CVR 71186911
Page 1 of
26
Company announcement no 2021-11 12 August 2021
Interim Report 2021
E
xcellent Group performance in H1 with 51% organic growth and market share gains in Hearing Healthcare
Recovery in the global hearing healthcare market in H1 at least in line with our expectations
EBIT of DKK 1,638 million in H1, corresponding to an EBIT margin of 18.2%, exceeding our expectations
Positive trends expected to continue in H2 – 2021 organic growth outlook upgraded to 26-30% (prev. 24-28%)
EBIT guidance for 2021 upgraded to DKK 3,150-3,450 million (prev. DKK 3,000-3,300 million)
Revenue (DKK million)
Growth H1 2021 vs H1 2020
Growth H1 2021 vs H1 2019
Revenue and growth rates
H1 2021
H1 2020
H1 2019
Org.
Acq.
LCY
Org.
Acq.
LCY
Hearing Aids
4,416
2,937
3,852
55%
0%
55%
17%
1%
17%
Hereof sales to Hearing Care
-871
-465
-607
90%
4%
94%
42%
6%
48%
Hearing Care
3,737
2,154
3,128
72%
5%
78%
15%
7%
23%
Hearing Implants
266
246
304
11%
0%
12%
-9%
1%
-8%
Diagnostics
843
660
673
34%
1%
35%
29%
2%
31%
Hearing Healthcare
8,391
5,532
7,350
55%
2%
57%
14%
3%
17%
Communications
621
546
-
16%
0%
16%
n.a.
n.a.
n.a.
Group
9,012
6,078
7,350
51%
2%
53%
15%
11%
26%
Please note that there are no comparative figures for Communications in 2019, as EPOS was not consolidated until 2020. Unless otherwise indicated, 2020
figures are adjusted for one-offs related to the consolidation of EPOS with financial effect from 1 January 2020.
In H1, Group revenue amounted to DKK 9,012 million, corresponding to growth of 53% in local currencies
compared to H1 2020, with 51% organic growth and 2% acquisitive growth. Exchange rate effects were -5%.
Compared to pre-pandemic levels in H1 2019, the Group saw growth of 26% in local currencies, with 15% or-
ganic growth and 11% acquisitive growth. The latter can mainly be attributed to the consolidation of EPOS i
n
2020.
Exchange rate effects were -3%.
Our Hearing Healthcare segment saw growth of 57% in local currencies compared to H1 2020, reflecting both
s
trong business performance and the severe negative impact of coronavirus on comparative figures. Heari
ng
A
ids and Hearing Care benefitted from the strong recovery of the hearing aid market, particularly in the US
where we saw the release of some pent-up demand in Q2. We also saw a significant positive impact of t
he
hear
ing healthcare reform in France, which we estimate added around DKK 200 million to revenue in H1 that
will not recur to the same extent in H2. Furthermore, Hearing Aids gained market share thanks to the highly
successful launch of new flagship hearing aids, including Oticon More and Philips HearLink. Diagnostics deliv-
ered very strong performance and gained market share and exited H1 with an all-time high number of orders in
the order book. Hearing Implants continued to see a significant negative impact of the slow recovery in a num-
ber of our key cochlear implants markets. Relative to H1 2019, Hearing Healthcare grew by 17% in local cur-
rencies, with 14% organic growth and 3% acquisitive growth, which is significantly above the market growth rate.
In Communications, growth was 16% in local currencies compared to H1 2020, all of which was organic
growth. Following the very high double-digit organic growth rate realised in the first months of the year – als
o
ai
ded by extraordinarily low comparative figures – growth decelerated significantly. Besides higher comparativ
e
f
igures, the deceleration was driven by a softening in the number of new orders, particularly for low-pric
ed
w
ired headsets. While we view this as a temporary slowdown, it will also impact growth in H2 negatively.
The Group realised a gross margin of 74.5% in H1, corresponding to growth of 4.5 percentage points com-
pared to H1 2020 and to sequential growth of 2.0 percentage points compared to H2 2020. The improvement
was mainly driven by higher production volumes and by strong growth in Hearing Healthcare, which has
a
s
tructurally higher gross margin than the Communications segment.
The Group’s OPEX grew by 18% in local currencies compared to H1 2020, with organic growth of 16% and
ac
quisitive growth of 2%. This reflects both the substantial sales growth and the very significant, temporary
cost savings realised in the comparative period, including support from government schemes related to corona-
DEMANT INTERIM REPORT 2021
Page 2 of 26
virus. We continued to see material temporary savings in OPEX, although these, as expected, gradually dimin-
ished during the reporting period. While we will continue to benefit from the structural savings announced in
October 2020, we only expect a limited impact of further temporary savings in H2.
EBIT for the Group was better than expected and amounted to DKK 1,638 million in H1, corresponding to an
E
BIT margin of 18.2%. Hearing Healthcare delivered very strong profitability with an EBIT margin of 20.0%
driven by a combination of strong revenue and temporary cost savings. Profitability was strongly supported by
the success of the new flagship hearing aids, and we estimate that the reform in France added around DKK
100 million to EBIT in H1 that will not recur to the same extent in H2. Conversely, the slowdown in Communica-
tions resulted in an EBIT of DKK -44 million, as we continued to invest in R&D and distribution that will support
our medium- to long-term growth.
Reflecting the Group’s improved profitability, cash flow was very strong, and both CFFO and FCF more than
doubl
ed to DKK 1,511 million and DKK 1,234 million, respectively. M&A activities have largely found their nor-
mal level with cash spent on acquisitions amounting to DKK 406 million, predominantly relating to Hearing Care.
Share buy-backs amounted to DKK 1,813 million, while the Group’s gearing multiple (NIBD/EBITDA) was
2.1 at the end of H1, which is in line with our medium- to long-term target of 2.0-2.5.
OUTLOOK FOR 2021
Based on expectations that our strong business momentum and market share gains in Hearing Healthcare will
continue in H2 – despite tailwind from the French reform not recurring to the same extent as in H1 – we upgrade
our guidance for the Group’s organic growth rate for 2021 to 26-30% (previously 24-28%). Due to the slowdown in
Communications, we now expect this segment to see negative organic growth in H2. As a result of the upgraded
outlook for revenue growth, we also upgrade our guidance for Group EBIT for 2021 to DKK 3,150-3,450 million
(previously DKK 3,000-3,300 million). In Communications, we expect to realise a negative EBIT for H2, as we will
continue to invest in the business as originally planned to support our future growth and market position. Due to
higher expectations in respect of our cash flow in H2, we now expect to buy back shares worth more than DKK 3.0
billion (previously more than DKK 2.5 billion).
Metric
Outlook for 2021
Organic growth
26-30% (previously 24-28%). For Communications, we expect negative organic growth in H2.
Acquisitive growth
1% based on revenue from acquisitions completed as of 11 August 2021.
FX growth
-1% (previously -2%) based on exchange rates as of 11 August 2021 and including the impact of hedging.
EBIT
DKK 3,150-3,450 million (previously DKK 3,000-3,300 million). For Communications, we expect a negative EBIT in H2.
Effective tax rate
Around 23%.
Gearing
Gearing multiple at the end of 2021 in line with medium- to long-term target of 2.0-2.5 (NIBD relative to EBITDA).
Share buy-backs
More than DKK 3.0 billion (previously more than DKK 2.5 billion).
“O
verall, we look at the first half-year with great satisfaction, we perform extremely well and win market share. We
have once again been let into many people’s lives with our innovative technologies and services, and based on
trustful collaboration, we continue to make life-changing differences for our customers and users around the world.
With the launch of our flagship hearing aids Oticon More and Philips HearLink standing out, we have generally
succeeded with our sales activities, leading to market share gains and sales above our original expectations. Our
Hearing Aids, Hearing Care and Diagnostics businesses have performed particularly well, resulting in strong profit-
ability for the period. Based on our expectations of continued strong performance in the second half-year, we now
upgrade our guidance for growth and profit for the year,” says Søren Nielsen, President & CEO of Demant.
