GN Store Nord (GN)—the Copenhagen-based parent group of ReSound, Beltone, and Otometrics—reported 8% organic growth and increased its EBITA by 7% in the second quarter of 2015, but fell short of the high expectations of the financial community. Generally speaking, GN’s hearing healthcare division continues to do very well, while GN Netcom, maker of Jabra wireless headsets, saw sales decrease by 2% in Q2 as the result of a continued soft market in the low-margin mobile segment.
GN also reported the discovery that Beltone’s VP of Finance had committed accounting fraud. As a result, the company took a one-time loss of US$22.3 million (DKK 150 million) in the second quarter related to fraud conducted from 2012-2014. The executive, who was not identified by name, has been dismissed and the matter is under investigation, GN said.
Todd Murray, a well-respected and long-time leader in the hearing industry, has decided to resign from his position as president of Beltone and GN North America senior vice president. GN says it respects his decision and wishes him the best in his future endeavors.
In response to an email from The Hearing Review, Rich Swanson, VP finance GN North America and Beltone’s interim president, wrote: “The accounting issues discovered took place over the course of several years. It did not involve any actual cash, only paper transactions. The company will not let the actions of a single individual disrupt Beltone’s employees, brand or customer relationships, which, with a rich 75-year history, are stronger than ever.”
According to GN, ReSound continued its strong growth and experienced 8% organic growth in the quarter driven by the successful launch of ReSound LiNX2, the company’s 4th generation 2.4 GHz technology hearing aid. ReSound also delivered very strong free cash flow excluding M&A of $33.5 million (DKK 225 million) corresponding to a cash conversion of 103%.
GN now predicts that overall 2015 company sales will increase 6-7% this year, down from the 8% previously forecasted, due to weakness in the Bluetooth headset market.
“Obviously, I’m troubled with the accounting fraud in Beltone,” said GN ReSound CEO Anders Hedegaard in a press statement. “But having said that, what matters is that GN ReSound continued its very strong momentum in Q2. The successful launch of ReSound LiNX2 documents our ability to continuously advance our technology leadership. With the launch, we have also demonstrated strong commercial execution leading to significant growth in key segments such as Veterans Affairs, Germany, and Japan. It is truly exciting to see the recognition of our innovative technology as a contributor to improving the quality of life for hearing impaired”
GN Netcom CEO René Svendsen-Tune, who joined the company only 4 months ago, acknowledged that the wireless headset market has witnessed two consecutive poor quarters, but expressed hope that they are “now on the other side of this period, and the market is normalizing, which gives me confidence that we can turn the company back to solid growth in the second half of 2015.”