Agenda. Group highlights Hearing Devices Hearing Implants Diagnostic Instruments Other business areas Group financials 2015 highlights Q&A

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2 Agenda Group highlights Hearing Devices Hearing Implants Diagnostic Instruments Other business areas Group financials 2015 highlights Q&A 2

3 Group highlights 2014 The journey towards becoming one of the leading global hearing healthcare companies continues Challenging and dynamic year for the Group however... Successful integration of Neurelec into Oticon Medical, adding continued value to and generating growth in the Group s Hearing Implant business Successful integration of acquired businesses, delivering strong growth and profitability in Diagnostic Instruments The Group has successfully adapted to the changing US market dynamics and ended 2014 with improved momentum after having launched commercial initiatives Continued development and strengthening of our global distribution platform Continued strong commitment to innovation and R&D across all business areas Improved efficiency through focused restructuring the development of the Group s infrastructure continues 3

4 The William Demant Group Revenue by business activity DKK million FY 2014 FY 2013* Change Change in local currencies Hearing Devices 8,033 7,828 3% 5% Diagnostic Instruments % 11% Hearing Implants % 36% Total 9,346 8,959 4% 6% The strong growth achieved in our Hearing Implants business has improved the significance of the business activity, and revenue is now shown as a separate business activity *Revenue figures for 2013 are restated due to new accounting policies. 4

5 The William Demant Group Revenue by geographic region Change in local DKK million FY 2014 FY 2013* Change currencies Europe 3,683 3,350 10% 10% North America 3,746 3,712 1% 3% Oceania % 5% Asia % 7% Other countries % 6% Total 9,346 8,959 4% 6% Strong growth achieved in Europe *Revenue figures for 2013 are restated due to new accounting policies. 5

6 Hearing Devices

7 Hearing instrument market 2014 Encouraging global unit growth of 5 6% p.a. exceeding our normal expectations of 3 4% unit growth The US hearing aid market delivered 5% unit growth in 2014 Veterans Affairs (VA) in the US grew by as much as 10% The unit growth rate in the private sector of the US market was well over 3% European unit growth rate is estimated to be in the high single digits A considerable part of this growth in units can be attributed to reimbursement changes in Germany Continued strong growth in the Asian region, except for Japan which saw slightly negative development In terms of value, the overall market growth rate was slightly positive The average selling price on the hearing aid market declined by 4 5% in 2014, primarily due to channel, product and country mix changes as well as changed market dynamics in the US 7

8 Hearing Devices 2014 business highlights First half year dominated by strong growth in our German business, due to favourable market conditions, however, opposite negative market conditions where observed in the US market Second half dominated by change in US market dynamics, leading to important growth with independents Commercial initiatives launched in first half 2014 leading to improved momentum in units sales Negative development for Bernafon with Costco Veterans Affairs market share run rate increased from 8% to 10% in 2014 Overall, the Group experienced negative ASP development due to channel and product mix changes as well as a revised commercial strategy in the US 8

9 Hearing Devices 2014 financial highlights Overall revenue growth rate of 5% in local currencies in 2014 especially strong in the second half of the year Our core business the development, manufacture and wholesale of hearing aids realised an organic growth rate of 2% in 2014 This growth was driven by a satisfactory unit growth rate of 8% The Group s hearing aid wholesale ASP saw a decline of more than 5% Our continuous efficiency improvements have counterbalanced the gross margin pressure 9

10 Helping the brain makes sense of sound Oticon improves 10

11 Introducing the Inium Sense Platform Our new engine New system architecture 30% more processing power Fully wireless Minimal power consumption 11

12 Inium Sense Improved speech understanding with the new Soft Speech Booster Facts on soft sounds Soft Speech Booster is relevant for 75% of the moments of life Average sound levels above 1.5 khz 75% 25% higher than 50 db SPL less than 50 db SPL New Soft Speech Booster TM Improves soft speech understanding by up to 20% Improves speech understanding by 6%* in average 80% of normal speech signals are soft sounds in the spectrum above 1.5 khz Speech levels above 1.5 khz 80% 20% Normal > 50 db SPL Soft < 50 db SPL 12 * Alta2 compared to Alta

13 Inium Sense Monitors and reduces feedback four times faster than previous solutions Any audible feedback is instantly removed while maintaining audibility across all frequency channels 13

14 Inium Sense Tinnitus treatment with Ocean Sounds New Oticon Tinnitus SoundSupport TM the most comprehensive Tinnitus solution on the market right now Unique on board Ocean Sounds preferred by a majority of Tinnitus patients 14

15 New minirite Modern look, smaller device, more discreet 15

16 Inium Sense Now water resistant Nano coated and IP58 certified water resistant instruments 16

17 Inium Sense Ultra low power wireless platform drives ultra discreet and invisible design! High performance with 10A and 312 battery Invisible IIC and ultra discreet CIC Stylish designrite and sleek minirite Continues binaural signal processing Full smartphone interaction and streaming capabilities No compromise on audiological performance Up to 105 db HL with minirite IIC (10A) CIC (10A) designrite (10A) minirite (312) 17

18 Inium Sense Available in all styles and at all price points! 18

19 Introducing Inium Sense The biggest launch ever ALL new products will be available in more than 80% of our markets, three weeks from today 19

20 Oticon Tinnitus sound app for iphone and Android Enhancing the most comprehensive connectivity solution on the market Beautiful and intuitive design Enhances the built in Tinnitus support of Alta2 Pro TI, Nera2 Pro TI and Ria2 Pro Ti Offers additional relief sounds and the opportunity to organise sounds Includes breathing and relaxation exercises Streaming from own music library as part of Tinnitus relief 20

21 Hearing Implants

22 Hearing Implants 2014 highlights On the path to becoming one of the world s leading manufacturers of hearing implants Successful integration of Neurelec into Oticon Medical adding continued value to and generating growth in the Group s Hearing Implant business Neurelec is now branded under the Oticon Medical name Continued increase in R&D and distribution costs to achieve continued high growth Revenue growth rate of 36% in local currencies 25% organic growth 22

23 Hearing Implants 2014 highlights Global distribution expanded and strengthened in 2014 Oticon Medical entered eight new markets in 2014 and is now active in more than 40 markets In the key growth markets, the US and China, regulatory approval of our CI products is still pending 23

24 Cochlear implant system (CI) 2015 will see the most comprehensive launch activities ever undertaken by Oticon Medical In 2014, cochlear implant sales grew significantly, with a few markets showing particularly strong growth We have successfully outgrown the market in 2014 Entered new markets in the Middle East, Asia and South America Upgraded production facility and significantly increased production capacity In 2015, we will reach a major milestone with the launch of the first Oticon Medical CI system 24

25 Bone anchored hearing system (BAHS) Strong momentum entering 2015 BAHS sales developed favourably in 2014, driven especially by the UK, the Netherlands and Denmark Second half year sales in the US picked up significantly, after uncertainty regarding Medicare reimbursement was resolved In 2015, we will launch a new surgery concept making the procedure; Faster More cosmetically attractive Fully reversible In 2015, we will also launch the first Ponto App to enable users to adjust their sound processor, using an iphone or an Android phone together with the ConnectLine Streamer 25

26 Diagnostic Instruments

27 Diagnostic Instruments 2014 business highlights 10% organic growth in 2014 Growth driven by audiometers, balance equipment and equipment for newborn hearing screening Diagnostic Instruments has significantly increased their market share in 2014 Global market for diagnostic equipment is estimated to have grown by 5% Impressive growth achieved despite bottleneck issues in 2014 Most of the issues relate to the first half of 2014, and the majority of the issues were resolved in the second half of 2014 Delivery situation is expected to be normal again in the first half of 2015 Maico EasyScreen½ 27

28 Diagnostic Instruments 2015 highlights In 2015, the Group will continue to focus on integrating and developing the businesses already acquired We expect the multiple product introductions in 2014 and also the introductions planned for 2015 to support this growth In 2015, Interacoustics headquarters will move to Middelfart, Denmark Interacoustics EyeSeeCam vhit 28

29 Other business areas

30 Sennheiser Communications Anotheryearof market share gains 16% organic revenue growth in 2014, thereby exceeding the market growth rate The underlying sales growth in 2014 was even higher due to the one off sale of inventory in 2013 Growth especially driven by Unified Communication Significantly strengthened product portfolio and global distribution to drive growth going forward DKK million Revenue* Gross profit Gross profit margin 48.4% 50.8% Capacity costs Operating profit (EBIT) EBIT margin 26.7% 26.5% Tax on profit for the year Profit for the year William Demant Holding share of profit, 50% *Sales to Sennheiser sales companies and other distributors 30

31 Exclusive negotiations to acquire controlling stake in Audika Highlights and investment rationale One of France s leading providers of hearing care services A well managed and profitable business Ownership structure Alain and Jean Claude Tonnard European Capital S.A. (Private equity) Strong historical profitability on a par with industry leading peers 61% 39% Purchase price of EUR per share, representing a 32% premium on top of the closing price as of 16 February 2015 (EUR 13.50) Holton SAS 54%* Free float listed on Euronext Paris 46% If successful, William Demant is committed to commencing a mandatory public tender offer for the remaining 46.1% of Audika s share capital outstanding Based on a price of EUR per share, the entire transaction will amount to an equity value of EUR 168 million *William Demant intends to acquire 53.9% of the share capital of Audika Group SA (Audika) from the controlling shareholder Holton SAS, at a price of EUR per share. 31

