Innovation inspired by people Annual Report 2019 – Conference call presentation, February 5, 2020
Safe Harbor Statement The forward-looking statements in this report reflect the management's current expectations of certain future events and financial results. Statements regarding the future are, naturally, subject to risks and uncertainties, which may result in considerable 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. 2
Agenda Group highlights 2019 GN Hearing update GN Audio update Strategy for 2020 and beyond Financial outlook and mid-term targets 3
Delivering on promises… again We are delivering on our annual guidance for 2019 We are delivering on our promises and targets set by our 2017-19 strategy In the period, both businesses have delivered successful product introductions and have taken market shares consistently Our business remains asset light and highly cash generating We have created significant shareholder value – share price development, dividends and share buybacks 4
Outstanding performance during the 2017 – 2019 strategy period Revenue growth EBITA growth EPS growth +45% +47% +51% +14% CAGR +15% CAGR +13% CAGR Shareholder Cash Share price distribution conversion increase 4.0 +114% 59% DKK billion +29% CAGR 5
2019: very strong performance – delivered on guidance GN Hearing revenue (DKKm) GN Hearing EBITA margin Organic 7% (0.3)%p growth 6,351 ✓ GN Hearing organic growth: 7% 20.5% 20.2% 5,833 ✓ GN Hearing EBITA margin: 20.2% 2018 2019 2018 2019 GN Audio EBITA margin GN Audio revenue (DKKm) ✓ GN Audio organic growth: 26% Organic 26% +1.0%p growth 20.0% 1 6,223 19.0% 20 4,774 18 16 ✓ GN Audio EBITA margin: 20.0% 1 14 2018 2019 2018 2019 ✓ GN Store Nord effective tax rate: 23% GN Store Nord effective tax rate (%) +1%p 23% 22% 2018 2019 1 Excluding transaction related costs associated with the Altia acquisition 6 6
Group financial highlights 2019 Double digit organic growth drives strong EBITA growth and 20% EPS growth DKK million FY 2019 FY 2018 Growth • Organic growth was 15%. Revenue growth was 19% including an impact of around 3% from FX and 1% from Revenue 12,574 10,607 +19% M&A Organic grow th 15% 13% • Continued solid gross profit increase driven by strong Gross profit 7,582 6,574 +15% business performance Gross margin 60.3% 62.0% (1.7)%p • Reported EBITA increased by 19%, driven by strong EBITA 2,321 1,956 +19% execution across GN Hearing and GN Audio EBITA margin 18.5% 18.4% +0.1%p Profit before tax 1,913 1,606 +19% • Net profit reached DKK 1,468 million, 18% increase Net profit 1,468 1,247 +18% compared to 2018 EPS 11.12 9.25 +20% • EPS growth of 20% ROIC * 25% 24% +1%p • 1 percentage point increase in ROIC, driven by Free cash flow excl. M&A 1,296 1,110 17% increased earnings level as well as strict focus on the Cash conversion 56% 57% (1)%p balance sheet during the years NIBD/EBITDA 2.0x 1.5x * EBITA (rolling four quarters) / avg. invested capital 7
Continued strong cash generation DKKm GN Hearing GN’s strong focus on cash conversion continues 1,749 1,546 672 574 • GN Hearing’s free cash flow excl. M&A in 2019 reflects growth in operating cash flow and a stable -146 -150 -204 -435 -496 -618 net working capital, but to some extent off-set with Operating cash flow Change in working Investing activities* Tax and financial items Free cash flow excl before changes in capital M&A the timing of corporate tax payments working capital • Continued strong free cash flow excl. M&A in GN DKKm GN Audio 1,492 Audio on top of investment activities and significant 1,139 849 798 topline growth 67 -160 • -168 -189 -219 Strong group cash conversion of 56% in 2019 -315 Operating cash flow Change in working Investing activities* Tax and financial items Free cash flow excl before changes in capital M&A • Focused and prudent management of net working working capital capital continues GN Store Nord DKKm 3,168 2,593 • 3 year average cash conversion of ~60% 1,296 1,110 -95 -312 -426 -649 -962 -911 Operating cash flow Change in working Investing activities* Tax and financial items Free cash flow excl before changes in capital M&A working capital 2018 2019 *Excluding M&A activities 8
