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Demant
Annual Report (ESEF) • Feb 6, 2024
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Download Source FileUntitled Annual Report 2023
Demant A/S
Kongebakken 9
2765 Smørum
Denmark
CVR no. 71186911
1 January – 31 December 2023
Louise, Clinical specialist, mountain climber and Oticon hearing aid user
Insights and highlights
Our business
Corporate information
Financial report
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Key figures and financial ratios
Demant – Annual Report 2023 | 1
Insights and highlights
CEO letter
4
This is Demant
6
Purpose and strategy
7
Highlights in 2023
10
2023 in brief
11
Sustainability
13
Group financial review
16
Financial outlook
24
Our business
Hearing Healthcare
27
Hearing Aids
30
Hearing Care
33
Diagnostics
35
Communications
37
EPOS
38
Corporate information
Shareholder information
42
William Demant Foundation
45
Risk management activities
46
Corporate governance
50
Executive Board
53
Board of Directors
54
Financial report
Management statement
57
Independent auditor’s report
58
Consolidated financial statements
62
Notes to consolidated financial statements
68
Parent financial statements
125
Contents
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https://www.demant.com/reports-2023/sustainability-report-2023
https://www.demant.com/reports-2023/corporate-governance-report-2023
https://www.demant.com/reports-2023/remuneration-report-2023
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CEO Letter
Demant – Annual Report 2023 | 2
| Cash flow statement | 2023 | 2022 | 2021 | 2020 | 2019 |
|---|---|---|---|---|---|
| Adjusted cash flow from operating activities (CFFO) | 4,335 | 2,622 | 3,593 | 2,710 | 2,149 |
| Cash flow from operating activities (CFFO) | 4,335 | 2,622 | 3,593 | 2,621 | 2,149 |
| Investment in property, plant and equipment, net | 633 | 630 | 547 | 493 | 561 |
| Free cash flow | 3,483 | 1,617 | 2,838 | 2,023 | 1,338 |
| Share buy-backs | 846 | 1,840 | 3,200 | 197 | 946 |
| Other key figures | |||||
|---|---|---|---|---|---|
| Gearing multiple (NIBD/EBITDA) | 2.2 | 2.9 | 1.9 | 2.8 | 2.6 |
| Earnings per share (EPS), DKK – continuing operations | 11.44 | 10.06 | 11.48 | 4.68 | 6.00 |
| Earnings per share (EPS) | 8.04 | 9.21 | 10.70 | 4.68 | 6.00 |
| Free cash flow per share (FCFPS) | 15.61 | 7.15 | 12.09 | 8.44 | 5.49 |
| Share price, end of period | 296.00 | 192.55 | 335.10 | 240.60 | 209.80 |
| Average number of shares outstanding | 223.13 | 226.01 | 234.82 | 239.78 | 243.55 |
| Average number of employees | 21,168 | 19,239 | 16,866 | 16,155 | 15,352 |
| Scope 1 and 2 CO2e emissions (tonnes)² | 30,469 | 35,862 | 31,721 | 27,335 | 28,433 |
| Group renewable electricity share (%) | 21 | - | - | - | - |
| CEO remuneration ratio | 48 | 39 | 38 | 35 | 34 |
| Gender diversity, Board of Directors (women/men) | 40/60% | 40/60% | 40/60% | 40/60% | 20/80% |
| Gender diversity, all managers (women/men) | 47/53% | 44/56% | 43/57% | 42/58% | 41/59% |
| Gender diversity, top-level management (women/men) | 27/73% | 23/77% | 22/78% | - | - |
| Gender diversity, top-level management teams (on/off target) | 79/21% | 71/29% | 63/35% | - | - |
¹ EBIT for Communications in 2019 relates to the Group’s share of profit after tax from our former joint venture Sennheiser Communications.
² 2019-2022 were restated in order to recognise new acquisitions. We refer to section 9.1 for a description of the accounting policies for key figures and financial ratios.
| Key figures and financial ratios – year (DKK million) | 2023 | 2022 | 2021 | 2020 | 2019 |
|---|---|---|---|---|---|
| Hearing Healthcare | |||||
| Revenue | 21,601 | 18,645 | 16,722 | 13,163 | 14,946 |
| Organic growth | 14% | 5% | 31% | -13% | 4% |
| Gross margin | 75.6% | 76.1% | 77.1% | 73.6% | 75.8% |
| Operating profit (EBIT) | 4,506 | 3,443 | 3,626 | 1,211 | 2,085 |
| EBIT margin | 20.9% | 18.5% | 21.7% | 9.2% | 14.0% |
| Communications | |||||
| Revenue | 842 | 1,060 | 1,183 | 1,306 | - |
| Organic growth | -19% | -13% | -9.0% | - | - |
| Gross margin | 26.6% | 45.0% | 48.3% | 50.3% | - |
| Operating profit (EBIT)¹ | -358 | -236 | -122 | 102 | 66 |
| EBIT margin | -42.5% | -22.3% | -10.3% | 7.8% | - |
| Group | |||||
| Income statement | |||||
| Revenue | 22,443 | 19,705 | 17,905 | 14,469 | 14,946 |
| Organic growth | 12% | 4% | 27% | -13% | 4% |
| Gross margin | 73.7% | 74.4% | 75.2% | 70.4% | 75.8% |
| EBITDA | 5,482 | 4,383 | 4,730 | 2,578 | 3,110 |
| EBITDA margin | 24.4% | 22.2% | 26.4% | 17.8% | 20.8% |
| Adjusted EBIT | 4,148 | 3,207 | 3,504 | 1,313 | 2,151 |
| Adjusted EBIT margin | 18.5% | 16.3% | 19.6% | 9.1% | 14.4% |
| Operating profit (EBIT) | 4,148 | 3,207 | 3,663 | 1,530 | 2,151 |
| EBIT margin | 18.5% | 16.3% | 20.5% | 10.6% | 14.4% |
| Net financial items | -754 | -280 | -202 | -194 | -240 |
| Profit after tax - continuing operations | 2,555 | 2,276 | 2,711 | 1,134 | 1,467 |
| Profit after tax - discontinued operations | -757 | -192 | -183 | - | - |
| Profit for the year | 1,798 | 2,084 | 2,528 | 1,134 | 1,467 |
| Balance sheet | |||||
| Total assets | 30,546 | 29,857 | 24,860 | 21,927 | 21,798 |
| Net interest-bearing debt (NIBD) | 12,280 | 12,711 | 9,150 | 7,135 | 8,185 |
| Equity | 9,338 | 8,562 | 7,981 | 8,279 | 7,645 |
The Hearing Implants business was recognised as a discontinued operation in 2022 and 2023, and comparative figures for 2021 in the income statement and cash flow statement as well as related key figures and financial ratios excluding organic growth were restated.
Demant – Annual Report 2023 | 3
| H2 2023 | H1 2023 | H2 2022 | H1 2022 | H2 2021 | H1 2021 | |
|---|---|---|---|---|---|---|
| Balance sheet | ||||||
| Total assets | 30,546 | 29,833 | 29,857 | 27,335 | 24,860 | 23,579 |
| Net interest-bearing debt (NIBD) | 12,280 | 12,197 | 12,711 | 10,986 | 9,150 | 8,573 |
| Equity | 9,338 | 8,990 | 8,562 | 8,184 | 7,981 | 7,796 |
| Cash flow statement | ||||||
| Cash flow from operating activities (CFFO) | 2,472 | 1,863 | 1,707 | 915 | 2,000 | 1,593 |
| Investment in property, plant and equipment, net | 327 | 306 | 329 | 301 | 340 | 207 |
| Free cash flow | 1,993 | 1,490 | 1,219 | 398 | 1,522 | 1,316 |
| Share buy-backs | 829 | 17 | 533 | 1,307 | 1,387 | 1,813 |
| Other key figures | ||||||
| Gearing multiple (NIBD/EBITDA) | 2.2 | 2.5 | 2.9 | 2.4 | 1.9 | 1.8 |
| Earnings per share (EPS), DKK – continuing operations | 5.81 | 5.63 | 4.99 | 5.07 | 6.40 | 5.08 |
| Earnings per share (EPS) | 5.44 | 2.60 | 4.61 | 4.60 | 5.76 | 4.94 |
| Free cash flow per share (FCFPS) | 8.93 | 6.68 | 5.40 | 1.75 | 6.55 | 5.54 |
| Share price, end of period | 296.00 | 288.50 | 192.55 | 266.30 | 335.10 | 353.00 |
| Average number of shares outstanding | 223.13 | 223.17 | 224.06 | 227.98 | 232.59 | 237.66 |
| Average number of employees | 21,413 | 20,922 | 20,349 | 18,130 | 17,161 | 16,572 |
| Scope 1 and 2 CO2e emissions (tonnes)¹ | 14,973 | 15,496 | 18,218 | 17,644 | 15,454 | 16,267 |
| Gender diversity, Board of Directors (women/men) | 40/60% | 40/60% | 40/60% | 40/60% | - | - |
| Gender diversity, all managers (women/men) | 47/53% | 47/53% | 44/56% | 44/56% | - | - |
The Hearing Implants business was recognised as a discontinued operation in 2022 and 2023, and comparative figures for 2021 in the income statement and cash flow statement as well as related key figures and financial ratios, excluding organic growth, were restated. We refer to section 9.1 for a description of the accounting policies for key figures and financial ratios.
Demant – Annual Report 2023 | 4
CEO Letter
The challenges that we address in our industry are chronical, and the people segment we predominantly serve, the elderly, is growing. Therefore, the treatment of hearing loss and the care for people living with hearing loss require our continuous attention and consistent focus on innovative technology and care.
For Real
If anything, 2023 has confirmed that when we work with the core of hearing healthcare innovation and strive for technological advances to make our products respond faster and handle complex listening situations, we produce solutions that provide strong benefits for the users. This was clearly demonstrated in our broad range of new hearing aids introduced early in 2023 in all brands. Especially Oticon Real swept the table and became a first choice for users and customers and thus helped drive significant market share gains and outstanding organic growth of 21% in Hearing Aids.
For users, the most important aspect of hearing aids remains the ability to hear clearly in all listening environments, and we work tirelessly to solve this challenge. Artificial Intelligence (AI) is an important means of addressing this and improving the user experience. We use AI to train our devices to seek out, balance and deliver the best and most useful sounds to the user. We introduced our first Deep Neural Network a few years ago, and in our very latest chip platform, we have taken this technology further and implemented the next generation of AI, which we expect will truly benefit users in the future.
While we continue to improve rechargeable battery technology and connectivity in our devices, we are especially proud to introduce further audiological advancements with the imminent launch of new hearing aids in all our brands. Based on the introduction of new sensors, which can now detect and support the user’s listening intentions, Oticon Intent™ will provide further benefits to users – especially in complex and dynamic listening situations.
Demant – Annual Report 2023 | 5
| Key figures and financial ratios – half-year (DKK million) | H2 2023 | H1 2023 | H2 2022 | H1 2022 | H2 2021 | H1 2021 |
|---|---|---|---|---|---|---|
| Hearing Healthcare | ||||||
| Revenue | 10,907 | 10,694 | 9,700 | 8,945 | 8,597 | 8,125 |
| Organic growth | 13% | 15% | 5% | 6% | 14% | 55% |
| Gross margin | 76.1% | 75.0% | 75.9% | 76.4% | 77.6% | 76.6% |
| Operating profit (EBIT) | 2,344 | 2,162 | 1,748 | 1,695 | 1,908 | 1,718 |
| EBIT margin | 21.5% | 20.2% | 18.0% | 18.9% | 22.2% | 21.1% |
| Communications | ||||||
| Revenue | 381 | 461 | 508 | 552 | 562 | 621 |
| Organic growth | -22% | -15% | -13% | -14% | -27% | 16% |
| Gross margin | 17.8% | 33.8% | 43.9% | 45.9% | 48.2% | 48.3% |
| Operating profit (EBIT) | -210 | -148 | -129 | -107 | -78 | -44 |
| EBIT margin | -54.9% | -32.1% | -25.4% | -19.3% | -13.9% | -7.1% |
| Group | ||||||
| Income statement | ||||||
| Revenue | 11,288 | 11,155 | 10,208 | 9,497 | 9,159 | 8,746 |
| Organic growth | 11% | 13% | 3% | 4% | 10% | 51% |
| Gross margin | 74.2% | 73.3% | 74.3% | 74.6% | 75.8% | 74.5% |
| EBITDA | 2,820 | 2,662 | 2,255 | 2,128 | 2,543 | 2,187 |
| EBITDA margin | 25.0% | 23.9% | 22.1% | 22.4% | 27.8% | 25.0% |
| Adjusted EBIT | 2,134 | 2,014 | 1,619 | 1,588 | 1,830 | 1,674 |
| Adjusted EBIT margin¹ | 18.9% | 18.1% | 15.9% | 16.7% | 20.0% | 19.1% |
| Operating profit (EBIT) | 2,134 | 2,014 | 1,619 | 1,588 | 1,989 | 1,674 |
| EBIT margin | 18.9% | 18.1% | 15.9% | 16.7% | 21.7% | 19.1% |
| Net financial items | -395 | -359 | -185 | -95 | -101 | -101 |
| Profit after tax – continuing operations | 1,297 | 1,258 | 1,118 | 1,157 | 1,495 | 1,216 |
| Profit after tax – discontinued operations | -81 | -676 | -84 | -107 | -150 | -33 |
| Profit for the period | 1,216 | 582 | 1,035 | 1,050 | 1,345 | 1,183 |
¹ 2021-2022 were restated in order to recognise new acquisitions.# CEO Letter
Demant – Annual Report 2023
5
This is further supported by the introduction of the second generation of our Deep Neural Network technology. These efforts contribute to the impact we strive to achieve with our hearing healthcare solutions: To enable people with hearing loss to enjoy a socially engaging life.
For Demant, 2023 was a year of innovative launches and remarkable growth, cementing our high relevance to users and customers worldwide. While the year started with uncertain market conditions, we saw a quickly improving market, returning to normal growth rates. I am proud to see how we were able to adapt to this normalisation after years of volatility, translating it into high performance and market share gains. The Group delivered significant 12% organic revenue growth and a strong operating profit of more than DKK 4.1 billion, and Hearing Healthcare delivered 14% organic revenue growth. Twice during the year, we lifted our guidance. And just as importantly, we created life-changing differences for more people living with hearing loss than ever before.
Groundbreaking hearing test
However, before any technological assistance becomes relevant, it is necessary to know how the individual hearing loss should be alleviated. Based on ten years of research performed by our Interacoustics Research Unit, our Diagnostics business area launched a new groundbreaking diagnostic test method in 2023, the Audible Contrast Threshold TM , ACT. The new test method offers the possibility to diagnose how well the user is able to hear speech in noise and enables the hearing care professional to fit the hearing aids even more accurately to individual needs than before. We believe that in the future, the two-fold diagnosing of hearing loss, the classic audiogram and the new Audible Contrast Threshold TM , will provide an added benefit for customers and users.
Generally, our Diagnostics business area delivered solid growth in 2023 on top of a very strong previous year, while also launching new products and inaugurating a brand new production site in Poland. In our view, alleviating hearing loss starts with the hearing care professional, who delivers professional and personalised care. The social and human aspect of hearing must not be neglected, and that is why we always put the individual at the centre of our work. We strive to understand their needs and preferences, while offering the best technology to support this. We continue to welcome more and more people into our clinics, and our Hearing Care business area delivered solid growth in 2023.
A more focused Demant
2023 has also confirmed our belief that when we operate a more focused business, we can increase our positive impact, enhance our performance and exceed our customers’ expectations. On the Hearing Implants side, we proceeded with the divestment of Oticon Medical, which has been amended in scope to only include the cochlear implants part of the business area. Since the bone anchored hearing systems business is no longer part of the transaction, the business will remain with the Group for now, pending a review of our strategic options.
In a difficult market, our Communications business area had a tough year with negative growth and profits, impacting the Group’s overall performance. In 2023, we therefore took the decision to focus EPOS’ activities on its Enterprise Solutions business, and we have gradually wound down our Gaming business. With this change and other cost reduction measures, the business is now on a path back to profitability. In the light of this, we have decided that now is a good time to explore whether a different owner may be better positioned to accelerate growth for Communications and to allow the business to realise its full potential. We have thus decided to undertake a review of strategic options for the business area and expect this review to be completed by the end of the first half of 2024.
Hand in hand
In 2023, we sharpened our ambition: As the leading hearing healthcare company to improve as many lives as possible. Clearly, we do so every day with our solutions, but we also have an obligation to broaden our scope. Caring for people’s health and well-being goes hand in hand with caring for society and the planet. We take part in the world’s transition to net zero CO2 emissions and continue to integrate our climate strategy into our business and operations. Our ambitious targets for CO2 emissions reductions got the green light from the Science Based Targets initiative in 2023. We can certainly move the needle as far as reducing our own direct and indirect emissions are concerned, but we cannot do it alone in our value chain, and in 2023, we increased collaboration with our suppliers. Nations, companies like Demant and consumers must all take part in fighting climate changes and collaborate on initiatives to urgently reduce global emissions.
Another goal of ours is to increase the diversity of our organisation. I am happy to see us develop in a more diverse direction. It is my experience that a diverse culture strengthens our innovation power and our collaboration. In fact, it is a prerequisite for success in a highly complex and dynamic world.
I would like to extend my thanks to our customers, employees and shareholders. We are very grateful for your trust and loyalty throughout 2023. You have been an integral part of our success, and we are committed to continuing to deliver world-class customer experiences, an engaging work culture and attractive financial returns.
Looking towards 2024, I expect the normalisation we saw in 2023 to continue, and I am confident that Demant will stay on this growth journey and continue to provide life-changing hearing health to even more users in 2024.
Søren Nielsen
When you work with the core of hearing healthcare innovation and strive for technological advances, you also get solutions that provide strong benefits for the users.
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This is Demant
Demant – Annual Report 2023
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Demant is a global hearing healthcare and audio technology company that operates subsidiaries in more than 30 countries and sells products in more than 130 countries. To help people connect and communicate with the world around them, the Group offers solutions and services in four business areas: Hearing Care, Hearing Aids and Diagnostics, which together constitute the Hearing Healthcare segment, and Communications*.
Value chain
We are active throughout the entire value chain from R&D to the final fitting of users around the world. Also, in our hearing care clinics, we support hearing aid users on their journey from awareness to fitting and adapting to a life with hearing aids. In short, we create life-changing differences through hearing health.
Hearing aid user journey
One in five people live with hearing loss, a number that will increase in the future due to an ageing population. However, there are material barriers to wider adoption of hearing aids, such as lack of awareness and stigma. In our view, alleviating hearing loss starts with the hearing care professional, who delivers personalised care, consisting of diagnosing, fitting and rendering support based on the individual’s needs. We believe that people prefer personal counselling to find the best treatment rather than seeking hearing solutions without this assistance.
This is Demant
Demant’s value chain
Key steps in the hearing aid user journey
| Awareness | Diagnostics | Treatment | Fitting | Adaptation | Support |
| Research & Development | Clinical Trials | Product development | Manufacturer | Hearing care clinics | Aftercare |
| Hearing aid user journey | Intervention | Counselling | |||
| *The Group has decided to undertake a review of strategic options for its Communications business area. |
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This is Demant
Demant – Annual Report 2023
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Purpose and strategy
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Purpose and strategy
Demant – Annual Report 2023
7
The Demant Group is built on a heritage of care, health and innovation since 1904. Our shared purpose is to create life-changing differences through hearing health. With our innovative technologies and services, we are let into people’s lives and are involved in some of the most important aspects of their lives by offering the possibility to be actively engaged without constraints.
My hearing aids expand my possibilities to engage in the free life with leisure activities, get-togethers, travels and time with family and not least grandchildren.
Steen, pensioner, pilot
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Purpose and strategy
Demant – Annual Report 2023
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Our strategy
Leading hearing healthcare
Demant is a hearing healthcare and audio technology company, and our strategy is based on a deep understanding of the fundamental issues of hearing loss and the people who live with it. We develop and provide professional hearing healthcare centred on personalised counselling and innovative solutions. Across our Hearing Healthcare segment, we are focused on delivering diagnostic solutions, hearing aids and professional counselling and services with a view to improving people’s hearing health. As part of our strategy, we are committed to continuing to invest heavily in R&D and further expanding the distribution of our products in both existing and new markets going forward.
In our Communications segment, we develop high-quality communication solutions for enterprises. We are currently reviewing strategic options for this business area and exploring whether a different owner may be better positioned to accelerate growth.# Our ambition
As a leading hearing healthcare company, our ambition is to improve as many lives as possible. Our ambition goes hand in hand with our purpose to create life-changing differences through hearing health. In doing so, we contribute to building a more sustainable world where more people have the opportunity to enjoy an active life.
Our ambition translates into clear commitments towards our main stakeholders:
- Customers: Deliver a world-class customer and user experience that exceeds expectations.
- Employees: Pursue an engaging, inclusive and innovative work culture, enabling employees to develop and grow.
- Investors: Drive attractive financial returns and growth based on a resilient business model.
We are active in markets – with several major players, intense competition and a high level of innovation – that will continue to grow in the foreseeable future due to the demographic development. In these markets, our strategy is to operate multiple businesses that create value-adding synergies. To obtain the benefit of economies of scale, our clear goal is to grow faster than the underlying markets with a view to winning market shares over time through both organic and acquisitive growth.
Our operating model
Our operating model ensures that we remain focused on excelling in the different business areas, while – equally important – harvesting synergies across the Group and maintaining a resilient business model. With our business areas’ common understanding of technology, innovation is the core of our operating model, and we will continue to focus on value-adding collaboration between the R&D functions of our individual business areas.
With sales companies and hearing care clinics all over the world, the Group benefits from a strong global distribution set-up, which enables us to continuously increase our reach to a variety of countries, markets and customer segments, thereby expanding our business. Our global shared services support each business area and provide a robust infrastructure within the Group, allowing each business area to benefit from economies of scale. All our business areas have dedicated organisations to enable them to service their individual markets, ensure a customer-centric approach and execute their specific strategic initiatives. The organisation and operating model combined support a strong collaboration culture across our business areas.
