GN Q2 Interim Report 2009 by ijk77032

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									GN Q2 Interim Report 2009
CEO GN ReSound Mike van der Wallen
CEO GN Netcom Mogens Elsberg
CFO GN Netcom Anders Boyer
Finance, IR & Comm. GN Store Nord Jens Bille Bergholdt

Copenhagen, August 14, 2009
                  Safe Harbour Statement


            The forward-looking statements in this interim report reflect
            management's current expectations of certain future events and
            financial results. Statements regarding 2009 are, of course, subject
            to risks and uncertainties which may result in material 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, developments in class action and patent
            infringement litigation in the United States, and the integration of
            company acquisitions.

            This interim report, announcement or presentation should not be
            considered an offer to sell or buy securities in GN Store Nord.
                                                                            2
August 14, 2009
                                                                                   Slide 2
                  Q2 Summary

          •       GN’s Q2 results were in line with expectations and the full-year guidance is
                  unchanged.

          •       Mogens Elsberg announced as new CEO of GN Netcom on June 26.

          •       GN’s short-term focus for 2009 is primarily on generating cash flow,
                  improving earnings and proactively addressing challenging market
                  conditions through the two restructuring programs.

          •       The restructuring programs in both businesses are progressing very well
                  delivering more cost reductions than previously announced.

          •       For both GN Netcom and GN ReSound, driving revenue remains a challenge
                  due to market conditions. GN ReSound is also impacted by a shift in the
                  product mix.

          •       Strong focus on working capital management and reduced capital
                  expenditure has resulted in a positive free cash flow for the third
                  consecutive quarter at DKK 89 million.

          •       In regards to the DPTG/TPSA arbitration proceedings, a hearing was held
                  on April 20-23, 2009. The hearing progressed as expected. The Parties will
                  submit their final post-hearing briefs on August 28. After the submission
                  the agreed schedule calls for the Arbitration Tribunal to render an award on
                  DPTG’s claim for the period 1994 - mid-2004, expectedly within 2009
                                                                                         3
August 14, 2009
                                                                                                 Slide 3
                  Profit and Loss



                                                       Q2      YTD       Q2      YTD
                  (DKK million)                      2008     2008     2009     2009
                  Revenue                            1,363    2,774    1,196    2,394
                  Gross Profit                        734     1,463     644     1,271
                  SG&A, R&D etc.                     (696)   (1,398)   (642)   (1,334)
                  EBITA                                38        65       2       (63)
                  Amort., finance, associates etc.    (43)      (77)    (13)      (67)
                  EBT                                  (5)      (12)    (11)    (130)

          • Revenue was DKK 1,196 million corresponding to organic growth of (17)%. GN
            Netcom generated revenue of DKK 435 million and GN ReSound DKK 757 million.
          • Operating expenses are being reduced. Cost-cutting initiatives in both GN Netcom
            and GN ReSound are well on track.
          • EBITA of DKK 2 million was impacted by cost related to the restructuring
            programs in GN Netcom and GN ReSound of DKK 61 million.
          • Q2 amortizations & finance costs etc. lower than expected mitigating higher than
            expected costs in Q1. YTD as expected.                                     4
August 14, 2009
                                                                                               Slide 4
                  Balance & Cash Flow


                                                      End            FY         End          End
                                                  Q2/2008          2008     Q1/2009      Q2/2009
       (DKK million)
       Goodwill                                        2,424       2,655        2,794       2,651
       Other intangible assets                         1,141       1,163        1,182       1,169
       Tangible & other non-current assets             1,488       1,592        1,614       1,414
       Current assets                                  2,481       2,468        2,269       2,265
       Equity                                          4,252       4,507        4,607       4,427
       Liabilities                                     3,282       3,371        3,252       3,072
       Total assets/liabilities                        7,534       7,878        7,859       7,499
       NIBD                                          (1,612)     (1,592)      (1,522)     (1,438)
       Free Cash flow                                     39         (95)          72            89

                  •   The free cash flow improved and was positive at DKK 89 million.
                  •   Net interest-bearing debt decreased to DKK 1,438 million.
                  •   Equity ratio: 59%.
                  •   Goodwill split: GN Netcom: ~DKK 0.4bn & GN ReSound ~DKK 2.2bn.
                  •   Value of TPSA and tax dispute is not included in balance sheet.
                                                                                             5
                  •   Sale of one HQ building at a price of DKK 153 million to be closed in Q3
August 14, 2009
                                                                                                      Slide 5
                  GN Netcom




                              6
August 14, 2009
                                  Slide 6
                  Mogens Elsberg New CEO GN Netcom


                                  Mogens Elsberg, new CEO GN Netcom as of
                                  August 10, 2009

                                  Born: February 4, 1955
                                  Nationality: Danish

                                  Education:
                                  M.Sc. (Engineering) from the Technical
                                  University of Denmark and B.Sc. (Marketing)
                                  from Copenhagen Business School.

