Sonova Holding Ag · SIX:SOON
Sonova — Investor Presentation (June 2013)
65 slides from Sonova's investor presentation, June 2013
Slide 1: Investor Presentation June 2013
INVESTOR PRESENTATION June 2013
Slide 2: Disclaimer
DISCLAIMER This presentation may contain forward-looking statements including, but not limited to, projections of future performance of products, financial conditions, results of operations and cash flows. The statements are made on the basis of management’s views and assumptions regarding future ev
Slide 3: Vision
VISION AT SONOVA, WE ENVISION … A WORLD WHERE EVERYONE ENJOYS THE DELIGHT OF HEARING AND THEREFORE LIVES A LIFE WITHOUT LIMITATIONS June 2013 Page 3
Slide 4: Sonova Group
SONOVA GROUP BROADEST OFFERING: HEARING INSTRUMENTS, COCHLEAR IMPLANTS … HI Hearing Instruments Behind-The-Ear hearing instruments (BTE) FM systems CI Cochlear Implants Cochlear implants Custom In-The-Ear hearing instruments (ITE) Hearing protection Wireless communication systems Invis
Slide 5: Business Case
BUSINESS CASE CLEAR AND FOCUSED STRATEGY – CUSTOMER DRIVEN INNOVATION SONOVA: «HEAR THE WORLD» Key to our success - Our customers and our employees Broadest product and service offering / portfolio - Hearing instruments (Phonak, Unitron) - Cochlear implants (Advanced Bionics) - Professional services
Slide 6: Contents
CONTENTS 1 MARKET PAGE 7 2 BUSINESS PAGE 11 3 CORPORATE STRATEGY PAGE 20 4 BUSINESS STRATEGIES PAGE 30 5 FINANCIAL INFORMATION PAGE 51 June 2013 Page 6
Slide 7: 1. Market
Sonova 1. MARKET
Slide 8: Market: around 15% of adults have hearing impairment
MARKET AROUND 15% OF ADULTS HAVE SOME DEGREE OF HEARING IMPAIRMENT CI PROFOUND HI MODERATE HI 15% MILD HI With hearing system Without hearing system END-USER MARKET – PENETRATION* - Profound loss 70% - Moderate loss 50% - Mild loss 10% * Source: Several industry statistics, Sonova estimates
Slide 9: Hearing solutions: instruments, implants and services
MARKET HEARING SOLUTIONS: INSTRUMENTS, IMPLANTS AND SERVICES HEARING INSTRUMENTS HI - Market Size ~ CHF 4.3 billion - Market CAGR ~ + 2-4% - HI Size (units) 10-11 million CI HI COCHLEAR IMPLANTS CI - Market Size ~ CHF 900 million - Market CAGR ~ +10% - CI Size (units) ~ 40 thousand TOTAL HEARING CAR
Slide 10: Service channels: key to access end-users
MARKET SERVICE CHANNELS: KEY TO ACCESS END-USERS HEARING INSTRUMENTS HI HOSPITALS GOVERNMENT - Market Size ~ CHF 4.3 billion OTHERS INDEPENDENTS - Market CAGR ~ + 2-4% - HI Size (units) 10-11 million BUYING GROUPS GLOBAL COCHLEAR IMPLANTS CI LARGE KEY RETAIL ACCOUNTS - Market Size ~ CHF 900 million
Slide 11: 2. Business
sonova 2. BUSINESS
Slide 12: Sonova Group: performance history
SONOVA GROUP PERFORMANCE HISTORY – STRONG FINANCIAL TRACK RECORD SALES EBITA EBITA in CHF million in CHF million margin in % 1H 2H 2'000 450 45% 1'800 400 40% 1'600 350 35% 1'400 300 30% 1'200 250 25% 1'000 200 20% 800 600 150 15% 400 100 10% 200 50 5% 0 0 0% 07/08 08/09 09/10 10/11 11/12 12/13 13/1
Slide 13: Well established global infrastructure and network
