9.2.2021 08:01:42 CET | Demant A/S | Annual Financial Report
Company
announcement no 2021-02 9 February 2021
Annual Report 2020
Growth of 14%
in local currencies (2% organic) in H2 after strong recovery of
hearing
healthcare market
Strong EBIT of DKK 1,506 million in H2 driven by market
recovery and tight cost
control
Very strong cash flows in H2 with CFFO of DKK
1,892 million (+72%) and FCF of
DKK 1,534 million (+141%)
Outlook for FY 2021
for the Group: Organic growth of 23-27% and EBIT of DKK
2,850-3,150
million
Still uncertainty about timing of normalisation and release of pent-up
demand
In this Annual Report 2020, we have made several changes to our
reporting
structure to further enhance transparency in the value created by
each of our
different business areas. The changes include disclosing separate
income
statements for two business segments:
Hearing Healthcare: Comprises the
four business areas Hearing Aids (previously
hearing aid wholesale), Hearing
Care (previously hearing aid retail), Hearing
Implants and
Diagnostics.
Communications: Comprises only our headset business, which
operates under the
EPOS brand.
Furthermore and in addition to reporting
separate growth rates, we now also
report separate revenues for our Hearing
Aids and Hearing Care business areas.
However, we no longer report separate
growth rates for our cochlear implants
(CI) and bone anchored hearing systems
(BAHS) businesses but only one growth
rate for Hearing Implants as a whole to
simplify our reporting across business
areas.
| Group | Hearin |
Commun |
| | g | icatio |
| | Health | ns*
|
| | care | |
Growth | H1 | H2 | FY | H1
| H2 | FY | H1 | H2 | FY
| 2020 | 2020 | 2020 | 2020 |
2020 | 2020 | 2020 | 2020 | 2020
| -27% | 2% | -13% | -27% |
2% | -13% | | |
Organi | | | | | |
| | |
c | | | | | |
| | |
| 9% | 12% | 11% | 2% | 2% | 2% |
| |
Acquis | | | | | | | |
|
itions | | | | | | | | |
Local | -18% | 14% | -2% | -25% | 4% | -11% | | |
curren | | | | | | | | |
cies
| | | | | | | | |
| 0%
| -3% | -1% | 0% | -3% | -1% | | |
Exchan | |
| | | | | | |
ge | | |
| | | | | |
rates | | |
| | | | | |
Total | -17% | 11% | -3% |
-25% | 0% | -12% | | |
*Growth rates for Communications are not
available, as there is no directly
comparable base (EPOS was not consolidated
in 2019).
* After the severe impact of coronavirus in H1, revenue for the
Group improved
significantly in H2 although it remained below the normal
level. In line with
the latest guidance of revenue growth of 12-14%, growth
in H2 was 14% in
local currencies with 2% organic growth and 12% growth from
acquisitions. The
latter included 10 percentage points attributable to the
consolidation of
EPOS. Exchange rates had an impact of -3%, including
exchange rate hedging.
For the full year 2020, revenue declined by 3% with
organic growth of -13%,
acquisitive growth of 11% and exchange rate effects
of -1%.
* As previously announced, revenue in the comparative period (H2 2019)
was
negatively impacted by an estimated DKK 575 million due to the IT
incident
that occurred on 3 September 2019. Adjusted for this, underlying
organic
growth was -5% and -16% for H2 and the full year 2020,
respectively.
Revenu | Revenu | Organi | Underl |
e and | e (DKK | c
| ying |
growth | millio | growth | organi |
rates | n) | | c
|
| | | growth |
| | | * |
H1 | H2 | FY | H1 | H2 | FY | H1 | H2 | FY |
2020 | 2020 | 2020 | 2020 | 2020 | 2020 | 2020 | 2020 | 2020 |
Hearin | 2,937 | 3,886 | 6,823 | -25% | 1% | -12% | -25% | -8% |
-16%
g Aids | | | | | | | | |
Hereof | -465 | -657 | | -27% | 5% | -11% | -27% | -4% |
-15%
sales | | | -1,122 | | | | | |
to | | | | | | | | |
Hearin | | | | | | | | |
g
Care | | | | | | | | |
Hearin
| 2,154 | 3,310 | 5,464 | -35% | 4% | -16% | -35% | -4% | -19%
g Care
| | | | | | | | |
Hearin |
246 | 277 | 523 | -18% | -9% | -13% | -18% | -9% | -13%
g |
| | | | | | | |
Implan |
| | | | | | | |
ts | |
| | | | | | |
Diagno | 660 | 815
| 1,475 | -3% | 4% | 1% | -3% | 4% | 1%
stics | | |
| | | | | |
Hearin | 5,532 | 7,631 |
| -27% | 2% | -13% | -27% | -5% | -16%
g | | |
13,163 | | | | | |
Health | | |
| | | | | |
care | | | |
| | | | |
Commun | 546 | 760 | 1,306 |
| | | | |
icatio | | | | |
| | | |
ns** | | | | | |
| | |
Group | 6,078 | 8,391 | | | |
| | |
| | | 14,469 | | | |
| |
*Organic growth adjusted for estimated impact of IT incident in
H2 2019.
