7.11.2023 07:30:34 CET | Demant A/S |
Delårsrapport/Periodemeddelelse (Q1 og Q3)
Selskabsmeddelelse nr. 2023-13 7. november 2023
Periodemeddelelse for Q3 2023
Organisk vækst i koncernen på 13 % i Q3 drevet af fastholdte markedsandele i Hearing Healthcare
Høj lønsomhed og stærkt cashflow i koncernen trods negativ effekt af nedlukning af Gaming-aktiviteter
Forventninger til 2023 indsnævret: Organisk vækst på 12-13 % (tidl. 11-14 %) og EBIT på DKK 4.050-4.350 mio. (tidl. DKK 4.000-4.400 mio.)
“Vores forretningssegment Hearing Healthcare er stadig i rigtig god form og har leveret imponerende tocifret organisk vækst, hvilket især skyldes Hearing Aids, som i Q3 opnåede 25 % organisk vækst i salget til eksterne kunder. Jeg tilskriver succesen vores innovative og brede produktportefølje – Oticon Real gør det særdeles godt – og vores skarpe fokus på et tæt samarbejde med kunder og hørebehandling tilpasset den enkelte bruger. Demant har øget sin markedsandel betydeligt over de seneste kvartaler i et nu normaliseret marked for høresundhed, men vi ser stadig en negativ effekt på koncernen af resultaterne i Communications som følge af beslutningen om at lukke vores Gaming-aktiviteter samt et svagt marked for audioløsninger. Vi har ikke desto mindre leveret høj lønsomhed og et stærkt cashflow, hvilket gør os i stand til fortsat at investere i udviklingen af vores livsforandrende høresundhedsløsninger,” siger Søren Nielsen, koncernchef og adm. direktør for Demant.
Omsætning (DKK mio.)
Vækst
Forretningsområde
Q3 2023
Q3 2022
Organisk
Akkvisitiv
LCY
FX
Rapporteret
Hearing Aids, samlet omsætning
2.924
2.446
21 %
0 %
21 %
-1 %
20 %
Hearing Aids, intern omsætning
-494
-470
4 %
5 %
9 %
-4 %
5 %
Hearing Aids, ekstern omsætning
2.430
1.976
25 %
-1 %
24 %
-1 %
23 %
Hearing Care
2.152
2.018
6 %
6 %
12 %
-5 %
7 %
Diagnostics
625
613
6 %
2 %
8 %
-6 %
2 %
Hearing Healthcare
5.207
4.607
14 %
2 %
17 %
-4 %
13 %
Communications
196
256
-20 %
0 %
-20 %
-4 %
-23 %
Koncern
5.403
4.863
13 %
2 %
15 %
-4 %
11 %
Omsætning (DKK mio.)
Vækst
Forretningsområde
ÅTD 2023
ÅTD 2022
Organisk
Akkvisitiv
LCY
FX
Rapporteret
Hearing Aids, samlet omsætning
9.012
7.288
22 %
0 %
22 %
1 %
24 %
Hearing Aids, intern omsætning
-1.594
-1.365
13 %
6 %
19 %
-2 %
17 %
Hearing Aids, ekstern omsætning
7.418
5.923
24 %
-1 %
23 %
2 %
25 %
Hearing Care
6.660
5.950
7 %
7 %
15 %
-3 %
12 %
Diagnostics
1.823
1.679
6 %
5 %
11 %
-3 %
9 %
Hearing Healthcare
15.901
13.552
15 %
3 %
18 %
-1 %
17 %
Communications
657
808
-17 %
0 %
-17 %
-2 %
-19 %
Koncern
16.558
14.360
13 %
3 %
16 %
-1 %
15 %
Medmindre andet er angivet, omhandler nedenstående tekst Q3 2023.
Koncernen leverede organisk vækst på 13 %, som udelukkende var drevet af Hearing Healthcare. Den akkvisitive vækst lå på 2 %, og valutakurseffekter udgjorde -4 %. Den rapporterede omsætningsvækst var 11 %.