Demant will host a conference call on 12 August 2021 at 14:00 CEST. To attend this call, please use one of the
following dial-ins: +45 3544 5577 (DK), +44 3333 000 804 (UK) or +1 6319 131 422 (US). The pin code is
65378756#. A presentation for the call will be uploaded to 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
Christian Lange, Investor Relations Officer
Trine Kromann-Mikkelsen, VP Corporate Communications and Relations
Key figures and financial ratios
DEMANT INTERIM REPORT 2021
Page 3 of 26
H1 2021
H1 2020
H1 2019
Change vs
H1 2020
Change vs
H1 2019
Full year
2020
Hearing Healthcare
Revenue
8,391
5,532
7,350
52%
14%
13,163
Organic growth
55%
-27%
5%
-13%
Gross margin
76.5%
72.3%
77.6%
73.6%
Operating profit (EBIT)
1,682
-214
1,085
n.a.
55%
1,211
EBIT margin
20.0%
-3.9%
14.8%
9.2%
Communications
Revenue
621
546
-
14%
-
1,306
Organic growth
16%
-
-
-
Gross margin
48.3%
46.7%
-
50.3%
Operating profit (EBIT)*
-44
21
28
-310%
-257%
102
EBIT margin
-7.1%
3.8%
-
7.8%
Group
Income statement, DKK million
Revenue
9,012
6,078
7,350
48%
23%
14,469
Adjusted gross margin**
74.5%
70.0%
77.6%
71.5%
Gross margin
74.5%
68.2%
77.6%
70.4%
EBITDA
2,162
629
1,582
244%
37%
2,578
EBITDA margin
24.0%
10.3%
21.5%
17.8%
Adjusted operating profit (EBIT)**
1,638
-193
1,113
n.a.
47%
1,313
Adjusted EBIT margin**
18.2%
-3.2%
15.1%
9.1%
Operating profit (EBIT)
1,638
114
1,113
1,337%
47%
1,530
EBIT margin
18.2%
1.9%
15.1%
10.6%
Net financial items
-103
-88
-119
17%
-13%
-194
Profit for the period
1,183
121
767
878%
54%
1,134
Balance sheet, DKK million
Total assets
23,579
22,067
20,759
7%
14%
21,927
Net interest-bearing debt (NIBD)
8,573
8,388
7,613
2%
13%
7,135
Equity
7,796
7,449
7,596
5%
3%
8,279
Cash flow statement, DKK million
Adjusted cash flow from operating activities (CFFO)**
1,511
766
1,047
97%
44%
2,710
Cash flow from operating activities (CFFO)
1,511
729
1,047
107%
44%
2,621
Investment in property, plant and equipment, net
-203
-242
-251
-16%
-19%
-493
Free cash flow
1,234
489
702
152%
76%
2,023
Share buy-backs
-1,813
-197
-264
820%
587%
-197
Other key figures, DKK million
Return on equity
28.3%
3.2%
21.0%
14.3%
Equity ratio
33.1%
33.8%
36.6%
37.8%
Gearing multiple (NIBD/EBITDA)
2.1
3.9
2.3
2.8
Earnings per share (EPS), DKK***
4.94
0.50
3.12
897%
58%
4.68
Free cash flow per share (FCFPS), DKK***
5.19
2.04
2.87
8.44
Price earnings (P/E) ratio
71.5
348.9
65.4
-80%
9%
51.4
Share price, end of period, DKK***
353.00
174.90
204.10
102%
73%
240.60
Average number of shares outstanding, million
237.66
239.90
244.40
-1%
-3%
239.78
Market capitalisation
82,569
41,917
49,783
97%
66%
57,718
Average number of employees
17,184
16,107
15,044
7%
14%
16,155
* EBIT for Communications in 2019 relates to the Group’s share of profit after tax from our former joint venture Sennheiser Communications.
** Adjusted for one-offs related to EPOS in H1 2020.
*** Per share of nominally DKK 0.20.
Group financial review
DEMANT INTERIM REPORT 2021
Page 4 of 26
The financial review below covers the Group. Unless
otherwise stated, figures for 2020 down to and in-
cluding the EBIT line are shown on an adjusted ba-
sis before one-offs related to the consolidation of
EPOS with financial effect from 1 January 2020. For
financial reviews of our Hearing Healthcare and
Communications segments, please refer to page 9
and 14, respectively.
INCOME STATEMENT
Hearing
Healthcare
Communi-
cations
Group
Group
adjusted
EPOS
one-offs
Group
reported
(DKK million)
H1 2021
H1 2021
H1 2021
H1 2020
Change
H1 2020
H1 2020
Change
Revenue
8,391
621
9,012
6,078
48%
-
6,078
48%
Production costs
-1,973
-321
-2,294
-1,823
26%
-109
-1,932
19%
Gross profit
6,418
300
6,718
4,255
58%
-109
4,146
62%
Gross margin
76.5%
48.3%
74.5%
70.0%
-
68.2%
R&D costs
-564
-91
-655
-618
6%
-
-618
6%
Distribution costs
-3,807
-233
-4,040
-3,455
17%
-37
-3,492
16%
Administrative expenses
-422
-20
-442
-388
14%
-
-388
14%
Share of profit after tax,
associates and joint ventures
57
-
57
13
338%
453
466
-88%
Operating profit (EBIT)
1,682
-44
1,638
-193
n.a.
307
114
1,337%
EBIT margin
20.0%
-7.1%
18.2%
-3.2%
-
1.9%
REVENUE
In H1, Group revenue amounted to DKK 9,012 mil-
lion, corresponding to a growth rate of 53% in local
currencies compared to H1 2020. Organic growth
was 51%, driven primarily by Hearing Healthcare
due to low comparative figures, strong recovery in
the hearing healthcare market, including tailwind
from the hearing healthcare reform in France, and
market share gains fuelled by new product launches.
Growth from acquisitions was 2%, whereas exchange
rate effects were -5%, driven mainly by depreciation
of the US dollar relative to Danish kroner and – to a
much lesser extent – of the Brazilian real and Japa-
nese yen.
Compared to H1 2019, the Group delivered growth
of 26% in local currencies with 15% organic growth
and with 11% acquisitive growth of which the consol-
idation of EPOS accounted for 8 percentage points.
Exchange rate effects were -3%.
In terms of geography, North America was the key
driver of organic growth compared to H1 2020 due to
a relatively extended lockdown period last year in
that region. Compared to H1 2019, we saw double-
digit organic growth in all regions except in the Other
countries region, which covers a number of emerg-
ing markets where sales are still impacted by coro-
navirus. Asia saw the highest organic growth rate,
but also Europe saw very strong growth aided by the
hearing healthcare reform in France.
Growth rates in H1 2021 by business segment
vs 2020
vs 2019
Hearing Healthcare
Organic
55%
14%
Acquisitions
2%
3%
LCY
57%
17%
FX
-5%
-3%
Total
52%
14%
Communications
Organic
16%
n.a.
Acquisitions
0%
n.a.
LCY
16%
n.a.
FX
-2%
n.a.
Total
14%
n.a.
Group
Organic
51%
15%
Acquisitions
2%
11%
LCY
53%
26%
FX
-5%
-3%
Total
48%
23%
Group financial review
DEMANT INTERIM REPORT 2021
Page 5 of 26
Revenue by geographic region
Change
(DKK million)
H1 2021
H1 2020
DKK
LCY
Org.
Europe
3,990
2,674
49%
50%
48%
North America
3,485
2,258
54%
66%
63%
Pacific
571
406
41%
33%
33%
Asia
752
575
30%
37%
37%
Other countries
214
165
30%
45%
45%
Total
9,012
6,078
48%
53%
51%
Change
(DKK million)
H1 2021
H1 2019
DKK
LCY
Org.
Europe
3,990
2,996
33%
34%
19%
North America
3,485
3,063
14%
19%
10%
Pacific
571
459
24%
23%
17%
Asia
752
574
31%
36%
23%
Other countries
214
258
-17%
-2%
-2%
Total
9,012
7,350
23%
26%
15%
GROSS PROFIT
The Group’s gross profit was DKK 6,718 million in
H1, an increase of 58% compared to H1 2020 and
18% above the same period in 2019. Driven mainly
by higher production volumes and by strong growth
in Hearing Healthcare, which has a structurally higher
gross margin than Communications, the gross mar-
gin increased by 4.5 percentage points to 74.5%.