**Growth rates for Communications are not available, as there is no
directly
comparable base (EPOS was not consolidated in 2019).
* Following
the very challenging market conditions in most of H1, our Hearing
Healthcare
business segment saw significant recovery in H2, particularly in
the first
months of the period where our Hearing Aids and Hearing Care
business areas
benefitted from the release of some pent-up demand in Europe.
At the
beginning of Q4, we saw rising infection rates and the implementation
of new
restrictions in most regions, resulting in a halt in the market
recovery
although clinics remained open and showed some resilience. Towards
the very
end of 2020, restrictions were once again tightened in most markets,
and
revenue remained below the normal level, particularly in the UK and to a
lesser extent in the US. Starting in December, all our four hearing aid
brands introduced new flagship products, and we have thus entered 2021 in an
excellent commercial position.
* In Communications, our EPOS brand saw very
strong demand for its virtual
collaboration tools in 2020 following the
surge in remote working. After a
slow start to the year, revenue increased
significantly from mid-March and
accelerated further in H2, as demand
remained strong and production capacity
was increased. In 2021, we have so
far continued to see high demand and high
double-digit organic growth, and
the number of backorders remains above the
normal level.
* The gross margin
in H2 was 72.5%, a decrease of 1.5 percentage points
compared to H2 2019.
The consolidation of EPOS diluted the Group’s gross
margin by 2.0 percentage
points, but for our Hearing Healthcare segment, the
gross margin increased
slightly as a result of mix effects.
* The Group drove material savings in
OPEX throughout 2020, and in H2, OPEX
only saw flat growth in local
currencies despite the increase related to the
consolidation of EPOS.
Savings were both temporary and structural, and as
previously announced, the
structural savings amount to around DKK 250 million
on an annual basis with
full effect from H2 2020. Temporary savings mostly
related to lower sales
and marketing costs as well as lower travelling
expenses but also included
global support from government compensation
schemes of around DKK 100
million and a positive effect of DKK 50 million
from the reversal of part of
the provision for bad debt recognised in H1.
* Despite the challenging market
conditions, profitability was very strong in
H2, and EBIT for the Group
amounted to DKK 1,506 million before EPOS
one-offs, corresponding to an EBIT
margin of 17.9%. Including the negative
EBIT in H1, EBIT for the full year
2020 amounted to DKK 1,313 million,
corresponding to an EBIT margin of
9.1%.
* EPOS one-offs amounted to DKK -90 million in H2 of which DKK -52
million
related to extraordinary branding costs and DKK -38 million to the
negative
adjustment of inventory purchased as part of the demerger of
Sennheiser
Communications. The latter had no effect on cash flows. Including
the net
positive one-offs in H1, EPOS one-offs were net positive by DKK 217
million
for the full year 2020.
* Cash flow from operating activities
(CFFO) increased by 72% to DKK 1,892
million in H2, and the free cash flow
(FCF) increased by 141% to DKK 1,534
million. The very strong cash flows
were driven by tight working capital
management, and the free cash flow was
further supported by the temporary
suspension of non-essential investments
from mid-March and into H2.
* Having been suspended from 15 March until today,
share buy-backs totalled DKK
197 million for the full year 2020.
OUTLOOK
FOR 2021
Our outlook (summarised below) is subject to greater uncertainty than
usual due
to the continued impact of coronavirus in most markets. In 2021, the
hearing
healthcare market has so far continued to be negatively impacted by
coronavirus,
and the Group’s revenue remains below the normal level. In our
outlook for 2021,
we assume that the global hearing healthcare market will
gradually normalise
during H1 supported by the global roll-out of coronavirus
vaccines, which will
make it possible to lift coronavirus-related restrictions
in developed markets.