Hearing Healthcare leverede organisk vækst på 14 % drevet af stærk vækst i Hearing Aids samt yderligere vækst på 2 % fra akkvisitioner i Hearing Care og Diagnostics.
Hearing Aids fortsatte med at præstere på et meget højt niveau og fastholdt markedsandelene på tværs af markeder og kanaler drevet af succesen med nye højkvalitetsapparater lanceret i Q1, deriblandt vores flagskibsprodukt, Oticon Real. Væksten bestod primært af stykvækst, men også ASP-udviklingen var svagt positiv.
Hearing Care leverede solide resultater drevet af godt momentum på de fleste mellemstore markeder. Dette udlignede den svagt negative vækst i Frankrig, hvor vi så en ugunstig markedsudvikling, samt den svagere end forventede vækst i Kina grundet svage markedsforhold. Akkvisitioner på flere markeder, særligt i Tyskland, bidrog ligeledes til væksten i perioden.
Diagnostics oplevede solid vækst, selvom vi så en svagt negativ effekt af et afdæmpet kinesisk marked. Mindre akkvisitioner understøttede fortsat væksten.
Communications oplevede fortsat svagt momentum og negativ vækst, idet markederne for både enterprise solutions og gaming-headset forblev udfordrede. Vores Enterprise Solutions-forretning leverede organisk vækst på -24 %. Den gradvise nedlukning af vores Gaming-aktiviteter, som vi annoncerede den 29. august 2023, omfatter afhændelse af vores lagre af Gaming-produkter, hvilket er sket til lavere priser end forudset. Sammen med andre mindre engangsomkostninger forventes dette at påvirke EBIT negativt med yderligere DKK 50-100 mio. i H2. Ud over øvrige omkostningsbesparelser bringe os tættere på lønsomhed i Communications.
Koncernens bruttomargin var som forventet og blev øget sekventielt i forhold til H1. Dette skyldes en positiv udvikling i Hearing Healthcare, som udlignede det betydelige sekventielle fald i bruttomarginen i Communications som følge af afhændelsen af vores lagre af Gaming-produkter.
OPEX var i tråd med forventningerne og oplevede høj encifret vækst i lokal valuta, hvoraf organisk vækst tegnede sig for omtrent halvdelen, hvilket afspejler en kombination af fortsatte investeringer i Hearing Healthcare og omkostningsbesparelser i Communications med henblik på at øge lønsomheden.
Koncernens EBIT var i tråd med forventningerne, idet betydelig driftsmæssig gearing udlignede større end forventede negative engangseffekter af nedlukningen af vores Gaming-aktiviteter og et afdæmpet kinesisk marked.
Koncernens CFFO og FCF fortsatte på et højt niveau drevet af øget lønsomhed. Til trods for et højt akkvisitionsniveau i Q3 reducerede koncernen sin nettorentebærende gæld en smule. Sammen med et øget EBITDA blev koncernens gearing-multipel således reduceret en smule i Q3. Der blev ikke foretaget aktietilbagekøb i Q3, men koncernen vil muligvis genoptage sit aktietilbagekøb, hvilket dog afhænger af genereringen af pengestrømme samt omfanget af akkvisitioner, der lukkes i Q4.
Frasalget af vores cochlear implants-forretning til Cochlear Limited skrider fortsat fremad, men arbejdet tager længere tid end forventet. Vi forventer nu, at transaktionen lukkes i H1 2024 (tidligere inden udgangen af 2023). Vores forventninger til overskud efter skat fra ophørende aktiviteter er uændrede, og i Q3 var driftsresultatet i Hearing Implants som forventet.
