62
Investor Presentation June 2014
Investor PresentationJune 2014
Disclaimer
This presentation contains forward-looking statements, which offer no guarantee withregard to future performance. These statements are made on the basis of management’sviews and assumptions regarding future events and business performance at the time thestatements are made. They are subject to risks and uncertainties including, but notconfined to, future global economic conditions, exchange rates, legal provisions, marketconditions, activities by competitors and other factors outside Sonova’s control. Should oneor more of these risks or uncertainties materialize or should underlying assumptions proveincorrect, actual outcomes may vary materially from those forecasted or expected. Eachforward-looking statement speaks only as of the date of the particular statement, andSonova undertakes no obligation to publicly update or revise any forward-lookingstatements, except as required by law.
This presentation constitutes neither an offer to sell nor a solicitation to buy any securities.This presentation does not constitute an offering prospectus within the meaning of Article652a of the Swiss Code of Obligations nor a listing prospectus within the meaning of thelisting rules of SIX Swiss Exchange.
Page 2June 2014
At Sonova, we envision …
… “Hear the world”
Vision
A WORLD WHERE EVERYONE
ENJOYS THE DELIGHT OF HEARING AND
THEREFORE LIVES A LIFE WITHOUT LIMITATIONS
Page 3June 2014
Broadest offering: Hearing Instruments, Cochlear Im plants …
… and professional audiological services
Sonova Group
HI Hearing Instruments � Behind-The-Ear hearing instruments (BTE)� Wireless systems
� Custom In-The-Ear hearing instruments (ITE)
� Hearing protection� Wireless communication systems
� Invisible extended-wear hearing instruments
� Cochlear implants
CI Cochlear Implants
Page 4June 2014
Sonova: “Hear the world”
Key to our success - Our customers and our employees
Broadest product and service offering / portfolio - Hearing instruments (Phonak, Unitron)
- Cochlear implants (Advanced Bionics)
- Professional services (Connect Hearing Group)
Strong competitive positions - Leading position in hearing instruments
- Strong contender on cochlear implants
- Strong position in selected key retail markets
Significant market share gain potential - High R&D spend – fast product introduction
- Differentiated multi-brand strategy
- Optimized multi-channel approach
Strong product pipelines - High innovation rate and rapid new product introduction
Productivity / efficiency gains - Leverage existing global infrastructure to expand margins
Mid-term financial targets (excluding FX impact) - EBITA margin: return to mid-twenties
- ROCE: expand to low-thirties
Clear and focused strategy – Customer driven innovat ion
Sonova Group
Page 5June 2014
Contents
1 Market Page 7
2 Business Page 10
3 Corporate Strategy Page 19
4 Business Strategies Page 26
5 Financial Information Page 44
6 Outlook Page 57
Page 6June 2014
1. Market
Around 15% of adults have some degree of hearing im pairment
Low penetration rate – Around 20% in developed count ries
Market
MILD
MODERATE
PROFOUND
With hearing system Without hearing system
END-USER MARKET – PENETRATION*
- Profound loss- Moderate loss- Mild loss
70%50%10%
���� HI
���� HI
���� CI
���� HI
15%
* Source: Several industry statistics, Sonova estimates
Page 8June 2014
Hearing solutions: Instruments, implants and servic es