However, we expect a slower pace of normalisation in
certain government channels
and in emerging markets and for the latter,
normalisation may even go beyond
2021. Furthermore, we assume that some pent-up
demand for hearing healthcare
solutions will be released, predominantly in H2,
and despite strong comparative
figures for 2020, we expect that the demand for
headsets will continue to grow
in line with structural growth trends of
8-10%.
Group organic growth | 23-27%, with Hearing Healthcare
realising a higher
| organic growth rate than
Communications.
Group acquisitive growth | 1% based on revenue from
acquisitions completed as
| of 8 February
2021.
Group exchange rate growth | -2% based on exchange rates as of 8 February
2021
| and including the impact of exchange rate
hedging.
EBIT | DKK 2,850-3,150 million, with EBIT
skewing towards
| H2.
Effective tax rate |
Around 23%.
Gearing | Gearing multiple at the end of 2021 in
line with
| our medium- to long-term target of
2.0-2.5 measured
| as NIBD relative to
EBITDA.*
Share buy-backs | More than DKK 2 billion.
* Our gearing
target no longer excludes the impact of leasing. The target
remains unchanged
if adjusted for the estimated impact of
leasing on our gearing of 0.3.
“I am
pleased to see how well the entire global organisation has steered
Demant
through a year impacted by the worst ever market conditions for
hearing
healthcare. The first half-year was tough, but in the second half, we
saw strong
recovery for the Group, not least thanks to the success of our new
brand in
premium audio solutions, EPOS. At the same time, we successfully
managed costs,
and particularly in the second half-year, we saw strong cash
flows. Having now
entered 2021, our business is showing good resilience,
despite abnormal hearing
healthcare market conditions, and all our business
areas are ready to capture
market shares. So, with our proven business model in
place and vaccines rolling
out, I take an optimistic view on the coming year
where many factors will
contribute to good growth, such as the release of
pent-up demand and our
recently launched flagship products in all our hearing
aid brands. So far,
Oticon More, the world’s first hearing aid using a deep
neural network – AI
technology – has been rolled out in most major markets
where it has seen strong
traction. Oticon More will no doubt be an important
growth driver in 2021,” says
Søren Nielsen, President & CEO of Demant.
Demant
will host a conference call on 9 February 2021 at 14:00 CEST. 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 38012667#. A
presentation
for the call will be uploaded to www.demant.com
[http://www.demant.com] shortly
before the call.
Further information: | Other contacts:
|
Søren Nielsen, President & CEO
| René Schneider, CFO
|
Phone +45 3917
7300 | Mathias Holten Møller, Head of Investor
| Relations
www.demant.com [http://www.demant.com] |
| Christian Lange, Investor Relations
| Officer
|
| Trine Kromann-Mikkelsen, VP
Corporate
| Communications and
Relations
Key figures and financial ratios
| H2 2020
| H2 2019 | Change | | FY 2020 | FY 2019 | Change
|
| | | | | |
Hearing | |
| | | | |
Healthcare | |
| | | | |
Revenue | 7,631 | 7,596 | 0%
| | 13,163 | 14,946 | -12%
Organic growth | 2% | 3% |
| | -13% | 4% |
Gross margin | 74.5% | 74.0% | |
| 73.6% | 75.8% |
Operating profit | 1,425 | 1,000 | 43% | |
1,211 | 2,085 | -42%
(EBIT) | | | | |
| |
EBIT margin | 18.7% | 13.2% | | | 9.2%
| 14.0% |
| | | | | |
|
Communications | | | | | | |
Revenue | 760 | - | - | | 1,306 | - |
-
Organic growth | - | - | | | - | - |
Gross margin | 52.9% | - | | | 50.3% | - |
Operating profit | 81 | 38 | 113% | | 102 | 66 |
55%
(EBIT)* | | | | | | |
