Company Announcement No 2010-03 11 March 2010
Publication of Annual Report 2009
Today, the Board of Directors of William Demant Holding A/S adopted the
Company's Annual Report 2009. This announcement includes the highlights of the
annual report:
In 2009, consolidated revenues totalled DKK 5,701 million, matching a growth
rate of 6% of which acquisitions account for approximately half. The effect of
exchange rate fluctuations was neutral.
Operating profits (EBIT) amounted to DKK 1,149 million and generated net
revenues of DKK 795 million, corresponding to growth rates of 10% and 16%,
respectively. The profit margin in 2009 was 20.2% against 19.4% in 2008.
In the second half-year 2009, in particular, the Group saw considerable growth
compared with the difficult second half-year 2008. In the second half of 2009,
the Group thus realised growth in revenues, operating profits (EBIT) and net
profits of 10%, 26% and 37%, respectively.
The Group's ability to generate cash flows remains strong. Cash flows from
operating activities thus amounted to DKK 950 million in 2009, which is an
increase of 15% on 2008.
In 2010, we expect fair growth in both consolidated revenues and operating
profits (EBIT), and we expect this growth to be driven, among other factors, by
the prospect of an increase in the Group's wholesale of hearing aids that is
expected to exceed market growth by 3-5 percentage points in terms of value.
Hearing Aids
Consolidated revenues for 2009 totalled DKK 5,061 million, or a 6% rise in terms
of local currency. Overall, the market developed flatly in terms of value, which
means that the Group also captured market shares in 2009. Up until the end of
2009, the Group was prevented from selling to one of the absolutely largest
buyers of hearing aids in the world, namely Veterans Affairs (VA), which even
increased their demand during that period. At the same time, we experienced a
substantial decline in demand by the British health service (NHS) after a
significant reduction of waiting lists.
Sales of Group-manufactured instruments rose by more than 5% if we exclude sales
to the NHS, and by just under 1% if we include sales to the NHS. Growth in the
number of instruments sold should particularly be found in sales to the
independent dispensers, and we have thus captured fair market shares in this
highly competitive customer segment. Stagnating sales to chains and public
systems were thus more than counterbalanced by a rise in sales to independent
hearing care businesses. It is this shift in mix in particular that had a
positive effect on our average selling prices.
The positive trend is largely due to the strengthening of Oticon's and
Bernafon's product portfolios, which began towards the end of 2008 and really
gained momentum in 2009. The high year-over-year growth in earnings in the
second half-year was achieved despite the fact that during this period, we
incurred costs for the establishment of a sales force and service functions to
take care of business relations with Veterans Affairs (VA) and with customers in
the market for Oticon Medical's bone-anchored hearing systems. We also defrayed
costs in connection with the completion and launch of Oticon Agil, which is
Oticon's next generation of wireless high-end instruments and the largest
product introduction from Oticon to date. These efforts enabled us to announce
the introduction of Oticon Agil in early February 2010 and at the same time
announce that the product would be released for sale in all variants and on all
markets in early March 2010. Through the introduction of Oticon Agil, Oticon has
fortified its frontrunner position as regards state-of-the-art signal processing
and connectivity and is thus in a strong position to capture further market
shares again in 2010.
It is estimated that in 2009, unit growth in the global hearing aid market was
approx. 4% and that this growth has been neutralised by a corresponding fall in
the average selling price. Overall, the market developed flatly, which means
that with a 6% increase in revenues, the Group captured market shares. Thanks to
improved country, product and channel mixes, our wholesale hearing aid
activities saw favourable development in average selling prices. There is thus a
considerable gap between the development in market prices and Group prices.
Diagnostic Instruments
In 2009, Diagnostic Instruments realised revenues of DKK 413 million, or a 17%
improvement in local currencies. Organic growth accounted for 8 percentage
points, with the rest being attributable to the acquisition of British Amplivox
and the US brand Grason-Stadler. As it is estimated that the underlying market
has developed flatly, Diagnostic Instruments thus gained large market shares in
2009, which means that Diagnostic Instruments has further consolidated its
position as the world's biggest and leading player in its field. Diagnostic
Instruments accounted for 7% of consolidated revenues in 2009.
Personal Communication
Personal Communication generated revenues of DKK 227 million in 2009,
corresponding to a decline of 6%. Both FrontRow and Sennheiser Communications
were adversely affected by difficult cyclical business conditions; Sennheiser
Communications, in particular, whose handsfree communication solutions are
positioned in the upper price segments. Personal Communication accounted for
just under 4% of consolidated revenues in 2009.
Other matters
In continuation of our decision in autumn 2008 to temporarily suspend the
buyback of shares, consolidated cash flows have largely been used to settle debt
on a continuous basis, and we expect to continue to settle debt in 2010, however
depending on current consolidated cash flows and acquisitions, if any. During
the next few months, we will review the Group's capital structure and in doing
so, also decide whether or not to resume the share buyback programme. The result
of such considerations will be announced on the presentation of our Interim
Report 2010.