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Demant – Annual Report 2023 | 9
Demant – Annual Report 2023 | 9
These devices can help me distinguish a baby crying from the crackles that wood makes when it burns – that ability could help me save a life! Clare, firefighter
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Highlights in 2023
Demant – Annual Report 2023 | 10
- Demant sets ambitious 2025 target for renewable electricity
- Oticon releases new premium hearing aids: Oticon Real™
- Philips Hearing Solutions releases the HearLink 40 hearing aids
- Audika doubles its presence in Belgium after recent acquisition
- Celebrating World Hearing Day
- Grand opening of the new Diagnostics production facility in Poland
- Increasing the awareness of hearing healthcare in China
- Demant’s climate targets get the green light
- Interacoustics launches new breakthrough Audible Contrast Threshold™ hearing test
- EPOS and Lenovo announce partnership to deliver professional audio solutions
Read more at demant.com/about/latest-news
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Demant – Annual Report 2023 | 11
2023 in brief
| Demant Group FY 2023 | ||
|---|---|---|
| REVENUE | 22,443 DKK MILLION | |
| Hearing Care | REVENUE 10,036 DKK MILLION | Hearing aid retail activities with +3,500 clinics worldwide |
| Hearing Aids | REVENUE 2,482 DKK MILLION | Development, production and wholesale of hearing aids |
| Diagnostics | REVENUE 842 DKK MILLION | Diagnostic instruments, services and disposables |
| Communications | REVENUE 157 DKK MILLION | High-end audio and video solutions for enterprises |
| Hearing Healthcare | REVENUE 21,601 DKK MILLION | |
| GROWTH 17% IN LOCAL CURRENCIES | ||
| EBIT MARGIN 18.5% | ||
| EBIT 4,506 DKK MILLION | ||
| Communications | GROWTH -19% IN LOCAL CURRENCIES | |
| EBIT MARGIN -42.5% | ||
| EBIT -358 DKK MILLION |
Revenue and organic growth by geographic region in 2023
- North America: Revenue: DKK 9,236 million, Organic growth: 14%
- Europe: Revenue: DKK 9,137 million, Organic growth: 9%
- Asia: Revenue: DKK 2,331 million, Organic growth: 24%
- Pacific region: Revenue: DKK 1,103 million, Organic growth: 8%
- Other: Revenue: DKK 636 million, Organic growth: 9%
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2023 in brief
Demant – Annual Report 2023 | 12
| Demant Group | ||
|---|---|---|
| GROWTH | 17% IN LOCAL CURRENCIES | |
| EBIT MARGIN | 18.5% | |
| EBIT | 4,506 DKK MILLION | |
| Communications | GROWTH -19% IN LOCAL CURRENCIES | |
| EBIT MARGIN -42.5% | ||
| EBIT -358 DKK MILLION | ||
| Outlook in 2024 (continuing operations) | ||
| ORGANIC GROWTH | 4-8% | |
| EBIT | 4,600-5,000 DKK MILLION | |
| SHARE BUY-BACKS | >2,000 DKK MILLION | |
| GROWTH 15% IN LOCAL CURRENCIES |
Group key figures
- EMPLOYEES 21,623
- 1.4 DKK BILLION INVESTED IN R&D
- Cash flow from operating activities CFFO 4.3 DKK BILLION
- Earnings per share EPS 11.44 DKK
Financial results shown for continuing operations
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Demant – Annual Report 2023 | 13
Sustainability
Demant – Annual Report 2023 | 13
Through life-changing hearing health, we contribute to building a more sustainable world where all people have the opportunity to enjoy an active life. One in five people live with hearing loss and, due to an ageing population, this number is increasing. Testing your hearing is the first step towards better hearing, but many hearing losses go undetected. If we can enable more people to hear better, we can give them a voice and thus the opportunity to be part of society without constraints. We empower them to tune in to life and take an active part in their community for the good of everyone.
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Demant – Annual Report 2023 | 14
The difference we make for people living with hearing loss is our most important contribution to society and to a more sustainable world. The business areas in Demant bring their expertise and innovative solutions within all aspects of hearing health to millions of people around the world and deliver on our ambition to improve as many lives as possible.
Life-changing impact
In 2023, we continued to increase our positive impact on society, bringing quality of life to people through life-changing hearing health.
*Read more in accounting policies on page 63 in the Sustainability Report 2023.
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Demant – Annual Report 2023 | 15
We identified the material ESG issues and opportunities from an impact and financial perspective. We have looked at our current and potential positive and negative impact on society and at the financial impacts and risks that the topics present to our business in the short, medium and long term. The assessment confirms our positive impact on society: We bring life-changing differences through hearing health to the global community of people living with hearing loss. The assessment also sheds light on other impacts and opportunities for Demant as well as on areas where we risk having a negative impact on society and nature. In Demant’s Sustainability Report 2023, we describe how we manage our material topics and risks.
Sustainability reporting
Demant publishes a separate Sustainability Report that serves as the statutory report to be presented under sections 99a, 99d and 107d of the Danish Financial Statements Act. It also includes the disclosure requirements of the EU taxonomy for sustainable activities. The full Sustainability Report is available on our website or via the full link on page 2 of this report.
Material sustainability topics
In 2023, we conducted a double materiality assessment that will guide strategic decisions and reporting going forward.
| Material topics | Environment | Social | Governance |
|---|---|---|---|
| • Climate action | • Providing life-changing hearing health | • Business ethics | |
| • Circular economy | • Positive outcomes of treatment and technology | • Supplier relations | |
| • Climate mitigation | • Employee engagement, retention and attraction | • Advocacy for hearing health | |
| • Diversity, equity, inclusion and wellbeing | • Data ethics | ||
| • Product quality | • Cyber security | ||
| • Sustainable supply chain | • Intellectual property | ||
| • Work creation and optimisation | |||
| • Health and safety |
Sustainability performance and targets
| Performance | Targets | |||
|---|---|---|---|---|
| 2023 | 2025 | 2030 | 2050 | |
| Diversity, equity and inclusion | ||||
| Share of women in top-level management | 27% | 30% | ||
| Share of top-level management teams with less than 75% of one gender | 79% | 75% | ||
| Climate action | ||||
| Share of renewable electricity | 21% | 50% | 100% | |
| Reduction in scope 1 and 2 CO2e emissions | +7%* | -46% | Net-zero emissions |
*Compared to 2019 baseline.# Group financial review
Demant – Annual Report 2023
16 Group financial review
| FY (DKK million) | Hearing Healthcare | Communications | Group 2023 | Group 2022 | Group growth |
|---|---|---|---|---|---|
| Revenue | 21,601 | 842 | 22,443 | 19,705 | 14% |
| Production costs | -5,281 | -618 | -5,899 | -5,036 | 17% |
| Gross profit | 16,320 | 224 | 16,544 | 14,669 | 13% |
| Gross margin | 75.6% | 26.6% | 73.7% | 74.4% | |
| R&D costs | -1,226 | -184 | -1,410 | -1,314 | 7% |
| Distribution costs | -9,554 | -363 | -9,917 | -9,232 | 7% |
| Administrative expenses | -1,102 | -36 | -1,138 | -1,038 | 10% |
| Share of profit after tax, associates | 68 | 1 | 69 | 122 | -43% |
| Operating profit (EBIT) | 4,506 | -358 | 4,148 | 3,207 | 29% |
| EBIT margin | 20.9% | -42.5% | 18.5% | 16.3% |
Demant – Annual Report 2023
17 H1 (DKK million)
| H1 (DKK million) | Hearing Healthcare | Communications | Group 2023 | Group 2022 | Group growth |
|---|---|---|---|---|---|
| Revenue | 10,694 | 461 | 11,155 | 9,497 | 17% |
| Production costs | -2,677 | -305 | -2,982 | -2,414 | 24% |
| Gross profit | 8,017 | 156 | 8,173 | 7,083 | 15% |
| Gross margin | 75.0% | 33.8% | 73.3% | 74.6% | |
| R&D costs | -607 | -99 | -706 | -651 | 8% |
| Distribution costs | -4,726 | -188 | -4,914 | -4,394 | 12% |
| Administrative expenses | -562 | -17 | -579 | -507 | 14% |
| Share of profit after tax, associates | 40 | - | 40 | 57 | -30% |
| Operating profit (EBIT) | 2,162 | -148 | 2,014 | 1,588 | 27% |
| EBIT margin | 20.2% | -32.1% | 18.1% | 16.7% |
Demant – Annual Report 2023
18 H2 (DKK million)
| H2 (DKK million) | Hearing Healthcare | Communications | Group 2023 | Group 2022 | Group growth |
|---|---|---|---|---|---|
| Revenue | 10,907 | 381 | 11,288 | 10,208 | 11% |
| Production costs | -2,604 | -313 | -2,917 | -2,622 | 11% |
| Gross profit | 8,303 | 68 | 8,371 | 7,586 | 10% |
| Gross margin | 76.1% | 17.8% | 74.2% | 74.3% | |
| R&D costs | -619 | -85 | -704 | -663 | 6% |
| Distribution costs | -4,828 | -175 | -5,003 | -4,838 | 3% |
| Administrative expenses | -540 | -19 | -559 | -531 | 5% |
| Share of profit after tax, associates | 28 | 1 | 29 | 65 | -55% |
| Operating profit (EBIT) | 2,344 | -210 | 2,134 | 1,619 | 32% |
| EBIT margin | 21.5% | -54.9% | 18.9% | 15.9% |
Demant – Annual Report 2023
Introduction
As a result of the decision to discontinue the Hearing Implants business, this former business area is recognised as a discontinued operation. As announced on 5 February 2024, the Group has decided to undertake a review of strategic options for Communications, but for 2023, the business is recognised as a separate business segment and as part of the Group’s continuing operations.
For detailed financial reviews of our Hearing Healthcare and Communications segments, please refer to page 27 and 37, respectively.
Revenue
For the full year, Group revenue amounted to DKK 22,443 million, corresponding to a growth rate of 15% in local currencies. Organic growth was 12%, which is above our initial expectations but within the most recent organic growth guidance of 12-13% for 2023. Acquisitive growth was 3%, and exchange rates had an impact on revenue of -1%, which includes the effect of exchange rate hedging. Total reported growth for 2023 was 14%.
Revenue for H2 amounted to DKK 11,288 million, corresponding to a growth rate of 13% in local currencies. Organic growth was 11%, which was entirely driven by Hearing Healthcare, and growth from acquisitions was 2%. Exchange rates negatively impacted revenue by 3%, and total reported growth for H2 was 11%.
In terms of geography, Europe saw good organic growth in H2 driven by the UK and Germany, the latter being supported by acquisitions. Organic growth in France was slightly negative, as the market continued to normalise following the initial boost in demand from the hearing healthcare reform implemented in 2021. North America saw very strong organic growth thanks to both the US, in part helped by low comparative figures, and Canada, but exchange rate effects were negative.
Growth rates by business segment
| H1 2023 | H2 2023 | FY 2023 | |
|---|---|---|---|
| Hearing Healthcare | |||
| Organic | 15% | 13% | 14% |
| Acquisitions | 4% | 2% | 3% |
| Local currencies | 19% | 15% | 17% |
| FX | 1% | -3% | -1% |
| Total | 20% | 12% | 16% |
| Communications | |||
| Organic | -15% | -22% | -19% |
| Acquisitions | 0% | 0% | 0% |
| Local currencies | -15% | -22% | -19% |
| FX | -1% | -3% | -2% |
| Total | -16% | -25% | -21% |
| Group | |||
| Organic | 13% | 11% | 12% |
| Acquisitions | 4% | 2% | 3% |
| Local currencies | 17% | 13% | 15% |
| FX | 1% | -3% | -1% |
| Total | 18% | 11% | 14% |
HEARING HEALTHCARE
21,601 DKK MILLION (+16%)
COMMUNICATIONS
842 DKK MILLION (-21%)
GROUP REVENUE
22,443 DKK MILLION (+14%)
Demant – Annual Report 2023
19
In Asia, several markets saw very strong organic growth in H2 and Japan delivered good contribution to growth. Organic growth in China was particularly strong in Q4, supported by softer comparative figures as a result of the coronavirus situation in 2022. Despite delivering growth, performance in China remained below our original expectations. Revenue growth in the region was negatively impacted by exchange rate effects. We saw solid organic growth in both the Pacific region and in our Rest of world region, the latter driven primarily by strong performance in several markets in South America.
Five-year gross profit (DKK million)
2019-2020 figures have not been restated to reflect the discontinuation of Hearing Implants, but have been adjusted for one-offs.
| 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|
| 11,325 | 10,340 | 13,458 | 14,669 | 16,544 |
Gross profit
The Group’s gross profit increased by 13% to DKK 16,544 million in 2023, corresponding to a gross margin of 73.7%. This is a decrease of 0.7 percentage point compared to 2022, primarily due to exchange rate effects in H1 and a significant decline in the gross margin in Communications. In H2, the Group’s gross profit amounted to DKK 8,371 million, corresponding to an increase of 10% compared to H2 2022 and resulting in a gross margin of 74.2%, a decline of 0.1 percentage point. While the gross margin improved compared to H1, we continued to see a significant dilution in Communications due to promotional activities and, in particular, to our decision to wind down our Gaming activities.
Operating expenses (OPEX)
For the full year, OPEX increased by 10% in local currencies of which 6 percentage points relate to organic growth and 4 percent age points to acquisitive growth. In H2, OPEX growth was 7% in local currencies. In organic terms, OPEX increased by 3%, reflecting ongoing investments in Hearing Healthcare, as we continued to focus on R&D to drive innovation and ensure continuous technological leadership. In terms of business segments, OPEX growth in Hearing Healthcare was somewhat offset by significant cost cutting measures in Communications following previously announced redundancies. In H2, the Group saw an impact of 4% on OPEX from acquisitions related to Hearing Care and Diagnostics, while exchange rate effects were -3%.
Revenue by geographic region
| Change (DKK million) | H2 2023 | H2 2022 | DKK | LCY | Org. |
|---|---|---|---|---|---|
| Europe | 4,609 | 4,092 | 13% | 12% | 8% |
| North America | 4,664 | 4,203 | 11% | 15% | 15% |
| Asia | 1,142 | 1,063 | 7% | 18% | 16% |
| Pacific region | 550 | 550 | 0% | 7% | 7% |
| Rest of world | 323 | 300 | 8% | 9% | 8% |
| Total | 11,288 | 10,208 | 11% | 13% | 11% |
OPEX by function
| Change (DKK million) | H2 2023 | H2 2022 | DKK | LCY | Org. |
|---|---|---|---|---|---|
| R&D costs | 704 | 663 | 6% | 7% | 6% |
| Distribution costs | 5,003 | 4,838 | 3% | 7% | 3% |
| Administrative expenses | 559 | 531 | 5% | 11% | 3% |
| Total | 6,266 | 6,032 | 4% | 7% | 3% |
Revenue by geographic region
| H2 2023 |
|---|
| Europe |
| 41% |
| North America |
| 41% |
| Asia |
| 10% |
| Pacific region |
| 5% |
| Rest of world |
| 3% |
Demant – Annual Report 2023
20
Five-year OPEX (DKK million)
2019-2020 figures have not been restated to reflect the discontinuation of Hearing Implants, but have been adjusted for one-offs.
Operating profit (EBIT)
The Group’s reported EBIT amounted to DKK 4,148 million in 2023, which corresponds to an EBIT margin of 18.5%. In H2, EBIT was DKK 2,134 million, an increase of 32%. Hearing Healthcare contributed DKK 2,344 million and Communications DKK -210 million. The resulting EBIT margin for H2 was 18.9%, which is an increase of 3.0 percentage points. The significant increase in EBIT margin was entirely driven by Hearing Healthcare, particularly due to material operating leverage in Hearing Aids, whereas Communications delivered below expectations and was a drag on the Group’s profitability. Exchange rates had a slightly positive impact on EBIT.
As a consequence of our acquisition strategy, we realised certain fair value adjustments of non-controlling interests in step acquisitions, contingent considerations etc. These totalled a net positive fair value adjustment of DKK 32 million for the full year (DKK 23 million in 2022). Please refer to Note 6.1 for more details.
Financial items
For the full year, net financial items amounted to DKK -754 million, which is a very significant increase of DKK 474 million compared to 2022. The increase primarily relates to higher interest rates paid. In H2, net financial items totalled DKK -395 million, an increase of DKK 210 million versus H2 2022.
Profit for the year – continuing operations
Reported profit before tax from continuing operations in 2023 amounted to DKK 3,394 million, which is an increase of 16% compared to 2022. Tax amounted to DKK 839 million. The resulting effective tax rate was 24.7%, which is in line with our guidance of 24-25%. For H2, profit before tax from continuing operations was DKK 1,739 million and tax amounted to DKK 442 million.
For the full year, reported net profit for continuing operations was DKK 2,555 million, or an increase of 12%, resulting in earnings per share (EPS) of DKK 11.44. In H2, reported net profit for continuing operations was DKK 1,297 million, which corresponds to an EPS of DKK 5.81.
Discontinued operations
Profit after tax from discontinued operations amounted to DKK -757 million for the full year.Of this amount, DKK -638 million relates to non-cash write-downs of assets related to the cochlear implants business, which was recognised in H1. For H2, profit after tax from discontinued operations was DKK -81 million, which is in line with our expectations.
Profit for the year
For the Group as a whole, profit after tax in 2023 amounted to DKK 1,798 million, corresponding to an EPS of DKK 8.04. In H2, net profit after tax was DKK 1,216 million, with an EPS of DKK 5.44. At the annual general meeting, the Board of Directors will propose that the entire profit for the year be retained and transferred to the company’s reserves.
Earnings per share (EPS) for continuing operations (DKK per share)
2019-2020 figures have not been restated to reflect the discontinuation of Hearing Implants.
 (tonnes CO2e) | 30,469 | 35,862 | -15% |
| CEO remuneration ratio | 48 | 39 | 9 |
| Gender diversity, Board of Directors (women/men) | 40/60% | 40/60% | - |
| Gender diversity, all managers (women/men) | 47/53% | 44/56% | 3 p.p. |
| Gender diversity, top-level management | 27/73% | 23/77% | 4 p.p. |
| Gender diversity, top-level management teams (on/off target) | 79/21% | 71/29% | 8 p.p. |
1 Figures in 2022 were restated in order recognise new acquisitions.
2 Shareholder-elected members.
Group financial review
Demant – Annual Report 2023 24
Financial outlook
- Organic growth: 4-8%
- EBIT: DKK 4,600-5,000 million
- Share buy-backs: More than DKK 2,000 million
The outlook is based on a number of key assumptions as described below:
- We expect the unit growth rate in the global hearing aid market in 2024 to be in line with the structural growth rate of 4-6%. We expect a negative impact of ASP declines around the normal level of 1-2% due to mix effects.
- We expect the cash allocated to bolt-on acquisitions in 2024 to be higher than normal due to the postponement of some acquisitions from 2023 and a good pipeline of attractive opportunities.
- Communications will be recognised as part of discontinued operations. We expect profit after tax related to Communications to be negative by DKK 100-150 million. This relates entirely to an expected full-year operating loss and does not include any financial impact related to the review of strategic options.
- The divestment of our cochlear implants business is expected to close in H1 2024. Our bone anchored hearing systems business will remain with the Group for now, pending a review of our strategic options. For the full year 2024, we expect profit after tax related to Hearing Implants to be around DKK 0 million.
Medium- to long-term outlook
Outlook for 2024
For modelling purposes, we provide further assumptions for 2024 below:
| Acquisitive growth | 1% based on revenue from acquisitions completed as of 4 February 2024 |
| FX growth | -1% based on exchange rates as of 4 February 2024 and including the impact of hedging |
| Effective tax rate | Around 24% |
| Profit after tax from discontinued operations | Negative by DKK 100-150 million, entirely related to Communications, with profit after tax for Hearing Implants to be around DKK 0 million |
| Revenue growth | 7-10% p.a. in local currencies with organic growth of 6-8% p.a. and acquisitive growth of 1-2% p.a. |
| EBIT margin | For Hearing Healthcare, aim for incremental EBIT margin expansion over time, and for Communications*, aim for transformative EBIT margin expansion |
| CAPEX | Around 4% of the Group's revenue (investments in tangible and intangible assets, excluding customer loans and acquisitions) |
| Gearing | Gearing multiple (NIBD/EBITDA) of 2.0-2.5 |
| Capital allocation | Subject to our gearing target, we will return any excess free cash flow after acquisitions to our shareholders in the form of share buy-backs |
And for our business segments, we have the following medium- to long-term outlook:
- Hearing Healthcare: Aim to gain market shares in organic terms in all our business areas, translating into an organic growth rate of at least 5% p.a.
- Communications*: Aim to grow revenue in organic terms at least in line with the market growth rate, corresponding to an organic growth rate of at least 12% p.a.
Our outlook for 2024 for continuing operations (Hearing Healthcare) is summarised in the table below:
*The Group has decided to undertake a review of strategic options for its Communications business.
Demant – Annual Report 2023 25
Despite living with a disease that causes both visual and hearing impairment that worsens over time, my motto is: Disability is not inability. Peter, pensioner and ironman
Demant – Annual Report 2023 26
Our business
- Hearing Healthcare
- Hearing Aids
- Hearing Care
- Diagnostics
- Communications
- EPOS
Demant – Annual Report 2023 27
Financial review
Hearing Healthcare
Demant – Annual Report 2023 27
GROWTH 17% IN LOCAL CURRENCIES
REVENUE 21,601 DKK MILLION
Income statement
| (DKK million) | H1 2023 | H1 2022 | Growth | H2 2023 | H2 2022 | Growth | FY 2023 | FY 2022 | Growth |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 10,694 | 8,945 | 20% | 10,907 | 9,700 | 12% | 21,601 | 18,645 | 16% |
| Production costs | -2,677 | -2,115 | 27% | -2,604 | -2,338 | 11% | -5,281 | -4,453 | 19% |
| Gross profit | 8,017 | 6,830 | 17% | 8,303 | 7,362 | 13% | 16,320 | 14,192 | 15% |
| Gross margin | 75.0% | 76.4% | 76.1% | 75.9% | 75.6% | 76.1% | |||
| R&D costs | -607 | -534 | 14% | -619 | -549 | 13% | -1,226 | -1,083 | 13% |
| Distribution costs | -4,726 | -4,170 | 13% | -4,828 | -4,617 | 5% | -9,554 | -8,787 | 9% |
| Administrative expenses | -562 | -488 | 15% | -540 | -513 | 5% | -1,102 | -1,001 | 10% |
| Share of profit after tax, associates | 40 | 57 | -30% | 28 | 65 | -57% | 68 | 122 | -44% |
| Operating profit (EBIT) | 2,162 | 1,695 | 28% | 2,344 | 1,748 | 34% | 4,506 | 3,443 | 31% |
| EBIT margin | 20.2% | 18.9% | 21.5% | 18.0% | 20.9% | 18.5% |
Revenue by business area
| (DKK million) | H1 2023 | H1 2022 | Growth | H2 2023 | H2 2022 | Growth | FY 2023 | FY 2022 | Growth |
|---|---|---|---|---|---|---|---|---|---|
| Hearing Aids, total sales | 6,088 | 4,842 | 26% | 6,024 | 5,149 | 17% | 12,112 | 9,991 | 21% |
| Hearing Aids, internal sales | -1,100 | -895 | 23% | -976 | -865 | 13% | -2,076 | -1,760 | 18% |
| Hearing Aids, external sales | 4,988 | 3,947 | 26% | 5,048 | 4,284 | 18% | 10,036 | 8,231 | 22% |
| Hearing Care | 4,508 | 3,932 | 15% | 4,575 | 4,191 | 9% | 9,083 | 8,123 | 12% |
| Diagnostics | 1,198 | 1,066 | 12% | 1,284 | 1,225 | 5% | 2,482 | 2,291 | 8% |
| Hearing Healthcare | 10,694 | 8,945 | 20% | 10,907 | 9,700 | 12% | 21,601 | 18,645 | 16% |
Demant – Annual Report 2023 28
Revenue
In 2023, our Hearing Healthcare segment generated revenue of DKK 21,601 million. This corresponds to a growth rate of 17% in local currencies, with organic growth accounting for 14 percentage points and acquisitive growth for 3 percentage points. Exchange rate effects reduced growth by 1 percentage point, and total reported growth was thus 16%. In H2, revenue amounted to DKK 10,907 million, corresponding to growth of 15% in local currencies. The organic growth of 13% was driven primarily by excellent performance in Hearing Aids, although both Hearing Care and Diagnostics also saw good performance. Driven by acquisitions in Hearing Care and Diagnostics, acquisitive growth added 2 percentage points to growth in H2, while negative exchange rate effects reduced growth by 3 percentage points. Total reported growth was 12% for the period.