Creating shareholder value through efficient capital structure Earnings per share DKK 12% 11.12 • GN distributed DKK 1.4 billion to shareholders in 9.25 10% 2019 8.07 7.34 8% 6% • DKK 197 million dividend was paid out in March 4.79 4% 2019 (DKK 1.35 per share) 2015 2016 2017 2018 2019 • DKK 1,195 million share buybacks Shareholder distribution DKKm • By the end of 2019, net interest-bearing debt was 1,443 1,392 1,364 1,500 1,198 1,168 within 1.5-2.0x EBITDA as expected 1,000 500 • Annual General Meeting on March 11, 2020: 0 2015 2016 2017 2018 2019 Share buyback Dividends • GN will propose a dividend of DKK 1.45 per share in respect of the fiscal year 2019, total DKK 206 million NIBD / EBITDA development • Ambition to continue to buy back shares , 2.0x 1.9x subject to AGM approval 1.6x 1.5x 1.4x 2015 2016 2017 2018 2019 9
Diversified funding profile provides flexibility and de-risks balance sheet Maturity profile (DKKbn) • Refinancing of Convertible Bond 2.5 resulted in extended debt profile, locked in zero coupons, raised strike price to 2.0 DKK 474 and reduced equity dilution with roughly 1 million shares 1.5 • Eurobond issuance of EUR 220 million placed in November. 4-year maturity, 2.5 issued at 99.683% to a coupon of 0.75% 1.0 1.6 • Diversified funding profile with mid- 1.1 0.1 0.5 term maturity profile that provides 0.7 0.6 flexibility based on very strong cash- 0.1 generative business 0.0 2020 2021 2022 2023 2024 • Access to liquidity via undrawn RCF Commercial Papers EIB loan Bond • Sufficient flexibility to fund the growth NIB loan Convertible Bond prospects of the company 10
Agenda Group highlights 2019 GN Hearing update GN Audio update Strategy for 2020 and beyond Financial outlook and mid-term targets 11
GN Hearing financial highlights 2019 Strong performance by ReSound LiNX Quattro creates a solid growth platform for 2020 and onwards DKK million FY 2019 FY 2018 Growth • Organic growth of 7% in 2019 (4% in Q4 2019). Revenue growth of 9%, including impact of around 2% Revenue 6,351 5,833 +9% from FX Organic grow th 7% 7% • Gross margin was slightly lower than in 2018 due to Gross profit 4,380 4,034 +9% mix effects Gross margin 69.0% 69.2% (0.2)%p EBITA 1,284 1,194 +8% • EBITA increased 8%. The EBITA margin reached EBITA margin 20.2% 20.5% (0.3)%p 20.2%, in line with financial guidance ROIC * 19% 19% +0%p • Cash conversion of 52%, with stable development in Free cash flow excl. M&A 672 574 +17% net working capital on top of timing of corporate tax Cash conversion 52% 48% +4%p payments * EBITA (rolling four quarters) / avg. invested capital 12
The strong organic growth of 7% was driven across regions and countries North America Europe Rest of World Solid performance across Strong growth in Europe with Solid organic growth. channels, off-set by the loss of particularly strong performance in China, India and Japan as the one large customer in 2018. Italy, Spain and the UK main drivers Strong contribution from VA GN Hearing has taken market shares 9 years in a row 13
Committed to developing the best Android TM streaming Q3 2019 Future Q3 2018 ASHA Specification Release of ASHA in Further Android 10 for Pixel 3 implementations released from Google Q2 2019 Q4 2019 ASHA made available Samsung starting to roll out in Android “Q” Beta* Android 10 in newer phones *Android 10 was formerly called Android Q in the beta version 14
Strong performance during 2017-2019 strategy period Hear More, Do More, Be More • Development and launch of two new families of hearing aids that set new industry standards: • Innovation ReSound LiNX 3D and ReSound LiNX Quattro excellence • The first manufacturer to enable direct streaming from Android devices • Expanding collaboration with Cochlear including joint research and development, shared technology and strengthened global commercial collaboration Commercial • Market share gains achieved throughout all three years excellence • More structured commercial organization and execution • People Fostering talent pipeline • excellence Increasing diversity throughout the organization 15
Agenda Group highlights 2019 GN Hearing update GN Audio update Strategy for 2020 and beyond Financial outlook and mid-term targets 16
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