EBIT margin | 10.7% | - | | | 7.8% | - |
| | | | | | |
Group
| | | | | | |
| | | | | | |
Income statement |
| | | | | |
Revenue | 8,391
| 7,596 | 10% | | 14,469 | 14,946 | -3%
Adjusted gross | 72.5% |
74.0% | | | 71.5% | 75.8% |
margin** | |
| | | | |
Gross margin | 72.1% | 74.0% |
| | 70.4% | 75.8% |
EBITDA | 1,949 | 1,528 | 28%
| | 2,578 | 3,110 | -17%
EBITDA margin | 23.2% | 20.1% | |
| 17.8% | 20.8% |
Adjusted EBIT** | 1,506 | 1,038 | 45% | |
1,313 | 2,151 | -39%
Adjusted EBIT | 17.9% | 13.7% | | |
9.1% | 14.4% |
margin** | | | | |
| |
Operating profit | 1,416 | 1,038 | 36% | | 1,530 |
2,151 | -29%
(EBIT) | | | | | |
|
EBIT margin | 16.9% | 13.7% | | | 10.6% | 14.4%
|
Net financial | -106 | -121 | -12% | | -194 | -240 |
-19%
items | | | | | | |
Profit for the | 1,013 | 700 | 45% | | 1,134 | 1,467 |
-23%
year | | | | | | |
| | | | | | |
Balance sheet | | | | | | |
Total assets | 21,927 | 21,798 | 1% | | 21,927 | 21,798 |
1%
Net | 7,135 | 8,185 | -13% | | 7,135 | 8,185 |
-13%
interest-bearing | | | | | | |
debt (NIBD) | | | | | | |
Equity | 8,279 | 7,645 | 8% | | 8,279 | 7,645 | 8%
| | | | | | |
Cash
flow | | | | | | |
statement
| | | | | | |
Adjusted cash
| 1,944 | 1,102 | 76% | | 2,710 | 2,149 | 26%
flow from |
| | | | | |
operating |
| | | | | |
activities | |
| | | | |
(CFFO)** | |
| | | | |
Cash flow from | 1,892 | 1,102 | 72%
| | 2,621 | 2,149 | 22%
operating | | |
| | | |
activities (CFFO) | | | | |
| |
Investment in | 251 | 310 | -19% | | 493
| 561 | -12%
property, plant | | | | |
| |
and equipment, | | | | | |
|
net | | | | | | |
Free cash flow | 1,534 | 636 | 141% | | 2,023 | 1,338 |
51%
Share buy-backs | - | 682 | - | | 197 | 946 |
-79%
| | | | | | |
Other key figures | | | | | | |
Return on equity | 25.7% | 18.0% | | | 14.3% | 19.5% |
Equity ratio | 37.8% | 35.1% | | | 37.8% | 35.1% |
Gearing multiple | 2.8 | 2.6 | | | 2.8 | 2.6 |
(NIBD/EBITDA) | | | | | | |
Earnings per | 4.18 | 2.87 | 46% | | 4.68 | 6.00 |
-22%
share (EPS)*** | | | | | | |
Free cash flow | 6.40 | 2.62 | 144% | | 8.44 | 5.49 |
54%
per share | | | | | | |
(FCFPS)*** | | | | | | |
Price/earnings | 57.6 | 73.1 | -21% | | 51.4 | 35.0 |
47%
(P/E) ratio | | | | | | |
Share price, end | 240.60 | 209.80 | 15% | | 240.60 | 209.80 |
15%
of period*** | | | | | | |
Average number of | 239.78 | 243.55 | -2% | | 239.78 | 243.55 |
-2%
shares | | | | | | |
outstanding | | | | | | |
Market | 57,718 | 50,470 | 14% | | 57,718 | 50,470 |
14%
capitalisation | | | | | | |
Average number of | 16,203 | 15,660 | 3% | | 16,155 | 15,352 |
5%
employees | | | | | | |
*EBIT for |
Communications in |
2019 relates to |
the Group’s
share |
of profit after |
tax from our |
former joint |
venture
|
Sennheiser |
Communications. |
**Adjusted for |
| | | | | |
EPOS one-offs in | |
| | | | |
2020. | |
| | | | |
***Per share of | | |
| | | |
nominally DKK | | | |
| | |
0.20. | | | | |
| |
ABOUT DEMANT A/S
Demant is a world-leading hearing
healthcare group that offers solutions and
services to help people with hearing
loss connect with the world around them. In
every aspect, from hearing devices,
hearing implants, diagnostics to audio and
video solutions and hearing care all
over the world, Demant is active and
engaged. Our innovative technologies and
know-how help improve people’s health
and hear-ing. We create life-changing
differences through hearing health.
ATTACHMENTS
* 2021-02 Annual Report
2020.pdf
[https://via.ritzau.dk/ir-files/13560112/3446/3840/2021-02%20Annual%20Report%
202020.pdf]
* Annual Report 2020.pdf
[https://via.ritzau.dk/ir-files/13560112/3446/3844/Annual%20Report%202020.pdf
]
* DEMA-2020-12-31.zip
[https://via.ritzau.dk/ir-files/13560112/3446/3845/DEMA-2020-12-31.zip]
|