Forventninger til 2023
Koncernens forventninger til 2023, som er opsummeret i nedenstående tabel, er blevet indsnævret, for så vidt angår organisk vækst og EBIT, for at afspejle reduceret overordnet usikkerhed. De indsnævrede forventninger afspejler betydelig driftsmæssig gearing i Hearing Healthcare, hvilket udligner en større end forventet negativ effekt af nedlukningen af vores Gaming-aktiviteter samt et mere afdæmpet kinesisk marked.
Parameter
Forventninger til 2023
Organisk vækst
12-13 % (tidligere 11-14 %)
Akkvisitiv vækst
3 % baseret på omsætning fra akkvisitioner gennemført pr. 6. november 2023
Valutakursvækst
-1 % baseret på valutakurser pr. 6. november 2023 og inkl. effekten af valutakurssikring (tidligere -2 %)
EBIT
DKK 4.050-4.350 mio. (tidligere DKK 4.000-4.400 mio.)
Finansielle poster, netto
Negative med ca. DKK 700 mio.
Effektiv skattesats
24-25 %
Gearing-multipel
Gearing-multipel (NIBD/EBITDA) ved udgangen af 2023 inden for vores mellemlange til langsigtede mål på 2,0-2,5
Aktietilbagekøb
Bliver muligvis genoptaget, dog afhængigt af genereringen af pengestrømme samt omfanget af gennemførte akkvisitioner
Resultat efter skat fra ophørende aktiviteter
Negativt med DKK 700-850 mio.
Forventningerne er baseret på en række nøgleantagelser som beskrevet nedenfor (ændringer i forhold til seneste forventninger er med fed skrift):
Efter at det globale høreapparatmarked har stabiliseret sig i H1, forventer vi, at stykvæksten på markedet i 2023 vil ligge en smule over den strukturelle vækstrate på 4-6 %. Vi forventer at se et negativt bidrag fra et fald i ASP’en omkring det normale niveau på 1-2 % som følge af miksforskydninger.
Vi forventer, at det svage momentum på markederne for enterprise solutions og gaming-headsets vil fortsætte igennem hele 2023. Vi forventer, at vores Communications-segment i 2023 vil opleve negativ organisk vækst og levere et EBIT, som er mere negativt end niveauet i 2022, idet den lavere omsætning og bruttomargin kun delvist vil blive opvejet af allerede gennemførte omkostningsbesparelser. Nedlukningen af vores Gaming-aktiviteter forventes at have en yderligere negativ engangseffekt på koncernens EBIT i H2 på DKK 50-100 mio., hvilket er indregnet i koncernens forventninger.
Vi forventer, at omfanget af mindre akkvisitioner i 2023 vil være en smule højere end normalt, men en række akkvisitioner, som vi havde planlagt gennemført i 2023, forventes nu at blive afsluttet i 2024.
Trods højere end normal omkostningsinflation planlægger vi gennem fokuseret omkostningskontrol at øge OPEX mindre end omsætningen for at forbedre lønsomheden.
Frasalget af vores cochlear implants-forretning forventes at blive afsluttet i H1 2024. Vores forretning for benforankrede høresystemer vil forblive en del af koncernen, mens overvejelser om vores strategiske muligheder pågår.
Demant afholder en telekonference den 7. november 2023 kl. 14.00. For at modtage opkaldsdetaljer skal man forhåndsregistreres via dette link: https://dpregister.com/sreg/10183674/facb9ae4f2. En præsentation til telekonferencen vil blive uploadet på www.demant.com, kort før konferencen starter.
Yderligere information:
Søren Nielsen, koncernchef og adm. direktør
Telefon +45 3917 7300
www.demant.com
Øvrige kontaktpersoner:
René Schneider, CFO
Mathias Holten Møller, Head of Investor Relations
Peter Pudselykke, Investor Relations Officer
Henrik Axel Lynge Buchter, Manager of External Communications
Kontakter
Henrik Axel Lynge Buchter, External Communication Manager, Corporate Communication & Sustainability, +45 2264 9982, heey@demant.com
Om 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.
