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Coloplast — Annual Report 2016
Nov 2, 2016
3358_rns_2016-11-02_7116fdb1-1aaf-4369-bc42-4bc431f2351b.pdf
Annual Report
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Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Announcement no. 10/2016
2 November 2016
Coloplast A/S
Holtedom 1
DK-3050
Humlebæk
Denmark
CVR no. 69749917
2015/16
Announcement of full-year financial results 2015/16
(1 October 2015 - 30 September 2016)
Highlights
- Organic revenue growth was 7%. Revenue in DKK was up by 6% to DKK 14,681m.
- Organic growth rates by business area: Ostomy Care 9%, Continence Care 5%, Urology Care 9% and Wound & Skin Care 6%.
- Gross profit was up by 5% to DKK 10,032m. At constant exchange rates, the gross margin was 69% compared to 68% last year. In DKK, the gross margin was 68%, against 69% last year.
- EBIT before special items was up by 7% to DKK 4,846m. The EBIT margin before special items was 34% at constant exchange rates, against 33% last year. Measured in DKK, the EBIT margin was 33%.
- EBIT was impacted by a further provision of DKK 750m to cover potential settlements and costs in connection with the lawsuits in the United States alleging injury resulting from the use of transvaginal surgical mesh products designed to treat pelvic organ prolapse and stress urinary incontinence.
- EBIT after special items was DKK 4,096m for an EBIT margin after special items of 28% at constant exchange rates. Measured in DKK, the EBIT margin was 28%.
- The full-year net profit before special items was up by 15% to DKK 3,728m, while diluted earnings per share before special items were also up by 15% to DKK 17.53.
- Net profit for the year after special items was DKK 3,143m, against DKK 899m last year.
- The free cash flow amounted to DKK 2,425m, DKK 444m (15%) less than last year. Adjusted for payments made in connection with lawsuits alleging injury resulting from the use of transvaginal surgical mesh products, the free cash flow was an inflow of DKK 4,023m against DKK 2,786m in 2014/15.
- ROIC after tax before special items was 49% against 48% last year.
- The Board of Directors recommends that the shareholders attending the general meeting to be held on 5 December 2016 approve a year-end dividend of DKK 9.0 per share. This brings the dividend paid for the year to DKK 13.5 per share, as compared with DKK 12.5 per share last year.
Financial guidance for 2016/17
- We expect organic revenue growth of 7-8% at constant exchange rates and of 5-6% in DKK.
- We expect an EBIT margin of 33-34% at constant exchange rates and at about 33% in DKK.
- Capital expenditure is expected to be about DKK 700m.
- The effective tax rate is expected to be about 23%.
Conference call
Coloplast will host a conference call on 2 November 2016 at 15.00 CET. The call is expected to last about one hour. To attend the conference call, call +45 3271 4607, +44 (0)20 7162 0077 or +1 646 851 2407. Conference call reference no. 960109.
A webcast will be posted on www.coloplast.com shortly after the conclusion of the conference call.
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Financial highlights and key ratios
1 October - 30 September
(Unaudited)
| Consolidated | DKK million | DKK million | ||||
|---|---|---|---|---|---|---|
| 2015/16 | 2014/15 | Change | 2015/16 | 2014/15 | Change | |
| 12 mths | 12 mths | Q4 | Q4 | |||
| Income statement | ||||||
| Revenue | 14,681 | 13,909 | 6% | 3,739 | 3,621 | 3% |
| Research and development costs | -509 | -442 | 15% | -129 | -114 | 13% |
| Operating profit before interest, tax, depreciation and amortisation (EBITDA) | 4,624 | 2,020 | >100% | 669 | -1,629 | <-100% |
| Operating profit (EBIT) before special items | 4,846 | 4,535 | 7% | 1,284 | 1,249 | 3% |
| Special items | -750 | -3,000 | -75% | -750 | -3,000 | -75% |
| Operating profit (EBIT) | 4,096 | 1,535 | >100% | 534 | -1,751 | <-100% |
| Net financial income and expenses | -13 | -289 | -96% | 18 | -56 | <100% |
| Profit before tax | 4,082 | 1,245 | >100% | 551 | -1,808 | <-100% |
| Net profit for the year | 3,143 | 899 | >100% | 424 | -1,422 | <-100% |
| Revenue growth | ||||||
| Period growth in revenue, % | 6 | 12 | 3 | 13 | ||
| Growth break down: | ||||||
| Organic growth, % | 7 | 7 | 7 | 8 | ||
| Currency effect, % | -1 | 5 | -4 | 5 | ||
| Balance sheet | ||||||
| Total assets | 11,007 | 10,817 | 2% | 11,007 | 10,817 | 2% |
| Capital invested | 5,551 | 4,702 | 18% | 5,551 | 4,702 | 18% |
| Equity end of period | 5,068 | 4,706 | 8% | 5,068 | 4,706 | 8% |
| Cash flow and investments | ||||||
| Cash flow from operating activities | 3,028 | 3,337 | -9% | 1,326 | 1,379 | -4% |
| Cash flow from investing activities | -603 | -468 | 29% | -544 | -460 | 18% |
| Investments in property, plant and equipment, gross | -627 | -583 | 8% | -257 | -157 | 64% |
| Free cash flow | 2,425 | 2,869 | -15% | 782 | 919 | -15% |
| Cash flow from financing activities | -2,868 | -2,963 | 3% | 35 | 14 | >100% |
| Key ratios | ||||||
| Average number of employees, FTEs | 9,817 | 9,303 | ||||
| Operating margin, EBIT, % | 28 | 11 | 14 | -48 | ||
| Operating margin before special items, EBIT before special items, % | 33 | 33 | 34 | 34 | ||
| Operating margin, EBITDA, % | 31 | 15 | 18 | -45 | ||
| Return on average invested capital before tax (ROIC), %1) | 63 | 62 | 66 | 64 | ||
| Return on average invested capital after tax (ROIC), %1) | 49 | 48 | 51 | 49 | ||
| Return on equity, % | 69 | 16 | 35 | -102 | ||
| Equity ratio, % | 46 | 44 | 46 | 44 | ||
| Net asset value per outstanding share, DKK | 24 | 22 | 9% | 24 | 22 | 9% |
| Share data | ||||||
| Share price, DKK | 514 | 473 | 9% | 514 | 473 | 9% |
| Share price/net asset value per share | 21.5 | 22.1 | -3% | 21.5 | 22.1 | -3% |
| Average number of outstanding shares, millions | 211.7 | 211.2 | 0% | 211.6 | 211.3 | 0% |
| PE, price/earnings ratio | 29.2 | 111.0 | -74% | 26.9 | -17.6 | <-100% |
| Dividend per share, DKK1) | 13.5 | 12.5 | 8% | |||
| Pay-out ratio, %2) | 76.7 | 81.6 | -6% | |||
| Earnings per share (EPS), diluted | 14.78 | 4.20 | >100% | 2.00 | -6.68 | <-100% |
| Free cash flow per share | 11.4 | 13.6 | -16% | 3.7 | 4.1 | -10% |
1) This item is before Special Items. After Special Items, ROIC before tax is 80%/28%, and ROIC after tax is 62%/21%.
2) This item is before Special Items. After Special Items, the pay-out ratio is 91%/294%.
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Management's report
Sales performance
Revenue in DKK was up by 6% to DKK 14,681m on 7% organic growth. Currency depreciation against DKK, especially of GBP and ARS, was partly offset by USD appreciation, but exchange rate developments in general reduced revenue growth by 1 percentage point. Q4 revenue in DKK was up by 3% to DKK 3,739m on 7% organic growth. Currency depreciation against DKK, especially of GBP and ARS, reduced revenue growth by 4 percentage points.
