Egedal, Denmark, 2013-05-07 08:05 CEST (GLOBE NEWSWIRE) --
- The Group is off to a good start in 2013 and in the first quarter, business developed positively.
- Growing unit sales in the Group's core business (wholesale of hearing aids) despite challenging market conditions in several countries.
- Successful global launch of the high-end instrument Oticon Alta, which became available in all markets and in all styles in the first quarter.
- The Group maintains its announced expectations of 2013, including organic revenue growth in the wholesale of hearing aids, which is expected to exceed market growth by 3-5 percentage points, and an operating profit (EBIT), which is expected to exceed the level realised in 2012.
Market trends
Due to fewer sales days in the first quarter of 2013 compared with the same period last year, we believe that the development in absolute unit sales in the market was flat in the first quarter. Adjusted for the number of sales days, the first quarter of the year was, however, characterised by slightly rising unit sales – a growth which is still mainly driven by the surge in the elderly population.
The development in unit sales of hearing aids in the US market was flat in the first quarter, and if adjusted for the number of sales days, growth was just under 2%, which is below historical average growth in the USA. Growth in the USA was mainly driven by Veterans Affairs (VA). Also in Europe, the rise in unit sales was below the historical level, and we believe that absolute unit sales were at the same level as last year. The Japanese market continues to show good momentum with an increase in unit sales of just over 5% compared with the first quarter of 2012.
The general lack of official price statistics makes it difficult to get a varied picture of the real development in the average wholesale price. The number of high-end launches in the past few quarters has, however, had a positive impact on the product mix, resulting in a favourable spillover effect on average selling prices in the market. On the other hand, changed subsidy schemes in among other countries Denmark and Holland have had a considerable adverse effect on average selling prices in the two countries. In addition, there are still challenges in relation to the invoicing of instruments sold in Norway following the transition to consignment stock in mid-2012.
At the recently held AudiologyNOW! convention, the world's largest audiology and hearing aid convention, which took place in Anaheim, California, we saw a string of new products, but the most important ones were already known prior to the convention and therefore did not change our view on the general competitive situation. Generally speaking, we see a stable, but competitive market, so we maintain our expectation that in 2013, the market for hearing aids will generate modest positive growth in value.
Hearing Devices
Wholesale of hearing aids generated positive unit growth in the first quarter of the year, and the Group captured further market shares. Our US business, in particular, contributed to this growth, whereas our development in Europe is characterised by considerable exposure in markets such as Denmark, Holland and Norway, where the first quarter saw significant negative growth due to structural changes in the hearing care systems in these countries. The launch of Oticon Alta in January and the global roll-out of Alta in the following weeks contributed to the positive development in the second half of the quarter, but also the strengthened product portfolios of our two other hearing aid brands, Bernafon and Sonic, have contributed to continued unit growth.
With the launch of Alta, Oticon has set new audiological standards and created a more natural sound, ensuring that the end-user will use less cognitive energy to understand speech in difficult listening situations, thereby leaving more energy for active participation. Not least the new Inium processor has made it possible to create a natural and more individual listening experience, while offering the market's most efficient anti-feedback system. Only a few weeks after its launch, Oticon Alta was available in almost all markets at two price points and in all styles, including a brand new series of customised ITE instruments (In-The-Ear), thus giving the users more options and even smaller instruments. Oticon's customers have given Oticon Alta a very good reception with extremely positive feedback from audiologists and end-users alike, and sales in the introductory period have lived up to expectations. We still believe that with Oticon Alta and the Inium platform, we have a strong position for capturing market shares both in 2013 and going forward.
Our second hearing aid brand, Bernafon, was also off to a good start in 2013 due to a strong product offering. In order to further strengthen its position, Bernafon launched a brand new high-end instrument called Acriva in connection with the previously mentioned AudiologyNOW! convention. The complete Bernafon Acriva family has been available at two price points since April, and for the first time, Bernafon now also offers a cosmetically attractive IIC instrument (Invisible-In-the-Canal), which is placed deep inside the ear canal and is thus invisible to the naked eye. With the introduction of the high-end instrument Sonic Bliss, the Group's third independent hearing aid brand, Sonic, has taken another step towards a complete renewal of its product portfolio.
