GN STORE NORD - SEB INVESTOR CONFERENCE. Lars Viksmoen, CEO GN ReSound Michael Bjergby, Director IR & Communications GN Store Nord

Transcription

1 GN STORE NORD - SEB INVESTOR CONFERENCE Lars Viksmoen, CEO GN ReSound Michael Bjergby, Director IR & Communications GN Store Nord Copenhagen, January 8, 2013

2 SAFE HARBOR STATEMENT The forward-looking statements in this presentation reflect management's current expectations of certain future events and financial results. Statements regarding the future 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 sub-contractor supplies and developments in ongoing litigation (including but not limited to class action and patent infringement litigation in the United States). This presentation should not be considered an offer to sell or buy securities in GN Store Nord. Slide 2

3 GN STORE NORD GROUP STRUCTURE TODAY GN Store Nord GN ReSound Hearing instruments and diagnostic equipment GN Netcom Handsfree Communication Hearing Instruments Otometrics CC&O Headsets Mobile Headsets Slide 3

4 AGENDA Hearing aid market characteristics Product innovation ReSound Verso SMART restructuring program GN Netcom Group financial outlook Slide 4

5 MARKET STRUCTURE AND DYNAMICS - ATTRACTIVE UNDERLYING LONG TERM UNIT GROWTH Aging Population Demographic trends Healthier living Better medical treatment Higher prevalence IPod generation Lifestyle entailing increased exposure to noise Improved penetration rates Improved hearing aids New generation willing to adopt technology Increased wealth Increasing binaural fit rates Technology advances leveraging benefits of binaural fitting Increased customer wealth Slide 5

6 MARKET STRUCTURE AND DYNAMICS - ATTRACTIVE UNDERLYING LONG TERM UNIT GROWTH The hearing aid market is reasonably resilient to the macroeconomic development Average unit growth in the US market since 2009 is 4-5% Global unit growth in Q3 was lower than the historical trend due to primarily reimbursement change in Switzerland, implementation of consignment terms in Norway and weakness in certain southern European markets Historical unit growth on the US market 20.0% 16.0% 12.0% 8.0% 4.0% 0.0% -4.0% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q3 unit growth globally Q2 10 Q3 10 Q4 10 Unit growth Average 4.8% Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 5% 1% 1% -3% Globally Europe North America RoW Slide 6

7 MARKET STRUCTURE AND DYNAMICS - EXPECTED MODERATE BUT CONSISTENT ASP PRESSURE OF 1-2% PER YEAR Estimated units hearing aid market structure by distribution segments Recent development Manufacturers retail Intensified vertical integration by some manufacturers. Government (tenders) Government having increased focus on pricing when conducting tenders Aggressive pricing behavior in tender markets Trend toward introducing high-end features in low-end segments Retail chains Government (tenders) Independent shops Purchasing groups Manufacturers retail Retail chains Consolidating and growing faster than the market Independent markets Focus on reimbursement levels Customer behavior Shopping around Slide 7

8 GN RESOUND GAINED MARKET SHARES FOR 9 CONSECUTIVE QUARTERS BASED ON RESOUND ALERA GN ReSound organic growth 15% 10% Launch of ReSound Alera TM 9 consecutive quarters with market share gains Launch of ReSound Verso TM 5% 0% -5% -10% -15% Q1 09 Q2 09 Q3 09 Q3 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Slide 8

10 RESOUND ALERA BROUGHT THE HIGHLY INNOVATIVE 2.4 GHZ SOLUTION INTO HEARING AIDS - STILL EXCLUSIVELY OFFERED BY GN RESOUND Key barriers to entry: In ReSound Verso, a 3 cm long antenna is folded into the hearing aid. Hearing aid is built around the antenna No interference between potential dual radio/antenna systems Innovative and efficient power management on the radio is key for running on HI batteries Clear benefits of having succeeded Direct streaming of sound No latency due to audio data compression to proprietary MI signal Material future benefits an open standard and opportunities to create solutions with other devices Slide 10