Sales performance by business area
| DKK million | Growth composition | DKK million | Organic growth | ||||
|---|---|---|---|---|---|---|---|
| 2015/16 | 2014/15 | Organic growth | Exchange rates | Reported growth | 2015/16 | ||
| 12 mths | 12 mths | Q4 | Q4 | ||||
| Ostomy Care | 5,935 | 5,567 | 9% | -2% | 7% | 1,519 | 8% |
| Continence Care | 5,182 | 5,019 | 5% | -2% | 3% | 1,343 | 6% |
| Urology Care | 1,497 | 1,359 | 9% | 1% | 10% | 376 | 11% |
| Wound & Skin Care | 2,067 | 1,964 | 6% | -1% | 5% | 501 | 3% |
| Net revenue | 14,681 | 13,909 | 7% | -1% | 6% | 3,739 | 7% |
Sales performance by region
| DKK million | Growth composition | DKK million | Organic growth | ||||
|---|---|---|---|---|---|---|---|
| 2015/16 | 2014/15 | Organic growth | Exchange rates | Reported growth | 2015/16 | ||
| 12 mths | 12 mths | Q4 | Q4 | ||||
| European markets | 9,213 | 8,843 | 6% | -2% | 4% | 2,270 | 5% |
| Other developed markets | 3,177 | 2,945 | 6% | 2% | 8% | 886 | 10% |
| Emerging markets | 2,291 | 2,121 | 14% | -6% | 8% | 583 | 9% |
| Net revenue | 14,681 | 13,909 | 7% | -1% | 6% | 3,739 | 7% |
Ostomy Care
The full-year sales of ostomy care products amounted to DKK 5,935m, a 7% increase in DKK. Organic growth, at 9%, remained driven mainly by the portfolio of SenSura® products and the Brava® accessories range.
The SenSura® portfolio generated highly satisfactory sales growth, driven in part by performance in the UK, Germany, the Nordic markets and the USA. In particular, the performance of the SenSura® Mio products continued to lift sales growth with the Sensura® Mio Convex range contributing to the growth momentum.
The SenSura® Mio Convex is now available in 16 countries, and feedback on the product remains highly positive. Coloplast encountered capacity shortages of SenSura® Mio Convex products during the third quarter of 2015/16 due to demand being much greater than anticipated. Additional capacity will become available during the 2016/17 financial year.
The Assura/Alterna® portfolio generated satisfactory sales growth, driven mainly by the Chinese, Russian and Algerian markets and with Argentina also contributing high full-year growth rates.
The Brava® range of accessories generated a satisfactory sales performance, driven mainly by the French, Chinese and UK markets.
From a country perspective, the UK reported highly satisfactory sales growth, supported by the performance of the Charter homecare business, which continues to win market share. China, Russia, the Nordic markets and Argentina were also positive contributors to growth. While contributing to sales growth, China reported slightly weaker growth rates compared to last year. The positive performance in Russia was due to an increase in tender activity in the first half of the financial year and satisfactory growth in the second half.
Q4 organic growth was 8%. As for the full-year period, the SenSura® portfolio and the Brava® range of accessories contributed strongly to performance. The sales growth of the SenSura® portfolio in the UK, Germany, the Nordic markets and the USA continued to drive performance. As in the third quarter, the SenSura® Mio Convex range supported the strong sales momentum of the
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SenSura® Mio portfolio. Q4 sales growth was negatively impacted by back orders on urostomy bags due to quality issues experienced by an external raw materials supplier. The back order situation is expected to normalise in the first quarter of the 2016/17 financial year. Sales growth in the Brava® range of accessories was driven mainly by the positive performance in China following the launch of Brava® accessories in that market. The French and UK markets also contributed to performance.
From a country perspective, China and the UK reported satisfactory growth rates, while the USA and Brazil also performed well. In the Chinese market, sales of the Assura/Alterna® and the Brava® portfolio performed particularly well.
The global market for ostomy care products is worth an estimated DKK 15-16bn with annual market growth forecast at 4-5%. Coloplast is the global market leader, holding a market share of 35-40%. The ostomy accessories market is estimated at about DKK 2bn with annual market growth estimated at 6-8%. Coloplast currently holds 25-30% of the accessories market.
Continence Care
Continence Care generated full-year revenue of DKK 5,182m, a 3% improvement in DKK and 5% organically. Sales of SpeediCath® intermittent catheters and Peristeen® drove growth in the period. Positive trends in sales of compact catheters in the UK, French and German markets were the main drivers, but the Nordic markets and Italy also reported satisfactory growth.
Sales growth in standard catheters remained challenged, due to distributor buying patterns and inventory reductions in the US market and a lower tender value in Saudi Arabia compared with last year. Sales in Argentina and an increase in tender activity in Russia supported growth.
The slightly positive sales performance in urine bags and urisheaths was based on an improved momentum in Russia and France, but growing competition in the Netherlands had a negative impact.
Sales of Peristeen® continued to grow at a fair rate, driven by good performances in the UK, the US and France.
From a country perspective, the UK was a positive contributor to growth in the Continence Care business due to satisfactory growth in the Charter homecare business. Also, France and Argentina reported momentum improvements, and there was an increase in tender activity in the Russian market, particularly in the first half of the financial year. For
the reasons mentioned above, sales growth was challenged by developments in the US market and in Saudi Arabia.
Q4 organic growth, at 6%, was driven by SpeediCath® intermittent catheters and Peristeen®. Sales of compact catheters in the French and UK markets contributed particularly well to performance. Especially Argentina and the USA reported satisfactory sales of standard catheters, but the performance was offset by the lower tender value in Saudi Arabia compared with last year.
Urine bag sales in China and growing competition in the Netherlands had a negative impact on growth in sales of urine bags and urisheaths.
Sales of Peristeen® improved in most markets, particularly in the USA, UK and France.
From a country perspective, the UK, France, Argentina and the USA contributed to sales growth, whereas Saudi Arabia and China detracted from performance. In addition, catheter sales in the Netherlands and Norway were adversely affected by price reforms.
The part of the continence care market Coloplast competes in is worth an estimated DKK 12bn. Annual market growth is estimated at 5-6%. Coloplast is the global market leader, with a market share of about 40%.
Urology Care
Sales of urology care products were up by 10% to DKK 1,497m for the full year, while the organic growth rate was 9%.
Growth remained driven mainly by implant sales, especially of Titan® penile implants in the US market. In addition, sales of Altis® slings and Restorelle® products designed to treat stress urinary incontinence and pelvic organ prolapse contributed to growth in the US market, in which Coloplast successfully took market share.
Growth in sales of disposable surgical products was supported by healthy sales in France, but were dented by lower tender activity in Brazil and Saudi Arabia.
From a country perspective, the US market continued to drive the Urology Care business, but Europe, and France in particular, also contributed, whereas especially Brazil detracted from growth.
The Q4 organic growth rate, at 11%, was mainly driven by Altis® slings, Titan® penile implants and Restorelle® products in the US market, in which Coloplast continued to win market share. Sales of disposable surgical products were supported by sales growth in France and Germany, but were
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negatively impacted by developments in Emerging Markets.
From a country perspective, the US market was the main driver of growth in the Urology Care business, while especially Brazil detracted from growth.
