Coloplast A/s Class B · OMXCOP:COLO_B
Coloplast A/s Class B — H1 2018/19 Earnings Presentation
68 slides from Coloplast A/s Class B's earnings presentation, May 2019
Slide 1: Leading intimate healthcare – Roadshow presentation H1 2018/19
Leading intimate healthcare Roadshow presentation H1 2018/19
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: Solid underlying performance in Q2 and reported growth guidance increased to ~9%
Solid underlying performance in Q2 and reported growth guidance for 2018/19 increased to ~9% due to currencies Q2 Highlights Revenue growth +9% • Organic growth of 8% and 9% in DKK Reported revenue (DKKm) +8% • Strong growth in Continence Care, Wound Care and Organic growth +9% 8,722 Interventional
Slide 4: Solid growth across all business areas in Europe, US and China
Solid growth across all business areas in Europe, US and China H1 18/19 revenue by business area H1 18/19 revenue by geography Business Reported revenue Organic growth Share of organic Geographic Reported revenue Organic growth Share of organic area DKKm growth area DKKm growth Ostomy Care 3,478 7%
Slide 5: Ostomy Care grew 6% organically in Q2
Ostomy Care grew 6% organically in Q2, negatively impacted by lower tender activity in Emerging markets Ostomy Care performance Comments • H1 organic growth of 7% (reported growth 7%). Q2 organic growth of 10 6% (reported growth 7%). Acquired growth was less than 1% in H1 9 • Satisfactory growth in
Slide 6: Continence Care grew 9% organically in Q2
Continence Care grew 9% organically in Q2 driven by SpeediCath® intermittent catheters and Peristeen® Continence Care performance Comments 10 10 • H1 organic growth of 8% (10% reported growth). Q2 organic growth of 9 9% (10% reported growth). Acquired growth was 2% in H1 resulting from acquisitions
Slide 7: Interventional Urology grew 10% organically in Q2
Interventional Urology grew 10% organically in Q2 driven by Titan® penile implants and Altis® single incision slings Interventional Urology performance Comments • H1 organic growth of 9% (12% reported growth). Q2 organic growth of 10% (14% reported growth) 14 • Q2 growth mainly driven by the US 11 1
Slide 8: Wound Care grew 9% in Q2
Wound Care grew 9% in Q2 driven by the Biatain® Silicone portfolio in Europe and the Biatain® portfolio in China Wound & Skin Care performance Comments • H1 organic growth of 10% in Wound & Skin Care (11% reported growth). Q2 organic growth of 9% in Wound & Skin Care (11% reported growth) 12 11 11 •
Slide 9: H1 18/19 reported revenue grew 9% driven by organic growth of 8%
H1 18/19 reported revenue grew 9% driven by solid organic growth of 8% Comments Revenue development • H1 2018/19 reported revenue increased by DKK 732m (DKKm) or 9% compared to H1 2017/18 55 39 8,722 • The majority of growth was driven by organic growth 638 contributing DKK 638m or 8% to reported re
Slide 10: Solid growth in EBIT of 12% in Q2 and 10% in H1
Solid growth in EBIT of 12% in Q2 and 10% in H1 Comments EBIT margin development (%) • EBIT increased 10% to DKK 2,639m with a reported margin of 30% compared to 30% last year • Gross margin of 67% in DKK compared to 67% same period last year • Positive impact from operational leverage, continued ef
Slide 11: FCF driven by solid underlying development in earnings
FCF driven by solid underlying development in earnings and acquisitions in comparison period FCF development Comments • Free cash flow in H1 2018/19 was DKK 1,004m compared to DKK 811m in H1 2017/18 98 99 93 93 96 • The increase is mainly explained by a decrease in investment activities, 92 mainly d
Slide 12: Updated guidance for FY 2018/19
Updated guidance for FY 2018/19 Guidance 2018/19 Guidance 2018/19 (DKK)* Key assumptions Sales growth ~8% ~9% • Up to 1% negative price pressure (organic) (previously 8-9%) • DKK guidance includes growth from Lilial and IncoCare • Incremental investments of up to 2% of revenue • Restructuring costs
Slide 13: Introduction to Coloplast
Leading intimate healthcare Introduction to Coloplast
Slide 14: Coloplast has four business areas all with global sales presence
Coloplast has four business areas all with global sales presence Group revenue 2017/18 by segment Group revenue 2017/18 by geography X = Coloplast’s global market position Emerging markets 17% Ostomy Care Continence 40% Care 36% #1 DKK DKK 16.4bn #1 Other 16.4bn developed European markets markets 23
Slide 15: 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 16: The Chronic Care model secures a predictable revenue stream
The Chronic Care model secures a predictable revenue stream and stable revenue growth The chronic care user flow Chronic Care condition New user Installed base of users Stable flow of loyal users Solid reimbursement Coloplast group revenues 16.4 11.6 9 8 8 7 7 7 7 One new patient per year… … secures
