title of the presentation presentation_jan_2014_0.pdf · mid-term financial targets (excluding fx...

INVESTOR PRESENTATION January 2014

DISCLAIMER

This presentation contains forward-looking statements, which offer no guarantee with

regard to future performance. These statements are made on the basis of

management’s views and assumptions regarding future events and business

performance at the time the statements are made. They are subject to risks and

uncertainties including, but not confined to, future global economic conditions, exchange

rates, legal provisions, market conditions, activities by competitors and other factors

outside Sonova’s control. Should one or more of these risks or uncertainties materialize

or should underlying assumptions prove incorrect, actual outcomes may vary materially

from those forecasted or expected. Each forward-looking statement speaks only as of

the date of the particular statement, and Sonova undertakes no obligation to publicly

update or revise any forward-looking statements, 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 Article 652a of the Swiss Code of Obligations nor a listing prospectus within

the meaning of the listing rules of SIX Swiss Exchange.

January 2014

VISION

AT SONOVA, WE ENVISION …

January 2014

A WORLD WHERE

EVERYONE

ENJOYS THE DELIGHT OF

HEARING AND

THEREFORE LIVES A LIFE

WITHOUT LIMITATIONS

… “HEAR THE WORLD”

SONOVA GROUP

BROADEST OFFERING: HEARING INSTRUMENTS, COCHLEAR IMPLANTS …

… AND PROFESSIONAL AUDIOLOGICAL SERVICES

January 2014

HI Hearing Instruments Behind-The-Ear hearing instruments (BTE)

FM systems

Custom In-The-Ear hearing instruments (ITE)

Hearing protection

Wireless communication systems

Invisible extended-wear hearing instruments

Cochlear implants

CI Cochlear Implants

SONOVA GROUP

CLEAR AND FOCUSED STRATEGY – CUSTOMER DRIVEN INNOVATION

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

January 2014

CONTENTS

1 MARKET PAGE 7

2 BUSINESS PAGE 10

3 CORPORATE STRATEGY PAGE 19

4 BUSINESS STRATEGIES PAGE 28

5 FINANCIAL INFORMATION PAGE 43

6 ADDITIONAL SLIDES PAGE 59

January 2014

1. MARKET

MARKET

LOW PENETRATION RATE – AROUND 20% IN DEVELOPED COUNTRIES

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

AROUND 15% OF ADULTS HAVE SOME DEGREE OF HEARING IMPAIRMENT

January 2014

MARKET

January 2014

TOTAL HEARING CARE MARKET

- Market Size

- Market CAGR

- HI Size (units)

- CI Size (units)

~ CHF 15-16 billion

~ + 3-5%

10-11 million

~ 40-50 thousand

COCHLEAR IMPLANTS CI

- Market Size

- Market CAGR

- CI Size (units)

~ CHF 1 billion

~ +10%

~ 40-50 thousand

HEARING INSTRUMENTS HI

- Market Size

- Market CAGR

- HI Size (units)

~ CHF 4.5 billion

~ + 2-4%

10-11 million INDEPENDENTS

GLOBAL

KEY

ACCOUNTS LARGE

RETAIL

ACCOUNTS

BUYING

GROUPS

HOSPITALS

GOVERNMENT

OTHERS

CI

HI

SERVICE CHANNELS: KEY TO ACCESS END-USERS

HEARING SOLUTIONS: INSTRUMENTS, IMPLANTS AND SERVICES

2. BUSINESS

SONOVA GROUP

PERFORMANCE HISTORY – STRONG FINANCIAL TRACK RECORD

1H

SALES in CHF million

EBITA in CHF million

EBITA margin in %

Notes: FY 2009/10 Restated based on finalization of the acquisition accounting of Advanced Bionics

FY 2012/13 Excluding one-off cost for AB Vendor B provision increase, AB Rixheim restructuring and settlement with a group of investors

2H

FY 2008/09 FY 2009/10 FY 2010/11 FY 2011/12 FY 2012/13 CAGR 5-y 1H 2013/14

Sales growth reported +3.7% +20.1% +7.8% +0.2% +10.8% +8.3% +8.6%

Sales growth in LC +10.8% +23.8% +13.3% +11.6% +7.4% +13.2% +10.4%

EBITA margin 26.6% 28.0% 20.2% 19.5% 21.5% N/A 21.8%

Basic EPS 4.35 3.32 3.50 3.71 4.62 +0.3% 2.39

0

200

400

600

800

1'000

1'200

1'400

1'600

1'800

2'000

08/09 09/10 10/11 11/12 12/13 13/14

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

50

100

150

200

250

300

350

400

450

08/09 09/10 10/11 11/12 12/13 13/14

January 2014

AB Center

Unitron Center

Sonova & Phonak HQ & Centers

Distributors WHS Group Companies

Operation Centers Phonak Communications Center

InSound Center

Murten (CH)

