- ISIN DK0010268440
William Demant Holding A/S
Interim Report 2013
William Demant Holding A/S
14.08.2013 07:36
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Company announcement no 2013-08 14 August 2013
Improved earning momentum in first half-year despite difficult conditions in
several markets
As expected substantial contribution to corporate growth by Oticon Alta
William Demant Holding A/S today published its Interim Report 2013. Selected
highlights from the Interim Report are summarised below:
-- In the first half-year, the Group realised revenue of DKK 4,541 million, or
a 7% rise compared to the same period last year. Both the Group's core
business, wholesale of hearing aids, as Diagnostic Instruments and Personal
Communication have generated positive organic growth. Furthermore, revenue
was positively impacted by acquisitions, including the acquisition in April
2013 of the French implant company Neurelec.
-- Driven by the successful launch of the high-end product Oticon Alta, the
Group's core business, wholesale of hearing aids, has in the reporting
period generated a growth rate that outmatches the market growth rate.
Compared with the second half-year 2012, the organic growth rate was 8%.
Growth was achieved despite continuously difficult conditions in several
markets, including Denmark, Norway and Holland, where the Group has lost
revenue of more than DKK 100 million, or 2-3% of corporate revenue.
-- By virtue of the boosted sales momentum, corporate operating profit (EBIT)
in the period under review reached DKK 880 million, or a rate of growth of
12% on the second half of 2012. The profit margin (EBIT margin) was 19.4%,
which is 1 percentage point above the level realised in the past six
months. Compared to the second half-year of 2012, earnings per share (EPS)
rose by as much as 16% to DKK 11.2, which are the highest earnings per
share ever generated by our Group in any half-year period.
-- Our hearing aid business will in the second half-year carry out its most
comprehensive launch of new products ever, including the introduction of
the mid-priced product Oticon Nera in early September. We will also see the
introduction of a completely new family of paediatric products from Oticon
and new mid-priced products from both Bernafon and Sonic.
-- The Group maintains its expectations of 2013, except that the corporate tax
rate is now expected to amount to 24-25% against a previously estimated tax
rate of 'approx. 25%'. We would also emphasise that revenue and earnings in
the second half-year are expected to exceed the levels achieved in the
first six months. We thus maintain our expectation that for 2013, organic
growth rates in the wholesale of hearing aids will exceed market growth
rates by 3-5 percentage points and that our operating profit (EBIT) will
exceed the level realised in 2012.
'In the light of a rather difficult previous half-year, that is the second
half-year of 2012, we are especially pleased to see that our core business has
managed to grow 8% organically and that our Group's earnings per share have
risen by 16%. A significant reason for this is that with its successful launch
of the high-end product Oticon Alta, Oticon has again achieved sales momentum
and cemented its position in this part of the market,' says Niels Jacobsen,
President & CEO of William Demant Holding.
'In our opinion, the development we have seen in the first half-year only goes
to prove that we are on the right track to meeting the expectations
communicated to the share market for the full year. Our optimism is of course
supported by the many new products we will introduce in the second half-year,
which will enable us to maintain our strengthened sales momentum achieved in
the first half of 2013,' adds Niels Jacobsen.
Principal key figures and financial ratios
1st half 2nd half Change 1st half Change
2013 2012 2012
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Key figures, DKK million
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Revenue 4,541 4,297 6% 4,258 7%
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Gross profit 3,292 3,072 7% 3,055 8%
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Operating profit (EBIT) 880 789 12% 864 2%
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Net financials -38 -77 -51% -55 -31%
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Profit before tax 842 712 18% 809 4%
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Profit for the period 637 548 16% 603 6%
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Assets 9,851 8,777 12% 8,111 21%
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Equity 4,645 4,059 14% 3,559 31%
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Cash flow from operating 704 482 46% 790 -11%
activities (CFFO)
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Financial ratios
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Earnings per share (EPS), 11.2 9.7 16% 10.5 7%
DKK
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Gross profit ratio 72.5% 71.5% 71.7%
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Profit margin (EBIT margin) 19.4% 18.4% 20.3%
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Return on equity 29.3% 28.8% 34.9%
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Market conditions and business trends
Growth in unit sales in the global market for hearing aids developed positively
in the first six months of 2013, and we estimate growth to be in the middle of
our long-term forecasts of 2-4% unit.
