Company announcementno 2024-08
Interim Management Statement for Q1 2024
Organic revenue growth of 3% in Q1 driven by good performances in Hearing Aids and Diagnostics
Recently launched Oticon Intent has seen strong initial reception, especially in the independent channel
Outlook for 2024 maintained: Organic growth of 4-8% and EBIT before special items of
“Overall, we are pleased with the start to the year where our Diagnostics and Hearing Aids business areas continued the trend from 2023 and delivered good growth, while Hearing Care saw a slower start to the year, with performance improving during the period. These results combined are in line with our expectations, and we maintain our outlook for the year. As we look towards the upcoming quarters, we expect to see increased growth, which will be driven by our recently launched hearing aid flagship products, including Oticon Intent. In Q1, we also delivered on our updated strategic direction to be a fully focused hearing healthcare company dedicated to improving the lives of as many people as possible through market-leading innovation and distribution,”says Søren Nielsen, President & CEO of Demant.
| Revenue(DKK million) |
| Growth | |||||
Business area | Q1 2024 | Q1 2023 |
| Organic | Acquisitive | LCY | FX | Reported |
|
|
|
|
|
|
|
|
|
Hearing Aids, total revenue | 3,107 | 3,048 |
| 3% | 0% | 3% | -1% | 2% |
Hearing Aids, internal revenue | -599 | -570 |
| 1% | 4% | 5% | 0% | 5% |
Hearing Aids, external revenue | 2,508 | 2,478 |
| 4% | -1% | 3% | -2% | 1% |
Hearing Care | 2,318 | 2,218 |
| 0% | 5% | 5% | 0% | 5% |
Diagnostics | 597 | 566 |
| 7% | 0% | 7% | -1% | 5% |
Group | 5,423 | 5,262 |
| 3% | 2% | 4% | -1% | 3% |
- Following very strong growth in the comparative period, the Group realised organic growth of 3% in Q1, which was driven by Hearing Aids and Diagnostics. Growth from acquisitions added 2% and exchange rate effects -1%, leading to total reported growth of 3%.
- Hearing Aids continued to see good performance in Q1, resulting in organic growth attributable to external customers of 4%. Despite very strong performance in the comparative period, we estimate that our market share in value remained stable. Our recently launched premium hearing aids have seen strong initial reception amongst customers, particularly in the independent channel where we have seen sequential market share gains. Growth in the period was entirely driven by the average selling price (ASP), whereas unit growth was negative, in part due to lower sales to certain larger accounts.
-
Hearing Care saw a slow start to the year with flat organic growth in Q1, which is slightly below expectations. This development was predominantly due to slow momentum in
France where traffic and conversion rates were lower than expected.China was also a drag on organic growth, primarily due to weak market dynamics. Oticon Intent has now been introduced to most of our markets, which contributed to a positive ASP in the period. During the period, we have seen an improved run rate, and we expect growth to increase going forward. In line with our strategy, acquisitions – primarily inGermany andBelgium – continued to contribute to growth. - Diagnostics saw solid performance, leading to organic growth of 7% in Q1, with strong growth contributions from our services and hearing instrument fitting solutions businesses.
- The Group’s gross margin was better than expected and improved meaningfully vs. Q1 2023. This growth was particularly driven by our continued focus on improving our product and channel mix to lift the ASP in Hearing Aids and by gross margin improvements in Diagnostics, and it was realised despite a negative business mix in the period.
- In line with expectations, OPEX saw low double-digit growth in local currencies in Q1 of which most was organic. The increased OPEX partly reflects lower spending in the comparative period, and partly our commitment to invest in future growth. We thus continued to increase our R&D capacity and expand our distribution both organically and through acquisitions.
- The Group’s EBIT before special items was in line with expectations, albeit slightly down compared to a very strong Q1 2023.
- Driven by good profitability,CFFO and FCF were positive, although lower than last year due to higher tax payments in Q1.
-
Profit after tax from discontinued operations, which comprise
Hearing Implants and Communications , was negative and in line with expectations. We still expect the divestment of our cochlear implants business to close in H1 2024, and the strategic review of Communications to be completed by the end of H1 2024. -
In H1, we will recognise two extraordinary non-recurring items, which will have a positive, non-cash net impact of around
DKK 125 million on EBIT. These items will be recognised on a separate line as special items, and for this year, we will thus refer to EBIT in our outlook as EBIT before special items.
- After Q1, we have closed an acquisition of a value-added distributor in Hearing Aids, which will result in an unusually large, non-operational and non-cash step-up gain on the book value of our existing ownership and will be recognised under special items.
- We have updated the accounting treatment of certain earn-out payments related to acquisitions, which will result in a non-cash cost to be recognised under special items.
