Download Presentation (PDF) - GN Store Nord

Q2 Interim Report 2010
CEO, GN ReSound Lars Viksmoen
CEO, GN Netcom Mogens Elsberg
CFO, GN Store Nord Anders Boyer
Director IR & Communications, GN Store Nord Mikkel Danvold
Copenhagen, August 11, 2010

August 11, 2010
Financial Highlights Q2 2010
Continued improvement in revenue and EBITA
• GN continued to see clear results of the
comprehensive restructuring
• Positive organic growth for the second
consecutive quarter – fuelled by UC
• Q2 showed strong improvement in
EBITA – up DKK 111 million compared to
Q2 2009
• Revenue and EBITA outlook for 2010
confirmed
• DKK 88 million share buyback program
announced and completed during Q2
Revenue:
DKK 1,286m
EBITA:
DKK 113m
Free cash flow:
DKK 78m
NIBD:
DKK 1,014m
Q2 2009
DKK 1,196m
Q2 2009
DKK 2m
Q2 2009
DKK 89m
Q2 2009
DKK 1,438m
2
Slide 2

August 11, 2010
Additional Highlights
TPSA
• In the DPTG/TPSA arbitration proceedings, GN is awaiting a decision from the
Arbitration Tribunal on DPTG’s claim for phase 1 (1994 to mid-2004). The
parties to the DPTG/TPSA arbitration proceedings have been informed by the
Arbitration Tribunal in Vienna that a decision on the award will not be issued
before September 2010 due to logistical reasons
Claim against the Federal Cartel Office
• On May 5, GN received the complete wording of the ruling in which the
German Federal Supreme Court declared the decision made by the German
Federal Cartel Office on April 11, 2007 prohibiting the sale of GN ReSound to
Sonova unlawful
• GN will file a claim against the German Federal Cartel Office claiming
compensation for the losses imposed on GN which as of July 2010
amount to around EUR 1 billion
Long-term financial targets
• As mentioned in the Q1 Interim Report 2010, GN will announce its aspirations
in regards to long-term financial targets during the fall
3
Slide 3

Capital structure
• It is GN’s long-term target to maintain a capital structure consisting of a
combination of debt and equity, subject to a net interest-bearing debt of
up to a maximum of 2.0 x EBITDA
Dividend and share buyback policy
• GN aims to pay out a dividend corresponding to 15-25% of the annual
net result
• GN will initiate share buyback programs when deemed appropriate
• Dividend payments and share buybacks are subject to among others
cash requirements to support the ongoing operations, strategic
opportunities and capital structure
Plan for the fiscal year 2010
• Based on the expected significant improvement in EBITA for GN Store
Nord from DKK 8 million in 2009 to DKK 425-525 million in 2010, the
Board of Directors plans to recommend the initiation of a share buyback
program in addition to a dividend pay-out based on the net result for
2010
• The use of the potential proceeds from TPSA will be dealt with separately
and as a one-time event
4
August 11, 2010
Dividend, Share Buyback & Capital Structure
Slide 4

August 11, 2010
GN Netcom
5
Slide 5

(DKK million)
August 11, 2010
GN Netcom – Financial Highlights
20% organic growth in Q2, excl OEM
Q1
2009
Q2
2009
Q3
2009
Q4
2009
FY
2009
Q1
2010
6
Q2
2010
Revenue 421 435 412 468 1,736 446 495
Organic growth (36)% (30)% (32)% (19)% (30)% 9% 8%
Gross margin 35% 42% 43% 50% 43% 52% 53%
SG&A, R&D etc. (229) (224) (187) (284) (924) (205) (211)
EBITA (82) (43) (11) (48) (184) 26 52
EBITA margin (19.5)% (9.9)% (2.7)% (10.3)% (10.6)% 5.8% 10.5%
Non-recurring costs 41 36 25 126 228 - -
• Excluding the OEM business, organic growth in Q2 was 20%
• Accelerating deployment of UC
• Strong operational leverage resulting in a double-digit EBITA-margin
Slide 6