Gross profit
Our gross profit increased by 15% in 2023 to DKK 16,320 million, corresponding to a gross margin of 75.6%. In H2, the gross profit increased by 13%, and the gross margin was 76.1%, an increase of 0.2 percentage point compared to H2 2022. The gross margin was negatively impacted by an increasing share of rechargeable units, but this was more than offset by increasing ASPs, mostly related to geography mix changes. Exchange rate effects had a slightly positive impact on the gross margin.
Growth rates
| H1 2023 | H2 2023 | FY 2023 | |
|---|---|---|---|
| Hearing Aids, external sales | |||
| Organic | 24% | 20% | 22% |
| Acquisitions | -1% | -1% | -1% |
| Local currencies | 23% | 19% | 21% |
| FX | 3% | -1% | 1% |
| Total | 26% | 18% | 22% |
| Hearing Care | |||
| Organic | 8% | 7% | 8% |
| Acquisitions | 8% | 6% | 7% |
| Local currencies | 16% | 13% | 15% |
| FX | -2% | -4% | -3% |
| Total | 15% | 9% | 12% |
| Diagnostics | |||
| Organic | 6% | 7% | 7% |
| Acquisitions | 7% | 2% | 4% |
| Local currencies | 13% | 10% | 11% |
| FX | -1% | -5% | -3% |
| Total | 12% | 5% | 8% |
| Hearing Healthcare | |||
| Organic | 15% | 13% | 14% |
| Acquisitions | 4% | 2% | 3% |
| Local currencies | 19% | 15% | 17% |
| FX | 1% | -3% | -1% |
| Total | 20% | 12% | 16% |
Demant – Annual Report 2023 29
Operating expenses (OPEX)
For the full year, OPEX amounted to DKK 11,882 million with an increase of 12% in local currencies. In H2, OPEX was DKK 5,988 million with growth of 9% in local currencies, with organic growth accounting for 5 percentage points and acquisitive growth for 4 percentage points. Organic growth was highest in R&D costs, as we continued to fuel further investments to deliver future growth. Organic growth was driven by balanced growth in Hearing Aids and Diagnostics, reflecting higher activity levels.# Demant – Annual Report 2023
Insights and highlights
Our business
Corporate information
Financial report
Acquisitive growth was primarily related to Hearing Care, particularly in Germany. Exchange rate effects reduced growth in OPEX by 4 percentage points.
Operating profit (EBIT)
In 2023, EBIT amounted to DKK 4,506 million, corresponding to an EBIT margin of 20.9%. In H2, EBIT amounted to DKK 2,344 million, corresponding to an EBIT margin of 21.5%. This is an increase of 3.5 percentage points versus H2 2022. The margin increase is primarily due to material operating leverage in Hearing Aids, but was also helped by increased profitability in Hearing Care, which more than offset lower profitability in Diagnostics. Exchange rate effects were slightly positive.
Full-year OPEX (DKK million)
2019-2020 figures have not been restated to reflect the discontinuation of Hearing Implants, but have been adjusted for one-offs.
Half-year EBIT (DKK million)
| H2 2021 | H1 2022 | H2 2022 | H1 2023 | H2 2023 | |
|---|---|---|---|---|---|
| EBIT (DKK million) | 1,695 | 1,748 | 2,162 | 2,344 | 2,344 |
Full-year EBIT (DKK million)
2019-2020 figures have not been restated to reflect the discontinuation of Hearing Implants, but have been adjusted for one-offs. EBIT for 2019 was negatively impacted by DKK 550 million as a result of the IT incident.
| 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|
| EBIT (DKK million) | 9,392 | 8,524 | 9,381 | 10,871 | 11,882 |
OPEX by function
| H2 2023 | H2 2022 | Change (DKK million) | DKK | LCY | Org. | |
|---|---|---|---|---|---|---|
| R&D costs | 619 | 549 | 13% | 13% | 13% | 13% |
| Distribution costs | 4,829 | 4,617 | 5% | 8% | 4% | |
| Administrative expenses | 540 | 513 | 5% | 11% | 4% | |
| Total | 5,988 | 5,679 | 5% | 9% | 5% |
Core SDG impact
Based on the estimated lifetime of hearing aids and fittings made by the Group in 2023, we facilitated 13.3 million years of improved quality of life in 2023.
Key 2023 sustainability results
New handles for hearing aid filters made from 52% less material with no residue plastic as well as connectivity packaging emitting 78% less CO2e.
Hearing Healthcare
REVENUE
12,112 DKK MILLION
GROWTH
21% IN LOCAL CURRENCIES
Oticon Intent TM
Hearing Aids
Market developments
Based on available market statistics, covering around two-thirds of the market, and on our own assumptions, we estimate that the global hearing aid market saw unit growth of around 7% in 2023. Although slightly above the structural growth rate of 4-6%, it is primarily due to the softer comparative base in H2 2022, which was affected by the macroeconomic environment, and if we compare to pre-pandemic levels, growth in the global hearing aid market was 5% p.a., which is in line with the structural growth rate. Overall, we consider the hearing aid market to have largely normalised in 2023 after several years of unusual volatility, mostly related to the coronavirus pandemic. Growth in 2023 was primarily driven by North America, in particular the US commercial market, which had seen significant weakness in H2 2022. We estimate that geography mix changes resulted in slight growth in the market’s ASP for the year. For Q4, we estimate that global market unit growth was 8%. Compared to pre-pandemic levels, growth decelerated slightly, although this was primarily a reflection of lower growth in government channels and phasing in distributor markets. Compared to the same period last year, we estimate that growth in Europe was 2% in Q4. In France, growth was slightly positive, showing signs of stabilisation following fluctuations related to the hearing healthcare reform in 2021. In the UK, market growth was slightly negative, as growth in the NHS declined following a very strong Q3, but growth in the UK private market was positive. In Germany, growth was solid in Q4, supported by lower comparative figures, although growth for the full year was flat due to negative growth in H1. Growth in North America accelerated to 16% in Q4. In the US, the commercial part of the market grew by 19%, as the US saw a particularly negative impact of macroeconomic uncertainty in Q4 2022. Despite high unit growth rates in Q4, we continued to see negative mix effects, with managed care and large chains growing more than the independent part of the market. Growth in Veterans Affairs (VA) was 4%, and in Canada, growth was strong throughout the year. Looking beyond North America and Europe, we estimate that in Q4, unit growth in Australia was slightly negative. Although momentum in China continued to be slower than originally expected, growth was very strong in Q4, as the coronavirus situation significantly impacted the activity level in the same period last year. We estimate that several other emerging markets saw strong growth, however distributor-driven markets declined in the period.
Business update
In 2023, total revenue in Hearing Aids amounted to DKK 12,112 million, corresponding to an organic growth rate of 21% (Q4: 16%). Internal revenue from sales to our Hearing Care business accounted for 17% of total revenue. Our commentary below focuses on total revenue, including revenue from sales through our own retail clinics, and thus covers our total wholesale activities. However, internal revenue is eliminated from the reported revenue for our Hearing Healthcare segment and thus for the Group. Hearing Aids delivered excellent growth in 2023 as a result of broad-based commercial momentum across geographies and channels and the successful launches of new premium hearing aids in Q1. Furthermore, we saw strong additional sales to a large US customer. With growth in Hearing Aids significantly outpacing the market growth rate, the business area gained important market share in 2023. Similar to H1, growth in H2 was mainly unit-driven, although the ASP also contributed positively, particularly in Q4. In H2, unit and ASP growth was 11% and 7%, respectively. The very positive ASP development in H2 is due to changes in the channel and geography mix and our success in the premium price segment, which drove positive product mix effects. In Q4, growth was 16% in local currencies, all of which was organic growth.
Hearing Aids (DKK million)
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | |
|---|---|---|---|---|---|
| Revenue | 3,048 | 3,040 | 2,924 | 3,100 | 12,112 |
| Growth | |||||
| Organic | 26% | 20% | 21% | 16% | 21% |
| Acquisitions | 0% | 0% | 0% | 0% | 0% |
| Local currencies | 26% | 20% | 21% | 16% | 21% |
| FX | 4% | 2% | -2% | -1% | 0% |
| Total | 30% | 22% | 20% | 15% | 21% |
Estimated hearing aid market unit growth in 2023 by region (vs. 2022)
| Q1 | Q2 | Q3 | Q4 | FY | |
|---|---|---|---|---|---|
| Europe | 4% | -4% | 7% | 2% | 2% |
| North America | 9% | 5% | 11% | 16% | 10% |
| US (commercial) | 9% | 5% | 12% | 19% | 11% |
| US (VA) | 9% | 4% | 4% | 4% | 5% |
| Rest of world | 9% | 10% | 7% | 10% | 9% |
| Global | 7% | 3% | 8% | 8% | 7% |
| CAGR vs. 2019 | 5% | 5% | 5% | 4% | 5% |
Growth thus continued at a very high level but decelerated slightly compared to previous quarters, which is primarily due to the annualisation of increased sales to a large US customer, but also to lower growth with certain other large accounts. In terms of geographies, North America delivered strong growth in Q4 driven by continuously strong momentum across channels in the US. In the important VA channel, our unit market share ended at 20.3%, and throughout the year, we saw strong progress in this channel. Sales in Canada were also very strong in Q4. In Europe, growth was strong, particularly in France, where the growth rate was well above the market growth rate, but many of our other markets, including Germany also saw good performance in Q4. Sales growth in Asia was very strong in Q4, in part due to low comparative figures. China saw significant growth, but only due to sales in 2022 being negatively impacted by the coronavirus situation. In the Pacific region, growth was strong thanks to Australia, which more than offset weak performance in New Zealand. In our Rest of world region, mostly comprising emerging markets, we saw negative growth due to lower sales in distributor markets.
Product update
During February, we will start the roll-out of new families of premium hearing aids in our Oticon, Bernafon and Philips brands. This includes our flagship hearing aid, Oticon Intent™, which is based on the new Sirius™ platform and is a further advancement of our unique BrainHearing™ philosophy. Oticon Intent™ is the first hearing aid to introduce 4D Sensor technology, enabling the hearing aid to interpret the user’s listening intentions and further improve speech understanding in noisy environments. In addition, Oticon Intent™ features our new, second-generation Deep Neural Network (DNN) and supports Bluetooth LE Audio, which will be the future of low-energy connectivity. The new hearing aids will be available in four price points in a rechargeable miniRITE style and will be launched in Q1 2024.
Growth in units and ASP (LCY)
| H1 2023 | H2 2023 | FY 2023 | |
|---|---|---|---|
| Units | 18% | 11% | 15% |
| ASP | 4% | 7% | 6% |
| Total | 23% | 18% | 21% |
Revenue and growth (DKK million)
| FY 2023 | FY 2022 | Org. | Acq. | LCY | FX | Rep. | Total revenue | |
|---|---|---|---|---|---|---|---|---|
| Total revenue | 12,112 | 9,991 | 21% | 0% | 21% | 0% | 21% | 21% |
| Internal sales to Hearing Care* | 2,076 | 1,760 | 14% | 6% | 20% | -2% | 18% | 18% |
| Sales to external customers | 10,036 | 8,231 | 22% | -1% | 21% | 1% | 22% | 22% |
Growth (DKK million)
| Q4 2023 | Q4 2022 | Org. | Acq. | LCY | FX | Rep. | |
|---|---|---|---|---|---|---|---|
| Total revenue | 3,100 | 2,703 | 16% | 0% | 16% | -1% | 15% |
| Internal sales to Hearing Care* | 482 | 395 | 18% | 6% | 24% | -2% | 22% |
| Sales to external customers | 2,618 | 2,308 | 16% | -1% | 15% | -1% | 13% |
*Revenue from internal sales to Hearing Care is eliminated from the reported revenue for Hearing Healthcare and for the Group, i.e. we only include revenue from external customers.# Hearing Care
Demant – Annual Report 2023 33
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Core SDG impact
We offer people over 60 years free yearly hearing assessments and increased the number by 5% this year.
Key 2023 sustainability result
As part of the global Campaign for Better Hearing, we donated 466 hearing aids.
Demant – Annual Report 2023 33
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Hearing Healthcare
REVENUE 9,083 DKK MILLION
GROWTH 15% IN LOCAL CURRENCIES
Demant – Annual Report 2023 34
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Market developments
Please refer to the Hearing Aids section above for details on developments in the hearing aid market in 2023, but note that our Hearing Care business is not present in many emerging markets or in government channels. As a result, we estimate that the growth rate in the part of the market where Hearing Care is active has been slightly below the global unit market growth rate of around 7%.
Business update
In 2023, revenue in Hearing Care amounted to DKK 9,083 million. Organic growth was 8% (Q4: 8%) and acquisitive growth was 7% (Q4: 6%), driven in particular by the acquisition in 2022 of Sheng Wang in China and by a high level of acquisitions in Germany in line with our expansion strategy there. Overall for 2023, organic growth was driven by strong growth in most of our medium-sized markets, while our two biggest markets grew at a slower pace (the US) and declined slightly (France). Helped by a soft comparative base in H2 2022, the US saw accelerating growth in H2 2023 following a slow start to the year. In France, growth momentum was weak throughout the year, even though we grew slightly more than the French market, which was impacted by normalisation effects following the initial demand boost from the 2021 refom. After seeing activity levels slowing down in H2 2022 due to macroeconomic uncertainties, we generally saw solid activity levels across our clinic network in 2023, reflecting the normalisation of the global hearing aid market after several years of elevated uncertainty. Organic growth was predominantly driven by units, but we also saw a slight tailwind from an increasing ASP in H2 due to a positive product mix, which more than offset negative geography mix changes. In Q4, organic growth was 8%, reflecting continuing solid business momentum in most medium-sized markets, but we also saw accelerating growth in the US, whereas France remained weak. Regionally, Europe was the largest absolute growth driver in Q4 with particularly strong performances in Poland, the UK and Spain. France saw slightly negative growth in Q4. In North America, we saw positive organic growth in both the US and Canada. The US saw solid organic growth, although at a level below the market growth rate, as the market was fuelled by growth in managed care. While we continue to work with some managed care providers, we have reduced the share of units originating from these activities and instead increased our focus on private pay, which has led to higher profitability in the US. Australia saw strong growth in Q4, and in China, Sheng Wang delivered very strong double-digit organic growth in Q4, driven mostly by low comparative figures, as revenue remained below original expectations due to the weak consumer sentiment.
| Hearing Care (DKK million) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 |
|---|---|---|---|---|---|
| Revenue | 2,218 | 2,290 | 2,152 | 2,423 | 9,083 |
| Growth | |||||
| Organic | 9% | 7% | 6% | 8% | 8% |
| Acquisitions | 8% | 8% | 6% | 6% | 7% |
| Local currencies | 17% | 15% | 12% | 14% | 15% |
| FX | 0% | -3% | -5% | -3% | -3% |
| Total | 17% | 13% | 7% | 12% | 12% |
Demant – Annual Report 2023 35
Diagnostics
Demant – Annual Report 2023 35
Insights and highlights
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Core SDG impact
Every year, our technology helps screen and diagnose over 200 million people with suspected hearing loss and screen over 20 million newborns.
Key 2023 sustainability result
A new, qualitative, diagnostic test will help people with hearing loss hear better in noisy environments, enabling them to engage in conversations.
Demant – Annual Report 2023 36
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Market developments
We estimate that the market for diagnostic instruments and services saw growth in 2023 in line with the structural market growth rate of 3-5% per year. Overall, the market has proved resilient in recent years, and compared to pre-pandemic levels in 2019, growth has developed in line with the structural growth rate.
Business update
Diagnostics generated revenue of DKK 2,482 million in 2023 with organic growth of 7% (Q4: 8%) and acquisitive growth of 4% (Q4: 3%), relating mostly to the acquisition in 2022 of Italy-based Inventis Srl. Despite high comparative figures related to a very strong performance in 2022, organic growth was slightly above the estimated market growth rate in 2023. Our Diagnostics business thus cemented its market-leading position, building on strong innovation, a complete product portfolio in several brands and global distribution. Overall, growth in 2023 was driven by strong performance in Europe, whereas adverse market developments in China, where Diagnostics has an above-Group revenue exposure, were a drag on growth, particularly in H2. In Q4, organic growth was 8%, a slight acceleration compared to the level in Q3, and growth was driven by solid momentum in our two largest regions, North America and Europe. In North America, both the US and Canada saw strong organic growth, helped by good momentum in e3 Diagnostics, our leading provider of diagnostic instruments and services in the US. Driven in particular by the UK and Italy, growth in Europe was strong, but it was somewhat offset by Poland where growth was negative due to very high comparative figures from Q4 2022. Similar to Q3, momentum in China in Q4 continued to be negatively impacted by general market weakness, and growth remained negative and below our original expectations.
Product update
In October 2023, our Interacoustics brand introduced a completely new hearing test, the Audible Contrast Threshold™ (ACT) test. ACT is designed to go beyond the traditional audiogram and help the hearing care professional in a fast and accurate manner quantify a person’s real-world ability to hear in noise. This will allow for more targeted counselling and expectation-setting regarding the outcome of the hearing aid fitting and thus make it possible to offer a new standard of care in hearing aid clinics.
| Diagnostics (DKK million) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 |
|---|---|---|---|---|---|
| Revenue | 566 | 632 | 625 | 659 | 2,482 |
| Growth | |||||
| Organic | 4% | 9% | 6% | 8% | 7% |
| Acquisitions | 7% | 6% | 2% | 3% | 4% |
| Local currencies | 11% | 15% | 8% | 11% | 11% |
| FX | 2% | -3% | -6% | -3% | -3% |
| Total | 13% | 12% | 2% | 8% | 8% |
Demant – Annual Report 2023 37
Communications
Demant – Annual Report 2023 37
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Core SDG impact
EPOS audio and video solutions help prevent stress and listening fatigue, which can be caused by imperfect audio experiences, and also help improve concentration and the ability to focus for longer.
Key 2023 sustainability result
EPOS initiated life cycle assessments of selected products, and EPOS headquarters in Ballerup, Denmark, obtained the ISO14001 certification.
Demant – Annual Report 2023 37
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EPOS
Demant – Annual Report 2023 38
Financial review
| Income statement (DKK million) | H1 2023 | H1 2022 | Growth | H2 2023 | H2 2022 | Growth | FY 2023 | FY 2022 | Growth |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 461 | 552 | -16% | 381 | 508 | -25% | 842 | 1,060 | -21% |
| Production costs | -305 | -299 | 2% | -313 | -284 | 10% | -618 | -583 | 6% |
| Gross profit | 156 | 253 | -38% | 68 | 224 | -70% | 224 | 477 | -53% |
| Gross margin | 33.8% | 45.9% | 17.8% | 43.9% | 26.6% | 45.0% | |||
| R&D costs | -99 | -117 | -15% | -85 | -114 | -25% | -184 | -231 | -20% |
| Distribution costs | -188 | -224 | -16% | -175 | -221 | -21% | -363 | -445 | -18% |
| Administrative expenses | -17 | -19 | -11% | -19 | -18 | 6% | -36 | -37 | -3% |
| Share of profit after tax, associates | - | - | n.a. | 1 | - | n.a. | 1 | - | n.a. |
| Operating profit (EBIT) | -148 | -107 | n.a. | -210 | -129 | n.a. | -358 | -236 | n.a. |
| EBIT margin | -32.1% | -19.4% | -54.9% | -25.4% | -42.5% | -22.3% |
REVENUE 842 DKK MILLION
GROWTH -19% IN LOCAL CURRENCIES
Demant – Annual Report 2023 39
Revenue
In 2023, revenue in Communications amounted to DKK 842 million. This corresponds to -19% growth in local currencies, all of which was organic. The decline in revenue is due to continuously weak markets for both gaming headsets and enterprise solutions, as macroeconomic uncertainty weighed on consumers, and we continued to see buyer hesitation within enterprise solutions. In August, we also took the decision to sharpen our focus on our Enterprise Solutions business and to wind down our Gaming business. In H2, revenue reached DKK 381 million, corresponding to an organic growth rate of -22%. Growth was negative across all regions, with both Gaming and Enterprise Solutions delivering negative growth, and despite our efforts to improve the business, we saw a challenging end to the year.Gross profit For the full year, gross profit was DKK 224 million, and the gross margin was 26.6%, a significant decline of 18.4 percentage points compared to 2022. The decline was particularly steep in H2 where the gross profit was DKK 68 million, resulting in a gross margin of 17.8%. The decline compared to H2 2022 of 26.1 percentage points is the result of our decision to wind down our Gaming activities, where remaining inventories were sold at very low prices, but also the result of weaker-than-expected performance by Enterprise Solutions.
Operating expenses (OPEX) For 2023 as a whole, OPEX amounted to DKK 583 million, which is a decrease of 18% compared to 2022. In response to weak markets, we have implemented significant cost reduction measures, which have lowered our OPEX throughout the year and will also lead to lower costs in 2024 when the workforce reductions take full effect. For H2 specifically, OPEX amounted to DKK 279 million, corresponding to a decrease of 21%. Savings were primarily realised on distribution costs following the earlier announced redundancies as well as on R&D costs. Administrative expenses increased slightly.
OPEX by half-year (DKK million)
| H2 2021 | H1 2022 | H2 2022 | H1 2023 | H2 2023 |
|---|---|---|---|---|
| 349 | 360 | 353 | 304 | 279 |
EBIT by half-year (DKK million)
| H2 2021 | H1 2022 | H2 2022 | H1 2023 | H2 2023 |
|---|---|---|---|---|
| -78 | -107 | -129 | -148 | -210 |
Operating profit (EBIT) EBIT for the full year amounted to DKK -358 million, corresponding to an EBIT margin of -42.5%, a significant decline compared to 2022 and significantly below our initial plans. For H2, EBIT amounted to DKK -210 million, corresponding to an EBIT margin of -54.9%. Low revenue negatively impacted the scalability of our business in Enterprise Solutions, but profitability was also impacted by the winding down of our Gaming activities, which negatively impacted EBIT by approx. DKK 60 million.
OPEX by function – Communications Change (DKK million)
| H2 2023 | H2 2022 | Change (%) | |
|---|---|---|---|
| DKK LCY | |||
| Org. R&D costs | 85 | 114 | -25% |
| Distribution costs | 175 | 221 | -21% |
| Administrative expenses | 19 | 18 | 6% |
| Total | 279 | 353 | -21% |
Market developments
In 2023, growth in the markets for enterprise solutions and gaming headsets was negative. At the beginning of the year, both markets saw tough market conditions and negative growth, and as the year progressed, the gaming market did not improve, and – unexpectedly – we also saw continuously negative growth in enterprise solutions throughout the year and thus a weak end to the year. From a geographical perspective, we estimate that growth was negative in all regions, but less negative in Asia compared to North America and Europe. Despite negative market growth in 2023, we still consider the fundamental growth drivers for enterprise solutions to be intact. However, following weak growth for the last couple of years, growth will come from a lower starting point than originally anticipated.
Business update
Revenue in Communications amounted to DKK 842 million in 2023, corresponding to an organic growth rate of -19% (Q4: -25%). This is substantially below the original plans for the year due to lower-than-expected performance by both Gaming and Enterprise Solutions, which also had a challenging end to the year. On 29 August 2023, Demant announced the decision to gradually wind down its Gaming business following a review of the future growth potential and competitiveness of the business. As a consequence of this decision, we had cleared out most of our inventory of Gaming products at the end of Q4 where organic revenue growth in Gaming declined more than in Enterprise Solutions. In Q4, Enterprise Solutions accounted for approx. 85% of revenue in Communications and organic growth was -18%. As expected, we continued to see hesitation to buy among end-customers, which negatively impacted growth in our Enterprise Solutions business. In terms of geographies, we saw negative growth in all the regions where we operate, although it was most pronounced in North America and Europe. In 2023, we saw continuously negative development in our markets, but following the winding down of our Gaming activities, we have entered 2024 with lower costs and a sharpened focus. The business is now on a path back to profitability, and in the light of this, we have decided to undertake a review of strategic options for the business area and explore whether a different owner may be better positioned to accelerate growth. We expect this review to be completed by the end of H1 2024.
