GN Store Nord A/S

GN Store Nord
Divestment of GN ReSound
Copenhagen, October 2 2006
Safe harbor statement
The forward-looking statements in this presentation reflect management's current
expectations for certain future events and financial results. Statements regarding 2006
are, of course, subject to risks and uncertainties which may result in material deviations
from the outlook set forth. Furthermore, some of these expectations are based on
assumptions regarding future events which may prove incorrect.
As a matter of course, all Q3 figures are preliminary and therefore subject to uncertainty.
Q3 figures and full-year estimates have not been consolidated.
Factors that may cause the actual results to deviate materially from expectations include
but are not limited to general economic developments and developments in the financial
markets; technological developments; changes and amendments to legislation and
regulations governing GN’s markets; changes in the demand for GN's products;
competition; fluctuations in sub-contractor supplies; and the integration of company
acquisitions.
This presentation should not be considered an offer to buy or sell securities in GN Store
Nord.
Page 2
Agenda
•
Results of Strategic Review
Chairman of the Supervisory Board, Mogens Hugo Jørgensen
•
Return of Proceeds
Chairman of the Supervisory Board, Mogens Hugo Jørgensen
•
Management Structure
Chairman of the Supervisory Board, Mogens Hugo Jørgensen
•
Preliminary Results and Full Year Outlook
EVP & CFO, Jens Due Olsen
•
GN Going Forward
Chairman of the Supervisory Board, Mogens Hugo Jørgensen and
President & CEO, Toon Bouten
Page 3
Results of Strategic Review
Mogens Hugo Jørgensen
Chairman of the Supervisory Board
Consolidation of Six Smaller HI Players
Company:
Danavox
ReSound Corp
Viennatone
Beltone and
Philips HI
INTERTON
1977
1999
2000
2005
Acquired by GN in:
GN ReSound and GN Otometrics
Revenue
DKK millions
EBITA
DKK millions
3500
600
3000
500
GN Store Nord (2001 incl. NetTest)
Revenue
DKK millions
EBITA
DKK millions
8.000
1000
7.000
900
800
6.000
2500
400
700
5.000
600
4.000
500
3.000
400
2000
300
1500
200
1000
300
2.000
100
500
0
0
2001
2002
2003
HI
ADE
2004
2005
EBITA
ADE revenue included in HI revenue in 2001
200
1.000
100
0
0
2001
2002
2003
GN Store Nord
2004
2005
EBITA
Page 5
Transaction Background and Process
•
GN ReSound has played a leading role in consolidating the hearing
instrument industry
•
Constantly growing demand for more frequent and faster product
launches in all price segments raising pressure for consolidation
•
On July 5, GN announced plans to investigate the strategic options for
GN’s hearing instrument business
•
A group of strategic and financial investors were invited to submit
indicative offers
•
A limited group of interested parties were short-listed and given the
opportunity to carry out due diligence and submit binding offers
Page 6
Conclusion of Strategic Review (1)
•
The divestment to Phonak is the most attractive option for GN’s
shareholders as an alternative to retaining the operations under GN’s
ownership
•
The transaction value exceeds the value that can be achieved on a
stand-alone basis with organic growth supported by minor acquisitions
•
Price reflects competitive process and large potential for synergies
•
Fairness opinion from JP Morgan plc
Page 7
Conclusion of Strategic Review (2)
•
The combined operations of GN ReSound and Phonak will have a
leading position in an industry defined by increasing economies of
scale
•
Exciting opportunities for employees of the combined entity
•
Mogens Hugo Jørgensen proposed for Phonak board
•
Strong business, cultural and geographic match
•
Phonak will retain GN ReSound’s brands, sales organization and
competency centers
Beltone One
Metrix Power
Metrix Mini
BeltonePage
Linq8
Divestment of GN ReSound to Phonak
•
GN has signed an agreement to sell GN ReSound to Phonak for a total
consideration of DKK 15.5bn in cash on a debt and cash free basis
•
Divestment comprises all assets and liabilities of the hearing instrument
business including the affiliated activities in GN Otometrics
•
Transaction is subject to approval by competition authorities and
subject to Phonak issuance of shares to fund the acquisition
•
In the event that Phonak does not complete the share issuance by
August 15 2007, GN has the right to receive consideration consisting of
cash and Phonak shares
•
Closing is expected in the first half of 2007
•
GN’s after-tax profit is expected to be at least DKK 10bn
Page 9
Return of Proceeds
Mogens Hugo Jørgensen
Chairman of the Supervisory Board
Return of Proceeds
•
The Board intends to return a significant part of the proceeds from the
divestment as soon as reasonably possible, taking into account that GN will
retain a net cash position of DKK 1bn reflecting GN’s future capital
requirements
•
Immediately after closing, the Board will call for an extraordinary general
meeting to decide on a reduction of GN’s share capital
Page 11
Management Structure
Mogens Hugo Jørgensen
Chairman of the Supervisory Board
Page 12
Changes in Management
•
The Supervisory Board will be changed to best handle GN’s
new challenges and consumer electronics focus
•
CEO Jørn Kildegaard has decided to resign given the
material changes to the nature of his job after the
divestment of GN ReSound
•
EVP Jesper Mailind retires from the Executive Management
and will move with GN ReSound to Phonak
•
Hans Henrik Lund, President of the headset division, will
leave his position after completing an appropriate handover
to the new CEO
Page 13
Toon Bouten New President & CEO
•
Graduate from the University of Technology in
Eindhoven, 1984
•
Dutch national; 47 years old, lives in Germany
•
2004-06: Executive VP, Philips Consumer
Electronics EMEA; activities in 48 countries
– Comprehensive redesign of business; focus on
profitability (2004-2005) and growth (2006)
•
Significant results achieved in international
consumer electronics and technology groups
–
–
–
–
1984-93: Director, Philips Consumer Electronics
1994-2000: VP, Compaq Consumer Group EMEA
2000-01: CEO, Jobline International AB
2002-04: Consultant, temporary CEO of AND
International Publishers N.V. and Plaut AG
Page 14
New Management Structure
Supervisory Board
Mogens Hugo Jørgensen
Chairman
EXECUTIVE MANAGEMENT
Toon Bouten
President & CEO
Jens Due Olsen
EVP & CFO
Headset Operations
Support Functions
Jesper Mailind
GN ReSound and
GN Otometrics
Page 15
Preliminary Results and Full Year Outlook
Jens Due Olsen
EVP & CFO
Revised Forecast for Headset Business (1)
•
Continued improvement in CC&O Headsets
(excluding Hello Direct); Q3 growth of approx.
