Interim Report Q Conference call November 2, 2017

Transcription

1 Interim Report Q Conference call November 2, 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 Q GN delivered 7% organic growth in Q driven by solid performance across GN Hearing and GN Audio Solid gross profit increase Slight gross margin decrease driven by mix effects with particularly high growth for GN Hearing in among other China and India EBITA grew 14% reflecting the solid revenue growth Net profit increase of 27% Very strong EPS growth of 36% Following strong performance YTD, GN Audio s organic growth guidance is upgraded from more than 6% to more than 7% DKK million Q Q Growth Revenue 2,282 2,117 +8% Organic growth 7% 6% Gross profit 1,421 1,347 +5% Gross margin 62.3% 63.6% (1.3)%p EBITA % EBITA margin 17.8% 16.9% 0.9%p Profit before tax % Net profit % EPS % ROIC* 21% 20% +1%p Free cash flow excl. M&A (19) NIBD/EBITDA * Reported EBITA (rolling four quarters) / avg. invested capital

5 Continued strong cash generation 5 GN s focus on cash conversion continues In Q3 2017, cash conversion was 88% In the first nine months of 2017, cash conversion was 76%, in line with the high level of 82% in the first nine months of 2016 Focused and prudent management of net working capital continues Free cash flow excl. M&A (DKK million) GN Hearing GN Audio GN Store Nord (7)% 28% (5)% Q3 16 Q3 17 Q3 16 Q3 17 Q3 16 Q3 17 Cash conversion (FCF ex. M&A / reported EBITA) GN Hearing GN Audio GN Store Nord (16)%p 0%p (17)%p 114% 98% 92% 92% 105% 88% Q3 16 Q3 17 Q3 16 Q3 17 Q3 16 Q3 17

6 Agenda 6 Group highlights Q GN Hearing update GN Audio update Financial outlook

7 GN Hearing key highlights Q Solid revenue growth 6% organic growth Solid gross profit In line with last year, reflecting country and channel mix in Q Strong growth in EBITA 8% increase in EBITA Continued positive momentum generated by ReSound LiNX 3D Momentum bodes well for rest of 2017

8 GN Hearing financial highlights Q The positive momentum generated by ReSound LiNX 3D following the launch in Q continued in Q3 and bodes well for rest of 2017 GN Hearing delivered organic growth of 6% GN Hearing s growth was negatively impacted by hurricanes in Florida and Texas as well as one fewer trading day fewer than in Q Gross margin decrease driven by mix effects with particularly high growth in among other China and India 8% increase in EBITA reflecting solid revenue growth Continued strong free cash flow. YTD free cash flow of DKK 606 million, versus DKK 597 million in the first 9 months of 2016 DKK million Q Q Growth Revenue 1,327 1,284 +3% Organic growth 6% 5% Gross profit Gross margin 68.4% 70.6% (2.2)%p EBITA % EBITA margin 19.4% 18.5% (1) +0.9%p ROIC* 18% 17% +1%p Free cash flow excl. M&A (18) * Reported EBITA (rolling four quarters) / avg. invested capital Note: continued operations (1) 19.5% before transaction costs related to the Otometrics divestment

9 Well-balanced growth in Q Leading technology and commercial excellence driving growth North America Commercial market business and Beltone network driving GN Hearing s growth in Q3, partly offset by impact of hurricanes ReSound LiNX 3D in VA from Nov. Europe GN Hearing continued to gain market share in several important markets with double digit growth in Italy and Spain Rest of World Very strong double digit growth in China and India Strong growth in Korea and solid growth in Japan The continued positive momentum generated by ReSound LiNX 3D bodes well for rest of 2017

10 The complete ReSound LiNX 3D experience 10 Hear more than you ever thought possible Enhanced hearing and fitting experience Hearing care wherever you are

11 ReSound LiNX 3D for all aspects of life 11 All people no matter lifestyle, age, form factor preference, level of hearing loss All purposes and situations no matter where you are All types of connectivity no matter choice of smartphone or accessories

12 ReSound LiNX 3D Hear more than you ever thought possible 12 High conversion to ReSound LiNX 3D from ReSound LiNX 2 Binaural Directionality III and Spatial Sense End-user preference for GN ReSound LiNX 3D in field tests against premium competing products, e.g., speech understanding in noise Up to 50% better at identifying speech in various environments* Hear up to 80% more of the sounds around you* Understand up to 40% more speech in noise* Continued high unit uptake and positive ASP development * Compared to premium hearing aids from competitive brands: Groth, J., & Cui, T. (2017, April), Groth (2016) and Jespersen et al. (2016)