Service channels: Key to access end-users
Market
TOTAL HEARING CARE MARKET
- Market Size- Market CAGR- HI Size (units)- CI Size (units)
~ CHF 15-16 billion~ + 3-5%
11-12 million~ 50 thousand
COCHLEAR IMPLANTS CI
- Market Size- Market CAGR- CI Size (units)
~ CHF 1 billion~ +10%
~ 50 thousand
HEARING INSTRUMENTS HI
- Market Size- Market CAGR- HI Size (units)
~ CHF 4.5 billion~ + 2-4%
11-12 millionINDEPENDENTS
GLOBAL
KEY
ACCOUNTSLARGE
RETAIL
ACCOUNTS
BUYING
GROUPS
HOSPITALS
GOVERNMENT
OTHERS
CI
HI
Page 9June 2014
2. Business
Performance history – Strong financial track record
Sonova Group
1HSALESin CHF million
EBITAin CHF million
EBITAmargin in %
Notes: FY 2009/10 Restated based on finalization of the acquisition accounting of Advanced BionicsFY 2012/13 Excluding one-off cost for AB Vendor B provision increase, AB Rixheim restructuring and settlement with a group of investors
2H
FY 2009/10 FY 2010/11 FY 2011/12 FY 2012/13 FY 2013/14 CAGR 5-y
Sales growth reported +20.1% +7.8% +0.2% +10.8% +8.7% +9.3%
Sales growth in LC +23.8% +13.3% +11.6% +7.4% +11.7% +13.4%
Organic sales growth in LC +18.4% +5.8% +6.7% +5.2% +11.0% +9.3%
EBITA margin +28.0% +20.2% +19.5% +21.5% +22.0% n/a
Basic EPS 3.32 3.50 3.71 4.60 5.08 +3.2%
0200400600800
1'0001'2001'4001'6001'8002'0002'200
09/10 10/11 11/12 12/13 13/14 14/150%5%10%15%20%25%30%35%40%45%
050
100150200250300350400450500
09/10 10/11 11/12 12/13 13/14 14/15
Page 11June 2014
Well established global infrastructure and network
Strong local presence – Supporting customers worldwi de
Sonova Group
AB CenterUnitron CenterSonova & Phonak HQ & Centers
DistributorsWHS Group Companies
Operation CentersPhonak Communications CenterPhonak Lyric Center
Murten (CH)
Kitchener (CAN)
Ho Chi Minh City (VN)
Suzhou (CN)
Valencia (USA)
Newark (USA)
Stäfa (CH)
Page 12June 2014
Europe and Americas – Main contributors to group sal es
Sonova Group
SALESin CHF million
SALESin CHF million
2009/10 2010/11 2011/12 2012/13 2013/14CAGR5-year
EU - Sales growth in LC +23.0% +11.3% +13.9% +5.3% +12.4% +13.0%
AM - Sales growth in LC +26.0% +16.9% +7.8% +7.1% +10.7% +13.5%
AP - Sales growth in LC +15.3% +2.7% +24.0% +17.7% +14.0% +14.5%
0200400600800
1'0001'2001'4001'6001'8002'0002'200
09/10 10/11 11/12 12/13 13/14 14/15
EU AM AP
0200400600800
1'0001'2001'4001'6001'8002'0002'200
09/10 10/11 11/12 12/13 13/14 14/15
Page 13June 2014
Expanding strong HI position into larger hearing ca re market
Market position
TOTAL HEARING CARE MARKET
- Market Size- Market CAGR- HI Size (units)- CI Size (units)
~ CHF 15-16 billion~ + 3-5%
11-12 million~ 50 thousand
COCHLEAR IMPLANTS CI
- Market Size- Market CAGR- CI Size (units)
~ CHF 1 billion~ +10%
~ 50 thousand
HEARING INSTRUMENTS HI
- Market Size- Market CAGR- HI Size (units)
~ CHF 4.5 billion~ + 2-4%
11-12 million
Page 14June 2014
Service channels: Strong partner to IND, LRA, BG an d Govt
Market position
TOTAL HEARING CARE MARKET
- Market Size- Market CAGR- HI Size (units)- CI Size (units)
~ CHF 15-16 billion~ + 3-5%
11-12 million~ 50 thousand
COCHLEAR IMPLANTS CI
- Market Size- Market CAGR- CI Size (units)
~ CHF 1 billion~ +10%
~ 50 thousand
HEARING INSTRUMENTS HI
- Market Size- Market CAGR- HI Size (units)
~ CHF 4.5 billion~ + 2-4%
11-12 millionINDEPENDENTS
GLOBAL
KEY
ACCOUNTSLARGE
RETAIL
ACCOUNTS
BUYING
GROUPS
HOSPITALS
GOVERNMENT
OTHERS
SOONSales Split
Page 15June 2014
Balanced portfolio of profitable growth businesses
Sonova Group
SONOVA Group
HEARING INSTRUMENT (HI)Segment