Product update
In Q4, EPOS announced a new strategic agreement with Lenovo to provide high-quality audio solutions for business professionals. Besides inclusion of the EPOS portfolio into Lenovo’s third-party reseller programme, the agreement will entail co-development of future professional audio solutions, which we expect will contribute to growth in 2024.
Communications (DKK million)
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | |
|---|---|---|---|---|---|
| Revenue | 246 | 215 | 196 | 185 | 842 |
| Growth Organic | -15% | -16% | -20% | -25% | -19% |
| Acquisitions | 0% | 0% | 0% | 0% | 0% |
| Local currencies | -15% | -16% | -20% | -25% | -19% |
| FX | -1% | -2% | -4% | -2% | -2% |
| Total | -16% | -17% | -23% | -27% | -21% |
Share capital
As of 31 December 2023, Demant’s nominal share capital was DKK 44,787,888.00 divided into 223,939,440 shares of DKK 0.20 each. All shares are the same class and carry one vote each. The change compared to the year before is due to the cancellation of treasury shares amounting to DKK 1,287,859.00, which was approved at the annual general meeting on 8 March 2023.
The Board of Directors is authorised to increase the company’s share capital by a total nominal value of up to DKK 4,800,000. This increase may consist of no more than DKK 4,800,000 of the share capital with pre-emptive rights for existing shareholders and of no more than DKK 4,800,000 of the share capital without pre-emptive rights for existing shareholders. The increase in the company’s share capital can also be carried out through a combination of share capital with and without pre-emptive rights, but it cannot exceed a total nominal value of DKK 4,800,000. Furthermore, the Board of Directors is authorised to increase the share capital by an additional nominal value of up to DKK 2,500,000 for shares offered to employees. All authorisations have been decided by the annual general meeting and are valid until 1 March 2026.
Ownership
The William Demant Foundation is the majority shareholder in Demant through its investment company William Demant Invest and has previously communicated its intention to maintain an ownership interest of 55-60% of Demant’s share capital. As of 31 December 2023, the William Demant Foundation held – either directly or indirectly – approx. 58% of the share capital, excluding treasury shares. No other shareholders had flagged an ownership interest of 5% or more as of 31 December 2023. Demant had 33,324 individual investors as of 31 December 2023. Excluding shares held by the William Demant Foundation, approx. 40% of the share capital is registered in Denmark and 30% is registered in North America. The remaining 30% of the share capital is split between the remaining geographies but is predominantly registered in Europe. As of 31 December 2023, the company held 3,386,939 treasury shares, corresponding to 1.5% of the share capital.
Share information (DKK 1,000)
| 2023 | 2022 | 2021 | 2020 | 2019 | |
|---|---|---|---|---|---|
| Share capital at 1 January | 46,076 | 48,025 | 48,138 | 49,057 | 50,474 |
| Capital reduction | -1,288 | -1,950 | -113 | -919 | -1,416 |
| Share capital at 31 December | 44,788 | 46,076 | 48,025 | 48,138 | 49,057 |
| Nominal value per share, DKK | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 |
| Total number of shares, thousand | 223,939 | 230,378 | 240,127 | 240,691 | 245,287 |
| Highest share price, DKK | 312.3 | 339.3 | 394.7 | 244.4 | 237.2 |
| Lowest share price, DKK | 190.0 | 173.1 | 219.6 | 132.2 | 160.5 |
| Share price, year-end, DKK | 296.0 | 192.6 | 335.1 | 240.6 | 209.8 |
| Market capitalisation at 31 December, DKK million*) | 65,284 | 42,977 | 77,117 | 57,718 | 50,470 |
| Average daily trading turnover, DKK million*) | 85.6 | 76.2 | 111.0 | 99.8 | 112.4 |
| Average number of shares, million*) | 223.1 | 226.0 | 234.8 | 239.8 | 243.6 |
| Number of shares at 31 December, million*) | 220.5 | 223.2 | 230.1 | 239.9 | 240.6 |
| Number of treasury shares at 31 December, million | 3.4 | 7.2 | 10.0 | 0.8 | 4.7 |
*Excluding treasury shares.
Share price development
The price of Demant shares increased by 53.7% in 2023, and on 31 December 2023, the share price was DKK 296.00 This corresponds to a market capitalisation of DKK 65.3 billion (excluding treasury shares). The average daily trading turnover in 2023 was DKK 86 million. The company is a constituent of the OMX Copenhagen 25 Index (C25), which covers the 25 largest and most frequently traded shares on Nasdaq Copenhagen. The C25 Index increased by 7% during the year.
Capital allocation
The company follows the principles of its capital allocation policy and uses its cash flow from operating activities for value-adding investments and acquisitions. Subject to Demant’s targeted gearing multiple of 2.0-2.5 measured as net interest-bearing debt relative to EBITDA, any excess liquidity is distributed back to shareholders through share buy-backs.# Shareholder information
Until the next annual general meeting in March 2024, the Board of Directors has been authorised to let the company buy back shares at a nominal value of up to 10% of the share capital. The purchase price may not deviate by more than 10% from the price quoted on Nasdaq Copenhagen.
Investor Relations (IR) Demant strives to ensure a steady and consistent flow of information to IR stakeholders in order to promote the basis for a fair pricing of the company’s shares – pricing that will at any time reflect the company’s strategies, financial capabilities and outlook for the future. The flow of information will contribute to a reduction of the company-specific risk associated with investing in Demant shares, thereby leading to a reduction of the company’s cost of capital. We aim to reach this goal by continuously providing relevant, correct, adequate and timely information in our company announcements.
In the course of the year, we publish an annual report, an interim report as well as interim management statements pertaining to Q1 and Q3, all of which contain updates on the Group and its financial position as well as results in relation to the full-year outlook, including updates on important events and transactions in the period under review. We strive to maintain an active and open dialogue with analysts and with current and potential investors, which helps the company stay updated on the views, interests and opinions of the company’s various stakeholders. At our annual general meeting and through presentations, individual meetings, participation in investor conferences, webcasts, capital markets days etc., we aim to maintain an ongoing dialogue with a broad spectrum of stakeholders. In 2023, we held nearly 500 investor meetings and presentations.
Development in share price and daily turnover in 2023
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| | | | | | # Risk management activities
Demant – Annual Report 2023 47
Insights and highlights
- We attract competent staff through a strong company culture and high employee engagement.
- We protect and maintain patents for our own groundbreaking technology, while ensuring that we do not infringe the rights of others.
- We adhere to standards and regulations in our innovation, production, and supply chain processes.
- We work with business and contingency plans to secure service to our customers.
- We maintain adequate safety stocks to counter potential interruptions in our production.
- We are committed to supplying safe products and ensuring a safe and engaging working environment for our employees.
Supply disruptions may result in delayed deliveries or inefficient production set-ups. Lockdowns and other restrictions may also affect the global supply chain and thus increase the risk of sudden changes. We work with business and contingency plans to secure service to our customers in the best possible way in any given situation. We closely monitor our supply situation and seek to keep adequate safety stocks to counter potential interruptions in our production. Our main production facilities in Poland and Mexico are in close proximity to our largest markets, which is important for us to quickly and efficiently serve our customers despite dynamic changes in the supply chain. We continuously evaluate our production footprint and dependency on key suppliers to strike a sound balance between flexibility, exposure and costs. We collaborate closely with our highly specialised suppliers. In our supply chain and throughout our organisation, we actively work to ensure a safe and engaging working environment for all our employees.
Sustainability risks
Demant is a positive-impact business that helps people overcome their hearing loss and thus improve their quality of life. Due to the nature of our business and to our value chain, Demant is not exposed to – nor do we pose – large sustainability-related risks. The most material risks include talent retention, climate impact and bribery and corruption. Please refer to our Sustainability Report for more details on environmental, social and governance risks.
The hearing healthcare market consists of a few, highly specialised players that operate in an extremely competitive market. While navigating in the current market conditions, we monitor potential changes to the competitive situation to ensure that we respond swiftly and effectively to any changes in the market.
Macroeconomic impacts on markets
Historically, the hearing healthcare market has seen stable growth driven by demographic changes. The current macroeconomic uncertainties, which are still to some extent impacting some regions, may have an adverse effect on the demand for hearing healthcare solutions and audio equipment in those regions. Some countries are also experiencing above-previous-level inflation rates, which impact the economies in some markets. In case of macroeconomic or geopolitical headwinds, we seek to adapt our organisation, activities and costs accordingly to mitigate the financial impacts in the affected markets.
After the coronavirus pandemic, we have seen a general stabilisation of the hearing healthcare market. While the pandemic has largely passed, a new pandemic could limit contact with hearing aid users. Although demand for our hearing healthcare products is not considered cyclical, the demand for hearing aids may suffer if the client contact is limited as a significant part of our sales is based on in-person counselling of individuals with hearing difficulties.
Regulatory risks in the markets
The Group is exposed to certain regulatory risks in terms of changes to reimbursement schemes and public tenders in the markets where we operate. In most markets, the current regulatory landscape is considered stable, so for the time being, we do not expect significant changes in the regulatory environment. There might be an overlap with commercial risks, if the level of reimbursement changes, or if the way of distribution changes in a market from for instance retail to managed care. While regulatory changes are an intrinsic part of the hearing healthcare market, we feel well positioned to respond to such changes in the commercial environment. We continue to monitor any changes in the regulatory landscape and engage in dialogues with regulators as part of our business planning.
Innovations and operations – continued
Market and customer risks
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- We monitor potential changes to the competitive situation to ensure that we respond swiftly.
- We seek to adapt our organisation, activities and costs to mitigate the financial impacts of macroeconomic uncertainties.
- We adapt our operating model when we see changes to reimbursement schemes in markets where we operate.
- We continue to monitor changes in the regulatory landscape and engage in dialogues with regulators.
- We are committed to being in compliance with legislation related to financial sanctions, export controls and other types of sanctions.
- We continuously assess our IT maturity and remain focused on ensuring proper IT security.
- We train and educate our employees in IT-related topics.
- We ensure an adequate response and timely reporting in case of an IT security incident.
- We remain committed to protecting personal data.
The market development over the last years has confirmed our belief in the importance of providing a combination of personal counselling, individual fitting, lifelong service, and highly advanced technology. In the US, the new over-the-counter category of hearing aids has now been available since 2022, and while this may increase access to hearing aids, we have only seen a limited impact on the hearing aid market in the US. In addition, the US market in general continues to see an increasing part of hearing aid purchases being covered by insurance companies. The emergence of large managed care organisations continues to pose a risk to average selling prices in the hearing aid market, as volumes may to an increasing extent be consolidated on fewer players. Lower fitting fees and lost customer loyalty may also become a result of this consolidation.
The Group sells its products in countries that may be subject to EU or US sanctions. These sanctions include financial sanctions, trade/export controls and sanctions against entities and individuals. To ensure compliance, distributors and other business partners engaging in business in these countries are subject to sanction checks and, where needed, firm and swift actions are taken to ensure that the Group is compliant. Sanctions may increase due to geopolitical risks and create an overall stop to trade in certain cases, as it has been the case for Russia and Belarus. The Group continues to closely monitor the changing legislation in this area and to further develop systems and processes to ensure that proper controls and documentation are in place to secure compliance.
As our Group becomes increasingly digitalised, more devices and control systems are connected online, resulting in a broader interface across our IT infrastructure that could potentially be compromised. As a large, global organisation, we are dependent on numerous IT systems and the general IT infrastructure to operate efficiently across our value chain. This carries an inherent risk of system errors, human errors, data breaches or other interruptions that may impact the Group financially. In addition, we may be exposed to attempts to access or steal information, computer viruses, denial of service and other digital security breaches.
Our IT security committee continuously follows up on and monitors our IT security set-up to ensure that the Group remains focused on ensuring proper IT security. Once a year, the committee reviews a maturity assessment based on the Cybersecurity Framework of the National Institute of Standards and Technology (NIST), the purpose of which is to ensure that also in future, we continue to focus on relevant parameters. The assessment was done by an external party in 2023. We train and educate our employees in IT-related topics on an ongoing basis to limit any IT-related incidents caused by human errors. We regularly update policies to ensure that they are up-to-date and reflect the current environment. You can read more about this area on page 38 in the Sustainability Report.
Demant is entrusted with personal data on employees, customers, users and business partners, which must be collected and processed in accordance with applicable laws and regulations.
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Risk management activities
Demant – Annual Report 2023 48# Demant – Annual Report 2023
Risk management activities
Financial risk management
Financial risk management concentrates on identifying risks in respect of changes in the financial markets and customers’ propensity to pay for products and services. The Executive Board monitors the financial risks of the company to ensure that these remain well-balanced. Financial risks are managed centrally by Group Treasury, which is responsible for securing attractive funding under the prevailing market conditions and for monitoring and mitigating risks related to liquidity, interest rates and exchange rates. Risks related to counterparties are managed in the individual markets.
Capital structure, funding and liquidity
Demant remains a highly cash-generating Group with a strong balance sheet. The Group continuously adapts its capital structure to the prevailing market conditions in order to secure attractive financing. We secure our funding based on a strong commitment by our banks to provide longer-term bank facilities. To mitigate potential liquidity and refinancing risks, the Group has secured considerable undrawn committed credit facilities. To minimise financing risks, we aim for more than 50% of our credit facilities to be committed with long-term maturity, and our financial gearing multiple is currently within our desired target range of 2.0-2.5.
- To mitigate potential liquidity and refinancing risks, the Group has secured access to considerable undrawn committed credit facilities.
- We limit interest rate risks by hedging part of our exposure.
- We continuously seek to balance our foreign exchange rate exposures and, where relevant, these are hedged.
- We monitor the credit risks on business partners on an ongoing basis.
Interest rate risks
Due to higher market interest rates, our financial expenses increased in 2023. Furthermore, credit spreads and debt margins increased in the financial markets due to higher capital requirements imposed on the banks. Currently, around 45% of the Group’s debt is funded through facilities with fixed rates or hedged through financial instruments limiting the interest rate risk.
Exchange rate risks
The Group is exposed to exchange rate risks, as the company trades with counterparties in a number of countries, and as the Group has cash flows in different currencies. It is therefore important to adequately balance foreign exchange rate risks to avoid unexpected adverse impacts on the financial performance. The majority of Group companies transact mainly in local currencies and are therefore exposed to limited exchange rate risks. The Group does not hedge translation risks resulting from the consolidation of Group accounts into Danish kroner.
Most Group companies are invoiced from the Danish production entities. Around two-thirds of the invoicing out of Denmark is invoiced in other currencies than Danish kroner or euros. To reduce our exchange rate exposure, we continuously seek to balance incoming and outgoing cash flows in our main trading currencies as much as possible. To ensure predictability in terms of net profit, we hedge expected future net cash flows mainly through forward exchange contracts with a horizon of up to 18 months. In addition, we seek to balance our on-balance net exposure in our main trading currencies and, where relevant, our exposure is hedged. It is the Group’s policy to exclusively hedge financial risks arising from our commercial activities and not to undertake any financial transactions of a speculative nature.
Counterpart risks
From a commercial point of view, the Group is exposed to credit risks if our customers fail to pay for products and services provided. Such risks mainly relate to trade receivables and loans to customers or business partners, and failure to adequately manage credit risks can adversely impact the Group. To minimise the risk of suffering losses on customers, the Group monitors the credit risks on an ongoing basis. The Group generally has a diversified customer base, and in 2023, the accumulated revenue from our ten largest customers accounted for approx. 15% of total consolidated revenue. We regularly adjust our financial accounts to reflect the current credit risks. When granting loans to business partners, we require that our counterparties provide security in their business. In general, we estimate that the risk relative to our total credit exposure is well-balanced at Group level, and historically, we have only suffered limited credit-related losses. Please refer to Note 4.1.
Data and IT security
As our business continues to grow, the complexity of managing customers’ data increases. We remain committed to protecting personal data, and failure to do so could have serious consequences for the people whose data we possess as well as for the Group. Our Data Ethics Policy can be found here.
Corporate governance
The work on corporate governance is an ongoing process for the Board of Directors and Executive Board. Once a year, the Board of Directors and Executive Board review the company’s corporate governance principles. In that context, we consider the corporate governance principles that derive from legislation, recommendations and good practices. We focus on developing and maintaining a transparent corporate governance structure that promotes responsible business behaviour and long-term value creation.
Recommendations issued by the Danish Committee on Corporate Governance and adopted by Nasdaq Copenhagen are best-practice guidelines for the governance of companies admitted to trading on a regulated market in Denmark. When reporting on corporate governance, we follow the “comply or explain” principle. Demant follows 38 of the 40 recommendations. The few cases (two) where we have chosen to deviate from a recommendation are well-founded, and we explain what we do instead. To further increase transparency, we provide supplementary and relevant information, even when we follow the recommendations. A complete presentation of the recommendations and how we comply with them, the Statutory report on corporate governance, is available on our website, www.demant.com. The report as well as the financial reporting process and internal control described in Risk management activities in this Annual Report 2023 constitute Demant’s statement on corporate governance, cf. section 107b of the Danish Financial Statements Act.
Tasks and responsibilities of the Board of Directors
In accordance with Danish legislation, Demant has a two-tier management system, comprising the Board of Directors and the Executive Board. No individual is a member of both Boards. The division of responsibilities between the Board of Directors and the Executive Board is clearly outlined and described in the Rules of Procedure for the Board of Directors and in the Instructions for the Executive Board. The Board of Directors is responsible for the overall strategic management and for the financial and managerial supervision of the company, the ultimate goal being to ensure long-term value creation. On an ongoing basis, the Board of Directors evaluates the work of the Executive Board as for instance reflected in the annual plan prepared for the Board of Directors.
Composition and organisation
The Board of Directors has eight members: five members elected by the shareholders at the annual general meeting and three members elected by staff in Denmark. Shareholders elect Board members for a term of one year, and staff elect Board members for a term of four years. Staff-elected members are elected in accordance with the provisions of the Danish Companies Act. In 2023, Charlotte Hedegaard and Heidir Hørby were elected for the first time, and Thomas Duer was re-elected to the Board of Directors. Although the Board members elected by the annual general meeting are up for election every year, the individual Board members are traditionally re-elected and sit on the Board for an extended number of years. This ensures consistency and maximum insight into the conditions prevailing in the company and the industry. Such consistency and insight are considered important in order for the Board members to bring value to the company.
Three of the five Board members presently elected by the shareholders at the annual general meeting are considered independent. The Board is composed to ensure the right combination of competencies and experience, with extensive international managerial experience, board experience from major listed companies and diversity traits carrying particular weight. On our website, www.demant.com/about/management-and-governance, we describe the competencies and qualifications that the Board of Directors deems necessary to have at its overall disposal in order to be able to perform its tasks for the company.
Diversity
The Board of Directors aims to have at least 40% of the underrepresented gender amongst the Board members elected by the shareholders, as this constitutes an even distribution in terms of gender. As of now, there is an even distribution in terms of gender of 40% women and 60% men. As part of our ambitions to ensure diversity and inclusion in the Group, we launched a Diversity, equity and inclusion policy in 2022, which includes targets to increase diversity and inclusion in the Demant Group. Demant is present in all parts of the world and employs people with different ethnic background, personality, nationality, age, gender and education. We encourage respect for diversity, and we strive to treat all employees fairly.# Corporate governance
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Corporate governance
Demant – Annual Report 2023 51
Applicable to the legal entity Demant A/S, new Danish legislation on underrepre- sented gender in management took effect from 2023, cf. section 99b of the Danish Financial Statements Act and section 139c of the Danish Companies Act. In 2023, fewer people than 50 were em- ployed in the legal entity Demant A/S and an even distribution of gender was achieved for both the Board of Directors and other levels of management. Hence Demant A/S is not required to define a specific target and policy. However, there is a requirement to disclose the distribution of genders for the Board of Directors and other levels of management in the legal entity.
Evaluation of the performance of the Board of Directors
Once a year, the Board of Directors per- forms an evaluation of the Board’s work. The evaluation is performed either through personal, individual interviews with the Board members or by means of a ques- tionnaire to be filled out by the individual Board members. In both instances, the findings of the evaluation are presented and discussed at the subsequent Board meeting. At least every third year, the evaluation is performed with external assistance. In 2023, the evaluation was performed with external assistance.
Overall, the eval- uation confirmed that the Board is satis- fied with its governance structures and furthermore confirmed that the interaction between the Board members works well. The Board of Directors is keen to keep fo- cus on and allocate time to the long-term strategic development of the company to continuously ensure that the potential of the company is exploited to the fullest.
In 2023, audit committee meetings have been separated from ordinary Board meet- ings. This has led not only to more in- depth discussions on audit and financial topics, but also allowed the members of the Board of Directors to focus more on the strategic development of the company. The collaboration between the Board of Directors and the Executive Board works well, and there is an open and trustful working atmosphere. The work performed by the Board of Direc- tors takes its starting point in the annual wheel, which is regularly refined and up- dated and ensures the Board’s commit- ment and immersion into relevant areas.
Board of Directors 2023
| Total number of shareholder elected members | Women | Men |
|---|---|---|
| 5 | 40% | 60% |
Other levels of Management* 2023
| Total number of members | Women | Men |
|---|---|---|
| 7* | 43% | 57% |
*Executive Board incl. direct reports employed in the legal entity Demant A/S.
Annual General Meeting in Smørum Denmark
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Corporate governance
Demant – Annual Report 2023 52
Board committees
The company’s Board of Directors has set up four committees: an audit, a nomina- tion, a remuneration and an IT security committee.
The audit committee has been engaged in setting up updated working practices in the new set-up where audit committee meetings are separated from ordinary Board meetings. This allows the members of the committee to focus more on audit and financial topics. The audit committee is dedicated to a number of topics accord- ing to its committee charter, particularly preparations for improved ESG reporting.
The nomination committee has been en- gaged in activities in relation to its normal tasks pursuant to the committee charter. In April 2023, an Executive Board member left the company. The committee has been engaged in ensuring that a competent business area President is recruited.
The remuneration committee has been engaged in supervising the remuneration structure and Remuneration Policy, which was adopted in March 2022. The commit- tee is satisfied with the Policy, the purpose of which is to direct the Executive Board’s focus towards value creation on important parameters.
The IT security committee has focused on following up on and ensuring progress in the plans made. Once a year, the commit- tee performs a maturity assessment based on the Cybersecurity Framework of the National Institute of Standards and Tech- nology (NIST), the purpose of which is to ensure that also in future, we continue to focus on relevant parameters. Again in 2023, we manged to enhance our ma- turity.