SONOVA GROUP WELL ESTABLISHED GLOBAL INFRASTRUCTURE AND NETWORK Stäfa (CH) Newark (USA) Kitchener (CAN) Suzhou (CN) Murten (CH) Valencia (USA) Ho Chi Minh City (VN) Sonova & Phonak HQ & Centers AB Center WHS Group Companies Unitron Center InSound Center Distributors Phonak Communications Center Oper
Slide 14: Europe and Americas main contributors to group sales
SONOVA GROUP EUROPE AND AMERICAS – MAIN CONTRIBUTORS TO GROUP SALES SALES SALES in CHF million in CHF million 2'000 2'000 1'800 1'800 1'600 1'600 1'400 1'400 1'200 1'200 1'000 1'000 '800 '800 '600 '600 '400 '400 '200 '200 '0 '0 07/08 08/09 09/10 10/11 11/12 12/13 13/14 07/08 08/09 09/10 10/11 11/12
Slide 15: Market position
MARKET POSITION EXPANDING STRONG HI POSITION INTO LARGER HEARING CARE MARKET HEARING INSTRUMENTS HI - Market Size ~ CHF 4.3 billion - Market CAGR ~ + 2-4% - HI Size (units) 10-11 million COCHLEAR IMPLANTS CI - Market Size ~ CHF 900 million - Market CAGR ~ +10% - CI Size (units) ~ 40 thousand TOTAL H
Slide 16: Service channels: strong partner
MARKET POSITION SERVICE CHANNELS: STRONG PARTNER TO IND, LRA, BG AND GOVT HEARING INSTRUMENTS HI HOSPITALS - Market Size ~ CHF 4.3 billion GOVERNMENT OTHERS INDEPENDENTS - Market CAGR ~ + 2-4% - HI Size (units) 10-11 million SOON Sales Split BUYING GROUPS GLOBAL LARGE KEY COCHLEAR IMPLANTS CI RETAIL
Slide 17: Businesses
BUSINESSES BALANCED PORTFOLIO OF PROFITABLE GROWTH BUSINESSES SONOVA Group HEARING INSTRUMENT (HI) IMPLANT (CI) Segment Segment HI HI HI CI RETAIL UNITRON PHONAK ADVANCED BIONICS Business Business Business Business June 2013 Page 17
Slide 18: HI Segment: performance history
HI SEGMENT PERFORMANCE HISTORY – STRONG FINANCIAL TRACK RECORD SALES EBITA EBITA in CHF million in CHF million margin in % 1H 2H 2'000 450 45% 1'800 400 40% 1'600 350 35% 1'400 300 30% 1'200 250 25% 1'000 200 20% 800 600 150 15% 400 100 10% 200 50 5% 0 0 0% 07/08 08/09 09/10 10/11 11/12 12/13 07/08
Slide 19: CI Segment: performance history
CI SEGMENT PERFORMANCE HISTORY SALES EBITA EBITA in CHF million in CHF million margin in % 1H 2H 150 10 20% 125 0 0% 100 -10 -20% 75 -20 -40% 50 -30 -60% 25 -40 -80% 0 -50 -100% 07/08 08/09 09/10 10/11 11/12 12/13 07/08 08/09 09/10 10/11 11/12 12/13 FY 2008/09 FY 2009/10 FY 2010/11 FY 2011/12 FY 201
Slide 20: 3. Corporate Strategy
Sonova 3. CORPORATE STRATEGY
Slide 21: Mission
MISSION WE STRIVE TO BE RECOGNIZED AS THE INNOVATION LEADER … HI Hearing Instruments Behind-The-Ear hearing instruments (BTE) FM systems CI Cochlear Implants Cochlear implants Custom In-The-Ear hearing instruments (ITE) Hearing protection Wireless communication systems Invisible extend
Slide 22: Financial targets
FINANCIAL TARGETS ON COURSE FOR MID TERM FINANCIAL TARGETS Notes: FY 2007/08 Excluding one-off cost for the prohibited acquisition of the GN ReSound Group FY 2009/10 Restated based on finalization of the acquisition accounting of Advanced Bionics FY 2012/13 Excluding one-off cost for AB Vendor B pro
Slide 23: Strategy: six key strategies
STRATEGY SIX KEY STRATEGIES DRIVING CORE SALES AND EARNINGS GROWTH CORPORATE STRATEGIES BUSINESS STRATEGIES 1 INNOVATION 1 HI PHONAK 2 MARKET 2 HI UNITRON 3 PRODUCT 3 HI RETAIL 4 PORTFOLIO 4 CI ADVANCED BIONICS 5 RESOURCE 6 ACQUISITION June 2013 Page 23
