Interim Report Q Conference call May 4, 2017

Transcription

1 Interim Report Q Conference call May 4, 2017

2 Safe Harbor Statement 2 The forward-looking statements in this interim report reflect the management's current expectations of certain future events and financial results. Statements regarding the future are, naturally, subject to risks and uncertainties, which may result in considerable deviations from the outlook set forth. Furthermore, some of these expectations are based on assumptions regarding future events, which may prove incorrect. Factors that may cause actual results to deviate materially from expectations include but are not limited to general economic developments and developments in the financial markets, technological developments, changes and amendments to legislation and regulations governing GN s markets, changes in the demand for GN's products, competition, fluctuations in sub-contractor supplies and developments in ongoing litigation (including but not limited to class action and patent infringement litigation in the United States). This presentation should not be considered an offer to sell or buy securities in GN Store Nord.

3 Agenda 3 Group highlights Q GN Hearing update GN Audio update Financial outlook

4 Group financial highlights in Q GN delivered 15% revenue growth in Q driven by solid performance in both GN Hearing and GN Audio. Organic growth was 5%, well-balanced with GN Hearing delivering 4% and GN Audio delivering 8% organic growth Gross profit increase and margin expansion GN Hearing development driven by channel mix and Audigy GN Audio development driven by product mix EBITA grew 8% reflecting solid operational execution and previously communicated investments in growth as part of the strategy EPS increased 4% Very strong FCF generation for the start of the year DKK million Q Q Growth Revenue 2,233 1, % Organic growth 5% 8% Gross profit 1,379 1, % Gross margin 61.8% 61.4% +0.4%p EBITA % EBITA margin 14.3% 15.3% (1.0)%p Profit before tax (5)% Net profit (2)% EPS % ROIC* 20% 19% +1%p Free cash flow excl. M&A NIBD/EBITDA 1.9x 1.7x * Reported EBITA (rolling four quarters) / avg. invested capital

5 Strong improvements in cash flow in Q Free cash flow excl. M&A (DKK million) GN Hearing GN Audio GN Store Nord GN s strong focus on cash conversion is bearing fruit across both businesses with solid increase compared to Q In Q1 2017, cash conversion increased to 44% from 9% in Q % Q1 16 Q % Q1 16 Q % Q1 16 Q1 17 Focused and prudent management of net working capital continued The first quarter of the year is traditionally impacted by, among others, payment of corporate tax as well as bonus payouts Cash conversion (FCF ex. M&A / reported EBITA) GN Hearing GN Audio GN Store Nord +14%p +44%p +35%p 76% 21% 35% 44% 32% 9% Q1 16 Q1 17 Q1 16 Q1 17 Q1 16 Q1 17

6 Creating shareholder value through efficient capital structure 6 During 2017, GN has distributed DKK 775 million to shareholders via share buybacks and dividends Total dividend of DKK 178 million was paid out during March 2017 (DKK 1.15 per share) During 2017, DKK 597 million has been distributed by means of the concluded share buyback program On April 12, 2017 GN cancelled 9,103,715 shares as approved on the Annual General Meeting in 2017 By the end of March 2017, the net interest bearing debt ratio was 1.9x EBITDA Initiation of DKK 1 billion share buyback program. To be concluded no later then March 12, 2018 DKKm 1,500 1, * 12 month rolling Million Shareholder distribution % CAGR 1,198 1, YTD Dividends Share buybacks 173 (3)% Total shares outstanding 168 (3)% 162 (5)% 155 (6)% Outstanding shares

7 Agenda 7 Group highlights Q GN Hearing update GN Audio update Financial outlook

8 GN Hearing key highlights in Q Solid revenue growth 13% revenue growth, 4% organically Strong growth in EBITA 9% increase in EBITA Strong cash generation 35% cash conversion in Q vs 21% in Q th generation 2.4 GHz announced GN Hearing fortifies its technology lead with ReSound LiNX 3D

