GN Store Nord A/S
Quarterly report

Interim Report Q3 2012: GN introduces innovative new products. Strong gross margin improvement in GN ReSound

Copenhagen, 2012-11-15 08:00 CET -- In Q3 2012, GN Store Nord continued to improve business fundamentals through product innovation, partnerships and restructuring. GN Store Nord’s revenue increased by 10% with organic growth of 1%. Excluding SMART restructuring costs, EBITA improved by 13% compared to Q3 2011 ending at DKK 195 million for the group.

GN ReSound achieved organic growth of 2% in Q3 2012. Within Hearing Instruments organic growth was 1% – somewhat above the market growth, which is estimated to have developed flat to slightly negative in value terms in Q3. Supported by further innovative product launches, GN Otometrics generated 16% organic growth in Q3. In late Q3, GN ReSound launched ReSound Verso^TM, a new breakthrough premium hearing aid family. ReSound Verso^TM is the first hearing aid that features both wireless direct streaming of sound and ear-to-ear connectivity based on 2.4 GHz technology. ReSound Verso^TM has been introduced to the market with very encouraging feedback. As previously announced, the SMART restructuring program started showing impact in Q3, clearly driving up the gross margin compared to prior years. The gross margin reached 63.6% excluding SMART restructuring costs in Q3 an increase of 2.3 percentage points. EBITA increased by 29% to DKK 138 million excluding SMART restructuring costs. GN ReSound’s revenue and EBITA guidance for 2012 are confirmed.

The organic growth in GN Netcom was (1)% for the quarter. Europe, GN Netcom’s largest region, was severely impacted by the macroeconomic weakness in southern Europe and the suppressed financial sector in the UK. The development in southern Europe and UK was partly offset by continued strong performance in the Nordic markets leading to organic growth of 0% in Europe. In North America, organic growth amounted to 7% driven by strong development in Unified Communications headsets. Based on the overall weak demand in Europe, the organic growth guidance for 2012 for GN Netcom is reduced to “around 5%” from previously “around 7%”. The EBITA guidance of “DKK 350 - 375 million” is confirmed.

As previously communicated, GN ReSound is divesting certain non-core and loss making entities as part of the SMART restructuring program. In this connection certain one-off non-cash losses are incurred. The group guidance for “Amortization, finance, etc.” is consequently adjusted from “around DKK (75) million” to “around DKK (100) million”.
 

Quarterly highlights:

• GN Store Nord’s revenue was DKK 1,494 million in Q3 2012 compared to DKK 1,359 million in Q3 2011 corresponding to 10% revenue growth and 1% organic growth. Acquired activities added around 1% to the revenue, and the development in foreign exchange rates added around 8% compared to Q3 2011.
• Consolidated EBITA was DKK 195 million (excluding SMART restructuring costs of DKK 78 million), an increase of 13% compared to Q3 2011.
• GN ReSound’s revenue was DKK 946 million, and organic growth ended at 2%. EBITA was DKK 138 million (excluding SMART restructuring costs), up 29% from DKK 107 million in Q3 2011. The gross margin ended at a historically high level at 63.6% (excluding SMART restructuring costs).
• As previously communicated, additional profit improvement potential has been identified as the SMART program progresses. The targeted EBITA improvement in 2013 compared to 2011 as the base year is consequently increased to “DKK 240 – 290 million” (up from “DKK 190 - 240 million”) with further run rate improvements expected in 2014.  The expected one-time SMART restructuring costs are changed from “up to DKK 200 million” to now “up to DKK 325 million”. The majority of the additional costs, around DKK 100 million, are expected to be incurred in 2013.
• GN Netcom’s revenue was DKK 548 million compared to DKK 516 million in Q3 2011. EBITA was DKK 74 million equivalent to the realized EBITA in Q3 2011.
• On November 14, 2012, GN Store Nord entered into an agreement with 3DM Systems, a US based company, which has succeeded in developing a truly innovative and unique ear scanner technology. This new breakthrough technology will offer an important innovation for hearing solutions and underlines GN Store Nord’s commitment to provide unique and innovative solutions with real user benefits to the market. 
• GN Store Nord confirms the EBITA guidance for 2012 of “DKK 815 - 875 million”. The organic growth guidance is changed slightly from “4-6%” to “4-5%”. The guidance for “Amortization, finance, etc.” is adjusted from “around DKK (75) million” to “around DKK (100) million”.
• GN Store Nord confirms the 2013 target on revenue of “more than DKK 6.4 billion” and an EBITA margin of “around 19%”

For further information, please contact:

Michael Bjergby

Director – IR, Communications, CSR & Treasury

GN Store Nord A/S

Tel: +45 45 75 02 92