Interim Report Q Conference call presentation May 2, 2018

Transcription

1 Interim Report Q Conference call presentation May 2,

2 Safe Harbor Statement The forward-looking statements in this 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. 2

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

4 Group financial highlights Q GN Store Nord delivered strong organic growth and a strong EBITA margin increase in the first quarter of 2018 DKK million Q Q Growth Organic growth was 10%, while revenue growth was 3% including an impact of around (7)% from the development in foreign exchange Solid gross profit increase driven by strong business execution EBITA increased by 11%, driven by strong execution across GN Hearing and GN Audio Net profit reached DKK 213 million, a 7% increase compared to Q EPS growth of 11% Revenue 2,296 2,233 +3% Organic growth 10% 5% Gross profit 1,425 1,379 +3% Gross margin 62.1% 61.8% +0.3%p EBITA % EBITA margin 15.4% 14.3% +1.1%p Profit before tax % Net profit % EPS % ROIC* 22% 20% +2%p Free cash flow excl. M&A % Cash conversion 50% 44% +6%p NIBD/EBITDA 1.8x 1.9x * Reported EBITA (rolling four quarters) / avg. invested capital 4

5 Continued strong cash generation GN s strong focus on cash conversion continues In Q1 2018, free cash flow excl. M&A increased 25% compared to Q1 2017, with a strong development in both businesses In Q1 2018, cash conversion increased to 50% from 44% in Q Focused and prudent management of net working capital continues The first quarter of the year is traditionally impacted by, among others, payment of corporate tax as well as bonus payouts Free cash flow excl. M&A (DKK million) GN Hearing GN Audio GN Store Nord +20% +27% +25% Q1 17 Q1 18 Q1 17 Q1 18 Q1 17 Q1 18 Cash conversion (FCF ex. M&A / reported EBITA) GN Hearing GN Audio GN Store Nord +4%p +3%p +6%p 35% 39% 76% 79% 44% 50% Q1 17 Q1 18 Q1 17 Q1 18 Q1 17 Q1 18 5

6 Creating shareholder value through efficient capital structure During 2018, GN has distributed DKK 513 million to shareholders DKK 182 million dividend was paid out in March 2018 (DKK 1.25 per share) DKK 331 million was distributed as share buybacks Earlier today, GN initiated a new DKK 1 billion share buyback program. The announced share buyback program is scheduled to finish no later than March 14, 2019 DKKm DKKm 146 Dividend distribution % CAGR Share buybacks YTD End March 2018, the net interest bearing debt was 1.8x EBITDA 1,500 1, , % CAGR 1,203 1, YTD 6

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

8 GN Hearing financial highlights Q The positive momentum generated by ReSound LiNX 3D continues and bodes well for 2018 Organic growth of 5%. Revenue growth of (1)%, incl. impact of around (7)% from FX and 1% from M&A Organic growth reflects strong performance among independent customers, in line with strategy Partly offset in the quarter by the development in certain larger accounts Organic growth guidance for 2018 is confirmed The constant gross margin reflects the high-end ReSound LiNX 3D product family launched in 2017, but offset by strong growth in, among other, China and India EBITA margin increased 1.4%pts, driven by strong operational execution and channel mix Continued high cash generation. 20% increase in free cash flow, on par with/above industry peers DKK million Q Q Growth Revenue 1,365 1,376 (1)% Organic growth 5% 4% Gross profit (1)% Gross margin 68.1% 68.2% (0.1)%p EBITA % EBITA margin 19.2% 17.8% +1.4%p ROIC* 18% 18% - Free cash flow excl. M&A % Cash conversion 39% 35% +4%p * Reported EBITA (rolling four quarters) / avg. invested capital 8

9 Continued solid organic growth in Q Leading technology and commercial excellence driving growth North America Significant growth with independents, in line with strategy. Stable VA business and satisfactory development in Costco following new KS contract Europe Growth in Europe as a region below GN Hearing group growth in Q1 due to the development in certain larger accounts Rest of World Strong double digit organic growth in, among other, China, India and distributor sales, with encouraging development in Japan GN Hearing continues to capture market shares 9

