Helping people hear more, do more, be more

Transcription

1 Helping people hear more, do more, be more Interim Report Q Co. reg. no

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3 Financial highlights Q3 Q3 YTD YTD Full year DKK million (unaud.) (unaud.) (unaud.) (unaud.) (aud.) GN Hearing (excl. GN Otometrics) Continuing operations Revenue 1,284 1,109 3,767 3,259 4,526 Organic growth 5% 7% 8% 8% 9% Gross profit margin 70.6% 65.6% 68.1% 67.0% 67.4% EBITA EBITA margin 18.5% 20.7% 18.6% 18.8% 20.3% ROIC (EBITA/Average invested capital) 16.5% 15.8% 16.5% 15.8% 16.2% Free cash flow excl. company acquisitions and divestments Cash conversion (free cash flow excl. company acquisitions and divestments/ebita) 114% 70% 85% 46% 50% GN Audio Revenue ,377 2,224 3,229 - CC&O ,750 1,503 2,148 - Mobile ,081 Organic growth 9% 11% 7% 2% 2% - CC&O 24% 11% 16% 5% 6% - Mobile (21)% 12% (12)% (6)% (5)% Gross profit margin 52.9% 51.4% 52.5% 53.0% 52.6% EBITA EBITA margin 16.7% 14.8% 14.5% 14.8% 16.7% ROIC (EBITA/Average invested capital) 45.5% 52.0% 45.5% 52.0% 46.9% Free cash flow excl. company acquisitions and divestments Cash conversion (free cash flow excl. company acquisitions and divestments/ebita) 92% 63% 92% 62% 50% GN Store Nord Continuing operations Revenue 2,117 1,875 6,144 5,483 7,755 Organic growth 6% 9% 8% 6% 6% Gross profit margin 63.6% 59.8% 62.0% 61.4% 61.2% EBITA ,383 EBITA margin 16.9% 17.4% 16.1% 16.3% 17.8% Profit (loss) before tax ,016 Effective tax rate 20.1% 26.5% 23.2% 26.8% 26.5% ROIC (EBITA/Average invested capital) 19.5% 19.7% 19.5% 19.7% 19.6% Earnings per share, basic (EPS) from continuing operations Earnings per share, fully diluted (EPS diluted) from continuing operations Free cash flow excl. company acquisitions and divestments Cash conversion (free cash flow excl. company acquisitions and divestments/ebita) 105% 59% 82% 38% 44% Continuing and discontinued operations Equity ratio 45.6% 51.1% 45.6% 51.1% 51.6% Net interest-bearing debt 3,008 2,256 3,008 2,256 2,212 Net interest-bearing debt (period-end)/ebitda Dividend payout ratio % Share buybacks* ,162 Outstanding shares, end of period (thousand) 146, , , , ,254 Average number of outstanding shares, fully diluted (thousand) 147, , , , ,734 Share price at the end of the period Market capitalization 21,000 18,534 21,000 18,534 19,032 ROIC and NIBD/EBITDA are calculated based on reported EBITA and EBITDA for the latest four quarters * Incl. buybacks as part of share based incentive programs GN Otometrics will be classified as held for sale in the balance sheet and as discontinued operations in the income statement Page 3 of 27

4 GN Hearing HIGHLIGHTS Q Revenue growth of 16% in Q with organic growth of 5% EBITA of DKK 237 million after transaction related costs of DKK 13 million related to the divestment of Otometrics. Before transaction related costs, EBITA was DKK 250 million, compared to DKK 230 million in Q Strong free cash flow excl. M&A of DKK 271 million with a cash conversion of 114% Divestment of non-core Otometrics business targeted to be completed by the end of 2016 GN Hearing s financial guidance for 2016 is confirmed REVENUE GN Hearing delivered 16% revenue growth in Q3 2016, with organic growth of 5%. The organic growth reflects a tough comparison base with strong growth in certain channels in Q as well as de-stocking in the private label part of Costco (Kirkland Signature) this quarter. The effects of foreign exchange rates added around 3% to revenue, while M&A contribution was around 8%. GN Hearing s revenue in Q reached DKK 1,284 million compared to DKK 1,109 million in Q In the first nine months of 2016, the organic growth was 8%. The reported figures only include the Hearing Instrument business, with Otometrics reported as Profit (Loss) for the period from discontinued operations. The revenue growth in Q was driven by the consistent success of GN Hearing s broad industry leading product portfolio. In the second year after its launch, ReSound LiNX 2 continues to drive growth and to open up for new customer accounts with its strong audiological and connectivity benefits. ReSound Enya continues to deliver high growth rates in the Essential category. GN Hearing recorded solid growth across all regions. In the US, the position in Veteran Affairs (VA) as the second largest supplier was maintained and ReSound Cala was successfully introduced in Costco. In Europe, GN Hearing continued to gain market share in several important countries, including Germany. In the Asian region, China, Korea and India continued to deliver strong double-digit organic growth, while both the market and GN Hearing in Japan had negative growth. In the beginning of Q3 2016, Audigy became part of GN Hearing, with the integration progressing as planned. Audigy is a preeminent provider of business and performance management solutions to independent hearing care professionals. The acquisition reflects GN Hearing s ambition to continuously offer leading products and services to its customers while maintaining GN Hearing s strict focus on its innovative hearing aid wholesale business, which has driven significant market share gains in recent years. EARNINGS AND OTHER FINANCIAL HIGHLIGHTS Gross profit for GN Hearing reached DKK 906 million in Q3 2016, which is an increase of 24%. The gross margin was 70.6%, compared to 65.6% in Q3 2015, positively impacted among other by Audigy. GN Hearing s EBITA grew to DKK 237 million after transaction related costs of DKK 13 million related to the divestment of Otometrics. Before transaction related costs, EBITA was DKK 250 million, compared to DKK 230 million in Q The EBITA margin was 2.2 percentage points lower than Q3 2015, reflecting among other the transaction related costs as well as short term dilutive EBITA margin impact from Audigy. In the first nine months of 2016, EBITA increased from DKK 614 million to DKK 701 million, equivalent to an increase of 14%. Free cash flow excl. M&A was DKK 271 million in Q3 2016, an increase of DKK 109 million compared to Q The strong development led to a cash conversion of 114% in Q3 2016, driven by continued strict focus on working capital. Cash conversion was 85% in the first nine months of 2016, which is above or on par with industry peers. Net cash from financial support arrangements was DKK 9 million in Q Results relating to Otometrics are reported as Profit (Loss) for the period from discontinued operations. In Q3 2016, the result was DKK (5) million. Page 4 of 27

