William Demant Holding A/S, Smorum, Denmark, the parent company of Oticon (US headquarters in Somerset, NJ), reports that in the first half of 2010, the Group has revenues of approximately $575 million (a figure converted to US dollars from DKK 3,328 million), or a 21% increase from the same period last year.
Corporate organic growth in the period was 13%. The three main business activities all generated double-digit organic growth in the first half-year, to which should be added the effects of acquisitions and exchange movements.
Growth in hearing aids was, in particular, driven by the launch of Oticon Agil, which is Oticon’s second generation of wireless hearing aids. Unit sales in the corporate wholesale business improved by almost 9%.
In the period under review, the Group gained sizeable market shares, according to the company. The global market for hearing aids in the first 6 months of 2010 is estimated to have grown by 3% in terms of units.
Operating profits (EBIT) constituted approximately $115 million (DKK 666 million), or an 18% increase on the first half of 2009.
The consolidated profit margin of 20.0% was adversely affected by costs to the tune of $8.6 to 12.1 million (DKK 50 to 70 million) related among other things to the Agil introduction and the employee share ownership plan that carried through in the first half-year. These costs are not expected to recur in the second half-year, says the company.
Based on favorable trends in the first 6 months combined with anticipation of continued growth, corporate outlook has been upgraded, says the company, which expects corporate wholesale of hearing aids in 2010 to outmatch market growth by 8 to 10% in terms of value, which is 5 percentage points above its most recent forecast. Demant says it also expects the second half-year to produce a profit margin that exceeds that of the first 6 months.
Based on the announced considerations on the Group’s capital structure, the company has seeks to have a consolidated net debt of around $173 million to $259 million (DKK 1.0 to 1.5 billion), which means that in the coming period, the company will once again be able to buy back shares, but whether such buyback will actually occur before year-end 2010 will depend on current consolidated cash flows and the extent of acquisitions carried through in the second half-year.
"We are very pleased to note that the success of Oticon Agil continues, enabling us to gain substantial market shares," said Niels Jacobsen, president and CEO, William Demant Holding, in a statement. "I am convinced that also in [the] future Agil will contribute significantly to the creation of revenues as well as earnings. In combination with the product launches, which are in the pipeline for this autumn, we will have the strongest product program in our industry. This will secure solid momentum in the quarters to come, and we have therefore chosen to upgrade our outlook for 2010.”
Despite stern wintry weather in January and February, growth in the global hearing aid market in the first half of the year is estimated at around 3% in terms of volume, which is within the framework of the Group’s long-term forecasts of 2 to 4% unit growth. The company says average wholesale prices in the market did not go up in the first 6 months and therefore did not contribute positively to market growth.
In the first half-year, corporate core business comprising the development, production, and wholesale of hearing aids generated unit growth of group-manufactured instruments of almost 9%, which considerably exceeds market growth, says the company. Organic growth in revenues in our core business constituted well over 17% in the period under review, while the overall hearing aid business, including corporate retail activities, generated organic growth in revenues of nearly 13% in the same period, it adds.
Corporate growth was in particular driven by the success of Oticon Agil, which was released for sale in early March 2010 and favorably affected average wholesale prices. Apart from Oticon Agil, Hit, and Vigo Connect also made a significant contribution to unit growth in the period under review, and Oticon was also successful with their Safari products, according to the compay. Oticon has the strongest product portfolio in many years, and plans to introduce the Chili Super Power hearing aid in the autumn,
The company reports that the Bernafon business saw strong growth in the first 6 months of 2010, especially the Veras and Vérité product lines in the upper price segments.
In the period under review, corporate retail activities grew more slowly than the underlying market, albeit with most corporate retail activities still showing reasonable growth rates.
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[Source: William Demant]