Slide 24: Innovation strategy
INNOVATION STRATEGY FOCUS ON CONTINUOUS INNOVATION TO GROW SALES AND EARNINGS Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 MARKETING SALES & DISTRIBUTION NEW PRODUCTS PRODUCTIVITY & EFFICIENCY RESOURCES & PROCESSES CORE: DRIVE STRONG NEW PRODUCT PIPELINE – GROSS R&D 7-8% OF SALES June
Slide 25: Market strategy
MARKET STRATEGY GROW MARKET POSITION ALONG 4 MAIN GROWTH VECTORS 1 Penetrate existing markets – WHS account development – Dual-brand strategy – Continuous product innovation 2 Expand accessible markets – BRIC markets – New product formats 3 Integrate service channels – Retail network expansion – Int
Slide 26: Product strategy
PRODUCT STRATEGY PROVIDE COMPLETE CUSTOMER SOLUTIONS: HW, SW AND SERVICES PLATFORM CONCEPT APPROACH TO SOLUTION DEVELOPMENT June 2013 Page 26
Slide 27: Portfolio strategy
PORTFOLIO STRATEGY DEVELOP BALANCED PORTFOLIO OF PROFITABLE GROWTH BUSINESSES INVEST RETURN Low High ??? STAR High LYRIC MARKET GROWTH CI High HI COM Low Low DOG COW MARKET SHARE LEAD INNOVATION IN HEARING INSTRUMENTS AND IMPLANTS June 2013 Page 27
Slide 28: Resource strategy
RESOURCE STRATEGY LEVERAGE GLOBAL INFRASTRUCTURE TO EXPAND MARGINS AMERICAS EUROPE APAC 200 200 200 150 150 150 100 100 100 SALES SALES SALES 50 50 50 OPEX OPEX OPEX 0 0 0 2012 2016 2012 2016 2012 2016 RE-BALANCE GLOBAL OPEX BASE TO CREATE NATURAL HEDGE June 2013 Page 28
Slide 29: Acquisition strategy
ACQUISITION STRATEGY INVEST TO LEVERAGE EXISTING CHANNELS AND PRODUCTS 3,000 ,0 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 Channels HI ISM CI AB TARGETS: STRICT CRITERIA FOR STRATEGIC AND FINANCIAL FIT June 2013 Page 29
Slide 30: 4. Business Strategies
Sonova 4. BUSINESS STRATEGIES
Slide 31: Phonak: balanced portfolio
PHONAK SONOVA: BALANCED PORTFOLIO OF PROFITABLE GROWTH BUSINESSES SONOVA Group HEARING INSTRUMENT (HI) IMPLANT (CI) Segment Segment HI HI HI CI RETAIL UNITRON PHONAK ADVANCED BIONICS Business Business Business Business June 2013 Page 31
Slide 32: Phonak business strategy
PHONAK BUSINESS STRATEGY PHONAK: «LIFE IS ON» Mission / value proposition - Drive innovation leadership to expand market position Markets - Cover broadest global (whole)sale, distribution & support network Products - Offer complete range across all form factors and performance levels Product pipelin
Slide 33: Phonak markets
PHONAK MARKETS: COVER BROADEST GLOBAL SALES & SUPPORT NETWORK AP AM EU FURTHER PENETRATE AM AND EU – EXPAND POSITIONS IN AP (CHINA) June 2013 Page 33
Slide 34: Phonak product pipeline
PHONAK PRODUCT PIPELINE: DRIVE HIGH INNOVATION & PRODUCT LAUNCH RATE TIMELINE / CY 1H 11 2H 11 1H 12 2H 12 1H 13 2H 13 1H 14 2H 14 1H 15 2H 15 POWER – Naída Q F1 F3 F4 F2 HI - Premium BTE – Bolero Q RIC – Audéo Q ITE – Virto Q F 5 F 1 F 2 F 3 F 4 F 5 F1 F2 F5 HI - Advanced F1 F5 HI - Standard F1 / 4
Slide 35: Phonak product portfolio