IMPLANT (CI)Segment
CIADVANCED
BIONICS
Business
HIPHONAK
Business
HIUNITRON
Business
HIRETAIL
Business
Page 16June 2014
Performance history
Hearing instruments
SALESin CHF million
EBITAin CHF million
EBITAmargin in %1H 2H
FY 2009/10 FY 2010/11 FY 2011/12 FY 2012/13 FY 2013/14 CAGR 5-y
Sales growth reported +18.1% +4.8% -1.4% +8.2% +6.5% +7.1%
Sales growth in LC +21.7% +10.1% +9.7% +4.9% +9.5% +11.0%
Organic sales growth in LC +18.4% +5.8% +4.5% +2.6% +8.8% +7.9%
EBITA margin +29.0% +24.1% +22.3% +23.3% +23.8% n/a
0200400600800
1'0001'2001'4001'6001'8002'0002'200
09/10 10/11 11/12 12/13 13/140%5%10%15%20%25%30%35%40%45%
050
100150200250300350400450500
09/10 10/11 11/12 12/13 13/14
Page 17June 2014
Performance history
Cochlear implants
SALESin CHF million
EBITAin CHF million
EBITAmargin in %1H 2H
* FY 2012/13 Excluding one-off cost for AB Vendor B provision increase, AB Rixheim restructuring
0255075
100125150175200225
09/10 10/11 11/12 12/13 13/14-70%-60%-50%-40%-30%-20%-10%0%10%20%
-70-60-50-40-30-20-10
01020
09/10 10/11 11/12 12/13 13/14
FY 2009/10 FY 2010/11 FY 2011/12 FY 2012/13 FY 2013/14 CAGR 4-y
Sales growth reported -- +180.5% +36.0% +52.3% +33.1% +66.8%
Sales growth in LC -- +202.1% +53.5% +47.1% +36.0% +74.5%
EBITA margin -31.0% -63.4% -25.0% +1.2% +6.6% n/a
Page 18June 2014
3. Corporate Strategy
On course for mid term financial targets
Financial targets
Notes: FY 2007/08 Excluding one-off cost for the prohibited acquisition of the GN ReSound GroupFY 2009/10 Restated based on finalization of the acquisition accounting of Advanced BionicsFY 2012/13 Excluding one-off cost for AB Vendor B provision at AB, AB Rixheim restructuring and settlement with a group of investors
10%
20%
30%
40%
,0
1,000
2,000
3,000
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17
EB
ITA
Mar
gin
/ RO
CE
(%
)
Sal
es (
in C
HF
mill
ion)
Sales EBITA Margin (%) ROCE (%)
Page 20June 2014
Focus on continuous innovation to grow sales and ea rnings
Core: Drive strong new product pipeline – Gross R&D 7-8% of sales
Innovation strategy
NEW PRODUCTS
SALES & DISTRIBUTION
Q1 15 Q2 15Q1 14 Q2 14 Q3 14 Q4 14Q1 13 Q2 13 Q3 13 Q4 13
MARKETING
PRODUCTIVITY & EFFICIENCY
RESOURCES & PROCESSES
Page 21June 2014
Grow market position along 4 main growth vectors
Focus on key initiatives to support growth strategy
Market strategy
1
2
3
4
Penetrate existing markets– WHS account development– Dual-brand strategy– Continuous product innovation
Expand accessible markets– BRIC markets– New product formats
Integrate service channels– Retail network expansion– Integration & productivity
Develop consumer base– Direct marketing– Demand generation processes
Page 22
1
2
3
4
June 2014
Provide complete customer solutions: HW , SW and Services
Platform concept approach to solution development f or HI & CI
Product strategy
Page 23June 2014
Leverage global infrastructure to expand margins
Re-balance global OPEX base to create natural hedge
Resource strategy
0
50
100
150
200
2012 2016
SALES
OPEX0
50
100
150
200
2012 2016
SALES
OPEX0
50
100
150
200
2012 2016
SALES
OPEX
AMERICAS EUROPE APAC
Page 24June 2014
Invest to leverage existing channels and products
Targets: Strict criteria for strategic and financia l fit
Acquisition strategy
HI
CI
Channels
,0
3,000
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16
ISM
AB
Page 25June 2014
4. Business Strategies
Balanced portfolio of profitable growth businesses
Sonova Group
SONOVA Group