10 Continued positive momentum generated by ReSound LiNX 3D Continued strong sales uptake globally ReSound LiNX 3D has consistently performed stronger than ReSound LiNX 2 globally Feedback focuses on superior speech in noise Users of ReSound LiNX 3D have a natural hearing experience Positive ASP development Continued global ASP increase like-for-like Price point upselling compared to ReSound LiNX 2 ReSound Assist very well received by both HCPs and users Continued strong increase in points-of-sales sign-up for ReSound Assist now focusing on user registrations Studies show that 100% of HCPs and 89% of users would recommend ReSound Assist to others (NPS) 10

11 Expanding in the independent market Superior product offering ReSound LiNX 3D complete experience for all aspects of life Excellent sound quality with proven audiological benefits Improved fitting experience Unique remote fine-tuning Natural hearing Better Ear Situational Awareness ReSound Competitor 1 Competitor 2 Competitor 3 Expanded sales force Hiring the right people with the right mindset Clear link between performance and incentives Double digit increase in the number of new customers vs Q No. of customers Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Focused sales execution Continued improvements to sales management Data driven approach linked to KPIs Expanded share-of-wallet with existing customers, as reflected in strong launch performance of ReSound LiNX 3D Expanded share-of-wallet with existing customers... Significant organic growth among independent customers in Q

12 ReSound LiNX 3D successfully launched globally as planned ReSound LiNX 3D now available in all major countries Available in China later in the year 12

13 Agenda Group highlights Q GN Hearing update GN Audio update Financial outlook 13

14 GN Audio financial highlights Q Organic growth of 17%, further strengthening GN Audio s world-leading position Revenue growth was 9%, incl. impact of around (8)% from FX Strong performance in CC&O, reflecting GN Audio s innovative world leading product portfolio as well as strong execution on its commercial excellence initiatives Gross margin increase of 1.8%pts compared to Q1 2017, among other, driven by product mix EBITA increased 22% reflecting strong revenue growth and product mix Cash conversion of 79% GN Audio s organic growth guidance for 2018 is upgraded to around 9% from more than 7% following strong performance in Q DKK million Q * Reported EBITA (rolling four quarters) / avg. invested capital Q Growth Revenue % Organic growth 17% 8% Gross profit % Gross margin 53.3% 51.5% +1.8%p EBITA % EBITA margin 13.5% 12.0% +1.5%p ROIC* 49% 40% +9%p Free cash flow excl. M&A % Cash conversion 79% 76% +3%p 14

15 Very strong organic growth in CC&O continues Leading technology and commercial excellence drives growth across geographies North America Solid double digit organic growth driven by GN Audio s strong professional product portfolio Europe Very strong double digit organic growth in Q driven by a broad portfolio of countries Rest of World Strong double digit growth continued in Q across several countries GN Audio s professional business continues its strong momentum 15

16 Jabra launches new call-centric franchise the Jabra Engage series With Jabra Engage, GN Audio stays in the absolute forefront of innovation with a world-leading CC&O product portfolio including several unique key benefits: World s most secure professional wireless headsets. This includes authentication and encryption functions, along with physical assisted pairing which creates a secret link-key between the headset and docking base unit Connects three times as many users in any given space or density compared to competing technologies, without affecting the call experience in terms of sound quality and range All-day battery life and a rapid charging option with a range up to 150 metres/490 feet 115,000 hours of development by Jabra engineers, in the course of which the company registered four new patents Jabra Engage 75 Stereo & Mono Jabra Engage 75 Convertible Jabra Engage 65 Stereo & Mono 16

17 GN Audio invests in further growth in India with Jabra Connect GN Audio has acquired a majority ownership stake in Innova Telecom will continue under the name Jabra Connect The strategic acquisition will further strengthen Jabra s CC&O presence in India Innova has consistently outgrown the market thanks to its networks of partners and strong relations with customers Indian market development (USDm) Innova has been distributing GN Audio s flagship brand Jabra in India for over a decade In Q2, GN Audio will launch a new special designed headset targeting and addressing the unique market requirements in India ~ 20 Source: GN Audio estimates >10% CAGR 17