Board of Directors’ and Executive Board’s remuneration
Demant has a Remuneration Policy and publishes a Remuneration Report. A new Policy was approved at the annual general meeting in March 2022. The Remuneration Report is available on our website here. The Report will be submitted for advisory vote at the annual general meeting in March 2024.
| Members of Board committees | ||||
|---|---|---|---|---|
| Role | Audit committee | Nomination committee | Remuneration committee | IT security committee |
| Niels B. Christiansen | Chair | Chair | Chair | Chair |
| Niels Jacobsen | Vice Chair | Member | Member | Member |
| Thomas Duer | Member | |||
| Charlotte Hedegaard | Member | |||
| Heidir Hørby | Member | |||
| Anja Madsen | Member | Chair | ||
| Sisse Fjelsted Rasmussen | Member | Member | Member | |
| Kristian Villumsen | Member | Member | ||
| Lars Nørby Johansen | Chair of the Board of Directors of William Demant Foundation | Member | ||
| Søren Nielsen | President & CEO | Member |
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Executive Board
Demant – Annual Report 2023 53
Executive Board
| | Søren Nielsen (man) # Board of Directors
Demant – Annual Report 2023 55
Charlotte Hedegaard (woman)
Born 1971
Nationality: Danish
580 shares (+258)
Staff-elected Board member in 2023 for a term of four years
Considered independent: N/A
Position: Head of Group Compliance in Demant
Has been with the Demant Group since 2019
Education: Holds an MSc in Law from Copenhagen University
Attendance at Board and committee meetings: No absence
Heidir Hørby (woman)
Born 1974
Nationality: Danish
591 shares (unchanged)
Staff-elected Board member in 2023 for a term of four years
Considered independent: N/A
Position: Quality Systems Engineer, Demant facility in Ballerup, Denmark
Has been with the Demant Group since 1994
Education: N/A
Attendance at Board and committee meetings: No absence
Abbreviations
C = Chair, VC = Vice Chair, M = Member
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Kristian Villumsen (man)
Born 1970
Nationality: Danish
4,130 shares (unchanged)
Joined the Board in 2021
Member of the audit committee
Considered independent: Yes
Position: President & CEO, Coloplast
Other positions: Committee on Life Science under the Confederation of Danish Industry (M)
Education: Holds an MSc in Political Science from Aarhus University and a Master in Public Policy from Harvard University
Competences: International leadership experience from the global MedTech industry, management experience from such areas as innovation, sales, strategy deployment and commercial excellence
Attendance at Board and committee meetings: No absence
Thomas Duer (man)
Born 1973
Nationality: Danish
1,335 shares (unchanged)
Staff-elected Board member since 2015. Re-elected in 2023 for a term of four years
Considered independent: N/A
Position: Senior Director, Requirements, Configuration & Test, R&D, Demant
Has been with the Demant Group since 2002
Other positions: Danske Sprogseminarer A/S (M), Oticon A/S (M, staff-elected)
Education: Holds an MSc in Electrical Engineering from the Technical University of Denmark
Attendance at Board and committee meetings: No absence
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Demant – Annual Report 2023 56
Financial pages
Demant – Annual Report 2023 56
Bernafon Brand relaunch
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Management statement
Demant – Annual Report 2023 57
The Board of Directors and Executive Board have today reviewed and approved the Annual Report 2023 of Demant A/S for the financial year 1 January to 31 December 2023. The consolidated financial statements are prepared and presented in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements in the Danish Financial Statements Act. The Parent financial statements are prepared and presented in accordance with the Danish Financial Statements Act. Further, the Annual Report 2023 has been prepared in accordance with Danish disclosure requirements for listed companies.
In our opinion, the consolidated financial statements and the Parent financial statements give a true and fair view of the Group’s and the Parent’s assets, liabilities and financial position at 31 December 2023, of the results of the Group’s and the Parent’s operations and of the Group’s cash flows for the financial year 1 January to 31 December 2023.
In our opinion, Management’s commentary includes a true and fair view of the development in the operations and financial circumstances of the Group and the Parent, of the results for the year and of the financial position of the Group and the Parent as well as a description of the most significant risks and uncertainties facing the Group and the Parent. Management's Commentary has been prepared in accordance with the Danish Financial Statements Act and Article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation).
In our opinion, the Annual Report 2023 for Demant A/S with the file name DEMANT-2023-12-31-en.zip for the financial year 1 January to 31 December 2023 is prepared in compliance with the ESEF regulation.
We recommend that the Annual Report 2023 be adopted at the annual general meeting on 6 March 2024.
Smørum, 6 February 2024
Management statement
0BExecutive Board
Søren Nielsen, President & CEO
René Schneider, CFO
Niels Wagner, President Hearing Care
1BBoard of Directors
Niels B. Christiansen, Chair
Niels Jacobsen, Vice Chair
Thomas Duer
Charlotte Hedegaard
Heidir Hørby
Anja Madsen
Sisse Fjelsted Rasmussen
Kristian Villumsen
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Independent auditor’s reports
Demant – Annual Report 2023 58
To the shareholders of Demant A/S
Report on the audit of the Financial Statements
Our opinion
In our opinion, the Consolidated financial statements give a true and fair view of the Group’s financial position at 31 December 2023 and of the results of the Group’s operations and cash flows for the financial year 1 January to 31 December 2023 in accordance with IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act.
Moreover, in our opinion, the Parent financial statements give a true and fair view of the Parent Company’s financial position at 31 December 2023 and of the results of the Parent Company’s operations for the financial year 1 January to 31 December 2023 in accordance with the Danish Financial Statements Act.
Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors.
What we have audited
The Consolidated financial statements and the Parent financial statements of Demant A/S for the financial year 1 January to 31 December 2023 comprise income statement, balance sheet, statement of changes in equity and notes, including material accounting policy information for the Group as well as for the Parent Company and statement of comprehensive income and cash flow statement for the Group. Collectively referred to as the “Financial Statements”.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided.
Appointment
We were first appointed auditors of Demant A/S on 10 March 2022 for the financial year 2022. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of two years including the financial year 2023.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2023. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.# Independent auditor’s reports
Key audit matter
How our audit addressed the key audit matter
Acquisitions
Acquisitions are complex transactions, which are subject to significant estimates, including the identification and valuation of assets, liabilities and contingent consideration etc. In order to determine the fair value of the separately identified assets and liabilities in a business combination, the valuation methodologies require input based on assumptions about the future and applied discounted cash flow forecasts, including market development and WACC. We focused on this area because of the significance to the Financial Statements, the inherent complexity and high degree of estimation in the accounting for acquisitions, as well as the potential inherent risk related to the control environment. Our main focus of the area was on the acquisitions of Mr. Optik Group and Flemming & Klingbeil Group, the hearing aid related activities of Goed Hulpmiddelen CV and Virtualis Group. Reference is made to section 6.1 “Acquisition of enterprises and activities” in the Consolidated financial statements.
Our audit procedures included assessing the appropriateness of the accounting policies for acquisitions applied by Management and assessing compliance with IFRS Accounting Standards. We involved our internal specialists in the assessment of the valuation methodologies applied by Management and we challenged Management’s significant assumptions used to determine the fair value of the acquired assets and liabilities in the acquisitions, including the fair value of the intangible assets. Finally, we assessed the adequacy of disclosures relating to the acquisitions.
How our audit addressed the key audit matter
Revenue recognition
Recognition of revenue is inherently complex due to the extent of different revenue streams, several performance obligations, trial periods and prepaid discounts, which are subject to interpretation, including the point in time of satisfaction of the performance obligations and recognition of related deferred income in respect of e.g. extended warranties, after sales services, etc. We focused on this area because of the significance to the Financial Statements, as well as the complexity and high degree of estimation related to e.g. prepaid discounts, provision for sales returns and extended warranties and deferred income. In addition, we focused on this area as revenue comprises a substantial number of transactions, with different characteristics depending on the business segment the revenue relates to. Reference is made to section 1.2 “Revenue” in the Consolidated financial statements.
Our audit procedures included considering the appropriateness of the accounting policies for revenue recognition applied by Management and assessing compliance with IFRS Accounting Standards. We performed risk assessment procedures to understand the information processing activities in relation to revenue recognition and evaluated whether the information systems appropriately support revenue recognition and measurement in accordance with the accounting policies. We identified controls addressing risk of material misstatements determined to be significant risk and evaluated the design of the controls and determined whether the controls have been implemented. We discussed the accounting estimates related to the recognition, and classification of revenue with Management. Further, we performed substantive procedures regarding invoicing, significant contracts, cut-off at year-end and provision for e.g. sales returns and extended warranties in order to assess the accounting treatment and principles applied. We applied data analysis in our testing of selected revenue streams in order to identify transactions outside the ordinary transaction flow, including journal entry testing. Finally, we assessed the adequacy of disclosures relating to revenue recognition.
Statement on Management’s Commentary
Management is responsible for Management’s Commentary. Our opinion on the Financial Statements does not cover Management’s Commentary, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management’s Commentary and, in doing so, consider whether Management’s Commentary is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Management’s Commentary includes the disclosures required by the Danish Financial Statements Act and Article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). Based on the work we have performed, in our view, Management’s Commentary is in accordance with the Consolidated financial statements and the Parent financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act and the disclosure requirements of Article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). We did not identify any material misstatement in Management’s Commentary.
Management’s responsibilities for the Financial Statements
Management is responsible for the preparation of Consolidated financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act and for the preparation of Parent financial statements that give a true and fair view in accordance with the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.
As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.
- Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.# Independent auditor’s reports
Demant – Annual Report 2023 61
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter.
Report on compliance with the ESEF Regulation
As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of Demant A/S for the financial year 1 January to 31 December 2023 with the filename DEMANT-2023-12-31-en.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements including notes.
Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes:
- The preparing of the annual report in XHTML format;
- The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary;
- Ensuring consistency between iXBRL tagged data and the Consolidated financial statements presented in human-readable format; and
- For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation.
Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include:
- Testing whether the annual report is prepared in XHTML format;
- Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process;
- Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements including notes;
- Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified;
- Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and
- Reconciling the iXBRL tagged data with the audited Consolidated financial statements.
In our opinion, the annual report of Demant A/S for the financial year 1 January to 31 December 2023 with the file name DEMANT-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation.
Hellerup, 6 February 2024
PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab
CVR No 3377 1231
Mogens Nørgaard Mogensen State-Authorised Public Accountant mne21404
Rasmus Friis Jørgensen State-Authorised Public Accountant mne28705
Demant – Annual Report 2023 62
Consolidated financial statements
Demant – Annual Report 2023 62
Demant – Annual Report 2023 63
Consolidated income statement (DKK million)
| Note | 2023 | 2022 |
|---|---|---|
| Revenue | 22,443 | 19,705 |
| Production costs | -5,899 | -5,036 |
| Gross profit | 16,544 | 14,669 |
| R&D costs | -1,410 | -1,314 |
| Distribution costs | -9,917 | -9,232 |
| Administrative expenses | -1,138 | -1,038 |
| Share of profit after tax, associates | 69 | 122 |
| Operating profit (EBIT) | 4,148 | 3,207 |
| Financial income | 101 | 83 |
| Financial expenses | -855 | -363 |
| Profit before tax | 3,394 | 2,927 |
| Tax on profit for the year | -839 | -651 |
| Profit after tax - continuing operations | 2,555 | 2,276 |
| Profit after tax - discontinued operations | -757 | -192 |
| Profit for the year | 1,798 | 2,084 |
| Profit for the year attributable to: | ||
| Demant A/S' shareholders | 1,795 | 2,082 |
| Non-controlling interests | 3 | 2 |
| 1,798 | 2,084 | |
| Earnings per share (EPS), DKK - continuing operations | 11.44 | 10.06 |
| Diluted earnings per share (DEPS), DKK - continuing operations | 11.44 | 10.06 |
| Earnings per share (EPS), DKK | 8.04 | 9.21 |
| Diluted earnings per share (DEPS), DKK | 8.04 | 9.21 |
Consolidated statement of comprehensive income (DKK million)
| 2023 | 2022 | |
|---|---|---|
| Profit for the year | 1,798 | 2,084 |
| Foreign currency translation adjustment, subsidiaries | -177 | 60 |
| Value adjustments of hedging instruments: | ||
| Value adjustment for the year | 41 | -40 |
| Value adjustment transferred to revenue | -106 | 202 |
| Tax on items that have been or may subsequently be reclassified to the income statement | 17 | -32 |
| Items that have been or may subsequently be reclassified to the income statement | -225 | 190 |
| Actuarial gains/losses on defined benefit plans | -19 | 105 |
| Tax on items that will not subsequently be reclassified to the income statement | 4 | -27 |
| Items that will not subsequently be reclassified to the income statement | -15 | 78 |
| Other comprehensive income | -240 | 268 |
| Comprehensive income | 1,558 | 2,352 |
| Comprehensive income attributable to: | ||
| Demant A/S’ shareholders | 1,555 | 2,350 |
| Non-controlling interests | 3 | 2 |
| 1,558 | 2,352 | |
| Breakdown of tax on other comprehensive income: | ||
| Foreign currency translation adjustment, foreign enterprises | 3 | 3 |
| Value adjustment of hedging instruments for the year | -9 | 9 |
| Value adjustment of hedging instruments transferred to revenue | 23 | -44 |
| Actuarial gains/losses on defined benefit plans | 4 | -27 |
| Tax on other comprehensive income | 21 | -59 |
Demant – Annual Report 2023 64
Consolidated balance sheet 31 December (DKK million)
| Note | 2023 | 2022 |
|---|---|---|
| Equity and liabilities | ||
| Share capital | 45 | 46 |
| Other reserves | 9,211 | 8,515 |
| Equity attributable to Demant A/S' shareholders | 9,256 | 8,561 |
| Equity attributable to non-controlling interests | 82 | 1 |
| Equity | 9,338 | 8,562 |
| Borrowings | 10,171 | 6,098 |
| Lease liabilities | 2,045 | 1,766 |
| Deferred tax liabilities | 633 | 620 |
| Provisions | 201 | 175 |
| Other liabilities | 661 | 566 |
| Deferred income | 635 | 501 |
| Non-current liabilities | 14,346 | 9,726 |
| Borrowings | 1,597 | 6,598 |
| Lease liabilities | 641 | 614 |
| Trade payables | 799 | 865 |
| Payables to associates | 1 | - |
| Income tax | 578 | 311 |
| Provisions | 77 | 33 |
| Other liabilities | 2,497 | 2,445 |
| Unrealised losses on financial contracts | 35 | 15 |
| Deferred income | 548 | 513 |
| Liabilities related to assets held for sale | 89 | 175 |
| Current liabilities | 6,862 | 11,569 |
| Liabilities | 21,208 | 21,295 |
| Equity and liabilities | 30,546 | 29,857 |
| Assets | ||
| Intangible assets | 13,540 | 12,582 |
| Property, plant and equipment | 2,813 | 2,553 |
| Lease assets | 2,596 | 2,304 |
| Investments in associates | 728 | 822 |
| Receivables from associates | 277 | 371 |
| Other investments | 19 | 15 |
| Customer loans | 477 | 566 |
| Other receivables | 170 | 84 |
| Deferred tax assets | 542 | 538 |
| Other non-current assets | 4,809 | 4,700 |
| Non-current assets | 21,162 | 19,835 |
| Inventories | 2,845 | 2,904 |
| Trade receivables | 3,650 | 3,626 |
| Receivables from associates | 188 | 170 |
| Income tax | 236 | 126 |
| Customer loans | 191 | 229 |
| Other receivables | 378 | 376 |
| Unrealised gains on financial contracts | 60 | 103 |
| Prepaid expenses | 415 | 394 |
| Cash | 1,138 | 1,130 |
| Assets held for sale | 283 | 964 |
| Current assets | 9,384 | 10,022 |
| Assets | 30,546 | 29,857 |
Demant – Annual Report 2023 65
Consolidated statement of cash flows (DKK million)
| Note | 2023 | 2022 |
|---|---|---|
| Operating profit (EBIT) | 4,148 | 3,207 |
| Non-cash items etc. | 1,323 | 1,074 |
| Change in receivables etc. | -85 | -491 |
| Change in inventories | 4 | -532 |
| Change in trade payables and other liabilities etc. | 36 | 10 |
| Change in provisions | 51 | 3 |
| Dividends received | 85 | 164 |
| Cash flow from operating profit | 5,562 | 3,435 |
| Financial income etc. received | 85 | 63 |
| Financial expenses etc. | ||
| Income tax paid -606 -517 | ||
| Cash flow from operating activities (CFFO) 4,335 2,622 |
Acquisition of enterprises, participating interests and activities -935 -2,323
Investments in intangible assets -192 -277
Investments in property, plant and equipment -654 -647
Disposal of property, plant and equipment 21 16
Investments in other non-current assets -273 -356
Disposal of other non-current assets 246 259
Cash flow from investing activities (CFFI) -1,787 -3,328
| (DKK million) | Note | 2023 | 2022 |
|---|---|---|---|
| Repayments of borrowings | 4.4 | -6,740 | -2,737 |
| Proceeds from borrowings | 4.4 | 6,034 | 8,606 |
| Change in short-term bank facilities | 4.4 | -188 | -2,477 |
| Repayments of lease liabilities | 3.3 / 4.4 | -698 | -614 |
| Transactions with non-controlling interests | -3 | -4 | |
| Share buy-backs | -846 | -1,840 | |
| Cash flow from financing activities (CFFF) | -2,441 | 934 |
Cash flow for the period, net continuing operations | | 107 | 228
Cash flow for the period, net – discontinued operations | 6.2 | -65 | -253
Cash flow for the year, net | | 42 | -25
Cash and cash equivalents at the beginning of the year | | 1,130 | 1,172
Foreign currency translation adjustment of cash and cash equivalents | | -34 | -17
Cash and cash equivalents at the end of the year | | 1,138 | 1,130
Breakdown of cash and cash equivalents at the end of the year:
Cash | 4.3 / 4.4 | 1,138 | 1,130
Cash and cash equivalents at the end of the year | | 1,138 | 1,130
Consolidated statement of changes in equity (DKK million)
| Share capital | Foreign currency translation reserve | Hedging reserve | Retained earnings | Demant A/S share- share | Non- controlling share | Equity | |
|---|---|---|---|---|---|---|---|
| Equity at 1.1.2023 | 46 | 71 | 73 | 8,371 | 8,561 | 1 | 8,562 |
| Comprehensive income: | |||||||
| Profit for the year | - | - | - | 1,795 | 1,795 | 3 | 1,798 |
| Other comprehensive income: | |||||||
| Foreign currency translation adjustment, subsidiaries | - | -177 | - | - | -177 | - | -177 |
| Value adjustments of hedging instruments: | |||||||
| Value adjustment, year | - | - | 41 | - | 41 | - | 41 |
| Value adjustment transferred to revenue | - | - | -106 | - | -106 | - | -106 |
| Actuarial gains/losses on defined benefit plans | - | - | - | -19 | -19 | - | -19 |
| Tax on other comprehensive income | - | 3 | 14 | 4 | 21 | - | 21 |
| Other comprehensive income | - | -174 | -51 | -15 | -240 | - | -240 |
| Comprehensive income for the year | - | -174 | -51 | 1,780 | 1,555 | 3 | 1,558 |
| Share buy-backs | - | - | - | -846 | -846 | - | -846 |
| Share-based compensation | - | - | - | 63 | 63 | - | 63 |
| Capital reduction through cancellation of treasury shares | -1 | - | - | 1 | - | - | - |
| Transactions with non-controlling interests | - | - | - | - | - | -3 | -3 |
| Non-controlling interests on acquisition | - | - | - | -76 | -76 | 80 | 4 |
| Other changes in equity | - | - | - | -1 | -1 | 1 | - |
| Equity at 31.12.2023 | 45 | -103 | 22 | 9,292 | 9,256 | 82 | 9,338 |
Consolidated statement of changes in equity (continued)
(DKK million)
| Share capital | Foreign currency translation reserve | Hedging reserve | Retained earnings | Demant A/S share- share | Non- controlling share | Equity | |
|---|---|---|---|---|---|---|---|
| Equity at 1.1.2022 | 48 | 8 | -54 | 7,975 | 7,977 | 4 | 7,981 |
| Comprehensive income: | |||||||
| Profit for the year | - | - | - | 2,082 | 2,082 | 2 | 2,084 |
| Other comprehensive income: | |||||||
| Foreign currency translation adjustment, subsidiaries | - | 60 | - | - | 60 | - | 60 |
| Value adjustments of hedging instruments: | |||||||
| Value adjustment, year | - | - | -40 | - | -40 | - | -40 |
| Value adjustment transferred to revenue | - | - | 202 | - | 202 | - | 202 |
| Actuarial gains/losses on defined benefit plans | - | - | - | 105 | 105 | - | 105 |
| Tax on other comprehensive income | - | 3 | -35 | -27 | -59 | - | -59 |
| Other comprehensive income | - | 63 | 127 | 78 | 268 | - | 268 |
| Comprehensive income for the year | - | 63 | 127 | 2,160 | 2,350 | 2 | 2,352 |
| Share buy-backs | - | - | - | -1,840 | -1,840 | - | -1,840 |
| Share-based compensation | - | - | - | 80 | 80 | - | 80 |
| Capital reduction through cancellation of treasury shares | -2 | - | - | 2 | - | - | - |
| Transactions with non-controlling interests | - | - | - | -3 | -3 | -8 | -11 |
| Other changes in equity | - | - | - | -3 | -3 | 3 | - |
| Equity at 31.12.2022 | 46 | 71 | 73 | 8,371 | 8,561 | 1 | 8,562 |
Notes to consolidated financial statements
Section 1 page 69 Operating activities and cash flow
1.1 Segment disclosures
1.2 Revenue
1.3 Employees
1.4 Amortisation, depreciation and impairment losses
1.5 Earnings per share
1.6 Inventories
1.7 Trade receivables
1.8 Customer loans
1.9 Specification of non-cash items
Section 2 page 81 Exchange rates
2.1 Exchange rate risk policy
2.2 Sensitivity analysis in respect of exchange rates
2.3 Hedging and forward exchange contracts
Section 3 page 84 Asset base
3.1 Intangible assets
3.2 Property, plant and equipment
3.3 Leases
3.4 Other non-current assets
3.5 Non-current assets by geographies
3.6 Impairment testing
Section 4 page 93 Capital structure and financial management
4.1 Financial risk management and capital structure
4.2 Net financial items
4.3 Categories of financial instruments
4.4 Net interest-bearing debt, liquidity and interest rate risks
4.5 Fair value hierarchy
Section 5 page 101 Tax
5.1 Tax on profit
5.2 Deferred tax
Section 6 page 105 Acquisitions
6.1 Acquisitions of enterprises and activities
6.2 Discontinued operations and assets held for sale
Section 7 page 111 Provisions, other liabilities etc.
7.1 Provisions
7.2 Other liabilities
7.3 Deferred income
7.4 Contingent liabilities
Section 8 page 116 Other disclosure requirements
8.1 Related parties
8.2 Fees to auditors
8.3 Government grants
8.4 Events after the balance sheet date
Section 9 page 119 Basis for preparation
9.1 Group accounting policies
9.2 Accounting estimates and judgements
Section 10 page 130 Notes to Parent financial statements
Section 11 page 138 Subsidiaries and associates
Notes to consolidated financial statements Demant – Annual Report 2023 68
Section 1 Operating activities and cash flow Demant – Annual Report 2023 69
Operating activities and cash flow Demant – Annual Report 2023 69
REVENUE 22,443 DKK MILLION
FREE CASH FLOW 3,483 DKK MILLION
Section 1 Operating activities and cash flow Demant – Annual Report 2023 70
Management has identified Hearing Healthcare and Communications as the reportable segments in the Group, as this reflects Management’s approach to the organisation and the management of activities, including the assessment of results and the use of resources. Hearing Healthcare comprises the business areas: Hearing Aids, Hearing Care and Diagnostics, which provide hearing healthcare solutions, involving manufacturing, servicing and sale of hearing aids, diagnostic products and services. In 2022, Demant announced the decision to discontinue its Hearing Implants business. Please refer to Note 6.2. Communications comprises our headset business, which operates under the EPOS brand and provides headsets and other solutions for the professional call centre and office market (Enterprise Solutions) and headsets for the gaming market (Gaming). In August 2023, the decision was taken to wind down our Gaming business.