- As of
31 March 2024 , the Group had bought back shares worthDKK 739 million .
Outlook for 2024
Our outlook for 2024 remains unchanged and is summarised in the table below:
Metric | Outlook for 2024 |
Organic growth | 4-8% |
EBIT before special items | |
Share buy-backs | More than |
The outlook is based on a number of key assumptions as described below (changes in bold):
- At our Capital Markets Day in
March 2024 , we updated our medium- to long-term view on the hearing aid market. We thus expect the unit growth rate in the global hearing aid market in 2024 to be in line with the structural growth rate of 4-6% and that the hearing aid market will see a flattish ASP development in the year. - We expect the cash allocated to bolt-on acquisitions in 2024 to be higher than normaldue to acquisitions already made in 2024 and a continuously good pipeline of attractive opportunities.
-
We expect profit after tax related to Communications to be negative by
DKK 100-150 million . This relates entirely to an expected full-year operating loss and does not include any financial impact related to the review of strategic options. -
The divestment of our cochlear implants business is expected to close in H1 2024. Our bone anchored hearing systems business will remain with the Group for now, pending a review of our strategic options. For the full year 2024, we expect profit after tax related to Hearing Implants to be around
DKK 0 million .
For modelling purposes, we provide further assumptions for 2024 below, which are updated as of
Metric | Assumption for 2024 |
Acquisitive growth | 2% based on revenue from acquisitions completed as of |
FX growth | -1% based on exchange rates as of |
Effective tax rate | Around 24% |
Profit after tax from discontinued | Negative by |
Special Items | Positive by around |
Conference call details
Demant will host a conference call on
Further information: Søren Nielsen, President & CEO Phone +45 3917 7300 www.demant.com | Other contacts: Peter Pudselykke, Head of Investor Relations |
Hearing Healthcare
Market trends
Overall, the hearing healthcare market we address, which comprises the markets for hearing aids and diagnostic instruments and services, saw growth in Q1.
Hearing aid market
Based on available market statistics, covering around two-thirds of the hearing aid market, and on our own assumptions, we estimate that the global hearing aid market saw unit growth of around 3% in Q1 compared to the same period in 2023. Growth was positive across regions, and we estimate that geography and channel mix changes resulted in a slightly positive ASP development, leading to value growth in the hearing aid market, which is roughly in line with our expectations.
Estimated hearing aid market unit growth by region
| 2023 | 2024 | ||||
Region | Q1 | Q2 | Q3 | Q4 | FY | Q1 |
4% | -4% | 7% | 2% | 2% | 1% | |
9% | 5% | 11% | 16% | 10% | 10% | |
Hereof US (commercial) | 9% | 5% | 12% | 19% | 11% | 13% |
Hereof US (VA) | 9% | 4% | 4% | 4% | 5% | -1% |
Rest of world | 9% | 10% | 7% | 10% | 9% | 1% |
Global | 7% | 3% | 8% | 8% | 7% | 3% |
Compared to the same period in 2023, we estimate that in Q1, market unit growth in
Growth in
Looking beyond
Diagnostics market
We estimate that, compared to the same period last year, the market growth rate in Q1 was in line with the estimated structural growth rate of 4-6% per year.
Hearing Aids
As expected, our Hearing Aids business delivered solid growth, leading to total organic growth of 3% and organic growth from external customers of 4% in Q1. Growth in the period was negatively impacted by very strong performance in Q1 2023. In addition, exchange rates saw growth of -1%.
Following the recent launch of premium hearing aids in all brands, we have seen strong initial reception amongst customers, particularly in the independent channel. This led to a very positive ASP contribution in Q1, which was further supported by lower sales to certain large accounts.
In
In
Hearing Care
In Hearing Care, we saw a slow start to the year with flat organic growth in Q1, which is slightly below our expectations and due to lower traffic and conversion rates than expected in
In terms of regions,
In
Diagnostics
Following another good year in 2023, organic growth in Diagnostics was off to a good start and grew 7% in Q1. This was partly supported by lower growth in the comparative period, which saw some shipment delays from the ramp-up of our production site in
Organic growth was broad-based across regions, except for
Contacts
Henrik Axel Lynge Buchter , External Communication Manager, Corporate Communication & Sustainability, +45 2264 9982, heey@demant.com
About Demant A/S
Demant is a world-leading hearing healthcare group that offers solutions and services to help people with hearing loss connect with the world around them. In every aspect, from hearing devices, hearing implants, diagnostics to audio and video solutions and hearing care all over the world, Demant is active and engaged. Our innovative technologies and know-how help improve people’s health and hear-ing. We create life-changing differences through hearing health.
Attachments
- 2024-08 Interim Management Statement for Q1 2024.pdf
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