Second quarter summary:
The financial results were below expectations for Headsets (continuing
operations) and better than expected for Hearing Instruments and Audiologic
Diagnostics Equipment (discontinuing operations).
Headsets
CC&O Headsets showed good results, mainly driven by the continuing strong
performance in Europe.
Mobile Headsets showed weak results after a disappointing revenue development
as GN experienced a sharp decline in the number of headsets sold to a large
mobile phone manufacturer. However, GN secured several important programs with
key clients. The ongoing restructuring of the business is proceeding in line
with the strategy.
- Revenue declined to DKK 621 million from DKK 947 million in Q2 2006.
- Gross margin increased to 42% from 35% in Q2 2006.
- EBITA was DKK (36) million including restructuring costs of DKK (28) million,
flat from DKK (36) million in Q2 2006.
- Profit before tax declined to DKK (45) million from DKK (30) million in Q2
2006.
- Cash flow from operations improved to DKK 82 million from DKK (67) million in
Q2 2006.
Hearing Instruments and Audiologic Diagnostics Equipment
GN ReSound showed good results as a consequence of several successful product
launches and the effect of the restructuring measures implemented last year.
- Revenue increased to DKK 842 million from DKK 812 million in Q2 2006 (organic
growth of 8% in Hearing Instruments).
- Gross margin improved to 64% from 63% in Q2 2006.
- EBITA increased to DKK 129 million from DKK 101 million in Q2 2006.
- Cash flow from operations improved to DKK 161 million from DKK 69 million in
Q2 2006.
The profit from discontinuing operations which includes GN ReSound and other
discontinuing operations was DKK 149 million.
Full-year guidance
EBITA for CC&O Headsets: DKK 325-350 million; an increase of DKK 75-100 million
as a continued strong performance is expected in Europe. EBITA for Mobile
Headsets: DKK (125)-(175) million; reduced by DKK (75)-(100) million to due to
lowered revenue expectations.
Following the decision of the German appeal court not to grant injunctive
relief on the GN ReSound/Sonova transaction, GN expects to own GN Resound
throughout 2007. As a consequence increased group function costs will
negatively impact EBITA by an additional DKK (20) million and the full-year
EBITA guidance for continuing operations is reduced from DKK 150-175 million to
DKK 100-175 million.
The full-year profit from discontinuing operations is still expected to be DKK
400-450 million. This guidance indicates an EBITA in the range of DKK 500-550
million, calculated as if GN ReSound had been a part of the continuing
operations.
GN ReSound sale update
On August 8, 2007, the appeal court (Oberlandesgericht) in Dusseldorf, Germany,
decided that it does not have the power to grant injunctive relief in merger
prohibition cases, since only the German Federal Cartel Office
(Bundeskartellamt) can authorize parties to implement a merger before it has
been cleared. The court decision only concerns the application for injunctive
relief, which the court considers inadmissible, and is without prejudice to the
main appeal proceedings that are still pending.
The share purchase agreement with Sonova contains a termination date of August
15, 2007 after which date each party can unilaterally terminate the
transaction. Following the recent developments, Sonova has today sent a
notification informing GN that they wish to terminate the transaction. GN has
taken notice of the termination notified by Sonova, and acknowledges that
Sonova according to the share purchase agreement can terminate the transaction.
GN will, nonetheless, continue to pursue the main appeal unilaterally. GN will
in parallel pursue all possible strategic options including but not limited to
an alternative transaction or a possible listing of GN in two separate
entities.
Costs associated with the divestment of GN ReSound have so far amounted to
payments of DKK 115 million which are included in Assets held for sale. This
amount will substantially increase in line with additional work done on
strategic alternatives and in line with the running costs of ongoing retention
plans. In case that it is decided not to proceed with the divestment of GN
ReSound, all transaction costs will be expensed immediately.
For further information, please contact:
Toon Bouten
CEO
GN Store Nord A/S
Tel: +45 45 75 00 00
Jens Due Olsen
Deputy CEO
GN Store Nord A/S
Tel: +45 45 75 00 00