                                  Career:
                                  2009- Investor and interim CEO, Pensio
                                  2007-2008 General Manager, Microsoft
                                  Dynamics - all products
                                  2005-2007 General Manager, Navision and
                                  since 2006 also for Axapta
                                  2001-2004 CEO Aston Business Solutions
                                  2000-2001 VP, Nordic Region Aston Business
                                  Solutions
                                  1979-2000 Held several managerial positions
                                  with IBM Global Services in Denmark and
                                                                     7
                                  internationally
August 14, 2009
                                                                           Slide 7
                  GN Netcom Income Statement


            (DKK million)          Q1       Q2       Q3       Q4     2008          Q1       Q2
            Revenue                636      584      595      615     2,430       421      435

            Organic growth        (8)%       3%     (6)%    (23)%      (9)%     (36)%    (30)%

            Gross margin          41%       43%      38%      37%      40%        35%      42%

            SG&A, R&D etc.        (260)    (277)    (254)    (248)   (1,039)     (229)    (224)

            EBITA                    3      (28)     (28)     (18)      (71)      (82)     (43)

            EBITA margin          0.5%    (4.8)%   (4.7)%   (2.9)%   (2.9)%    (19.5)%   (9.9)%

            Non-recurring costs      5       25       28       49       107        41       36


       • Operating expenses (excl. non-recurring costs) are down by 26% relative to the
         quarterly average of 2007 (2007 being the base line for the FAST program).
       • CC&O Headsets generated revenue of DKK 264 million equal to organic growth of (25)%
         relative to Q2 2008 broadly in line with market development. The CC&O headset market
         stabilized during Q2 relative to Q1 2009.
       • Mobile Headsets generated revenue of DKK 171 million equal to organic growth of
         (37)% relative to Q2 2008. Jabra branded products holding their market share.
       • GN Netcom’s gross margin was 42% which was in line with last year, excluding non-
         recurring costs.                                                            8
August 14, 2009
                                                                                                  Slide 8
                  GN Netcom Balance Sheet and Cash Flow



        Balance sheet selected items                     Q2        FY         Q1            Q2
        (DKK million)                                  2008      2008       2009          2009
        Inventories                                     228        271        179         128
        Trade receivables                               424        362        279         275
        Trade payables                                  163        208         97         118
        Cash flow (DKK million)
        Cash flow before working capital                  34       213         14           34
        Change in working capital &
        restructuring/non-recurring costs paid          145        150         49           37
        Cash flow from investing activities             (33)      (145)       (20)        (25)
        Free cash flow excl. tax & financial items      146        218         43           46


      • Continued reductions in working capital. DSO’s stayed at low level and inventory turns
        increased further – and both improved relative to last year.
      • Reduction in capital expenditures.
      • Positive free cash flow despite the negative earnings for the quarter.
                                                                                      9
August 14, 2009
                                                                                                 Slide 9
                  Two New Industry-first Unified
                  Communication Headsets from GN Netcom

          • Jabra GO™ 6400 and Jabra PRO™ 9400 Series are
            both industry-first Bluetooth and DECT headset         Jabra PRO 9400
            solutions to feature a touch screen base.

          • Both series combine the sound, range and quality
            performance of a professional office headset with
            the flexibility of a mobile headset, offering the
            ease of using a single device for several forms of
            communication.

          • Both headset solutions offer triple connectivity
            with the ability to connect simultaneously to desk,
            soft and mobile phones.
                                                   Jabra GO 6400
          • Scheduled to launch in October.

          • Solidifies our leadership
            role within the increasingly
            important UC market,
            which represents a
            growth opportunity for
            the CC&O industry.
                                                                          10
August 14, 2009
                                                                               Slide 10
                  Status on the FAST Program



                        Two dedicated and simplified supply chain organizations. Went live at
      Supply Chain      the end of Q2 2009 as planned.


       Customers        Previously, the Mobile division had around 700 customers. Now focus
                        is on 100 large customers generating 90% of revenue. Completed.


                        Number of products significantly reduced to fewer products based on
         Products       reconfigurable platforms – especially in Mobile headsets. Completed.



      Organization      The number of employees for the quarter is down 24% relative to last
                        year.

                        FAST expected to provide cost reductions in 2010 in the magnitude of
    Cost Reductions     DKK 500 million annually relative to 2007. Includes DKK 175 million
                        in structural reductions in production costs.

                        Total non-recurring costs related to FAST expected to amount to up to
           Costs        around DKK 250 million of which DKK 107 million was expensed in
                        2008. Unchanged, despite higher savings target.           11
August 14, 2009
                                                                                         Slide 11
                  GN ReSound




                               12
August 14, 2009
                                    Slide 12
                  GN ReSound Income Statement


                  (DKK million)     Q1      Q2      Q3       Q4    2008       Q1       Q2
                  Revenue           772     776     787     843     3,178     774     757

                  Organic growth    1%     (1)%     9%      10%       5%     (4)%    (7)%

                  Gross margin     60%     62%     57%      62%      60%     62%     61%

                  SG&A, R&D etc.   (432)   (410)   (447)   (465)   (1,754)   (448)   (405)