The decline of 3.1 percentage points compared to
H1 2019 is attributable to the consolidation of EPOS,
which had a dilutive effect of about 2 percentage
points, and to an increasing share of sales of re-
chargeable hearing aids and higher freight charges.
OPERATING EXPENSES (OPEX)
In H1, total OPEX amounted to DKK 5,137 million,
corresponding to 18% growth in local currencies
compared to H1 2020. In organic terms, OPEX in-
creased by 16% driven by higher distribution costs
and administrative expenses, which reflects both the
much higher activity levels and the very significant,
temporary, coronavirus-related cost savings realised
last year. The savings in H1 last year included around
DKK 350 million in government support schemes,
which were, however, partly offset by a provision for
bad debt of DKK 150 million. Growth in R&D costs
was more modest, as we maintained our innovation
efforts last year despite the impact of coronavirus.
Acquisitions added 2% to the Group’s OPEX,
whereas exchange rate effects were -3%.
Compared to H1 2019, OPEX grew by 14% in local
currencies, which was mainly driven by acquisitive
growth of 8%, including growth from the consolida-
tion of EPOS. Organic growth was only 6% due to
the realisation of both structural savings and further
temporary savings in H1. As expected, temporary
savings gradually diminished in the reporting period,
and we only expect a limited impact in H2, but we
will continue to benefit from the structural savings
announced back in October 2020. These relate to
headcount reductions made in H1 2020, changes to
the marketing model in parts of our US Hearing Care
network and structurally less travelling.
OPEX by function
Change
(DKK million)
H1 2021
H1 2020
DKK
LCY
Org.
R&D costs
655
618
6%
7%
6%
Distribution costs
4,040
3,455
17%
20%
18%
Adm. expenses
442
388
14%
17%
16%
Total
5,137
4,461
15%
18%
16%
OPEX by half-year (DKK million)
OPERATING PROFIT (EBIT)
The Group’s operating profit (EBIT) was better than
expected and amounted to DKK 1,638 million in H1
to which Hearing Healthcare contributed with DKK
1,682 million, whereas Communications realised an
EBIT of DKK -44 million. The Group’s EBIT thus re-
bounded from the loss of DKK 193 million realised in
H1 2020, and compared to H1 2019, EBIT grew by
47%, which is more than double the reported reve-
nue growth of 23% since H1 2019.
The resulting EBIT margin in H1 was 18.2%, which
is an increase of 3.1 percentage points compared to
H1 2019, despite the negative impact of the consoli-
dation of EPOS in 2020. The increasing EBIT margin
thus reflects a significant improvement in the profita-
bility of Hearing Healthcare.
EBIT by half-year (DKK million)
* EBIT in H2 2019 was negatively impacted by an estimated DKK 550
million as a result of the IT incident.
4,628
4,764
4,461
4,618
5,137
2,000
3,000
4,000
5,000
6,000
H1
2019
H2
2019
H1
2020
H2
2020
H1
2021
1,113
1,038
-193
1,506
1,638
-500
0
500
1,000
1,500
2,000
H1
2019
H2
2019*
H1
2020
H2
2020
H1
2021
Group financial review
DEMANT INTERIM REPORT 2021
Page 6 of 26
FINANCIAL ITEMS
Reported net financial items amounted to expenses
of DKK 102 million in H1, which is an increase of
DKK 14 million compared to last year. The increase
is mainly caused by higher credit card fees due to
higher revenue.
PROFIT FOR THE PERIOD
Reported profit before tax amounted to DKK 1,536
million in H1, a significant increase compared to both
2020 and 2019. Tax for the period amounted to DKK
353 million, corresponding to an effective tax rate of
23.0%. This resulted in profit after tax of DKK 1,183
million, corresponding to reported earnings per share
(EPS) of DKK 4.94. Earnings per share thus in-
creased by 58% compared to H1 2019.
EPS by half-year (DKK)
CASH FLOW STATEMENT
As was also the case for H2 2020, the Group’s cash
flow from operating activities (CFFO) was very strong
in H1, amounting to DKK 1,511 million, which is a
107% increase compared to reported CFFO in the
same period last year. The increase can be attributed
to a significantly higher EBIT, which was offset by an
increase in working capital, primarily trade receiva-
bles, driven by strong revenue growth.
Cash flow by main items
(DKK million)
H1 2021
H1 2020
Change
Change
Reported EBIT
1,638
114
1,524
1,337%
Non-cash items etc.
509
364
145
40%
Change in working
capital
-385
323
-708
-219%
Dividends received
42
20
22
110%
Financial items etc.
paid/received
-109
-99
-10
10%
Income tax paid/
received
-184
7
-191
n.a.
CFFO
1,511
729
782
107%
Net investments
-277
-240
-37
15%
Free cash flow
1,234
489
745
152%
Acquisition of
enterprises etc.
-406
-293
-113
39%
Share buy-backs
-1,813
-197
-1,616
820%
Other financing
activities
1,242
143
1,099
769%
Cash flow for the
period
257
142
115
81%
CFFO by half-year (DKK million)
Net investments resulted in a cash flow of DKK -277
million in H1 of which DKK -274 million, or 3% of
Group revenue, related to net investments in prop-
erty, plant and equipment and in intangible assets
(CAPEX). This is a decrease of 16% compared to
H1 2020.
CAPEX by half-year (DKK million)
3.12
2.87
0.50
4.18
4.94
0.00
2.00
4.00
6.00
H1
2019
H2
2019
H1
2020
H2
2020
H1
2021
1,047
1,102
729
1,892
1,511
500
1,000
1,500
2,000
H1
2019
H2
2019
H1
2020
H2
2020
H1
2021
335
421
327
340
274
0.0%
2.0%
4.0%
6.0%
0
200
400
600
H1
2019
H2
2019
H1
2020
H2
2020
H1
2021
CAPEX CAPEX (% of revenue)
Group financial review
DEMANT INTERIM REPORT 2021
Page 7 of 26
Net investments in other non-current assets, which
mostly comprise customer loans, amounted to DKK
-3 million compared to DKK 87 million in H1 2020.
Free cash flow before acquisitions and divestments
thus increased significantly by 152% from DKK 489
million in H1 2020 to DKK 1,234 million in H1 2021.
Predominantly relating to acquisitions made by Hear-
ing Care, cash spent on acquisitions totalled DKK
406 million. This is an increase compared to H1 last
year where transactions were temporarily suspended.
In general, we consider our M&A activities to be
back to their normal level.
Share buy-backs in the reporting period amounted to
DKK 1,813 million, as the Group bought back
5,985,632 shares at an average price of DKK
302.91.
After other financing activities of DKK 1,242 million,
which primarily relate to an increase in short-term
debt facilities, net cash flow in H1 amounted to DKK
257 million.
BALANCE SHEET
As of 30 June 2021, total assets amounted to DKK
23,579 million, which is an increase of 8% compared
to the end of 2020. This is driven by organic growth
of 4%, with acquisitions and exchange rate effects
accounting for 2% each. The development is mainly
driven by an increase in other non-current assets,
primarily related to goodwill in connection with acqui-
sitions, and an increase in trade receivables.
Balance sheet by main items
(DKK million)
H1 2021
FY 2020
Change
Change
Lease assets
2,024
1,847
177
10%
Other non-current
assets
14,064
13,393
671
5%
Inventories
2,088
1,968
120
6%
Trade receivables
3,140
2,808
332
12%
Cash
1,221
952
269
28%
Other current assets
1,042
959
83
9%
Assets
23,579
21,927
1,652
8%
Equity
7,796
8,279
-483
-6%
Lease liabilities
2,077
1,893
184
10%
Other non-current
liabilities
4,728
4,837
-109
-2%
Trade payables
753
802
-49
-6%
Other current
liabilities
8,225
6,116
2,109
34%
Equity and
liabilities
23,579
21,927
1,652
8%
The increase in trade receivables of 12% was a nat-
ural consequence of the higher revenue, which was
partly offset by strong collection efforts. Inventories
increased by 6%, whereas trade payables decreased
by 6%. In aggregate, the Group’s net working capital
as at 30 June 2021 increased by 17% to DKK 2,871
million.
