The Sonova Group, Stäfa, Switzerland, reports that it has posted a new sales record of CHF 1,500 million for financial year 2009/10, representing an increase of 20.1% in Swiss francs, despite a negative currency effect of 3.7%.
The Group was able to consolidate its position due to an organic growth rate of 18.4% in local currencies and 5.4% growth through acquisitions. Profitability rose significantly, as indicated by an EBITA margin of 28.0%, while income after taxes totaling CHF 355 million was a clear 24.9% above the previous-year level.
Organic sales growth of 18.4% in local currencies significantly exceeded the market growth of the hearing instrument industry, according to Sonova.
The integration of the newly acquired companies Advanced Bionics and InSound Medical is proceeding according to plan; 5.4% sales growth in total through acquisitions,
The EBITA margin increased to 28.0% from 26.6%
The Group posted cash-based basic earnings per share of CHF 5.602; 26.4% higher than in the previous year.
Some 77% of total sales were generated with products launched within the last 2 years; Sonova reports that new products such as Exélia Art, Audéo Mini, and SMART by Phonak, and Fuse by Unitron set new benchmarks in hearing instrument technology.
A higher dividend of CHF 1.20 per share was proposed to the annual general shareholders’ m.eeting
Based on current market conditions, the Sonova Group expects organic sales growth of 8 to 10% in local currencies and, taking into account investments in new market segments and expenditures for the integration of the acquired companies, an EBITA margin of 26–27%
The Sonova Group increased its sales in financial year 2009/10 to CHF 1,500.3 million from CHF 1,249.2 million, thus posting a growth rate of 20.1% in Swiss francs, despite a negative currency effect of 3.7%. The Group achieved organic growth of 18.4% in local currencies, which significantly surpassed the market as a whole. Market growth in 2009/10 is estimated at around 4% in units sold. In addition, the Sonova Group completed two major strategic acquisitions: Advanced Bionics, one of the leading manufacturers of cochlear implants, and InSound Medical, producer of the world’s first invisible extended-wear hearing device.
Following further smaller acquisitions in the distribution of hearing systems in selected countries, growth from acquisitions amounted to 5.4%.
Sonova notes that it recorded broad-based growth in the last financial year, characterized by additional market share gains, further expansion in growth markets, and the acquisitions mentioned. The strongest growth was achieved in the United States, as a result of significant market share gains in the private market and an excellent performance in the Department of Veterans Affairs (VA), which
supplies American veterans with hearing systems. A growth rate of 29.3% was thus achieved in local currencies.
The Europe, Middle East, and Africa (EMEA) region including Switzerland achieved a growth rate of 23.0% in local currencies, to which key markets such as France and Italy, and particularly Germany, made a marked contribution. The Group achieved growth of 15.3% in local currencies in the Asia/Pacific region, owing to increased sales in Japan in particular and further market penetration in China.
Despite negative currency effects, Sonova was able to increase its gross profit to CHF 1,058.4 million from CHF 867.2 million, primarily due to significant organic growth. The gross profit margin was 70.5%, a definite improvement over the previous-year figure of 69.4% mainly as a result of economies of scale, increased efficiency in manufacturing, and savings in procurement.
Including additional acquisition-related expenses and investments in new projects—the launch of the new Sona brand being one example—the Sonova Group posted an operating profit before acquisition-related amortization (EBITA) of CHF 420.1 million in financial year 2009/10, up from CHF 331.8 million a year earlier. The EBITA margin also increased to 28.0% from 26.6%,
a result that includes a negative currency effect of around 90 bps. However, the negative effects were more than offset by the strong growth, economies of scale in production, and the sustainability of the ongoing Group-wide cost-saving program.
The importance of research and development was strikingly apparent in 2009/10 due to the contribution of new products to sales growth. The Sonova Group generated 77% of its total sales with hearing instruments that had been on the market for less than 2 years, which allowed it to sustainably expand and consolidate its technological lead over its competitors. This is attributable above all to the success of the entire Phonak product portfolio based on the
CORE platform and to the expansion of the miniaturized CRT product family Audéo. Overall, the Phonak brand achieved an above-average increase in sales in financial year 2009/10. The Unitron brand also contributed to this success through further technological development and the expansion of most of its product portfolio.
The hearing instruments segment achieved significant growth of 21.8% in local currencies over the previous year, primarily due to growth of 26.5% in business class hearing instruments. Increased demand for first class hearing instruments was apparent after declining sales in the previous year, this area grew by 21.0%. Sales of economy class hearing instruments grew by 24.7%, also a substantial increase.
With the completion of the acquisition of Advanced Bionics at the end of December 2009, the Sonova Group took the strategic step of expanding into the market segment of cochlear implants, thus exploiting its position as a global provider of hearing systems. Advanced Bionics achieved sales of $123 million in 2009 and has reported sales of CHF 25 million for the first consolidated quarter of 2010. A strong competitive environment and the focus on the integration of the company into the Sonova Group led to this result. Over the course of the first quarter, a positive trend emerged toward customer acceptance and growth. As already communicated, Advanced Bionics’ current product portfolio needs substantial further development to achieve the medium-term growth targets. This will not be achieved until new products are launched over the next few years. Sonova is planning to double the sales of Advanced Bionics within the next 3 to 5 years and increase the EBITA margin to at least 20%.
At CHF 324.8 million, operating free cash flow before acquisitions exceeded the previous-year level of CHF 176.3 million. Sonova invested cash funds of CHF 626.1 million in acquisitions, which is considerably more than in the previous year due to the acquisition of Advanced Bionics and InSound Medical. Sonova’s free cash flow for financial year 2009/10 was thus CHF –301.4 million compared with CHF 79.0 million in the previous year. Cash flow from operating activities
rose by 51.8% in the year under review, from CHF 281.8 million to CHF 427.7 million. The higher cash flow from operating activities is mainly due to higher pre-tax profits and improved management of working capital.
Income after taxes totaled CHF 354.8 million, up from CHF 284.1 million in the previous year. The increase resulted from higher operating profit, a slightly lower financial result, and somewhat higher tax expenses. Financial income was negatively affected, primarily by the generally lower interest rate level on the income side, while higher costs for the completed acquisitions had an adverse effect on financial expenses. Earnings per share amounted to CHF 5.412 versus CHF 4.348 in the previous year. Excluding acquisition-related noncash items, cash-based basic earnings per share amounted to CHF 5.602 compared with CHF 4.433 in the previous year. In view of the Group’s positive result, the board of directors will propose to the annual general shareholders’ meeting on June 15, to pay out a higher dividend of CHF 1.20 per share.
The board of directors will propose the election of John Zei as a new board member at the meeting. Zei, a United States citizen, was CEO of Knowles Electronics, one of the primary suppliers of acoustic components for the hearing instruments industry, through the end of 2009. Since his retirement he now acts as senior advisor for the company. He will contribute his in-depth expertise in the health care market, especially the hearing instruments industry.
Based on current market conditions and subject to unforeseen events, Sonova expects an organic sales growth of 8 to 10% in local currencies and, taking into account investments in new market segments and expenditures for the integration of the acquired companies, an EBITA margin of 26 to 27% for the financial year 2010/11.
The Sonova annual report 2009/10 can be downloaded from: