Sonova Holding Ag · SIX:SOON
Sonova — Non-Deal Roadshow (May 2012)
60 slides from Sonova's roadshow presentation, May 2012
Slide 1: Roadshow | Full-Year 2011/12 Results
ROADSHOW | FULL-YEAR 2011/12 RESULTS May 2012
Slide 2: Disclaimer
Disclaimer This presentation may contain forward-looking statements including, but not limited to, projections of future performance of products, financial conditions, results of operations and cash flows. The statements are made on the basis of management’s views and assumptions regarding future ev
Slide 3: Business Case
Business Case CLEAR AND FOCUSED STRATEGY – CUSTOMER DRIVEN INNOVATION – Key to our success – our customers and employees – Leading position in hearing instruments – Strong contender in cochlear implants – Global infrastructure provides opportunities – Significant potential for market share gains H
Slide 4: Businesses
Businesses FOCUS ON HEARING INSTRUMENTS AND COCHLEAR IMPLANTS HI Hearing Instruments Behind-The-Ear hearing instruments (BTE) FM systems CI Cochlear Implants Cochlear implants Custom In-The-Ear hearing instruments (ITE) Hearing protection Wireless communication systems Earphones Invi
Slide 5: Contents
Contents 01. MARKET Page 6 02. BUSINESS Page 10 03. STRATEGY Page 19 04. IMPLEMENTATION INITIATIVES Page 28 05. FINANCIAL INFORMATION Page 44 May 2012 Page 5
Slide 6: Market
SOonovVvd 01. MARKET
Slide 7: Market
Market AROUND 15% OF PEOPLE HAVE SOME DEGREE OF HEARING IMPAIRMENT CI PROFOUND COCHLEAR HI IMPLANTS CI MODERATE HI 15% MILD HI With hearing system Without hearing system END-USER MARKET – PENETRATION* - Profound loss 70% - Moderate loss 50% - Mild loss 10% * Source: Several industry statisti
Slide 8: Market: Hearing Solutions
Market HEARING SOLUTIONS : INSTRUMENTS AND COCHLEAR IMPLANTS COCHLEAR IMPLANTS (CI) GOVERNMENT GOVERNMENT CI BUYING INDEPENDENTS HI GROUPS MULTI- HEARING SHOP INSTRUMENTS (HI) LARGE RA GLOBAL KA MARKET - UNITS MARKET - VALUE - HI Size > 10 million - HI Market - Total ~ CHF 15 billion - HI CAGR + 3-4
Slide 9: Market: Service Channels
Market SERVICE CHANNELS : KEY TO ACCESS END-USERS HOSPITALS GOVERNMENT HOSPITALS OTHERS GOVERNMENT INDEPENDENTS GOVERNMENT OTHERS BUYING INDEPENDENTS GROUPS BUYING INDEPENDENTS BUYING GROUPS MULTI- GROUPS GLOBAL SHOP KEY ACCOUNTS LARGE MULTI- MULTI- LARGE SHOP RETAIL SHOP GLOBAL RETAIL ACCONTS KEY A
Slide 10: Business
SOonovVvd 02. BUSINESS
Slide 11: Strong Financial Track Record
Strong Financial Track Record SALES EBITA EBITA in CHF million in CHF million margin in % 1'800 450 40% 1'600 400 35% 1'400 350 30% 1'200 300 25% 1'000 250 20% 800 200 15% 600 150 400 100 10% 200 50 5% 0 0 0% 1) 2007/08 2008/09 2) 2009/10 2010/11 2011/12 5-year CAGR Sales growth reported +12.3% +3.7
Slide 12: Market Position
Market Position EXPANDING STRONG HI POSITION INTO LARGER HEARING CARE MARKET HI : LEADING POSITION CI : EXPANDING POSITION - Market Size ~ CHF 4 billion - Market Size ~ CHF 800 million - Market CAGR + 3-4% - Market CAGR + 10-15% - Position No 1 - Position No 2 - Share ~ 25% - Share ~ 15% May 2012 Pa
Slide 13: Market Position
Market Position SOLID COMPETITIVE ADVANTAGES IN BOTH HEARING AID SEGMENTS HI : LEADING BRAND(S) CI : RESPECTED No 2 BRAND - Largest manufacturer in HI industry - CI solution with strong performance - Most extensive product portfolio - CI solution with high reliability - Multi-brand strategy Phonak /
Slide 14: Channels