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7 BUSINESS HIGHLIGHTS In October 2016, GN Audio announced the acquisition of the US based company VXi Corporation, a leading innovative manufacturer of professional headset solutions. The acquisition further strengthens GN Audio s presence in the important North American market, where VXi enables access to new attractive segments, among other leveraging VXi s best-in-class expertise within communication in high noise environments. At the IFA international consumer electronics tradeshow in Berlin in September 2016, GN Audio launched true wireless earbuds under its new Elite franchise with superior sound, strong long battery life and advanced personalized fitness analysis. Leveraging GN Group s unique combined headset and hearing aid expertise, GN Audio continues to pioneer unparalleled sound capabilities with the launch of the unrivalled Elite franchise. Benefitting among other from being waterproof, Jabra Elite Sport is a true training aid delivering freedom of movement, ground-breaking in-ear fitness analysis and strong long battery life for anyone who wants to work out. In Q3 2016, GN Audio continued to innovate in the Sports Audio segment and extended the range of wireless sports headphones with the launch of two new Special Editions. The Jabra Sport Pulse and Jabra Sport Coach Special Editions deliver innovation in all areas, with passive noise cancellation, a broader choice of fitting options, improved durability and world-first intelligent sports features for fitness enthusiasts of all standards. As the existing line-up of Jabra sports headphones (Jabra Sport Pulse, Jabra Sport Coach and Jabra Sport Pace), the new editions offer quality calls, music and intelligent in-ear coaching to help enhance the users training effectiveness. MARKET DEVELOPMENT In Q3 2016, the global CC&O market continued to develop favorably. GN Audio expects that the market trend will continue for the remaining part of 2016 creating a solid foundation for continued growth. On the consumer electronics market, the challenges faced in the Bluetooth mono market during 2015 and early 2016 continued in Q3 and is expected to continue in Q4. OUTLOOK 2016 GN Audio confirms its financial guidance for 2016 of an organic growth of 7-10% and EBITA of around DKK 590 million. In Q3 2016, we continued to improve our very strong momentum in our CC&O business. It is satisfying to see the strong focus on professional execution within the organization the driver behind our continued market share gains and strengthened leadership in the attractive CC&O market. I am also very pleased with our ability to continuously improve our cash generation. René Svendsen-Tune, CEO of GN Audio Page 7 of 27

8 GN Store Nord In Q3 2016, GN Store Nord increased revenue with 13% to DKK 2,117 million from DKK 1,875 million (excluding Otometrics). Organic growth was 6%. EBITA in Other amounted to DKK (19) million in Q3 2016, compared to DKK (17) million in Q GN Store Nord EBITA reached DKK 357 million, an increase of 10% compared to Q In Q3 2016, amortization of acquired intangible assets amounted to DKK (30) million. Financial items amounted to DKK (49) million and the profit before tax was DKK 278 million. The free cash flow excl. M&A reached DKK 375 million. Earnings per share (EPS) was DKK 1.51, an increase of 21% compared to Q (excluding Otometrics). In the first nine months of 2016, GN Store Nord has increased revenue by 12% compared to the same period in The growth was primarily driven by a strong organic growth of 8% as a result of solid performance across GN Hearing and GN Audio. EBITA has increased by 11% from DKK 894 million in the first nine months of 2015 to DKK 990 million in the first nine months of 2016, equivalent to a relative flat development in the EBITA margin, driven by among other investment in growth. In the first nine months of 2016, amortizations of acquired intangible assets amounted to DKK (77) million compared to DKK (52) million, while financial items ended at DKK (61) million compared to DKK (103) million. In the first nine months of 2016, the net profit from continuing operations increased by 53% to DKK 653 million. During 2016, the strong performance across the business entities has driven a cash conversion increase of 44 percentage point from 38% in the first nine months of 2015 to 82% in the first nine months of GN Store Nord confirms the overall financial guidance for The expected effective tax rate is lowered from 25-26% to around 22% : DKK million GN Hearing GN Audio Other GN Store Nord Organic revenue growth EBITA Profit before tax Effective tax rate ~ 6% ~ 1,100* 7-10% ~ 590 ~ (70) ~ 7% ~ 1,620* ~ 1,420* ~ 22% * Before transaction related costs to Audigy and Otometrics CAPITAL STRUCTURE Until today, GN has in total distributed DKK 1,093 million back to shareholders through share buybacks and dividend. Until today, GN has in total repurchased 7.1 million shares at a total price of DKK 932 million through two different Safe Harbor programs in As of November 3, 2016, GN owns 9,381,028 treasury shares equivalent to 6.1% of the shares issued. As previously communicated, GN s long-term capital structure policy is to have net interest-bearing debt of up to a maximum of two times EBITDA. As highlighted on the Capital Markets Day 2016, GN targets a net interest-bearing debt between one and two times EBITDA for the coming years based on the solid financial development in GN, the favorable capital markets as well as the relentless focus on maximizing shareholder value. By the end of Q3 2016, the net interest-bearing debt was DKK 3,008 million corresponding to 1.8 times EBITDA where EBITDA is based on last four rolling quarters and is including GN Otometrics. Page 8 of 27

