Amplifon Spa · MIL:AMP
Amplifon Spa — H1 2014 Earnings Presentation
60 slides from Amplifon Spa's earnings presentation, Jul 23, 2014
Slide 1: Amplifon H1 2014
Amplifon H1 2014 Milan - July 23rd, 2014
Slide 2: Disclaimer
Disclaimer The information contained herein and other material discussed during the analysts’ presentation, particularly the ones regarding any possible or assumed future performance of the Amplifon Group, are or may be forward looking statements and in this respect they involve some risks and uncer
Slide 3: H1-2014 Financial Results
H1-2014 Financial Results WE
Slide 4: Growth acceleration in Q2 over strong comps and FX impact
Growth acceleration in Q2 over strong comps and FX impact Growth accelerated in Q2 (up +6.1% y-o-y at constant FX) driven by: ongoing recovery in Europe (+5.9% at constant FX) consolidation of Israel and strong growth rates in the rest of EMEA (+242.1% at constant FX) soft trend in Americas (-1.3% i
Slide 5: Solid Balance Sheet sustains our growth strategy
Solid Balance Sheet sustains our growth strategy International presence and footprint expansion has speed up: entrance in the Israeli market by acquiring 60% of MedOrt – closing on April 30th acquisition of the retail chain Audika Italia Srl (55 shops) – closing on April 28th increased the stake in
Slide 6: H1-2014 Financial Results: recovery well on track
H1-2014 Financial Results: recovery well on track € millions H1 2014 H1 2013* restated ∆% REVENUE 416.5 100.0% 408.6 100.0% 1.9% EBITDA 57.5 13.8% 55.1 13.5% 4.3% EBITA 42.7 10.2% 39.9 9.8% 6.8% EBIT 35.4 8.5% 32.0 7.8% 10.6% PBT 23.4 5.6% 13.4 3.3% 75.3% GROUP NET INCOME 22.6 5.4% 4.3 1.0% 426.6% €
Slide 7: Good cruising speed across the globe
Good cruising speed across the globe US & Italy expected to rebound in H2 Europe: Revenue +4.2% YoY EMEA (+4.0% at constant FX) ME & A: Revenue +111.3% YoY AMERICAS DA AGGIORNARE (+133.1% at constant FX) Revenue APAC -1.0% in USD YoY Revenue +10.9% in AUD YoY 6
Slide 8: Ongoing recovery in Europe offsets challenging comparison base in Italy
Ongoing recovery in Europe offsets challenging comparison base in Italy H1 2014 Q2 2014 H1 2014 Q2 2014 % of H1 2014 vs vs vs vs Group sales H1 2013 Q2 2013 H1 2013 Q2 2013 Weak Q2 performance in line with expectations, owing to the particularly strong comparison base Italy -5.0% -3.7% (+12% in Q2-1
Slide 9: Slow start of the year in Americas, strong organic growth in APAC
Slow start of the year in Americas, strong organic growth in APAC H1 2014 Q2 2014 H1 2014 Q2 2014 % of H1 2014 vs vs vs vs Group sales H1 2013 Q2 2013 H1 2013 Q2 2013 Slow start of the year and weather impact on sales, further penalized by the negative FX effect (USD: -1.3% in Q2; -1.0% in H1). AMER
Slide 10: EMEA: ongoing recovery in Europe with margin improvement
EMEA: ongoing recovery in Europe with margin improvement € millions H1 2014 H1 2013* ∆% € millions Q2 2014 Q2 2013* ∆% REVENUE 289.3 100.0% 275.3 100.0% 5.1% REVENUE 161.4 100.0% 149.9 100.0% 7.7% EBITDA 29.4 10.2% 26.4 9.6% 11.1% EBITDA 23.4 14.5% 21.5 14.3% 8.9% EBIT 14.4 5.0% 11.2 4.1% 28.3% EBIT
Slide 11: AMERICAS: slow year start but expectations of a stronger H2
AMERICAS: slow year start but expectations of a stronger H2 € millions H1 2014 H1 2013 ∆% € millions Q2 2014 Q2 2013 ∆% REVENUE 66.4 100.0% 70.0 100.0% -5.1% REVENUE 33.4 100.0% 35.5 100.0% -6.0% EBITDA 11.9 17.9% 13.7 19.5% -13.0% EBITDA 5.7 17.1% 7.2 20.2% -20.5% EBIT 10.1 15.2% 11.6 16.6% -13.3%
Slide 12: APAC: margins back to previous highs boosted by strong organic growth
APAC: margins back to previous highs boosted by strong & profitable organic growth € millions H1 2014 H1 2013 ∆% € millions Q2 2014 Q2 2013 ∆% REVENUE 60.7 100.0% 63.4 100.0% -4.1% REVENUE 33.3 100.0% 33.8 100.0% -1.6% EBITDA 16.3 26.8% 15.0 23.7% 8.1% EBITDA 9.8 29.3% 8.7 25.7% 12.2% EBIT 10.9 17.9