Vedhæftninger
2023-13 Interim Management Statement for Q3 2023.pdf
2023-13 Periodemeddelelse Q3 2023.pdf
7.11.2023 07:30:34 CET | Demant A/S |
Interim report (Q1 and Q3)
Company announcement no 2023-13 7 November 2023
Interim Management Statement for Q3 2023
Group organic growth of 13% in Q3 driven by sustained market share gains in Hearing Healthcare
Strong profitability and cash flow generation for the Group despite negative effect of Gaming wind-down
Outlook for 2023 narrowed: Organic growth of 12-13% (prev. 11-14%) and EBIT of DKK 4,050-4,350 million (prev. DKK 4,000-4,400 million)
“Our Hearing Healthcare business segment continues to be in very good shape, delivering an impressive double-digit organic growth rate, particularly lifted by Hearing Aids that generated 25% organic growth in sales to external customers in Q3. I attribute our success to the innovative and broad product portfolio – Oticon Real is doing very well – and our strong focus on customer collaboration and personalised care. Demant has gained significant market share over the last quarters in a normalised hearing healthcare market, but we still see negative effects of the results in Communications on the Group’s performance due to the decision to wind down our Gaming activities as well as to a weak market for audio solutions. Nonetheless, we have delivered strong profitability and cash flow, allowing us to continue to invest in developing our life-changing hearing healthcare solutions,” says Søren Nielsen, President & CEO of Demant.
Revenue (DKK million)
Growth
Business area
Q3 2023
Q3 2022
Organic
Acquisitive
LCY
FX
Reported
Hearing Aids, total revenue
2,924
2,446
21%
0%
21%
-1%
20%
Hearing Aids, internal revenue
-494
-470
4%
5%
9%
-4%
5%
Hearing Aids, external revenue
2,430
1,976
25%
-1%
24%
-1%
23%
Hearing Care
2,152
2,018
6%
6%
12%
-5%
7%
Diagnostics
625
613
6%
2%
8%
-6%
2%
Hearing Healthcare
5,207
4,607
14%
2%
17%
-4%
13%
Communications
196
256
-20%
0%
-20%
-4%
-23%
Group
5,403
4,863
13%
2%
15%
-4%
11%
Revenue (DKK million)
Growth
Business area
YTD 2023
YTD 2022
Organic
Acquisitive
LCY
FX
Reported
Hearing Aids, total revenue
9,012
7,288
22%
0%
22%
1%
24%
Hearing Aids, internal revenue
-1,594
-1,365
13%
6%
19%
-2%
17%
Hearing Aids, external revenue
7,418
5,923
24%
-1%
23%
2%
25%
Hearing Care
6,660
5,950
7%
7%
15%
-3%
12%
Diagnostics
1,823
1,679
6%
5%
11%
-3%
9%
Hearing Healthcare
15,901
13,552
15%
3%
18%
-1%
17%
Communications
657
808
-17%
0%
-17%
-2%
-19%
Group
16,558
14,360
13%
3%
16%
-1%
15%
Unless otherwise indicated, the commentary below relates to Q3 2023.
The Group generated organic growth of 13%, driven entirely by Hearing Healthcare. Acquisitive growth was 2% and exchange rate effects were -4%. Reported revenue growth was 11%.
Hearing Healthcare saw organic growth of 14%, fuelled by strong growth in Hearing Aids, with additional growth of 2% related to acquisitions in Hearing Care and Diagnostics.
Performance in Hearing Aids continued at a very high level with sustained market share gains across markets and channels, driven by the success of new premium hearing aids launched in Q1, including our flagship product, Oticon Real. Growth was primarily driven by unit growth, while the ASP development was slightly positive.
Hearing Care delivered solid performance, driven by good momentum in most medium-sized markets. This offset slightly negative growth in France, which saw adverse market developments, and weaker-than-expected growth in China due to weak market dynamics. Acquisitions in several markets also contributed to growth in the period, primarily in Germany.