Channels STRONG POSITIONS IN INDEPENDENTS, LRA, BG AND GOVERNMENT HOSPITALS INDEPENDENTS GOVERNMENT INDEPENDENTS HOSPITALS OTHERS GOVERNMENT OTHERS GOVERNMENT BUYING GROUPS BUYING BUYING MULTI- INDEPENDENTS GROUPS GROUPS SHOP GLOBAL KEY LARGE MULTI- MULTI- LARGE ACCOUNTS RETAIL SHOP SHOP GLOBAL RETA
Slide 15: Geography
Geography WELL ESTABLISHED GLOBAL INFRASTRUCTURE AND NETWORK Stäfa (CH) Newark (USA) Kitchener (CAN) Suzhou (CN) Murten (CH) Valencia (USA) Ho Chi Minh City (VN) Sonova & Phonak HQ & Centers AB Center WHS Group Companies Unitron Center InSound Center Distributors Phonak Communications Center Operati
Slide 16: Geography
Geography EUROPE AND AMERICAS - MAIN CONTRIBUTORS TO GROUP SALES 5-yearSales FY06/07 CAGR (LC) FY11/12 TOTAL +14.6% EMEA +13.3% (incl. Switzerland) Americas +15.2% (incl. USA) APAC +17.2% 0 500 1'000 1'500 2'000 0 500 1'000 1'500 2'000 Sales (CHF million) Sales (CHF million) ASIA-PACIFIC - ATTRACTIV
Slide 17: Businesses
Businesses FOCUS ON HEARING INSTRUMENTS AND COCHLEAR IMPLANTS HI Hearing Instruments Behind-The-Ear hearing instruments (BTE) FM systems CI Cochlear Implants Cochlear implants Custom In-The-Ear hearing instruments (ITE) Hearing protection Wireless communication systems Earphones Invi
Slide 18: Businesses
Businesses SOLID GROWTH IN BOTH HEARING INSTRUMENTS AND IMPLANTS 5-yearSales FY06/07 CAGR (LC) FY11/12 TOTAL +14.6% CI HI +13.1% 0 500 1'000 1'500 2'000 0 500 1'000 1'500 2'000 Sales (CHF million) Sales (CHF million) May 2012 Page 18
Slide 19: Strategy
SOonovVvd 03. STRATEGY
Slide 20: Vision
Vision RECOGNIZED AS INNOVATION LEADER IN GLOBAL HEARING CARE MARKET HI Hearing Instruments Behind-The-Ear hearing instruments (BTE) FM systems CI Cochlear Implants Cochlear implants Custom In-The-Ear hearing instruments (ITE) Hearing protection Wireless communication systems Earphones
Slide 21: Strategy
Strategy SIX KEY STRATEGIES DRIVING CORE SALES AND EARNINGS GROWTH STRATEGIES STRATEGIC IMPLEMENTATION INITIATIVES • INNOVATION 1 MARKETING (MAR) • MARKET 2 SALES & DISTRIBUTION (S&D) • PRODUCT 3 NEW PRODUCTS (PRO) • PORTFOLIO 4 PRODUCTIVITY & EFFICIENCY (P&E) • RESOURCE • ACQUISITION 5 PROCESSES &
Slide 22: Innovation Strategy
Innovation Strategy FOCUS ON CONTINUOUS INNOVATION TO GROW SALES AND EARNINGS Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 MARKETING SALES & DISTRIBUTION NEW PRODUCTS PRODUCTIVITY & EFFICIENCY RESOURCES & PROCESSES CORE: DRIVE STRONG NEW PRODUCT PIPELINE – R&D 7-8% OF SALES May 2012 P
Slide 23: Market Strategy
Market Strategy GROW MARKET POSITION ALONG 4 MAIN GROWTH VECTORS 4 1 Penetrate existing markets – WHS account development – Dual-brand strategy 3 – Continuous product innovation 2 Expand accessible markets – BRIC markets – New product formats 2 3 Integrate service channels – Retail network expansion
Slide 24: Product Strategy
Product Strategy PROVIDE COMPLETE CUSTOMER SOLUTIONS: HW, SW AND SERVICES PLATFORM CONCEPT APPROACH TO SOLUTION DEVELOPMENT May 2012 Page 24
Slide 25: Portfolio Strategy
Portfolio Strategy DEVELOP BALANCED PORTFOLIO OF PROFITABLE GROWTH BUSINESSES INVEST RETURN Low High ??? STAR High LYRIC High MARKET GROWTH CI HI FM Low Low DOG COW MARKET SHARE LEAD INNOVATION IN HEARING INSTRUMENTS AND IMPLANTS May 2012 Page 25
Slide 26: Resource Strategy
Resource Strategy LEVERAGE GLOBAL INFRASTRUCTURE TO EXPAND MARGINS AMERICAS EUROPE APAC 200 200 200 150 150 150 100 100 100 SALES SALES SALES 50 50 50 OPEX OPEX OPEX 0 0 0 2012 2016 2012 2016 2012 2016 RE-BALANCE GLOBAL OPEX BASE TO CREATE NATURAL HEDGE May 2012 Page 26