11 RESOUND VERSO IS ANOTHER BREAKTHROUGH IN THE INDUSTRY - EAR-TO-EAR COMMUNICATION WITH 2.4 GHZ TECHNOLOGY High frequency entails short wavelength that does not go through the head Waves can only bend around the head if the antenna is designed correctly Waves travel at the speed of the light and bounces on surfaces but the solution has to be solid outdoor as well Slide 11 Clear benefits vs. competition of having succeeded Meaningful audiological end user benefits from ear-to-ear No need for two wireless solutions with obvious related disadvantages: Potential interference between the radio signals Size penalty due to having the inductive antenna Additional battery consumption by running two radios

12 PRODUCT DEVELOPMENT IN THE INDUSTRY HAS BEEN HIGHLY INFLUENCED BY RESOUND INNOVATIONS Challenge the conventionel way of thinking about hearing aids Strive to push the limits for what is perceived as possible Provide solutions with real value to customers Slide : First commercial digital hearing aid 2003: First hearing aid with thin tube without blocking the ear canal 2010: First hearing aid with 2.4 GHz wireless technology 2012: First hearing aid with ear-2-ear communication using 2.4 GHz technology Beyond 2012: Groundbreaking solutions based on 2.4 GHz wireless connectivity including launch of MFI ( Made for Iphone ) hearing aids

13 WHERE IS INNOVATION GOING IN THE COMING YEARS? - CONNECTIVITY IS THE FUTURE OF HEARING AIDS The power of 2.4 GHz technology Hearing aids: The control center for connectivity Slide 13

14 GN RESOUND PRODUCT PORTFOLIO EARLY 2012 Segment Performance Life style/ Design Tinnitus Super power Pediatrics Top ReSound Alera TM 9 ReSound Alera TM TS 9 Premium Essentials Plus Basic Basic Budget ReSound Alera TM 7 ReSound Alera TM ReSound Essence TM ReSound Essence TM ReSound Alera TM TS 7 ReSound Unite premium connectivity ReSound Sparx TM ReSound Sparx TM Lite Slide 14

15 GN RESOUND END OF 2012 PRODUCT PORTFOLIO - SIGNIFICANT INNOVATION AND BEST IN INDUSTRY R&D EFFICIENCY Segment Top Performance ReSound Verso TM 9 Life style/ Design ReSound Verso TM 9 IIC Tinnitus Super power Pediatrics ReSound Alera TM TS 9 ReSound Up TM 9* Premium Essentials Plus Basic ReSound Unite premium connectivity Basic Budget ReSound Verso TM 7 ReSound Alera TM ReSound Vea TM 3 ReSound Vea TM ReSound ReSound Verso TM 7 IIC Alera TM TS 7 ReSound Alera TM TS 5 - PhoneClip+ - Control App ReSound Sparx TM ReSound Sparx TM Lite ReSound Up TM 7* * In selected markets Slide 15

17 Slide 17 ReSound Verso

18 KEY COMPETITIVE ADVANTAGES OF RESOUND VERSO Breakthrough technology 2.4 GHZ wireless streaming Best sound quality Surround Sound by ReSound Best ear-to-ear connectivity Ear-to-ear taken to a new level

19 EAR-TO-EAR CONNECTIVITY TAKEN TO A NEW LEVEL - FURTHER BREAKTHROUGH FOR THE 2.4 GHZ TECHNOLOGY ReSound Verso TM The first hearing aid featuring both direct streaming of sound and ear-to-ear connectivity based on 2.4 GHz technology The ear-to-ear connectivity solution, Binaural Fusion, is unique in the hearing aid space and provides the most natural sound quality on the market. Binaural Fusion takes the Surround Sound by ReSound experience to a new level ReSound Verso TM is another example of GN ReSound s core competency of bringing significant innovations to the market with real end user benefits Slide 19