The part of the urology care market in which Coloplast products are represented is estimated to be worth approximately DKK 10bn. Market growth is estimated at 3–5%. Coloplast holds a 10–15% share of the combined global urology product market.
Wound & Skin Care
Sales of wound and skin care products amounted to DKK 2,067m for the full year, equal to a 5% increase in DKK and 6% organic growth. The Wound Care business in isolation generated 5% organic growth.
In Wound Care, growth was driven by sales of Biatain® foam dressings, especially by Biatain® Silicone in the UK and German markets. China also contributed to sales of Biatain® foam dressings, although at a lower growth rate than last year, whereas Saudi Arabia detracted from growth due to a lower tender value compared with last year. Skin care products generated a satisfactory sales performance in the US market due to sales of InterDry® products.
Contract production of Compeed® also contributed to growth.
From a country perspective, the USA, China and the UK all contributed favourably to growth in the Wound & Skin Care business, whereas Saudi Arabia, France and Brazil were negative contributors. The French market was impacted by changes in reimbursement rules taking effect at 1 April 2016.
Wound & Skin Care generated Q4 organic growth rates of 3% and the Wound Care business in isolation generated 2% organic growth.
Growth was driven by sales of Biatain® foam dressings, especially by Biatain® Silicone in Europe and notably in the UK market.
Sales of skin care products performed well due to positive sales growth for InterDry® products in the US market.
Contract production of Compeed® also contributed to Q4 growth.
From a country perspective, the UK and the USA contributed favourably to growth in the Wound & Skin Care business. The overall Q4 performance was adversely affected by the changes in reimbursement rules in France, the lower tender value in Saudi Arabia relative to last year and last year's delivery on a large tender win in Algeria. In addition, a price reform in Greece and negative growth in China also detracted from the Q4 performance.
The global wound care segment Coloplast competes in is worth an estimated DKK 17–19bn with annual market growth of 3–5%. The market is defined as advanced wound care products, and Coloplast holds a market share of 7–9%.
Gross profit
Gross profit was up by 5% to DKK 10,032m from DKK 9,533m last year. The gross margin was 68%, against 69% last year. Last year's margin included a writedown on NPWT inventory when the partnership with Devon Medical was discontinued. Product mix and depreciation on new machinery reduced the gross margin. The ongoing efficiency enhancements supported the gross margin, especially the production relocation of the SenSura® Mio portfolio to Hungary and the downsizing by about 100 production staff in Denmark. The relocation of machinery from Denmark to Hungary remains on schedule. At constant exchange rates, the gross margin was 69%, against 68% last year.
The Q4 gross margin was 68%, against 69% last year. At constant exchange rates, both this year's and last year's Q4 gross margins were 69%.
Costs
Distribution costs amounted to DKK 4,131m, a DKK 169m increase from DKK 3,962m last year.
Distribution costs amounted to 28% of revenue, which was in line with last year. The full-year costs included sales and marketing initiatives, mainly in the US, China, the UK and Germany.
The Q4 distribution costs amounted to DKK 1,017m, equal to 27% of revenue, against 28% last year.
The full-year administrative expenses amounted to DKK 561m, a DKK 39m reduction from DKK 600m last year. Last year's administrative expenses included non-recurring costs of DKK 75m relating to the industry-wide investigation of sales and marketing practices in the USA by the US Department of Justice and an increase in the provision for bad debt in Southern Europe.
Administrative expenses accounted for 4% of revenue, which was in line with last year both before and after non-recurring costs.
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The Q4 administrative expenses amounted to DKK 138m, a DKK 15m increase from DKK 123m last year. The Q4 administrative costs amounted to 4% of revenue, compared with 3% in the Q4 period of last year.
The full-year R&D costs were DKK 509m, which was DKK 67m more than last year. The 15% increase was due to a general increase in business activity, in part as a result of new product launches, such as SpeediCath® Flex and Biatain® Silicone Sizes & Shapes. R&D costs amounted to 3% of revenue, which was consistent with last year's percentage.
The Q4 R&D costs amounted to DKK 129m, a DKK 15m increase over the same period last year. The Q4 R&D costs amounted to 3% of revenue, which was consistent with the level in the same period last year.
Other operating income and other operating expenses amounted to a net income for the year of DKK 15m, against a net income of DKK 6m last year.
Other operating income and other operating expenses amounted to net income of DKK 7m in the fourth quarter, against net expense of DKK 2m in Q4 last year. The change in operating income was mainly due to timing differences in terms of royalty payments.
Special items
At 30 September 2016, Coloplast took a further provision of DKK 750m to cover potential settlements and costs in connection with the lawsuits in the US alleging injury resulting from the use of transvaginal surgical mesh products designed to treat pelvic organ prolapse and stress urinary incontinence. It is estimated that more than 90% of the cases have been settled at the date of this annual report. The total provision is now DKK 5.25bn and is the current best estimate of the total potential costs including existing settlements, future potential settlements and potential results of litigation as well as other costs associated with the litigation including legal advisory costs. See note 8 to the consolidated financial statements for more details.
Operating profit (EBIT)
The full-year EBIT before special items was DKK 4,846m, a DKK 311m (7%) increase from DKK 4,535m last year. The EBIT margin was 33%, which was in line with last year. At constant exchange rates, the EBIT margin was 34%, against 33% last year.
EBIT after special items was DKK 4,096m against DKK 1,535m last year. The EBIT margin was 28% both in DKK and at constant exchange rates, against 11% last year both in DKK and at constant exchange rates.
Q4 EBIT before special items was DKK 1,284m, against DKK 1,249m in Q4 2014/15, for an EBIT margin of 34% in Q4 2015/16, which was in line with last year's Q4 EBIT margin. At constant exchange rates, the Q4 2015/16 EBIT margin was 35%, compared with 34% last year.
The Q4 EBIT after special items was a DKK 534m profit against a DKK 1,751m loss last year.
Financial items and tax
Financial items were a net expense of DKK 13m, compared to a net expense of DKK 289m last year. The change in the net expense was mainly due to last year's loss on realised forward exchange contracts, especially on USD and GPB. This year, losses on USD and ARS in particular, were offset by gains in GBP.
The Q4 financial items amounted to a net income of DKK 18m, against a net expense of DKK 56m in Q4 2014/15, the difference being due to a net gain on realised forward exchange contracts mainly relating to GBP.
The tax rate was 23% against 28% last year. Last year's tax rate was based on the increase in provisions of DKK 3,000m to cover potential settlements and costs in connection with the lawsuits in the USA alleging injury resulting from the use of transvaginal surgical mesh products. Last year's tax expense before special items was DKK 1,006m for a tax rate of 24%.
Net profit
The full-year net profit before special items was DKK 3,728m, a DKK 489m (15%) increase from DKK 3,239m last year. Earnings per share (EPS) before special items, diluted, also improved by 15% to DKK 17.53.
Net profit for the year (after special items) was DKK 3,143m against DKK 899m last year.
The Q4 net profit before special items was DKK 1,009m, a 10% increase from DKK 918m last year. Earnings per share (EPS) before special items,
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diluted, also improved by 10%, from DKK 4.31 to DKK 4.75.
The Q4 net profit (after special items) was DKK 424m against a DKK 1,422m loss last year.
Cash flows and investments
Cash flows from operating activities
Cash flows from operating activities amounted to DKK 3,028m, against DKK 3,337m last year. Most of the decline was due to payments in connection with settlements in lawsuits in the US alleging injury resulting from the use of transvaginal mesh products, which was partly offset by lower tax payments due to voluntary tax payments made in 2014/15 and the 2015/16 EBIT improvement. Payments made in respect of the above-mentioned lawsuits in the US in the 2015/16 financial year amounted to DKK 1.6bn. Total payments made to date amount to DKK 2.4bn.