In Diagnostics, organic growth was solid, albeit with a slightly negative impact of weak market dynamics in China. Growth continued to be supported by minor acquisitions.
Communications continued to see weak momentum and negative growth, as the markets for both enterprise solutions and for gaming headsets remained challenging. Our Enterprise Solutions business saw organic growth of -24%. The gradual wind-down of our Gaming activities announced on 29 August 2023 entails the clearing of Gaming-related inventories, which has been realised at lower prices than anticipated. Together with other minor one-off costs, this is expected to impact EBIT negatively by an additional DKK 50-100 million in H2. Along with other cost savings, the wind-down will shorten the path back to profitability in Communications.
The Group’s gross margin was in line with expectations and improved sequentially relative to H1. This was driven by positive developments in Hearing Healthcare, which offset a significant sequential gross margin decline in Communications due to the clearing of Gaming-related inventories.
OPEX was in line with expectations with high single-digit growth in local currencies of which roughly half was organic, reflecting a combination of continued investments in Hearing Healthcare and cost savings in Communications with a view to improving profitability.
The Group’s EBIT was in line with expectations, as material operating leverage in Hearing Healthcare offset larger-than-anticipated negative one-off effects related to the wind-down of our Gaming activities and softening market dynamics in China.
The Group’s CFFO and FCF continued at a high level driven by improved profitability. Despite a high level of acquisitions in Q3, the Group slightly reduced its net interest-bearing debt. Combined with an increased EBITDA, the Group’s gearing multiple was thus reduced slightly in Q3. No shares were bought back in Q3, but the Group may resume share buy-backs, however subject to cash generation and the level of acquisitions that will be closed in Q4.
The divestment of our cochlear implants business to Cochlear Limited continues to progress, but the work is taking longer than expected. We now expect the transaction to close in H1 2024 (previously before the end of 2023). There are no changes to the outlook for profit after tax from discontinued operations, and in Q3, the operational performance of Hearing Implants was in line with expectations.
Outlook for 2023
The Group’s outlook for 2023, which is summarised in the table below, has been narrowed with respect to organic growth and EBIT to reflect reduced overall uncertainty. The narrowed outlook reflects material operating leverage in Hearing Healthcare, offsetting larger-than-anticipated negative effects of the wind-down of our Gaming activities as well as softening market dynamics in China.
Metric
Outlook for 2023
Organic growth
12-13% (previously 11-14%)
Acquisitive growth
3% based on revenue from acquisitions completed as of 6 November 2023
FX growth
-1% based on exchange rates as of 6 November 2023 and including the impact of hedging (previously -2%)
EBIT
DKK 4,050-4,350 million (previously DKK 4,000-4,400 million)
Net financials
Negative by around DKK 700 million
Effective tax rate
24-25%
Gearing multiple
Gearing multiple (NIBD/EBITDA) at the end of 2023 within our medium- to long-term target of 2.0-2.5
Share buy-backs
May be resumed, subject to cash generation and the level of acquisitions completed
Profit after tax from discontinued operations
Negative by DKK 700-850 million
The outlook is based on a number of key assumptions as described below (changes versus most recent outlook in bold):
Following a stabilisation of the global hearing aid market in H1, we expect the market unit growth rate in 2023 to be slightly above the structural growth rate of 4-6%. We expect a negative contribution from ASP declines around the normal level of 1-2% due to mix effects.
We expect the weak momentum in the markets for enterprise solutions and gaming headsets to continue throughout 2023. In 2023, we expect our Communications segment to see negative organic growth and to generate EBIT that is more negative than the level in 2022, as lower revenue and gross margin are only partly offset by cost savings already implemented. The wind-down of our Gaming activities is expected to have an additional negative one-off impact on the Group’s EBIT in H2 of DKK 50-100 million, which is included in the Group’s outlook.
We expect the level of bolt-on acquisitions in 2023 to be slightly higher than normal, but a number of acquisitions that we had planned for completion in 2023 are now expected to close in 2024.
