Third Quarter Summary
The financial results for Headsets (continuing operations) improved strongly
Y-o-Y; however the results were in the low end of expectations. As a
consequence of a very long sales process, the financial results for Hearing
Instruments and Audiologic Diagnostics Equipment (discontinuing operations) did
not meet expectations.
Update on strategy and governance
•The Supervisory Board has decided to abandon the sales process concerning GN
ReSound immediately and keep the activities within GN.
•A new governance structure will safeguard shareholder value and address GN's
challenges. The two businesses will be run as separate entities. The Executive
Management will consist of the heads of the two businesses - Headsets and GN
ReSound - as equally ranked executives.
•Toon Bouten will remain CEO of the headset business whereas the position as
CEO for GN ReSound will be filled as soon as possible. Following this new
structure, GN Deputy CEO Jens Due Olsen will resign from GN's Executive
Management as of today. GN ReSound CEO Jesper Mailind will remain in place
until a new CEO takes over.
Headsets
•CC&O Headsets: Good overall organic growth with continued strong growth in
Europe and in the Asia Pacific region. Continued disappointing growth and
results in North America.
• Mobile Headsets: Organic growth improved significantly with results showing
good progression but still affected by a low revenue level.
• GN signed a milestone supply chain agreement and the ongoing restructuring of
the business is generally proceeding in line with the strategy.
• Revenue declined to DKK 673 million from DKK 711 million in Q3 2006
corresponding to flat organic growth due to currency fluctuations.
• The gross margin increased to 44% from 32% in Q3 2006.
• EBITA was DKK 12 million compared to DKK (126) million in Q3 2006.
• Profit before tax improved to DKK (6) million from DKK (131) million in Q3
2006.
• The cash flow from operations was DKK (22) million compared to DKK (119)
million in Q3 2006.
Hearing Instruments and Audiologic Diagnostics Equipment
• GN ReSound: Negative growth primarily due both to lost customers and to
customers delaying new orders because of the general uncertainty about the
future ownership of GN ReSound.
• The Q3 results were also adversely affected by extraordinary costs of
lawyers' fees and settlement costs relating to a lawsuit against GN ReSound.
• Revenue decreased to DKK 755 million from DKK 802 million in Q3 2006 (organic
growth of (4)% in Hearing Instruments).
• The gross margin improved to 62% from 61% in Q3 2006. Gross margin is
positively affected from the restructuring measures implemented last year.
• EBITA decreased to DKK 55 million from DKK 102 million in Q3 2006.
• The cash flow from operations was DKK 108 million against DKK 104 million in
Q3 2006.
Full-year guidance
• EBITA for CC&O Headsets: approximately DKK 300 million; a decrease of DKK
25-50 million compared to the previous guidance.
• EBITA for Mobile Headsets: approximately DKK (150) million; i.e. in the mid
point and hence unchanged compared to the previous guidance.
• Other Activities is unchanged at DKK (50) million.
• Accordingly, the full-year EBITA guidance for Headsets and Other Activities:
approximately DKK 100 million; i.e. in the low end of the previous guidance.
• EBITA for GN ReSound: approximately DKK 400-450 million; reduced by DKK 100
million compared to the previous guidance.
• Costs associated to the strategic process will be expensed in 2007. Total
costs amount to approximately DKK 275 million of which DKK 49 million were
already expensed in Q3.
• In light of the decision to keep GN ReSound within GN, GN ReSound will be
classified as continuing operations in the Interim Reports from Q4 2007 onwards
as well as in the Annual Report for 2007.
For further information, please contact:
Toon Bouten
President & CEO
GN Store Nord A/S
Tel: +45 45 75 00 00
Anders Boyer
Executive Vice President & CFO
GN Store Nord A/S
Tel: +45 45 75 00 00