In the first quarter, our retail business felt – as did a number of other players – the effect of fewer sales days and generally speaking more difficult market conditions in some of the countries where we have significant exposure, e.g. Australia and Holland.
Our stake in bone anchored hearing systems through Oticon Medical continues to develop very positively, and in the first quarter of the year, Oticon Medical succeeded in generating substantial growth and once again captured market shares. The launch of a new implant system in the second half of 2012 progressed very satisfactorily, creating great interest among surgeons to cooperate with Oticon Medical. In the audiological field, Oticon Medical recently announced that in the second half of 2013, they will launch a brand new sound processor that will offer an array of audiological advantages also known from Oticon Alta, including the possibility to stream sound from external units such as TV and mobile phones by means of Oticon's ConnectLine system.
At the beginning of April, the Group announced that it had concluded an agreement to take over the shares in Neurelec SA, a French manufacturer of cochlear implants, at a total price of DKK 428 million. The Group's entry into this part of the implant market, which is characterised by considerable, long-term growth possibilities, is a natural continuation of our successful stake in bone anchored hearing systems. With this takeover, the William Demant Group has acquired a strategically important business unit and will thus become the only company in the world which – in addition to traditional hearing aids – also covers bone anchored hearing systems and cochlear implants and furthermore has sizeable activities in the area of diagnostic instruments.
Other business activities
In the first quarter, Diagnostic Instruments generated satisfactory growth and once again captured market shares in a market with only limited growth. In addition to fair contribution from acquisitions, a string of product launches, including the launch of the AudioStar audiometer from Grason-Stadler, also contributed to growth. As far as Diagnostic Instruments are concerned, the North American and Asian markets, in particular, showed good momentum in the first quarter. With the succession of product launches and the continued integration of recent years' acquisitions, our Diagnostic Instruments business activity is in a strong position to secure positive development, also in the years to come.
The Personal Communication business activity was also off to a good start in the first quarter of the year, and both Sennheiser Communications (headsets for professional and private users) and FrontRow (wireless sound systems for schools etc.) generated positive growth rates. Supplying assistive listening devices to hearing impaired, Phonic Ear is still feeling the effects of an increasing number of these devices being sold together with modern hearing solutions, resulting in slightly negative growth in the first quarter.
Other matters
At the beginning of 2013, the Group's net interest-bearing debt was at the upper end of the DKK 1.5-2.0 billion range. On determination of this range in May 2011, we aimed among other things to ensure that the level of debt would not limit the Group in acting swiftly, if attractive acquisition opportunities should arise.
Since spring 2011, our pool of assets and cash flows has, however, grown considerably driven by both organic growth and the completion of acquisitions. At the same time, we have seen some stabilisation of the financial markets. Our Board of Directors has therefore now decided to raise the target for the Group's net interest-bearing debt to a range of DKK 2.0-2.5 billion.
The completion of a number of minor acquisitions in the first part of 2013 as well as the acquisition of Neurelec SA at the beginning of April at a price of DKK 428 million mean that despite current cash flows from operating activities, the Group has increased its net interest-bearing debt compared to the level at the end of 2012 (DKK 1.8 billion). As a consequence, we have so far refrained from buying back shares in 2013. The prospect of continued solid cash flows from operating activities combined with the increase of the level of debt that we strive towards means that we still aim to use our share buy-back programme to direct our excess cash flows – after any acquisitions – back to the shareholders.
Outlook
In spite of the fact that in 2013, the market for hearing aids is impacted by greater uncertainty than before our best estimate is still for the global market for hearing aids to show modest positive growth in terms of value for the year as a whole.
We maintain our expectations of 2013 as stated in our Annual Report 2012: That organic revenue growth in the Group's wholesale of hearing aids in 2013 is expected to exceed market growth by 3-5 percentage points measured in local currency; that our retail business is expected to generate organic growth on par with growth in the underlying market; and that in 2013, Diagnostic Instruments will organically capture market shares in a market that is expected to show low, single-digit growth rates. Add to this, any exchange rate effects. Moreover, we maintain our expectation that the Group's operating profit (EBIT) for 2013 will exceed the level realised in 2012.
Further information: Other contacts:
Niels Jacobsen, President & CEO Stefan Ingildsen, SVP Finance
Phone +45 3917 7500 Søren B. Andersson, VP IR
www.demant.com Morten Lehmann Nielsen, IR Manager