August 11, 2010
GN Netcom Balance Sheet and Cash Flow
Continued strong cash flow
Balance sheet selected items
(DKK million)
Q1
2009
Q2
2009
Q3
2009
Q4
2009
FY
2009
Q1
2010
7
Q2
2010
Inventories 179 128 101 - 87 74 91
Trade receivables 279 275 270 - 289 265 288
Trade payables 97 118 102 - 140 127 168
Cash flow (DKK million)
Cash flow before working capital 14 34 36 72 156 61 84
Change in working capital &
restructuring/non-recurring costs
paid 49 37 2 (2) 86 11 17
Cash flow from investing activities (20) (25) (25) (20) (90) (13) (19)
Free cash flow excl. tax & financial
items
43 46 13 50 152 59 82
• Net working capital continued to decline and was only DKK 35 million
at the end of Q2. Net working capital is expected to increase during
the remaining part of 2010.
Slide 7

August 11, 2010
Unified Communications
• UC brings together the many disparate communication systems that exist
today – voice, video, collaboration, conferencing, instant messaging, mail
etc
• The first step towards achieving full benefit from UC is voice integration –
which requires a headset solution
• Today, many people have three telephones: a mobile, their landline, and a
soft phone application
• GN Netcom helps you achieve true UC, switching seamlessly from one
device to the other
Instant benefits from UC
• Reduce costs
• Telecommunications
• Conferencing
• Travel & commuting
• Real estate
• Supporting environmental initiatives
• Increase productivity and collaboration
• Reduce latency
• Work everywhere and at any time
• Work together across locations
8

400 million
office workers
world wide
August 11, 2010
The UC Market Opportunity
Based on GN Netcom’s current 30% share of the CC&O market, UC
translates into a significant CC&O revenue opportunity
• Full benefit of UC requires a headset
solution – headsets becomes part of
the core infrastructure
• UC will drive significantly higher
headset attachment rates
• UC vendors and systems integrators
drive the market
• GN Netcom’s revenue from UC
enabled products increased by more
than 50% in Q2 2010 compared to
prior year
Of which 50
million are
using UC
With a 50% headset
attachment
rate
GN Netcom CC&O revenue opportunity
2009 2014
DKK 10bn market
in 2014*
* Source: Frost and Sullivan, GN estimates
9

August 11, 2010
Broad Deployment of UC in H2 2010
Proof of
concept,
technology is in
place
Projects with
early adaptors
Broad
deployment
H2 2010
2006 2009 2010-12
• Companies are beginning transition towards UC solutions
• Broad deployment is accelerating and is happening now
"Through 2013, 40% of knowledge workers will have
abandoned their desk phones and headsets will
become essential communication tools.”
Analyst Steve Blood,
Gartner Group
10
Slide 10

August 11, 2010
GN Netcom UC status
• GN Netcom has the largest installed
base of UC devices
• GN Netcom is the most experienced
UC headset supplier in the world
• GN Netcom has delivered the
world’s largest UC installation in
one single company – close to
100,000 headsets installed
• In Q2 2010, GN Netcom won
several very large UC customers
including customers installing more
than 100,000 headsets
• New product portfolio ready to
support Microsoft’s Wave 14
11

August 11, 2010
GN Netcom’s UC Strategy
• Win early adopters in the UC market
• Stay in the front and benefit from Jabra’s state-of-the art product
portfolio
• Continued focus on developing user friendly products compatible with
all major UC applications
• Maintain and develop successful partnering with UC vendors and
systems integrators
• Strong focus on new opportunities arising out of the UC development
• Sales focus towards systems integrators
12

August 11, 2010
Plug-and-play with all Leading UC Applications
UC integrates technologies such as voice, email and instant messaging
GN Netcom’s UC headsets are plug-and-play with all leading UC applications
13