Kitchener

(CAN)

Ho Chi Minh City

(VN)

Suzhou (CN)

Valencia (USA)

Newark

(USA)

Stäfa (CH)

SONOVA GROUP

WELL ESTABLISHED GLOBAL INFRASTRUCTURE AND NETWORK

STRONG LOCAL PRESENCE – SUPPORTING CUSTOMERS WORLDWIDE

January 2014

SONOVA GROUP

EUROPE AND AMERICAS – MAIN CONTRIBUTORS TO GROUP SALES

January 2014



2008/09 2009/10 2010/11 2011/12 2012/13 CAGR

5-year 1H 2013/14

EU - Sales growth in LC +6.4% +23.0% +11.3% +13.9% +5.3% +11.8% 8.3%

AM - Sales growth in LC +12.9% +26.0% +16.9% +7.8% +7.1% +13.9% 9.6%

AP - Sales growth in LC +22.3% +15.3% +2.7% +24.0% +17.7% +16.1% 22.9%

'0

'200

'400

'600

'800

1'000

1'200

1'400

1'600

1'800

2'000

08/09 09/10 10/11 11/12 12/13 13/14

EU AM AP

'0

'200

'400

'600

'800

1'000

1'200

1'400

1'600

1'800

2'000

08/09 09/10 10/11 11/12 12/13 13/14

MARKET POSITION

EXPANDING STRONG HI POSITION INTO LARGER HEARING CARE MARKET

January 2014


- Market Size

- Market CAGR

- HI Size (units)

- CI Size (units)

~ CHF 15-16 billion

~ + 3-5%

10-11 million

~ 40-50 thousand


- Market Size

- Market CAGR

- CI Size (units)

~ CHF 1 billion

~ +10%

~ 40-50 thousand


- Market Size

- Market CAGR

- HI Size (units)

~ CHF 4.5 billion

~ + 2-4%

10-11 million

MARKET POSITION

SERVICE CHANNELS: STRONG PARTNER TO IND, LRA, BG AND GOVT


- Market Size

- Market CAGR

- HI Size (units)

- CI Size (units)

~ CHF 15-16 billion

~ + 3-5%

10-11 million

~ 40-50 thousand


- Market Size

- Market CAGR

- CI Size (units)

~ CHF 1 billion

~ +10%

~ 40-50 thousand


- Market Size

- Market CAGR

- HI Size (units)

~ CHF 4.5 billion

~ + 2-4%

10-11 million INDEPENDENTS

GLOBAL

KEY

ACCOUNTS LARGE

RETAIL

ACCOUNTS

BUYING

GROUPS

HOSPITALS

GOVERNMENT

OTHERS

SOON

Sales Split

January 2014

SONOVA GROUP

BALANCED PORTFOLIO OF PROFITABLE GROWTH BUSINESSES

SONOVA

Group

HEARING INSTRUMENT (HI)

Segment IMPLANT (CI)

Segment

CI

ADVANCED

BIONICS

Business

HI

PHONAK

Business

HI

UNITRON

Business

HI

RETAIL

Business

January 2014

HI SEGMENT

HEARING INSTRUMENTS – PERFORMANCE HISTORY



EBITA margin in %

1H 2H


Sales growth reported +3.7% +18.1% +4.8% -1.4% +8.2% +6.5% +8.1%

Sales growth in LC +10.8% +21.7% +10.1% +9.7% +4.9% +11.3% +9.9%

EBITA margin 27.2% 29.0% 24.1% 22.3% 23.3% N/A 23.8%

0

200

400

600

800

1'000

1'200

1'400

1'600

1'800

2'000

08/09 09/10 10/11 11/12 12/13 13/14

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

50

100

150

200

250

300

350

400

450

08/09 09/10 10/11 11/12 12/13 13/14

January 2014

CI SEGMENT

COCHLEAR IMPLANTS – PERFORMANCE HISTORY



EBITA margin in %

1H 2H

* FY 2012/13 Excluding one-off cost for Vendor B provision at AB and AB Rixheim restructuring