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 17-18bn 13-14bn 11-12bn 18-20bn 4-5% 5-6% 3-5% 2-4% Size in DKK Growth in % Coloplast 40 - 50% 45 - 55% 10 - 20% 5 - 15% reg
Slide 19: LEAD20 strategy will drive revenue and earnings growth across 4 themes
Coloplast’s LEAD20 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: Long-term guidance for the LEAD20 strategy period
Long-term guidance for the LEAD20 strategy period aimed at accelerating growth and long-term value creation Revenue growth EBIT margin annual organic constant currencies 7–9% >30% Page 20
Slide 21: Growth acceleration through two key pillars and GOP4
Growth acceleration to be driven through two key pillars and GOP4 will continue to drive unparalleled efficiency Two pillars to drive growth I. Accelerated organic investments I. Invest up to 2% of topline p.a. in new incremental investment cases Understanding II. Emerging markets, US, selected coun
Slide 22: Increased investments into R&D and commercial opportunities
We have increased our investments into R&D and commercial opportunities in the US and Emerging markets Investment allocation Investment allocation by type FY 15/16 to FY 17/18 FY 15/16 to FY 17/18 Up to 2% of Coloplast sales Up to Sales & marketing expansion invested per year 2% R&D Other (IT, Admin
Slide 23: Up to 2% of revenue in incremental investments for 18/19
For 18/19 we will commit up to 2% of revenue in incre- mental investments in commercial initiatives and innovation Understanding users’ lives in full Innovation Consumer R&D ~4% of sales Creating life-changing products and services Supporting beyond expectations Page 23
Slide 24: Global Coloplast Care and DtC presence supports users
Our global Coloplast Care and DtC presence enables us to support users across countries and business areas Over 1M consumers in our database Over 1M conversations with users across the globe Over 30 countries with a consumer setup New Bowel Care program implemented in 2018 Coloplast Care & DTC offer
Slide 25: Ambitious Clinical Performance Program
We have initiated a very ambitious Clinical Performance Program to tackle the biggest issues users face What really matters to people using catheters? What really matters to people living with a stoma? 45 %* of users describe UTIs are their 93 % worry about leakage2 greatest challenge in life1 * Peo
Slide 26: Digitalization of new products
Through digitalization of new products, we will take the next step towards our mission of making life easier for our users Digitalization in product development as first important milestone Payers Digitalization • We have a mission of making life easier Direct for people with intimate healthcare Glo
Slide 27: EBIT margin development is a function of scalability, cost discipline, investments and M&A
EBIT margin development is a function of scalability, cost discipline, investments and M&A Illustrative Natural leverage Possible incremental Future drivers of EBIT margin effect depending on investment of up to 2% organic growth level of revenue per year EBIT will be positively impacted by: + Lever
Slide 28: Global Operation Plan 4 supports unparalleled efficiency
Global Operation Plan 4 aims to support LEAD20 through continued unparalleled efficiency and financial discipline Global Operations Plan 4 1. Reduction of manufacturing in Denmark EBIT margin contribution, bps Manufacturing FTE’s in Denmark, Ultimo FY GOP 3 GOP 4 700 600 50 500 375 21% 200 100 Salar
Slide 29: Profitability supported by scalability and efficiency gains
Profitability supported by scalability and efficiency gains enabling additional investments within distribution and R&D Gross margin development, in % of revenue Cost item Development, in % of revenue +0.4%-points 28.3 28.5 28.1 28.1 28.7 28-30 Distribution -1.4%-points 68.7 68.5 68.3 68.1 67.3 0%-p
Slide 30: Global Business Support and IT landscape enables scaling
A global Business Support and IT landscape enables Coloplast to scale faster and more efficiently Global Business Services Global business services handle the majority of all global support % of group processes 100% ~90% 100% IT infrastructure Finance/ Master Data Global Business & support accountin
Slide 31: We will continue to deliver strong free cash flows
We will continue to deliver strong and attractive free cash flows … Taxation Net working capital CAPEX(2) Reported tax rate Net working capital in % revenue Depreciation in % of revenue CAPEX in % of revenue CAPEX DKKm 4.1% 3.7% 4-5% 27.8% 25.2% 25.1% 23.9% 24.1% 23.8% 23.4% ~24% 2.8% 2.4% 23.0% 23.