August 11, 2010
Wide Range of Jabra UC Solutions
Jabra has a wide range of UC ready
audio end-points for all major UC
platforms
Solutions in four categories:
- Corded headsets
- Wireless headsets
- Speakerphones
- Software: Jabra PC suite allows IT
departments to maintain and update
Jabra headsets as any other standard
infrastructure solution.
14

August 11, 2010
New Products from GN Netcom
Expansion of the product portfolio – UC speaker phones and
corded mobile headsets
Jabra STONE – now also in
white
Jabra SPEAK TM 410 – your
portable conference room
(launch in October)
During the next few months, Mobile Headsets will enter the market for
corded mobile stereo headsets. The market for corded mobile headsets
constitutes some 20% of the total handsfree market.
15
Slide 15

mDKK
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0
August 11, 2010
Mobile Market and Prospect
Unchanged growth rates – but corded up and Bluetooth mono
down
2009 2010 2011 2012
BT Mono BT Stereo Speakerphones Corded
Source: Strategy analytics, NPD, GFK and team analysis.
Key Trends:
• Mono Bluetooth ® headsets are still
the largest part of the market, but
market value declines slightly
• Significant growth in corded
headsets – constitute 20% of the
market
• Bluetooth ® stereo headsets show
highest growth of all handsfree
categories, although from a low
base
• The speakerphone category makes
up 20% of the total mobile
handsfree market and continues to
grow strongly
16
Slide 16

August 11, 2010
Drivers and Challenges for GN Netcom
Key Value Drivers Challenges
• Prospect of significant mid/longterm
market growth from UC.
• No additional investments are
required to participate in the
attractive UC opportunity.
• Attractive margins in the CC&O
industry.
• High operational leverage and
low working capital.
• Very strong product portfolio
from both Mobile and CC&O
Headsets.
• Build a long-term sustainable
business model for Mobile
Headsets.
• Leverage on GN Netcom’s strong
UC base and remain a key
player on the UC market.
• Gain market share in North
America.
17
Slide 17

August 11, 2010
GN ReSound
ReSound Alera TM
18
Slide 18

August 11, 2010
Continued Focus on Fundamentals
2010 Focus Unchanged
• Competitive new launches based on innovative technology
• Further develop and leverage collaborations with key accounts
• Expand position in Emerging markets
• Continued cost containment except selected growth initiatives
• Accelerate end-to-end supply chain transformation
Achieved YTD
� Positive sales trend development
� Successful nano-coating introduction
� Significant growth with Strategic Accounts including VA
� Launch of first true wireless hearing aid: ReSound Alera with
improved Surround Sound by ReSound technology
� MADSEN AccuScreen TM and AURICAL FreeFit TM launched by GN
Otometrics
� Supply chain transformation well on track
19
Slide 19

August 11, 2010
GN ReSound - Financial Highlights
ReSound broke the negative growth seen during the last 5 quarters
(DKK million)
Q1
2009
Q2
2009
Q3
2009
Q4
2009
FY
2009
Q1
2010
• Revenue in GN ReSound improved in Q2 and broke the negative organic
growth seen during the last five quarters.
• GN ReSound expects to outgrow the market in the second half of 2010
and therefore confirms the revenue outlook for 2010 provided in the Q1
Interim Report 2010.
• Excluding DKK 19 million costs related to the supply chain transformation,
the EBITA-margin was 10.4%.
20
Q2
2010
Revenue 774 757 693 757 2,981 726 789
Organic growth (4)% (7)% (13)% (3)% (6)% (2)% 0%
Gross margin 62% 61% 60% 60% 61% 59% 59%
SG&A, R&D etc. (448) (405) (364) (367) (1,584) (359) (399)
EBITA 29 54 55 87 225 70 63
EBITA margin 3.7% 7.1% 7.9% 11.4% 7.5% 9.6% 8.0%
Slide 20

