Annual Report - Sonova Holding AG

FINANCIAL RESULTS
6
The estimated global hearing instrument market growth in
2005/06 was 5%–7%.
Phonak sales increased by 31.2% to CHF 866.7 million.
Sales growth in local currencies and excluding acquisitions
was 23.8%.
The operating profit (EBIT) increased by 68.3% to CHF
211.7 million, and the EBIT margin of 24.4% clearly
surpassed the comparable previous year’s figure of 19.0%.
Profitability improved due to the favorable product mix,
enhanced efficiency, cost savings in materials procurement,
and the operating leverage in general and administration
expenses.
Earnings per share on a diluted basis reached CHF 2.57
(previous year CHF 1.43), which represents an improvement
of 79.1%. This strong increase was supported by
an improved net financial income and a lower tax rate.
Net cash increased by CHF 84.1 million to CHF 177.9 million
(previous year CHF 93.8 million), in spite of the acquisition
of sales companies.
Equity reached CHF 627.0 million and the equity financing
ratio has increased to 67.3% (previous year 60.5%), reflecting
a further substantial strengthening of the Group’s
financial position.
Free cash flow rose 21.5% to CHF 101.8 million (previous
year CHF 83.8 million).
Outlook: The Phonak Group expects to outgrow the market
once again in 2006/07.
Adjustments to prior year 2004/05 financial figures
The adoption of the new IFRS 2 standard “Share-based payment”,
resulted in a change in the accounting policy for share
and option plans to employees. Prior-year figures have been
adjusted accordingly in order to facilitate comparison. In
addition, we improved the presentation of the Consolidated
Income Statement which led to a reclassification of sales-
related costs. For further details, we refer to Note 2 and Note
32 to the Consolidated Financial Statements (page 50 and
80 of this report).
Financial Results
Consolidated Income Statement
Sales
Measured in local currencies and excluding acquisitions,
sales grew by 23.8%. The weakening of the Swiss Franc, especially
against the US Dollar, led to a positive currency effect of
3.4%. In reported currency (CHF), sales increased by 31.2% to
CHF 866.7 million, which includes a contribution of 4.0%
from acquisitions.
Sales growth was driven mainly by the dynamic performance
of our new premium product line Savia, which was complemented
in January 2006 by microSavia, a micro hearing system
for open fitting. Other significant sales drivers included miniValeo
in the mid price segment, eXtra in the digital economy
segment, the Unitron Hearing brand, and our wireless communication
systems.
The first class hearing systems segment accounted for 35%
of total sales (previous year 31%). With Savia, we have succeeded
in establishing an industry benchmark. We expect Savia to
continue to perform strongly in 2006/07. Other growth drivers
in this segment will be the recently launched Verve product
line, which is targeted at our most discerning customers, and
Indigo, the latest flagship product from Unitron Hearing.
Business class hearing systems accounted for 18% of total
sales (previous year 21%). Eleva, our newest product line in this
segment, had a very successful launch at the start of March
2006, which meant it only made a positive contribution to sales
during the final month of the financial year 2005/06. The key
business class product lines of the Phonak brand – Valeo, mini-
Valeo, and Supero – as well as Unitron’s Conversa.NT, performed
according to expectations. In 2006/07, the most important sales
drivers will be Eleva and the recently launched microPower,
the first micro hearing system for people with severe hearing loss.
The economy class hearing systems segment accounted for
27% of total sales, unchanged from last year’s figure. However,
the various strategic measures undertaken to strengthen our
market position resulted in a sharp increase in sales in this segment.
The main contributor to this success was eXtra, the new