18 Agenda Group highlights Q GN Hearing update GN Audio update Financial outlook 18

19 Financial guidance for 2018: Guidance upgrade for GN Audio GN Hearing Unchanged Organic growth is expected to be more than 6% The EBITA margin is expected to be more than 20%. GN Hearing will continue to invest in future growth opportunities, as described in the strategy for Revenue (DKKm) 1) +6% +6% Organic growth >6% 4,526 5,156 5, EBITA margin +0.3%p (0.1)%p 20.3% 20.6% 20.5% >20% GN Audio Upgraded GN Audio s organic growth guidance for 2018 is upgraded to around 9% from more than 7% following strong performance in Q The EBITA margin is expected to be more than 17% GN Store Nord Unchanged EBITA in Other expected to be DKK (135) million related to Group Functions, continued investments in new business opportunities and research projects on a corporate level GN expects an effective tax rate around 22% GN Store Nord targets a double digit percent increase in earnings per share (EPS) Revenue (DKKm) Organic growth +7% +10% ~9% 3,229 3,495 3, Tax rate (%) 1)2) (4)%p +3%p 26% 22% 25% ~22% US tax reform net of related items (3.1%pts) 1) Excluding Otometrics 2) Including Other EBITA margin +0.4%p +1.1%p 16.7% 17.1% 18.2% >17%

20 Q&A Peter Justesen, VP, IR & Treasury, Tel.: Rune Sandager, Senior IR Manager, Tel.:

21 Appendix 21

22 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 22

23 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 23

24 Strong profitable growth to continue in coming years 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% ) Excl. income received from the legal dispute with Telekomunikacja Polska (TPSA) 2) All numbers excluding Otometrics 24

25 GN Store Nord five-year performance DKK million Q GN Store Nord Revenue 6,248 6,763 7,755 8,651 9,585 2,296 Organic growth 13% 9% 6% 6% 8% 10% Gross margin* 60.3% 62.4% 61.2% 62.4% 62.7% 62.1% EBITA* 1,217 1,196 1,383 1,583 1, EBITA margin* 19.5% 17.7% 17.8% 18.3% 18.2% 15.4% EBITA reported 1,113 1,196 1,383 1,583 1, Operating profit reported 1,050 1,132 1,149 1,445 1, Financial items (81) (80) (138) (52) (60) (42) Profit before tax reported 968 1,057 1,016 1,395 1, Effective tax rate 28% 29% 26% 22% 25% 22% Profit for the year reported ,086 1, ROIC (EBITA/Invested capital) 20% 19% 20% 20% 20% 22% Free cash flow excl. M&A ,179 1, Cash conversion** 9% 47% 44% 74% 65% 50% * Excl. SMART restructuring costs ** Free cash flow excluding M&A / reported EBITA 25

26 GN Hearing five-year performance DKK million Q GN Hearing Revenue 3,636 3,892 4,526 5,156 5,615 1,365 Organic growth 10% 8% 9% 6% 6% 5% Gross margin* 65.8% 68.8% 67.4% 69.0% 69.4% 68.1% EBITA* ,062 1, EBITA margin* 21.3% 21.4% 20.3% 20.6% 20.5% 19.2% EBITA reported ,062 1, ROIC (EBITA/Invested capital) 14% 16% 16% 17% 17% 18% Free cash flow excl. M&A Cash conversion** 7% 44% 50% 66% 75% 39% * Excl. SMART restructuring costs ** Free cash flow excluding M&A / reported EBITA 26

27 GN Audio five-year performance DKK million Q GN Audio Revenue 2,612 2,871 3,229 3,495 3, Organic growth 18% 11% 2% 7% 10% 17% Gross margin 52.7% 53.6% 52.6% 52.7% 53.2% 53.3% EBITA EBITA margin 18.1% 18.1% 16.7% 17.1% 18.2% 13.5% ROIC (EBITA/Invested capital) 65% 57% 47% 41% 46% 49% Free cash flow excl. M&A Cash conversion* 38% 65% 50% 88% 67% 79% * Free cash flow excluding M&A / reported EBITA 27

28 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 C25 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 (2017) Treasury shares: 9,241, % of share capital (2017) Market cap: DKK 27.4 billion (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) 290 GN C20 CAP Stoxx Dec 12/28/ Dec 12/28/ Dec 12/28/ Dec 12/28/ Dec 12/28/ Dec 12/28/ Index: = 100 Financial calendar Date Event August 22, 2018 Interim Report Q November 15, 2018 Interim Report Q