Coloplast A/s Class B · OMXCOP:COLO_B
Coloplast A/s Class B — 9M 2015/16 Earnings Presentation
60 slides from Coloplast A/s Class B's earnings presentation, August 2016
Slide 1: Leading intimate healthcare – Roadshow presentation 9M 2015/16
Leading intimate healthcare Roadshow presentation 9M 2015/16
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: 9M 15/16 organic growth of 7% and 33% EBIT margin
9M 15/16 organic growth of 7% and 33% EBIT margin Highlights Revenue growth +7 • Organic revenue growth of 7% (6% in Reported revenue (DKKm) 10,942 10,288 DKK) Organic growth (%) − For Q3, organic revenue growth of +8 8% (4% in DKK) 3,540 3,686 • Gross margin of 68% on par with last year • EBIT marg
Slide 4: 9M 15/16 organic growth was 7% against a market growth of ~5%
9M 15/16 organic growth was 7% against a market growth of ~5% 9M 15/16 revenue by business area 9M 15/16 revenue by geography Business Reported revenue Organic growth Share of growth Geographic Reported revenue Organic growth Share of growth area DKKm In percent In percent area DKKm In percent In pe
Slide 5: Ostomy Care grew 9% YTD and 11% in Q3
Our Ostomy Care business grew 9% YTD and 11% in Q3 driven by SenSura® range and Brava® accessories Performance Comments 11 11 • 9M organic growth of 9% (7% in DKK). Q3 organic growth of 11% 9 9 9 • Satisfactory growth in UK, China, Russia, Argentina and Nordic markets 8 • Satisfactory growth in SenS
Slide 6: Continence Care grew 5% YTD driven by Speedicath and Peristeen
Our Continence Care business grew 5% YTD driven by Speedicath® and Peristeen® Performance Comments 16 • 9M organic sales growth of 5% (4% in DKK). Q3 organic growth of 6% • Satisfactory growth in UK, Argentina, France and Russia • Growth driven by SpeediCath® Compact catheters in the UK, US, 12 Fran
Slide 7: Solid Urology Care organic growth of 8%
Solid Urology Care 9M and Q3 organic growth of 8% driven by market share gains in US Men’s and Women’s Health Performance Comments 17 • 9M organic growth of 8% (10% in DKK). Q3 organic growth of 8% 15 • Satisfactory growth for Men’s Health driven by US demand for Titan® penile implants 14 • Satisfac
Slide 8: WSC delivered 9M 7% organic growth
WSC delivered 9M 7% organic growth adversely impacted by lower growth momentum in Emerging Markets Performance Comments 18 • 9M organic sales growth in WSC of 7% (7% in DKK), and 6% for Wound Care in isolation 15 15 • Q3 organic growth for WSC of 4%, and 6% for Wound Care in isolation 12 • Growth in
Slide 9: Operating margin of 33%
Operating margin of 33% impacted by efficiency gains, product mix and increased R&D activity Performance Comments • EBIT grew 8% to DKK 3,562m with a margin of 33% for 9M 68 69 69 68 68 2015/16 • Q3 EBIT margin of 33% 1) 34 • Gross margin of 68% on par with last year 30 33 32 33 • Continued efficien
Slide 10: Free cash flow development
Positive impact on FCF from higher EBITDA and lower tax payments offset by payments for Mesh settlements Performance Comments • Free cash flow was DKK 1,643m compared to DKK 1,950m for 9M 26 2014/15 • EBITDA DKK 306m higher 21 20 • NWC-to-sales of 26%, 2%-point higher than FY 2014/15 19 primarily du
Slide 11: Financial guidance for 2015/16
Financial guidance for 2015/16 – revised expectations for sales growth in DKK Guidance 15/16 Guidance 15/16 (DKK) Long term ambition Sales growth 7-8% (organic) ~6% 7-9% p.a. EBIT margin 33-34 (fixed) ~33 +50-100 bps p.a. CAPEX (DKKm) 600-700 4-5% of sales Tax rate ~23 Page 11
Slide 12: Introduction to Coloplast
Leading intimate healthcare Introduction to Coloplast
Slide 13: Coloplast has four business areas with global sales presence
Coloplast has four business areas all with global sales presence Group revenue FY 2014/15 by segment Group revenue FY 2014/15 by geography X = Coloplast’s global market position Emerging markets 15% Continence Ostomy Care Care 40% 36% DKK Other DKK #1 13.9bn #1 developed 13.9bn markets 21% European
Slide 14: 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 opening in the SenSura® Mio abdominal wall Ostomy bag Ostomy Care People in need of bladder or bowel management SpeediCath® Continence Compact male C
Slide 15: Intimate health care is characterized by stable industry trends
Intimate health care 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 E
Slide 16: Strong market positions in Europe and commercial 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 ~14bn ~11bn 9-10bn 16-17bn 4-5% 5-6% 3-5% 3-5% Size in DKK Growth in % Coloplast 40 - 50% 45 - 55% 10 - 20% 5 - 15% regional
Slide 17: 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 17
Slide 18: Innovative product launches and Consumer investments
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 18