13 ReSound LiNX 3D Enhanced fitting experience 13 Efficient and intuitive fitting software: Fast and easy to use Improved 1 st fit experience On-the-go personalization Available on Android and ios incl. Apple Watch +90% satisfaction rate with HCPs

14 ReSound LiNX 3D Remote fine-tuning offers major benefits to HCPs and users 14 Hearing care professional 93% RFT = better sound experience 40% 5 hours saved per week 1 points-of-sales signed up for RFT since launch, vs 33% end of Q2 Users 4-7 potentially saved physical re-visits to the clinic 55% would change HCP if no RFT 2x downloads of ReSound LiNX 3D app vs ReSound LiNX 2 app, continuing the trend from Q2 Note: Market research with 15 HCP and 37 users. 1) 20 minute saving on average per fine-tuning vs. traditional fine-tuning

15 ReSound LiNX 3D rollout as planned 15 ReSound LiNX 3D now available in all major countries Available in Veterans Affairs in the US during November Super power (ReSound ENZO 3D) and rechargeable options added to ReSound LiNX 3D family during Q3

16 Strong launch KPIs exceeding those of ReSound LiNX 2 16 Strong sales uptake continues Since the launch in April, ReSound LiNX 3D has consistently performed stronger than ReSound LiNX 2 globally Feedback focuses on improved speech in noise Positive ASP development Continued global ASP increase like-for-like Price point upselling compared to ReSound LiNX 2 Remote fine-tuning very well-received by dispensers and endusers Double up downloads of ReSound SMART 3D app vs ReSound LiNX 2 app 1/3 of downloads are for Android devices 40% of points-of-sales have signed up for RFT since launch, vs 33% end of Q2

17 Agenda 17 Group highlights Q GN Hearing update GN Audio update Financial outlook

18 GN Audio key highlights Q Solid organic growth 9% organic growth Strong EBITA increase 29% increase in EBITA Strong EBITA margin growth 2%pts increase in EBITA margin Upgraded organic growth guidance Following strong performance YTD, organic growth guidance is upgraded to more than 7%

19 GN Audio financial highlights Q % revenue growth in Q with organic growth of 9% The growth was also in Q driven by strong CC&O performance across regions and channels In the quarter, GN Audio continued to take important steps in the repositioning of the consumer segment EBITA increased by 29% reflecting the strong revenue growth and product mix Strong EBITA margin increase compared to Q reflecting well executed commercialization Q Q Growth DKK million Revenue % Organic growth 9% 9% Gross profit % Gross margin 53.7% 52.9% +0.8%p EBITA % EBITA margin 18.7% 16.7% +2.0%p ROIC* 50% 46% +4%p Free cash flow excl. M&A * Reported EBITA (rolling four quarters) / avg. invested capital

20 Strong organic growth in CC&O continues 20 Leading technology and commercial excellence drives growth across geographies North America Strong organic growth in Q on a tough comparison base Europe Very strong double digit organic growth in Q driven by several countries Rest of World Continued double digit growth continued in Q across several countries GN Audio s professional business continues its strong current momentum

21 The CC&O story Engineered for Productivity 21 Jabra Evolve Jabra Evolve 75 Jabra Speak 710 Jabra Evolve 75e Insight Dec 2017

22 Changing work environments calls for product innovations 22 78% state that interruptions in the office has a negative impact on their productivity 34% of knowledge workers work in open-plan offices DEVELOPMENT IN M2 PER EMPLOYEE OFFICE SPACE 1960: 50 m2 2010: 20 m2 2020: 10 m2

23 Engineered to Boost Productivity and drive Adoption 23 Evolve 20 Evolve 30 Evolve 40 Evolve 65 Evolve 80 Evolve 75 Evolve 75e Growth Unprecedented level of interest and adoption in the market place New opportunities Drivers Adoption Flexibility Concentration

24 Engineered to Boost Productivity and drive Adoption 24 Speak 410 Speak 510 Speak 810 Speak 710 Growth Unprecedented level of interest and adoption in the market place New opportunities Drivers Adoption Flexibility Concentration