HEARING INSTRUMENT (HI)Segment
IMPLANT (CI)Segment
CIADVANCED
BIONICS
Business
HIPHONAK
Business
HIUNITRON
Business
HIRETAIL
Business
Page 27June 2014
Business strategy
Phonak
Phonak: “Life is on”
Mission / value proposition - Drive innovation leadership to expand market position
Markets - Cover broadest global (whole)sale, distribution & support network
Products - Offer complete range across all form factors and performance levels
Product pipeline - Drive high innovation rate and rapid new product introduction
Productivity / efficiency - Leverage global sales & production infrastructure to expand margins
Selected initiatives 2014/15 - Consumer base development: Web based marketing B2B and B2C
- Increased Web-Store penetration
- New product launch 2014/15
- Roll-out Lyric 3
- Wireless communication/connectivity standards based on 2.4 GHz: e.g. Roger
- Asia market growth and expansion (lead)
Page 28June 2014
Product pipeline – Drive high innovation & launch ra te
Complete range across all formats and performance l evels
Phonak
PH-SPICE PH-QUEST NEXT PLATFORM
BT
E –
Bo
lero
Q
ITE
–V
irto
Q
RIC
–A
ud
éo Q
PO
WE
R –
Naí
da
Q
PE
D –
Sky
Q
F 1
F 2
F 3
F 4
F 5
Lyric2 Lyric3
T 2.1 T 3.3T 3.0 T 4.0T 3.1 T 3.2 T 4.1 T 4.2
F1 / 4
HI – Premium
HI – Advanced
HI – Standard
HI – Essential/Basic
HI – Platform
HI – New EW Format
Fitting Software(TARGET)
1H 16 2H 161H 14 2H 141H 12 2H 12 1H 15 2H 151H 13 2H 13TIMELINE / CY
NEXT PF
F 1
T 4.3 T 5.0
Note: Subject to change
Page 29June 2014
Completing the range of solutions on Quest
Building on the success of the platform
Phonak
BTE Custom RIC Power Pediatric
Premium Bolero Q90 Virto Q90 Audéo Q90 Naída Q90 Sky Q90
Advanced Bolero Q70 Virto Q70 Audéo Q70 Naída Q70 Sky Q70
Standard Bolero Q50 Virto Q50 Audéo Q50 Naída Q50 Sky Q50
Essential Bolero Q30 Virto Q30 Audéo Q30 Naída Q30
Basic Baseo Q Tao Q
Page 30June 2014
Lyric – A new format shaping up
New product format to expand the accessible market
Phonak
<Invisible
24/7
Hassle-free
Page 31June 2014
Business strategy
Unitron
Unitron: “Hearing matters”
Mission / value proposition - Drive leadership in customer experience
Markets - Deeper penetration in core markets in Europe and NA
Products - Offer flexible range across many form factors and all performance levels
Product pipeline - Drive focused innovation and rapid new product introduction
Productivity / efficiency - Leverage Sonova technology & production platform to expand margins
Selected initiatives 2014/15 - B2B Marketing campaign “favorite sound”
- B2B and B2C customer experience – Flex solution roll-out
- Roll-out of premium products on Era 2 platform
- UT customer experience initiatives – “The Unitron Way”
- New product launch 2014/15
- Europe and Asia market growth and expansion
Page 32June 2014
Product pipeline – Drive focused product innovation
Flexible range across 3 formats and all performance levels
Unitron
Fitting Software(TRUEFIT)
UT-ERA NEXT PLATFORM
FL
EX
Tri
al
PO
WE
R –
Max
RIC
–M
oxi
Kis
s
FL
EX
Tri
al &
Up
gra
de
F 1
F2
TF 1.1 TF 2.3TF 2.0 TF 2.3TF 2.1 TF 2.2 TF 3.0 TF 3.1
HI – Premium
HI – Advanced
HI – Standard
HI – Essential/Basic
HI – PlatformQ
PR
O
MP
RO
RIC
–M
oxi
2
Q P
RO
2
M P
RO
2
1H 16 2H 161H 14 2H 141H 12 2H 12 1H 15 2H 151H 13 2H 13TIMELINE / CY
Fitting Software(TRUEFIT)
BTE
–Q
uant
um2
F 1
F2
TF 3.2 TF 3.3
Note: Subject to change
Page 33June 2014
Next generation of products on the Era platform
Building on the success of the Flex concept