Slide 19: 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 20: Expansion relies on 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 21: 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 21
Slide 22: Profitability uplift from 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 -0.9%-points 29.4 28.8 28.5 28.3 28.5 28-29 Distribution +3.9%-points 67.6 68.7 68.5 64.6 66.6 -1.6%-points 5.9 5.6 4.6 4.0 4.3 ~4 Admin -0.9%
Slide 23: Strong and attractive free cash flows
We will continue to deliver strong and attractive free cash flows … Taxation Net working capital CAPEX Reported tax rate Operating working capital in % revenue Depreciation in % of revenue CAPEX in % of revenue CAPEX DKKm 23.9% 24.1% ~24% 4.2% 4-5% 23.1% 3.5% 27.8%* 2.3% 2.5% 25.9% 22.2% 22.5% ~23%
Slide 24: Attractive cash returns despite large investments
… and attractive cash returns despite large investments in commercial and expansion activities Coloplast cash distribution to investors Comments 100 Dividends (DKKm) Share buy-back (DKKm) Pay-out ratio (%)* • Coloplast returns excess liquidity to shareholders in the form of dividends 82 and share bu
Slide 25: New long-term guidance
Our new long-term guidance will continue to deliver strong value creation Revenue growth EBIT margin annual organic annual improvement 7–9% 50–100 bps Page 25
Slide 26: Stable shareholder returns
In sum, we believe Coloplast can continue to deliver stable shareholder returns through ... 33% Comments • Stable market trends in our Chronic Care business 13% • Strong retention program and innovative DtC activities 12% 7% • Increased focus on growing the business outside Europe 8% 7% • Additional
Slide 27: Appendices
Leading intimate healthcare Appendices
Slide 28: The Coloplast share (COLO'B-KO)
The Coloplast share (COLO’B-KO) Share Capital Ownership Coloplast share listed on Nasdaq Copenhagen since 1983 1% ~114 billion DKK (~17 billion USD) market cap @ ~530 DKK per 12% share (incl. A shares) 7% Two share classes: 2% 46% • 18m A shares carry 10 votes (family) • 198m B shares carry 1 vote (
Slide 29: 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- 0.1x -0.3x -0.3x backs -0.4x -0.3x • Interest bearing debt will be raised in connection with a major acquisition or to 1,593 suppor
Slide 30: Key Value Ratios
Key Value Ratios Profitability drivers Free Cash Flow drivers 36.8 36.1 36.1 38.7 35.8 34.1 35.4 33.4 32.4 30.6 31.3 31.5 31.7 29.5 29.4 27.1 28.8 28.5 28.3 28.5 25.7 28.5 23.1 23.1 23.9 24.1 22.2 22.5 5.9 5.8 5.6 4.6 4.0 4.3 3.9 3.8 4.3 4.4 3.2 2.5 3.1 3.5 4.3 4.1 3.1 3.3 3.1 3.2 3.5 09/10 10/11 11
Slide 31: Revenue development by business area
Coloplast revenue development by business area Ostomy Care Urology Care 9 9 9 13 8 7 7 11 9 10 6 6 9 5 5 8 8 7 6 5,091 5,567 1,359 4,633 4,849 4,416 1,124 1,199 1,121 1,037 5 11/12 12/13 13/14 14/15 YTD 15/16 11/12 12/13 13/14 14/15 YTD 15/16 Continence Care Wound & Skin Care 13 16 11 10 9 10 8 8 9
Slide 32: Revenue development by geography and total
Coloplast revenue development by geography and total Europe Other Developed Markets 8 19 15 6 6 9 5 6 10 6 7 6 7 4 5 5 6 5 4 8,221 8,843 4 7,388 7,749 6,943 2,945 2,288 2,395 2,479 2,291 11/12 12/13 13/14 14/15 YTD 15/16 11/12 12/13 13/14 14/15 YTD 15/16 Emerging Markets Coloplast group 23 12 24 21
Slide 33: Segment operating profit
Segment operating profit Chronic Care Urology Care Wound & Skin Care Ostomy and Continence Care 40 39 36 37 61 61 60 60 61 34 36 36 35 35 218 32 198 184 184 1,622 1,703 1,667 1,696 171 1,603 137 133 133 124 110 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 14/15 14/15 15/16 15/16 15/16 14/15 14/15 15
Slide 34: Investments to pursue growth and recalibrate
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 35: US Mesh litigation – current financial impact
US Mesh litigation – Overview of current financial impact P&L Balance Cash flow Assets Actual/Expected cash flow, DKKbn 1,152 FY FY Restricted cash, DKKm 13/14 14/15 EBIT (before special items) 4,147 4,535 634 Special items 1,000 3,000 556 563 418 EBIT 3,147 1,535 288 191 2.0 72 EBIT % (before speci
Slide 36: Exchange rate exposure and hedging policy
Exchange rate exposure and hedging policy Financial guidance for 2015/16 based on below 12 months exposure from 10% Hedging Policy assumptions for the company’s principal currencies initial exchange rate drop To achieve the objective of a stabile Profit before Tax we hedge: • Balance sheet items in
Slide 37: 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 38: Health reform landscape