Since 2008, we have offered employees liable to pay tax in Denmark to
participate in salary sacrifice arrangements. For 2010, we are planning to offer
the Group's more than 4,000 foreign employees, who cannot participate in such
salary sacrifice arrangements, the opportunity to acquire shares at a
favaourable price under an employee share ownership plan instead. This offer is
given to foreign employees who have been employed by a Group company since 1
January 2010 and are not under notice at the time of purchase of the shares. The
purchase period runs from April through May 2010 after which the purchased
employee shares will be held in trust until 1 July 2015. The employee shares
will be offered under two different models: a seniority model and a pay model at
a price of DKK 100 and DKK 200, respectively, depending on the model chosen by
the employee. A total of up to 65,000 shares will be offered corresponding to
approx. 0.1% of the share capital and during the second quarter 2010, the
Company expects to acquire the shares on the market prior to resale to the
employees. The net proceeds will amount to approx. DKK 11 million if all the
shares offered are sold. Based on today's share price, the total gift element
under this plan is calculated at DKK 15 million. The expense will be charged to
the income statement for the first half-year 2010 and has been recognised in the
forecast for the financial year 2010.
Outlook for the future
Our long-term forecasts for unit growth in the global hearing aid market remain
unchanged, and unit growth is estimated at 2-4%, which is also the expected
growth rate for the market in 2010. Looking ahead, we do, however, expect higher
fluctuations in average selling prices than seen previously, but on the long
term, we foresee increases of about 1-2% annually. In 2010, average wholesale
prices in the market are expected to contribute neutrally or slightly negatively
to market growth, depending on the competitive situation including product
launches by our competitors during the year.
At the end of 2009, both Oticon and Bernafon were selected as suppliers to
Veterans Affairs (VA) in the USA, and the cooperation with VA is already well
under way. Right from the start of 2010, Oticon has also had its introduction of
Oticon Agil in place. Agil is a new generation of wireless high-end hearing aids
featuring the most sophisticated signal processing concepts on the market.
Against this backdrop, we expect trends in corporate wholesale of hearing aids
in 2010 to exceed market growth by 3-5 percentage points in terms of value.
Together with the effect of retail business acquisitions, this will match an
improvement of our share of the wholesale market of about 1 percentage point in
2010.
In 2010, corporate retail activities are estimated to grow in step with trends
in the underlying market to which should be added the effect of acquisitions. In
Diagnostic Instruments, we forecast moderate single-digit growth in 2010 in an
otherwise flat market to which should be added a positive effect on revenues to
the tune of DKK 60-70 million from the acquisition of Grason-Stadler. For
Personal Communication, we foresee a gradual return to normal market conditions
in our various areas of activity, and despite the weak development in 2009,
Personal Communication is generally expected to generate positive growth in
revenues in 2010.
Based on average exchange rates in February 2010, we expect positive exchange
effects on revenues of 3% and on operating profits (EBIT) of 1-2% for 2010.
Overall, we forecast fair growth in both consolidated revenues and operating
profits (EBIT) in 2010. The profit margin for 2010 will depend on the
composition of realised sales, particularly the distribution of wholesale and
retail sales and of organic growth and acquisitions.
The Group's current investments in property, plant and equipment are estimated
at DKK 180-200 million for 2010. Moreover, we expect to invest some DKK 100
million from 2010 through 2012 in connection with the planned establishment of a
new domicile for Oticon Inc. in the USA. However, at this point we have not yet
finally clarified how the DKK 100 million will be distributed over the three
financial years. Our effective tax rate for 2010 is expected to be about 25%,
which matches the Danish corporation tax rate.
Lars Nørby Johansen Niels Jacobsen
Chairman of the Board President & CEO
The full Annual Report 2009 for William Demant Holding A/S totalling 72 pages
will be published immediately after this announcement.
Further information:
Phone +45 39 17 71 00
www.demant.com
Contact:
Niels Jacobsen, President & CEO
Other contacts:
Stefan Ingildsen, Vice President, Finance and IR
Søren B. Andersson, IR Manager
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| | 2005 | 2006 | 2007 | 2008 | 2009 | Developm |
| | | | | | | ent |
| | | | | | | 2008-20 |
| | | | | | | 09 |
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| Key figures, DKK | | | | | | |
| million | | | | | | |
--------------------------------------------------------------------------------
| Revenue | 4,523 | 5,085 | 5,488 | 5,374 | 5,701 | 6.1% |
--------------------------------------------------------------------------------
| Gross profit | 3,133 | 3,575 | 3,971 | 3,725 | 4,035 | 8.3% |
--------------------------------------------------------------------------------
| Operating profit | 1,103 | 1,271 | 1,268 | 1,042 | 1,149 | 10.3% |
| (EBIT) | | | | | | |
--------------------------------------------------------------------------------
| Net financials | -37 | -61 | -97 | -139 | -94 | -32.4% |
--------------------------------------------------------------------------------
| Profit before tax | 1,066 | 1,209 | 1,171 | 903 | 1,055 | 16.8% |
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| Profit for the year | 791 | 901 | 894 | 682 | 795 | 16.5% |
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| Total assets | 2,882 | 3,123 | 3,714 | 3,914 | 4,626 | 18.2% |
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| Equity | 748 | 662 | 426 | 532 | 1,302 | 144.9% |
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| Cash flow from | 892 | 964 | 848 | 828 | 950 | 14.8% |
| operating activities | | | | | | |
| (CFFO) | | | | | | |
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| Financial ratios | | | | | | |
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| Gross profit ratio | 69.3% | 70.3% | 72.4% | 69.3% | 70.8% | - |
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| Profit margin | 24.4% | 25.0% | 23.1% | 19.4% | 20.2% | - |
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| Earnings per share | 12.2 | 14.4 | 14.8 | 11.6 | 13.6 | 17.4% |
| (EPS), DKK | | | | | | |
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| Return on equity | 107.4 | 114.7 | 160.3% | 162.9% | 87.2% | - |
| | % | % | | | | |
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