Demant (DEMANT) Q2 2024 earnings summary

Executive summary

• Revenue grew 4% to DKK 11,087 million in H1 2024, with 3% organic growth, mainly driven by Hearing Care and acquisitions, but below expectations due to weak Hearing Aids and Diagnostics and U.S. managed care market share loss.

• Gross margin improved to 76.8% (up 1.8 p.p.), while EBIT before special items declined 4% to DKK 2,068 million, reflecting lower operating leverage.

• Profit after tax from continuing operations was DKK 1,354 million, down 1% year-over-year; EPS from continuing operations was DKK 6.18.

• Discontinued operations (Communications and Hearing Implants) posted a loss after tax of DKK 154 million, including a DKK 36 million loss on the CI business divestment.

• Strategic review and restructuring of Communications (EPOS) initiated, with divestment planned; cochlear implant business divested, bone-anchored hearing aid business under review.

Financial highlights

• EBITDA was DKK 2,897 million (margin 26.1%), flat year-over-year.

• Free cash flow before acquisitions/divestments fell 25% to DKK 1,157 million, mainly due to lower CFFO.

• Net interest-bearing debt increased 13% to DKK 13,853 million; leverage at 2.3x, within guidance.

• Equity rose 2% to DKK 9,522 million, as profit offset share buy-backs of DKK 1,137 million.

• Capital expenditure was DKK 375 million, or 3% of group revenue.

Outlook and guidance

• 2024 organic growth expected at 2–4%; EBIT before special items forecast at DKK 4,300–4,600 million.

• Share buy-backs guidance raised to around DKK 2,300 million for the year.

• Loss from discontinued operations expected at DKK 550 million, mainly from Communications restructuring.

• OPEX growth in H2 expected to be low to mid-single digit organically after cost-saving initiatives.