Net interest-bearing debt (NIBD) amounted to DKK
8,573 million as of 30 June 2021, corresponding to a
gearing multiple of 2.1 measured as NIBD relative to
a 12-month rolling EBITDA. This is within our me-
dium- to long-term target of 2.0-2.5. The gearing
multiple was 2.8 at 31 December 2020.
Group equity decreased by DKK 483 million, or 6%,
in H1 to DKK 7,796 million at 30 June 2021, primarily
due to share buy-backs. The decline was offset by
foreign currency translation adjustments in subsidiar-
ies and the Group’s profit for the period.
EMPLOYEES
At the end of H1, Demant had 17,556 employees
compared to 16,591 at the beginning of the year and
15,678 at the end of H1 2020. The insourcing of em-
ployees at our new production site in Mexico ac-
counted for around half of the increase, while acqui-
sitions made by our Hearing Care business accounted
for close to the rest.
HEDGING ACTIVITIES
The material forward exchange contracts in place as
at 30 June 2021 to hedge against the Group’s expo-
sure to movements in exchange rates are shown in
the table below.
Exchange rate hedging
Currency
Hedging period
Average hedging rate
USD
10 months
627
JPY
10 months
5.82
AUD
10 months
460
GBP
10 months
837
CAD
12 months
486
PLN
9 months
164
EVENTS AFTER THE BALANCE SHEET DATE
There have been no events that materially change
the assessment of this Interim Report 2021 from the
balance sheet date and up to today.
Outlook for 2021
DEMANT INTERIM REPORT 2021
Page 8 of 26
ASSUMPTIONS
Due to coronavirus, our outlook (summarised below)
is still subject to greater uncertainty than usual. How-
ever, in H1, the global hearing healthcare market re-
covered strongly and at least in line with expecta-
tions, and we still expect to see further gradual re-
covery in H2. Specifically, we consider the hearing
aid market largely normalised in developed markets,
except in the large government channels, Veterans
Affairs (VA) and the NHS. Supported by the release
of some pent-up demand in H2, we expect growth
for 2021 as a whole to be close to normal levels in
these markets. We believe that we have already
seen some tailwind from such release of pent-up de-
mand in Q2 in the US, with more markets likely to
follow. We still believe that the normalisation in
emerging markets is likely to go beyond 2021.
We assume that the addressable market for Com-
munications will grow at least in line with its struc-
tural trend of 8-10%, despite strong comparative fig-
ures in 2020.
While we have seen pressure in some parts of our
global supply chain in H1, this has so far not had a
material impact on the Group’s financial perfor-
mance. In line with this, our outlook for 2021 as-
sumes no material impact of potential supply chain
constraints.
OUTLOOK FOR 2021
In H1, we delivered better-than-expected EBIT
thanks to strong business momentum and market
share gains in Hearing Healthcare. Based on expec-
tations that this development will continue in H2 –
despite tailwind from the French reform not recurring
to the same extent as in H1 – we upgrade our guid-
ance for the Group’s organic revenue growth rate for
2021 to 26-30% (previously 24-28%). Due to the
slowdown in Communications, we now expect this
segment to see negative organic growth in H2.
As a result of the upgraded outlook for organic reve-
nue growth, we also upgrade our guidance for Group
EBIT for 2021 to DKK 3,150-3,450 million (previously
DKK 3,000-3,300 million). In Communications, we ex-
pect to realise a negative EBIT for H2, as we will con-
tinue to invest in the business as originally planned to
support our future growth and market position.
Due to higher expectations in respect of the Group’s
cash flow in H2, we now expect to buy back shares
worth more than DKK 3.0 billion (previously more
than DKK 2.5 billion).
Metric
Outlook for 2021
Organic growth
26-30% (previously 24-28%). For Communications, we expect negative organic growth in H2.
Acquisitive growth
1% based on revenue from acquisitions completed as of 11 August 2021.
FX growth
-1% (previously -2%) based on exchange rates as of 11 August 2021 and including the impact of hedging.
EBIT
DKK 3,150-3,450 million (previously DKK 3,000-3,300 million). For Communications, we expect a negative EBIT in H2.
Effective tax rate
Around 23%.
Gearing
Gearing multiple at the end of 2021 in line with medium- to long-term target of 2.0-2.5 (NIBD relative to EBITDA).
Share buy-backs
More than DKK 3.0 billion (previously more than DKK 2.5 billion).
Hearing Healthcare
DEMANT INTERIM REPORT 2021
Page 9 of 26
FINANCIAL REVIEW
Income statement
(DKK million)
H1 2021
H1 2020
H1 2019
Change vs
H1 2020
Change vs
H1 2019
Revenue
8,391
5,532
7,350
52%
14%
Production costs
-1,973
-1,532
-1,649
29%
20%
Gross profit
6,418
4,000
5,701
60%
13%
Gross margin
76.5%
72.3%
77.6%
R&D costs
-564
-540
-552
4%
2%
Distribution costs
-3,807
-3,311
-3,661
15%
4%
Administrative expenses
-422
-376
-415
12%
2%
Share of profit after tax, associates and joint ventures
57
13
12
338%
375%
Operating profit (EBIT)
1,682
-214
1,085
n.a.
55%
EBIT margin
20.0%
-3.9%
14.8%
Revenue by business area
(DKK million)
H1 2021
H1 2020
H1 2019
Change vs
H1 2020
Change vs
H1 2019
Hearing Aids
4,416
2,937
3,852
50%
15%
Hereof sales to Hearing Care
-871
-465
-607
87%
43%
Hearing Care
3,737
2,154
3,128
73%
19%
Hearing implants
266
246
304
8%
-13%
Diagnostics
843
660
673
28%
25%
Hearing Healthcare
8,391
5,532
7,350
52%
14%
REVENUE
Revenue in our Hearing Healthcare segment
amounted to DKK 8,391 million in H1, corresponding
to a growth rate of 57% in local currencies with or-
ganic growth of 55% and acquisitive growth of 2%.
Exchange rate effects were -5%. Compared to 2019,
growth in H1 was 17% in local currencies with or-
ganic growth of 14% and acquisitive growth of 3%,
while the exchange rate effect was -3%.
The very strong performance in H1 was first and
foremost driven by the gradual recovery of the hear-
ing healthcare market, particularly the market for
hearing aids. Hearing Aids and Hearing Care bene-
fitted from this but also from successful product
launches and from the positive impact of the French
hearing healthcare reform. Specifically, we estimate
that Hearing Healthcare saw a positive impact on
revenue of the French reform of around DKK 200
million in H1, which will not recur to the same extent
in H2, even if the reform will still support growth com-
pared to previous years.
Diagnostics delivered very strong performance with
market share gains and exited H1 with an all-time
high number of orders in the order book. Hearing Im-
plants continued to be impacted by coronavirus and
the postponement of cochlear implant surgeries.
Growth rates in H1 2021 by business area
vs 2020
vs 2019
Hearing Aids
Organic
55%
17%
Acquisitions
0%
1%
LCY
55%
17%
FX
-5%
-3%
Total
50%
15%
Hearing Care
Organic
72%
15%
Acquisitions
5%
7%
LCY
78%
23%
FX
-4%
-3%
Total
74%
20%
Hearing Implants
Organic
11%
-9%
Acquisitions
0%
1%
LCY
12%
-8%
FX
-3%
-4%
Total
8%
-13%
Diagnostics
Organic
34%
29%
Acquisitions
1%
2%
LCY
35%
31%
FX
-7%
-6%
Total
28%
25%
Hearing Healthcare
Organic
55%
14%
Acquisitions
2%
3%
LCY
57%
17%
FX
-5%
-3%
Total
52%
14%
Hearing Healthcare
DEMANT INTERIM REPORT 2021
Page 10 of 26
GROSS PROFIT
Gross profit increased by 60% on H1 2020 to DKK
6,418 million, resulting in a gross margin of 76.5%.
The gross margin was 6.2 percentage points above
the margin in H1 2020, due to higher production vol-
umes and a higher share of revenue generated in
Hearing Care, which has a structurally higher gross
margin than our other business areas. Relative to H1
2019, the gross margin decreased by 1.1 percentage
points, driven primarily by dilution due to a higher
share of rechargeable devices.