Investments
Coloplast made investments of DKK 649m in the 2015/16 financial year compared with DKK 617m last year. Gross investments in property, plant and equipment and intangible assets (CAPEX) consisted mainly of the factory expansion in Hungary and machinery for new and existing products. The factory expansion at Tatabánya affected investments in the fourth quarter. CAPEX accounted for 4% of revenue.
Sales of securities amounted to DKK 30m, which was DKK 70m less than last year. Total cash flows from investing activities were a DKK 603m outflow.
Free cash flow
The free cash flow was DKK 2,425m, against DKK 2,869m last year. Adjusted for payments made in connection with lawsuits alleging injury resulting from the use of transvaginal surgical mesh products, the free cash flow was an inflow of DKK 4,023m against DKK 2,786m in 2014/15.
Capital resources
At 30 September 2016, interest-bearing net deposits including securities amounted to DKK 813m, against DKK 1,300m at 30 September 2015. Unlike in the third quarter, the two-year credit facility to cover liquidity fluctuations resulting from settlements in lawsuits in the United States in respect of product liability relating to the use of transvaginal mesh products was not utilised in the fourth quarter.
Statement of financial position and equity
Balance sheet
At DKK 11,007m, total assets increased by DKK 190m relative to 30 September 2015.
Intangible assets amounted to DKK 1,397m, which was DKK 114m less than at 30 September 2015. The reduction was mainly due to the amortisation of acquired patents and trademarks.
Property, plant and equipment increased by DKK 220m relative to 30 September 2015 to stand at DKK 2,925m. The change was mainly due to the factory expansion at Tatabánya.
Other non-current assets fell by DKK 315m from DKK 836m to DKK 521m, the decrease being related to deferred tax assets due to provisions made in respect of the lawsuits in the US alleging injury resulting from the use of transvaginal surgical mesh products.
This reduced non-current assets by a total of DKK 209m to DKK 4,843m.
Working capital was 24% of revenue, which was in line with the percentage at 30 September 2015. Inventories were DKK 45m higher at DKK 1,518m due to inventory build-ups in connection with the relocation of production. Trade receivables were up by 9%, or DKK 212m, to DKK 2,679m, due to timing differences in the buying patterns of a number of major distributors. Trade payables were up by 18%, or DKK 106m, relative to 30 September 2015 to stand at DKK 697m. The change was due to timing differences in payments made.
Working capital was at 23% of Q4 revenue, which was in line with last year's percentage.
Coloplast reached a number of additional agreements during the year relating to lawsuits in the US alleging injury resulting from the use of transvaginal surgical mesh. In that connection, amounts held in escrow increased by DKK 385m net relative to 30 September 2015 to stand at DKK 457m. The amounts held in escrow were reduced by DKK 695m net in the fourth quarter due to the payments made to plaintiffs.
Marketable securities amounted to DKK 489m at 30 September 2016, DKK 30m less than at the beginning of the financial year, while cash and cash equivalents were reduced by DKK 335m to stand at DKK 546m.
Current assets rose by DKK 399m relative to 30 September 2015 to stand at DKK 6,164m.
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Equity
Equity grew by DKK 362m relative to 30 September 2015 to DKK 5,068m. The full-year comprehensive income of DKK 3,105m, share-based remuneration of DKK 27m and tax on equity entries of DKK 98m were offset by the effect of treasury shares bought and sold of DKK 218m, net, and dividend payments of DKK 2,650m.
In the second quarter of 2015/16, Coloplast launched a DKK 1bn share buy-back programme running until the end of the 2016/17 financial year. The first part of the share buy-back programme of DKK 500 m was completed in August 2016.
Treasury shares
At 30 September 2016, Coloplast's holding of treasury shares consisted of 4.3m class B shares, which was 4.4m fewer than at 30 September 2015. The holding was reduced due to the cancellation of 4.0m shares and the exercise of options for 1.4m shares, which were partly offset by 1.0m shares bought back.
Financial guidance for 2016/17
- We expect organic revenue growth of 7-8% at constant exchange rates and of 5-6% in DKK.
- We expect an EBIT margin of 33-34% at constant exchange rates and at about 33% in DKK.
- Capital expenditure is expected to be about DKK 700m.
- The effective tax rate is expected to be about 23%.
Our financial guidance takes account of reforms with known effects. Our expectations for long-term price pressures, of about 1.0% in annual price pressure, are unchanged.
Also, the financial guidance assumes sustained and stable sales growth in Coloplast's core markets and a continuation of the successful roll-out of new products.
The EBIT margin guidance assumes that Coloplast, in addition to achieving its growth target, will continue to deliver scale economies and efficiency improvements.
The capital investments will boost the production capacity for new and existing products and will provide for the completion of a new factory during 2017/18.
The provision made to cover costs relating to transvaginal surgical mesh products remains subject to a high degree of estimation.
Other matters
Launch of the SpeediCath® Flex product portfolio
Coloplast presented SpeediCath® Flex, a new portfolio of flexible catheters for men, at the IsCoS Scientific Meeting in Austria. SpeediCath® Flex will be launched in all major markets in 2016/17. With the launch of this new product, Coloplast now has a complete range of catheters for all users.
Launch of the Biatain® Silicone Sizes & Shapes product portfolio
Coloplast presented Biatain® Silicone Sizes & Shapes, a new series of eight silicone dressings, at the WUWHS Congress in Italy. The new series will be launched in all major markets in 2016/17. By expanding the product portfolio, Coloplast emphasises its commitment to providing treatment options to as many wound indications as possible.
Organisational changes in our German, UK and Dutch operations
Henning Reichardt has been appointed country manager for Germany effective 7 November 2016. Henning Reichardt has more than 20 years' management experience in sales and marketing with Johnson & Johnson, including in Germany, Switzerland and Austria.
UK country manager Ulrik Berthelsen resigned his position effective 1 October 2016. Paul Cook, sales director of Coloplast's UK ostomy care business, has been appointed interim UK country manager.
Annemarie van Neck, country manager for the Netherlands, has been appointed country manager for Coloplast UK effective 1 April 2017. Also effective 1 April 2017, Paul Cook has been appointed country manager for the Netherlands.
Organisational changes in Wound & Skin Care in the USA
As part of the ambition to double Wound & Skin Care revenue by 2020/21, the US Wound & Skin care business is being reorganised, and a dedicated US Wound & Skin Care organisation will be established, reporting directly to the global Wound & Skin Care business headed by Nicolai Buhl Andersen.
8/24
Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
No agreement with the US-based group purchasing organisation Premier
The ostomy care contracts with a number of major US purchasing organisations are scheduled for renegotiation during 2016. The US-based group purchasing organisation Premier has decided not to include Coloplast in its GPO contract. The decision will not affect Coloplast's long-term financial guidance. As explained at the Capital Markets Day in June, although Coloplast is not on the contracts with the large GPOs, Coloplast has access to concluding contracts with more than half of the hospitals in the US. During the year, Coloplast concluded a number of contracts with major hospitals.
Timetable for dividend of DKK 9 per share
5 December 2016 – Declaration date
6 December 2016 – Ex. dividend date
7 December 2016 – Value date
8 December 2016 – Payment date
Investor Relations
Ellen Bjurgert has been appointed Director, Investor Relations effective 1 October 2016 replacing Ian Christensen, who is Coloplast's new country manager in South Africa.