0

25

50

75

100

125

150

175

200

08/09 09/10 10/11 11/12 12/13 13/14

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

-70

-60

-50

-40

-30

-20

-10

0

10

08/09 09/10 10/11 11/12 12/13 13/14


Sales growth reported -- -- +180.5% +36.0% +52.3% > +80.0% +15.0%

Sales growth in LC -- -- +202.1% +53.5% +47.1% > +80.0% +16.2%

EBITA margin -- -31.0% -63.4% -25.0% 1.2% N/A 0.1%

January 2014

3. CORPORATE STRATEGY

SONOVA GROUP

BROADEST OFFERING: HEARING INSTRUMENTS, COCHLEAR IMPLANTS …

… AND PROFESSIONAL AUDIOLOGICAL SERVICES

January 2014

HI Hearing Instruments Behind-The-Ear hearing instruments (BTE)

FM systems

Custom In-The-Ear hearing instruments (ITE)

Hearing protection

Wireless communication systems

Invisible extended-wear hearing instruments

Cochlear implants

CI Cochlear Implants

FINANCIAL TARGETS

ON COURSE FOR MID TERM FINANCIAL TARGETS

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

Ma

rgin

/ R

OC

E (

%)

Sa

les (

in C

HF

mill

ion

)

Sales EBITA Margin (%) ROCE (%)

Notes: FY 2007/08 Excluding one-off cost for the prohibited acquisition of the GN ReSound Group

FY 2009/10 Restated based on finalization of the acquisition accounting of Advanced Bionics

FY 2012/13 Excluding one-off cost for AB Vendor B provision at AB, AB Rixheim restructuring and settlement with a group of investors

January 2014

STRATEGY

FIVE KEY STRATEGIES DRIVING CORE SALES AND EARNINGS GROWTH

1 INNOVATION

2 MARKET

3 PRODUCT

4 RESOURCE

5 ACQUISITION

CORPORATE STRATEGIES

1 HI PHONAK

2 HI UNITRON

3 HI RETAIL

4 CI ADVANCED BIONICS

BUSINESS STRATEGIES

January 2014

INNOVATION STRATEGY

FOCUS ON CONTINUOUS INNOVATION TO GROW SALES AND EARNINGS

January 2014

CORE: DRIVE STRONG NEW PRODUCT PIPELINE – GROSS R&D 7-8% OF SALES

NEW PRODUCTS

SALES & DISTRIBUTION

Q1 15 Q2 15 Q1 14 Q2 14 Q3 14 Q4 14 Q1 13 Q2 13 Q3 13 Q4 13

MARKETING

PRODUCTIVITY & EFFICIENCY

RESOURCES & PROCESSES

MARKET STRATEGY

GROW MARKET POSITION ALONG 4 MAIN GROWTH VECTORS

January 2014

FOCUS ON KEY INITIATIVES TO SUPPORT GROWTH 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

– Lead generation processes

PRODUCT STRATEGY

PROVIDE COMPLETE CUSTOMER SOLUTIONS: HW, SW AND SERVICES

January 2014

PLATFORM CONCEPT APPROACH TO SOLUTION DEVELOPMENT

RESOURCE STRATEGY

LEVERAGE GLOBAL INFRASTRUCTURE TO EXPAND MARGINS

RE-BALANCE GLOBAL OPEX BASE TO CREATE NATURAL HEDGE

0

50

100

150

200

2012 2016

SALES

OPEX 0

50

100

150

200

2012 2016

SALES

OPEX 0

50

100

150

200

2012 2016

SALES

OPEX

AMERICAS EUROPE APAC

January 2014

ACQUISITION STRATEGY

INVEST TO LEVERAGE EXISTING CHANNELS AND PRODUCTS

January 2014

TARGETS: STRICT CRITERIA FOR STRATEGIC AND FINANCIAL FIT

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

4. BUSINESS STRATEGIES

SONOVA GROUP

BALANCED PORTFOLIO OF PROFITABLE GROWTH BUSINESSES

SONOVA

Group

HEARING INSTRUMENT (HI)

Segment IMPLANT (CI)

Segment

CI

ADVANCED

BIONICS

Business

HI

PHONAK

Business

HI

UNITRON

Business

HI

RETAIL

Business

January 2014

PHONAK

BUSINESS STRATEGY

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 2013/14

- B2B/B2C marketing campaign: «Phonak engaging voices»

- New product launch Spring 2013

- New product launch Fall 2013

- Lyric 2.3

- Communication/wireless connectivity standard “ROGER” based on 2.4 GHz

- China market growth and expansion (lead)

- etc.