PHONAK PRODUCT PORTFOLIO BTE product line ITE product line RIC Power Pediatric Premium Phonak Bolero Q90 Phonak Virto Q90 Audéo Q90 Naída Q90 Advanced Phonak Bolero Q70 Phonak Virto Q70 Audéo Q70 Naída Q70 Nios S V* Standard Phonak Bolero Q50 Phonak Virto Q50 Audéo Q50 Naída Q50 Nios S III* Essentia
Slide 36: Unitron: balanced portfolio
UNITRON SONOVA: BALANCED PORTFOLIO OF PROFITABLE GROWTH BUSINESSES SONOVA Group HEARING INSTRUMENT (HI) IMPLANT (CI) Segment Segment HI HI HI CI RETAIL UNITRON PHONAK ADVANCED BIONICS Business Business Business Business June 2013 Page 36
Slide 37: Unitron business strategy
UNITRON BUSINESS STRATEGY UNITRON: «HEARING MATTERS» Mission / value proposition - Drive leadership in customer experience Markets - Deeper penetration in core markets in Europe and NA Products - Offer flexible range across many form factors and all performance levels Product pipeline - Drive focuse
Slide 38: Unitron markets
UNITRON MARKETS: EXPAND GLOBAL NETWORK FROM STRONG BASE IN NA AP AM EU DEVELOP POSITIONS IN EU – SUPPORT SONOVA EXPANSION IN AP (CHINA) June 2013 Page 38
Slide 39: Unitron product pipeline
UNITRON PRODUCT PIPELINE: DRIVE FOCUSED PRODUCT INNOVATION TIMELINE / CY 1H 11 2H 11 1H 12 2H 12 1H 13 2H 13 1H 14 2H 14 1H 15 2H 15 M PRO Q PRO M PRO Q PRO F 3 FLEX Trial&Upgrade HI - Premium Moxi Kiss – RIC Q – FLEX 1 M– FLEX 1 HI - Advanced M1 F 1 F 2 Q1 Q- M 2 HI - Standard HI - Essential/Basic
Slide 40: Unitron product portfolio
UNITRON PRODUCT PORTFOLIO BTE product line ITE product line RIC Power Flex Trial Any Performance Premium Quantum Pro Quantum Pro Moxi Kiss Pro Moxi Pro Quantum 20 Quantum 20 Moxi Kiss 20 Moxi 20 Max 20 Advanced Level Quantum 12 Quantum 12 Moxi Kiss 12 Moxi 12 Standard Quantum 6 Quantum 6 Moxi Kiss 6
Slide 41: Connect Hearing: balanced portfolio
CONNECT HEARING SONOVA: BALANCED PORTFOLIO OF PROFITABLE GROWTH BUSINESSES SONOVA Group HEARING INSTRUMENT (HI) IMPLANT (CI) Segment Segment HI HI CI HI RETAIL PHONAK ADVANCED UNITRON BIONICS Business Business Business Business June 2013 Page 41
Slide 42: Connect Hearing business strategy
CONNECT HEARING BUSINESS STRATEGY RETAIL: «YOUR HEARING CARE PROFESSIONAL» Mission / value proposition - Secure market access and grow professional hearing care services Markets - Build strong service positions / networks in key focus markets Business models / products - Support new business concept
Slide 43: Connect Hearing markets
CONNECT HEARING MARKETS: BUILD STRONG SERVICE POSITIONS IN KEY MARKETS AP AM EU FOCUS ON: US, CA, BR, UK, FR, BE, AT, AUS/NZ June 2013 Page 43
Slide 44: Connect Hearing offering: DOHC / Boots shop in shop
CONNECT HEARING OFFERING MARKET LEADING SHOP IN SHOP CONCEPT – EXAMPLE DOHC / BOOTS (UK) Well-established partnership between David Ormerod Hearing Centres (DOHC) and Boots since 2003 Number of locations in the UK grew from 64 to more than 340 during that time Boots hearingcare offers professi
Slide 45: Advanced Bionics: balanced portfolio
ADVANCED BIONICS SONOVA: BALANCED PORTFOLIO OF PROFITABLE GROWTH BUSINESSES SONOVA Group HEARING INSTRUMENT (HI) IMPLANT (CI) Segment Segment HI HI HI CI RETAIL UNITRON PHONAK ADVANCED BIONICS Business Business Business Business June 2013 Page 45