Unitron
BTE Custom RIC Power Flex Trial & Upgrade
Premium Quantum² Pro Quantum² Pro Moxi² Pro
Any Performance LevelAdvanced
Quantum² 20 Quantum² 20 Moxi² 20 Max 20
Quantum² 16 Quantum² 16 Moxi² 16
Standard Quantum² 10 Quantum² 10 Moxi² 10 Max 6
Essential Quantum² E Quantum² E Moxi² E Max E
Basic Shine Shine
Page 34June 2014
Business strategy
Connect Hearing
Retail: “Your hearing care professional”
Mission / value proposition - Secure market access and grow professional hearing care services
Markets - Build strong service positions / networks in key focus markets
Business models / products - Support new business concepts to increase store traffic and service
Profitability / productivity - Standardize business systems and processes
Brand equity - Apply consistent store branding within key markets
Selected initiatives 2014/15 - Selected acquisitions and store openings
- Shop-in-shop concept (Boots/UK, Ohrtheke/Austria)
- Web based lead and demand generation
- Roll-out of customized proprietary IT retail application
- Integration of branding and operations in the US
Page 35June 2014
Boots Hearingcare shop-in-shop concept – Continued s trong development
Premium market access by partnership with leading p harmacy chain
Connect Hearing
− Based on a market-leading concept established ten years ago
− Number of locations in the UK: From 390 at the end of 2012/13 to 430 twelve months later
− Value proposition: professional audiological services at attractive locations
− Tangible synergies for both sides from increased store traffic
− Solid long-term Sonova/Boots partnership: 51/49 joint ownership
Page 36June 2014
US retail – Integration of branding and operations
Focused effort to realize economies of scale
Connect Hearing
− Roll out of modern consistent store design and branding approach
− Centralization of administration
− Harmonization of business systems
− Broadening of lead generation services to support own retail as well as wholesale customers
− e-marketing/call center
− Healthcare insurance contracting
Page 37June 2014
Business strategy
Advanced Bionics
Advanced Bionics: “Patients always first”
Mission / value proposition - Strive for performance leadership – leverage AB and Phonak combination
Markets - Build global direct sales & support network - grow from strong US base
Products - Expand innovative range of processors, implants and electrodes
Product pipeline - Accelerate innovation rate – synchronize with Phonak pipeline and platforms
Productivity / efficiency - Leverage PH technology & process platform to expand margins
Selected initiatives 2014/15 - AB/Phonak - continued joint platform and product development
- New product launches 2014/15
- Focused emerging markets approach
- Expansion of waterproof technology
- AB Partner Program for retail: «Think beyond Hearing Aids»
Page 38June 2014
How a cochlear implant works
Advanced Bionics
SoundprocessorSound is captured and converted into detailed digital information
Magnetic headpieceTransmits digital signal wirelessly to the implant
ImplantConverts digital information into electrical signal
ElectrodeDelivers signal as electrical stimulation to the auditory nerve
Page 39June 2014
Product pipeline – Accelerate innovation rate, lever age Phonak technology
Expand range of innovative processors, implants, el ectrodes
Advanced Bionics
FDACE
FDACE
FDACE
CI – Electrodes
CI – Implants
CI – Processors
CI – Platform
Fitting Software(SOUNDWAVE)
.