Slide 13: Positive FCF generation and renewed focus on external growth
Positive FCF generation and renewed focus on external growth € thousands H1 2014 H1 2013 restated* EBIT 35,358 31,970 1. Higher Net Financials D&A 22,142 23,159 due to the pre-payment Other non cash adjustments and gains/losses on sale 6,910 6,227 of derivatives on the SFA. Net financials -10,826 -1
Slide 14: Strong capital structure to sustain expansion plans
Strong capital structure to sustain expansion plans Net Debt to Equity Net Debt € millions 439.8 € millions 297.3 297.3 As of 30/06/2014, Net Debt maturities covered until 27.7 Total Equity 2018 by the current 413.8 Long-term Short-term Cash Net debt cash position – this debt debt -170.3 does not in
Slide 15: H1-2014 Amplifon Revenue Breakdown
H1-2014 Amplifon Revenue Breakdown € millions H1 2014 H1 2013 ∆% ∆ FX OG% Q2 2014 Q2 2013 ∆% ∆ FX OG% Italy 107.4 25.8% 113.1 27.7% -5.0% -6.1% 63.7 66.2 -3.7% -5.5% France 50.4 12.1% 48.5 11.9% 4.0% 1.9% 26.3 25.5 3.0% 0.7% The Netherlands* 30.9 7.4% 28.2 6.9% 9.2% 9.2% 17.5 13.1 33.0% 33.0% German
Slide 16: H1-2014 Income Statement
H1-2014 Income Statement H1 2014 H1 2013 € thousands ∆% restated* Revenue 416,450 100.0% 408,599 100.0% 1.9% COGS (99,028) -23.8% 1 (94,729) -23.2% 4.5% 1.ASP pressure in NL and Labour Costs (129,061) -31.0% (128,678) -31.5% 3 0.3% unfavorable product mix in 2 Cost of services (130,539) -31.3% (130,
Slide 17: Q2-2014 Income Statement
Q2-2014 Income Statement Q2 2014 Q2 2013 ∆% restated* Revenue 228,101 100.0% 219,231 100.0% 4.0% COGS (52,835) -23.2% 1 (48,833) -22.3% 8.2% 1.Unfavorable product mix in Labour Costs (66,710) -29.2% (64,317) -29.3% 3.7% EHN bearing on COGS%. Cost of services (69,221) -30.3% (68,816) -31.4% 0.6% Othe
Slide 18: Balance Sheet: seasonal movement, perimeter growth and currency impact
Balance Sheet: seasonal movement, perimeter growth and currency impact 30/06/2014 31/12/2013 30/06/2014 31/12/2013 € thousands € thousands restated* restated* Trade payables -100,194 -96,241 Goodwill 525,294 500,680 Other payables -103,265 -117,111 Cust. lists, non-compet. agreem., Provisions for co
Slide 19: FY-2013 Financial Results
FY-2013 Financial Results 18
Slide 20: Short-term challenges in 2013 but fundamentals remain intact
Short-term challenges in 2013 but fundamentals remain intact MANAGING LEVERAGING SHORT-TERM CHALLENGES ON-GOING STRUCTURAL GROWTH DRIVERS Regulatory change in The Netherlands Solid & intact industry fundamentals Weak European macroeconomic environment Resilient business in a weak economic environmen
Slide 21: FY-2013 Financial Results
FY-2013 Financial Results FY-2013 FY-2012 € millions Recurring % on Non- Total % on Recurring % on Non- Total % on ∆ % on Recurring Recurring Total Recurring Recurring Total Recurring REVENUE 828,6 100,0% - 828,6 100,0% 846,6 100,0% - 846,6 100,0% -2,1% EBITDA 123,2 14,9% (5,8) 117,4 14,2% 145,2 17,
Slide 22: Global player outperforming the market growth
Global player outperforming the market growth Europe ex. NL: EUROPE Revenue -0.1% YoY (+0.5% at constant FX) NL: Revenue -25.6% YoY USA Revenue Revenue +8.7% in +9.9% in Emerging Market APAC AUD YoY USD YoY (ET, IN, TK) Revenue organic growth +45% YoY - representing less than 1% of Total Group’s sal
Slide 23: Revenue Breakdown: resilience with increased volatility Q-o-Q
Revenue Breakdown: resilience with increased volatility Q-o-Q FY 2013 Q4 2013 FY 2013 Q4 2013 % of FY 2013 vs vs vs vs Group sales FY 2012 Q4 2012 FY 2012 Q4 2012 The business remained resilient despite the slowdown of the economic Italy 0,4% -0,3% environment; Q4 sales were almost in line with PY n
Slide 24: Revenue Breakdown: resilience with increased volatility Q-o-Q