Slide 46: Advanced Bionics business strategy
ADVANCED BIONICS BUSINESS STRATEGY ADVANCED BIONICS: «PATIENTS ALWAYS FIRST» Mission / value proposition - Strive for performance leadership – leverage AB and PH combination Markets - Build global direct sales & support network - grow from strong US base Products - Expand innovative range of process
Slide 47: Advanced Bionics markets
ADVANCED BIONICS MARKETS: EXPAND GLOBAL NETWORK FROM STRONG BASE IN US AP AM EU GROW POSITIONS IN EU, BR, JP – BUILD PLATFORM IN CHINA June 2013 Page 47
Slide 48: How a cochlear implant works
ADVANCED BIONICS HOW A COCHLEAR IMPLANT WORKS Magnetic headpiece Implant Transmits digital signal Converts digital wirelessly to the implant information into electrical signal Soundprocessor Sound is captured and Electrode converted into detailed Delivers signal as digital information electrical sti
Slide 49: Advanced Bionics product pipeline
ADVANCED BIONICS PRODUCT PIPELINE: ACCELERATE INNOVATION RATE – LEVERAGE PH TIMELINE / CY 1H 11 2H 11 1H 12 2H 12 1H 13 2H 13 1H 14 2H 14 1H 15 2H 15 FDA HiFocus N El 2 N El 3 CI - Electrodes CE N El 2 N El 3 Mid-Scala FDA HiRes 90k N Imp 2 N Imp 3 CI - Implants CE Advantage N Imp 2 N Imp 3 FDA CI -
Slide 50: Advanced Bionics product portfolio
ADVANCED BIONICS PRODUCT PORTFOLIO Implant HiRes 90K Advantage HiRes 90K Electrodes HiFocus Mid-Scala HiFocus 1j HiFocus Helix Sound Processors Naída CI* Neptune Harmony BTE Software SoundWave 2.1 * approved in Europa and Canada, not yet approved in the US June 2013 Page 50
Slide 51: 5. Financial Information
sonova 5. FINANCIAL INFORMATION
Slide 52: Full year 2012/13 summary of financial results
FULL YEAR 2012/13 SUMMARY OF FINANCIAL RESULTS – Solid sales growth – Sales of CHF 1’795.3 million – up 10.8% in Swiss francs and 7.4% in LC – All major regions contributing to the increase – Strong EBITA growth and margin expansion – normalized for one-off charges – Normalized EBITA of CHF 386.4 mi
Slide 53: Solid financial performance - normalized
FY 2012/13 SOLID FINANCIAL PERFORMANCE – NORMALIZED in CHF million FY 2011/12 FY 2012/13 Δ % in CHF Δ % in LC Sales 1'619.8 1'795.3 10.8% 7.4% Gross profit 1'105.9 1'240.1 12.1% 8.2% - Gross profit margin 68.3% 69.1% OPEX 790.7 853.7 8.0% 5.4% EBITA 315.2 386.4 22.6% 15.4% - EBITA margin 19.5% 21.5%
Slide 54: Group EBITA development
FY 2012/13 GROUP EBITA DEVELOPMENT 386.4 +5.1 363.7 +22.7 +43.4 -203.6 315.2 182.8 +48.5 +15.4% +71.2 Margin: Margin: +22.6% Margin: Margin: 19.5% 20.9% 21.5% 10.2% EBITA Organic Acquisitions EBITA FX EBITA One-off EBITA 2011/12 Growth 2012/13 effect 2012/13 cost (reported) const. FX normalized 2012
Slide 55: Details by business segments
FY 2012/13 DETAILS BY BUSINESS SEGMENTS Growth in CHF million 2011/12 2012/13 Growth in CHF in lc Sales Hearing Instruments 1’523.5 1’648.5 +4.9% +8.2% - thereof organic +2.6% Cochlear Implants 96.3 146.7 +47.1% +52.3% Group 1’619.8 1’795.3 +7.4% +10.8% EBITA Hearing Instruments 339.3 384.7 +6.7% +1
Slide 56: Operating expenses
