William Demant Holding A/S: Interim Report 2017

Market share gains in wholesale of hearing aids, with organic growth of 11% driven by Oticon Opn
Group organic growth of 8% due to innovative products and strong performances by all businesses
Based on strong EBIT growth of 28% in the first half-year, we increase our guidance for 2017

• In the first half of 2017, the Group continued its positive momentum from the second half of 2016 with strong performances by all business activities. Revenue amounted to DKK 6,505 million, corresponding to 12% growth compared to the same period last year, with 8 percentage points attributable to organic growth and 2 percentage points attributable to acquisitions and exchange rate effects, respectively.
• Hearing Devices had a very encouraging first half-year with the wholesale business as the main driver of organic growth, as Oticon Opn continued to perform strongly and thus helped improve the overall product mix. Our wholesale business realised an organic growth rate of 11%, with unit sales growing by 8% and the average selling price (ASP) going up by 3%. Oticon launched Oticon Opn in two new styles including a rechargeable solution, which can be retrofitted to existing Oticon Opn devices, as well as a tinnitus feature. Bernafon and Sonic also launched new hearing aid families in early June
  in three styles and at three price points including Made for iPhone® connectivity, which will help improve the competitive position of these brands. Our retail business realised 10% growth in local currencies of which 4 percentage points are attributable to organic growth.
• Realising an organic growth rate of 24%, Hearing Implants performed very well in the first half-year. Both our cochlear implants and our bone-anchored hearing systems business performed strongly due to continued positive momentum sparked by new products, product approvals in new markets and won tenders in a couple of oil-dependent countries.
• Revenue in Diagnostic Instruments grew by 11% in local currencies of which 10 percentage points can be attributed to organic growth. The substantial organic growth was broadly based across most geographies and brands.
• Our operating profit (EBIT) grew by 28% supported by significant sales growth, economies of scale and strategic initiatives. EBIT amounted to DKK 1,142 million before restructuring costs of DKK 83 million. The resulting EBIT margin was 17.6% compared to 15.4% for the same period last year. Profit for the period was DKK 798 million corresponding to earnings per share (EPS) of DKK 3.09, or an increase of 30%. Cash flow from operating activities (CFFO) was DKK 969 million, or an increase of 26% before cash flow from restructuring costs of DKK -83 million.
• Average exchange rates for our invoicing currencies were higher in the first half-year than in the same period last year and had a positive impact on Group revenue of 2%. However, these invoicing currencies have weakened significantly since the beginning of the year, particularly in the second quarter. This impacted the Group's EBIT negatively in the first half-year by around DKK 70 million. Based on current exchange rates and including expected full-year gains from our hedging activities, we now expect foreign exchange rates to negatively impact EBIT in 2017 by around DKK 80 million compared to exchange rates at the beginning of the year.
• Despite the negative exchange rate effect, we have increased our guidance for 2017 based on the financial results in the first six months combined with our expectation of a solid second half-year. We now expect an EBIT of DKK 2.3-2.6 billion (previously DKK 2.2-2.5 billion) before restructuring costs of around DKK 175 million (previously around DKK 200 million).

"I'm pleased with the overall very good development of the Company in the first half-year where we've seen strong performances by all our business activities. Being able to deliver such high growth rates is a testament to the strong product in-novation and customer focus across the entire Group, but also a clear indication that we are moving in the right direction
to deliver on our hearing healthcare strategy. The fact that we've entered the second half in very good shape makes me
confident that we can maintain our positive momentum for the remainder of the year, which is also the reason why we've increased our guidance for 2017," says Søren Nielsen, President & CEO.

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