OPERATING EXPENSES (OPEX)
OPEX totalled DKK 4,793 million in H1, which is an
increase of 17% in local currencies compared to H1
last year. The increase in OPEX can be attributed to
increased activity levels and to cost savings in the
comparative period, including support from govern-
ment schemes related to coronavirus. The increase
was driven mostly by Hearing Care where strong
revenue growth resulted in increased sales commis-
sions and salaries to new employees. Also acquisi-
tions drove the higher OPEX.
OPEX by half-year
OPERATING PROFIT (EBIT)
EBIT in H1 amounted to DKK 1,682 million, which
compares to an EBIT of DKK -214 million in H1 2020
and corresponds to 55% growth compared to H1
2019. The resulting EBIT margin was 20.0%, which
is an increase of 5.2 percentage points compared to
H1 2019, partly driven by low comparative figures.
Besides revenue growth, the improvement in profita-
bility was driven by material temporary cost savings
in H1, which will, however, only have limited impact
in H2. Profitability was also supported by the French
hearing healthcare reform, which we estimate had a
positive impact on EBIT in Hearing Healthcare of
around DKK 100 million in H1 that will not recur to
the same extent in H2.
Share of profit after tax in associates and joint ven-
tures increased by DKK 44 million and amounted to
DKK 57 million in H1, reflecting strong performance
by associates in our Hearing Care business.
EBIT by half-year
MANAGEMENT COMMENTARY
MARKET TRENDS
Overall, the hearing healthcare market, which com-
prises the markets for hearing aids, hearing implants
and diagnostic instruments and services, recovered
well in H1 2021 and at least in line with expectations,
albeit with differences between market segments
and regions.
Hearing aid market
Based on available market statistics, covering slightly
less than two-thirds of the market, and on our own
assumptions, we estimate that the global hearing aid
market saw unit growth of around 6% in Q1 and
116% in Q2 compared to the same periods in 2020.
In Q2, growth was to a large extent driven by the se-
vere impact of coronavirus on comparative figures.
Compared to Q1 and Q2 in 2019, we estimate that
unit growth in 2021 was 0% and 12% in Q1 and Q2,
respectively, indicating a strong market recovery.
We estimate that compared to 2019 and if measured
in units and on a run rate basis, growth in the com-
mercial channels in developed markets was at least
in line with the structural level of 4-6% per year at
the end of the reporting period, even when excluding
France, which has seen extraordinary growth due to
the hearing healthcare reform. However, as expected,
growth in government channels and emerging mar-
kets remained below the normal level.
Estimated hearing aid market unit growth by region
2021 vs 2020
Region
Q1
Q2
H1
Europe
10%
130%
52%
North America
9%
182%
61%
Hereof US (commercial)
12%
156%
59%
Hereof US (VA)
-7%
522%
74%
Rest of world
0%
64%
25%
Global
6%
116%
45%
4,628
4,764
4,227
4,297
4,793
2,000
3,000
4,000
5,000
H1
2019
H2
2019
H1
2020
H2
2020
H1
2021
1,085
1,000
-214
1,425
1,682
-500
0
500
1,000
1,500
2,000
H1
2019
H2
2019
H1
2020
H2
2020
H1
2021
Hearing Healthcare
DEMANT INTERIM REPORT 2021
Page 11 of 26
2021 vs 2019
Region
Q1
Q2
H1
Europe
-1%
15%
7%
North America
9%
16%
12%
Hereof US (commercial)
12%
22%
17%
Hereof US (VA)
-7%
3%
-2%
Rest of world
-6%
7%
0%
Global
0%
12%
6%
Relative to the same period in 2019, growth in Eu-
rope in H1 2021 was first and foremost driven by ex-
traordinary growth in France due to the full imple-
mentation of the hearing healthcare reform. The re-
form significantly boosted unit sales of products in
the lower-priced categories. In the UK, market growth
was negative due to the slow recovery of sales to the
NHS, whereas the commercial market recovered
well towards the end of Q1 and in Q2. Growth in
Germany was slightly negative, albeit less negative
in Q2 than in Q1, and excluding the extraordinary
growth in France, we estimate that overall unit
growth in Europe was -15% in Q1 and 1% in Q2
compared to 2019.
In North America, unit growth relative to 2019 saw
strong sequential improvement driven by both the
US commercial market and Veterans Affairs (VA), as
some pent-up demand was released. The growth
rate in Canada remained somewhat below the nor-
mal level in H1 due to continued restrictions, particu-
larly in Q2.
Looking beyond the US and Europe, we estimate
that unit growth in Australia was slightly positive in
H1 compared to 2019 and that Japan saw negative
growth. We estimate that growth rates in China and
South Korea were very strong, whereas emerging
markets remained severely impacted by coronavirus.
Hearing implants market
In the cochlear implants (CI) market, activity levels in
our core markets in Europe and in a number of
emerging markets remained low throughout H1, as
elective surgeries were postponed due to corona-
virus. However, we began to see signs of improve-
ments in the latter part of the reporting period but ex-
pect the path towards full normalisation to be longer
than for other areas of hearing healthcare. The mar-
ket for bone anchored hearing solutions (BAHS) has
recovered at a faster pace than the CI market but
has yet to fully normalise.
Diagnostics market
Compared with our other markets, the market for di-
agnostic instruments and services proved relatively
resilient in 2020, a trend that continued in H1 this
year. We estimate that compared to the same period
in 2019, growth in H1 was slightly above the esti-
mated structural growth rate of 3-5% per year, partic-
ularly in Q2.
HEARING AIDS
In H1 2021, total revenue in Hearing Aids grew by
55% in local currencies, which was entirely attributa-
ble to organic growth. Compared to H1 2019, total
revenue grew organically by 17%, which was signifi-
cantly above the market growth rate.
Revenue
H1 2021
H1 2020
H1 2019
(DKK million)
4,416
2,937
3,852
Growth
vs H1 2020
vs H1 2019
Organic
55%
17%
Acquisitions
0%
1%
Local currencies
55%
17%
FX
-5%
-3%
Total
50%
15%
Internal revenue from sales to our Hearing Care
business area accounted for 20% of total revenue
and external sales for the remaining 80%. Our com-
mentary below focuses on total revenue, including
revenue from sales through our own retail clinics,
and thus pertains to our total wholesale activities.
Revenue and growth in local currencies
Growth
(DKK million)
H1
2021
H1
2020
H1
2019
vs
H1 2020
vs
H1 2019
Hearing Aids
4,416
2,937
3,852
55%
17%
Hereof sales to
external customers
3,545
2,472
3,245
48%
12%
Hereof sales to
Hearing Care*
871
465
607
94%
48%
* Revenue from internal sales to Hearing Care is eliminated from the re-
ported revenue for Hearing Healthcare and for the Group, i.e. we only
include revenue from external customers. The pricing used in internal
transactions is determined on an arm’s length basis and thus reflects
normal commercial terms.
Our Hearing Aids business area performed strongly
in H1, benefitting from both the market recovery and
very positive traction created by our new flagship
hearing aids launched at the end of 2020 in all our
brands: Oticon, Philips HearLink, Bernafon and
Sonic. Sales to independent hearing care profes-
sionals, not least in the US, benefitted strongly from
the launch of Oticon More, resulting in market share
gains in many markets. Driven especially by France,
growth was supported by strong sales to our own
Hearing Care business area.
Hearing Healthcare
DEMANT INTERIM REPORT 2021
Page 12 of 26
Unit growth and ASP growth in H1 were 50% and
4%, respectively, compared to the same period last
year, which was heavily impacted by coronavirus.
Compared to H1 2019, revenue growth was driven
by ASP growth of 14% due to differences in the pace
of recovery between regions with different ASP dy-
namics. This drove large geography mix effects. Unit
growth was more modest at 3%.
Unit and ASP growth in H1 2021
(local currencies)
vs H1 2020
vs H1 2019
Units
50%
3%
ASP
4%
14%
Total
55%
17%
Compared to H1 2019, North America was the main
growth driver in H1 due to a combination of strong
market recovery and success in the commercial part
of the US where Oticon More was rolled out in Janu-
ary. In addition, Oticon More was launched success-
fully in VA in May, resulting in market share gains in
this important sales channel. In Canada, revenue re-
covered at a significantly slower pace due to the
continued impact of coronavirus-related restrictions
in certain regions.