Accounting policies
Segmentation of income statement
Segment performance is evaluated on EBIT level and is based on the accounting policies for the consolidated income statement. Consolidated financial income and expenses as well as income taxes are managed on Group level and are not allocated to operating segments.
Segmentation of assets and liabilities
Segment assets and liabilities are based on the accounting policies for the consolidated balance sheet and allocated to operating segments. The Group’s borrowings, derivative financial instruments and income tax-related assets and liabilities are managed on Group level and are not allocated to operating segments.
1.1 Segment disclosures (DKK million)
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Hearing Healthcare | Communications | Consolidated | Hearing Healthcare | Communications | Consolidated | |
| Revenue | 21,601 | 842 | 22,443 | 18,645 | 1,060 | 19,705 |
| Production costs | -5,281 | -618 | -5,899 | -4,453 | -583 | -5,036 |
| Gross profit | 16,320 | 224 | 16,544 | 14,192 | 477 | 14,669 |
| R&D costs | -1,226 | -184 | -1,410 | -1,083 | -231 | -1,314 |
| Distribution costs | -9,554 | -363 | -9,917 | -8,787 | -445 | -9,232 |
| Administrative expenses | -1,102 | -36 | -1,138 | -1,001 | -37 | -1,038 |
| Share of profit after tax, associates | 68 | 1 | 69 | 122 | - | 122 |
| Operating profit (EBIT) | 4,506 | -358 | 4,148 | 3,443 | -236 | 3,207 |
| Other: | ||||||
| Depreciation | 1,128 | 25 | 1,153 | 998 | 26 | 1,024 |
| Amortisation | 164 | 17 | 181 | 135 | 17 | 152 |
| Fair value adjustments of non-controlling interests in step acquisitions | 27 | - | 27 | 14 | - | 14 |
Section 1 Operating activities and cash flow Demant – Annual Report 2023 71
1.1 Segment disclosures (continued) (DKK million)
| 2023 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| Hearing Healthcare | Communications | Eliminations | Not allocated | Consolidated | Hearing Healthcare | Communications | Eliminations | |
| Intangible assets | 13,091 | 449 | - | - | 13,540 | 12,117 | 465 | - |
| Property, plant and equipment | 2,789 | 24 | - | - | 2,813 | 2,523 | 30 | - |
| Lease assets | 2,564 | 32 | - | - | 2,596 | 2,262 | 42 | - |
| Investments in associates | 660 | 68 | - | - | 728 | 755 | 67 | - |
| Other non-current assets | 863 | 80 | - | 542 | 1,485 | 959 | 77 | - |
| Total non-current assets | 19,967 | 653 | - | 542 | 21,162 | 18,616 | 681 | - |
| Inventories | 2,422 | 423 | - | - | 2,845 | 2,359 | 545 | - |
| Trade receivables | 3,466 | 184 | - | - | 3,650 | 3,368 | 258 | - |
| Intra-group receivables | 1,478 | - | -1,478 | - | - | 1,298 | - | -1,298 |
| Other current assets | 1,358 | 110 | - | - | 1,468 | 1,296 | 102 | - |
| Cash | 1,104 | 34 | - | - | 1,138 | 1,078 | 52 | - |
Section 1 Operating activities and cash flow
1.2 Revenue (DKK million)
| 2023 | 2022 | |
|---|---|---|
| Liabilities related to contracts with customers: | ||
| Customer prepayments* | 62 | 68 |
| Future performance obligations* | 1,121 | 946 |
| Expected volume discounts and other customer-related items** | 389 | 343 |
| Expected product returns*** | 197 | 172 |
| Transferred to liabilities related to assets held for sale | -4 | - |
| Contract liabilities with customers | 1,769 | 1,525 |
*Included in deferred income.
**Included in other cost payables under other liabilities.
***Included in product-related liabilities under other liabilities.
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Changes in contract liabilities with customers: | ||
| Contract liabilities at 1.1. | 1,525 | 1,390 |
| Foreign currency translation adjustment | -15 | 17 |
| Revenue recognised and included in the contract liability balance at 1.1. | -576 | -554 |
| Increases due to cash received, excluding amounts recognised as revenue during the year | 614 | 624 |
| Changes from expected volume discounts and other customer-related items | 51 | 35 |
| Changes from product returns | 28 | 6 |
| Additions from acquisitions | 142 | 11 |
| Transferred to liabilities related to assets held for sale | - | -4 |
| Contract liabilities at 31.12. | 1,769 | 1,525 |
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Revenue by business area: | ||
| Hearing Aids | 10,036 | 8,231 |
| Hearing Care | 9,083 | 8,123 |
| Diagnostics | 2,482 | 2,291 |
| Communications – EPOS | 842 | 1,060 |
| Revenue | 22,443 | 19,705 |
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Revenue by geographic region: | ||
| Europe | 9,137 | 8,108 |
| North America | 9,236 | 8,078 |
| Asia | 2,331 | 1,887 |
| Pacific region | 1,103 | 1,055 |
| Rest of world | 636 | 577 |
| Revenue | 22,443 | 19,705 |
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Revenue by country: | ||
| Denmark | 261 | 265 |
| USA | 7,653 | 6,726 |
| France | 2,214 | 2,188 |
| Other countries | 12,315 | 10,526 |
| Revenue | 22,443 | 19,705 |
Nature of goods and services
Control is normally transferred to the customer when the goods are shipped to the customer, though delivery terms can vary and control may be transferred at a later point in time. When selling hearing aids to customers, we transfer control and recognise revenue, when the hearing aid is delivered to the customer at a given point in time, and when a hearing aid is initially fitted to the user’s specific hearing loss. In some countries, the users are granted a trial period. In such cases, the transfer of control occurs when the trial period expires. In some countries, customers are given the right to return the hearing aid within a certain period. In such cases, the expected returns are estimated based on an analysis of historical return rates adjusted for any known factors impacting expectations of future return rates. Revenue and cost of goods sold are adjusted accordingly, and contract liabilities (refund liabilities) and rights to the returned goods (included in prepaid expenses) are recognised for the expected returns.
Our activities also involve delivery of various services, such as extended warranties, warranty-related coverages (loss and damage) and after-sales services (e.g. fine-tuning of the hearing aid, additional hearing tests and cleaning). Revenue from these services is recognised on a straight-line basis over the warranty or service period, as the user makes use of the service continuously. Some users purchase a battery package or are given batteries free of charge as part of the purchase of the hearing aid, entitling them to free batteries for a certain period. Revenue is recognised when the user receives the batteries or is given batteries free of charge as part of the purchase of the hearing aid. When available, we use an observable price to determine the stand-alone selling price for the separate performance obligations related to these services, and in countries where observable prices are not available, we use a cost-plus-margin method. The standard warranty period for hearing aids and diagnostic equipment varies between countries but is typically 12-24 months and for certain products or countries up to 48 months. The extended warranty covers periods beyond the standard warranty period or standard warranty terms. Payment terms vary significantly between countries and depend on whether the customer is a private or public customer. The majority of hearing aids sold to users are invoiced and paid for after the initial fitting, but some customers choose to have the hearing aid financed by us. The transaction price of such arrangements is adjusted for any significant financing benefit, and the financing component is recognised as financial income.
Accounting policies
Revenue is recognised when obligations under the terms of the contract with the customer are satisfied, which usually occurs with the transfer of control of our products and services within Hearing Healthcare and Communications. Revenue is measured as the consideration we expect to receive in exchange for transferring goods and providing services net of the estimated discounts or other customer-related reductions.
Accounting estimates and judgements
Discounts, returns etc. (estimate)
Discounts, loyalty programmes and other revenue reductions are estimated and accrued when the related revenue is recognised. To make such estimates is a matter of judgement, as all conditions are not known at the time of sale, e.g. the number of units sold to a given customer or the expected utilisation of loyalty programmes. Sales discounts, rebates and loyalty programmes are adjusted, as we obtain better information on the likelihood that they will be realised and the value at which they are expected to be realised. Sales discounts and rebates are recognised under other cost payables as part of other liabilities, and loyalty programmes are recognised under deferred income. Depending on local legislation and the conditions to which a sale is subject, some customers have the option to return purchased goods and obtain a refund. Based on historical return rates, an estimate is made of the expected returns and a provision is recognised. This provision is updated, as returns are recognised or when we collect more accurate data on return rates.
After-sales services (estimate)
After-sales services are provided to users of our hearing aids and are based on estimates, as not all users make use of these services. The estimate is a matter of judgement and is based on the number of visits, the duration of an average user’s visits and the expected number of users that make use of the after-sales services.
Remuneration of the Executive Board
The total remuneration of the Executive Board comprises:
• Wages and salaries, which include a base salary and certain other benefits
• A short-term incentive programme (cash bonus) – STIP
• A long-term incentive programme (share-based remuneration) – LTIP
As announced on 27 April 2023, Arne Boye Nielsen, former President of Diagnostics and Communications and member of the Executive Board, left his position in Demant. He was entitled to continued remuneration throughout the notice period, but not entitled to severance pay in accordance with the Remuneration Policy. Arne Boye Nielsen’s remuneration covers the period in which he rendered services as member of the Executive Board. The remuneration of the Executive Board and the Board of Directors is described in detail in our Remuneration Report 2023.
Remuneration of the Board of Directors
The remuneration of the Board of Directors comprises a fixed fee and is not incentive-based. In 2023, the basic remuneration was DKK 450,000 (DKK 400,000 in 2022). The Chair receives three times the base fee and the Vice Chair twice the base fee. The members of the audit committee receive a base fee of DKK 100,000 (DKK 50,000 in 2022), and the chair of the audit committee receives twice the base fee. The individual Board members' fees and their shareholdings can be found in our Remuneration Report 2023.
Accounting policies
Employee costs comprise wages, salaries, social security contributions, annual and sick leave, bonuses and non-monetary benefits and are recognised in the year in which the associated services are rendered by the employees.
Consolidated balance sheet (DKK million)
| Assets | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Current | Non-curr | Other | Total | Current | Non-curr | Other | Total | |||
| Property, plant and equipment | - | 8,968 | - | 8,968 | - | 8,699 | - | 8,699 | ||
| Goodwill | - | 3,136 | - | 3,136 | - | 3,145 | - | 3,145 | ||
| Intangible assets | - | 1,649 | - | 1,649 | - | 1,686 | - | 1,686 | ||
| Other non-current assets | - | 542 | - | 542 | - | 538 | - | 538 | ||
| Deferred tax assets | - | 1,201 | - | 1,201 | - | 925 | - | 925 | ||
| Income tax receivables | 13 | - | - | 13 | 14 | - | - | 14 | ||
| Other current assets | 1,156 | - | - | 1,156 | 1,084 | - | - | 1,084 | ||
| Trade receivables | 7,654 | - | - | 7,654 | 7,956 | - | - | 7,956 | ||
| Cash and cash equivalents | 988 | - | - | 988 | 547 | - | - | 547 | ||
| Total current assets | 10,111 | - | - | 10,111 | 10,363 | - | - | 10,363 | ||
| Assets held for sale | 283 | - | - | 283 | 964 | - | - | 964 | ||
| Total assets | 30,078 | 14,102 | - | 44,180 | 28,979 | 15,099 | - | 44,078 | ||
| Total assets | 30,078 | 1,404 | -1,478 | 542 | 30,546 | 28,979 | 1,638 | -1,298 | 538 | 29,857 |
| Equity and Liabilities | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Equity | 22,024 | -261 | - | -12,425 | 9,338 | 21,561 | 74 | - | -13,073 | 8,562 |
| Borrowings | - | - | - | 10,171 | 10,171 | - | - | - | 6,098 | 6,098 |
| Lease liabilities | 2,023 | 22 | - | - | 2,045 | 1,734 | 32 | - | - | 1,766 |
| Other non-current liabilities | 1,468 | 42 | - | 620 | 2,130 | 1,219 | 37 | - | 606 | 1,862 |
| Total non-current liabilities | 3,491 | 64 | - | 10,791 | 14,346 | 2,953 | 69 | - | 6,704 | 9,726 |
| Borrowings | - | - | - | 1,597 | 1,597 | - | - | - | 6,598 | 6,598 |
| Lease liabilities | 629 | 12 | - | - | 641 | 601 | 13 | - | - | 614 |
| Intra-group payables | - | 1,478 | -1,478 | - | - | - | 1,298 | -1,298 | - | - |
| Other current liabilities | 3,845 | 111 | - | 579 | 4,535 | 3,689 | 184 | - | 309 | 4,182 |
| Liabilities related to assets held for sale | 89 | - | - | - | 89 | 175 | - | - | - | 175 |
| Total current liabilities | 4,563 | 1,601 | -1,478 | 2,176 | 6,862 | 4,465 | 1,495 | -1,298 | 6,907 | 11,569 |
| Total equity and liabilities | 30,078 | 1,404 | -1,478 | 542 | 30,546 | 28,979 | 1,638 | -1,298 | 538 | 29,857 |
Where Demant provides long-term employee benefits, the costs are accrued to match the rendering of service by the employee in question.
Remuneration to Executive Board and Board of Directors (included in employee costs) (DKK million)
| 2023 | 2022 | |
|---|---|---|
| Executive Board: | ||
| Wages and salaries | 25.6 | 25.9 |
| Cash bonus | 4.4 | 1.7 |
| Share-based remuneration | 11.6 | 8.7 |
| Remuneration in the notice period* | 22.1 | - |
| Total | 63.7 | 36.3 |
| Board of Directors: | ||
| Fee | 5.4 | 4.8 |
| Total | 5.4 | 4.8 |
*As announced on 27 April 2023, Arne Boye Nielsen, former President of Diagnostics and Communications and member of the Executive Board, left his position in Demant.
Employee costs (DKK million)
| Note | 2023 | 2022 | |
|---|---|---|---|
| Wages and salaries | 8,051 | 7,307 | |
| Share-based remuneration | 38 | 32 | |
| Defined contribution plans | 98 | 134 | |
| Defined benefit plans | 7.1 | 12 | |
| Social security costs etc. | 15 | 928 | |
| Employee costs | 9,127 | 8,305 |
Employee costs by function:
| 2023 | 2022 | |
|---|---|---|
| Production costs | 1,185 | 1,130 |
| R&D costs | 1,030 | 839 |
| Distribution costs | 5,926 | 5,465 |
| Administrative expenses | 986 | 871 |
| Employee costs | 9,127 | 8,305 |
Average number of full-time employees: 21,168 (2023) vs. 19,239 (2022)
Share-based remuneration
The Group has two types of share-based remuneration programmes, which consist of the “shadow share” programme and a RSU (restricted stock units) programme. The “shadow share” programme introduced in 2016 is cash-settled, whereas the RSU programme introduced in 2019 is equity-settled. Remuneration under both programmes is granted on a yearly basis and is contingent on the employee still being employed and not under termination when three years have passed from the time of the grant. The fair value of the shares at the time of the grant under both programmes is based on the average share price of the first five trading days after publication of the annual report.
Shadow share programme
In 2023 and 2022, the Group granted no “shadow shares”. No new programmes were introduced in 2023. The liability is recognised on a straight-line basis, as the service is rendered, and the liability is re-measured at each reporting date and at the settlement date based on the fair value of the “shadow shares”. Fair value adjustments are recognised as financial income or financial expenses. If relevant, the liability is adjusted to reflect the expected risk of non-vesting as a result of resignations. Any changes to the liability are recognised in the income statement. In 2023, the Group bought back shares to cover the financial risk of share price fluctuations related to the programmes. At 31 December 2023, the remaining average contractual life of cash-settled remuneration programmes was three months (nine months in 2022).
RSU programme
In 2023, RSU shares were granted to 151 employees (149 employees in 2022). The Group recognised costs of DKK 34 million (DKK 24 million in 2022) in the income statement related to the RSU programme. There has been no subsequent remeasurement of the fair value. The costs are recognised on a straight-line basis, as the service is rendered. At 31 December 2023, the remaining average contractual life of equity-settled share programmes was 21 months (21 months in 2022).
Restricted share units (RSU programme)
| Total shares (number) | Total fair value (DKK million) | |
|---|---|---|
| Outstanding 1.1.2022 | 109,965 | |
| Granted | 166,345 | 45 |
| Exercised | -18,943 | |
| Forfeited | -8,069 | |
| Outstanding 31.12.2022 | 249,298 | |
| Granted | 235,254 | 52 |
| Exercised | -19,001 | |
| Forfeited | -1,753 | |
| Outstanding 31.12.2023 | 463,798 |
Accounting estimates and judgements
Vesting conditions and fair value (estimate)
For the share-based programmes, Management estimates the likelihood of vesting conditions being satisfied. Vesting is entirely dependent on the persons enrolled in the share-based programmes remaining employed until expiry of the vesting period. Based on such likelihood, the estimate made is used to calculate the fair value of the share-based programmes. Furthermore, the shares must be valued. For this purpose, Management uses the share price quoted on Nasdaq Copenhagen.
Share-based remuneration ("shadow share" programme) (DKK million)
| Other senior members of Management | Executive Board | Other senior members of Management | |
|---|---|---|---|
| 2023 | 2023 | 2022 | |
| Liabilities at 1.1. | 11.0 | 1.8 | 14.4 |
| Transfer due to extension of Executive Board* | - | 6.1 | -6.1 |
| Transfer due to termination of Executive Board member** | -2.1 | - | - |
| Expensed during the year in wages and salaries | 4.5 | 0.2 | 6.0 |
| Fair value adjustments | 3.9 | 0.4 | -6.6 |
| Settled during the year | -8.0 | -2.2 | -8.9 |
| Liabilities at 31.12. | 9.3 | 2.3 | 11.0 |
| Granted during the year | - | - | - |
| Unrecognised commitment at 31.12.* | 0.8 | 0.3 | 3.9 |
- Arne Boye Nielsen, former President of Diagnostics and Communications, and Niels Wagner, President of Hearing Care, joined the Executive Board effective 1 April 2022. The liability at the beginning of the year has therefore been transferred to the Executive Board.
** As announced on 27 April 2023, Arne Boye Nielsen left his position in Demant. The liability at the end of the year has therefore been transferred to the Other senior members of Management.
*** Unrecognised commitment is the part of granted ”shadow shares” not expensed at 31 December.
1.4 Amortisation, depreciation and impairment losses
For accounting policies on amortisation and depreciation, please refer to Note 3.1, Note 3.2 and Note 3.3. There were no impairment losses in 2023 and 2022 except for the impairment losses related to discontinued operations, please refer to Note 6.2.
| Note | 2023 | 2022 | |
|---|---|---|---|
| Amortisation of intangible assets | 3.1 | 181 | 152 |
| Depreciation of property, plant and equipment | 3.2 | 446 | 405 |
| Depreciation of lease assets | 3.3 | 707 | 619 |
| Amortisation, depreciation and impairment losses | 1,334 | 1,176 |
Amortisation, depreciation and impairment losses by function:
| 2023 | 2022 | |
|---|---|---|
| Production costs | 126 | 109 |
| R&D costs | 53 | 53 |
| Distribution costs | 929 | 812 |
| Administrative expenses | 226 | 202 |
| Amortisation, depreciation and impairment losses | 1,334 | 1,176 |
1.5 Earnings per share
| 2023 | 2022 | |
|---|---|---|
| Demant A/S' shareholders' share of profit for the year, DKK million – continuing operations | 2,552 | 2,274 |
| Demant A/S' shareholders' share of profit for the year, DKK million – discontinued operations | -757 | -192 |
| Demant A/S' shareholders' share of profit for the year, DKK million | 1,795 | 2,082 |
| Average number of shares, million | 225.77 | 233.45 |
| Average number of treasury shares, million | -2.64 | -7.44 |
| Average number of shares outstanding, million | 223.13 | 226.01 |
| Earnings per share (EPS), DKK – continuing operations | 11.44 | 10.06 |
| Diluted earnings per share (DEPS), DKK – continuing operations | 11.44 | 10.06 |
| Earnings per share (EPS), DKK – discontinued operations | -3.39 | -0.85 |
| Diluted earnings per share (DEPS), DKK – discontinued operations | -3.39 | -0.85 |
| Earnings per share (EPS), DKK | 8.04 | 9.21 |
| Diluted earnings per share (DEPS), DKK | 8.04 | 9.21 |
Accounting policies
Raw materials, components and goods for resale are measured at cost according to the FIFO principle (according to which the most recently purchased items are considered to be in stock) or at their net realisable value, whichever is lower. Group-manufactured finished goods and work in progress are measured at the value of direct costs, direct payroll costs, consumables and a proportionate share of indirect production costs, which are allocated based on the normal capacity of the production facility. Indirect production costs include the proportionate share of capacity costs directly relating to Group-manufactured finished goods and work in progress. The net realisable value of inventories is determined as the estimated selling price less costs of completion and costs to sell.
Write-downs for the year are shown net, as breakdown into reversed write-downs and new write-downs is not possible. Inventories are generally expected to be sold within one year.
Accounting estimates and judgements
Indirect production costs (significant judgement)
Indirect production cost allocations to inventories are based on relevant judgements of capacity utilisation at the production facility, of production time and of other product-related factors. The judgements are reviewed regularly to ensure that inventories are measured at their actual production cost. Changes in judgements may affect gross profit margins as well as the valuation of work in progress, finished goods and goods for resale.
Obsolescence provision (estimate)
The obsolescence provision for inventories is based on the expected sales forecasts for the individual types of hearing devices, diagnostic equipment, headsets and other gaming/enterprise devices. Sales forecasts are based on Management’s expectations of market conditions and trends, and the obsolescence provision is subject to changes in these assumptions.
1.6 Inventories (DKK million)
| 2023 | 2022 | |
|---|---|---|
| Raw materials and purchased components | 1,244 | 1,249 |
| Work in progress | 71 | 60 |
| Finished goods and goods for resale | 1,530 | 1,595 |
| Inventories | 2,845 | 2,904 |
| Write-downs, provisions for obsolescence etc. included in the above | 149 | 146 |
Included in the income statement under production costs:
| 2023 | 2022 | |
|---|---|---|
| Write-downs of inventories for the year, net | 54 | 52 |
| Cost of goods sold for the year | 4,343 | 3,813 |
The opening balance of trade receivables in 2023 amounted to DKK 3,203 million.# Section 1 Operating activities and cash flow
Demant – Annual Report 2023 79
Accounting policies
Trade receivables and contract assets are measured at amortised costs less ex- pected lifetime credit losses. For trade receivables, the Group has a sim- plified approach to determining the ex- pected credit loss. The allowance for credit loss is measured through a provision matrix. To measure the expected credit loss, trade receivables are grouped based on shared credit risk and the number of days that have passed after the due date. Allowances are also made for trade receivables not due. For trade receivables that are considered credit-impaired, the expected credit loss is determined on an individual basis.
Accounting estimates and judgements
Impairment of receivables (estimate)
The Group has historically incurred insignifi- cant losses on trade receivables and con- tract assets. Allowance for impairment is calculated for trade receivables. The allowance is deter- mined as expected credit losses based on assessments of the debtors’ ability to pay. These assessments are made by local management for uniform groups of debt- ors based on maturity analyses. When in- dicated by special circumstances, impair- ments are made for individual trade re- ceivables.