9 CLAIM AGAINST PLANTRONICS INC. In 2012, GN Audio filed suit against Plantronics for attempted monopolization of the distributors market in the US. On September 23, 2013, the federal district court in Wilmington, Delaware, dismissed Plantronics motion to dismiss the case in its entirety. The court also stated that GN Audio s allegations were sufficiently substantiated to allow the case to proceed into discovery. During the discovery phase, GN learned of alleged intentional document destruction. A hearing on the matter was held on May 18, 2016, and on July 6, 2016, the Court issued a sanctions motion ordering Plantronics to pay USD 3 million to GN Audio in punitive damages as well as reasonable fees and costs incurred in connection with the discovery dispute. The USD 3 million do not have any impact on the income statement. Further, the Court reserved the right to issue additional evidentiary sanctions and it will instruct the jury that it may draw an adverse inference that s destroyed by Plantronics would have been favorable to GN Audio's case and/or unfavorable to Plantronics' defense. The Court has set the jury trial for October 10, FOREIGN EXCHANGE EXPOSURE Based on the expected 2016 revenue and cost composition, the table below outlines the currencies which constitute the primary exposure for GN in 2016, excluding any hedging impact. Annual EBITA impact from a 5% increase in currency excluding hedging (DKK million): Currency GN Hearing GN Audio GN Store Nord USD 52 (1) 51 GBP JPY CNY (8) 0 (8) CAD GN is hedging the vast majority of the expected EBITA exposure for the next 12 months in the above-mentioned currencies in both GN Hearing and GN Audio. The hedging practice entails that the EBITA effect from foreign exchange development is postponed one year while the majority of the impact on revenue is having immediate effect. Page 9 of 27

10 ADDITIONAL INFORMATION Teleconference GN will host a teleconference at am CET today. Please visit to access the teleconference. Presentation material will be available on the website approximately one hour prior to the start of the teleconference. Financial calendar for 2017 Annual Report 2016: February 9, 2017 Annual general meeting: March 14, 2017 Interim Report Q1 2017: May 4, 2017 Interim Report Q2 2017: August 17, 2017 Interim Report Q3 2017: November 2, 2017 Forward-looking statements 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. For further information please contact Peter Justesen Michael Nass Nielsen VP Investor Relations & Treasury Manager Investor Relations GN Store Nord A/S GN Store Nord A/S Tel: Tel: GN Store Nord A/S Lautrupbjerg Ballerup Denmark Company reg. no Page 10 of 27

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12 ABOUT GN STORE NORD In recent years, the GN group has transformed into an industry leader in innovation and growth pioneering great sound from world leading hearing aids, headphones, headsets and speakerphones. GN s purpose across the group is to make life sound better for people by developing intelligent audio solutions that let them hear more, do more and be more than they ever thought possible. GN is the only company that under the same roof commands world-leading expertise in the human auditory system, sound processing, wireless technologies, and software development linking deep insight and knowledge from both the hearing aid and the headset industries. This unique combination of knowledge across consumer, professional and medical products and solutions enables GN to develop truly intelligent audio solutions that do much more than amplify speech and sound. They are comprehensive solutions that support the user in a variety of different ways. The significant shifts in the world s demographics with ageing populations, a growing and increasingly affluent middle-class and pressure on public healthcare spend prompts a future when people ever more use technology to increase health and well-being as well as work productivity. The rapid emergence of ear-worn technology in combination with people s increasing reliance on always-on access to the internet and information presents a sweet spot for GN s combined innovative expertise and market access across medical, professional and consumer target groups. GN's innovative and intelligent audio solutions are marketed by the brands Jabra, ReSound, Beltone, Interton and Otometrics in more than 90 countries across the world. Founded in 1869, the GN Group today has more than 5,000 employees and is listed on Nasdaq Copenhagen (GN.CO). World leading audio solutions expertise, all under one roof For more information please visit Page 12 of 27

13 Statement by the board of directors and the executive management Today, the board of directors and the executive management have reviewed and approved the interim report for GN Store Nord A/S for the period January 1 - September 30, The interim report, which has not been audited or reviewed by the company s auditors, has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU and Danish disclosure requirements for listed companies. In our opinion, the interim report gives a true and fair view of the group's assets, liabilities and financial position at September 30, 2016 and of the results of the group's operations and cash flows for the period January 1 September 30, Further, in our opinion the executive management's review gives a true and fair view of the development in the group's operations and financial matters, the results of the group for the period and the group's financial position as a whole, and describes the significant risks and uncertainties pertaining to the group. Ballerup, November 3, 2016 BOARD OF DIRECTORS Per Wold-Olsen Chairman William E. Hoover, Jr. Deputy Chairman Carsten Krogsgaard Thomsen Hélène Barnekow Ronica Wang Wolfgang Reim Leo Larsen Nikolai Bisgaard Morten Andersen EXECUTIVE MANAGEMENT Anders Hedegaard CEO, GN Hearing René Svendsen-Tune CEO, GN Audio Marcus Desimoni CFO, GN Store Nord Page 13 of 27

14 Financial statements Quarterly reporting by segment 15 Income statement 16 Statement of comprehensive income 16 Balance sheet 17 Consolidated equity 18 Cash flow statement 19 Note 1 Accounting policies 20 Note 2.1 Segment disclosures Q Note 2.2 Segment disclosures September 2016 YTD 22 Note 3 Acquisitions of companies and operations 23 Note 4 Discontinued operations 24 Note 5 Incentive plans 25 Note 6 Shareholdings 25 Page 14 of 27