1H 16 2H 161H 14 2H 141H 12 2H 12 1H 15 2H 151H 13 2H 13TIMELINE / CY
SW 2.0 SW 3.0
NeptuneNaída CI
Q70
HiFocus
Mid-Scala
HiRes 90k
Advantage
AB-WOLVERINE AB-QUEST
Note: Subject to change, timing dependent upon regulatory approvals
Page 40June 2014
Unprecedented number of new products in the last 12 months
Expanding range of innovative processors, implants and electrodes
Advanced Bionics
Implants Electrodes Sound Processors
HiRes 90K Advantage HiFocus Mid-Scala Naída CI
HiRes 90K HiFocus 1j Neptune
HiFocus Helix Harmony BTE
Page 41June 2014
Naída CI sound processor – The best of both worlds
Advanced Bionics
T-Mic 2Natural microphone placement
ClearVoiceUnique speechenhancement
UltraZoomThe adaptive
beamformer
ZoomControlDual-microphonewith VoiceStream
HiRes Fidelity 120120 spectral bands
AutoSoundWidestdynamic range
DuoPhonePhone call streaming
to both ears
ComPilotWireless streaming
with bimodal
RemoteMicWireless solution
for noisy places
TVLink Wireless
solution for TV
HiRes OptimaOptimized battery life
Rechargeable Zinc-Air
HiFocus Mid-ScalaPerimodiolar electrode
AquaMicWaterproofheadpiece
RogerDesign-integrated
receiver
June 2014 Page 42
Well established global infrastructure and network
Sonova Group
AM EU APAC
Page 43
Relative sales contribution by business brand
June 2014
5. Financial Information
– Strong sales increase, driven by double-digit organ ic growth– Sales of CHF 1,951.3 million – up 8.7% in Swiss francs and 11.7% in LC– Organic sales growth of 11.0% – driving market share expansion in both segments
– Further EBITA growth and margin expansion– EBITA of CHF 430.1 million – up 11.6% in Swiss francs and 16.7% in LC– EBITA margin of 22.0% – expanding by 50 bps as reported and by 90 bps in LC
– Both segments outpacing the market and expanding pr ofitability– Hearing instruments: solid growth of 9.5% in LC – EBITA margin expanding by 50 bps to 23.8%– Cochlear implants: strong progress and growth of 36.0% in LC – EBITA margin reaching 6.6%
– High rate of innovation continues in both segments– Hearing instruments: successful launch of Quest – most comprehensive introduction in history– Cochlear implants: new implant, processor and electrode launched in FY 2013/14
– Solid balance sheet – increase in dividend proposed– Net cash position of CHF 311.5 million – dividend increase of 19% to CHF 1.90 proposed– ROCE of 27.7%, up from a 22.6% in FY 2012/13 (normalized for one-off costs)
Summary of financial results
Full-Year 2013/14
Page 45June 2014
Strong financial performance
Getting one step closer to our mid-term financial t argets
Full-Year 2013/14
in CHF million FY 2012/13 FY 2013/14 ∆ % in CHF ∆ % in LC
Sales 1,795.3 1,951.3 8.7% 11.7%
Gross profit 1,239.8 1,340.4 8.1% 11.3%
- Gross profit margin 69.1% 68.7%
OPEX -854.5 -910.3 6.5% 8.9%
EBITA 385.3 430.1 11.6% 16.7%
- EBITA margin 21.5% 22.0%
Operating free cash flow 318.6 318.4
EPS (in CHF) 4.60 5.08 10.4%
ROCE 22.6% 27.7%
Note: FY 2012/13 numbers and variances consider normalizations for FY 2012/13 one-off costs
Page 46June 2014
Group EBITA development – Year-on-year
Solid margin improvement driven by both segments