Slide 32: Attractive cash returns despite large investments
…and continue to provide attractive cash returns despite large investments in commercial and expansion activities Coloplast cash distribution to investors Comments • Coloplast returns excess liquidity to Dividends paid out in the year (mDKK) (1) Share buy-back (DKKm) Pay-out ratio (%) (2) shareholde
Slide 33: Coloplast can continue to deliver stable shareholder returns
In sum, we believe Coloplast can continue to deliver stable shareholder returns through ... 30% Comments • Stable market trends in our Chronic Care business • Strong Coloplast Care retention program and innovative DtC 10% activities 8% 9% • Increased focus on growing the business outside Europe • Ad
Slide 34: Appendices
Leading intimate healthcare Appendices
Slide 35: The Coloplast share (COLO'B-KO)
The Coloplast share (COLO’B-KO) Share Capital Ownership Coloplast share listed on Nasdaq Copenhagen since 1983 ~154 billion DKK (~23 billion USD) market cap @ ~715 DKK per 9% share (incl. A shares) 7% 2% Two share classes: 46% • 18m A shares carry 10 votes (family) • 198m B shares carry 1 vote (free
Slide 36: Capital structure
Capital structure Comments Net interest bearing debt • Overall policy is that excess liquidity is returned to shareholders through a combination of dividends and share buy- 0.1x 0.1x -0.3x -0.2x backs -0.3x • Interest bearing debt will be raised in connection with a major acquisition or other specia
Slide 37: Key Value Ratios
Key Value Ratios Profitability drivers Free Cash Flow drivers 31.9 32.7 32.8 36.1 36.6 36.3 31.5 31.7 34.7 33.9 28.5 28.1 28.7 29.0 28.1 25.2 24.8 24.1 23.8 23.4 4.3 3.8 4.0 3.9 4.3 4.4 4.4 4.4 4.1 3.1 3.2 3.5 3.7 4.0 4.0 14/15 15/16 16/17 17/18 YTD 18/19 14/15 15/16 16/17 17/18 YTD 18/19 Admin-to-S
Slide 38: Coloplast revenue development by business area
Coloplast revenue development by business area Ostomy Care Interventional Urology 9 9 6,291 6,643 13 5,935 12 5,567 7 10 10 9 10 8 9 6 7 3,478 10 6 6 77 6 5 9 9 5 6 1,740 1,359 1,497 1,641 963 14/15 15/16 16/17 17/18 YTD 18/19 14/15 15/16 16/17 17/18 YTD 18/19 Continence Care Wound & Skin Care 16 13
Slide 39: Coloplast revenue development by geography and total
Coloplast revenue development by geography and total Europe Other Developed Markets 19 9,213 9,394 9,941 15 8,843 15 5,217 11 8 8 8 8 6 5 6 3,791 10 2,945 3,177 3,642 2,069 5 4 2 5 6 6 6 4 14/15 15/16 16/17 17/18 YTD 18/19 14/15 15/16 16/17(1) 17/18 YTD 18/19 Emerging Markets Coloplast group 23 16,4
Slide 40: Coloplast Q2 revenue and EBIT development
Coloplast Q2 revenue and EBIT development Revenue development EBIT margin development (%) (DKKm) 50 4,401 0.5 30.5 -0.2 0.2 30.3 0.4 316 0.2 4,035 29.7 -0.5 Revenue Q2 Organic growth Currency effect Revenue Q2 2017/18 2018/19 Reported ∆ Gross ∆ ∆ Admin- ∆ R&D- ∆ Other Reported Currency EBIT margin D