15 Quarterly reporting by segment (excluding Otometrics) Q1 Q2 Q3 Q4 Q1 Q2 Q3 YTD YTD Total DKK million (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (aud.) Income statement Revenue GN Hearing 1,042 1,108 1,109 1,267 1,218 1,265 1,284 3,259 3,767 4,526 GN Audio , ,224 2,377 3,229 Total 1,736 1,872 1,875 2,272 1,938 2,089 2,117 5,483 6,144 7,755 Organic growth GN Hearing 10% 8% 7% 10% 11% 10% 5% 8% 8% 9% GN Audio (3)% (2)% 11% 3% 4% 9% 9% 2% 7% 2% Total 4% 3% 9% 7% 8% 9% 6% 6% 8% 6% Gross profit margin GN Hearing 67.2% 68.3% 65 6% 68.4% 67.2% 66.4% 70.6% 67.0% 68.1% 67.4% GN Audio 53.9% 53.8% 51.4% 51.5% 51.5% 52.8% 52.9% 53.0% 52.5% 52.6% Total 61.9% 62.4% 59.8% 61.0% 61.4% 61.0% 63.6% 61.4% 62.0% 61.2% Expensed development costs GN Hearing (100) (117) (112) (99) (116) (118) (117) (329) (351) (428) GN Audio (44) (52) (55) (58) (50) (68) (55) (151) (173) (209) Other * (2) (2) (4) (6) (3) - (1) (8) (4) (14) Total (146) (171) (171) (163) (169) (186) (173) (488) (528) (651) Selling and distribution costs and administrative expenses etc. GN Hearing (416) (440) (386) (461) (477) (483) (552) (1,242) (1,512) (1,703) GN Audio (220) (252) (226) (250) (231) (252) (247) (698) (730) (948) Other * (17) (12) (13) (22) (15) (18) (18) (42) (51) (64) Total (653) (704) (625) (733) (723) (753) (817) (1,982) (2,293) (2,715) EBITA GN Hearing GN Audio Other * (19) (14) (17) (28) (18) (18) (19) (50) (55) (78) Total ,383 EBITA margin GN Hearing 17.7% 18.1% 20.7% 24.2% 18.5% 18.9% 18.5% 18.8% 18.6% 20.3% GN Audio 15.9% 14.0% 14 8% 20.9% 12.5% 14.0% 16.7% 14.8% 14.5% 16.7% Total 15.8% 15.7% 17.4% 21.5% 15.3% 16.1% 16.9% 16.3% 16.1% 17.8% Depreciation and software amortization GN Hearing (24) (23) (27) (23) (25) (26) (29) (74) (80) (97) GN Audio (9) (9) (9) (10) (9) (9) (10) (27) (28) (37) Other * (7) (7) (7) (8) (8) (8) (7) (21) (23) (29) Total (40) (39) (43) (41) (42) (43) (46) (122) (131) (163) EBITDA GN Hearing ,018 GN Audio Other * (12) (7) (10) (20) (10) (10) (12) (29) (32) (49) Total ,016 1,121 1,546 EBITA ,383 Amortization of acquired intangible assets (18) (18) (16) (22) (22) (25) (30) (52) (77) (74) Gain (loss) on divestment of operations etc. - (4) - (6) (1) (1) - (4) (2) (10) Beltone Network non-recurring items - (150) (150) - (150) Operating profit (loss) ,149 Share of profit (loss) in associates Financial items, net (24) (33) (46) (35) (5) (7) (49) (103) (61) (138) Profit (loss) before tax ,016 Tax on profit (loss) (63) (24) (70) (112) (66) (75) (56) (157) (197) (269) Profit (loss) for the period from continuing operations Balance sheet Development projects GN Hearing GN Audio Other * Total , ,020 1,184 Inventories GN Hearing GN Audio Total Trade receivables GN Hearing 1,160 1,146 1,180 1,214 1,219 1,207 1,142 1,180 1,142 1,345 GN Audio Other * Total 1,860 1,899 1,886 2,124 1,910 1,965 1,956 1,886 1,956 2,255 Net working capital GN Hearing GN Audio Other * (49) (22) (39) (59) (93) (68) (84) (39) (84) (59) Total 1,327 1,191 1,254 1,182 1,335 1,229 1,109 1,254 1,109 1,369 Cash flow Free cash flow excl. company acquisitions and divestments GN Hearing (61) GN Audio Other * (84) (19) (41) 24 (49) (25) (24) (144) (98) (120) Total (134) Acquisitions and divestments of companies (12) (7) (4) (15) (33) (54) (606) (23) (693) (38) Free cash flow (146) (6) 360 (231) * "Other" comprises Group Shared Services, GN Ejendomme and eliminations. Page 15 of 27

16 Income statement Consolidated Q3 Q3 YTD YTD Full year (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (aud.) Continuing operations Revenue 2,117 1,875 6,144 5,483 7,755 Production costs (770) (753) (2,333) (2,119) (3,006) Gross profit 1,347 1,122 3,811 3,364 4,749 Development costs (173) (171) (528) (488) (651) Selling and distribution costs (663) (518) (1,849) (1,647) (2,261) Management and administrative expenses (153) (108) (450) (343) (462) Other operating income and costs, net (1) EBITA*) ,383 Amortization of acquired intang ble assets (30) (16) (77) (52) (74) Gain (loss) on divestment of operations etc. - - (2) (4) (10) Beltone Network non-recurring items (150) (150) Operating profit (loss) ,149 Share of profit (loss) in associates Financial income Financial expenses (75) (90) (184) (163) (226) Profit (loss) before tax ,016 Tax on profit (loss) (56) (70) (197) (157) (269) Profit (loss) for the period from continuing operations Discontinued operations Profit (loss) for the period from discontinued operations (5) Profit (loss) for the period Earnings per share (EPS) Earnings per share (EPS) Earnings per share, fully diluted (EPS diluted) Earnings per share (EPS) from continuing operations Earnings per share (EPS) from continuing operations Earnings per share from continuing operations, fully diluted (EPS diluted) *) Excluding Beltone Network non-recurring items, Gain (loss) on divestment of operations etc. and Amortization of acquired intang ble assets but including amortization of development projects and software. Statement of comprehensive income Consolidated Q3 Q3 YTD YTD Full year (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (aud.) Profit (loss) for the period Other comprehensive income Items that will not be reclassified to profit or loss Actuarial gains (losses) Tax relating to this item of other comprehensive income (6) Items that may be reclassified subsequently to profit or loss Adjustment of cash flow hedges 3 21 (6) Foreign exchange adjustments, etc. (18) (57) (128) Tax relating to these items of other comprehensive income 3 (2) 5 (15) (10) Other comprehensive income for the period, net of tax (12) (38) (129) Total comprehensive income for the period ,295 Page 16 of 27