August 11, 2010
Positive Sales Trend Development
mDKK
900
850
800
750
700
650
600
GN ReSound Revenue
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2008 2009 2010
15%
10%
5%
0%
-5%
-10%
-15%
Organic growth
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2008 2009 2010
• 90% of Top segment sales and 80% of Plus segment sales in Q2
came from products launched within the last 24 months
21
Slide 21

August 11, 2010
GN ReSound Balance Sheet & Cash Flow
Inventory increases driven by nano-coating and ReSound Alera
Balance sheet selected items
(DKK million)
Q1
2009
Q2
2009
Q3
2009
Q4
2009
FY
2009
Q1
2010
22
Q2
2010
Inventories 373 332 310 - 288 312 337
Trade receivables 741 687 658 - 705 721 738
Trade payables 155 126 135 - 190 172 202
Cash flow (DKK million)
Cash flow before working capital 100 113 115 149 477 134 133
Change in working capital &
restructuring/non-recurring costs
paid 72 52 48 6 178 (66) (59)
Cash flow from investing activities (75) (61) 16 (77) (197) (42) (82)
Free cash flow excl. tax & financial
items
97 104 179 78 458 26 (8)
• Cash flow impact from investing activities was at DKK (82) million up from
DKK (61) million in Q2 2009 driven by investment in distribution and
production technology/facilities.
Slide 22

August 11, 2010
Solid Long-term Market Growth
Market Volume Drivers
• Ageing population
• Higher prevalence
• Improving adoption rates
• Improving binaural fitting rates
• Additional replacement cycles
• Developing countries’ potential
Solid long-term
market growth
rates expected
Million
units
11
10
9
8
7
6
5
World HI market
2009 2012
23
Slide 23

Canada +4% (Q1)
August 11, 2010
The Market is Growing at Healthy Rates
Hearing aid market unit growth data - 2010 vs. 2009
US Total market +3% (Q2)
VA market +12%
Private market +1%
UK Total market -18% (Q1)
UK NHS -22%
UK private +2%
Netherlands +12% (Q2)
Italy +9% (Q2)
Germany +15% (Q2)
France +9% (Q1)
Japan +3% (Q2)
New Zealand +5% (Q1) 24
24

August 11, 2010
ReSound Alera TM
Groundbreaking advance in wireless
ReSound Alera
• Improved Surround Sound
by ReSound TM
• Breakthrough technology
- first truly wireless connectivity
- with nothing to wear around your neck!
• Slim, small with award-winning design
With ReSound Unite wireless accessories
25
Slide 25

August 11, 2010
iSolate Nanotech Introduction
Water-repellent and ”wear & tear proof” products
• ReSound Live and dot 2 by ReSound recently introduced
with iSolate nano-coating at AudiologyNOW! 2010.
• The technology provides the best protection in the
industry, with every component – internally and
externally – coated.
• More than 90% of all Behind-The-Ear (BTE) instruments
manufactured by GN ReSound now come with a
hypoallergenic nano-layer of protective coating.
All of these benefits are achieved while maintaining the
superior ReSound sound quality.
26
Slide 26

August 11, 2010
Supply Chain Transformation
Progressing as planned
• End-to-end transformation is progressing as planned
A major milestone was reached with the recent opening of a new
regional operations center in Oxford, UK.
• All critical global systems and infrastructure are expected to be in
place already by the end of 2010 and subsequently production and
customers will gradually be converted to the new set-up.
• The expected cost reductions are equivalent to a further
improvement of GN ReSound's EBITA margin by 6-7%-points at
unchanged revenue level.
The transformation builds on three pillars
Manufacturing Warehousing Service & Repairs
27
Slide 27