9/24
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Colorlast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Exchange rate exposure
Our financial guidance for the 2016/17 financial year has been prepared on the basis of the following assumptions for the company's principal currencies:
| DKK | GBP | USD | HUF | EUR |
|---|---|---|---|---|
| Average exchange rate 2015/16^{1)} | 956 | 671 | 2.39 | 745 |
| Spot rate, 26 October 2016 | 830 | 681 | 2.40 | 744 |
| Change in spot rate compared with the average exchange rate 2015/16 | -13% | 2% | 0% | 0% |
1) Average exchange rate from 1 October 2015 to 30 September 2016.
Revenue is particularly exposed to developments in USD and GBP relative to DKK. Fluctuations in HUF against DKK have an effect on the operating profit, because a substantial part of our production, and thus of our costs, are in Hungary, whereas our sales there are moderate.
| In DKK millions over 12 months on a 10% initial drop in exchange rates
(Average exchange rates 2015/16) | Revenue | EBIT |
| --- | --- | --- |
| USD | -290 | -130 |
| GBP | -260 | -170 |
| HUF | 0 | 50 |
Forward-looking statements
The forward-looking statements in this announcement, including revenue and earnings guidance, do not constitute a guarantee of future results and are subject to risk, uncertainty and assumptions, the consequences of which are difficult to predict. The forward-looking statements are based on our current expectations, estimates and assumptions and are provided on the basis of information available to us at the present time. Major fluctuations in the exchange rates of key currencies, significant changes in the healthcare sector or major developments in the global economy may impact our ability to achieve the defined long-term targets and meet our guidance. This may impact our company's financial results.
10/24
Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Statement by the Board of Directors and the Executive Management
The Board of Directors and the Executive Management have today considered and approved the Annual Report of Coloplast A/S for the financial year 1 October 2015 – 30 September 2016.
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU. The parent company financial statements have been prepared in accordance with the Danish Financial Statements Act. In addition, the consolidated financial statements and the parent company financial statements have been prepared in accordance with additional Danish disclosure requirements for listed companies. The Management's report is also presented in accordance with Danish disclosure requirements for listed companies.
In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group's and the parent company's assets, liabilities and financial position at 30 September 2016 and of the results of the Group's and the parent company's operations and the cash flows for the Group for the financial year 1 October 2015 – 30 September 2016.
In our opinion, the Management's report includes a fair account of the development and performance of the Group and the parent company, the results for the year and of the financial position of the Group and the parent company, together with a description of the principal risks and uncertainties that the Group and the parent company face.
We recommend the annual report for adoption at the Annual General Meeting.
Humlebæk, 2 November 2016
Executive Management:
Lars Rasmussen
President, CEO
Anders Lonning-Skovgaard
Executive Vice President, CFO
Allan Rasmussen
Executive Vice President, Global Operations
Kristian Villumsen
Executive Vice President, Chronic Care
Board of Directors:
Michael Pram Rasmussen
Chairman
Niels Peter Louis-Hansen
Deputy Chairman
Sven Håkan Björklund
Per Magid
Birgitte Nielsen
Jette Nygaard-Andersen
Brian Petersen
Jørgen Tang-Jensen
Thomas Barfod
Elected by the employees
Martin Giørtz Müller
Elected by the employees
Torben Rasmussen
Elected by the employees
11/24
12/24
Colorplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Tables
The financial figures are unaudited.
Statement of comprehensive income... 13
Balance sheet... 14
Statement of changes in equity... 16
Cash flow statement... 18
Notes to the financial statements... 19
Five year financial highlights and key ratios... 22
Income statement by quarter... 23
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Statement of comprehensive income
1 October - 30 September
(Unaudited)
| Consolidated | DKK million | DKK million | ||||
|---|---|---|---|---|---|---|
| 2015/16 | 2014/15 | 2015/16 | 2014/15 | |||
| Note | 12 mths | 12 mths | Q4 | Q4 | ||
| 1 Revenue | 14,681 | 13,909 | 106 | 3,739 | 3,621 | 103 |
| Production costs | -4,649 | -4,376 | 106 | -1,178 | -1,108 | 106 |
| Gross profit | 10,032 | 9,533 | 105 | 2,561 | 2,513 | 102 |
| Distribution costs | -4,131 | -3,962 | 104 | -1,017 | -1,025 | 99 |
| Administrative expenses | -561 | -600 | 94 | -138 | -123 | 112 |
| Research and development costs | -509 | -442 | 115 | -129 | -114 | 113 |
| Other operating income | 42 | 38 | 111 | 12 | 7 | 171 |
| Other operating expenses | -27 | -32 | 84 | -5 | -9 | 56 |
| Operating profit before special items | 4,846 | 4,535 | 107 | 1,284 | 1,249 | 103 |
| 2 Special items | -750 | -3,000 | - | -750 | -3,000 | - |
| Operating profit (EBIT) | 4,096 | 1,535 | >100 | 534 | -1,751 | -30 |
| Profit/loss after tax on investment in associates | -1 | -1 | 100 | -1 | -1 | 100 |
| 3 Financial income | 66 | 13 | >100 | 46 | 2 | >100 |
| 4 Financial expenses | -79 | -302 | 26 | -28 | -58 | 48 |
| Profit before tax | 4,082 | 1,245 | >100 | 551 | -1,808 | -30 |
| Tax on profit for the period | -939 | -346 | >100 | -127 | 386 | -33 |
| Net profit for the period | 3,143 | 899 | >100 | 424 | -1,422 | -30 |
| Other comprehensive income | ||||||
| Items that will not be reclassified to income statement: | ||||||
| Remeasurements of defined benefit plans | -83 | -4 | -37 | 9 | ||
| Tax on remeasurements of defined benefit plans | 20 | 3 | 8 | 1 | ||
| -63 | -1 | -29 | 10 | |||
| Items that may be reclassified to income statement: | ||||||
| Value adjustment of currency hedging | 99 | -156 | 37 | 98 | ||
| Of which transferred to financial items | -37 | 265 | -49 | 64 | ||
| Tax effect of hedging | -14 | -27 | 3 | -39 | ||
| Currency adjustment of opening balances and other currency adjustments relating to subsidiaries | -22 | 206 | 45 | 9 | ||
| Tax effect of currency adjustment of assets in foreign currency | -1 | -30 | -1 | -30 | ||
| 25 | 258 | 35 | 102 | |||
| Total other comprehensive income | -38 | 257 | 6 | 112 | ||
| Total comprehensive income | 3,105 | 1,156 | 430 | -1,310 | ||
| Earnings per Share (EPS) before special items | 17.62 | 15.33 | 4.77 | 4.35 | ||
| Earnings per Share (EPS) | 14.85 | 4.26 | 2.00 | -6.72 | ||
| Earnings per Share (EPS) before special items, diluted | 17.53 | 15.19 | 4.75 | 4.31 | ||
| Earnings per Share (EPS), diluted | 14.78 | 4.20 | 2.00 | -6.68 |
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Colorplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Balance sheet
At 30 September
| Consolidated | DKK million | |
|---|---|---|
| Note | 30.09.16 | 30.09.15 |
| Assets | ||
| Acquired patents and trademarks etc. | 468 | 579 |
| Goodwill | 844 | 842 |
| Software | 65 | 61 |
| Prepayments and intangible assets in progress | 20 | 29 |
| Intangible assets | 1,397 | 1,511 |