20 BINAURAL FUSION - SIMPLE, FLEXIBLE AND EFFECTIVE SOUND PROCESSING

22 GN RESOUND IS BUILT UP OF ACQUISITIONS - UNDERSTANDING THE OPPORTUNITY OF SMART GN acquires US based GN ReSound GN acquires Beltone, largest acquisition ever GN acquires Germany based Interton GN ReSound sold to Sonova (errorneously blocked by German competitive authority) Timeline Slide 22 GN ReSound has never been properly integrated working as one professional company GN ReSound has never been able to bring margins to a competitive level

23 UNATTRACTIVE GROSS MARGIN COMPARED TO INDUSTRY PEERS - UNDERSTANDING THE OPPORTUNITY OF SMART Historical gross margin development 72.0% GN ReSound Peers 68.0% 64.0% 60.0% 56.0% 52.0% Slide 23

24 SMART WILL BRING GN RESOUND CLOSE TO TOP- TIER COMPETITORS S M A R T Simplify the way we do business Mindset to win Act as ONE company Revenue growth Turn every stone Supporting target of around 20% EBITA margin in 2013 SMART program Complexity reduction Globalize operations Streamlined go-to-market ONE company Slide 24

25 SMART PROGRAM DELIVERING AS COMMUNICATED - HISTORICALLY HIGH GROSS MARGIN IN GN RESOUND IN Q Recent GN ReSound gross margin development 64% 63% 62% 61% 60% 59% Q1 Q2 Q Slide 25

26 UPDATE ON THE SMART RESTRUCTURING PROGRAM - HIGHLIGHTS OF THE SMART PROGRAM The SMART program delivered an EBITA improvement of around DKK 20 million in Q EBITA improvement targets DKK 50 million in 2012 compared to 2011 DKK million in 2013 compared to 2011 Expected one-time SMART restructuring costs Around DKK 225 million in 2012 Around DKK 100 million in 2013 SMART program Complexity reduction Globalize operations Streamlined go-to-market ONE company Slide 26

28 GN NETCOM AND JABRA Entity name and brand LEGAL ENTITY: Business areas GN Netcom BRAND NAME: CC&O (B2B) ~66% of revenue Mobile (B2C) ~34% of revenue Slide 28

29 CC&O FUNDAMENTALS CC&O Characteristics The market is almost a duopoly Plantronics has around 60% share Jabra has around 30% share UC and traditional CC&O CC&O Barriers to entry are relatively high Software requirements Sound quality requirements Margins are attractive Gross margins (%) in the 60 s EBITA margin (%) in the 20 s Long-term underlying structural growth UC expected to grow with double digit rates per year Traditional CC&O expected to grow 3-5% per year but cyclical by nature UC headsets ~40% of CC&O revenue Traditional CC&O ~60% of CC&O revenue Slide 29

30 WHAT IS UNIFIED COMMUNICATIONS - TRADITIONAL OFFICE STRUCTURE Instant Messaging Voic Video Conferencing Telephony Web Conferencing and Calendar Audio Conferencing User Experience User Experience User Experience User Experience Technology platform Soft & hardware User Experience Technology platform Soft & hardware User Experience Technology platform Soft & hardware User Experience Technology platform Soft & hardware Technology platform Soft & hardware Technology platform Soft & hardware Technology platform Soft & hardware Slide 30

31 UC INTEGRATES COMMUNICATION PLATFORMS - SIGNIFICANT COST REDUCTIONS AND PRODUCTIVITY GAINS Telephony and Voic / Calendar Unified Conferencing: Audio, Video, Web Instant Messaging Technology platform Soft & hardware Slide 31

32 CC&O MARKET OPPORTUNITY - UNIFIED COMMUNICATIONS IS EXPECTED TO DRIVE SIGNIFICANT MARKET GROWTH Market comments CC&O market size projection The number of UC users in 2012 is around 12 million. Frost & Sullivan estimates that number to be around 50 million in 2015 DKK billion Headset attachment rates are expected to continue to increase over time for UC solutions The traditional CC&O market is expected to grow 3-5% The leading Unified Communications providers continue to indicate attractive market prospects Microsoft reported more than 40% growth on Microsoft Lync revenue in Q Market conditions remain favorable with two major players in the headset market and modest price pressure DKK 6 billion Slide 32