9 GN Hearing financial highlights Q Strong revenue development in Q % revenue growth Organic growth of 4% despite tough comparison base Solid gross profit increase driven by Audigy and channel mix 9% increase in EBITA reflecting solid revenue growth Slight EBITA margin decline compared to Q reflecting investments in future growth opportunities as part of the strategy Strong development in cash flows in Q Cash flow excl. M&A up +80%, due to continued focus on cash generation throughout the organization DKK million * Reported EBITA (rolling four quarters) / avg. invested capital Note: continued operations Q Q Growth Revenue 1,376 1, % Organic growth 4% 11% Gross profit % Gross margin 68.2% 67.2% +1.0%p EBITA % EBITA margin 17.8% 18.5% (0.7)%p ROIC* 18% 16% +2%p Free cash flow excl. M&A

10 Well-balanced growth in Q Leading technology and commercial excellence driving growth North America Solid growth in VA Strong performance in Audigy Beltone back in growth Europe Solid growth especially driven by, e.g., the Nordic region and Spain Rest of World Strong growth driven by, e.g., China with double digit growth and Australia In Japan, both the market and GNH had negative growth Strongly positioned to take advantage of the newly launched ReSound LiNX 3D

11 11 ReSound LiNX 3D - Most advanced innovation in hearing care ReSound LiNX 3D New generation premium Smart Hearing aids allowing users to hear more, do more and be more, anywhere in life

12 Introducing The ReSound LiNX 3D experience 12 Hear more than you ever thought possible Enhanced hearing and fitting experience Hearing care wherever you are

13 The new hearing care experience leveraging multiple industry firsts GHz wireless connectivity World s first (2010) Binaural Directionality World s first (2012) Made for iphone (MFi) World s first (2013) Cloud based remote fine-tuning World s first (2017)

14 ReSound LiNX 3D - The future of Smart Hearing 14 Unmatched Sound Quality Strong and documented audiological benefits: - Superior sound quality - Most advanced surround sound - Best speech recognition in noise Efficient Fitting Fast, easy to use New ReSound Smart 3D App On-the-go personalization Easy control of programs and sound Available on Android and ios incl. Apple Watch Groundbreaking Remote Fine-Tuning New cloud based technology Remote care comparable to that offered in clinic Flexibility, ease and convenience for both user and hearing care professional

15 Global launch of ReSound LiNX 3D is well underway 15 Global launch in all primary markets First launched in US on April 29. Launched subsequently in +10 other countries, including Germany, Spain and Denmark Very positive initial market feedback. First shipments made ahead of plan to accommodate extraordinarily high interest from customers Early indications of best ever media coverage ReSound LiNX 3D is launched as a full product family ReSound LiNX 3D is launched in Top and Plus performance levels

16 Agenda 16 Group highlights Q GN Hearing update GN Audio update Financial outlook

17 GN Audio key highlights in Q Solid organic growth 19% revenue growth, 8% organically EBITA increased strongly 14% increase vs Q Highly cash generative business 76% cash conversion, up 44%pts vs Q New CC&O products launched GN Audio fortifies its technology lead with Jabra Speak 710 and Jabra Evolve 75

18 GN Audio financial highlights Q % revenue growth in Q1 2017, with organic growth of 8% The growth was also in Q driven by strong CC&O performance across regions and channels In the quarter, GN Audio continued to take some important steps in the repositioning of the consumer segment EBITA increased by 14% reflecting the strong revenue growth Slight EBITA margin decline compared to Q reflecting previously communicated investments in growth during start of 2017 Strong improvement in cash flow generation leading to a cash conversion of 76% Q Q Growth DKK million Revenue % Organic growth 8% 4% Gross profit % Gross margin 51.5% 51.5% +0.0%p EBITA % EBITA margin 12.0% 12.5% (0.5)%p ROIC* 40% 42% (2)%p Free cash flow excl. M&A * Reported EBITA (rolling four quarters) / avg. invested capital

19 Strong organic growth in CC&O continues 19 Leading technology and commercial excellence drives growth across geographies North America Strong organic growth in Q despite a tough comparison base Europe Very solid double digit organic growth in Q driven by several countries delivering strong growth Rest of World Very strong double digit growth continued in Q across several different countries GN Audio s professional business is set for a strong 2017 after a strong Q1

