William Demant Holding (WDH) and GN Store Nord (GN) reported their first-half results to the investment community on August 14. Although both companies increased their market share, posted what might be viewed within the industry as impressive gains, and confirmed their financial guidance, the financial community had expected more and gave the results a cool reception. Upon receiving the news, shares in WDH fell 5.6% yesterday, with a decrease of 11.5% on the year. GN shares fell 3.6%, with a decrease of 3.5% on the year. Bernstein Research has an “underperform” rating for WDH and “outperform” rating for GN.
Highlights from the two reports include:
Williams Demant Holding (WDH). WDH group—the second-largest hearing care company in the world (after Sonova) and parent group of Oticon, Bernafon, Sonic, Maico, Interacoustics, Sennheiser, Logia, and several others—reported a growth rate of 8% in local currencies, with revenues of DKK 4.54 billion (US$820 million), which was 3% short of financial analysts’ concensus of 4.65 DKK. Still, WDH’s hearing aid business substantially exceeded the unit growth of the overall market (eg, 2.9% in the United States) during the first half.
WDH will roll out new products in the third quarter in conjunction with the EUHA Congress in Germany and other fall conventions, and it has recently invested heavily in a new distribution center, its transfer of ITE production to Poland, roll-out of global IT projects, and the expansion of Oticon Medical. Due to this spending and negative impacts of foreign exchange rates, the group saw EBIT reach DKK 834 million with a margin of 18.4%, a decrease of 4% and short of the average analyst forecast of 922 DKK. Earnings per share were DKK 11.2, which matched last year’s earnings.
The WDH report says Oticon Medical continues to deliver double-digit sales growth, both in bone-anchored hearing systems (BAHS) and in cochlear implants (CI), and cited the Saphyr Neo speech processor as delivering superior performance in comparison to competitive products.
Similar to GN’s buy-back of shares last year, WDH plans a buy-back program worth a total of DKK 2.5-3.0 billion from 2014-2016 of which WDH has already bought back DKK 493 million this year. The group maintains its full-year outlook for 2014, including expectation to generate growth in both business activities and a rise in earnings per share of 5-10%, according to the company.
GN Store Nord. In the second quarter of 2014, GN Store Nord—the world’s fourth-largest maker of hearing aids and the parent company of ReSound, Beltone, Interton, GN Otometrics, and GN Netcom—reported strong organic growth of 9% and 12% when adjusting for the non-recurring GN Netcom revenue in China. Group revenue was DKK 1.81 billion (US$330 million), and EBITA was DKK 302 million, which is 8% below that of the DKK 325 million estimate published in a Reuters poll of analysts.
GN reports that it maintained its growth momentum and delivered 8% organic growth driven by more than 20% revenue growth in the important independent channel in the United States. With arguably the most-talked-about MFi hearing aid in the field, GN enters the third quarter of 2014 with ReSound LiNX™ and Beltone First™ available in all markets.
The company’s headset division, GN Netcom, generated organic growth of 11%, and reported an EBITDA of DKK 107 million (DKK 111 million in Q2 2013), which was substantially below the 119 DKK that analysts had expected.
On August 1, Anders Hedegaard took the reigns as the new CEO of GN ReSound and a member of GN Store Nord’s executive management, replacing Lars Viksmoen who will continue full-time at GN until the end of 2014 to secure a smooth transition.