33 SUSTAINABLE POSITIVE MARGINS IN MOBILE Key comments Mobile organic growth rates The Mobile business has grown at healthy rates year to date in a competitive market place Growth is primarily driven by Bluetooth speakerphones and Bluetooth stereo headsets The business model continues to improve and GN Netcom has shifted the product mix towards the high end of the market 50% 40% 30% 20% 10% 0% -10% -20% Organic growth Average Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Mobile EBITA margin EBITA margin Trend line - 4 quarters average Margins on high end Mobile headsets are approaching low end CC&O headsets Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Note: GN does not disclose EBITA-margin for the Mobile division Slide 33

34 LAUNCH OF JABRA SOLEMATE TM - STRATEGIC FOCUS ON ATTRACTIVE OPPORTUNITIES ARISING FROM INCREASED INTEGRATION OF MUSIC AND VOICE COMMUNICATION Jabra SOLEMATE TM The market opportunity for the Mobile business is currently gaining momentum from the integration between music and voice communication Jabra took the first step into this category with the launch of Jabra SOLEMATE TM Great initial respons from end users stars out of 5 in 65 reviews on Amazon GN Netcom will launch a number of additional products in this category during 2013 Very attractive market conditions with average annual growth rates (CAGR) estimated to 10-13% until 2015 Slide 34

36 UPDATED FINANCIAL OUTLOOK CONSOLIDATED EBITA GUIDANCE CONFIRMED Organic revenue growth GN ReSound: 3-5% organic growth MDKK GN Netcom: Around 5% organic growth 1,000 GN Store Nord: 4-5% organic growth EBITA GN ReSound GN Netcom Other GN Total Amortization, finance etc. DKK million, excl. SMART restructuring costs DKK million DKK ~ (75) million DKK million DKK ~ (100) million % % Acquisitions and divestments add around 1% revenue in GN ReSound in The net acquisition/divestment impact on revenue is expected to be (1)% in Q The guidance assumes that exchange rates as of November 1, 2012 (DKK/USD of 5.76) prevail during the remainder of * 2011* 2012 guidance** ReSound Netcom Group In 2012, SMART restructuring costs of up to DKK 225 million are expected in GN ReSound * Excl. TPSA and one-off costs in Other in 2011 ** Excl. SMART restructuring costs Slide 36

37 GN RESOUND HAS CLEAR TARGETS FOR 2013: - GAIN MARKET SHARES AND ACHIEVE AROUND 20% EBITA MARGIN S M A R T Gain market shares Around 20% EBITA margin Slide 37

38 GN RESOUND MADE-FOR-IPHONE HEARING AIDS TO BE LAUNCHED IN 2013 Slide 38

39 GN NETCOM - GROWTH DRIVERS FOR OVERALL NETCOM GROWTH TARGETED TO BE DOUBLE-DIGIT IN 2013 Business Unified Communications Factors driving growth in 2013 Cisco partnership New product launches including SPEAK 510 and UC VOICE 750 Double digit growth rates in 2012 despite macroeconomic weakness Traditional CC&O 2012 growth has been significantly negative Easier comparison base in 2013 Weakness in traditional CC&O tends to be experienced in cycles due to the nature of headsets and call centers Music 2012 growth rate of close to 10% in Mobile - could accelerate further in 2013: Solemate - Jabra s step into the Music category More products to be launched in 2013 Very attractive market growth Slide 39

40 GN NETCOM EBITA MARGIN TARGET - DRIVEN BY OPERATING LEVERAGE 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Around 18.0% E 2013E Slide 40

41 Slide 41 Q&A

42 Slide 42 Appendix