20 Integration of VXi progressing well 20 In October 2016, GN Audio acquired VXi Corporation to further strengthen GN Audio s position in the important North American market The integration of VXi is progressing as planned and the VXi business has now been fully merged into GN Audio VXi performance as planned. Channels and customers recognize the combination of Jabra VXi and Blueparrott brands as a differentiator in the market

21 Launch of Jabra Speak 710 and Jabra Evolve Jabra Speak 710, launched in March 2017 Fortifies GN Audio s leadership in the attractive market for premium, portable speakerphones for conference calls and music Jabra Evolve 75, launched in May 2017 The CC&O product portfolio is further strengthened in GN Audio s most successful product family, Evolve

22 Agenda 22 Group highlights Q GN Hearing update GN Audio update Financial outlook

23 Financial guidance for 2017 confirmed 23 GN Hearing expects continued solid revenue growth again in 2017, in line with the strategy Reflecting product launches during the year, GN Hearing expects organic growth rates and earnings levels to be lower in the first half of 2017 compared to the second half, also as a reflection of the comparison base in 2016 GN Audio expects to continue to deliver strong growth rates, in line with the strategy 2017 is, as in previous years, expected to show a seasonal pattern with revenue and EBITA expected to be skewed towards the second half of the year particularly in Q4 Financial guidance 2017 Organic revenue growth GN Hearing > 6% GN Audio > 6% EBITA margin Effective tax rate 1 > 20% > 17% ~22% Note 1: GN Store Nord EBITA in Other is expected to be around DKK (125) million in 2017 GN Store Nord expects a mid-teens percent increase in earnings per share (EPS) in 2017

24 Q&A Peter Justesen, VP IR & Treasury, Dir.:

25 Appendix 25

26 GN Hearing Strategy Hear More, Do More, Be More Innovation Excellence Commercial Excellence People Excellence Strategic User objectives centric Second to none focus on user needs and improving life through superior sound quality and services Strategic Open objectives market Expanding in the open market by improving sales execution, partner with retail and share Best Practice Strategic Empower objectives Empower leaders to drive efficient strategy execution while developing new talents Core technology Focus on core technology to deliver superior sound quality with increasing software capabilities needed Partnerships Continuation of successful partnerships by long-term alliance relations. Leadership Principles Implementation of new GN Leadership Principles: Listen Challenge Transform Time to market Continuously optimise R&D product development and time to market Digital Go digital and engage end users utilize our digital products. Growing talents Improve talent development via ongoing follow-up and quarterly reviews

27 GN Audio Strategy Hear More, Do More, Be More Innovation excellence Accelerate the call-centric category Expand Unified Communication (UC) strength for office Commercial excellence People excellence Grow share in focus markets Cloud & digital first Grow consumer profitably

28 Strong profitable growth to continue in coming years 28 Revenue development (DKKm) 1 CAGR: +11% 8,651 Financial targets ,174 CAGR: +11% CAGR: +11% +6-8% +6-9% EBITA development (DKKm) 1 CAGR: +20% 1,583 Financial targets % Margin: 20-22% Margin: 17-19% 12% Note 1: All numbers excluding Otometrics Note 2: Excl. income received from the legal dispute with Telekomunikacja Polska (TPSA)

29 Sources of cash 29 Profit and loss Balance sheet Cash flow Productivity, process optimisation and procurement savings lead to COGS reductions Growth, streamlined processes and investments into IT lead to SG&A efficiency Breakthrough innovation delivered while absolute spending level will be utilised with more flexibility Very capital efficient business due to low capex requirements 1.4% % % 2016 Capex 1 (excl. R&D) as % of revenue Ongoing working capital optimizations and strict control on balance sheet items Cash conversion improvements remain priority GN Hearing 7% 2013 GN Audio 38% 44% % Cash conversion 65% % 66% % Cash conversion Continuous improvements Continuous improvements Continuous improvements Note 1: Investments in property, plant and equipment