Despite higher-than-normal cost inflation, we plan to grow OPEX less than revenue through focused cost control in order to support margin improvement.
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.
Demant will host a conference call on 7 November 2023 at 14:00 CET. To receive dial-in details for this call, please pre-register via this link: https://dpregister.com/sreg/10183674/facb9ae4f2. A presentation for the call will be uploaded on www.demant.com shortly before the call.
Further information:
Søren Nielsen, President & CEO
Phone +45 3917 7300
www.demant.com
Other contacts:
René Schneider, CFO
Mathias Holten Møller, Head of Investor Relations
Peter Pudselykke, Investor Relations Officer
Henrik Axel Lynge Buchter, Manager of External Communications
Hearing Healthcare
Market trends
Overall, the hearing healthcare market we address, which comprises the markets for hearing aids and diagnostic instruments and services, saw positive growth in Q3. Compared to Q2, growth accelerated primarily as a reflection of soft comparative figures, and if we compare to pre-pandemic levels, growth in the global hearing aid market developed in line with the structural growth rate.
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 8% in Q3 compared to the same period in 2022. Growth was positive across regions, and we estimate that geography and channel mix changes resulted in a slightly negative ASP development. Consequently, value growth in the hearing aid market in Q3 was in line with our expectations.
Estimated hearing aid market unit growth by region
2023
Region
Q1
Q2
Q3
YTD
Europe
4%
-4%
7%
2%
North America
9%
5%
11%
8%
Hereof US (commercial)
9%
5%
12%
9%
Hereof US (VA)
9%
4%
4%
6%
Rest of world
9%
10%
7%
9%
Global
7%
3%
8%
6%
CAGR vs 2019
5%
5%
5%
5%
Compared to the same period in 2022, we estimate that in Q3, market unit growth in Europe was 7%. Growth was predominantly driven by very strong growth in the NHS, although in the UK, the commercial market also grew in the period. In Germany, growth was slightly positive, whereas France saw negative growth, as the hearing aid market continued to normalise following the hearing healthcare reform implemented in 2021. Several smaller markets saw strong growth, particularly Spain.
Growth in North America was 11% in Q3, driven by strong development in the US commercial market where growth was 12%. Relative to the same period last year, unit growth in the US commercial market continues to be driven by managed care and large chains growing faster than the independent market. Growth in VA was solid, and growth in Canada was also strong.
Looking beyond Europe and North America, we estimate that market unit growth in Rest of world was 7%. Growth in Japan was strong, whereas in China, growth decelerated, although we estimate that it remained slightly positive in the period. Growth in Australia was negative, but we estimate that several emerging markets delivered good growth in Q3.
Diagnostics market
We estimate that, compared to the same period last year, the market growth rate in Q3 was in line with the estimated structural growth rate of 3-5% per year, albeit likely at the low end of the range due to weak market momentum in China.
Hearing Aids
Our total Hearing Aids business delivered strong organic growth of 21% in Q3 thanks to 25% organic growth in sales to external customers. This was the result of broad-based commercial momentum and was boosted by the successful launches of new premium hearing aids in Q1, which has led to market share gains across markets and channels. Growth was primarily driven by unit growth, and the ASP development was slightly positive.
In Europe, we saw double-digit organic growth, particularly in Germany and the UK, but many of our other markets also saw good performance in Q3. In France, growth was slightly positive in Q3 despite negative market developments in the period.
North America delivered strong double-digit growth in Q3 driven by both the US and Canada. In the US commercial market, we continued to see good sales momentum in chains and independents, and in VA, we saw strong growth helped by the launch of Oticon Real at the beginning of May. Following strong growth in H1, Canada continued its good performance in Q3.
In Asia, organic growth was strong. In Japan, incremental market share gains continued to drive strong growth, but in China, growth was negative in the period. In the Pacific region, we saw negative organic growth, partially due to low market growth in Australia, whereas in our Rest of World region, mostly comprising emerging markets, we saw strong double-digit growth, especially in South America.