17 Balance sheet Consolidated Sep. 30 June 30 March 31 Dec (DKK million) (unaud.) (unaud.) (unaud.) (aud.) Assets Intangible assets 6,024 5,710 5,525 5,469 Property, plant and equipment Deferred tax assets Other non-current assets 991 1,084 1,129 1,264 Total non-current assets 8,025 7,827 7,669 7,774 Inventories Trade receivables 1,956 2,082 2,033 2,255 Tax receivable Other receivables Cash and cash equivalents Total current assets 3,047 3,244 3,207 3,402 Assets held for sale Total assets 11,934 11,071 10,876 11,176 Equity and liabilities Equity 5,444 5,383 5,284 5,764 Bank loans 3,145 2,687 2,831 2,297 Pension obligations Provisions Deferred tax liabilities Other non-current liabilities Total non-current liabilities 4,194 3,668 3,804 3,217 Bank loans Trade payables Tax payable Provisions Other payables 1,220 1,128 1,046 1,107 Total current liabilities 2,119 2,020 1,788 2,195 Liabilities directly associated with assets held for sale Total equity and liabilities 11,934 11,071 10,876 11,176 Page 17 of 27

18 Consolidated equity Share capital (shares of Additional paid-in Foreign exchange Hedging Treasury Proposed dividends Retained Total (DKK million) DKK 4 each) capital adjustments reserve shares for the year earnings equity Balance at December 31, (1,185) (50) (1,112) 151 6,651 5,667 Profit (loss) for the period Adjustment of cash flow hedges Foreign exchange adjustments, etc Tax relating to other comprehensive income - - (11) (4) (15) Total comprehensive income for the period Reduction of the share capital (23) (476) (285) - Share-based payment (granted) Share based payment (exercised) - (64) (1) 65 Tax related to share-based incentive plans Purchase/sale of treasury shares (883) - - (883) Paid dividends (142) - (142) Dividends, treasury shares (9) 9 - Balance at September 30, (854) (21) (1,081) - 6,871 5,564 Profit (loss) for the period Actuarial gains (losses) Adjustment of cash flow hedges (3) (3) Foreign exchange adjustments, etc Tax relating to other comprehensive income (3) - - (6) (1) Total comprehensive income for the period (6) Share-based payment (granted) Purchase/sale of treasury shares (279) - - (279) Proposed dividends for the year (161) - Balance at December 31, (726) (27) (1,360) 161 7,067 5,764 Profit (loss) for the period Adjustment of cash flow hedges (6) (6) Foreign exchange adjustments, etc. - - (128) (128) Tax relating to other comprehensive income Total comprehensive income for the period - - (128) (1) Reduction of the share capital (30) ,036 - (1,006) - Share-based payment (granted) Share-based payment (exercised) (27) 55 Tax related to share-based incentive plans Purchase/sale of treasury shares (779) - - (779) Proposed dividends for the year Paid dividends (149) - (149) Dividends, treasury shares (12) 12 - Balance at September 30, (854) (28) (1,021) - 6,728 5,444 Page 18 of 27

19 Cash flow statement (including GN Otometrics) Consolidated Q3 Q3 YTD YTD Full year (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (aud.) Operating activities Operating profit (loss) ,220 Depreciation, amortization and impairment Other non-cash adjustments (4) (27) Cash flow from operating activities before changes in working capital ,414 1,277 1,946 Changes in working capital 76 (51) (5) (184) (151) Cash flow from operating activities before financial items and tax ,409 1,093 1,795 Financial items, net (18) (29) (57) (56) (71) Tax paid, net (15) (18) (121) (120) (274) Cash flow from operating activities , ,450 - Investing activities Development projects (115) (111) (341) (332) (460) Investments in other intangible assets, net (38) (26) (85) (81) (159) Investments in property, plant and equipment, net (34) (47) (75) (130) (169) Investments in other non-current assets, net Company acquisitions (606) (4) (693) (29) (47) Cash flow from investing activities (781) (165) (1,152) (543) (754) Cash flow from operating and investing activities (free cash flow) (245) Financing activities Paid dividends - - (149) (142) (142) Share-based payment (exercised) Purchase/sale of treasury shares and other equity instruments (160) (228) (779) (883) (1,162) Increase/decrease in bank loans and other adjustments Cash flow from financing activities 278 (200) (26) (344) (682) Net cash flow 33 (22) Cash and cash equivalents beginning of period Adjustment foreign currency, cash and cash equivalents (1) (4) (2) 3 4 Cash and cash equivalents, end of period Page 19 of 27