1.7 Trade receivables (DKK million)
| Allowance for impairment: | 2023 | 2022 |
|---|---|---|
| Allowance for impairment at 1.1. | -324 | -334 |
| Foreign currency translation adjustments | 3 | -11 |
| Realised during the year | 67 | 151 |
| Additions during the year | -147 | -186 |
| Reversals during the year | 16 | 38 |
| Transfer to assets held for sale | - | 18 |
| Allowance for impairment at 31.12. | -385 | -324 |
Credit risk
| More than 12 months overdue | 6-12 months overdue | 3-6 months overdue | 0-3 months overdue | not due overdue | Total carrying amount | |
|---|---|---|---|---|---|---|
| 2023 | ||||||
| Gross carrying amount | 332 | 140 | 221 | 759 | 2,583 | 4,035 |
| Specific loss allowance | -197 | -28 | -41 | -62 | -19 | -347 |
| General loss allowance | -8 | -5 | -4 | -9 | -12 | -38 |
| Total | 127 | 107 | 176 | 688 | 2,552 | 3,650 |
| Expected loss rate | 61.7% | 23.6% | 20.4% | 9.4% | 1.2% | 9.5% |
| 2022 | ||||||
| Gross carrying amount | 277 | 212 | 228 | 669 | 2,564 | 3,950 |
| Specific loss allowance | -123 | -62 | -48 | -42 | -15 | -290 |
| General loss allowance | -6 | -5 | -4 | -8 | -11 | -34 |
| Total | 148 | 145 | 176 | 619 | 2,538 | 3,626 |
| Expected loss rate | 46.6% | 31.6% | 22.8% | 7.5% | 1.0% | 8.2% |
Accounting policies
Customer loans are initially recognised at fair value less transaction costs and are subsequently measured at amortised costs less loss allowance or impairment losses. Any difference between the nominal value and the fair value of the loans at initial recognition is treated as a prepaid dis- count on future sales to the customer and is recognised in the income statement as a reduction of revenue when the customer purchases goods from the Group. The fair value of customer loans at initial recognition is measured as the present value of future repayments on the loan discounted at a market interest rate. The effective interest on customer loans is rec- ognised as financial income in the income statement over the term of the loans. A loss allowance is recognised on initial recognition and is subsequently based on a 12-month expected credit loss model. If a significant increase in the credit risk has arisen since the initial recognition of the loan, a loss allowance based on the ex- pected lifetime credit loss is provided.
Accounting estimates and judgements
Accounting treatment (judgement) and impairment (estimate) of loans
The Group provides sales-related financ- ing in the form of loans to some of its cus- tomers and business partners. These cus- tomer loan arrangements are complex, cover several aspects of the customer rela- tionship and may vary from agreement to agreement. Management assesses the recognition and classification of income and expenses for each of these agreements, including whether the agreement represents a dis- count on future sales (judgement). Man- agement also assesses whether there is an indication of impairment based on cur- rent economic market conditions and changes in the customer’s payment be- haviour (estimate).
1.8 Customer loans (DKK million)
| 2023 | 2022 | |
|---|---|---|
| Non-current customer loans | 477 | 566 |
| Current customer loans | 191 | 229 |
| Total customer loans | 668 | 795 |
| Allowance for impairment: | ||
| Allowance for impairment at 1.1. | -33 | -17 |
| Realised during the year | - | 1 |
| Additions during the year | -32 | -26 |
| Reversals during the year | 3 | 9 |
| Allowance for impairment at 31.12. | -62 | -33 |
Group internal credit rating (DKK million)
| Expected 2023 loss rate | Gross credit carrying amount | Carrying amount | |
|---|---|---|---|
| Performing 12-month expected credit loss | 0.4% | 551 | 549 |
| Underperforming Expected lifetime credit loss | 33.5% | 179 | 119 |
| Total customer loans | 730 | 668 | |
| 2022 | |||
| Performing 12-month expected credit loss | 0.3% | 673 | 671 |
| Underperforming Expected lifetime credit loss | 20.0% | 155 | 124 |
| Total customer loans | 828 | 795 |
1.9 Specification of non-cash items
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Amortisation and depreciation | 1,334 | 1,176 |
| Share of profit after tax, associates | -69 | -122 |
| Gain on sale of intangible assets and property, plant and equipment | 11 | -1 |
| Provisions | 95 | -26 |
| Exchange rate adjustments | -50 | -51 |
| Employee share salary arrangement | 64 | 80 |
| Step-up gains | -27 | -14 |
| Other non-cash items | -35 | 32 |
| Non-cash items etc. | 1,323 | 1,074 |
Section 2 Exchange rates
Demant – Annual Report 2023 81
Exchange rates
Demant – Annual Report 2023 81
Demant – Annual Report 2023 82
The Group has cash flow in foreign curren- cies due to its international operations, which exposes the Group to fluctuations in exchange rates. Hedging against ex- change rate exposures ensures greater predictability in profit. The Group manu- factures and distributes most of its prod- ucts from the production facilities in Po- land and Mexico. The products are sold to the Group’s regional affiliates and are as a general principle invoiced in the functional currency of the buying entities. The currencies that mainly contribute to the Group’s exchange rate risks are US dollars, British pound, Canadian dollars, Australian dollars, Japanese yen, Polish zloty and Chinese yuan (renminbi). The aim of the Group’s hedging policy is to re- duce the Group’s exposure to exchange rate fluctuations, mainly by entering for- ward exchange contracts to mitigate the Group’s risks related to the impact that ex- change rate fluctuations have on consoli- dated earnings for up to 18 months rolling forward. The exchange rate risks are managed by Group Treasury. Hedging is done in ac- cordance with the Group's policy to main- tain an overall adequate hedging level in 70-100% of the Group’s exposure to ex- change rate fluctuations. Group Treasury is not allowed to undertake any financial transactions in foreign currencies of a speculative nature. Cash flow hedging is undertaken to the extent possible to miti- gate any negative effects of adverse de- velopments in exchange rates on the con- solidated operating results. Due to the fixed exchange rate policy to- wards the euro in Denmark, the risk asso- ciated with exposure to fluctuations is con- sidered to be limited and therefore not hedged. Furthermore, the Group seeks to balance the on-balance net exposure in our main trading currencies. The Group does not hedge translation risks associated with the consolidating group accounts. The tables show the impact on the year’s operating profit (EBIT) and consolidated equity, given a change of 5% in the ex- change rates with the highest exposures. The exchange rate impact on EBIT is cal- culated based on the Group’s EBIT for each currency and does not allow a possi- ble exchange rate impact on balance sheet values in those currencies.
2.1 Exchange rate risk policy
2.2 Sensitivity analysis in respect of exchange rates
| Effect on EBIT, 5% positive change in exchange rates* | Effect on equity, 5% positive change in exchange rates | ||||
|---|---|---|---|---|---|
| (DKK million) | 2023 | 2022 | (DKK million) | 2023 | 2022 |
| USD | +81 | +56 | USD | +66 | +47 |
| GBP | +35 | +30 | GBP | +34 | +29 |
| CAD | +29 | +22 | CAD | +26 | +20 |
| AUD | +10 | +10 | AUD | +9 | +9 |
| JPY | +6 | +5 | JPY | +5 | +5 |
| PLN | -33 | -30 | PLN | -35 | -31 |
| CNY | +7 | +5 | CNY | +6 | +4 |
*Estimated on a non-hedged basis, i.e. the total annual exchange rate effect, excluding forward exchange contracts.
Demant – Annual Report 2023 83
Cash flow hedging
Open forward exchange contracts at the balance sheet date, that is entered to hedge future cash flow, may be specified as shown in the table, with contracts for the sale of currency being shown at nega- tive contract values. The expiry dates re- flect the periods in which the hedged cash flows are expected to be realised. Realised forward exchange contracts, that is entered to hedge future cash flow, are recognised in the income statement to- gether with revenue in foreign currencies that such contracts are designed to hedge cash flow for. In 2023, our forward ex- change contracts realised a gain of DKK 106 million (loss of DKK 202 million in 2022), which increased our reported revenue for the year. The Group’s forward exchange contracts were effective in 2023 and 2022.
Accounting policies
On initial recognition, derivatives are measured at fair value at the settlement date.# 2.2 Financial Instruments (Continued)
After initial recognition, derivatives are measured at fair value at the balance sheet date. Any positive or negative fair values of derivatives are recognised as separate items on the balance sheet as unrealised gains/losses on financial contracts. Forward exchange contracts are measured based on current market data and by means of commonly recognised valuation methods. Please refer to Note 4.5.
Any changes in fair values of derivatives classified as hedging instruments and satisfying the criteria for hedging the fair value of a recognised asset or a recognised liability are recognised in the income statement together with any changes in the fair value of the hedged asset or hedged liability. Any changes in fair values of derivatives classified as hedging instruments and satisfying the criteria for effective hedging of future transactions are recognised in other comprehensive income. The ineffective portion is recognised directly in the income statement. On realisation of the hedged transactions, the accumulated changes are recognised together with the related transactions.
Derivatives not fulfilling the conditions for treatment as hedging instruments are considered trading investments and measured at fair value, with fair value adjustments being recognised on an ongoing basis in the income statement.
2.3 Hedging and Forward Exchange Contracts
| Contractual currency | Hedging expiry period* | Average hedging rate | Positive fair value at year-end | Negative fair value at year-end | Fair value (DKK million) 2023 | Fair value (DKK million) 2022 |
|---|---|---|---|---|---|---|
| 2023 | ||||||
| USD | 10 months | 676 | -1,216 | 15 | 18 | |
| AUD | 11 months | 447 | -239 | -5 | -5 | |
| GBP | 10 months | 844 | -523 | -4 | 1 | |
| CAD | 10 months | 504 | -413 | -2 | 1 | |
| JPY | 11 months | 4.90 | -95 | 1 | 2 | |
| PLN | 9 months | 161 | 711 | 37 | 37 | |
| EUR** | 12 months | 742 | 893 | 1 | 1 | |
| -882 | 43 | |||||
| 60 | 17 | |||||
| 2022 | ||||||
| USD | 10 months | 701 | -1,072 | 18 | 30 | |
| AUD | 9 months | 487 | -263 | 8 | 8 | |
| GBP | 9 months | 855 | -470 | 13 | 13 | |
| CAD | 9 months | 533 | -362 | 16 | 16 | |
| JPY | 10 months | 5.34 | -85 | - | 1 | |
| PLN | 9 months | 150 | 479 | 15 | 15 | |
| EUR** | 24 months | 742 | 891 | -2 | - | |
| -882 | 68 | |||||
| 83 | 15 |
*Hedging periods represent the estimated periods for which the exchange rate exposure of a relative share of our revenue in a currency will be covered by forward exchange contracts.
**Forward exchange contracts in euros hedged a fixed committed financial loan.
Section 3 Asset Base
Demant – Annual Report 2023 84
INTANGIBLE ASSETS
13,540 DKK MILLION
PROPERTY, PLANT AND EQUIPMENT
2,813 DKK MILLION
OTHER NON-CURRENT ASSETS
1,652 DKK MILLION
3.1 Intangible Assets (DKK million)
| 2023 | 2023 | 2022 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Goodwill | Patents and licences | Other intangible assets | Other under development* | Total assets | Goodwill | Patents and licences | Other intangible assets | Other under development* | Total assets | |
| Cost at 1.1. | 11,488 | 75 | 1,639 | 260 | 13,462 | 9,471 | 137 | 1,229 | 274 | 11,111 |
| Foreign currency translation adjustments | -220 | - | -8 | -6 | -234 | 111 | - | 15 | 2 | 128 |
| Additions during the year | - | 1 | 48 | 145 | 194 | - | 7 | 75 | 194 | 276 |
| Additions relating to acquisitions | 1,112 | - | 58 | 1 | 1,171 | 2,366 | 1 | 235 | 4 | 2,606 |
| Disposals during the year | - | -5 | -54 | - | -59 | -1 | -4 | -4 | - | -9 |
| Transferred to/from other items | 1 | - | 76 | -68 | 9 | - | - | 107 | -107 | - |
| Transferred to assets held for sale | - | - | 18 | - | 18 | -459 | -66 | -18 | -107 | -650 |
| Cost at 31.12. | 12,381 | 71 | 1,777 | 332 | 14,561 | 11,488 | 75 | 1,639 | 260 | 13,462 |
| Amortisation at 1.1. | - | -56 | -824 | - | -880 | - | -116 | -678 | - | -794 |
| Foreign currency translation adjustments | - | - | 5 | - | 5 | - | -11 | - | - | -11 |
| Amortisation for the year | - | -5 | -176 | - | -181 | - | -5 | -147 | - | -152 |
| Amortisation transfer | - | - | -9 | - | -9 | - | - | - | - | - |
| Disposals during the year | - | 5 | 50 | - | 55 | - | 3 | 1 | - | 4 |
| Transferred to assets held for sale | - | - | -11 | - | -11 | - | 62 | 11 | - | 73 |
| Amortisation at 31.12. | - | -56 | -965 | - | -1,021 | - | -56 | -824 | - | -880 |
| Carrying amount at 31.12. | 12,381 | 15 | 812 | 332 | 13,540 | 11,488 | 19 | 815 | 260 | 12,582 |
*Prepayments are included in assets under development.
Demant – Annual Report 2023 86
Accounting Policies
On initial recognition, goodwill is recognised and measured as the difference between the acquisition cost – including the value of non-controlling interests in the acquired enterprise and the fair value of any existing investment in the acquired enterprise – and the fair values of the acquired assets, liabilities and contingent liabilities. Please refer to Accounting policies in Note 6.1.
On recognition, goodwill is allocated to corporate activities that generate independent payments (cash-generating units). The definition of a cash-generating unit is in line with the Group’s managerial structure as well as the internal financial management reporting. Goodwill is not amortised but is tested for impairment at least once a year. If the recoverable amount of a cash-generating unit is lower than the carrying amounts of property, plant and equipment and intangible assets, including goodwill, attributable to the particular cash-generating unit, the particular assets will be written down.
Patents and licences acquired from third parties are measured at cost less accumulated amortisation and impairment losses. Patents and licences are amortised on a straight-line basis over their estimated useful lives.
Other intangible assets consist of software, other rights than patents and licences and other intangible assets acquired in connection with business combinations, primarily brand value, customer relationships and non-compete agreements. Other intangible assets are measured at cost less accumulated amortisation and impairment losses. Other intangible assets are amortised on a straight-line basis over their estimated useful lives, except other rights, which are not amortised, as the residual value of other rights is considered to exceed the cost price and is instead tested annually for impairment. Please refer to Note 3.6.
Assets under development include internally developed IT systems. Assets under development are measured at cost, which includes direct salaries, consultant fees and other direct costs attributable to the development of such assets. Assets under development are not amortised, as they are not available for use.
Useful lives of intangible assets:
* Patents and licences: 5-20 years
* Software: 3-10 years
* Brand value: 5-10 years
* Customer relationships: 5-9 years
Accounting estimates and judgements
Product development (judgement)
It is Management’s opinion that the product development undertaken by the Group today cannot meaningfully be allocated to either the development of new products or the further development of existing products. Moreover, as the products are subject to approval by various authorities, it is difficult to determine the final completion of new products.
Demant – Annual Report 2023 87
3.2 Property, Plant and Equipment (DKK million)
| 2023 | 2022 | |
|---|---|---|
| Other plant, fixtures and equipment | Lease-under-construction* | |
| Cost at 1.1. | 1,339 | 835 |
| Foreign currency translation adjustments | 6 | 13 |
| Additions during the year | 20 | 51 |
| Additions relating to acquisitions | 8 | 9 |
| Disposals during the year | -60 | -221 |
| Transferred to/from other items | 126 | 39 |
| Transferred to assets held for sale | - | - |
| Cost at 31.12. | 1,439 | 726 |
| Depreciation and impairment losses at 1.1. | -333 | -598 |
| Foreign currency translation adjustments | - | -6 |
| Depreciation for the year | -29 | -87 |
| Disposals during the year | 58 | 219 |
| Transferred to/from other items | - | 6 |
| Transferred to assets held for sale | - | - |
| Depreciation and impairment losses at 31.12. | -304 | -466 |
| Carrying amount at 31.12. | 1,135 | 260 |
*Prepayments are included in assets under construction.
Demant – Annual Report 2023 88
Accounting Policies
Property, plant and equipment are recognised at cost less accumulated depreciation and impairment losses. Cost is defined as the acquisition price and costs directly relating to the acquisition until the point in time when the particular asset is ready for use. For assets produced by the Group, cost includes all costs directly attributable to the production of such assets, including materials, components, sub-supplies and payroll. If the acquisition or the use of an asset requires the Group to defray costs for the demolition or restoration of such asset, the calculated costs hereof are recognised as a provision and as part of the cost of the particular asset, respectively. Assets consisting of various elements will be depreciated separately if their useful lives are not the same.## 3.2 Property, plant and equipment (continued)
Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Land is not depreciated.
- Buildings: 30-50 years
- Technical installations: 10 years
- Plant and machinery: 3-5 years
- Other plant, fixtures and operating equipment: 3-5 years
- IT hardware: 3-5 years
- Leasehold improvements: Up to 10 years
Accounting estimates and judgements
Useful life and residual value (estimate)
The depreciation basis is cost less the estimated residual value of an asset after the end of its useful life. The residual value is the estimated amount, which could after deduction of costs to sell be obtained through the sale of the asset today, such asset already having the age and being in the state of repair expected after the end of its useful life. The residual value is determined at the time of acquisition and is reviewed annually. If the residual value exceeds the carrying amount, depreciation will be discontinued. Depreciation methods, useful lives and residual values are reviewed annually. Property, plant and equipment are written down to their recoverable amounts, if these are lower than their carrying amounts.
Approx. 95% of the Group’s leases consist of property agreements. The lease terms are of various length and may contain extension and termination options. Management exercises significant judgement in determining whether it is reasonably certain that these extension and termination options will be exercised.
3.3 Leases
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Lease assets at 1.1. | 2,304 | 2,079 |
| Foreign currency translation adjustments | -6 | 8 |
| Additions during the year | 913 | 760 |
| Additions relating to acquisitions | 142 | 170 |
| Disposals during the year | -50 | -71 |
| Depreciations during the year | -707 | -624 |
| Transferred to assets held for sale | - | -18 |
| Lease assets at 31.12. | 2,596 | 2,304 |
| Lease liabilities at 1.1. | 2,380 | 2,121 |
| Foreign currency translation adjustments | -8 | 7 |
| Additions during the year | 918 | 763 |
| Additions relating to acquisitions | 142 | 170 |
| Covid-19-related rent concessions | -6 | -3 |
| Disposals during the year | -42 | -45 |
| Payments | -767 | -660 |
| Interest | 69 | 46 |
| Transferred to liabilities related to assets held for sale | - | -19 |
| Lease liabilities at 31.12. | 2,686 | 2,380 |
| Current lease liabilities | 641 | 614 |
| Non-current lease liabilities | 2,045 | 1,766 |
Amounts recognised in the income statement:
- Variable lease payments: 33 (2022: 31)
- Short-term lease expenses: 41 (2022: 45)
- Low-value assets: 6 (2022: 4)
Accounting policies
Lease assets
Lease assets and liabilities are recognised in the balance sheet at the commencement date of the contract, if it is or contains a lease. Lease assets are recognised at cost less accumulated depreciation and impairment. Cost is defined as the lease liability adjusted for any lease payments made at or before the commencement date. Lease assets are depreciated on a straight-line basis over the lease term.
Lease liabilities
Lease liabilities are measured at the present value of future payments, using the implicit interest rate in the lease agreement. Lease payments are discounted, using the Group’s incremental borrowing rate adjusted for the functional currencies and length of the lease term, if the implicit interest rate in the lease agreement cannot be determined. Lease payments contain fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate as well as payments of penalties for terminating the lease, if the terms of the lease warrants that the Group exercises that option. The lease liability is remeasured if or when the future payment or lease term changes. Any net remeasurement of the lease liability is recognised as an adjustment to the lease asset. If the carrying amount of the lease asset is reduced to zero, the adjustment will be recognised in the income statement. Additional information Short-term lease expenses, low-value assets and variable lease payments are classified as operating expenses in the income statement. Please refer to Note 4.4 for a maturity analysis of the lease liabilities.
Accounting estimates and judgements
Lease term (judgement)
The lease term is the period during which the lease contract is enforceable. If the original expiry date of a lease contract has passed, typically in the case of property leases, but the contract continues without a determined expiry date, the lease term is set for an estimated period during which the lease contract is expected to be enforceable. This assessment is based on Management’s judgement and takes into consideration the location of the lease, capitalised leasehold improvements and experience with similar leases for the specific area.
Extension and termination options (significant judgement)
When determining the lease term for lease agreements containing extension and termination options, Management considers circumstances that create a financial incentive to exercise an extension option or not to exercise a termination option. Extension and termination options are only included in the lease term, if it is reasonably certain that a lease will be extended/terminated.
3.4 Other non-current assets
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Investments in associates | Investments from customer loans | |
| Other | Associates | |
| Cost at 1.1. | 816 | 369 |
| Foreign currency translation adjustments | 587 | 108 |
| Additions during the year | -11 | -1 |
| Additions relating to acquisitions | -17 | -2 |
| Disposals related to step acquisitions and disposals of associates | 23 | -2 |
| Disposals, repayments etc. during the year | - | 21 |
| Transferred to current assets | - | -2 |
| Cost at 31.12. | 741 | 268 |
| Value adjustments at 1.1. | 6 | 2 |
| Foreign currency translation adjustments | -21 | -24 |
| Share of profit after tax | -2 | 55 |
| Dividends received | -24 | -4 |
| Disposals relating to step-up acquisitions of associates | 16 | -3 |
| Other adjustments | -2 | 6 |
| Disposals during the year | - | -14 |
| Value adjustments at 31.12. | -13 | 9 |
| Carrying amount at 31.12. | 728 | 277 |
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Investments in associates | Investments from customer loans | |
| Other | Associates | |
| Cost at 1.1. | 587 | 108 |
| Foreign currency translation adjustments | 501 | 97 |
| Additions during the year | -17 | -2 |
| Additions relating to acquisitions | -2 | 23 |
| Disposals related to step acquisitions and disposals of associates | 1 | - |
| Disposals, repayments etc. during the year | -56 | -3 |
| Transferred to current assets | -184 | - |
| Cost at 31.12. | 587 | 108 |
| Value adjustments at 1.1. | -8 | -22 |
| Foreign currency translation adjustments | 23 | 1 |
| Share of profit after tax | - | - |
| Dividends received | - | - |
| Disposals relating to step-up acquisitions of associates | - | - |
| Other adjustments | -14 | -2 |
| Disposals during the year | 1 | - |
| Value adjustments at 31.12. | -21 | -24 |
| Carrying amount at 31.12. | 566 | 84 |
Transactions with associates
In 2023, the Group recognised revenue from sales to associates of DKK 620 million (DKK 589 million in 2022). Further, the Group received royalties from and paid licence fees to associates amounting to net income of DKK 12 million (DKK 18 million in 2022), purchased materials and received other fees from associates amounting to net expenses of DKK 11 million (DKK 18 million in 2022) and received dividends from associates in the amount of DKK 85 million (DKK 164 million in 2022). In 2023, the Group received interest income from associates in the amount of DKK 24 million (DKK 16 million in 2022). Under the provisions of contracts concluded with associates, the Group is not entitled to receive dividends from certain associates. This is reflected in the profit included in the income statement, as no profit is recognised if the Group is not entitled to receive dividends.