30 GN Store Nord five year performance 30 DKK million Q GN Store Nord Revenue 5,778 6,248 6,763 7,755 8,651 2,233 Organic growth 6% 13% 9% 6% 6% 5% Gross margin* 58.3% 60.3% 62.4% 61.2% 62.4% 61.8% EBITA* 798 1,217 1,196 1,383 1, EBITA margin* 13.8% 19.5% 17.7% 17.8% 18.3% 14.3% EBITA reported 568 1,113 1,196 1,383 1, Operating profit reported 480 1,050 1,132 1,149 1, Financial items (62) (81) (80) (138) (52) (31) Profit before tax reported ,057 1,016 1, Effective tax rate 31% 28% 29% 26% 22% 22% Profit for the year reported , ROIC (EBITA/Invested capital) 8% 20% 19% 20% 20% 20% Free cash flow excl. M&A 2, , Cash conversion** 487% 9% 47% 44% 74% 44% * Excl. SMART restructuring costs ** Free cash flow excluding M&A / reported EBITA

31 GN Hearing five year performance 31 DKK million Q GN Hearing Revenue 3,423 3,636 3,892 4,526 5,156 1,376 Organic growth 5% 10% 8% 9% 6% 4% Gross margin* 61.1% 65.8% 68.8% 67.4% 69.0% 68.2% EBITA* , EBITA margin* 14.7% 21.3% 21.4% 20.3% 20.6% 17.8% EBITA reported , ROIC (EBITA/Invested capital) 6% 14% 16% 16% 17% 18% Free cash flow excl. M&A Cash conversion** 40% 7% 44% 50% 66% 35% * Excl. SMART restructuring costs ** Free cash flow excluding M&A / reported EBITA

32 GN Audio five year performance 32 DKK million Q GN Audio Revenue 2,355 2,612 2,871 3,229 3, Organic growth 7% 18% 11% 2% 7% 8% Gross margin 54.2% 52.7% 53.6% 52.6% 52.7% 51.5% EBITA EBITA margin 15.4% 18.1% 18.1% 16.7% 17.1% 12.0% EBITA reported ROIC (EBITA/Invested capital) 57% 65% 57% 47% 41% 40% Free cash flow excl. M&A Cash conversion* 65% 38% 65% 50% 88% 76% * Free cash flow excluding M&A / reported EBITA

33 Foreign exchange exposure and accounting approach 33 Annual EBITA impact from a 5% increase in currency excluding hedging Currency GN Hearing GN Audio GN Store Nord USD GBP JPY CNY (8) (1) (9) CAD A positive number indicates a long exposure, meaning that the revenue arising from the currency exceeds the costs that arise from the currency A negative number is a short exposure highlighting that there are more costs than revenue in the respective currency GN hedges its EBITA exposure on material currencies using forward contracts Accounting principles of hedging contracts P&L impact GN Hearing GN Audio Revenue USD, GBP, JPY and CAD GBP and CNY COGS CNY USD The gain/loss from hedging contracts arising from long exposures, will generally be booked directly on revenue The gain/loss from hedging contracts arising from short exposures, will generally be booked directly on COGS Treatment according to IFRS standards for hedge accounting

34 GN Store Nord share overview Share information GN has a share capital of DKK 582,736,856, which is consisting of 145,684,214 shares, each carrying four votes. GN has one share class, and there are no restrictions on ownership or voting rights GN is, among others, included in the C20 Cap and Large Cap indexes on Nasdaq Copenhagen as well as the Stoxx Europe 600 index Ticker symbols: GN:DC (Bloomberg) and GN.CO (Reuters) Number of registered shareholders: Around 25,000 (Dec ) Treasury shares: 5,956, % of share capital (May 4, 2017) Market cap: DKK 21 billion (Dec. 31, 2016) Largest shareholders: T. Rowe Price Associates Inc. (>5%) Marathon Asset Management LLP (>5%) APG Asset Management N.V. (>5%) NN Group N.V. (>5%) 34 Share price development (5 years) 330 GN C20 CAP Stoxx Index: = 100 Financial calendar Date Event May 4, 2017 Interim Report Q August 17, 2017 Interim Report Q November 2, 2017 Interim Report Q3 2017