20 Note 1 Accounting policies This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and Danish interim financial reporting requirements for listed companies. New standards, interpretations and amendments adopted by GN Store Nord As of January 1, 2016, GN Store Nord adopted all relevant new or revised International Financial Reporting Standards and IFRIC Interpretations with effective date January 1, 2016 or earlier, including those specified in note 1.1 in the Annual Report The new or revised Standards and Interpretations did not affect recognition and measurement materially or result in any material changes to disclosures in the notes. The accounting policies applied are unchanged from those applied in the Annual Report Discontinued operations On September 25, 2016 GN Hearing and Natus Medical Incorporated entered into an agreement whereby ownership of GN Otometrics is transferred from GN Hearing to Natus. As a consequence GN Store Nord has at September 30, 2016 classified GN Otometrics as a disposal group held for sale and as discontinued operations. Closing of the transaction is subject to regulatory approval and is targeted by end of Please refer to the note Discontinued operations for further information. Note 2.1 Segment disclosures Q Income statement GN Hearing GN Audio Other* Consolidated total Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) Continuing operations Revenue 1,284 1, ,117 1,875 Production costs (378) (381) (392) (372) - - (770) (753) Gross profit ,347 1,122 Expensed development costs (117) (112) (55) (55) (1) (4) (173) (171) Selling and distribution costs (448) (320) (215) (198) - - (663) (518) Management and administrative expenses (103) (67) (32) (28) (18) (13) (153) (108) Other operating income and costs, net (1) (1) 1 EBITA (19) (17) Amortization of acquired intangible assets (29) (13) (1) (3) - - (30) (16) Gain (loss) on divestment of operations etc Beltone Network non-recurring items Operating profit (loss) (19) (17) Financial items (37) (19) 7 (14) (19) (13) (49) (46) Profit (loss) before tax (38) (30) Tax on profit (loss) (40) (53) (23) (24) 7 7 (56) (70) Profit (loss) for the period from continuing operations (31) (23) Discontinued operations Profit (loss) for the period from discontinued operations (5) (5) 3 Profit (loss) for the period (31) (23) Cash flow statement (including GN Otometrics) GN Hearing GN Audio Other* Consolidated total Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) Operating activities before changes in working capital (17) (27) Cash flow from changes in working capital 71 (33) (3) (19) (51) Cash flow from operating activities excluding financial items and tax (9) (26) Cash flow from investing activities: Development projects (83) (78) (32) (33) - - (115) (111) Other (653) (32) (9) (17) (4) (5) (666) (54) Cash flow from operating and investing activities before financial items and tax (328) (13) (31) (212) 225 Tax and financial items (21) (22) (1) (15) (11) (10) (33) (47) Cash flow from operating and investing activities (free cash flow) (349) (24) (41) (245) 178 Free cash flow excl. company acquisitions and divestments (24) (41) * "Other" comprises Group Shared Services, GN Ejendomme and eliminations Page 20 of 27

21 Note 2.1 Segment disclosures Q (continued) Balance sheet GN Hearing GN Audio Other* Consolidated total Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) ASSETS Goodwill 3, ,071 3,520 Development projects ,020 1,144 Other intangible assets Property, plant and equipment Loans to dispensers and ownership interests ,010 Other non-current assets (17) Total non-current assets 6,717 6,324 1,031 1, ,025 7,601 Inventories Trade receivables 1,142 1, ,956 2,013 Receivables from subsidiaries** - - 2,271 1,870 (2,271) (1,870) - - Tax receivables Other receivables Cash and cash equivalents Total current assets 1,864 2,188 3,442 2,922 (2,259) (1,825) 3,047 3,285 Assets classified as held for sale Total assets 9,443 8,512 4,473 3,927 (1,982) (1,553) 11,934 10,886 EQUITY AND LIABILITIES Equity 6,428 5,697 3,661 3,153 (4,645) (3,286) 5,444 5,564 Bank loans ,145 2,325 3,145 2,325 Pension obligations and deferred tax Provisions Other non-current liabilities Total non-current liabilities ,317 2,480 4,194 3,192 Bank loans Trade payables Amounts owed to subsidiaries** (764) (861) - - Tax payables (12) (5) Provisions Other current liabilities ,220 1,022 Total current liabilities 2,022 2, (654) (747) 2,119 2,130 Liabilities directly associated with assets held for sale Total equity and liabilities 9,443 8,512 4,473 3,927 (1,982) (1,553) 11,934 10,886 Invested capital*** 6,415 6,501 1,262 1, ,865 7,903 Average invested capital 6,458 6,115 1,214 1, ,884 7,372 Additional information (excluding GN Otometrics) GN Hearing GN Audio Other* Consolidated total Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) Revenue distributed geographically Europe 23% 26% 43% 45% 0% 0% 31% 34% North America 56% 52% 39% 36% 0% 0% 49% 45% Rest of world 21% 22% 18% 19% 0% 0% 20% 21% Incurred development costs (124) (116) (67) (67) (1) (4) (192) (187) Capitalized development costs Amortization and depreciation of development costs** (57) (60) (20) (21) - - (77) (81) Expensed development costs (117) (112) (55) (55) (1) (4) (173) (171) EBITDA (12) (10) Depreciation and software amortization (29) (27) (10) (9) (7) (7) (46) (43) EBITA (19) (17) EBITA margin 18.5% 20.7% 16.7% 14.8% N/A N/A 16.9% 17.4% Number of employees, end of period ~4,300 ~3,875 ~1,025 ~1,000 ~75 ~75 ~5,400 ~4,950 * "Other" comprises Group Shared Services, GN Ejendomme and eliminations **Net amount *** Includes Net working capital (Inventories, Trade receivables, Other receivables, Trade payables and Other current liabilities), Goodwill, Development projects, Other intangible assets, Property, plant and equipment, Loans to dispensers and ownership interests and Provisions. Page 21 of 27