12%
•
Accelerated growth in Europe and Asia-Pacific;
growth continues to be modest in the US
•
Q3 EBITA excluding Hello Direct largely as
expected at DKK around 30-35m
•
Additional provisions of DKK 60m related to
Hello Direct “Try’n’Buy” campaigns on top of
the DKK 55m expensed at June 30
•
Terry Flynn, head of Hello Direct, leaves the
company
Page 17
Revised Forecast for Headset Business (2)
•
Lower than expected revenue of DKK 210-220m
from the Jabra brand in Q3
•
Growth in the entry level segment due to bundling
and in-box activities
•
Stronger momentum for Jabra in September;
growing trend for Q4 order intake in the US
•
OEM revenue dropped to DKK 110-120m in Q3,
mainly due to postponement of orders by a major
OEM customer
•
Unsatisfactory EBITA of around DKK (85)m, of
which DKK (40)m was attributable to write-downs
•
Revised full year outlook mobile headsets: revenue
of DKK 1.7-1.8bn and EBITA of DKK (150)m
Page 18
Revised 2006 Guidance
DKK
DKK millions
millions
CC&O
CC&O Headsets
Headsets
Revenue
Revenue
EBITA
EBITA margin
margin excl.
excl. HD
HD
EBITA
EBITA margin
margin incl.
incl. HD
HD
Mobile
Mobile Headsets
Headsets
Revenue
Revenue
EBITA
EBITA margin
margin
Continuing
Continuing Activities
Activities
Revenue
Revenue
EBITA,
EBITA, Headsets
Headsets
GN
GN consolidated
consolidated forecast
forecast
EBITA,
EBITA, continuing
continuing activities
activities
EBITA,
EBITA, discontinuing
discontinuing
activities
activities
New
New 2006
2006 guidance
guidance
Prev.
Prev. 2006
2006 guidance
guidance
2005
2005
1,600-1,700
1,600-1,700
Approx.
Approx. 18%
18%
6%
6%
Approx.
Approx. 1,700
1,700
19-20%
19-20%
13-15%
13-15%
1,549
1,549
-20.2%
20.2%
Approx.
Approx. 1,700-1,800
1,700-1,800
(8-9)%
(8-9)%
Approx.
Approx. 2,500
2,500
1-3%
1-3%
1,960
1,960
3,1%
3,1%
3,300-3,500
3,300-3,500
(50)
(50)
---
---
Approx.
Approx. (100)m
(100)m
Approx.
Approx. 525m
525m
Page 19
GN Going Forward
Mogens Hugo Jørgensen
Toon Bouten
GN is Leading Wireless Headset Innovation
Long list of industry firsts
GN 9010
Bluetooth®
headset v1.0
GN Satellite
Analog wireless
headset
Jabra BT250
Bluetooth®
headset v1.1
GN 9020
Digital truly
wireless
headset
Jabra BT500
Bluetooth®
headset v1.2
GN 9120
Truly wireless
headset
Jabra JX10
Bluetooth®
headset v2.0
GN 6210
Bluetooth® headset
for both mobile
phone and fixed line
GN 9350
wireless headset
for traditional
& IP telephony
Page 21
And Innovation Continues…
The latest significant Jabra products
BT620s
Bluetooth®
stereo headset
BT125
Bluetooth®
headset
C820s
Bluetooth®
stereo music
headphones
BT325s
Bluetooth®
stereo headset
Page 22
Market Opportunities
•
As the world’s largest independent
manufacturer of headsets, GN enjoys
significant economies of scale
•
The office market is expected to generate
annual growth rates of about 25% in the years
ahead
•
The contact centre market is expected to
produce stable single-digit growth rates in
the next few years
•
While growing strongly, Bluetooth headset
penetration remains low in the mobile market
Page 23
Immediate Action Points
•
The Jabra brand will be introduced in all
channels across the converging mobile and
office markets
•
More products introductions and increased
differentiation
•
The focus on sales channels and end users
will be intensified sharply, and know how in
key account management and support will be
strengthened
•
The cost structure will be brought in line with
the business needs across the value chain
Page 24
Initial Message From Toon Bouten
•
The financial model will be aligned with the focused
business needs across the value chain by increased
revenues, improved margins, adequate cost levels
and better cash flows
•
Get a better return on the products by intensified
marketing and sales activities
•
GN has the leading brand in the CC&O business and
will focus on solidifying its position.
•
GN is very competitive in Bluetooth headsets for the
fast growing consumer market and will strengthen
its leading position with innovative products,
leveraging the strong Jabra brand in the consumer
channels and with the right competences
•
Together with the management team I will refine the
future strategy and present the details early next
year
Page 25
Q&A Session