We are of the opinion that the average selling price in the global hearing aid
market is still under pressure mainly due to keener competition in connection
with large tenders, changes in public subsidy systems and a rise in sales to
channels that cater for the more cost-conscious end-users. In return, the
number of product launches in the upper price categories had a positive impact
on the average selling price, but with manufacturers' different launching
strategies of whom some have opted for simultaneous product launches in all
price categories as well as strong sales to the NHS, we are of the impression
that in overall terms, the average selling price on the market has fallen by
about 3% in the first six months of the year. In terms of value, we therefore
estimate that the market for hearing aids has developed flatly.
In the first six months of 2013, our corporate core business, which comprises
the development, manufacture and wholesale of hearing aids, once again captured
market shares with a fair rise in unit sales. Organic growth in revenue was
well over 1% in a market which, in our opinion, saw flat development in terms
of value. Compared with the second half-year 2012, our core business generated
8% organic growth. Overall, our hearing aid business, which also includes our
retail activities, produced 5% growth in local currencies, whereas organic
growth in revenue was neutral compared with the first half of 2012.
Trends in corporate hearing aid sales should be viewed in the light of the
negative market development in Denmark, Norway and Holland where structural
changes have resulted in a sizeable drop in revenue compared with the same
period last year. Our strong position in these markets has had a noticeably
adverse effect on organic revenue growth in Europe by more than DKK 100
million, corresponding to 2-3% of the overall revenue of the business.
Generally speaking, sales in the Group's other markets developed
satisfactorily.
With the launch of Oticon's latest high-end hearing aid, Oticon Alta, in the
first quarter of 2013, Oticon has taken another step towards delivering not
only the best audiological features and improved speech intelligibility, but
also the most natural sound. Based on Oticon's new Inium platform, Alta offers
features such as Speech Guard E, Inium feedback shield and YouMatic Premium,
which together create a natural listening experience adapted to match the
user's listening preferences. Oticon's customers and users have been very
enthusiastic about Alta and in the first half of 2013, sales fully matched our
expectations despite tough competition in this particular price category.
Unlike some of its competitors, Oticon has chosen to pursue its usual launching
strategy, which means that initially Oticon will only launch products to the
high-end segment, but in return, products are launched in all styles. Most
competitors have, however, chosen to introduce new products in all price
segments simultaneously and were therefore in a relatively stronger position
than Oticon in the mid-priced segment in the reporting period. The launch
strategy adopted by Oticon resulted in strong Alta sales in the high-end
segment in the first six months of 2013, but has had an adverse effect on sales
in the mid-priced segment. Compared with the period immediately prior to the
introduction of Oticon Alta, i.e. the second half of 2012, this turn has,
however, been significant. If compared to the previous six months, organic
growth in the wholesale of hearing aids was 8% in a market that saw flat or
slightly positive trends in the same period, resulting in an increase in the
Group's global market share of 1-2 percentage points.
With its launch in early September of a mid-priced product called Oticon Nera
in two price points, Oticon will however very soon be able to offer hearing
aids based on our Inium platform in a total of four price points, which will
substantially boost Oticon's position in the mid-priced market. Based on the
restored growth potential in the mid-priced segment, we thus expect Oticon to
fairly quickly recapture market shares in this part of the market. In addition,
we will introduce an entirely new line of paediatric products also building on
the unique qualities of the Inium platform. This new line will deliver
significant new audiological features for the fitting of hearing aids designed
for children. With these potent product novelties, Oticon's product portfolio
will again be among the absolutely strongest and most updated portfolios on the
market, and we will therefore hold a very strong position in the continuing
battle for market shares.
Sales in Bernafon and Sonic also developed favourably in the first half-year.
With the launch of its high-end product Acriva in April, Bernafon has fortified
its product programme and once again demonstrated that the company can muster a
fully updated product portfolio with highly competitive products based on the
ChannelFree technology - and what is more, products that do not compromise on
features or performance despite their competitive prices. The roll-out of
Sonic's Bliss family is progressing as planned and in the first half of 2013,
Bliss made a substantial contribution to Sonic's continuous growth. September
will see more exciting product novelties in the mid-priced segment from both
Bernafon and Sonic. Together with Oticon's new products, our Group will thus be
able to present a record number of product introductions in any second
half-year and have one of the most powerful product ranges on the market.
In the period under review, our retail activities delivered a fair improvement
in revenue driven by acquisitions made in both 2012 and 2013.
The original part of Oticon Medical, which develops, manufactures and sells
bone-anchored hearing solutions (BAHS), once again delivered an impressive rise
in revenue, driven among other things by increasing sales on the UK market and
a number of markets in South America. Our takeover of the cochlear implant
business, Neurelec, is proceeding according to plan, and we have succeeded in
keeping up the sales momentum that matches our expectations. On the short term,
our major focus areas are to further strengthen distribution and to boost our
research and development and marketing efforts.