22 Note 2.2 Segment disclosures September 2016 YTD Income statement GN Hearing GN Audio Other* Consolidated total Sep. YTD Sep. YTD Sep. YTD Sep. YTD Sep. YTD Sep. YTD Sep. YTD Sep. YTD (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) Continuing operations Revenue 3, ,377 2, ,144 5,483 Production costs (1,203) (1 074) (1,130) (1,045) - - (2,333) (2,119) Gross profit 2,564 2,185 1,247 1, ,811 3,364 Expensed development costs (351) (329) (173) (151) (4) (8) (528) (488) Selling and distribution costs (1,230) (1,040) (619) (607) - - (1,849) (1,647) Management and administrative expenses (287) (210) (112) (91) (51) (42) (450) (343) Other operating income and costs, net EBITA (55) (50) Amortization of acquired intangible assets (74) (44) (3) (8) - - (77) (52) Gain (loss) on divestment of operations etc. (2) (4) (2) (4) Beltone Network non-recurring items - (150) (150) Operating profit (loss) (55) (50) Financial items (39) (53) 20 (13) (42) (37) (61) (103) Profit (loss) before tax (97) (87) Tax on profit (loss) (148) (99) (66) (76) (197) (157) Profit (loss) for the period from continuing operations (80) (69) Discontinued operations Profit (loss) for the period from discontinued operations Profit (loss) for the period (80) (69) Cash flow statement (including GN Otometrics) GN Hearing GN Audio Other* Consolidated total Sep. YTD Sep. YTD Sep. YTD Sep. YTD Sep. YTD Sep. YTD Sep. YTD Sep. YTD (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) Operating activities before changes in working capital 1, (39) (48) 1,414 1,277 Cash flow from changes in working capital (10) (135) 17 (39) (12) (10) (5) (184) Cash flow from operating activities excluding financial items and tax 1, (51) (58) 1,409 1,093 Cash flow from investing activities: Development projects (249) (230) (92) (102) - - (341) (332) Other (781) (139) (21) (43) (9) (29) (811) (211) Cash flow from operating and investing activities before financial items and tax (30) (60) (87) Tax and financial items (110) (88) (30) (31) (38) (57) (178) (176) Cash flow from operating and investing activities (free cash flow) (140) (98) (144) Free cash flow excl. company acquisitions and divestments (98) (144) Additional information (excluding GN Otometrics) GN Hearing GN Audio Other* Consolidated total Sep. YTD Sep. YTD YTD YTD Sep. YTD Sep. YTD Sep. YTD Sep. YTD (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) Revenue distributed geographically Europe 26% 28% 47% 46% 0% 0% 34% 35% North America 55% 51% 36% 35% 0% 0% 47% 45% Rest of world 19% 21% 17% 19% 0% 0% 19% 20% Incurred development costs (366) (336) (198) (191) (4) (8) (568) (535) Capitalized development costs Amortization and depreciation of development costs** (171) (175) (67) (62) - - (238) (237) Expensed development costs (351) (329) (173) (151) (4) (8) (528) (488) EBITDA (32) (29) 1,121 1,016 Depreciation and software amortization (80) (74) (28) (27) (23) (21) (131) (122) EBITA (55) (50) EBITA margin 18.6% 18.8% 14.5% 14.8% N/A N/A 16.1% 16.3% Number of employees, end of period ~4,300 ~3,875 ~1,025 ~1,000 ~75 ~75 ~5,400 ~4,950 * "Other" comprises Group Shared Services, GN Ejendomme and eliminations **Net amount *** Includes Net working capital (Inventories, Trade receivables, Other Page 22 of 27

23 Note 3 Acquisitions of companies and operations In July 2016, GN Hearing acquired 100% of the US based company Audigy, a leading provider of business and performance management solutions to independent hearing care practices. The acquisition of Audigy will further support GN Hearing s strong momentum allowing GN Hearing to be an even better partner to its customers. The goodwill related to the acquisition of Audigy is mainly attributable to Audigy's business and performance management solutions to independent hearing care professionals and the expected synergy effects from applying these in other parts of GN Hearing as well as a strengthening of the sales and distribution channels. During the first nine months of 2016, GN Hearing furthermore acquired a number of minor hearing instrument chains and distributors, primarily in the US. These acquisitions all strengthen GN Hearing's sales and distribution channels and the goodwill related to the acquisitions are mainly attributable to this. Fair value at acquisition date YTD YTD DKK million Identifiable assets acquired and liabilities assumed and consideration transferred Non-current assets 28 1 Current assets 49 6 Non-current liabilities (15) (2) Current liabilities (57) (7) Fair value of identified net assets 5 (2) Goodwill Other intangible assets Consideration transferred Fair value of assets transferred (163) (1) Contingent consideration (163) (5) Acquired cash and cash equivalents - - Cash consideration paid The goodwill related to the acquisition of Audigy has not yet been allocated to cash generating units. Goodwill relating to the other transactions is allocated to the cash-generating unit Hearing Instruments with DKK 68 million (2015: DKK 21 million). Transaction costs of DKK 22 million were recognized and included in operating expenses during H In the first nine months of 2016, GN Hearing paid out DKK 25 million (2015: DKK 4 million) in contingent considerations related to prior years acquisitions. The payments were mainly related to the acquisition of Dansk HøreCenter ApS. No adjustment has been recognized in the income statement. The recognition of the fair value of identified net assets is based on available information at the acquisition date. In the event of new information, the recognition is subject to change within a one-year measurement period. DKK million The share of revenue and profit (loss) for the first three quarters of 2016 from the acquisition date can be specified as follows: Revenue EBIT 2 2 Profit (loss) for the year - - Acquired operations if they had been owned throughout the first three quarters of 2016: Revenue EBIT 24 2 Profit (loss) for the year 21 - Subsequent events As mentioned in the business highlights GN Audio acquired the US based company VXi Corporation on October 13, The purchase price allocation relating to the acquisition of VXi has not yet been finalized. Page 23 of 27