Full-Year 2013/14
EBITA2012/13
normalized
Organic Growth
FX effect
EBITA2013/14
const. FX
430.1-19.6
385.3 +63.4
+64.4+16.7%
+44.8+11.6%
Margin:21.5%
Margin:22.0%
+1.0
Acquisitions
449.7
Margin:22.4%
EBITA (reported)
2012/13
One-offcost
2012/13
+203.6
181.7
Margin:10.1%
EBITA(reported)
2013/14
Page 47June 2014
Group EBITA margin development – Mid-term
Continuous margin improvement towards our mid-term target
Full-Year 2013/14
FY 2011/12 FY 2012/13Operating margin
increasein LC
FXEffect
FY 2013/14FXEffect
Margin:19.5%
+140bps
+60 bps
Margin:21.5%
+90bps
-40 bpsMargin:22.0%
Operating margin
increasein LC
Note: FY 2012/13 numbers and variances consider normalizations for FY 2012/13 one-off costs
Page 48June 2014
Details by business segments
Full-Year 2013/14
Note: FY 2012/13 numbers and variances consider normalizations for FY 2012/13 one-off costs
in CHF million FY 2012/13 FY 2013/14 ∆ % in CHF ∆ % in LC
Sales
Hearing Instruments-thereof organic
1,648.5 1,756.0 6.5%8.8%
9.5%
Cochlear Implants 146.7 195.3 33.1% 36.0%
Group 1,795.3 1,951.3 8.7% 11.7%
EBITA
Hearing Instruments 383.6 417.3 8.8% 13.9%
Cochlear Implants 1.8 12.8 n/m n/m
Group 385.3 430.10 11.6% 16.7%
Page 49June 2014
Sales by product groups
Premium and standard segment drive growth
Full-Year 2013/14
in CHF million FY 2012/13 FY 2013/14 ∆ % in CHF ∆ % in LC
HI Premium 393.3 433.2 10.1% 12.8%
HI Advanced 434.5 437.6 0.7% 3.6%
HI Standard 495.9 556.0 12.1% 15.3%
Wireless communication 64.2 68.3 6.4% 9.9%
Miscellaneous 260.6 261.0 0.1% 3.1%
Total hearing instruments 1,648.5 1,756.0 6.5% 9.5%
Cochlear implants and accessories 146.7 195.3 33.1% 36.0%
Total sales 1,795.3 1,951.3 8.7% 11.7%
Page 50June 2014
Operating expenses
Underlying OPEX growth lower than top-line increase – Solid operating leverage
Full-Year 2013/14
in CHF million FY 2012/13 FY 2013/14 ∆ % in CHF ∆ % in LC
Research & Development -113.9 -125.7 10.3% 11.3%
in % of sales 6.3% 6.4%
Sales & Marketing -559.1 -589.6 5.5% 8.3%
in % of sales 31.1% 30.2%
General & Administration -181.5 -195.2 7.6% 9.4%
in % of sales 10.1% 10.0%
Other income / (expenses), net 0.0 0.2
Total OPEX -854.5 -910.3 6.5% 8.9%
in % of sales 47.6% 46.7%
Note: FY 2012/13 numbers and variances consider normalizations for FY 2012/13 one-off costs
Page 51June 2014
R&D spending
Continuing strong R&D investments drive innovation
Full-Year 2013/14
in CHF million / % of sales
107.8116.2 113.9
125.7
15.516.5 26.5
17.3123.2
132.7140.4 142.9
7.6%
8.2%7.8% 7.3%
6.7%7.2% 6.3%
6.4%
2010/11 2011/12 2012/13 2013/14
AB capitalized development costs (net of amortization) R&D costs charged to the P&L
Page 52June 2014
Reported results and income taxes
Full-Year 2013/14
in CHF million FY 2012/13 FY 2013/14 ∆ % in CHF
EBITA 385.3 430.1 11.6%
Amortization / Impairment -26.1 -26.1 -0.2%
Operating profit (EBIT)in % of sales
359.220.0%
404.020.7%
12.5%
Financial result -7.1 -9.5 33.2%
Income before taxes 352.1 394.6 12.1%
Income taxes -44.3 -47.2 6.5%
- Income tax rate 12.6% 12.0%
Income after taxesin % of sales
307.717.1%
347.417.8%
12.9%
Note: FY 2012/13 numbers and variances consider normalizations for FY 2012/13 one-off costs