32 Group financial highlights

33 Financial highlights 2014 EPS growth of 5% within guided range of 2 7% underlying EPS growth of 11% In 2014, group revenue totaled DKK 9,346 million resulting in 6% growth in local currencies Despite pressure on ASP the Group has managed to improve efficiency and the Group gross profit margin maintained at 72.9% (72.8% in 2013) Underlying EBIT growth of 7%, adjusted for; Negative exchange rate effect of DKK 50 million on operating profit One off loss on a customer loan of DKK 40 million Free cash flow increased by 28%, reaching DKK million In 2014, the acquisition related fair value adjustments amounted to DKK 95 million (DKK 96 million in 2013) 33

34 Restatement of 2013 financial figures 2013 income statement 1. Change in accounting policies and reporting principles The Group s joint venture (Sennheiser Communication) is now recognised, using the equity method, due to the implementation of IFRS 10 and 11 and IAS Error in prior period financial figures Inaccuracies identified in acquired retail entities, resulting in adjustments of certain balance sheet items. DKK 31 million relates to prior period errors and has in compliance with IAS 8 been restated in 2013 financial figures 2013 According to Annual Effect of Restated 2013 DKK million Report 2013 restatements Financial figures Revenue 9, ,959 Gross Profit 6, ,518 Research and development costs Distribution costs 3, ,652 Administrative expenses Share of profit, associates Operating profit (EBIT) 1, ,736 Profit before tax 1, ,664 Tax on profit for the period Profit for the period 1, ,286 Earnings per share (EPS), DKK

35 Income statement FY 2014 Adjusted profit margin of 19.6% DKK million ** Change Change in local currencies Revenue 9, % 6% Gross profit 6,813 6,518 5% Gross profit margin 72.9% 72.8% Research and development costs % 7% Distribution costs 3,877 3,652 6% 8% Administrative expenses % 3% Share of profit, associates Reported operating profit (EBIT) 1,761 1,736 1% Reported profit margin (EBIT margin) 18.8% 19.4% Adjusted profit margin (EBIT margin)* 19.6% Profit for the period 1,327 1,286 3% Earnings per share (EPS), DKK % Adjusted earnings per share (EPS), DKK* % 35 *Adjusted for the negative exchange rate effect of DKK 50 million and the one off loss on a customer loan of DKK 40 million **Restated

36 Cash flow FY 2014 Free cash flow increased by 28%, reaching more than DKK 1 billion DKK million H H2 2013* FY 2014 FY 2013* Operating profit (EBIT) ,761 1,736 CFFO ,495 1,282 CFFI, excluding acquisitions Free cash flow (FCF) , Acquisitions ,176 Buy back of shares Other financing activities Net cash flow for the period Cash conversion ratio** 85% 64% 85% 74% *Restated ** Cash conversion: CFFO/EBIT. 36

37 Balance sheet Steady balance sheet development Assets DKK million * Intangible assets 3,896 3,615 Property, plant and equipment 1,664 1,488 Other non current assets 1,610 1,453 Non current assets 7,170 6,556 Equity and liabilities DKK million * Equity 5,584 5,056 Non current liabilities Current liabilities 5,182 4,649 Total equity and liabilities 11,219 10,318 Inventories 1,203 1,142 Receivables etc. 2,403 2,292 Cash Current assets 4,049 3,762 Total assets 11,219 10,318 Net interest bearing debt of DKK 2,405 million as of 31 December 2014 This rise of DKK 121 million in net interest bearing debt can mainly be attributed to exchange rates and a higher business activity level *Restated 37

38 2015 highlights

39 2015 highlights Major undertakings in 2015 adding value for the Group in the medium to long term Major global product launch by Oticon, marking the biggest platform launch ever; products will from the very start be globally available in all styles and at all price points Continued launches of new innovative products across all business areas Expanding in Hearing Implants, driven by R&D and distribution activities Continued effort to improve the Group s efficiency through the entire value chain Build and implement a new global ERP system Establish shared services for our back office functions Further centralise our ITE production and repair services Put our new global distribution centre in Poland into operation Expected global growth in hearing aid market of 3 4% in units and flat to slightly positive in terms of value However, expected headwind from negative growth in Germany, could impact global growth 39

40 Outlook 2015 Expected revenue growth in all business activities in 2015 Efficiency improvements continue Building the future growth platform in Hearing Implants continues 4 5% positive foreign exchange rate impact on reported Group revenue in 2015 The positive exchange rate impact on the Groups earnings will be partly offset by the translation of the Groups Swiss R&D cost base share buyback programme to continue All in all, based on the Group s expected revenue growth in 2015 and on our continued efforts to improve our efficiency and to build a future growth platform in Hearing Implants, we guide for an operating profit (EBIT) for 2015 in the range of DKK 1,7 2,0 billion 40

41 Save the dates 41

42 42 Q&A

43 IR contacts Investors and analysts are welcome to contact Stefan Ingildsen Senior Vice President, Finance Tel.: Mob.: Søren B. Andersson Vice President, Investor Relations Tel.: Mob.: Rasmus Sørensen Investor Relations Officer Tel.: Mob.: by phone or by e mail to william@demant.com. 43