25 Agenda 25 Group highlights Q GN Hearing update GN Audio update Financial outlook

26 Financial guidance for 2017 is upgraded 26 GN Hearing expects continued solid revenue growth again in 2017, in line with the strategy Guidance confirmed. 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 Following strong performance in the first nine months of the year, GN Audio s organic growth guidance for 2017 is upgraded to more than 7% from more than 6%. The guidance of EBITA margin of more than 17% is unchanged Financial guidance 2017 Organic revenue growth GN Hearing > 6% GN Audio > 7% 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

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

28 Appendix 28

29 GN Hearing s strategic focus areas Hear more, Do more, Be more Innovation excellence focusing on end user needs, core technology and time to market optimization Innovation excellence Commercial excellence People excellence Commercial excellence through expansion in the open market, continuation of successful partnerships and engaging end users digitally People excellence by empowering leaders to deliver on strategy, implement GN values and develop talents

30 GN Audio s strategic focus areas 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

31 Strong profitable growth to continue in coming years 31 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)

32 GN Store Nord five year performance 32 DKK million YTD 2017 GN Store Nord Revenue 5,778 6,248 6,763 7,755 8,651 6,908 Organic growth 6% 13% 9% 6% 6% 7% Gross margin* 58.3% 60.3% 62.4% 61.2% 62.4% 62.2% EBITA* 798 1,217 1,196 1,383 1,583 1,112 EBITA margin* 13.8% 19.5% 17.7% 17.8% 18.3% 16.1% EBITA reported 568 1,113 1,196 1,383 1,583 1,112 Operating profit reported 480 1,050 1,132 1,149 1,445 1,003 Financial items (62) (81) (80) (138) (52) (44) 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% 21% Free cash flow excl. M&A 2, , Cash conversion** 487% 9% 47% 44% 74% 76% * Excl. SMART restructuring costs ** Free cash flow excluding M&A / reported EBITA

33 GN Hearing five year performance 33 DKK million YTD 2017 GN Hearing Revenue 3,423 3,636 3,892 4,526 5,156 4,118 Organic growth 5% 10% 8% 9% 6% 5% Gross margin* 61.1% 65.8% 68.8% 67.4% 69.0% 68.5% EBITA* , EBITA margin* 14.7% 21.3% 21.4% 20.3% 20.6% 18.4% 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% 80% * Excl. SMART restructuring costs ** Free cash flow excluding M&A / reported EBITA

34 GN Audio five year performance 34 DKK million YTD 2017 GN Audio Revenue 2,355 2,612 2,871 3,229 3,495 2,790 Organic growth 7% 18% 11% 2% 7% 10% Gross margin 54.2% 52.7% 53.6% 52.6% 52.7% 52.8% EBITA EBITA margin 15.4% 18.1% 18.1% 16.7% 17.1% 16.1% EBITA reported ROIC (EBITA/Invested capital) 57% 65% 57% 47% 41% 50% Free cash flow excl. M&A Cash conversion* 65% 38% 65% 50% 88% 83% * Free cash flow excluding M&A / reported EBITA

35 Creating shareholder value through efficient capital structure 35 During 2017, GN has distributed DKK 1,284 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) DKKm 1,500 1, Shareholder distribution % CAGR 1,198 1,364 1,284 During the first nine months of 2017, DKK 1,106 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 September 2017, the net interest bearing debt ratio was 1.6x EBITDA Ongoing DKK 1 billion share buyback program. To be concluded no later then March 12, YTD 2017 * 12 month rolling Dividends Share buybacks Million (3)% Total shares outstanding 168 (3)% 162 (5)% 155 (6)% Outstanding shares

36 GN Store Nord share overview 36 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: 8,470, % of share capital (Nov. 2, 2017) Market cap: DKK 29.7 billion (Sep. 30, 2017) Largest shareholders: T. Rowe Price Associates Inc. (>5%) Marathon Asset Management LLP (>5%) APG Asset Management N.V. (>5%) NN Group N.V. (>5%) Share price development (5 years) 280 GN C20 CAP Stoxx Index: = 100 Financial calendar Date Event February 7, 2018 Annual Report 2017 March 13, 2018 Annual general meeting May 2, 2018 Interim Report Q August 22, 2018 Interim Report Q November 15, 2018 Interim Report Q3 2018