Slide 27: Acquisition Strategy
Acquisition Strategy INVEST TO LEVERAGE EXISTING CHANNELS AND PRODUCTS 3'000 0 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 Channels HI ISM CI AB TARGETS: STRICT CRITERIA FOR STRATEGIC AND FINANCIAL FIT May 2012 Page 27
Slide 28: Implementation Initiatives
04. IMPLEMENTATION INITIATIVES
Slide 29: Strategic Implementation Initiatives
Strategic Implementation Initiatives KEY INITIATIVES DRIVING CORE SALES AND EARNINGS GROWTH STRATEGIES STRATEGIC IMPLEMENTATION INITIATIVES • INNOVATION 1 MARKETING (MAR) • MARKET 2 SALES & DISTRIBUTION (S&D) • PRODUCT 3 NEW PRODUCTS (PRO) • PORTFOLIO 4 PRODUCTIVITY & EFFICIENCY (P&E) • RESOURCE • A
Slide 30: Strategic Implementation Initiatives
Strategic Implementation Initiatives HEARING INSTRUMENTS HEARING IMPLANTS • Multi-brand strategy • Co-marketing with Phonak (trusted name) • Raise awareness for hearing related issues (PR) • Leverage hearing instrument patient database MARKETING • Direct marketing: referral and lead generation • Add
Slide 31: Multi-Brand Strategy
Multi-Brand Strategy MULTI-BRAND APPROACH PROVIDES BREADTH OF MARKET REACH Innovation leadership VALUE PROPOSITIONS Leadership in customer experience Performance leadership Professional hearing services May 2012 Page 31
Slide 32: Raising Awareness
Raising Awareness MULTIPLE INITIATIVES TO ADDRESS LEVELS OF HEARING LOSS Information and education on cochlear Sharing experiences & implants offer support Create awareness about the importance of hearing May 2012 Page 32
Slide 33: Direct Marketing / Lead Generation
Direct Marketing / Lead Generation REDUCE COST FOR LEAD GENERATION – IMPROVE LEAD CONVERSION Awareness Counseling Trial Use Owner Fitter Three quarter of Hearing Impaired Drop-out : 50% Hearing consult a doctor Impaired Drop-out : 60% Drop-out : 25% Innovative Raise Direct Our tasks: Awareness Marke
Slide 34: Drive Customer Penetration
Drive Customer Penetration KEEP SHARE OF WALLET WITH A - INCREASE WITH B & C CUSTOMERS A >70% B > 30% < 70% C > 10 % < 30% D < 10% EXPAND BEYOND «MILK-RUN» - ALIGN SALESFORCE INCENTIVES May 2012 Page 34
Slide 35: Develop Business in Emerging Markets
Develop Business in Emerging Markets FOCUS ON UNTAPPED POTENTIAL IN (B)RIC MARKETS DEVELOP TAILORED PRODUCT AND DISTRIBUTION INITIATIVES May 2012 Page 35
Slide 36: Retail Network Expansion
Retail Network Expansion KEY PROJECTS & INITIATIVES DRIVING PROFITABILITY SALES SYSTEM SALES FORCE (SHOPS) (PEOPLE) Operational Excellence Sales Excellence • Integration of acquisitions • Lead generation PROCESSES • Standardization • Customer experience • Systems & Tools • Lead conversion Capacity H
Slide 37: Retail Network Integration
Retail Network Integration CONSOLIDATION EFFECT ON MARGINS Profitability GROWTH & CONSOLIDATION EFFICIENCY & PROFITABILITY • Consolidation of lower margin businesses • Integration cost • Operational excellence • Unified branding Time TRADE-OFF – SHORT-TERM DILUTION VS. LONG-TERM PROFIT GROWTH May 20
Slide 38: New Product Innovation Rate
New Product Innovation Rate REGULAR INTRODUCTION OF NEW PLATFORMS Innovation rate1) Palio Core Spice 58% 65% 69% 69% 59% 62% 77% 81% 71% Ø 22% growth p.a. 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 1) Sales of products launched less than 2 years ago in % of total sales O
Slide 39: Rapid New Products Introductions