Compared to H1 2019, growth in Europe was solid,
albeit lower than in North America. France was the
primary positive driver on the back of the hearing
healthcare reform, but we also saw strong growth in
a number of other markets, including Spain and
Scandinavia. In the UK, we saw strong recovery in
the private market, but the slow recovery in the NHS
was a drag on overall growth. In the large German
market, recovery lagged behind recovery in most
other European markets.
In Asia, we saw strong growth compared to H1 2019,
driven by China, South Korea and a number of
smaller markets, whereas continued restrictions in
Japan were a drag on revenue growth. Similarly,
growth in the Pacific region was strong, driven by
both Australia and New Zealand, despite temporary,
local restrictions in certain areas in the reporting pe-
riod. Our Other countries region, which mostly com-
prises emerging markets, remained heavily impacted
by coronavirus and as expected, recovery in this re-
gion has been slow.
Looking ahead, we are now ready to expand the prod-
uct line-up of the flagship hearing aid families offered
by all our brands, including the Oticon More family,
by introducing a new non-rechargeable miniRITE
style, which will be available at the three upper price
points. All hearing aid brands will also introduce a
new CROS solution in a rechargeable miniRITE
style. In addition to these new hearing aids, we will
introduce a new, portable SmartCharger that fits our
latest generation of rechargeable hearing aids.
HEARING CARE
In H1 2021, revenue in Hearing Care grew by 78% in
local currencies with more than 72% organic growth
and slightly more than 5% acquisitive growth. Com-
pared to H1 2019, organic growth was 15% and ac-
quisitive growth 7%.
Revenue
H1 2021
H1 2020
H1 2019
(DKK million)
3,737
2,154
3,128
Growth
vs H1 2020
vs H1 2019
Organic
72%
15%
Acquisitions
5%
7%
Local currencies
78%
23%
FX
-4%
-3%
Total
74%
20%
We saw strong performance in our Hearing Care
business area in H1, as markets recovered from
coronavirus and as restrictions were gradually eased
in most places. Growth was first and foremost driven
by France where our strong position enabled us to
leverage the strong demand created by the reform.
While revenue growth in Hearing Care was mostly
driven by unit growth due to low comparative figures
for H1 2020, we also saw growth in the ASP driven
by the launch of Oticon More.
Generally speaking, increasing vaccination rates
supported market recovery in H1. Initially, the US
and UK markets recovered at the fastest pace, but a
range of other markets saw similar progress in the
latter part of the reporting period. Throughout the pe-
riod, we saw a higher-than-normal share of existing
users than new users, but we expect the share of
new users to increase gradually in the coming
months.
Revenue in North America was below the normal
level in H1 on the back of a slow start to the year
due to restrictions across the region. In the latter part
of the reporting period, we saw significant improve-
ments in the US, whereas renewed restrictions im-
pacted revenue in Canada. Growth in the region was
supported by acquisitions, primarily in Canada.
Revenue in Europe was very strong in H1 and above
the normal level, driven primarily by extraordinary
growth in France. As expected, the extraordinary ef-
fect of the French reform gradually faded towards
the end of the reporting period, as demand began to
Hearing Healthcare
DEMANT INTERIM REPORT 2021
Page 13 of 26
trend lower towards a “new normal”. However, this
level is still well above the demand in previous years.
Aside from France, we also saw strong recovery in
most other European markets, not least in Ireland
and Denmark. However, we continued to see an im-
pact of coronavirus in Sweden and Portugal.
In Australia, revenue recovered strongly at the be-
ginning of H1 and neared normalisation, but tempo-
rary, local lockdowns had a negative impact on
growth in the latter part of the reporting period.
HEARING IMPLANTS
Revenue in Hearing Implants increased by 12% in
local currencies in H1, which was attributable to or-
ganic growth. Compared to H1 2019, total revenue
decreased organically by 9%.
Revenue
H1 2021
H1 2020
H1 2019
(DKK million)
266
246
304
Growth
vs H1 2020
vs H1 2019
Organic
11%
-9%
Acquisitions
0%
1%
Local currencies
12%
-8%
FX
-3%
-4%
Total
8%
-13%
In H1, our Hearing Implants business area continued
to be severely impacted by coronavirus and the re-
sulting widespread postponement of elective surger-
ies, particularly of cochlear implants (CI). Our CI
sales were also hampered by the general prioritisa-
tion of paediatric patients, an area where our relative
exposure is smaller than in the adult segment. Sev-
eral of our key CI markets continued to be highly af-
fected by coronavirus, and we also experienced rela-
tively low activity levels in our export markets. How-
ever, we saw signs of recovery in most markets to-
wards the end of H1.
Our bone anchored hearing systems (BAHS) busi-
ness saw positive development, and sales remained
less impacted by coronavirus than CI sales and were
supported by sales of sound processors, including
upgrades for existing users. We saw solid perfor-
mance in many European markets, but our main
markets, the UK and the US, have still not reached
pre-coronavirus activity levels.
In spite of the severe impact of coronavirus, we have
maintained our commitment to drive innovation.
Later this year, we will launch the new Neuro Zti 3T
CI, which is approved for 3 Tesla MRI scanning and
does not require removal of the magnet in the im-
plant. Furthermore, we have recently obtained FDA
pre-market approval of the Neuro system in the US,
and we plan to launch it towards the end of the year,
which is in line with our previous expectations. In our
BAHS business, we expect to launch a new sound
processor, the Ponto 5 Mini, later this year, which
will take the open sound experience to a whole new
level by eliminating audible feedback. The Ponto 5
Mini also allows the use of RemoteCare for conven-
ient online appointments. We will also introduce
MONO, the next-generation surgical procedures,
which will further enhance clinical efficiency.
DIAGNOSTICS
In Diagnostics, revenue increased by 35% in local
currencies in H1 driven by 34% organic growth.
Compared to H1 2019, total revenue grew organi-
cally by 29%.
Revenue
H1 2021
H1 2020
H1 2019
(DKK million)
843
660
673
Growth
vs H1 2020
vs H1 2019
Organic
34%
29%
Acquisitions
1%
2%
Local currencies
35%
31%
FX
-7%
-6%
Total
28%
25%
The strong growth rate once again underlines the
strong momentum in our business thanks to a com-
bination of resilient markets and our continued ability
to gain market share. Our order book was at an all-
time high at the end of the reporting period.
In terms of geographies, we saw strong performances
in most markets, and in the latter part of the report-
ing period, we saw a positive impact of the release of
some of the pent-up demand in many of our mar-
kets. The US market was the most significant driver
of the strong performance, despite some headwinds
in the market for newborn hearing screening ser-
vices where reimbursements have been reduced
compared to previous years.
Growth was broadly based in terms of product cate-
gories, with particularly strong performance in the
balance category and in newborn hearing screening
products, such as devices that measure otoacoustic
emissions (OAE) and auditory brainstem response
(ABR). We also saw strong growth in the fitting cate-
gory in Audioscan, in MedRx and in our Affinity Com-
pact line of products from Interacoustics.
Communications
DEMANT INTERIM REPORT 2021
Page 14 of 26
FINANCIAL REVIEW
Income statement
(DKK million)
H1 2021
H1 2020
H1 2019*
Change vs
H1 2020
Change vs
H1 2019
Revenue
621
546
-
14%
-
Production costs
-321
-291
-
10%
-
Gross profit
300
255
-
18%
-
Gross margin
48.3%
46.7%
-
R&D costs
-91
-78
-
17%
-
Distribution costs
-233
-144
-
62%
-
Administrative expenses
-20
-12
-
67%
-
Share of profit after tax, associates and joint ventures
-
-
28
-
-100%
Operating profit (EBIT)
-44
21
28
-310%
-257%
EBIT margin
-7.1%
3.8%
n.a.
* The EBIT in 2019 relates to the Group’s share of profit after tax in our former joint venture, Sennheiser Communications, which was demerged and con-
solidated as Communications (EPOS) with financial effect from 1 January 2020.