24 Note 4 Discontinued Operations On September 25, 2016 GN Hearing and Natus Medical Incorporated (hereafter Natus ) entered into an agreement whereby ownership of GN Otometrics is transferred from GN Hearing to Natus. The divestment will further strengthen GN Hearing s focus and strategic direction as a dedicated hearing instrument company, with GN Hearing being in a unique position to continue to deliver industry leading growth and profitability. The total consideration payable by Natus is USD 145 million and will be settled in cash on a debt and cash free basis. Closing of the transaction is subject to regulatory approval and is targeted by end of At September 30, 2016 GN Otometrics was classified as a disposal group held for sale and as discontinued operations. The results of GN Otometrics for the first nine months of 2016 are presented below: YTD YTD DKK million GN Otometrics Revenue Expenses (477) (423) Operating profit Financial items (5) 1 Profit/(loss) before tax from discontinued operations 8 41 Tax (2) (10) Profit/(loss) for the period from discontinued operations 6 31 The major classes of assets and liabilities of GN Otometrics classified as held for sale as at September 30, 2016 are as follows: Assets Intangible assets 485 Property, plant & equipment 23 Inventories 128 Receivables 206 Cash and cash equivalents 20 Assets held for sale 862 Liabilities Pension obligations and deferred tax 60 Payables 117 Liabilities directly associated with assets held for sale 177 Earnings per share (EPS) from discontinued operations Earnings per share (EPS) from discontinued operations Earnings per share from discontinued operations, fully diluted (EPS diluted) Accounting policies Assets and liabilities classified as held for sale are presented separately as items in the balance sheet. A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and: Represents a separate major line of business or geographical area of operations, Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or Is a subsidiary acquired exclusively with a view to resale Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statement. Page 24 of 27

25 Note 5 Incentive plans As of September 30, 2016, the total number of outstanding warrants in GN Hearing was 16,575 (2.6% of the shares issued in GN Hearing). The total number of outstanding warrants in GN Audio was 10,091 (3.0% of the shares issued in GN Audio). Note 6 Shareholdings On November 3, 2016, members of the board of directors and the executive management, respectively, own 486,160 and 83,400 shares in GN Store Nord. On November 3, 2016, GN owns 9,381,028 treasury shares, equivalent to 6.1% of the 154,787,929 shares issued. At the annual general meeting on March 10, 2016, it was decided to reduce the company s nominal share capital from DKK 648,765,076 to nominally DKK 619,151,716 by cancelling part of the company s treasury shares at a nominal value of DKK 29,613,360 divided into 7,403,340 shares of DKK 4 each. The reduction was conducted on April 8, The GN stock is 100% free float, and the company has no dominant shareholders. T. Rowe Price Associates Inc., Marathon Asset Management LLP and APG Asset Management N.V. have reported an ownership interest in excess of 5% of GN s share capital. Foreign ownership of GN is estimated to be around 65%. Page 25 of 27

26 Appendix: Segment disclosures June 2016 YTD GN has in agreement with the Danish Business Authority attached the June YTD numbers on segment disclosures as well as comments on the June YTD development in the management part of the report. This information was by mistake not included in the Q report. During the first six months of 2016, GN Hearing increased revenue by 14% compared to the same period last year, which was primarily driven by organic growth of 9%. EBITA grew strongly by DKK 64 million, equivalent to an increase of 15% during the first six months of In the period the EBITA margin increased slightly from 17.0% to 17.2%. In the first six months of 2016, cash conversion developed strongly and increased from 46% to 61% equal to an improvement of free cash flow excl. M&A of DKK 104 million. During the first six months of 2016, GN Audio increased revenue by 6% compared to the same period last year, which was driven by organic growth of 6%, as M&A and the development in foreign exchange rates had no impact on the revenue growth. In the first six months of 2016, EBITA ended at DKK 205 million compared to DKK 217, equivalent to a flat development in the EBITA margin in constant currencies. In the first six months of 2016, cash conversion developed strongly and increased from 61% to 92% equal to an improvement of free cash flow excl. M&A of DKK 57 million. GN Store Nord delivered 8% organic growth in the first six months of 2016, equivalent to revenue of DKK 4,345 million. In the same period, EBITA increased from DKK 602 million to DKK 651 million, and the cash conversion increased from 37% to 63%, equivalent to an absolute increase of DKK 190 million. The tables are including GN Otometrics in GN Hearing, as the disposal of GN Otometrics was announced after the Q report was released. Income statement GN Hearing GN Audio Other* Consolidated total June YTD June YTD June YTD June YTD June YTD June YTD June YTD June YTD (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) Revenue 2,801 2,462 1,544 1, ,345 3,920 Production costs (984) (835) (738) (673) - - (1,722) (1,508) Gross profit 1,817 1, ,623 2,412 Expensed development costs (261) (240) (118) (96) (3) (4) (382) (340) Selling and distribution costs (868) (795) (404) (409) - - (1,272) (1,204) Management and administrative expenses (212) (181) (80) (63) (33) (29) (325) (273) Other operating income and costs, net EBITA (36) (33) Amortization of acquired intangible assets (46) (31) (2) (5) - - (48) (36) Gain (loss) on divestment of operations etc. (2) (4) (2) (4) Beltone Network non-recurring items - (150) (150) Operating profit (loss) (36) (33) Financial items (5) (32) 13 1 (23) (24) (15) (55) Profit (loss) before tax (59) (57) Tax on profit (loss) (111) (54) (43) (52) (144) (95) Profit (loss) (49) (46) Cash flow statement GN Hearing GN Audio Other* Consolidated total June YTD June YTD June YTD June YTD June YTD June YTD June YTD June YTD (DKK million) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) Operating activities before changes in working capital (22) (21) Cash flow from changes in working capital (81) (102) 20 (20) (20) (11) (81) (133) Cash flow from operating activities excluding financial items and tax (42) (32) Cash flow from investing activities: Development projects (166) (152) (60) (69) - - (226) (221) Other (128) (107) (12) (26) (5) (24) (145) (157) Cash flow from operating and investing activities before financial items and tax (47) (56) Tax and financial items (89) (66) (29) (16) (27) (47) (145) (129) Cash flow from operating and investing activities (free cash flow) (74) (103) Free cash flow excl. company acquisitions and divestments (74) (103) * "Other" comprises Group Shared Services, GN Ejendomme and eliminations Page 26 of 27