Rapid New Products Introductions CONSISTENTLY UPDATED RANGE OF PRODUCTS 29% Launched 1 year ago Launched 2 years ago Launched > 2 years ago 55% 16% Ø 22% growth p.a. Phonak nano Phonak M H2O Naida S CRT Nios S H2O Quantum BTE Lyric Naida S I Phonak Dalia Moxi Pro Quantum Pro BROAD RANGE ACROSS ALL F
Slide 40: Phonak Lyric
Phonak Lyric INTRODUCING A NEW PRODUCT CATEGORY min 24 mm Unique selling proposition – Invisible and hassle-free 24/7 for up to 120 days – Immediate insertion, no ear impression necessary – Worn during daily activities Further improved with new version – 50% higher anatomical fit rate – Improved lon
Slide 41: Accelerating Innovation Rate in CI
Accelerating Innovation Rate in CI ATTRACTIVE PRODUCT DEVELOPMENT – PHONAK AND AB SYNERGIES* PROCESSOR Innovation – Hearing performance – Connectivity – Size, esthetics Neptune Improved Improved Improved – Power consumption Harmony Processor v1 Processor v2 Processor v3 IMPLANT – Robustness – Size –
Slide 42: Incorporating HI Technology in CI
Incorporating HI Technology in CI LEVERAGING R&D - PRODUCT IMPROVEMENTS AND COST SYNERGIES Feature Phonak Ambra AB Harmony Competitor A Competitor B Stationary Noise Reduction NoiseBlock ClearVoice - (X) Impulsive Noise Reduction SoundRelax - - - Wind Noise Reduction WindBlock - - - Dereverberation
Slide 43: Business Case
Business Case CLEAR AND FOCUSED STRATEGY – CUSTOMER DRIVEN INNOVATION – Key to our success – our customers and employees – Leading position in hearing instruments – Strong contender in cochlear implants – Global infrastructure provides opportunities – Significant potential for market share gains H
Slide 44: Financial Information
SOonovVvd 05. FINANCIAL INFORMATION
Slide 45: Full Year 2011/12: Financial Highlights
FULL YEAR 2011/12 FINANCIAL HIGHLIGHTS – Solid financial results in local currencies on both Group level and in hearing instruments segment – Negative FX impact of approximately CHF 184 million on sales and CHF 82 million on EBITA – Gross profit of CHF 1,106 million Gross profit margin of 68.3%
Slide 46: Full Year 2011/12: Solid Financial Performance
FULL YEAR 2011/12 SOLID FINANCIAL PERFORMANCE In CHF million FY 2010/11 FY 2011/12 Change Sales 1,616.7 1,619.8 +0.2% Gross profit 1,118.7 1,105.9 -1.1% Gross profit margin 69.2% 68.3% EBITA 326.6 315.2 -3.5% EBITA margin 20.2% 19.5% Operating free cash flow 221.5 239.5 +8.1% EPS (in CHF) 3.50 3.71
Slide 47: Substantial FX Impact on Results
FULL YEAR 2011/12 SUBSTANTIAL FX IMPACT ON RESULTS FY 2011/12 FY 2011/12 In CHF million FY 2010/11 reported (const. currencies) Sales 1,617 1,620 1,804 Gross Profit 1,119 1,106 1,250 Gross Profit margin 69.2% 68.3% 69.3% EBITA 327 315 397 EBITA margin 20.2% 19.5% 22.0% USD (average rate) 1.01 0.88 1
Slide 48: Sales Results
FULL YEAR 2011/12 SALES RESULTS Growth Internal External In CHF million FY 2010/11 FY 2011/12 FX impact in lc Growth Growth -172 Hearing instrument sales 1,545.9 1,523.5 +9.7% +4.5% +5.2% (-11.1%) -12 Hearing implant sales 70.8 96.3 +53.5% +53.5% - (-17.5%) -184 Consolidated sales 1,616.7 1,619.8 +1
Slide 49: Solid Growth in Key Markets
FULL YEAR 2011/12 SOLID GROWTH IN KEY MARKETS IN LOCAL CURRENCIES in CHF million FY 2010/11 FY 2011/12 Sales in % Sales in % Growth in lc EMEA (excl. Switzerland) 596.8 37% 626.3 39% +15.4% Switzerland 41.3 3% 38.2 2% -7.4% USA 622.1 37% 590.2 36% +9.0% Americas (excl. USA) 220.5 15% 205.6 13% +4.4%