REVENUE
In H1, revenue in Communications amounted to
DKK 621 million, corresponding to 16% growth in lo-
cal currencies, all of which was organic growth. Ex-
change rate effects were -2%. Growth was primarily
driven by the Gaming business and was extremely
mixed in the reporting period with very high double-
digit organic growth in the first months of the year,
which slowed significantly from around the middle of
the reporting period. Please refer to the manage-
ment commentary on page 15 for more details.
Growth rates in H1 2021
vs 2020
vs 2019
Communications
Organic
16%
n.a.
Acquisitions
0%
n.a.
LCY
16%
n.a.
FX
-2%
n.a.
Total
14%
n.a.
GROSS PROFIT
Gross profit was DKK 300 million in H1, resulting in a
gross margin of 48.3%. This is an improvement of
1.6 percentage points compared to H1 2020 where
the high demand for USB headsets, which have a
relatively lower gross margin, had a dilutive effect on
the gross margin. On a sequential basis, the gross
margin in H1 2021 was lower than in H2 last year,
primarily due to lower revenue.
OPERATING EXPENSES (OPEX)
OPEX amounted to DKK 344 million in H1, corre-
sponding to a growth rate of 47% compared to H1
2020. The significant OPEX growth reflects our con-
tinuous investments in the business in order to fur-
ther establish the EPOS brand as a leading premium
provider among customers and end-users. The main
driver of the OPEX increase are distribution costs,
which include sales and marketing activities. R&D
costs have also increased, as we continue to inno-
vate and expand our product portfolio.
OPEX by half-year (DKK million)
OPERATING PROFIT (EBIT)
The combination of a slowdown in revenue and con-
tinuous investments in R&D, branding and distribu-
tion resulted in an EBIT for H1 of DKK -44 million,
corresponding to an EBIT margin of -7.1%. With the
slowdown that we have seen in revenue – which we
consider temporary – we also expect to see a nega-
tive EBIT in Communications in H2.
EBIT by half-year (DKK million)
234
321
344
0
100
200
300
400
H1
2020
H2
2020
H1
2021
21
81
-44
-50
0
50
100
H1
2020
H2
2020
H1
2021
Communications
DEMANT INTERIM REPORT 2021
Page 15 of 26
MANAGEMENT COMMENTARY
MARKET TRENDS
Growth in the market for gaming and enterprise solu-
tions was very mixed in H1. From the beginning of
the year and until around mid-March, the market saw
very high growth due to a combination of continued
strong momentum and low comparative figures for
2020, which had not yet been boosted by corona-
virus. However, as previously communicated, we es-
timate that market growth decelerated from around
mid-March driven by both a significantly higher com-
parative base and a softening of the extraordinary
demand seen in the wake of the working-from-home
trend – particularly when it comes to low-priced
wired headsets.
The softening seems partly driven by uncertainties
as to when and how staff will return to corporate of-
fices, which has caused hesitation among some cus-
tomers. We estimate that the deceleration was more
pronounced in Europe than in the US and Asia.
While the high comparative base will last for the re-
mainder of the year, we expect the softening de-
mand to be temporary, as we consider the funda-
mental growth drivers of the market to be fully intact.
COMMUNICATIONS (EPOS)
As outlined above, revenue in Communications grew
by 16% in local currencies in H1, which is entirely at-
tributable to organic growth. At the beginning of the
reporting period, growth was extraordinarily high due
to a combination of strong market momentum, a
strong order backlog and – particularly in our Gam-
ing business – low comparative figures. However,
we then began to see a softening in the number of
new orders, which continued throughout the report-
ing period. This softening is partly explained by ad-
justment of inventories in our sales channels, and
even though we consider it a temporary slowdown, it
will also have a negative impact on growth in H2.
In terms of geographies, revenue growth in H1 was
driven by Europe, which continues to account for
most of the revenue generated by Communications,
and by Asia, whereas we experienced slower mo-
mentum in the US. We continue to invest in building
brand awareness for the EPOS brand among our
customers and end-users. This includes a large
number of online activities as well as our recent part-
nership with the Aston Martin F1 team, which is help-
ing us further establish the EPOS brand in the pre-
mium segment.
We follow an ambitious product roadmap with sev-
eral large product launches to come within both
Gaming and Enterprise Solutions. Furthermore, we
recently entered the attractive and growing market
for video solutions by launching our video conferenc-
ing solution, EPOS EXPAND Vision 3T. The growth
contribution of this product has been marginal in the
reporting period, but the launch is an important mile-
stone in our journey towards becoming a full-suite
supplier of state-of-the-art unified collaboration and
communication solutions for professionals.
Management statement
+45 3917 7300
CVR 71186911
Page 16 of
26
E
xecutive Board:
B
oard of Directors:
Consolidated income statement
DEMANT INTERIM REPORT 2021
Page 17 of 26
(DKK million)
H1 2021
H1 2020
Full year
2020
Revenue
Production costs
-2,294
-1,932
-4,276
Gross profit
R&D costs
-655
-618
-1,261
Distribution costs
-4,040
-3,492
-7,067
Administrative expenses
-442
-388
-840
Share of profit after tax, associates and joint ventures
Operating profit (EBIT)
Financial income
Financial expenses
-122
-106
-232
Profit before tax
Tax on profit for the period
-353
-202
Profit for the period
Profit for the period attributable to:
Demant A/S’ shareholders
Non-controlling interests
Earnings per share (EPS), DKK
Diluted earnings per share (DEPS), DKK
Consolidated statement of comprehensive income
DEMANT INTERIM REPORT 2021
Page 18 of 26
(DKK million)
H1 2021
H1 2020
Full year
2020
Profit for the period
Items that have been or may subsequently be reclassified to the income
statement:
Foreign currency translation adjustments, subsidiaries
-146
-467
Value adjustments of hedging instruments:
Value adjustments for the period
-92
Value adjustments transferred to revenue
-1
-12
Tax on items that have been or may subsequently be reclassified to the income
statement
-9
-3
Items that have been or may subsequently be reclassified to the income
statement
-119
-372
Items that will not subsequently be reclassified to the income statement:
Actuarial gains/losses on defined benefit plans
-2
Tax on items that will not subsequently be reclassified to the income statement
Items that will not subsequently be reclassified to the income statement
Other comprehensive income
-119
-364
Comprehensive income
Comprehensive income attributable to:
Demant A/S’ shareholders
Non-controlling interests
Consolidated balance sheet
DEMANT INTERIM REPORT 2021
Page 19 of 26
(DKK million)
H1 2021
H1 2020
Full year
2020
Assets
Goodwill
Patents and licences
Other intangible assets
Prepayments and assets under development
Intangible assets
Land and buildings
Plant and machinery
Other plant, fixtures and operating equipment
Leasehold improvements
Prepayments and assets under construction
Property, plant and equipment
Leased assets
Investments in associates and joint ventures
Receivables from associates and joint ventures
Other investments
Other receivables
Deferred tax assets
Other non-current assets
Non-current assets
Inventories
Trade receivables
Receivables from associates and joint ventures
Income tax
Other receivables
Unrealised gains on financial contracts
Prepaid expenses
Cash
Current assets
Assets
Consolidated balance sheet
DEMANT INTERIM REPORT 2021
Page 20 of 26
(DKK million)
H1 2021
H1 2020
Full year
2020
Equity and liabilities
Share capital
Other reserves
Equity attributable to Demant A/S’ shareholders
Equity attributable to non-controlling interests
Equity
Borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Other liabilities
Deferred income
Non-current liabilities
Borrowings
Lease liabilities
Trade payables
Payables to associates and joint ventures
Income tax
Provisions
Other liabilities
Unrealised losses on financial contracts
Deferred income
Current liabilities
Liabilities
Equity and liabilities
Consolidated cash flow statement
DEMANT INTERIM REPORT 2021
Page 21 of 26
(DKK million)
H1 2021
H1 2020
Full year
2020
Operating profit (EBIT)
Non-cash items etc.
Change in receivables etc.
-397
Change in inventories
-93
-54
-73
Change in trade payables and other liabilities etc.
