Bang & Olufsen

Earnings Release • Jan 20, 2015

Q2 HIGHLIGHTS

“The Group’s financial results for the second quarter were adversely impacted
by the ramp-up issues in production and other supply-chain issues, which caused
a delayed launch of key products, and higher production costs than previously
anticipated. The combination of a continued strengthening of the product
portfolio in AV and B&O PLAY, a more stable production rhythm, and further
expansion of the distribution, as well as a stable development in Automotive,
are expected to result in a strong second half of the year, with significant
revenue growth and improved profitability compared to last year. It will
however not be enough to compensate for the poor performance in the first half
of the financial year”, says CEO Tue Mantoni.

-- The Group’s revenue was DKK 759 million for the second quarter of the
2014/15 financial year compared to revenue of DKK 822 million in the same
period last year, corresponding to a decrease of 8 per cent.
-- The B2C business recorded revenue of DKK 570 million in the second quarter
of the 2014/15 financial year compared to DKK 632 million in the same
period last year. Ramp-up issues in the production have, to a larger extent
than anticipated, adversely impacted the timing of key product launches.
-- B2C revenue decreased across all regions compared to the same quarter last
year. Europe and Rest of World decreased by 10 per cent, and North America
and BRIC decreased by 16 and 28 per cent respectively. The decrease in BRIC
was due to delayed product launches in China and continued high uncertainty
in the Russian market.
-- At the end of the second quarter, there were 541 B1 shops across the world
against 538 at the end of the first quarter. It was the first quarter since
2007 with a net increase in the number of stores.
-- The B2B business recorded revenue of DKK 183 million in the second quarter
of the 2014/15 financial year compared to revenue of DKK 194 million in the
same period last year. Automotive revenue was, as expected, back on par
with the level of last year after a very weak first quarter. ICEpower
decreased by 29 per cent.
-- The Group’s gross margin for the second quarter of the 2014/15 financial
year was 34.2 per cent compared to 42.7 per cent in the same period last
year and 36.2 per cent in the first quarter of the current financial year.
The lower margin was mainly a result of a high TV share in the AV segment
and ramp-up issues in the production relating to the BeoVision Avant.
-- Capacity costs were DKK 355 million in the second quarter, compared to DKK
321 million in the second quarter last year due to a lower level of
capitalization of R&D costs and higher distribution- and marketing
costs.
-- Earnings before interest and tax for the second quarter of the 2014/15
financial year were negative DKK 95 million compared to positive DKK 31
million in the same quarter last year. The impact from capitalization and
amortization on earnings before interest and tax was negative DKK 23
million compared to the same quarter last year.
-- Free cash flow in the second quarter was negative DKK 40 million compared
to negative DKK 52 million in the same period last year. The Group’s net
working capital improved to DKK 724 million from DKK 777 at the end of the
first quarter. This improvement partially mitigated the adverse effect from
the worse than expected negative net result on free cash flow.
-- The Group’s total revenue for the first six months of the 2014/15 financial
year was DKK 1,330 million against DKK 1,388 million last year,
corresponding to a decrease of 4 per cent. Earnings before interest and tax
for the first six months of the 2014/15 financial year were negative DKK
224 against negative DKK 34 million last year. Free cash flow in the first
six months of the 2014/15 financial year was negative DKK 281 million
compared to negative DKK 121 million last year.
-- After the end of reporting period Bang & Olufsen announced the launch
of BeoSound Moment, BeoVision Avant 75” and BeoPlay H8.
-- As previously disclosed in company announcement 14.23 from 22 December
2014, the company has revised the outlook for 2014/15. The topline guidance
of a high single digit growth is maintained. The guidance for earnings
before interest and tax (EBIT) is revised from the expectation of an
improving EBIT margin to a negative EBIT margin for the year. EBIT in the
second half of the financial year is expected to be positive, however not
sufficient to compensate for the shortfall in the first half of the
financial year. Free cash flow in the second half of the financial year is
expected to be in the range of DKK 50 million to DKK 100 million through a
combination of earnings and a continuous reduction in net working capital.
-- As disclosed in company announcement 14.23, the Board of Directors and
Executive Management has initiated a review to identify strategic and
structural options to increase scale and further reduce complexity.

Any enquiries about this announcement can be addressed to:

CEO, Tue Mantoni, tel.: +45 9684 5000

CFO, Anders Aakær Jensen, tel.: +45 9684 5000

Investors, Claus Højmark Jensen, tel.: +45 2325 1067

Press, Jan Helleskov, tel.: +45 5164 5375

A webcast will be hosted on 20 January 2015 at 10.00 CET. Access to the webcast
is obtained through our home page www.bang-olufsen.com.