Slide 50: Sales Growth Across Product Groups
FULL YEAR 2011/12 SALES GROWTH ACROSS PRODUCT GROUPS in CHF million FY 2010/11 FY 2011/12 Sales in % Sales in % Growth in lc Premium HI 398.0 25% 359.8 22% +3.5% Advanced HI 378.4 23% 375.9 23% +10.4% Standard HI 481.3 30% 490.2 30% +11.0% Wireless comm. 75.1 5% 65.3 4% -3.3% Miscellaneous 213.1 13%
Slide 51: Operating Expenses
FULL YEAR 2011/12 STRONG LEVERAGE – OPEX +7.7% LC VS TOP-LINE GROWTH OF 11.6% LC Change in CHF million FY 2010/11 FY 2011/12 Change in CHF in lc Research & Development 107.8 116.2 +7.8% +11.9% in % of sales 6.7% 7.2% Sales & Marketing 498.6 503.4 +1.0% +10.7% in % of sales 30.8% 31.1% General & Admi
Slide 52: Group EBITA Development
FULL YEAR 2011/12 GROUP EBITA DEVELOPMENT -9 +11 +68 397 -82 327 315 +71 +21.6% Margin: Margin: -12 Margin: 20.2% 22.0% -3.5% 19.5% EBITA Variance Increase of Acquisitions EBITA FX EBITA FY 2010/11 in gross OPEX FY 2011/12 effect FY 2011/12 profit const. FX EBITA REDUCED BY CHF 82 MILLION DUE TO NEG
Slide 53: EBITA Development Hearing Instruments Segment
FULL YEAR 2011/12 EBITA DEVELOPMENT HEARING INSTRUMENTS SEGMENT +11 +4 +37 424 -85 372 339 +52 +14.0% Margin: Margin: -32 Margin: 24.0% 25.0% -8.7% 22.3% EBITA Variance Decrease of Acquisitions EBITA FX EBITA FY 2010/11 in gross OPEX FY 2011/12 effect FY 2011/12 profit const. FX UNDERLYING MARGIN IM
Slide 54: Financial Results and Income Taxes
FULL YEAR 2011/12 FINANCIAL RESULTS AND INCOME TAXES in CHF million FY 2010/11 FY 2011/12 Comments EBITA 326.6 315.2 CHF 2.7m one-time costs (PAI) Impairment of CHF 4.9m (PAI) Amortization/Impairment -55.8 -27.5 vs. CHF 35.5m FY 10/11 Operating profit (EBIT) 270.8 287.7 Financial result, net -13.7 -
Slide 55: Significant Increase in Free Cash Flow
FULL YEAR 2011/12 SIGNIFICANT INCREASE IN FREE CASH FLOW in CHF million FY 2010/11 FY 2011/12 Cash flow before changes in 398.1 387.5 net working capital Changes in net working capital -53.4 -82.7 Operating cash flow 344.6 304.8 in % of sales 21.3% 18.8% Cash flow from investing activities (excl. -1
Slide 56: Balance Sheet: Sound Financial Position
FULL YEAR 2011/12 BALANCE SHEET: SOUND FINANCIAL POSITION in CHF million 31 Mar 2011 31 Mar 2012 Net working capital 158.2 163.4 Days sales outstanding (DSO) 78 72 Days inventory outstanding (DIO) 154 122 Operating capital employed 441.2 475.3 (excluding acquisition-related intangible assets) Capita
Slide 57: Unchanged Distribution
FULL YEAR 2011/12 UNCHANGED DISTRIBUTION • Proposed distribution of CHF 1.20 per share, without withholding tax • Pay-out ratio of around 30% Dividend / distribution development in CHF per share 1.20 1.20 1.20 1.00 1.00 0.75 0.50 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 May 2012 Page
Slide 58: Outlook: FX Impact
OUTLOOK FX IMPACT ON SALES AND MARGINS LIKELY TO BE MORE MODERATE USD/CHF EUR/CHF 1.20 1.20 1.50 1.50 1.15 1.15 1.45 1.45 Avg FY 10/11: 1.34 1.10 1.10 1.40 1.40 Avg FY 10/11: 1.01 1.05 1.05 1.35 1.35 1.00 1.00 1.30 1.30 -9% -13% 1.25 1.25 0.95 0.95 0.90 0.90 1.20 1.20 0.85 0.85 1.15 1.15 0.80 0.80 1
Slide 59: Outlook: Profitable Growth Expected in 2012/13
OUTLOOK PROFITABLE GROWTH EXPECTED IN 2012/13 in CHF million FY 2011/12 Guidance FY 2012/13 Sales Sales growth in lc 7%-9% thereof acquisition related growth approx. 1%-2% EBITA EBITA growth 15%-20% Currency assumptions: FX (average rates) USD 0.88 0.88 EUR 1.21 1.21 May 2012 Page 59
Slide 60: Thank You!
SOnNOVd THANK YOU!