In the period under review, Diagnostic Instruments generated 5% revenue growth
on the same period last year. In terms of local currencies, growth was 6%,
organic growth accounting for 2 percentage points.
In the first six months of 2013, Personal Communication realised an organic
growth rate of 47%. Accounting for more than half the revenue generated by
Personal Communication, Sennheiser Communications has moved its inventory
closer to its customers by selling it to Sennheiser KG. This extraordinary sale
naturally had a positive impact on revenue, but even if we adjust for this
income, both Sennheiser Communications and Personal Communication have been
quite successful and have achieved fair double-digit growth rates.
Results for the first half of 2013
In the reporting period, the Group realised revenue amounting to DKK 4,541
million, or 7% growth on the first half of 2012. The improvement in revenue is
attributable to organic and acquired growth of 2 and 5 percentage points,
respectively. The exchange rate impact for the period under review was neutral.
Corporate revenue rose by 6% compared with the previous six months.
In the period under review, consolidated gross profit totalled DKK 3,292
million, or an 8% rise on the same period last year and a rise of 7% on the
second half of 2012. The gross profit ratio was 72.5%, or an improvement of 0.8
percentage point compared with the same period last year and an improvement of
1 percentage point on the second half of 2012.
In the first half-year, capacity costs totalled DKK 2,414 million, or a 12%
rise in local currencies compared with the same period last year, acquisitions
accounting for almost half this increase.
Operating profit (EBIT) amounted to DKK 880 million, representing a 2% increase
on the same period last year and a 12% rise on the second half-year of 2012.
The profit margin (EBIT margin) is 19.4%, matching a fall of 0.9 percentage
point on the same period last year. The fall resulted from higher growth in
underlying capacity costs in the period than in organic revenue and also from a
high level of corporate acquisitions. Compared with the second half of 2012,
the profit margin rose by 1 percentage point.
In the period under review, the Group continued to generate significant cash
flows from operating activities and once again succeeded in converting a
considerable share of its profit into proper cash flows. In the first half of
2013, consolidated cash flows from operating activities were DKK 704 million,
or a fall of DKK 86 million on the same period last year. The lower level is
mainly due to an increase in trade receivables attributable, among other
things, to the introduction of Oticon Alta and the sale of Sennheiser
Communications' inventory to Sennheiser KG.
Outlook for the 2013 financial year
We maintain our forecasts for 2013, except that the corporate tax rate is now
estimated at 24-25% against a previous expectation of 'about 25%'. We would
emphasise that revenue and earnings in the second half-year are expected to
exceed the levels achieved in the first six months. Our overall outlook for
2013 may be summarised as follows:
Despite the fact that in 2013 the market for hearing aids is still marked by
more uncertainty than previously, our best estimate is that the global market
for hearing aids will generate a modest positive growth rate in terms of value
for the year as a whole.
For 2013, we expect an organic revenue growth rate in the wholesale of hearing
aids to exceed the market growth rate by 3-5 percentage points in local
currencies, and our retail business is expected to generate an organic growth
rate, matching the growth rate in the underlying market. We further expect
Diagnostic Instruments to capture market shares organically in a market that is
estimated to show low single-digit growth. In addition, there may be some
exchange rate impacts. Moreover, we maintain our forecasts in respect of
consolidated operating profit (EBIT) for 2013 and expect such profit to
outmatch the level realised in 2012.
¨ ¨ ¨ ¨ ¨ ¨ ¨
Further information:
Other contacts:
Niels Jacobsen, President & CEO Stefan
Ingildsen, SVP Finance
Phone +45 3917 7300 Søren
B. Andersson, VP IR
www.demant.com
Morten Lehmann Nielsen, IR Manager
The full Interim Report 2013 for William Demant Holding A/S totalling 15 pages
will be published in continuation of this announcement.
Please be advised that we will host a teleconference for analysts and investors
today at 1.00 p.m. CEST. The teleconference will be conducted in English and
broadcast via our website, www.demant.com.
News Source: NASDAQ OMX
14.08.2013 Dissemination of a Corporate News, transmitted by DGAP -
a company of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
DGAP's Distribution Services include Regulatory Announcements,
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Language: English
Company: William Demant Holding A/S
Denmark
Phone:
Fax:
E-mail:
Internet:
ISIN: DK0010268440
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