Health reform landscape • France: Reimbursement review of OC and • U.S.: Healthcare reform implementation ongoing CC in FY 15/16 • Brazil: Macroeconomic and political challenges • UK: Efficiency savings under NHS reform • Russia: Macroeconomic and political challenges • Germany: Reimbursement pressu
Slide 39: CARE program for enrolled consumers
CARE helps us increase retention and improve product compliance for more than 400,000 enrolled consumers We co-develop Care content with Care is a personal and “high-touch” Global program with shared local clinicians program infrastructure Advisors available on phone Clinically validated content and
Slide 40: DtC marketing program
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 40
Slide 41: Generic model for distribution and reimbursement
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 41
Slide 42: Introducing Ostomy Care
Introducing Ostomy Care Disease areas Key products Distribution of revenues* • Colorectal cancer (est. 45%) Urostomy • Bladder cancer (est. 10%) • Diverticulitis (est. 15%) Ileostomy • Inflammatory bowel disease (est. 10%) Colostomy • Other (est. 20%) Customer groups • Nurses, mainly stoma care nurs
Slide 43: 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 5-7% • Market share 20-25% users feel secure. Brava® was launched in April 2012 Brav
Slide 44: 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 • Benign prostatic Male ext. catheters hyperplasia, BPH & Bowel management prostatectomy patients • Elderly Custome
Slide 45: 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 46: 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 47: 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 48: Introducing Skin Care
Introducing Skin Care Disease areas Key products Product mix • Moisture associated skin damage Barriers • Incontinence Cleansing/Bathing • Skin folds & obesity Moisturizers • Prevention of skin impairments Textile Other Customer groups & call points Sween® EasiCleanse Bath® Hospitals • Broad line of
Slide 49: 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 + CMS Value Based Purchasing + Increase focus on prevention at DKK 7-8bn with ~ 5% + Increase importance of utilization growth management • Market share: ~5% ÷ Con
Slide 50: 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 51: 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 52: Corporate responsibility – external recognitions
Corporate responsibility – external recognitions Page 52
Slide 53: Income statement
Income statement DKKm 9M 2014/15 9M 2015/16 Change Revenue 10,288 10,942 6% Gross profit 7,020 7,471 6% SG&A costs -3,414 -3,537 4% R&D costs -328 -380 16% Other operating income/expenses 8 8 nm Operating profit (EBIT) 3,286 3,562 8% Net financial items -233 -31 -87% Tax -732 -812 11% Net profit 2,3
Slide 54: Balance sheet
Balance sheet DKKm 30 Jun 2015 30 Jun 2016 Change Balance, total 9,945 11,280 13% Assets Non-current assets 4,607 4,634 1% Current assets 5,338 6,646 25% of which: Inventories 1,484 1,502 1% Trade receivables 2,480 2,769 12% Restricted cash 191 1,152 nm Marketable securities, cash, and cash equivale
Slide 55: Cash flow
Cash flow DKKm 9M 2014/15 9M 2015/16 Change EBITDA 3,649 3,955 8% Change in working capital 227 291 nm Net interest payments -267 -84 nm Paid tax -1,130 -321 -72% Other -521 -2,139 nm Cash flow from operations 1,958 1,702 -13% CAPEX -447 -386 -14% Securities 409 318 -22% Other 30 9 nm Cash flow from
Slide 56: Manufacturing setup
Manufacturing setup Production by country* 5% Hungary 10% Thisted China Minneapolis Mørdrup Denmark Mankato US/France 25% 60% Nyirbátor Tatabánya Sarlat COGS by cost type** 9% Salary - Direct 20% 13% Salary - Indirect Materials (RM &SFG) 9% Innovation & Depreciations & amortisations Competency Centr
Slide 57: Production sites
Production sites Denmark US Mørdrup Minneapolis • Adhesives • Urology care products • Wound care products • Number of employees in production: ~100 • Ostomy care products • Continence care products • Number of employees in production: ~370 Thisted Mankato • Machine development • Skin and wound care
Slide 58: Production sites
Production sites Hungary China Tatabánya Zhuhai • Ostomy care products • Continence care products • Adhesives • Ostomy care products • Continence care products • Machine building • Number of employees in production: ~1,350 • Number of employees in production: ~1,000 Tata • Postponement & packaging •
Slide 59: Contact Investor Relations
Contact Investor Relations Holtedam 1 DK-3050 Humlebæk Denmark Ian Christensen Ellen Bjurgert Vice President Manager Investor Relations Investor Relations Tel. direct: +45 4911 1301 Tel. direct: +45 4911 3376 Office: +45 4911 1800 Office: +45 4911 1800 Fax: +45 4911 1555 Fax: +45 4911 1555 dkisec@co
Slide 60: 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