Hearing Care
Hearing Care delivered solid performance in Q3 with organic growth of 6%. Acquisitive growth was also 6%, driven in particular by Germany but also by a number of minor acquisitions in other markets. Similar to H1, organic growth was driven by good momentum in our medium-sized markets. Our two biggest markets, the US and France, grew at a slower pace, with France in slightly negative growth territory, due to negative market developments. Organic growth was predominantly driven by units, but we continued to also experience a slight tailwind from an increasing ASP.
Regionally, Europe was the largest growth driver thanks to positive developments in several markets. Poland continued to see particularly strong growth, and also the UK delivered good growth. In France, we saw slightly negative organic growth, which was a drag on total Hearing Care growth in Q3, but the growth rate was still better than the market growth rate.
Organic growth in North America was positive thanks mostly to the US, which was helped by low comparative figures and strong market growth rates in Q3, although market growth was primarily driven by managed care. Following our strategic decision last year to reduce our share of sales related to managed care, we have increased our focus on the private pay part of the market, which has led to a stabler business model and supported the ASP development and profitability. Canada also saw slightly positive organic growth.
In our other geographies, Australia saw slightly positive organic growth in Q3. In China, Sheng Wang saw weaker-than-expected revenue due to weak market dynamics but still delivered positive organic growth helped by low comparative figures.
Diagnostics
Organic growth in Diagnostics was 6%, which is above the estimated market growth rate. In addition, the business area saw acquisitive growth of 2%, mainly related to minor acquisitions in previous quarters. Overall, growth in Q3 was solid despite a slightly negative impact of weak market dynamics in China, and we continued to see a good order intake.
In terms of geographies, organic growth was driven by Europe, where we saw good growth in several markets, and by the US. In Asia, we saw negative organic growth due to weak market dynamics in China. In terms of product categories, Diagnostics mainly generated growth in the service business, which performed strongly in Q3, but instruments for balance testing and audiometers also performed well.
Communications
Market trends
After a weak H1 2023, we estimate that the market growth rate for enterprise solutions and gaming headsets continued to be negative in Q3. Both market segments continued to see tough market conditions with lower spending by both corporates and consumers, and visibility remains limited.
Communications (EPOS)
Our Communications business saw organic growth of -20% in Q3 because of weak market development and significant pressure on our realised sales prices due to promotional activities and to sales of legacy, co-branded products at discounted prices. Compared to last year, we continued to see negative organic growth in all regions.
As announced on 29 August, Demant has decided to gradually wind down its Gaming business following a review of the future growth potential and competitiveness of the business. Following this decision, we have focused on reducing our inventory of gaming products, and while revenue in Gaming grew slightly in Q3, sales prices were lower than anticipated due to very significant promotional activities. This negatively impacted profitability in Communications in Q3 and is expected to have an additional negative one-off EBIT impact of DKK 50-100 million in H2.
In Q3, Enterprise Solutions accounted for approx. 85% of Communications revenue, and organic growth was -24%, as we continued to be impacted by material hesitation to buy among end-customers, a factor that we expect will continue throughout H2. Looking ahead, we will in Enterprise Solutions focus on solidifying our position in a number of target markets, on further strengthening our product portfolio of premium audio and video solutions for enterprises and on expanding our distribution partnerships.
As a step in this direction, EPOS is today announcing a strategic agreement with Lenovo to provide high-quality audio solutions for business professionals. Through the agreement, EPOS will be Lenovo’s global audio partner for PC audio accessories, which entails the inclusion of the EPOS portfolio in Lenovo’s third-party reseller programme and the co-development of future hardware, software and services to create professional audio solutions. The agreement will have limited impact in 2023, but we expect a positive contribution to growth in 2024.
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
2023-13 Interim Management Statement for Q3 2023.pdf