Revenue Breakdown: resilience with increased volatility Q-o-Q FY 2013 Q4 2013 FY 2013 Q4 2013 % of FY 2013 vs vs vs vs Group sales FY 2012 Q4 2012 FY 2012 Q4 2012 NORTH A year of remarkable and profitable growth jeopardized by negative FX 6,3% 1,3% Usa & Canada 6,3% 1,3% impact (OG: +10,2% YTD/ +6,9
Slide 25: Europe: resilience & signs of recovery but challenging Dutch market
Europe: resilience & signs of recovery but challenging Dutch market € millions FY-2013 FY-2012 ∆% Q4-2013 Q4-2012 ∆% REVENUE 559,6 100,0% 582,9 100,0% -4,0% 175,2 100,0% 184,6 100,0% -5,1% EBITDA 57,9 10,3% 83,9 14,4% -31,0% 32,0 18,3% 42,1 22,8% -23,9% EBIT 25,8 4,6% 53,5 9,2% -51,8% 23,4 13,3% 34,
Slide 26: North America: sound & profitable growth outperforming the market
North America: sound & profitable growth outperforming the market € millions FY-2013 FY-2012 ∆% Q4-2013 Q4-2012 ∆% REVENUE 138,7 100,0% 130,4 100,0% 6,3% 33,3 100,0% 32,9 100,0% 1,3% EBITDA 25,6 18,5% 24,7 18,9% 3,7% 4,8 14,4% 7,2 21,9% -33,4% EBIT 21,1 15,2% 19,1 14,6% 10,8% 3,3 9,9% 5,3 16,2% -38,
Slide 27: APAC: solid organic growth and strong finish to the year
APAC: solid organic growth and strong finish to the year € millions FY-2013 FY-2012 ∆% Q4-2013 Q4-2012 ∆% REVENUE 128,0 100,0% 130,8 100,0% -2,1% 32,3 100,0% 32,2 100,0% 0,4% EBITDA 33,5 26,2% 36,2 27,7% -7,6% 10,0 30,9% 7,5 23,3% 32,9% EBIT 21,2 16,6% 25,0 19,1% -15,2% 6,7 20,8% 4,6 14,4% 44,2% EBI
Slide 28: Steady Cash Generation also in FY 2013
Steady Cash Generation also in FY 2013 € thousands FY 2013 FY 2012 1. Heavy impact from EBIT 68.518 97.886 taxes payment due to D&A 48.896 47.286 Country mix. Other non cash adjustments and gains/losses on sale 16.348 15.339 Net financials -21.874 -22.072 2. Careful management of Taxes paid 1. -37.8
Slide 29: Net Debt to Equity and Net Debt
Q1-2014 Amplifon Revenue Breakdown Net Debt to Equity Net Debt Two transactions € millions € millions successfully 435.4 negotiated on the 275.3 275.3 debt capital market: Net Debt a $ 130 mln USPP 10.3 (€100.9 mln at Total Equity 382.6 hedged rate) – 7, Long-term Short-term Cash Net debt debt debt
Slide 30: FY-2013 Amplifon Revenue Breakdown
FY-2013 Amplifon Revenue Breakdown € millions FY-2013 FY-2012 ∆% ∆ FX OG% Q4-2013 Q4-2012 ∆% ∆ FX OG% Italy 225,5 27,2% 224,5 26,5% 0,4% 0,4% 75,2 75,4 -0,3% -0,3% France 98,3 11,9% 98,3 11,6% 0,0% -1,6% 29,2 27,6 5,7% 4,6% The Netherlands 66,8 8,1% 89,8 10,6% -25,6% -25,6% 23,8 36,1 -34,2% -34,2% G
Slide 31: FY-2013 Income Statement
FY-2013 Income Statement FY- 2013 FY-2012 € thousands Recurring Non- Total % on Recurring Non- Total % on ∆ % on Recurring Recurring Recurring Recurring Recurring 1.Higher contribution of Revenue 828.632 - 828.632 100,0% 846.611 - 846.611 100,0% -2,1% US B2B business and COGS (194.898) - (194.898) -
Slide 32: FY-2013 Performance by Region
FY-2013 Performance by Region € millions FY-2013 FY-2012 ∆% Q4-2013 Q4-2012 ∆% REVENUE 559,6 100,0% 582,9 100,0% -4,0% 175,2 100,0% 184,6 100,0% -5,1% EUROPE EBITDA 57,9 10,3% 83,9 14,4% -31,0% 32,0 18,3% 42,1 22,8% -23,9% EBIT 25,8 4,6% 53,5 9,2% -51,8% 23,4 13,3% 34,1 18,5% -31,4% EBITDA adj * 61,
Slide 33: Balance Sheet: heavy currency impact
Balance Sheet: heavy currency impact € thousands 31/12/2013 31/12/2012 € thousands 31/12/2013 31/12/2012 Goodwill 500.680 551.853 Trade payables -96.297 -98.016 Other payables -115.690 -113.515 Cust. lists, non-compet. agreem., 92.875 119.096 Provisions for contingency and trademarks and location ri
Slide 34: Equity Story
Equity Story 33
Slide 35: Global leading presence
Global leading presence Worldwide leader in distribution and fitting of hearing solutions Only global player with 9% of global market share 21 Countries 2,000 Corporate POS 2,500 Amplifon points 3,000 Franchisee & EHN affiliates in US 5,200 professionals worldwide on payroll 5,200 franchisee & agent
Slide 36: European Leadership