Slide 41: Segment operating profit
Segment operating profit (Excludes shared/non-allocated costs) Chronic Care Interventional Urology Wound & Skin Care2 Ostomy and Continence Care 59 38 38 39 41 58 58 57 58 36 37 38 38 38 39 177 187 241 1,875 1,899 1,886 1,928 169 164 228 1,777 154 203 209 201 Q2 17/18 Q3 17/18 Q4 17/18 Q1 18/19 Q2 1
Slide 42: Exchange rate exposure FY 2018/19 and hedging policy
Exchange rate exposure FY 2018/19 and hedging policy Revenue FX exposure 2018/19(1) 12 months exposure from 10% initial exchange rate drop(1) Other 15% USD -330 -140 CNY, JPY, AUD, BRL & ARS EUR 11% 41% -250 GBP -160 14% HUF 0 110 GBP 19% Revenue (DKKm) EBIT (DKKm) USD Financial guidance for 2018/19
Slide 43: Mesh litigation timeline
Mesh litigation timeline April 28, 2017: Verdict vs Ethicon Sep. 7, 2017: April 12, 2018: Verdict vs Bard Jan. 31, 2019: Verdict vs Ethicon PA State Court: PA State Court: Verdict vs Ethicon NJ State Court: USD 41M USD 20M PA State Court: USD 68M (DKK 354.3M) (DKK 125.3M) USD 57.1M (DKK 410.3M) Sept
Slide 44: 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 13/14 14/15 15/16 16/17 17/18 Restricted cash, DKKbn Actual 1.2 Expected EBIT (before special items) 4,147 4,535 4,846 5,024 5,091 0.8 0.8 0.7 0.7 Special items -1,000 -3,000 - 750
Slide 45: Health reform landscape
Health reform landscape Europe Rest of World • France: Reimbursement pressure on OC, CC and WC • U.S.: Healthcare reform implementation ongoing • Greece: Reimbursement pressure on all BAs • Argentina: Macroeconomic challenges • Germany: Reimbursement pressure on OC and CC • Brazil: Macroeconomic and
Slide 46: 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 47: DtC marketing program reaches 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 47
Slide 48: The 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 48
Slide 49: In Wound Care we are progressing with our new ambition
In Wound Care we are progressing with our new ambition 1 Shape the standard Endorsements Publications Build a strong product 2 PIP portfolio 3 Accelerate in EU Ramp-up Strengthen position 4 in the US New structure New management New investment plan Secure leading position 5 in China Revised targetin
Slide 50: 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 51: Introducing Ostomy Care Supporting Products
Introducing Ostomy Care Supporting Products Market fundamentals Key products Brava® is a range of ostomy supporting products • Market size of DKK 2-3bn designed to reduce leakage or care for skin, to make • Market growth of 6-8% • Market share 30-35% Brava® Protective Seal our end-users feel secure.