January 2014

PHONAK

January 2014

PRODUCT PIPELINE: DRIVE HIGH INNOVATION & PRODUCT LAUNCH RATE

COMPLETE RANGE ACROSS ALL FORMATS AND PERFORMANCE LEVELS

Note: Subject to change

SPICE (new HW / new DSP / 65nm) QUEST (new HW / new core SW / 65nm) NEXT PLATFORM B

TE

– B

ole

ro 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 3.3 T 3.0 T 4.0 T 3.1 T 3.2 T 4.1 T 4.2 T 2.0 T 1.1

FM System (analog) Roger (digital /2.4 GHz)

F1 / 4

HI - Premium

HI - Advanced

HI - Standard

HI - Essential/Basic

HI - Platform

HI - New EW Format

Fitting Software (TARGET)

Communication

F 1

F 3

F 1

F

1

F 2

F

2

F 4

F 5

F

5

1H 15 2H 15 1H 13 2H 13 1H 11 2H 11 1H 14 2H 14 1H 12 2H 12 TIMELINE / CY

BT

E

ITE

PHONAK

COMPLETING THE RANGE OF SOLUTIONS ON QUEST

BUILDING ON THE SUCCESS OF THE PLATFORM

January 2014

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 Q15 Phonak Tao Q15

UNITRON

BUSINESS STRATEGY

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


- B2B Marketing campaign “favorite sound”

- UT customer experience initiatives

- New product launch Spring 2013

- New product launch Fall 2013

- China market growth and expansion (complement Phonak initiative)

- etc.

January 2014

UNITRON

January 2014

PRODUCT PIPELINE: DRIVE FOCUSED PRODUCT INNOVATION

Note: Subject to change

Fitting Software (TRUEFIT)

ERA (new HW / new DSP / 65nm) NEXT PLATFORM

FL

EX

Tri

al

PO

WE

R –

Max

RIC

– M

oxi

Kis

s

FL

EX

Tri

al &

Up

gra

de

F 1

F 2

TF 1.1 TF 2.3 TF 2.0 TF 2.3 TF 2.1 TF 2.2 TF 3.0 TF 3.1 TF 1.0

HI - Premium

HI - Advanced

HI - Standard

HI - Essential/Basic

HI - Platform

Q P

RO

M P

RO

RIC

– M

oxi

2

F 1

F 2

F 1

F 2


Fitting Software (TRUEFIT)

BTE

– Q

uant

um2

FLEXIBLE RANGE ACROSS 3 FORMATS AND ALL PERFORMANCE LEVELS

UNITRON

NEXT GENERATION OF PRODUCTS ON THE ERA PLATFORM

BUILDING ON THE SUCCESS OF THE FLEX CONCEPT

January 2014

BTE Custom RIC Power Flex Trial & Upgrade

Premium Quantum Pro Quantum Pro Moxi Pro

Any Performance Level Advanced

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

CONNECT HEARING

BUSINESS STRATEGY

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 acquisitions and store openings

- New store concepts (e.g. Boots/DOHC)

- CHG Retail Business Solution (RBT)

- Strategic branding approach

- etc.

January 2014

Based on a market-leading concept established

ten years ago

Number of locations in the UK: Around 370 today

– up from 64 ten years ago

Value proposition: professional audiological

services at attractive locations

Tangible synergies for both sides from increased

store traffic

Solid long-term SOON/Boots partnership: 51/49

joint ownership of DOHC

CONNECT HEARING

BOOTS/DOHC SHOP-IN-SHOP APPROACH – CONTINUED STRONG DEVELOPMENT

PREMIUM MARKET ACCESS BY PARTNERSHIP WITH LEADING PHARMACY CHAIN

January 2014

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

CONNECT HEARING

US RETAIL – FURTHER INTEGRATION

January 2014

EXTRA EFFORTS TO HARVEST SYNERGIES BETWEEN CHANNELS

ADVANCED BIONICS

BUSINESS STRATEGY

ADVANCED BIONICS: «PATIENTS ALWAYS FIRST»

Mission / value proposition - Strive for performance leadership – leverage AB and PH 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 PH pipeline and platforms

Productivity / efficiency - Leverage PH technology & process platform to expand margins


- AB Partner Program for retail: «Think beyond Hearing Aids»

- AB / PH system & product pipeline

- New product launches 2013/14 (implants, electrodes, processors)

- China market development

- etc.

January 2014

ADVANCED BIONICS

January 2014

PRODUCT PIPELINE: ACCELERATE INNOVATION RATE – LEVERAGE PH

EXPAND RANGE OF INNOVATIVE PROCESSORS, IMPLANTS, ELECTRODES

Note: Subject to change, timing dependent upon regulatory approvals

FDA

CE

FDA

CE

FDA

CE

WOLVERINE / QUEST (new HW / new DSP / 65nm) NEXT PLATFORM

CI - Electrodes

CI - Implants

CI - Processors

CI - Platform

Fitting Software (SOUNDWAVE)

N Pro 1 New Pro. New Pro.