| Land and buildings | 1,089 | 1,017 |
| Plant and machinery | 1,075 | 987 |
| Other fixtures and fittings, tools and equipment | 344 | 319 |
| Prepayments and property, plant and equipment under construction | 417 | 382 |
| Property, plant and equipment | 2,925 | 2,705 |
| Investment in associates | 11 | 11 |
| Deferred tax asset | 495 | 808 |
| Other receivables | 15 | 17 |
| Other non-current assets | 521 | 836 |
| Non-current assets | 4,843 | 5,052 |
| Inventories | 1,518 | 1,473 |
| Trade receivables | 2,679 | 2,467 |
| Income tax | 37 | 43 |
| Other receivables | 312 | 203 |
| Prepayments | 126 | 107 |
| Receivables | 3,154 | 2,820 |
| Amounts held in escrow | 457 | 72 |
| Marketable securities | 489 | 519 |
| Cash and cash equivalents | 546 | 881 |
| Current assets | 6,164 | 5,765 |
| Assets | 11,007 | 10,817 |
Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Balance sheet
At 30 September
| Consolidated | DKK million | |
|---|---|---|
| Note | 30.09.16 | 30.09.15 |
| Equity and liabilities | ||
| Share capital | 216 | 220 |
| Currency translation reserve | -78 | -54 |
| Reserve for currency hedging | 41 | -7 |
| Proposed dividend for the year | 1,905 | 1,691 |
| Retained earnings | 2,984 | 2,856 |
| Total equity | 5,068 | 4,706 |
| Provisions for pensions and similar liabilities | 236 | 169 |
| Provision for deferred tax | 106 | 1 |
| 8 Other provisions | 258 | 1,322 |
| Other payables | 1 | 1 |
| Prepayments | 29 | 40 |
| Non-current liabilities | 630 | 1,533 |
| Provisions for pensions and similar liabilities | 14 | 31 |
| 8 Other provisions | 814 | 2,029 |
| Other credit institutions | 222 | 100 |
| Trade payables | 697 | 591 |
| Income tax | 111 | 65 |
| Other payables | 3,436 | 1,746 |
| Prepayments | 15 | 16 |
| Current liabilities | 5,309 | 4,578 |
| Current and non-current liabilities | 5,939 | 6,111 |
| Equity and liabilities | 11,007 | 10,817 |
9 Contingent liabilities
Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Statement of changes in equity
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| DKK million | Share capital | Currency translation reserve | Reserve for currency hedging | Proposed dividend | Retained earnings | Total equity | |
| A shares | B shares | ||||||
| 2015/16 | |||||||
| Balance at 1.10. | 18 | 202 | -54 | -7 | 1,691 | 2,856 | 4,706 |
| Comprehensive income: | |||||||
| Net profit for the year | 2,859 | 284 | 3,143 | ||||
| Other comprehensive income that will not be reclassified to income statement: | |||||||
| Remeasurements of defined benefit plans | -83 | -83 | |||||
| Tax on remeasurements of defined benefit plans | 20 | 20 | |||||
| Other comprehensive income that may be reclassified to income statement: | |||||||
| Value adjustment of currency hedging | 99 | 99 | |||||
| Of which transferred to financial items | -37 | -37 | |||||
| Tax effect of hedging | -14 | -14 | |||||
| Currency adjustment of opening balances and other currency adjustments relating to subsidiaries | -24 | 2 | -22 | ||||
| Tax effect of currency adjustment of assets in foreign currency | -1 | -1 | |||||
| Total other comprehensive income | 0 | 0 | -24 | 48 | 0 | -62 | -38 |
| Total comprehensive income | 0 | 0 | -24 | 48 | 2,859 | 222 | 3,105 |
| Transactions with shareholders: | |||||||
| Transfers | 5 | -5 | 0 | ||||
| Acquisition of treasury shares | -500 | -500 | |||||
| Sale of treasury shares | 282 | 282 | |||||
| Share-based payment | 27 | 27 | |||||
| Tax on equity entries | 98 | 98 | |||||
| Reduction of share capital | -4 | 4 | 0 | ||||
| Dividend paid out in respect of 2015/16 | -954 | -954 | |||||
| Dividend paid out in respect of 2014/15 | -1,696 | -1,696 | |||||
| Total transactions with shareholders | 0 | -4 | 0 | 0 | -2,645 | -94 | -2,743 |
| Balance at 30.9. | 18 | 198 | -78 | 41 | 1,905 | 2,984 | 5,068 |
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Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Statement of changes in equity
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| DKK million | Share capital | Currency translation reserve | Reserve for currency hedging | Proposed dividend | Retained earnings | Total equity | |
| A shares | B shares | ||||||
| 2014/15 | |||||||
| Balance at 1.10. | 18 | 202 | -132 | -89 | 1,579 | 4,705 | 6,283 |
| Comprehensive income: | |||||||
| Net profit for the year | 2,644 | -1,745 | 899 | ||||
| Other comprehensive income that will not be reclassified to income statement: | |||||||
| Remeasurements on defined benefit plans | -4 | -4 | |||||
| Tax on remeasurements on defined benefit plans | 3 | 3 | |||||
| Other comprehensive income that may be reclassified to profit or loss: | |||||||
| Value adjustment of currency hedging | -156 | -156 | |||||
| Of which transferred to financial items | 265 | 265 | |||||
| Tax effect of hedging | -27 | -27 | |||||
| Currency adjustment of opening balances and other currency adjustments relating to subsidiaries | 78 | 128 | 206 | ||||
| Tax effect of currency adjustment of assets in foreign currency | -30 | -30 | |||||
| Total other comprehensive income | 0 | 0 | 78 | 82 | 0 | 97 | 257 |
| Total comprehensive income | 0 | 0 | 78 | 82 | 2,644 | -1,648 | 1,156 |
| Transactions with shareholders: | |||||||
| Transfers | 3 | -3 | 0 | ||||
| Acquisition of treasury shares | -500 | -500 | |||||
| Sale of treasury shares | 72 | 72 | |||||
| Share-based payment | 29 | 29 | |||||
| Tax on equity entries | 201 | 201 | |||||
| Dividend paid out in respect of 2014/15 | -953 | -953 | |||||
| Dividend paid out in respect of 2013/14 | -1,582 | -1,582 | |||||
| Total transactions with shareholders | 0 | 0 | 0 | 0 | -2,532 | -201 | -2,733 |
| Balance at 30.9. | 18 | 202 | -54 | -7 | 1,691 | 2,856 | 4,706 |
17/24
Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Cash flow statement
1 October - 30 September
| Consolidated | DKK million | |
|---|---|---|
| 2015/16 | 2014/15 | |
| Note | 12 mths | 12 mths |
| Operating profit | 4,096 | 1,535 |
| Depreciation and amortisation | 528 | 485 |
| Adjustment for other non-cash operating items | -2,297 | 2,368 |
| Changes in working capital | 1,126 | 393 |
| Ingoing interest payments, etc. | 29 | 13 |
| Outgoing interest payments, etc. | -89 | -279 |
| Income tax paid | -365 | -1,178 |
| Cash flows from operating activities | 3,028 | 3,337 |
| Investments in intangible assets | -22 | -34 |
| Investments in land and buildings | -134 | -5 |
| Investments in plant and machinery | -176 | -126 |
| Investments in property, plant and equipment under construction | -317 | -452 |
| Property, plant and equipment sold | 16 | 28 |
| Company divestment | 0 | 21 |
| Net sales/(-purchase) of marketable securities | 30 | 100 |
| Cash flow from investing activities | -603 | -468 |
| Free cash flow | 2,425 | 2,869 |
| Dividend to shareholders | -2,650 | -2,535 |
| Acquisitions of treasury shares | -500 | -500 |
| Sale of treasury shares | 282 | 72 |
| Cash flows from financing activities | -2,868 | -2,963 |
| Net cash flows | -443 | -94 |
| Cash, cash equivalents and short-term debt with credit institutions at 1.10. | 781 | 879 |
| Value adjustment of cash and bank balances | -14 | -4 |
| Net cash flows | -443 | -94 |
| Cash, cash equivalents and short-term debt with credit institutions at 30.9. | 324 | 781 |
The cash flow statement cannot be derived using only the published financial data.