-42
Change in provisions
Dividends received
Cash flow from operating profit
Financial income etc. received
Financial expenses etc. paid
-123
-109
-232
Realised foreign currency translation adjustments
-1
-2
Income tax paid
-184
-61
Cash flow from operating activities (CFFO)
Acquisition of enterprises, participating interests and activities
-406
-293
-394
Investments in and disposal of intangible assets
-71
-85
-174
Investments in property, plant and equipment
-211
-246
-507
Disposal of property, plant and equipment
Investments in other non-current assets
-151
-104
-219
Disposal of other non-current assets
Cash flow from investing activities (CFFI)
-683
-533
-992
Repayments of borrowings
-2,266
-97
-82
Proceeds from borrowings
Change in short-term bank facilities
-717
-2,157
Repayment of lease liabilities
-257
-221
-442
Dividends to non-controlling interests
-5
-2
-3
Share buy-backs
-1,813
-197
-197
Cash flow from financing activities (CFFF)
-571
-54
-1,435
Cash flow for the period, net
Cash and cash equivalents at the beginning of the period
Foreign currency translation adjustments of cash and cash equivalents
-15
-34
Cash and cash equivalents at the end of the period
Breakdown of cash and cash equivalents at the end of the period:
Cash
Cash and cash equivalents at the end of the period
Consolidated statement of changes in equity
DEMANT INTERIM REPORT 2021
Page 22 of 26
(DKK million)
Share
capital
Other reserves
Demant
A/S’
shareholders’
share
Non-
controlling
interests’
share
Equity
Foreign
currency
translation
reserve
Hedging
reserve
Retained
earnings
Equity at 1.1.2021
-414
Comprehensive income for the period:
Profit for the period
Other comprehensive income:
Foreign currency translation adjustments,
subsidiaries
Value adjustments of hedging instruments:
Value adjustments for the period
-91
-91
-91
Value adjustments transferred to revenue
-1
-1
-1
Tax on other comprehensive income
-1
Other comprehensive income
-70
Comprehensive income for the period
-70
Share buy-backs
-1,813
-1,813
-1,813
Share-based compensation
Transactions with non-controlling interests
-5
-5
Non-controlling interest on acquisitions
-7
-7
-1
-8
Equity at 30.06.2021
-211
-15
Consolidated statement of changes in equity
DEMANT INTERIM REPORT 2021
Page 23 of 26
(DKK million)
Share
capital
Other reserves
Demant
A/S’
shareholders’
share
Non-
controlling
interests’
share
Equity
Foreign
currency
translation
reserve
Hedging
reserve
Retained
earnings
Equity at 1.1.2020
-21
Comprehensive income for the period:
Profit for the period
Other comprehensive income:
Foreign currency translation adjustments,
subsidiaries
-146
-146
-146
Value adjustments of hedging instruments:
Value adjustments for the period
Value adjustments transferred to revenue
Tax on other comprehensive income
-9
-9
-9
Other comprehensive income
-146
-119
-119
Comprehensive income for the period
-146
Share buy-backs
-197
-197
-197
Share-based compensation
Capit
al reduction through cancellation of
treasury shares
-1
Other changes in equity
-2
-2
Equity at 30.06.2020
-112
Note 1 – Acquisition of enterprises and activities
DEMANT INTERIM REPORT 2021
Page 24 of 26
Hearing Healthcare
(DKK million)
North America
Europe
H1 2021
H1 2020
Intangible assets
1
4
5
14
Property, plant and equipment
2
2
4
19
Other non-current assets
14
59
73
20
Inventories
1
2
3
42
Current receivables
3
4
7
120
Cash and cash equivalents
10
3
13
40
Non-current liabilities
-13
-54
-67
-23
Current liabilities
-9
-16
-25
-201
Acquired net assets
9
4
13
31
Goodwill
192
245
437
997
Acquisition cost
201
249
450
1,028
Carrying amount of non
-controlling interests on
obtaining control
-6
-5
-11
-229
Fair value adjustment of non
-controlling interests
on obtaining control
0
1
1
-456
Contingent considerations and deferred payments
-13
-60
-73
-51
Acquired cash and bank debt
-10
-3
-13
-40
Cash acquisition cost
172
182
354
252
I
n H1 2021, the Group acquired a number of minor retail entities in North America and Europe. In respect of these
acquisitions, we paid acquisition costs exceeding the fair values of the acquired assets, liabilities and contingent
liabilities. Such positive balances in value can be attributed to expected synergies between the activities of the ac-
quired entities and our existing activities, to future growth opportunities and to the value of staff competencies in
the acquired entities. These synergies are not recognised separately from goodwill, as they are not separately
identifiable.
A
t the time of acquisition, non-controlling interests’ shares of acquisitions were measured at their proportionate
shares of the total fair value of the acquired entities, including goodwill. On obtaining a controlling interest through
step acquisitions, previously held non-controlling interests are at the time of obtaining control included at fair value
with fair value adjustments in the income statement.
I
n H1 2021, a few adjustments were made to the preliminary recognition of acquisitions made in 2020. These ad-
justments were made in respect of payments made, contingent considerations provided and net assets and good-
will acquired. The impact of these adjustments on goodwill was DKK 5 million (DKK 1 million in H1 2020), and the
impact on contingent considerations was DKK 7 million (DKK 0 million in H1 2020). In relation to acquisitions with
final recognition in 2014-2020, adjustments were made in 2021 in respect of estimated contingent considerations.
Such adjustments are recognised in the income statement.
The total impact on the income statement of fair value adjustments of non-controlling interests in step acquisitions
amounted to DKK 1 million (DKK 456 million in H1 2020). Adjustments of contingent considerations made via the
income statement of DKK 3 million (DKK 16 million in H1 2020) are recognised under Distribution cost for acquisi-
tions, and in respect of associates and joint ventures, DKK 0 million (DKK 5 million in H1 2020) is recognised un-
der Share of profit after tax, associates and joint ventures.
O
f total acquisition costs in the reporting period, the fair value of estimated contingent considerations in the form of
earnouts or deferred payments accounted for DKK 73 million (DKK 51 million in H1 2020). Such payments depend
on the results of the acquired entities for a period of 1-5 years after takeover and can total a maximum of DKK 73
million (DKK 53 million in H1 2020) for acquisitions.
Note 1 – Acquisition of enterprises and activities
DEMANT INTERIM REPORT 2021
Page 25 of 26
The acquired assets include contractual receivables amounting to DKK 3 million (DKK 100 million in H1 2020) of
which DKK 0 million (DKK 1 million in H1 2020) was thought to be uncollectible at the date of the acquisition. Of
total goodwill in the amount of DKK 437 million (DKK 997 million in H1 2020), DKK 354 million (DKK 40 million in
H1 2020) can be amortised for tax purposes.
Transaction costs in connection with acquisitions made in 2021 amounted to DKK 4 million (DKK 0 million in H1
2020) and are recognised under Distribution costs.
Revenue and profit generated by the acquired enterprises since our acquisition in 2021 amount to DKK 65 million
(DKK 590 million in H1 2020) and DKK 5 million (DKK 17 million in H1 2020), respectively. Had such revenue and
profit been consolidated on 1 January 2021, we estimate that consolidated pro forma revenue and profit would
have been DKK 9,042 million (DKK 6,086 million in H1 2020) and DKK 1,184 million (DKK 121 million in H1 2020),
respectively. Without taking synergies with our core business into account, we believe that these pro forma figures
reflect the level of consolidated earnings after our acquisition of the enterprises.
The above statements of the fair values of acquisitions are not considered final until 12 months after takeover.
From the balance sheet date and until the date of publication of this Interim Report 2021, we have acquired addi-
tional distribution enterprises. We are in the process of estimating their fair value. The acquisition costs are ex-
pected to relate primarily to goodwill.
Note 2 – Accounting policies and estimates
DEMANT INTERIM REPORT 2021
Page 26 of 26
This Interim Report 2021 is presented in accordance with IAS 34, Interim Financial Reporting, as adopted by
the EU and further Danish disclosure requirements in respect of interim reports for listed companies. We have not
prepared a separate interim report for the Parent. The report is presented in Danish kroner (DKK), which is the
functional currency of the Parent. The accounting policies used for this Interim Report 2021 are the same as the
accounting policies used for our Annual Report 2020 to which we refer for a full description. The Group has
adopted all new, amended and revised accounting standards and interpretations as published by the IASB and
adopted by the EU, effective for the accounting period beginning on 1 January 2021. The amendments, revised
standards and interpretations have not had a significant effect.