New Pro.

New Imp. New Imp.

New E. New El.


SW 2.0 SW 3.0 SW 4.0

Neptune Neptune Naída CI Q70

New Imp.

New Pro.

New Imp.

New El. HiFocus

Mid-Scala New El.

HiRes 90k

Advantage

ADVANCED BIONICS

UNPRECEDENTED NUMBER OF NEW PRODUCTS IN THE LAST 12 MONTHS

EXPANDING RANGE OF INNOVATIVE PROCESSORS, IMPLANTS AND ELECTRODES

January 2014

Implants Electrodes Sound Processors

HiRes 90K Advantage HiFocus Mid-Scala Naída CI

HiRes 90K HiFocus 1j Neptune

HiFocus Helix Harmony BTE

SONOVA GROUP

WELL ESTABLISHED GLOBAL INFRASTRUCTURE AND NETWORK

AM EU APAC

January 2014

5. FINANCIAL INFORMATION

HALF-YEAR 2013/14

– Solid sales growth +10.4% in LC and 8.6% in CHF – both segments exceeding

estimated market growth

– Gross profit margin of 68.5%, down 30 bps due to segment mix and FX

– EBITA margin increased by 40 bps to 21.8%

– R&D spending at CHF 70.4 million or 7.4% of sales including net capitalization

– Basic EPS of CHF 2.39

– Free cash flow up by 45.5% to CHF 125.6 million,

– Net cash at CHF 180.2 million

– Equity ratio at 62.2% in September 2013 (61.2% in March 2013)

FINANCIAL HIGHLIGHTS

January 2014

HALF-YEAR 2013/14

SONOVA GROUP – KEY FINANCIALS

DOUBLE DIGIT LC GROWTH IN SALES AND EBITA

January 2014

in CHF million 1H 2012/13 1H 2013/14 Δ % Δ % in LC

Sales 872.4 947.8 8.6% 10.4%

Gross profit 600.5 649.2 8.1% 9.8%

- Gross profit margin 68.8% 68.5%

OPEX -414.1 -443.0 7.0% 8.4%

EBITA 186.4 206.2 10.6% 13.0%

- EBITA margin 21.4% 21.8%

Operating free cash flow 127.1 138.7 9.1%

EPS (in CHF) 2.23 2.39 7.0%

HALF-YEAR 2013/14

GROUP SALES – REGIONS AND KEY MARKETS

ALL REGIONS CONTRIBUTING TO GROWTH, APAC IN PARTICULAR

January 2014

1H 2012/13 1H 2013/14

in CHF million Sales in % Sales in % Δ % in LC

EMEA 331.6 38.0% 361.7 38.1% 8.3%

USA 338.9 38.9% 368.2 38.9% 10.1%

Americas (excl. USA) 114.2 13.1% 116.9 12.3% 8.0%

Asia / Pacific 87.7 10.0% 101.0 10.7% 22.9%

Total SONOVA 872.4 100% 947.8 100% 10.4%

HALF-YEAR 2013/14

GROUP SALES – PRODUCT GROUPS

WELL BALANCED GROWTH PROFILE CONFIRMS HI LAUNCH STRATEGY

January 2014

in CHF million 1H 2012/13 in % of total 1H 2013/14 in % of total Δ % in LC

HI Premium 192.1 22.0% 220.6 23.3% 16.2%

HI Advanced 211.5 24.2% 215.9 22.8% 3.8%

HI Standard 239.8 27.5% 268.6 28.3% 14.6%

Wireless communication 31.3 3.6% 30.9 3.3% 0.5%

Miscellaneous 126.5 14.5% 129.9 13.7% 3.8%

Total HI Segment 801.2 91.8% 865.8 91.4% 9.9%

CI and accessories 71.3 8.2% 82.0 8.6% 16.2%

Total sales 872.4 100% 947.8 100% 10.4%

HALF-YEAR 2013/14

GROUP SALES – GROWTH COMPONENTS

ACCELERATION OF SALES DRIVEN BY ORGANIC GROWTH

January 2014

in CHF million 1H 2013/14 Growth Contribution

Growth in LC 91.0 10.4%

- Thereof organic 84.0 9.6%

- Thereof acquisitions 7.0 0.8%

Currency effect -15.6 -1.8%

Growth in CHF 75.3 8.6%

HALF-YEAR 2013/14

SONOVA GROUP – EBITA DEVELOPMENT

EBITA PERFORMANCE DRIVEN BY ORGANIC GROWTH; NEGATIVE FX EFFECT

January 2014

EBITA

1H 12/13

Organic

Growth

EBITA

1H 13/14

FX

effect

EBITA

1H 13/14

const. FX

206.2 -4.5

186.4 +23.6

Margin:

21.4%

Margin:

21.8%

+0.7

Acquisitions

210.7

Margin:

21.9%

+19.8 +10.6%

+24.3 +13.0%

Avg FX

Rates 1H 12/13 1H 13/14

USD 0.95 0.94

EUR 1.20 1.23

GBP 1.50 1.45

JPY (100) 1.20 0.95

BRL 0.48 0.43

AUD 0.97 0.89

CAD 0.95 0.91

HALF-YEAR 2013/14

SONOVA GROUP – OPERATING EXPENSES

IMPROVEMENTS IN SG&A PARTLY OFFSET BY CI LAUNCH & US RETAIL EFFORTS

January 2014

*H1 2012/13 one-off cost: settlement with a group of investors CHF 2.6m

in CHF million 1H 2012/13 1H 2013/14 Δ % in CHF Δ % in LC Comments

Research & Development -56.7 -59.4 4.9% 5.3%

in % of sales 6.5% 6.3%

Sales & Marketing -266.6 -290.0 8.8% 10.5% Intense product launch activity

in % of sales 30.6% 30.6%

General & Administration -88.3 -93.6 6.1% 7.1% US retail integration cost

in % of sales 10.1% 9.9%

Subtotal -411.6 -443.1

in % of sales 47.2% 46.8%

Other expenses* -2.6 0.1 Non recurring cost in prior year

Total OPEX -414.1 -443.0 7.0% 8.4%

in % of sales 47.5% 46.7%

HALF-YEAR 2013/14

SONOVA GROUP – R&D SPENDING

CONTINUED HIGH R&D INVESTMENT

January 2014

in CHF million 1H 2012/13 1H 2013/14 Δ % in CHF Δ % in LC Comments

R&D charged to the P&L 56.7 59.4 4.9% 5.3%

in % of sales 6.5% 6.3%

Capitalized development

costs 15.4 14.0

Investments to sustain high

pace of innovation in CI

in % of sales 1.8% 1.5%

Amortization of

development costs 0.8 3.0

New product launches triggers

higher amortization

in % of sales 0.1% 0.3%

Total R&D spending 71.2 70.4 -1.1% -0.7%

in % of sales 8.2% 7.4%

HALF-YEAR 2013/14

SONOVA GROUP – REPORTED RESULTS AND INCOME TAXES

SOLID EBITA DEVELOPMENT TRANSLATES INTO DOUBLE-DIGIT EARNINGS GROWTH

January 2014

in CHF million 1H 2012/13 1H 2013/14 Δ % in CHF Comments

EBITA 186.4 206.2 10.6% Adverse FX impact of CHF 4.5 million reduces

margin by 10 basis points

Acquisition related

amortization -12.6 -12.9 2.4%

Operating profit (EBIT) in % of sales

173.8 19.9%

193.3 20.4%

11.2%

Financial result -2.2 -5.1 129.4% Unwinding of discount on increased product

liability provision; lower result from associates

Income before taxes 171.6 188.2 9.7%

Income taxes -23.0 -24.6 6.8%

- Income tax rate 13.4% 13.0%

Income after taxes in % of sales

148.6 17.0%

163.7 17.3%

10.1%

Thereof attributable to

non-controlling interests -0.89 3.2 Change attributable to Boots partnership

EPS (in CHF) 2.23 2.39 7.0%

HALF-YEAR 2013/14

SONOVA GROUP – SOLID FREE CASH FLOW

STRONG FREE CASH FLOW SUPPORTED BY LOWER M&A ACTIVITY

January 2014

in CHF million 1H 2012/13 1H 2013/14 Δ % in CHF Comments

Cash flow before changes in NWC 218.5 260.2 19.1%

Changes in net working capital and

taxes paid -51.4 -68.6 33.6%

Movements in receivables, other

payables, accruals and provisions

Operating cash flow in % of sales

167.1 19.2%

191.6 20.2%

14.7%

Cash flow from investing activities

(excl. acquisitions) -40.0 -52.9 32.2%

Operating free cash flow in % of sales

127.1 14.6%

138.7 14.6%

9.1%

Cash consideration for acquisitions -40.8 -13.1 -68.0% Policy unchanged, firm application of