18/24
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Notes
Consolidated
1. Segment information
Operating segments
The operating segments are defined on the basis of the monthly reporting to the Executive Management, which is considered the Senior Operational Management, and the management structure. Reporting to Management is based on three operating segments: Chronic Care, Urology Care and Wound & Skin Care.
The operating segment Chronic Care covers the sale of ostomy care products and continence care products.
The operating segment Urology Care covers the sale of urological products, including disposable products.
The operating segment Wound & Skin Care covers the sale of wound and skin care products.
The reporting segments are also Chronic Care, Urology Care and Wound & Skin Care. The segmentation reflects the structure of reporting to the Executive Management.
Shared/non-allocated comprises support functions (Production units, R&D and Staff) and eliminations, as these functions do not generate revenue. Financial items and income tax are not allocated to the operating segments.
Management reviews each operating segment separately based on EBIT before internal items and eliminations (market contribution) and allocates resources on that background. Costs are allocated directly to segments. Certain immaterial indirect costs are allocated systematically to Shared/Non-allocated and the reporting segments.
Management does not receive reporting on asset and liabilities by the reporting segments. Accordingly, the reporting segments are not measured in this respect, nor are there resources allocated this background. No single customer accounts for more than 10% of revenue.
| Operating segments | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| DKK million | Chronic Care | Urology Care | Wound & Skin Care | Shared/Non-allocated | Total | |||||
| 2015/16 | 2014/15 | 2015/16 | 2014/15 | 2015/16 | 2014/15 | 2015/16 | 2014/15 | 2015/16 | 2014/15 | |
| Segment revenue | ||||||||||
| Ostomy Care | 5,935 | 5,567 | 0 | 0 | 0 | 0 | 0 | 0 | 5,935 | 5,567 |
| Continence Care | 5,182 | 5,019 | 0 | 0 | 0 | 0 | 0 | 0 | 5,182 | 5,019 |
| Urology Care | 0 | 0 | 1,497 | 1,359 | 0 | 0 | 0 | 0 | 1,497 | 1,359 |
| Wound & Skin Care | 0 | 0 | 0 | 0 | 2,067 | 1,964 | 0 | 0 | 2,067 | 1,964 |
| Group external revenue as per the Statement of comprehensive income | 11,117 | 10,586 | 1,497 | 1,359 | 2,067 | 1,964 | 0 | 0 | 14,681 | 13,909 |
| Segment operating profit/loss | 6,716 | 6,396 | 533 | 462 | 761 | 717 | -3,164 | -3,040 | 4,846 | 4,535 |
| Costs not included in segment operating profit/loss | -750 | -3,000 | ||||||||
| Operating profit before tax as per the Statement of comprehensive income | 4,096 | 1,535 | ||||||||
| Net financials | -13 | -289 | ||||||||
| Tax of profit for the year | -939 | -346 | ||||||||
| Income from investments in associates | -1 | -1 | ||||||||
| Profit/loss for the year as per the Statement of comprehensive income | 3,143 | 899 |
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^{}[]
Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Notes
Consolidated
8. Other provisions
Product liability case regarding transvaginal surgical mesh products
The amounts are gross amounts relating to certain legal claims.
Since 2011, Coloplast, along with a number of other major manufacturers, has been named as a defendant in individual lawsuits in various federal and state courts around the United States alleging injury resulting from use of transvaginal surgical mesh products designed to treat pelvic organ prolapse and stress urinary incontinence.
A multidistrict litigation (MDL) was formed in 2012 in Southern District of West Virginia to consolidate federal court cases in which Coloplast is the first named defendant.
Since the first lawsuits were filed, Coloplast has been intent on disputing the current and any future litigation, and has continually considered which strategy and other steps may serve the company's best interests.
Against this background, Coloplast has from the outset reached settlements with groups of law firms. This process was accelerated in 2015/16 after Judge Joseph Goodwin several times ordered the parties involved to make substantial progress in the settlement process.
An additional expense of DKK 0.75bn was recognised in the 2015/16 financial year to cover potential claims and settlements and other costs arising in connection with legal assistance. The expense is recognised under special items in the income statement.
This brings the total amount recognised since the 2013/14 financial year for expected costs of litigation in the USA to DKK 5.25bn including legal costs (before insurance cover of DKK 0.5bn).
The total expense is based on a number of estimates and assumptions and is therefore subject to substantial uncertainty.
The remaining provision made for legal claims at 30 September 2016 amounted to DKK 1.1bn (30 September 2015: DKK 3.3bn) plus DKK 2.4bn recognised under other debt (30 September 2015: DKK 0.7bn). Liabilities are classified as other debt when settlements are reached and amounts and timing become known.
With reference to the prejudicial exemption in IAS 37, Coloplast will not disclose any further information about the assumptions for the provision, including any details about current and the expected number of lawsuits and settled claims.
The disclosure of such information is believed to be detrimental to Coloplast in connection with the ongoing confidential negotiations and could inflict financial losses on Coloplast and its shareholders.
9. Contingent liabilities
Other than as set out in note 8 Other provisions, the Coloplast Group is a party to a few minor legal proceedings, which are not expected to influence the Group's future earnings.
