibalisation of old portfolio • Will be introduced in the VA channel in November • Additions to OpnTM family to be presented at EUHA 11
Slide 12: Hearing Implants
Hearing Implants • Hearing Implants realised lower-than-expected revenue growth of 6% in local currencies • In our CI business, some large tenders have been postponed to the second half of 2016, thus impacting the reported numbers negatively in H1 • Our BAHS business saw growth of 6% in local curren
Slide 13: Diagnostic Instruments
Diagnostic Instruments • Diagnostic Instruments saw 4% growth in local currencies • Significant decline of sales in export markets • We expect to see improved results in H2 13
Slide 14: Sennheiser Communications
Sennheiser Communications • Sennheiser Communications, our joint venture with German Sennheiser KG, delivered negative revenue growth of 12% • Mainly due to lower-than-expected growth in the CC&O segment and tough comparative figures • Positive outlook for H2 2016 14
Slide 15: Strategic initiatives
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Slide 16: Need for strong set-ups to support growth
Need for strong set-ups to support growth Reported revenue (DKKm) Number of employees 12.000 12.000 10.000 10.000 8.000 8.000 6.000 6.000 4.000 4.000 2.000 2.000 - - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015 Hearing Devices Diagnostic Instruments Heari
Slide 17: Efficiency improvements have offset lower prices
Efficiency improvements have offset lower prices Expanding industry-leading gross margins despite lower prices Lower prices Operational efficiency Economies of scale Retail acquisitions (negative for gross margin) (positive for gross margin) (positive for gross margin) (positive for gross margin) Gr
Slide 18: Global operations footprint
Global operations footprint • Economies of scale • Central production • Future ambition to build three main production hubs Global locations: Poland, Mexico Major local locations: Denmark, Italy, Germany, France, USA, Canada, China, Korea, Australia and Japan Standard production Custom production 20
Slide 19: Consolidating production to fewer locations
Consolidating production to fewer locations Gathering knowledge and skills at fewer production hubs to obtain maximum output in a competitive, scalable and cost-efficient way Poland as the Group’s central production hub in Europe Expanding new site in Mexico • Mierzyn, Poland: 90% of our production
Slide 20: Building strong, cost-efficient R&D set-ups
Building strong, cost-efficient R&D set-ups • Building two main R&D hubs in Poland and Denmark in order to secure optimal R&D output in a cost-efficient way • We are evaluating different options of Copenhagen Warsaw moving R&D from Bern (Switzerland) to Poland and Denmark, with the aim to make a sim
Slide 21: Executing on initiatives to improve efficiency
Executing on initiatives to improve efficiency To create the best possible platform for future growth with the most competitive, scalable and cost- efficient set-up, we have defined several strategic initiatives to be implemented in 2016 to 2018. Initiatives with the largest impact Financial impact
Slide 22: Group financials
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Slide 23: Adjusted income statement
Adjusted income statement Reported Restructuring Adjusted Reported Restructuring Adjusted DKK million H1 2016 costs H1 2016 H1 2015 costs H1 2015 Revenue 5,810 5,810 5,043 5,043 Production costs -1,461 20 -1,441 -1,300 -1,300 Gross profit 4,349 20 4,369 3,743 0 3,743 Research and development costs -
Slide 24: Group underlying development
Group underlying development Adjusted income statement (restructuring costs) FX adjustments Adjusted income statement DKK million 2015 2016 Change 2015 2016 2015 2016 Change Revenue 5,043 5,810 15.2% -21 33 5,022 5,843 16.3% EBIT 891 892 0.1% 59 17 950 909 -4.3% EBIT margin 17.7% 15.4% 18.9% 15.6% •
Slide 25: Wholesale vs. retail
Wholesale vs. retail 18% 30% COGS Sales & Marketing 21% 62% R&D 12% General & Admin 7% EBIT 30% 10% 10% Wholesale Retail Note: The illustration above is a mechanical example showing percentage of revenue 25
Slide 26: Balance sheet
Balance sheet Assets Equity and liabilities H1 H1 FY DKK million H1 2016 H1 2015 FY 2015 DKK million 2016 2015 2015 Intangible assets 6,300 4,273 5,977 Equity 6,704 6,088 6,500 Property, plant and equipment 1,754 1,641 1,768 Non-current liabilities 2,681 1,276 2,761 Other assets 1,834 1,724 1,837 Cu
Slide 27: Cash flows
Cash flows DKK million H1 2016 H1 2015 FY 2015 Operating profit (EBIT) 840 880 1,878 Non-cash adjustments 160 153 326 Changes in working capital -112 -192 -296 Dividends 8 79 79 CFFO 728 755 1,592 CFFI excluding acquisitions -224 -212 -463 Free cash flows 504 543 1,129 Acquisitions -229 -140 -1,633
Slide 28: Outlook for 2016
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Slide 29: Outlook for 2016
Outlook for 2016 We expect to see a market unit growth rate of 4-5% in the hearing aid market, which will however be partly offset by a decline in the market’s ASP due to continued mix changes and fierce competition. In terms of value, we expect to see a slightly positive market trend in 2016. We ex
Slide 30: Q&A
William Demant / Q&A
Slide 31: Appendix
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Slide 32: Income statement (reported)
Income statement (reported) Change in local DKK million H1 2016 H1 2015 Change currencies Revenue 5,810 5,043 15% 16% Gross profit 4,349 3,743 16% Gross profit margin 74.9% 74.2% Research and development costs -404 -369 9% 10% Distribution costs -2,786 -2,248 24% 27% Administrative expenses -334 -27