                  EBITA              31      72       4      56       163      29      54

                  EBITA margin     4.0%    9.3%    0.5%    6.6%      5.1%    3.7%    7.1%

           • GN ReSound continues the initiatives to create a leaner, more customer-focused
             organization with improved cash flows and a strong platform for profitable growth
             in 2010.
           • Operating expenses, excluding costs related to the restructuring program, have
             been reduced by 11% relative to quarterly average of 2008 (2008 being the base
             line for the restructuring program).
           • Hearing Instruments generated revenue of DKK 679 million corresponding to
             organic growth of (7)% adversely impacted by market conditions and a shift in the
             product mix.
           • Audiologic Diagnostics Equipment contributed with a revenue of DKK 78 million
             corresponding to organic growth of (3)%.
           • Hearing instrument unit growth was (1)%.                                   13
August 14, 2009
                                                                                             Slide 13
                  GN ReSound Balance Sheet & Cash Flow


          Balance sheet selected items                      Q2         FY        Q1         Q2
          (DKK million)                                   2008       2008      2009       2009
          Inventories                                       390        391       373       332
          Trade receivables                                 758        744       741       687

          Trade payables                                    161        206       155       126
          Cash flow (DKK million)
          Cash flow before working capital                  104        462       100       113

          Change in working capital &
          restructuring/non-recurring costs paid            (45)     (166)        72         52
          Cash flow from investing activities             (107)      (443)       (75)     (61)
          Free cash flow excl. tax & financial items        (48)     (147)        97       104

            • GN ReSound reduced its working capital during the quarter with both accounts
              receivable days and inventory turns improving.
            • The cash flow from investing activities was reduced significantly.
            • The positive change in working capital and lower investments has resulted in
              positive cash flow from operating and investing activities excluding tax and financial
              items of DKK 104 million.                                                  14
August 14, 2009
                                                                                                  Slide 14
                  Transformation of Organization on Track

      Cost reductions: Annual cost base in 2010 to be reduced by more than DKK
                       200 million relative to 2008
      Costs:           Costs related to the restructuring program is DKK 53 million
                       2009 YTD. Total costs of ~DKK 75m is expected in 2009
      Working Cap.:    Cash impact from reductions YTD > DKK 100 million
      Organization:    Reduced no. of employees from ~ 3,775 end of 2008 to
                       ~3,450 end Q2


                                      Finance, HR and IT
                           • Resized IT function and re-evaluated IT setup

                  R&D          Operations              Marketing                 Sales
    • New structure and    • Consolidate true      • New SVP and          • Reorganization to
      leadership             global organization     organization in        increase sales and
    • Increased              with new SVP            global marketing       customer focus
      efficiency, new      • Improved repair       • Focus on life cycle  • Transfer and
      products to market     and inventory           management             consolidation of
      at lower cost          management            • Increased efficiency   local manufacturing
    • Projects and core    • Fewer stock             in marketing
      technologies re-       keeping units           products
      evaluated                                                                      15
August 14, 2009
                                                                                           Slide 15
                  Refined strategic focus


      Customer focused                       –   Key accounts & tenders
                                             –   Emerging markets
                                             –   Germany and France


      Market innovation                      –   Regain position in top end
                                             –   Launch effectiveness
                                             –   Meeting needs for end-users and dispensers



      Efficient                              –   Execution excellence / Reducing costs
                                             –   End to end supply chain


      Culture                                –   Performance driven culture


             First results showing:
             • Reduced quarterly cost run-rate and reduced working capital
             • Improved and positive cash flow
             • Expanded strategic partnership with Amplifon
                                                                                    16
             • New partnership with KIND Hörgeräte
August 14, 2009
                                                                                         Slide 16
                  ReSound Live and dot2 by ReSound



                  Great, meaningful solutions to all end user
                  needs and preferences:
                    • ReSound Live: For users that primarily value the
                      many options & flexibility


                    • dot2 by ReSound: For users who primarily value
                      cosmetics/invisibility and simplicity in use.




                                                                   17
August 14, 2009
                  GN’s Outlook for 2009


     GN Store Nord                            GN Netcom                          GN ReSound
                                           Contact Center &                  Hearing Instruments
                                           Office Headsets,                  and Audiologic
   • Listed company                        Mobile Headsets                   Diagnostics Equip.
   • Supervisory Board
   • Equally ranked
     CEO’s GN Netcom
     and GN ReSound

     Outlook 2009:                 Outlook 2009:                      Outlook 2009:
     EBITA DKK ~(30)m              Revenue DKK ~2bn                   Revenue DKK ~3bn
                                   EBITA DKK ~(100)m                  EBITA DKK ~200m



                  Total GN Outlook 2009:
                  • Revenue: around DKK 5 billion
                  • EBITA: around same level as 2008
                  • Amortization, finance etc.: ~ DKK (175) million
                  • Investing activities cash outflow considerably lower than in 2008
                                                                                        18
                  • Free cash flow: significant, positive
August 14, 2009
                                                                                             Slide 18
GN Q2 Interim Report 2009
           Q&A

								
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