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Open
126
Volume
0.2m
Range
126/127
Market Cap
8,249,825,446m
52 Week
115/143
Date Source Announcement
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Weak organic performance front-end loaded

  • 11 Jan 17

Sonova’s H1 16/17 numbers (slightly below consensus estimates) confirmed continuing sluggishness due to AudioNova’s acquisition and an ageing product cycle. Sales grew at a slower pace of 5.5% in LC (6.7% in CHF) vs. 6.7% in H1 15/16 to CHF1.1bn, albeit slightly better than the 4.8% in H2 15/16. Even this growth primarily (3.5%) came from acquisitions, while the organic number languished at 2% (H1 15/16: 2.6%). On a segmental basis, Hearing Instruments (HI) and Cochlear Implants (CI) grew by 5.4% and 7%, respectively. Within HI, the premium category (25% of H1 16/17 sales) grew the fastest (6.4% at LC), outperforming the standard devices (29% of H1 16/17 sales) that inched up 5.1% in LC. Meanwhile, advanced instruments (20% of H1 16/17 sales) grew by just 1.5%. On the profitability front, reported EBITA declined 2.5% in LC (flat yoy in CHF) to CHF195.8m (margin down by 1.2pp) due to higher sales & marketing costs and one-time costs of c.CHF10m related to the AudioNova acquisition; adjusted EBITA margin fell 27bp yoy to 19.2% and the adjusted net margin fell c.60bp to 15.1% in H1 16/17. Geographically, the EMEA region (44% of sales) continued its strong momentum (+c.12% at LC vs. c.9% in H1 15/16) supported by an uptick in the UK, Nordics, French and Italian markets despite continued headwinds in Germany. Retail growth backed by acquisitions (primarily AudioNova), wholesale expansion due to new products and CI growth momentum on increased system sales contributed to the growth. On the other hand, the US (36% of sales) was flattened (-0.1%) by lower Unitron sales on the ageing platform and the ongoing consolidation of retail activities, while the rest of Americas increased modestly by 3.1%. Asia-Pacific rose meagrely (+1.6%), following a decline in demand in China before the anticipated launch of the Venture platform at the end of H1 16/17 and the trimming of activities in low-margin tender businesses related to CI in both India and China, despite sturdy growth from Australia. Including the AudioNova acquisition impact, management pegs revenue growth at 14-16% in LC and an EBITA increase of 8-12% in LC (excluding one-off charges) for FY 16/17 (previous guidance in LC: 4-6% sales and 3-7% EBITA expansion, excluding the contribution from the AudioNova acquisition).

AudioNova acquisition completed, major short-term headwinds to persist

  • 24 Oct 16

Sonova completed the acquisition of Europe’s second largest hearing aids retailer AudioNova (Amplifon remains the largest retailer in the hearing aids industry), earlier than expected, in September 2016. Sonova acquired AudioNova from the investment company HAL Trust, pipping the likes of WDM (William Demant) and Sivantos. The acquisition brings >1,300 retail stores spread across eight European countries, further fortifying Sonova’s hold on its distribution channel (as a reminder, with >2,000 retail stores Sonova already has the largest retail network amongst the big six hearing aids manufacturers), a crucial requirement in the prevailing pricing pressure environment (William Demant guides for 1-2% ASP decline annually). With AudioNova in the kitty, the share of the retail is set to increase to c.38% (vs 25% for WDM) of total sales (c.15% volume) from the earlier 27% (c.10% volume). From a financial point of view, the deal is expected to be earnings accretive in the first financial year after closure. As a consequence of the acquisition, Sonova has suspended the ongoing CHF500m share buy-back programme (of which CHF229m had been completed to March 2016). Furthermore, for FY 16/17, management sees revenue growth of 4-6% at LC and an EBITA increase of 3-7% at LC (excluding contribution from AudioNova acquisition), below its medium-term target of 5-7% sales (includes c.1% growth from acquisitions) and 7-11% EBITA growth. Separately, in its investors day held recently, Sonova provided an update on its strategy for the next five years wherein the focus continues to be on vertical integration primarily through retail network integration and expansion (to be further supported by continued bolt-on acquisitions), and strengthening its e-solutions across the hearing aids related services spectrum. As a result, management expects retail sales to outpace wholesale (+6-8% compared to +3-5%) in the mid-term. The company also unveiled new products across segments and, more importantly, confirmed that it will be launching a made-for-all (MFA) 2.4GHz based platform in 2017, an urgently needed push in our view.