21/24
Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
FIVE-YEAR FINANCIAL HIGHLIGHTS AND KEY RATIOS
| DKK million | 2015/16 | 2014/15 | 2013/14 | 2012/13 | 2011/12 |
|---|---|---|---|---|---|
| Income statement | |||||
| Revenue | 14,681 | 13,909 | 12,428 | 11,635 | 11,023 |
| Research and development costs | -509 | -442 | -390 | -380 | -342 |
| Operating profit before interest, tax, depreciation and amortisation | 4,624 | 2,020 | 3,573 | 4,160 | 3,756 |
| Operating profit (EBIT) before special items | 4,846 | 4,535 | 4,147 | 3,672 | 3,255 |
| Special items^{1)} | -750 | -3,000 | -1,000 | 0 | 0 |
| Operating profit (EBIT) | 4,096 | 1,535 | 3,147 | 3,672 | 3,255 |
| Net financial income and expenses | -13 | -289 | 46 | -46 | -300 |
| Profit before tax | 4,082 | 1,245 | 3,191 | 3,625 | 2,954 |
| Net profit for the year | 3,143 | 899 | 2,390 | 2,711 | 2,194 |
| Revenue growth | |||||
| Annual growth in revenue, % | 6 | 12 | 7 | 6 | 8 |
| Growth breakdown: | |||||
| Organic growth, % | 7 | 7 | 9 | 7 | 6 |
| Currency effect, % | -1 | 5 | -2 | -1 | 2 |
| Balance sheet | |||||
| Total assets | 11,007 | 10,817 | 10,379 | 9,564 | 10,176 |
| Capital invested | 5,551 | 4,702 | 6,088 | 6,320 | 6,295 |
| Equity at year end | 5,068 | 4,706 | 6,283 | 6,769 | 6,042 |
| Cash flows and investments | |||||
| Cash flows from operating activities | 3,028 | 3,337 | 3,149 | 3,136 | 2,649 |
| Cash flows from investing activities | -603 | -468 | -777 | -159 | -390 |
| Investment in property, plant and equipment, gross | -627 | -583 | -505 | -409 | -317 |
| Free cash flow | 2,425 | 2,869 | 2,372 | 2,977 | 2,259 |
| Cash flows from financing activities | -2,868 | -2,963 | -2,898 | -3,430 | -1,653 |
| Key ratios | |||||
| Average number of employees, FTEs | 9,817 | 9,303 | 8,741 | 8,143 | 7,624 |
| Operating margin, EBIT, % | 28 | 11 | 25 | 32 | 30 |
| Operating margin before special items, EBIT before special items, % | 33 | 33 | 33 | 32 | 30 |
| Operating margin, EBITDA, % | 31 | 15 | 29 | 36 | 34 |
| Return on average invested capital before tax (ROIC), %^{2)} | 63 | 62 | 60 | 58 | 52 |
| Return on average invested capital after tax (ROIC), %^{2)} | 49 | 48 | 49 | 44 | 38 |
| Return on equity, % | 69 | 16 | 37 | 42 | 42 |
| Equity ratio, % | 46 | 44 | 61 | 71 | 59 |
| Net asset value per unrestricted share, DKK^{4)} | 24 | 22 | 30 | 32 | 29 |
| Share data | |||||
| Share price, DKK^{4)} | 514 | 473 | 494 | 314 | 242 |
| Share price/net asset value per share^{4)} | 21 | 22 | 17 | 10 | 9 |
| Average number of outstanding shares, millions^{4)} | 212 | 211 | 211 | 211 | 210 |
| PE, price/earnings ratio | 29 | 111 | 44 | 24 | 23 |
| Dividend per share, DKK^{3) 4)} | 13.5 | 12.5 | 11.5 | 10.0 | 4.0 |
| Pay-out ratio, %^{5)} | 77 | 82 | 77 | 78 | 38 |
| Earnings per share (EPS), diluted^{4)} | 15 | 4 | 11 | 13 | 10 |
| Free cash flow per share^{4)} | 11 | 14 | 11 | 13 | 11 |
1) Special items include costs of settlements and costs in connection with the lawsuits in the United States alleging injury resulting from the use of transvaginal surgical mesh products.
2) For the 2015/16, 2014/15 and 2013/14 financial years, this item is before Special items. After Special items, ROIC before tax is 80%/28%/51%, and ROIC after tax is 62%/21%/38%.
3) The figure shown for the 2015/16 financial year is the proposed dividend.
4) The 2012/13 figure has been restated to reflect a 1-to-5 split of the company's A and B shares in the 2012/13 financial year.
5) For the 2015/16, 2014/15 and 2013/14 financial years, this item is before Special items. After Special items, the pay-out ratio is 91%/294%/101%. The key ratios have been calculated and applied in accordance with "Recommendations & Financial Ratios 2015" issued by the Danish Society of Financial Analysts.
22/24
Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
Income statement, quarterly
(Unaudited)
| Consolidated | ||||||||
|---|---|---|---|---|---|---|---|---|
| DKK million | 2015/16 | 2014/15 | ||||||
| Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Revenue | 3,739 | 3,686 | 3,600 | 3,656 | 3,621 | 3,540 | 3,447 | 3,301 |
| Production costs | -1,178 | -1,174 | -1,147 | -1,150 | -1,108 | -1,144 | -1,086 | -1,038 |
| Gross profit | 2,561 | 2,512 | 2,453 | 2,506 | 2,513 | 2,396 | 2,361 | 2,263 |
| Distribution costs | -1,017 | -1,037 | -1,036 | -1,041 | -1,025 | -993 | -999 | -945 |
| Administrative expenses | -138 | -148 | -140 | -135 | -123 | -208 | -133 | -136 |
| Research and development costs | -129 | -132 | -122 | -126 | -114 | -115 | -103 | -110 |
| Other operating income | 12 | 10 | 13 | 7 | 7 | 0 | 22 | 9 |
| Other operating expenses | -5 | -4 | -1 | -17 | -9 | -7 | -11 | -5 |
| Operating profit before special items | 1,284 | 1,201 | 1,167 | 1,194 | 1,249 | 1,073 | 1,137 | 1,076 |
| Special items | -750 | 0 | 0 | 0 | -3,000 | 0 | 0 | 0 |
| Operating profit (EBIT) | 534 | 1,201 | 1,167 | 1,194 | -1,751 | 1,073 | 1,137 | 1,076 |
| Profit/loss after tax on investment in associates | -1 | 0 | 0 | 0 | -1 | 0 | 0 | 0 |
| Financial income | 46 | 9 | 3 | 8 | 2 | -17 | 24 | 4 |
| Financial expenses | -28 | 60 | 20 | -131 | -58 | -123 | -89 | -32 |
| Profit before tax | 551 | 1,270 | 1,190 | 1,071 | -1,808 | 933 | 1,072 | 1,048 |
| Tax on profit for the period | -127 | -292 | -274 | -246 | 386 | -224 | -257 | -251 |
| Net profit for the period | 424 | 978 | 916 | 825 | -1,422 | 709 | 815 | 797 |
| Earnings per Share (EPS) before special items | 4.77 | 4.62 | 4.33 | 3.90 | 4.35 | 3.35 | 3.85 | 3.78 |
| Earnings per Share (EPS) | 2.00 | 4.62 | 4.33 | 3.90 | -6.72 | 3.35 | 3.85 | 3.78 |
| Earnings per Share (EPS) before special items, diluted | 4.75 | 4.60 | 4.31 | 3.87 | 4.31 | 3.32 | 3.82 | 3.74 |
| Earnings per Share (EPS), diluted | 2.00 | 4.60 | 4.31 | 3.87 | -6.68 | 3.32 | 3.82 | 3.74 |
Coloplast
Ostomy Care
Continence Care
Wound & Skin Care
Urology Care
For further information, please contact
Investors and analysts
Anders Lonning-Skovgaard
Koncerndirektør, CFO
Tlf. 4911 1111
Ellen Bjurgert
Director, Investor Relations
Tel. 4911 1800 / 4911 3376
E-mail [email protected]
Press and the media
Maria Lindeberg
Senior Media Relations Manager
Tlf. 4911 3095
E-mail [email protected]
Website
www.coloplast.com
Address
Coloplast A/S
Holtedam 1
DK-3050 Humlebæk
Denmark
CVR NR. 69749917
This announcement is available in a Danish and an English-language version. In the event of any discrepancies, the Danish version shall prevail.
The Coloplast logo is a registered trademark of Coloplast A/S. © 2016-11 All rights reserved. Coloplast A/S, 3050 Humlebæk, Denmark.
Coloplast develops products and services that make life easier for people with very personal and private medical conditions. Working closely with the people who use our products, we create solutions that are sensitive to their special needs. We call this intimate healthcare.
Our business includes Ostomy Care, Urology Care, Continence Care and Wound and Skin Care. We operate globally and employ more than 10,000 people.
Coloplast A/S
Holtedam 1
3050 Humlebæk
Denmark
Investor Relations
Tel. +45 4911 1800
Fax +45 4911 1555
www.coloplast.com
Comp. reg. (CVR).
69749917
24/24