quality thresholds on M&A targets

Free cash flow 86.3 125.6 45.5%

Cash flow from financing activities -79.2 -132.2 66.9% Higher distribution to shareholders

and share purchases to serve

management option programs

Changes in cash and cash

equivalents 8.5 -10.6

HALF-YEAR 2013/14

SONOVA GROUP – BALANCE SHEET

STABLE NET WORKING CAPITAL AND CAPITAL EMPLOYED

January 2014

in CHF million 31 Mar 2013 30 Sep 2013 Δ % in CHF Comments

Net working capital 187.1 184.8 -1.2%

Days sales outstanding (DSO) 71 67 -5.6% Continuous efforts to manage

receivables

Days inventory outstanding (DIO) 148 140 -5.4% Continuous efforts to manage

inventory

Capital employed 1’455.5 1’453.4 -0.1%

Net cash 185.8 180.2 -3.0% Considers CHF 107 million capital

distribution in 1H 2013/14

Equity 1’641.3 1’633.6 -0.5%

Equity in % of total assets 61.2% 62.2%

HALF-YEAR 2013/14

– Advanced Bionics signed settlement agreements in October 2013

– Agreements cover the majority of current product liability claims related to cochlear

implant malfunctions, including the case Sadler vs. Advanced Bionics

– Cash impact and accounting recognition in 2H 2013/14

– Excluding the claims covered by the settlement agreements, there currently are less

than 10 pending claims filed with a court

– October 2013 settlements and development of all other product liability costs in line with

the underlying assumptions of the provision for such claims

– Failure rates are tracking well within our expectations

– Development of claims in line with the underlying assumptions

– Advanced Bionics continues to deal with the failures under the normal warranty and

through out-of-court settlements

UPDATE ON VENDOR B RECALL – STATUS AS OF 1 NOVEMBER 2013

January 2014

OUTLOOK

FY 2013/14 GUIDANCE – UPDATE

Actual

FY 2012/13

Old guidance

FY 2013/14 (as of 21 May 2013)

Actual

1H 2013/14

New guidance

FY 2013/14 (as of 18 Nov 2013)

Sales

Sales growth in LC

thereof acquisition related growth

FX-impact

Total sales growth in CHF

7.4%

2.2%

3.4%

10.8%

6%-8%

approx. 1%

n/a

n/a

10.4%

0.8%

-1.8%

8.6%

8%-10%

approx. 1%

EBITA

EBITA growth in LC

FX-impact

Total EBITA growth in CHF

15.4%*

7.2%*

22.6%*

9-13%*

n/a

n/a

13.0%

-2.4%

10.6%

11-14%*

January 2014

* Growth refers to the normalized prior year values as displayed in the 2012/13 annual report

OUTLOOK

FY 2013/14 GUIDANCE – FX IMPACT ON SALES AND MARGINS

USD/CHF EUR/CHF

Rate Sales EBITA

USD/CHF +/- 5% +/- CHF 38 million +/- CHF 11 million

EUR/CHF +/- 5% +/- CHF 24 million +/- CHF 12 million

January 2014

OUTLOOK

FX RATES – MAIN CURRENCIES

Avg 1H

12/13

Avg FY

12/13

Avg 1H

13/14

Spot

15-Nov-13 Effect

USD 0.95 0.94 0.94 0.92 - EUR 1.20 1.21 1.23 1.23 + GBP 1.50 1.48 1.45 1.48 - JPY 100 1.20 1.14 0.95 0.92 - BRL 0.48 0.47 0.43 0.40 - AUD 0.97 0.97 0.89 0.86 - CAD 0.95 0.94 0.91 0.88 -

January 2014

ADVERSE IMPACT OF NON USD AND EUR CURRENCIES

Effects have added

up to a noticeable

adverse impact in 1H

6. ADDITIONAL SLIDES

WIRELESS COMMUNICATION

January 2014

MAIN APPLICATIONS FOR HEARING AIDS – TREND TOWARDS WIRELESS LINK

COMMUNICATION CONNECTIVITY

Application:

Transmitting the voice of

a distant speaker or the

sound provided by a third-

party device to the hearing

instrument

Challenges:

Background noise

Ease of use

Distance

Interference

Application:

Transmitting a control-

signal and/or streaming

sound from a third-party

device to the hearing

instrument

Challenges:

Compatibility

Power consumption

Reliability

Interference

Application:

Adjusting hearing aid

settings to an individual’s

hearing loss

Challenges:

Reliability

Interference FITTING

Application:

Transmitting a control-signal

and/or streaming sound between

two hearing instruments

Challenges:

Power consumption

Interference

Binaural


January 2014

TODAY – SPECIFIC SOLUTIONS FOR DIFFERENT USE-CASES

COMMUNICATION CONNECTIVITY

WIRELESS FITTING 2

.4 G

Hz

BL

UE

TO

OT

H

10

.5 M

Hz

HiB

AN

FM

Binaural

http://www.google.ch/imgres?imgurl=http://www.letsgodigital.org/images/artikelen/64/ipod-touch.jpg&imgrefurl=http://www.letsgodigital.org/de/16610/apple-ipod-touch/&usg=__apUQ7fUGLQOM7_tVYnazODXcXYw=&h=491&w=530&sz=47&hl=de&start=2&zoom=1&tbnid=F3dIu8TkHAqGIM:&tbnh=122&tbnw=132&prev=/images?q=ipod+touch&um=1&hl=de&tbs=isch:1&um=1&itbs=1


January 2014

FUTURE – STANDARDIZED SOLUTIONS FOR MOST USE-CASES

COMMUNICATION CONNECTIVITY INTERACTION CONNECTIVITY

WIRELESS FITTING CONNECTIVITY

2.4

GH

z

BL

UE

TO

OT

H

2.4

GH

z

RO

GE

R

Binaural

10.5 MHz



January 2014

STEP 1 – 2.4 GHZ / ROGER COMMUNICATION STANDARD AVAILABLE NOW

COMMUNICATION CONNECTIVITY INTERACTION CONNECTIVITY

WIRELESS FITTING CONNECTIVITY

2.4

GH

z

BL

UE

TO

OT

H

2.4

GH

z

RO

GE

R


Binaural

10.5 MHz




January 2014

COMMUNICATION STANDARDS – 2.4 GHZ / ROGER AND 2.4 GHZ / BLUETOOTH

2.4 GHz / ROGER 2.4 GHz / BLUETOOTH

Technology / carrier frequency Sonova 2.4 GHz ultra-low power chip Commercial 2.4 GHz low-energy chip

Communication protocol ROGER

Sonova proprietary

BT LEA

BT Classic & BT LE (*)

BT Foundation protocol (*)

Purpose Spatial audio/data applications

Audiological signal processing

General data/audio applications

Application scope Bi-directional & broadcasting

Long / medium / short distances

Audio & data (MATA) channel

Point-to-point, bi-directional (*)

Medium / short distances

Audio & data (MATA) channel (*)

Performance Ultra-low power (designed for HI)

No signal delay / HiFi

Medium / low energy

Signal delay

Compatibility Radio chip modules

HI / CI vendor compatible

Built-in radio chips

HI / CI vendor specific

Availability Full

Introduced to HI/CI industry

Specific solutions: today (BT LEA)

Industry standard: 2-3 years (*)

KEY CHALLENGES NONE BT PROTOCOL STANDARD (*)

(*) Long-term targets


January 2014

THE ROGER PRINCIPLE – COMPATIBILITY, FLEXIBILITY & STANDARDIZATION

pick-up &

transmit

Transmitter

receive &

hand-over

Receiver 2.4 GHz

TV

Voice Music

Cell

Phone

Hearing Aid CI

PLATFORM STRATEGY

PHONAK QUEST – TAKING IT TO THE NEXT LEVEL!

DRIVE RAPID TECHNOLOGY EVOLUTION

January 2014

PALIO CORE SPICE QUEST

iPFG iPFG TARGET TARGET

PALIO PALIO SPICE QUEST

10.5 MHz 10.5 MHz

180 nm 180 nm

10.5 MHz

180 nm

250 nm 250 nm 250 nm 250 nm

130 nm 130 nm 65 nm 65 nm

PALIO CORE SPICE QUEST

• Fitting SW

• HW - Housing

• Wireless - Frequency

• Wireless - Platform

• ASP - Platform

• DSP - Platform

• Core Algorithm SW

on DSP- Platform

ADVANCED BIONICS

HOW A COCHLEAR IMPLANT WORKS

Soundprocessor

Sound is captured and

converted into detailed

digital information

Magnetic headpiece

Transmits digital signal

wirelessly to the implant

Implant

Converts digital

information into

electrical signal

Electrode

Delivers signal as

electrical stimulation to

the auditory nerve

January 2014

Invisible and hassle-free 24/7

No handling for up to 120 days

Available for immediate insertion

No ear impression necessary

Soft seals, contour to the shape of the

ear canal

Worn during daily activities

PHONAK LYRIC

UNIQUE VALUE PROPOSITION – NEW FORMAT

January 2014

THANK YOU VERY MUCH

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