European Leadership Undisputed European leader in Fairly mature Still low penetration rate: a highly fragmented market market around 20% 35
Slide 37: Multi-continental Leadership
Multi-continental Leadership Highly Largest branded franchise Still low penetration rate: fragmented network around 25% market 36
Slide 38: Global Leadership
Global Leadership AUSTRALIA: NEW ZEALAND: INDIA: 25% market share Undisputed leader Presence to set leadership relatively young business over 50% market and develop the country’s with in-built growth share highly underpenetrated market 37
Slide 39: Balancing medical and retail core competencies
Balancing medical and retail core competencies Solid Consumer medical specialty retail background approach Medical Retail Business Market Resilience penetration MEDICAL APPROACH RETAIL APPROACH End users come to stores following End users come to stores driven by GP/ENT’s advice Advertisement /Marke
Slide 40: Specific solutions to all types of hearing loss & needs
Specific solutions to all types of hearing loss & needs Middle Ear implants Behind-The-Ear hearing instruments (BTE) Cochlear implants Standard/Custom Invisible in the canal In-The-Ear hearing (CIC) instruments (ITE) 39
Slide 41: Personalization is crucial
Personalization is crucial The sale of hearing aids is completely inseparable from the fitting process: The success of a product largely depends on accurate diagnosis, technical specification and personalized adaptation of device to customer’s needs; The personalized fitting procedure is carried out
Slide 42: A long-lasting relationship based on trust & dialogue
A long-lasting relationship based on trust & dialogue Specialized, high quality comprehensive A KEY PRINCIPLE: THE PERSONALISATION IS CRUCIAL audiological assessment, otoscopy & detailed patient history analysis The hearing solution life-cycle 1 2 REPURCHASE Avg life-cycle: 5 years Audiologists prop
Slide 43: Personalized pathways for each customer
Personalized pathways for each customer The average life-cycle of a solution is 5 years long: Follow-up , maintenance, cleaning, Steps: Getting ready Information Education on Product Product use Planning next batteries, for the visit and transference hearing loss presentation demonstration steps and
Slide 44: Best positioned within the hearing aids universe
Best positioned within the hearing aids universe In a highly fragmented H.A. retail market, Amplifon is well positioned to lead consolidation and market growth due to: ENT Doctors G.P. Doctors Unrivalled leadership position MANUFACTURERS Six major players Governments / in terms of volumes, revenues,
Slide 45: Leader in the largest segment of the value chain
Leader in the largest segment of the value chain Amplifon operates in the retail and wholesale segments. RETAIL GROSS MARGIN Components Hearing Aid Wholesale Manufactures Distributors Retail End Users Manufacturers ASP/ 200 - 700 € 400 - 1200 € 600 – 3.000 € 10 - 50 € Unit WHOLESALE GROSS MARGIN MAN
Slide 46: A sizeable, untapped and growing market
A sizeable, untapped and growing market profound 5% 90% A sizeable market 70% 30% Over 650 million people in the world suffer with severe 10% some degree of hearing impairment (source: WHO) 50% 50% 15% of population in industrialized countries moderately severe 15% Estimated global market size 11 ml
Slide 47: Facts and numbers underpin our potential
Facts and numbers underpin our potential Current average customer age is 72 years old BABY BOOMERS Demographic trends BB lower first buy age: 55 years old Population Growth BB new customers’ expectations: Longer life expectancy Technology savvy Expert on info data-mining Increasing noise pollution (
Slide 48: Amplifon history & performance