Slide 52: Introducing Continence Care
Introducing Continence Care Disease areas Key products Distribution of • Spinal Cord Injured, SCI revenues • Spina Bifida, SB • Multiple Sclerosis, MS Intermittent catheters • Benign prostatic hyperplasia, BPH & prostatectomy patients Urine bags • Elderly Male ext. catheters Bowel management CC Othe
Slide 53: Introducing Bowel Management
Introducing Bowel Management Disease areas Market dynamics Faecal incontinence + Growing awareness (management products only) + Huge underpenetrated and Customer groups unserved population • Spinal Cord Injured, SCI + New devices addressing the many • Spina Bifida, SB unmet needs • Multiple Sclerosi
Slide 54: Introducing Interventional Urology
Introducing Interventional Urology 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 Cus
Slide 55: Introducing Wound Care
Introducing Wound Care Disease areas Key products Distribution of revenues Chronic wounds (WSC) • Leg ulcers Biatain® range • Diabetic foot ulcers Comfeel® range • Pressure ulcers Skin Care Wound Care other Customer groups Contract manufacturing & call points Hospitals Biatain® Silicone Biatain® Sil
Slide 56: 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 SC Other Customer groups & call points Sween® EasiCleanse Bath® Hospi
Slide 57: 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 5-6bn with 4-5% growth + Increased focus on prevention + Increased importance of utilization • Market share: 7-9% management •
Slide 58: The Coloplast organisation
The Coloplast organisation Coloplast Group Chronic Care Strategic Business Units Chronic Care Strategic Business Units Ostomy Care Continence Care Wound & Skin Care Interventional Urology Marketing Marketing Marketing Sales R&D Operations Sales Regions Sales Regions R&D Global Operations Global Busi
Slide 59: Coloplast Executive Management
Coloplast Executive Management Kristian Villumsen President, CEO • Born 1970 • With Coloplast since 2008 Anders Lonning-Skovgaard Allan Rasmussen Paul Marcun EVP, CFO EVP, Global Operations EVP, Chronic Care • Born 1972 • Born 1967 • Born 1966 • With Coloplast since 2006 • With Coloplast since 1992
Slide 60: Responsible operations reduces risks and supports growth
Responsible operations reduces risks, stimulates employee engagement and supports growth Empowering People Acting respectfully Minimising footprint Access to Healthcare Inclusion and diversity Renewables Partnership programme to improve Year-on-year increase in women in top 100% electricity from ren
Slide 61: Income statement
Income statement DKKm H1 2017/18 H1 2018/19 Change Revenue 7,990 8,722 9% Gross profit 5,361 5,860 9% SG&A costs -2,662 -2,910 9% R&D costs -321 -352 10% Other operating income/expenses 29 41 41% Operating profit (EBIT) 2,407 2,639 10% Net financial items 5 -26 nm Tax -554 -601 8% Net profit 1,858 2
Slide 62: Balance sheet
Balance sheet DKKm 31 Mar 2018 31 Mar 2019 Change Balance, total 12,751 12,292 -4% Assets Non-current assets 6,110 6,195 1% Current assets 6,641 6,097 -8% of which: Inventories 1,679 1,869 11% Trade receivables 2,894 3,113 8% Restricted cash 702 71 -90% Marketable securities, cash, and cash equivale
Slide 63: Cash flow
Cash flow DKKm H1 2017/18 H1 2018/19 Change EBIT 2,407 2,639 10% Depreciation and amortisation 316 320 1% Change in working capital -545 -548 1% Net interest payments 49 -78 nm Paid tax -736 -1,012 38% Other -73 -87 19% Cash flow from operations 1,418 1,234 -13% Investments in intangibles -18 -36 10
Slide 64: Manufacturing setup
Manufacturing setup Production by country (Volume)¹ 2% Hungary 5% Mørdrup 15% Thisted4 Tatabánya China Minneapolis Sarlat Nyirbátor Denmark Mankato US/France Zhuhai 78% Costa Rica COGS by cost type² 9% Salary - Direct 21% 12% Salary - Indirect Materials (RM &SFG) 9% Innovation & Specialised Producti
Slide 65: Production sites
Production sites Denmark US Mørdrup Minneapolis • Pilot development work Ostomy care, • Interventional Urology products Continence care and Wound care • Number of employees in production: ~100 • Adhesives production • Number of employees in production: ~225 Thisted Mankato • Ostomy care products • S
Slide 66: Production sites
Production sites Hungary China Tatabánya Zhuhai • Ostomy care products • Continence care products • Adhesives • Ostomy care products • Continence care products • Machine building • Interventional Urology products • Number of employees in production: ~1,050 • Number of employees in production: ~1,700
Slide 67: Contact Investor Relations
Contact Investor Relations Holtedam 1 DK-3050 Humlebæk Denmark Ellen Bjurgert Rasmus Sørensen Anne-Sofie Søegaard Sine Flinck Vice President, Investor Relations Senior Manager, Investor Relations IR Coordinator Student Assistant Tel. direct: +45 4911 3376 Tel. direct: +45 4911 1786 Tel. direct: +45
Slide 68: 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 Group - Ostomy Care /