FY 2012/13 OPERATING EXPENSES in CHF million FY 2011/12 FY 2012/13 Δ % in CHF Δ % in LC Research & Development 116.2 113.5 -2.3% -3.7% in % of sales 7.2% 6.3% Sales & Marketing 503.4 558.9 11.0% 8.0% in % of sales 31.1% 31.1% General & Administration 168.7 181.3 7.5% 5.4% in % of sales 10.4% 10.1% S
Slide 57: R&D spending including net capitalized development cost
FY 2012/13 R&D SPENDING – INCLUDING NET CAPITALIZED DEVELOPMENT COST in CHF million / % of sales 140.0 132.7 7.8% 123.2 8.2% 7.6% 16.5 26.5 15.5 +9.5 +7.4 +7.7% 116.2 +5.5% 107.8 113.5 7.2% 6.3% 6.7% 2010/11 2011/12 2012/13 AB capitalized development costs (net of amortization) R&D costs charged to
Slide 58: Reported results and income taxes
FY 2012/13 REPORTED RESULTS AND INCOME TAXES in CHF million FY 2011/12 FY 2012/13 Δ % in CHF EBITA 315.2 182.8 -42.0% Amortization / Impairment -27.5 -26.1 -5.0% Operating profit (EBIT) 287.7 156.7 -45.5% in % of sales 17.8% 8.7% Financial result -5.9 -6.9 15.9% Income before taxes 281.8 149.8 -46.8
Slide 59: Significant increase in cash flow
FY 2012/13 SIGNIFICANT INCREASE IN CASH FLOW in CHF million FY 2011/12 FY 2012/13 Δ % in CHF Cash flow before changes in NWC 387.5 443.7 14.5% Changes in net working capital and taxes paid -82.7 -56.6 -31.5% Operating cash flow 304.8 387.1 27.0% in % of sales 18.8% 21.6% Cash flow from investing act
Slide 60: Balance sheet
FY 2012/13 BALANCE SHEET in CHF million FY 2011/12 FY 2012/13 Δ % in CHF Net working capital 163.4 187.1 14.5% Days sales outstanding (DSO) 72 71 -1.4% Days inventory outstanding (DIO) 122 148 21.3% Capital employed 1'540.3 1'449.5 -5.9% Net cash -64.4 185.8 > 100% Equity 1'475.9 1'635.3 10.8% Equit
Slide 61: Dividend - proposed increase by 33% to CHF 1.60
FY 2012/13 DIVIDEND – PROPOSED INCREASE BY 33% TO CHF 1.60 Dividend / distribution development in CHF per share 1.60 1.20 1.20 1.20 1.00 1.00 0.75 0.50 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 PROPOSED DIVIDEND REPRESENTS 35% OF NORMALIZED INCOME AFTER TAXES June 2013 Page 61
Slide 62: Outlook: FY 2013/14 guidance in local currencies
OUTLOOK FY 2013/14 GUIDANCE – IN LOCAL CURRENCIES Guidance Actual - normalized FY 2013/14 FY 2012/13 Sales Sales growth in LC 6%-8% 7.4% thereof acquisition related growth approx. 1% 2.2% FX-impact n/a 3.4% Total sales growth in CHF n/a 10.8% EBITA EBITA growth in lc 9%-13% 15.4% FX-impact n/a 7.2%
Slide 63: Outlook: FX impact on sales and margins
OUTLOOK FY 2013/14 GUIDANCE – FX IMPACT ON SALES AND MARGINS USD/CHF EUR/CHF 1.00 0.95 0.90 0.85 0.80 0.75 0.70 Jun-11 Jan-12 Jun-12 May-11 May-12 Aug-11 Sep-11 Aug-12 Jul-11 Jul-12 Feb-12 Mar-12 Apr-11 Oct-11 Oct-11 Nov-11 Dec-11 Apr-12 Rate Sales EBITA USD/CHF +/- 5% +/- CHF 38 million +/- CHF 11
Slide 64: Business Case
BUSINESS CASE CLEAR AND FOCUSED STRATEGY – CUSTOMER DRIVEN INNOVATION SONOVA: «HEAR THE WORLD» Key to our success - Our customers and our employees Broadest product and service offering / portfolio - Hearing instruments (Phonak, Unitron) - Cochlear implants (Advanced Bionics) - Professional services
Slide 65: Thank you very much
sOnova THANK YOU VERY MUCH