Amplifon history & performance Sales CAGR (2003/2013): +6.5% Ebitda CAGR (2003/2013): +6.9% 900 846.6 20% 827.4 828.6 800 17.1% 17.1% 708.1 17.5% 17.1% 14.5% 667.9 700 13.6% 657.0 13.7% 641.4 15% 613.1 14.2% 600 13.8% 11.6% 13.7% 547.1 499.9 500 443.4 10% 400 300 5% 200 144.5 145,2 117.4 93.5 105.1
Slide 49: Consistent cash generation & deleveraging track record
Consistent cash generation & deleveraging track record Historic FCF Margin % Historic Net Debt/Ebitda: 2009 - 2013 10% 4.0 8.8% 9% 8.2% 7.9% 3.5 3.5 8% * 3.0 * 3.0 Net Debt / Ebitda 7% 5.9% 6.1% 2.4 6% 2.5 2.1 2.2 5% 2.0 1.7 4% 1.5 3% 1.0 2% 1% 0.5 0% 0.0 2009 2010 2011 2012 2013 -0.5 2009 2010 2011
Slide 50: Global leading presence
Global leading presence Emerging Markets < 1% of Group revenue Create long-lasting Rank Develop the Market/ competitive advantage Network expansion Consolidate global market leadership Leader Roll out distinctive positioning of “consumer specialty retailer” Cluster 1 leveraging on: ∼ 50% of Group re
Slide 51: Annexes
Annexes 50
Slide 52: Strong competitive position across Countries
Strong competitive position across Countries Country Brand Market Share Position Competitors Italy Amplifon 41% #1 Independents, Maico, Audionova, Audibel Global leading player France Amplifon 11% #1 Audika, Audition Santè, Independents in the highly fragmented The Netherlands BeterHoren 34% #1 Scho
Slide 53: Unrivalled distribution network
Unrivalled distribution network DIRECT POS INDIRECT POS Country Brand Corporate Amplifon Franchisee/ Network POS points Service Centers Affiliates The Group operates through two main Italy Amplifon 496 2,138 distribution channels: Audika 55 France Amplifon 323 70 Direct points of sales, The Netherla
Slide 54: Brand simplification – praising local excellence
Brand simplification – praising local excellence Market Segment: medical and retail Model: corporate POS Flagship brand, founded in 1950 Countries: Italy, France, Germany, Spain, Portugal, Switzerland, Belgium, Luxembourg, Hungary, Poland, UK, Ireland, India, Egypt 1,564 owned stores, 2,407 Amplifon
Slide 55: Brand simplification – praising local excellence
Brand simplification – praising local excellence Elite Hearing Network is one of the largest independent networks in North America Market Segment: medical and retail Model: independent businesses Acquired in 2002 Countries: US Network of 1,748 independent stores National Hearing Care is a widely rec
Slide 56: Regulatory Environment 1/2
Regulatory Environment 1/2 % of Amplifon Country Sales Force Qualification Medical Prescription System of reimbursement and fiscal deduction Eligibility revenues from reimbursement Average reimbursement of € 600 per hearing aid which covers the basic device cost. Eligible individuals are entitled to
Slide 57: Regulatory Environment 2/2
Regulatory Environment 2/2 % of Amplifon COUNTRY Sales Force Qualification Medical Prescription System of reimbursement and fiscal deduction Eligibility revenues from reimbursement Audiologists / Mandatory only for public Partial reimbursement provided by public health service (150 € for each POLAND
Slide 58: US Value Proposition: Franchise & Wholesale
US Value Proposition: Franchise & Wholesale Territory: Marketing: Exclusive territory Members marketing fund Minimum Performance Target Broad-reach media plan + TV Referrals: Physician Marketing: HearPO prioritizes Amplifon CRS model to implement stores Research/ Clinical partnership Product: Nation
Slide 59: NHC: a young business with in-built growth
NHC: a young business with in-built growth Relatively young business with in-built growth through clients re-purchasing after 4 to 5 years as a greater number of NHC clinics starts to mature. Clinics > 4 years 58
Slide 60: Consumer Specialty Retailer, the “Amplifon Experience”
Consumer Specialty Retailer, the “Amplifon Experience” Amplifon, Worldwide Head Quarters Store, Milan, Italy: open since 2009 59