Company announcement no 2019-07                            14 August 2019
Interim Report 2019

8% growth for the Group – recent product launches drive growth acceleration into H2
12% unit growth drives market share gains in hearing aid wholesale business
Strong growth in Hearing Implants driven by 35% growth in cochlear implants business
Profitability in H1 diluted by product mix, one-off effects and significant investments in future growth
Outlook for EBIT adjusted to DKK 2.65-2.85bn with significantly improved growth and profitability in H2

  • Revenue for the first half of 2019 amounted to DKK 7,350 million, corresponding to a growth rate of 8%. Organic growth contributed 5 percentage points, acquisitions 2 percentage points and exchange rate effects 1 percentage point. Driven by new product launches, organic growth accelerated during the reporting period after a slow start to the year, and we expect significantly improved growth and profitability in the second half-year.
  • Growth in Hearing Devices was 7% in local currencies, primarily driven by organic growth in our hearing aid wholesale business and acquisitive growth in our hearing aid retail business. Organic growth in the hearing aid wholesale business was 6% driven by broad-based unit growth of 12%, but we saw negative development in the average selling price (ASP) of slightly more than 5% due to negative product mix changes. Rolled out in most major markets in March, April and May, Oticon Opn S helped drive higher growth in the last part of the reporting period after a slow start to the year before the launch. We saw a significantly higher-than-normal level of returned products based on legacy silver-zinc rechargeable technology, as customers – while still in their trial period – chose to swap their products for the new Opn S and its new, strong lithium-ion rechargeable technology. This negatively impacted our growth in several premium markets, but this is a one-off effect that will come to an end in August. In April and May, we also launched new products in our other brands, most notably the first products by Philips Hearing Solutions. All products are seeing good traction in a market that is highly competitive, particularly in the premium segment. Over the coming weeks, we will introduce new, state-of-the-art Super Power and Ultra Power instruments for adults and children based on our latest platforms and also roll out our video-based remote care solution globally.
  • Our hearing aid retail business saw growth of 9% in local currencies of which 7 percentage points were attributable to acquisitions, which were mainly made last year in the US and France. Organic growth contributed 2 percentage points despite a negative one-off impact of more than 1 percentage point from the new hearing healthcare reform in France, which took effect at the beginning of the year. The underlying organic growth rate of 3% was in line with our expectations. Organic growth was driven by several European markets as well as Australia, whereas organic growth in the US was flat.
  • In Hearing Implants, growth was 17% in local currencies driven by 35% growth in our cochlear implants business, all of which was organic growth. Our bone-anchored hearing systems business saw modest organic growth of 4%, but is now well positioned for significant growth acceleration in the second half-year driven by the new, ground-breaking Ponto 4 sound processor launched in June.
  • Diagnostics once again delivered market share gains with growth of 8% in local currencies of which 7 percentage points are attributable to organic growth following strong growth in North America and Asia.
  • Sennheiser Communications saw strong underlying growth of 12% driven particularly by wireless products. Reported growth was 11%, but product mix changes and increasing R&D and distribution costs diluted profitability, and the contribution to the Group’s EBIT decreased by 38% to DKK 28 million compared to the very strong first half of 2018.
  • Due to continued operational efficiencies and growth in our hearing aid retail business, we grew our gross profit margin by 0.9 percentage point compared to the first half of 2018. We saw a significant increase in the Group’s capacity costs in the first half-year due to our increased R&D efforts in 2018 and higher distribution costs, mainly driven by our hearing aid retail business, including costs relating to a large retail acquisition made in the first half of 2018. R&D costs increased by 12% and distribution costs by 16%. Operating profit (EBIT) for the Group amounted to DKK 1,113 million, a decrease of 9% compared to reported EBIT in the comparative period last year, and the corresponding EBIT margin was 15.1% compared to 18.1% in the same period last year. Adjusted for the effect of the French reform, IFRS 16 and exchange rates, underlying EBIT was DKK 1,205 million corresponding to an EBIT margin of 16.2%. Positively impacted by the new accounting standard, IFRS 16 Leases, cash flow from operating activities (CFFO) increased by 5% to DKK 1,047 million. Adjusted for this effect, CFFO decreased by 17%, primarily due to the lower EBIT.
  • We expect to see significant acceleration of organic growth for the Group in the second half-year, as we will see the full effect of our many recent product launches combined with returns of legacy rechargeable products coming to an end in August. We expect higher organic growth in our hearing aid retail business, strong growth in Hearing Implants and Diagnostics and no further impact of the reform in France. Also, total capacity costs will be in line with capacity costs in the first half of 2019, which will help drive material growth in profitability in the second half-year.
  • We maintain our expectation to generate organic sales growth above market level in 2019, accelerating through the year as a reflection of the timing of our product launches. Based on exchange rates as of 13 August 2019 and including the impact of exchange rate hedging, we continue to expect a positive exchange rate effect of 1% on revenue in 2019. Due to developments in the first half-year, including an adverse product mix development, a significantly higher-than-normal level of returns of legacy rechargeable products and a more competitive environment than originally expected, we adjust our outlook for reported operating profit (EBIT) for 2019 to DKK 2,650-2,850 million (previously DKK 2,650-2,950 million). We still expect to deliver substantial growth in our cash flow from operating activities (CFFO) and to buy back shares worth a minimum of DKK 1.2 billion. Due to the level of acquisition opportunities that we see and generally attractive access to funding, we now aim for a gearing multiple of 1.7-2.2 (previously 1.5-2.0) measured as net interest-bearing debt (NIBD) relative to EBITDA before depreciation related to leased assets (i.e. adjusted for the impact of IFRS 16).

“I’m very happy to see that we grew our revenue by 8% and that our many new products evidently accelerated growth in the last part of the reporting period. As expected, our decision to invest heavily in R&D and acquisitions has resulted in a growing cost base and – in addition to the product mix seen in Hearing Devices – this has had a dilutive effect on our profit, but we expect to see a very different picture in the second half-year. Hearing Implants and Diagnostics have delivered strong growth, which is very encouraging. With Oticon Opn S, the coming Super Power and Ultra Power products from Oticon and many new product launches such as the first-ever product family from Philips Hearing Solutions, we are extremely competitive with best-in-class and industry-leading audiology for the benefit of hearing care providers and users all over the world,” says Søren Nielsen, President & CEO of Demant.


Demant will host a conference call on 14 August 2019 at 14:00 CET. To attend this call, please use one of  the following dial-ins: +45 3544 5577 (DK), +44 3333 000 804 (UK) or +1 6319 131 422 (US). The pin code is 99690426#. A presentation for the call will be uploaded to shortly before the call.

Further information:
Søren Nielsen, President & CEO
Phone +45 3917 7300
Other contacts:
René Schneider, CFO
Søren B. Andersson, VP Investor Relations & Corporate Strategy
Mathias Holten Møller, Investor Relations Officer
Trine Kromann-Mikkelsen, VP Corporate Communication and Relations