August 11, 2010
2010 Focus per Area remain
North America
• Win top end share
• Grow share in Veterans Affairs
• Expand distribution
• Grow and protect market share
in Canada
APAC/Emerging markets
• China and India expansion strategy
• Optimize key account management
in more mature markets
Europe
• Refocus Germany and France
• Grow Strategic Accounts
• EuroShape – focus on sales & marketing
GN Otometrics
• China strategy execution
• Launch new products
in fitting and new screening category
• Global launch of product roadmap
28
Slide 28

August 11, 2010
Drivers and Challenges for GN ReSound
Key Value Drivers Challenges
• Solid long-term market growth
in an industry with attractive
margins
• Leverage attractive partner
strategy
• Strong position in Emerging
markets
• Strengthening of position with
VA
• Scalable and competitive cost
base
• Continued innovation resulting in
new and groundbreaking
products
• Comprehensive transformation
of the supply chain in 2010
• Pressure on average prices
• Win top end share
• Shorter product life cycles,
demanding more effective R&D
• Outgrow competition with no
growth in spending
29
Slide 29

August 11, 2010
Outlook for 2010
GN confirms outlook provided in Q1 Interim Report 2010
Revenue (DKK/USD 5.5)
GN Netcom’s organic revenue growth for 2010
is expected to be at least 5%.
GN ReSound’s revenue is expected to show
positive organic growth for 2010.
GN’s total revenue is expected to show positive
organic growth of 3-5%.
EBITA
GN Netcom DKK 150-200 million
GN ReSound DKK 300-350 million
Other Around DKK (30) million
GN Total DKK 425-525 million
Amortization, finance etc. DKK ~(50) million
DKK million
500
400
300
200
100
0
EBITA
2006 2007 2008 2009 2010
Outlook
30
Slide 30

August 11, 2010
Safe Harbour Statement
The forward-looking statements in this interim report reflect
management's current expectations of certain future events and
financial results. Statements regarding 2010 are, of course, subject
to risks and uncertainties which may result in material deviations
from the outlook set forth. Furthermore, some of these
expectations are based on assumptions regarding future events
which may prove incorrect.
Factors that may cause actual results to deviate materially from
expectations include – but are not limited to – general economic
developments and developments in the financial markets,
technological developments, changes and amendments to
legislation and regulations governing GN’s markets, changes in the
demand for GN's products, competition, fluctuations in subcontractor
supplies and developments in ongoing litigation
(including but not limited to class action and patent infringement
litigation in the United States).
This interim report, announcement or presentation should not be
considered an offer to sell or buy securities in GN Store Nord.
31
Slide 31

Q2 Interim Report 2010
Q&A

(DKK million)
August 11, 2010
Profit and Loss
FY
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
FY
2009
Q1
2010
33
Q2
2010
Revenue 5,624 1,198 1,196 1,108 1,227 4,729 1,174 1,286
Gross Profit 2,901 627 644 598 692 2,561 662 727
SG&A, R&D etc. (2,836) (692) (642) (553) (666) (2,553) (576) (614)
EBITA 65 (65) 2 45 26 8 86 113
Amort., finance,
associates etc.
(148) (54) (13) 83 (25) (9) (7) (9)
EBT (83) (119) (11) 128 1 (1) 79 104
Slide 33

(DKK million)
August 11, 2010
Balance Sheet & Cash Flow
End
Q2/2009
End
Q3/2009
End
Q4/2009
End
Q1/2010
End
Q2/2010
Goodwill 2,651 2,563 2,605 2,754 2,991
Other intangible assets 1,169 1,158 1,157 1,158 1,184
Tangible & other noncurrent
assets 1,414 1,389 1,344 1,349 1,402
Current assets 2,265 2,034 2,029 2,099 2,250
Equity 4,427 4,445 4,435 4,684 5,006
Liabilities 3,072 2,699 2,700 2,676 2,821
Total assets/liabilities 7,499 7,144 7,135 7,360 7,827
NIBD 1,438 1,135 1,029 987 1,014
Free cash flow 89 305 566 58 78
34
Slide 34