Page 53June 2014
Significant free cash flow
Full-Year 2013/14
in CHF million FY 2012/13 FY 2013/14 ∆ % in CHF
Cash flow before changes in NWC (incl. taxes paid) 401.5 452.1 12.6%
Changes in net working capital -14.4 -41.1
Cash flow from operating activitiesin % of sales
387.121.6%
411.021.1%
6.2%
Cash flow from investing activities (excl. acquisitions) -68.5 -92.6 35.2%
Operating free cash flowin % of sales
318.617.7%
318.416.3%
0.0%
Cash consideration for acquisitions -56.2 -29.8 -46.9%
Free cash flow 262.4 288.6 10.0%
Cash flow from financing activities -21.8 -309.1
Changes in cash and cash equivalents 242.8 -24.8
Cash outflow from provisions for product liability claims(included in Cash flow from operating activities)
-2.9 -43.4
Page 54June 2014
Maintaining a solid balance sheet
Full-Year 2013/14
in CHF million FY 2012/13 FY 2013/14 ∆ % in CHF
Net working capital 187.1 190.6 1.8%
Days sales outstanding (DSO) 71 69 -2.8%
Days inventory outstanding (DIO) 148 140 -5.6%
Capital employed 1,455.5 1,462.9 0.5%
Net cash 185.8 311.5 67.7%
Equity 1,641.3 1,774.4 8.1%
Equity in % of total assets 61.2% 68.4%
Page 55June 2014
Dividend – Proposed increase by 19% to CHF 1.90
Proposed dividend represents a payout ratio of 37%
Full-Year 2013/14
0.50
0.75
1.00 1.00
1.20 1.20 1.20
1.60
1.90
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14
Dividend / distribution development in CHF per shar e
Page 56June 2014
6. Outlook
On course for mid term financial targets
Outlook
Notes: FY 2007/08 Excluding one-off cost for the prohibited acquisition of the GN ReSound GroupFY 2009/10 Restated based on finalization of the acquisition accounting of Advanced BionicsFY 2012/13 Excluding one-off cost for AB Vendor B provision at AB, AB Rixheim restructuring and settlement with a group of investors
Page 58
10%
20%
30%
40%
,0
1,000
2,000
3,000
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17
EB
ITA
Mar
gin
/ RO
CE
(%
)
Sal
es (
in C
HF
mill
ion)
Sales EBITA Margin (%) ROCE (%)
June 2014
FY 2014/15 guidance
Outlook
ActualFY 2013/14
GuidanceFY 2014/15
Sales growth in LC
thereof acquisition related growth
FX-impact
Total sales growth in CHF
11.7%
0.7%
-3.0%
8.7%
7%-9%
approx. 1%
EBITA growth in LC
EBITA FX-impact
Total EBITA growth in CHF
16.7%
-5.1%
11.6%
11%-15%
Sales
Page 59June 2014
FX impact on sales and margins
USD and EUR account for roughly two thirds of the o verall FX exposure
Outlook
USD/CHF EUR/CHF
Rate Sales EBITA
USD/CHF +/- 5% +/- CHF 40 million +/- CHF 14 million
EUR/CHF +/- 5% +/- CHF 25 million +/- CHF 15 million
Page 60June 2014
FX rates – Main currencies accounted for around 90% of Group sales
EBITA growth in CHF 8 – 12% at May 2014 FX condition s / including mitigation efforts
Outlook
FY-12/13 1H-13/14 2H-13/14 FY-13/14 EffectSpot
May 2014
USD 0.94 0.94 0.90 0.92 - 0.89
EUR 1.21 1.23 1.23 1.23 - 1.22
GBP 1.48 1.45 1.47 1.46 + 1.50
CAD 0.94 0.91 0.84 0.87 - 0.82
AUD 0.97 0.89 0.82 0.86 - 0.83
BRL 0.47 0.43 0.39 0.41 - 0.40
JPY 100 1.14 0.95 0.88 0.92 - 0.88
USD
EUR
GBP, CAD, BRL, AUD and JPY
Other
Page 61June 2014
Thank You