Accounting policies
Investments in associates are recognised and measured using the equity method, i.e. investments are recognised in the balance sheet at the proportionate share of the equity value determined in accordance with the Group’s accounting policies after the deduction and addition of proportionate intra-group gains and losses, respectively, and after the addition of the carrying amount of any goodwill. The proportionate shares of profit after tax in associates are recognised in the income statement after the year’s changes in unrealised intra-group profits less any impairment loss relating to goodwill. The proportionate shares of all transactions and events, which have been recognised in other comprehensive income in associates, are recognised in consolidated other comprehensive income. On the acquisition of interests in associates, the acquisition method is applied. For accounting policies on segment information, please refer to Note 1.1.
Associates (DKK million)
| Financial information from financial statements (Group share): | 2023 | 2022 |
|---|---|---|
| Revenue | 768 | 876 |
| Profit for the year | 69 | 122 |
| Comprehensive income | 69 | 122 |
3.5 Non-current assets by geographies
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Non-current assets by geographic region: | ||
| Europe | 10,296 | 8,815 |
| North America | 7,155 | 7,243 |
| Asia | 2,125 | 2,223 |
| Pacific region | 853 | 802 |
| Rest of world | 191 | 214 |
| Non-current assets | 20,620 | 19,297 |
| Non-current assets by country: | ||
| Denmark | 2,303 | 2,307 |
| USA | 5,635 | 5,641 |
| France | 3,139 | 3,136 |
| Other countries | 9,543 | 8,213 |
| Non-current assets | 20,620 | 19,297 |
Impairment testing is carried out for the Group’s two cash-generating units, Hearing Healthcare and Communications. Based on the impairment tests performed, a material excess value was identified in each cash-generating unit compared to the carrying amount for which reason no impairment of goodwill was made at 31 December 2023, except for the impairment of goodwill related to discontinued operations, please refer to Note 6.2. This conclusion is supported by the fact that the market capitalisation of the company on Nasdaq Copenhagen by far exceeds the equity value of the company.# 3.6 Impairment testing
At 31 December 2023, goodwill amounted to DKK 11,964 million in Hearing Healthcare (DKK 11,071 million in 2022) and DKK 417 million in Communications (DKK 417 million in 2022). The impairment tests are performed as a test of the value in use, including a five-year budget/projection period from 2024-2028. Future cash flows are based on the budget for 2024, on strategy plans and on projections hereof. Projections extending beyond 2024 are based on general parameters, such as expected market growth, selling prices and profitability assumptions. The terminal value for the period after 2028 is determined on the assumption of 2% (2022: 2%) growth for each segment.
The market growth rate in the hearing aid industry and for audio solutions is predominantly determined by the following factors:
Hearing Healthcare:
- Growing demographics and an increasing share of elderly in the population, driving stable unit growth in the hearing aid market.
- Expansion of diagnostic instruments and services across the world.
- Increased penetration rates of hearing healthcare solutions due to education, increased affluence and availability.
Communications:
- Increasing adoption of Unified Communications and Collaboration equipment, especially professional headsets.
- Emergence and establishment of video solutions for enterprises.
The pre-tax discount rate is 8% (2022: 8%) for Hearing Healthcare and 12% (2022: 12%) for Communications. Sensitivity calculations show that even a significant increase in the discount rates or a significant reduction of the growth assumptions will not change the outcome of the impairment tests.
Apart from goodwill, all intangible assets have limited useful lives.
Accounting estimates and judgements
Cash-generating units (judgement)
Impairment testing is carried out annually on preparation of the annual report or on indication of impairment in which discounted values of future cash flows are compared with carrying amounts. Group enterprises cooperate closely on R&D, purchasing, production, marketing and sale, as the use of resources in the individual markets is coordinated and monitored by Management in Denmark. Group enterprises are thus highly integrated. Regardless of this, the products and services offered by Hearing Healthcare and Communications address different customer demands and customer groups, which would not be comparable by nature. Management therefore considers it most appropriate to split the activities into two reportable segments, Hearing Healthcare and Communications. The two reportable segments constitute the Group’s cash-generating units. Individual impairment testing is therefore carried out for these two cash-generating units.
Accounting policies
The carrying amounts of property, plant and equipment and intangible assets with definite useful lives as well as investments in associates are reviewed at the balance sheet date to determine whether there are indications of impairment. If so, the recoverable amount of the particular asset is calculated to determine the need for impairment, if any. The recoverable amounts of goodwill and other intangible assets with indefinite useful lives will be estimated, whether or not there are indications of impairment. The recoverable amount is estimated for the smallest cash-generating unit of which the asset is part. The recoverable amount is determined as the higher of the fair value of the asset or cash-generating unit less costs to sell and the value in use of such asset or unit.
On determination of the value in use, estimated future cash flows will be discounted to their present values, using a discount rate that reflects partly current market valuations of the time value of money, and partly the special risks attached to the particular asset or cash-generating unit for which no adjustment has been made in the estimated future cash flows.
If the recoverable amount of a particular asset or cash-generating unit is lower than its carrying amount, such asset or unit is written down to its recoverable amount. Impairment losses are recognised in the income statement.
On any subsequent reversal of impairment losses due to changes in the judgements on which the calculation of the recoverable amount is based, the carrying amount of an asset or cash-generating unit is increased to the adjusted estimate of the recoverable amount, however not exceeding the carrying amount of the asset or cash-generating unit, had the particular asset or cash-generating unit not been written down. Impairment of goodwill is not reversed.
Capital structure and financial management
Demant – Annual Report 2023 93
Capital structure and financial management
Demant – Annual Report 2023 93
| NET INTEREST-BEARING DEBT | 12,280 DKK MILLION |
| NET FINANCIAL ITEMS | -754 DKK MILLION |
Demant – Annual Report 2023 94
Policies relating to financial risk management
Financial risk management concentrates on identifying risks in respect of changes in the financial markets and customers’ propensity to pay for products and services. The Executive Board monitors the financial risks of the company to ensure that these remain well-balanced. Financial risks are managed centrally by Group Treasury, which is responsible for securing attractive funding under the prevailing market conditions and for monitoring and mitigating risks related to liquidity, interest rates and exchange rates. Risks related to counterparties are managed in the individual markets.
Capital structure, funding and liquidity risks
Demant remains a highly cash-generating company with a strong balance sheet. The Group continuously adapts its capital structure to the prevailing market conditions in order to secure attractive financing. We secure our funding based on a strong commitment by our banks to provide longer-term bank facilities. To mitigate potential liquidity and refinancing risks, the Group has secured considerable undrawn committed credit facilities. To minimise financing risks, we aim for more than 50% of our credit facilities to be committed with long-term maturity, and our financial gearing multiple is currently within our desired target range of 2.0-2.5.
Interest rate risks
Due to higher market interest rates, our financial expenses increased in 2023. Furthermore, credit spreads and debt margins increased in the financial markets due to higher capital requirements imposed on the banks. Currently, around 45% of the Group’s debt is funded through facilities with fixed rates or hedged through financial instruments limiting the interest rate risk. The Group’s net interest-bearing debt (NIBD) amounted to DKK 12,280 million as of 31 December 2023, and the gearing multiple (NIBD/EBITDA) was 2.2.
Exchange rate risks
The Group is exposed to exchange rate risks, as the company trades with counterparties in a number of countries, and as the Group has cash flows in different currencies. It is therefore important to adequately balance foreign exchange rate risks to avoid unexpected adverse impacts on the financial performance. The majority of Group companies transact mainly in local currencies and are therefore exposed to limited exchange rate risks. The Group does not hedge translation risks resulting from the consolidation of Group accounts into Danish kroner.
Most Group companies are invoiced from the Danish production entities. Around two-thirds of the invoicing out of Denmark is invoiced in other currencies than Danish kroner or euros. To reduce our exchange rate exposure, we continuously seek to balance in-going and outgoing cash flows in our main trading currencies as much as possible. To ensure predictability in terms of net profit, we hedge expected future net cash flows mainly through forward exchange contracts with a horizon of up to 18 months. In addition, we seek to balance our on-balance net exposure in our main trading currencies and, where relevant, our exposure is hedged.
It is the Group’s policy to exclusively hedge financial risks arising from our commercial activities and not to undertake any financial transactions of a speculative nature.
Counterpart risks
From a commercial point of view, the Group is exposed to credit risks if our customers fail to pay for products and services provided. Such risks mainly relate to trade receivables and loans to customers or business partners, and failure to adequately manage credit risks can adversely impact the Group. To minimise the risk of suffering losses on customers, the Group monitors the credit risks on an ongoing basis. The Group generally has a diversified customer base, and in 2023, the accumulated revenue from our ten largest customers accounted for approx. 15% of total consolidated revenue. We regularly adjust our financial accounts to reflect the current credit risks. When granting loans to business partners, we require that our counterparties provide security in their business. In general, we estimate that the risk relative to our total credit exposure is well-balanced at Group level, and historically, we have only suffered limited credit-related losses. The maximum credit risk relating to receivables matches the carrying amounts of such receivables. Overall, the Group has limited deposits with financial institutions for which reason the credit risk in respect of deposits is considered to be low.# Section 4 Capital structure and financial management
Accounting policies
Net financial items mainly consist of interest income and interest expenses, credit card fees and bank fees and also include interest on lease liabilities, the unwinding of discounts on financial assets and liabilities, fair value adjustments of “shadow shares” under share-based remuneration programmes as well as certain realised and unrealised foreign exchange gains and losses. Interest income and interest expenses are accrued based on the principal amount and the effective interest rate. The effective interest rate is the discount rate used for discounting expected future payments attaching to the financial asset or financial liability in order for the present value to match the carrying amount of such asset or liability. The following non-financial item is included in the balance sheet and represents the difference between the table and the balance sheet: Other liabilities of DKK 543 million (DKK 460 million in 2022).
Debt to credit institutions is recognised at the date of borrowing as the proceeds received less transaction costs. For subsequent periods, financial liabilities are measured at amortised cost in order for the difference between proceeds and the nominal value to be recognised as a financial expense over the term of the loan.
4.2 Net financial items (DKK million)
| 2023 | 2022 | |
|---|---|---|
| Interest on cash and bank deposits | 35 | 11 |
| Interest on receivables, customer loans etc. | 55 | 45 |
| Other financial income | 11 | 27 |
| Financial income from financial assets measured at amortised cost | 101 | 83 |
| Interest on bank debt, mortgages etc. | -488 | -145 |
| Interest expense on lease liabilities | -71 | -46 |
| Financial expenses on financial liabilities measured at amortised cost | -559 | -191 |
| Foreign exchange losses, net | -119 | -13 |
| Transaction costs | -177 | -159 |
| Financial expenses | -855 | -363 |
| Net financial items | -754 | -280 |
4.3 Categories of financial instruments (DKK million)
| 2023 | 2022 | |
|---|---|---|
| Unrealised gains on financial contracts | 60 | 103 |
| Financial assets used as hedging instruments | 60 | 103 |
| Receivables from associates | 465 | 541 |
| Customer loans | 668 | 795 |
| Other receivables | 548 | 460 |
| Trade receivables | 3,650 | 3,626 |
| Cash | 1,138 | 1,130 |
| Financial assets at amortised cost | 6,469 | 6,552 |
| Other investments | 19 | 15 |
| Financial assets at fair value through profit/loss | 19 | 15 |
| Unrealised losses on financial contracts | -35 | -15 |
| Financial liabilities used as hedging instruments | -35 | -15 |
| Debt to credit institutions etc. | -11,238 | -11,931 |
| Short-term bank facilities etc. | -530 | -765 |
| Lease liabilities | -2,686 | -2,380 |
| Trade payables | -799 | -865 |
| Other liabilities | -2,615 | -2,551 |
| Financial liabilities measured at amortised cost | -17,868 | -18,492 |
On initial recognition, other financial liabilities are measured at fair value and subsequently at amortised cost using the effective interest method, and the difference between proceeds and the nominal value is recognised in the income statement as a financial expense over the term of the loan.
4.4 Net interest-bearing debt, liquidity and interest rate risks (DKK million)
| Contractual cash flows | Weighted average effective interest rate | Less than 1 year | 1-5 years | More than 5 years | Total | Carrying amount | |
|---|---|---|---|---|---|---|---|
| 2023 | |||||||
| Interest-bearing receivables* | 269 | 677 | 145 | 1,091 | 1,036 | ||
| Cash | 1,172 | - | - | 1,172 | 1,138 | ||
| Interest-bearing assets | 4.1% | 1,441 | 677 | 145 | 2,263 | 2,174 | |
| Debt to credit institutions etc. | -1,489 | -10,619 | -301 | -12,409 | -11,238 | ||
| Short-term bank facilities etc. | -560 | - | - | -560 | -530 | ||
| Borrowings | 3.9% | -2,049 | -10,619 | -301 | -12,969 | -11,768 | |
| Lease liabilities | -688 | -1,822 | -650 | -3,160 | -2,686 | ||
| Net interest-bearing debt | -1,296 | -11,764 | -806 | -13,866 | -12,280 | ||
| 2022 | |||||||
| Interest-bearing receivables* | 302 | 790 | 194 | 1,286 | 1,235 | ||
| Cash | 1,140 | - | - | 1,140 | 1,130 | ||
| Interest-bearing assets | 2.6% | 1,442 | 790 | 194 | 2,426 | 2,365 | |
| Debt to credit institutions etc. | -6,027 | -5,358 | -885 | -12,270 | -11,931 | ||
| Short-term bank facilities etc. | -801 | - | - | -801 | -765 | ||
| Borrowings | 2.2% | -6,828 | -5,358 | -885 | -13,071 | -12,696 | |
| Lease liabilities | -656 | -1,531 | -462 | -2,649 | -2,380 | ||
| Net interest-bearing debt | -6,042 | -6,099 | -1,153 | -13,294 | -12,711 |
*Interest-bearing receivables comprise customer loans, receivables from associates as well as other receivables.
Trade payables and other liabilities have a contractual maturity of less than one year, with the exception of other liabilities of DKK 661 million (DKK 566 million in 2022), which have a contractual maturity of 1-5 years. The contractual cash flows approximate their carrying amounts.
Borrowings broken down by currency: 59% in Danish kroner (63% in 2022), 26% in euros (23% in 2022), 6% in US dollars (6% in 2022), 2% in Canadian dollars (3% in 2022) and 7% in other currencies (6% in 2022).
Reconciliation of liabilities arising from financing activities
The table shows the changes in consolidated liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the consolidated cash flow statement as cash flows from financing activities.
The fair value of the interest rate swap outstanding at the balance sheet date is DKK 18 million (DKK 0 million in 2022), and the contractual value of the interest swap is DKK 1,000 million (DKK 0 million in 2022). The interest rate swap matures in 2026.
Sensitivity analysis in respect of interest rates
Based on the Group’s net debt at the end of the 2023 financial year, a rise of 1 percentage point in the general interest rate level will cause an increase in consolidated annual interest expenses before tax of approx. DKK 58 million (DKK 57 million in 2022). Around 45% (around 46% in 2022) of the interest-bearing debt is subject to fixed interest rates, partly due to a bought interest rate swap and partly due to loans being raised at fixed interest rates.
4.4 Net interest-bearing debt, liquidity and interest rate risks (continued)
Interest rate swap (Interest rate cap in 2022)
| (DKK million) | Contractual amount | Expiry | Rate/strike | Positive fair value at year-end | Negative fair value at year-end |
|---|---|---|---|---|---|
| 2023 | |||||
| DKK/DKK | 1,000 | 2026 | 3.27% | - | -18 |
| 2022 | |||||
| DKK/DKK | 650 | 2023 | 0% | 20 | - |
4.4 Net interest-bearing debt, liquidity and interest rate risks (continued)
| (DKK million) | 2022 | Non-cash changes Acquisi-tions and financing activities | Transferred from liabilities held for sale | Covid-19 conces-sions | Other | Foreign exchange movement | Disposals | Transferred to liabilities held for sale | Additions | 2023 |
|---|---|---|---|---|---|---|---|---|---|---|
| Lease liabilities | 2,380 | -698 | -6 | 142 | -8 | 918 | -42 | - | - | 2,686 |
| Debt to credit institutions etc. | 11,931 | -706 | - | 15 | -2 | - | - | - | - | 11,238 |
| Short-term bank facilities | 765 | -188 | - | 1 | -48 | - | - | - | - | 530 |
| Interest-bearing liabilities | 15,076 | -1,592 | -6 | 158 | -58 | 918 | -42 | - | - | 14,454 |
| 2021 | 2022 | |||||||||
| Lease liabilities | 2,121 | -614 | -3 | 170 | 7 | 763 | -45 | -19 | - | 2,380 |
| Debt to credit institutions etc. | 6,020 | 5,869 | - | 30 | 12 | - | - | - | - | 11,931 |
| Short-term bank facilities | 3,197 | -2,477 | - | - | 46 | - | -1 | - | - | 765 |
| Interest-bearing liabilities | 11,338 | 2,778 | -3 | 200 | 65 | 763 | -45 | -20 | - | 15,076 |
Methods and judgements for determining fair values
Other investments
Other investments are assessed on the basis of their fair value.
Derivatives
Forward exchange contracts are assessed using discounted cash flow valuation techniques. Future cash flows are based on observable forward exchange rates at the end of the reporting period and on contractual forward exchange rates discounted at a rate that reflects the credit risk related to various counterparties.
Interest rate swaps are assessed using discounted cash flow valuation techniques. Future cash flows are based on observable forward yield curves at the end of the reporting period and on contractual interest rates discounted at a rate that reflects the credit risk related to various counterparties.
The value of a cap is assessed using discounted cash flow valuation techniques. A cap consists of a series of interest rate options (IRGs) with the same strike rate. The individual interest rate options each cover an interest period. The key elements, when pricing interest rate options, are strike rate, forward rate, maturity and volatility. The value of an interest rate option is made up of the intrinsic value and the time value of such option. The value of a cap is the combined value of the individual IRGs.
Contingent considerations
Contingent considerations are measured at their fair values based on the contractual terms of the contingent considerations and on non-observable inputs (level 3), such as the financial performance and purchasing patterns of the acquired enterprise for a period of typically 1-5 years after the date of acquisition.
Fair value hierarchy for assets and liabilities measured at fair value in the balance sheet
Financial instruments measured at fair value are broken down according to the fair value hierarchy:
- Listed prices in an active market for the same type of instrument (level 1).# Section 4 Capital structure and financial management
4.5 Fair value hierarchy
Listed prices in an active market for similar assets or liabilities or other valuation methods, with all significant inputs being based on observable market data (level 2). Valuation methods, with any significant inputs not being based on observable market data (level 3).
Accounting policies On initial recognition, other investments are recognised at fair value and subsequently measured at fair value in the income statement. Unrealised value adjustments are recognised in the income statement. On realisation, value adjustments are recognised in net financial items in the income statement. Contingent considerations arising from the acquisition of enterprises and activities are recognised at fair value at the time of acquisition. The obligations are re-evaluated on a recurring basis at fair value.
There have been no transfers between level 1 and 2 in the 2023 and 2022 financial years. Financial assets and contingent considerations are measured at fair value in the balance sheet based on valuation methods, with any significant inputs not being based on observable market data (level 3). Most of the contingent considerations recognised relate to deferred payments, which are not dependent on any performance obligations and will usually be paid out within 1-5 years. The majority of the contingent considerations are recognised as the maximum consideration to be paid, which Management has assessed to be the most likely outcome.
| (DKK million) | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| 2023 | ||||
| Financial assets used as hedging instruments | - | 60 | - | 60 |
| Other investments | - | - | 19 | 19 |
| Financial liabilities used as hedging instruments | - | -35 | - | -35 |
| Contingent considerations | - | - | -380 | -380 |
| 2022 | ||||
| Financial assets used as hedging instruments | - | 103 | - | 103 |
| Other investments | - | - | 15 | 15 |
| Financial liabilities used as hedging instruments | - | -15 | - | -15 |
| Contingent considerations | - | - | -420 | -420 |
4.5 Fair value hierarchy (continued)
| Contingent (DKK million) | Financial assets | considerations | ||
|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |
| Assets and liabilities (level 3) | ||||
| Carrying amount at 1.1. | 15 | 11 | -420 | -148 |
| Foreign currency translation adjustment | - | - | -1 | -8 |
| Acquisitions | 7 | 4 | -156 | -478 |
| Disposals, repayments, settlements etc. | - | - | 192 | 193 |
| Other adjustments | -3 | - | 5 | 11 |
| Transferred to liabilities related to assets held for sale | - | - | -10 | - |
| Carrying amount at 31.12. | 19 | 15 | -380 | -420 |
Section 5 Tax
TAX ON PROFIT -839 DKK MILLION EFFECTIVE TAX RATE 24.7% DKK MILLION
The Group is not expected to be materially impacted by OECD/EU Pillar Two Model rules and local implementation hereof. Most countries where the Group has operations impose taxation in excess of 15%, meaning that most countries are covered by the transitional Safe Harbour rules. Those few countries not covered by the transitional Safe Harbour rules are still expected to show a GloBE ETR in excess of 15%. As such, OECD/EU Pillar Two Model Rules and local implementation hereof are expected to result in neither materially increased tax payments nor changes to the Group’s ETR. The Group has applied the temporary exception, introduced in May 2023, from the accounting requirements for deferred taxes in IAS 12, which means that the Group neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two income taxes.
Accounting policies Tax on profit for the year includes current tax and any changes in deferred tax. Current tax includes taxes payable and is determined on the basis of the estimated taxable income for the year and any prior-year tax adjustments. Tax on changes in equity and other comprehensive income is recognised directly in equity and in other comprehensive income, respectively. Foreign currency translation adjustments of deferred tax are recognised as part of the year’s adjustments of deferred tax. Permanent differences primarily include Danish interest limitation, R&D incentives, profit in associates and non-deductible share-based payments. Current tax liabilities or tax receivables are recognised in the balance sheet and determined as tax calculated on taxable income for the year, adjusted for any tax on account. The tax rates prevailing at the balance sheet date are used for calculation of the year’s taxable income.
5.1 Tax on profit
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Current tax on profit for the year | -814 | -580 |
| Adjustment of current tax, prior years | 11 | 20 |
| Change in deferred tax | -31 | -79 |
| Adjustment of deferred tax, prior years | -4 | -10 |
| Impact of changes in corporate tax rates | -1 | -2 |
| Tax on profit for the year | -839 | -651 |
| Reconciliation of tax rates: | ||
| Danish corporate tax rate | 22.0% | 22.0% |
| Differences between tax rates of non-Danish enterprises and Danish corporate tax rate | 0.9% | 1.0% |
| Impact of changes in corporate tax rates | - | 0.1% |
| Impact of unrecognised tax assets, net | - | 0.3% |
| Permanent differences | 2.3% | -1.6% |
| Other items including prior-year adjustments | -0.5% | 0.4% |
| Effective tax rate | 24.7% | 22.2% |
The tax value of deferred tax assets not recognised is DKK 104 million (DKK 116 million in 2022) and relates mainly to tax losses and tax credits for which there is considerable uncertainty about their future utilisation. Tax losses of DKK 25 million will expire within 5-10 years, whereas other tax losses carried forward have no expiry date.
Accounting policies Deferred tax is recognised, using the balance sheet liability method on any temporary differences between the tax base of assets and liabilities and their carrying amounts, except for deferred tax on temporary differences arisen either on initial recognition of goodwill or on initial recognition of a transaction that is not a business combination, with the temporary difference ascertained on initial recognition affecting neither net profits nor taxable income. Deferred tax is determined on the basis of the tax rules and rates prevailing at the balance sheet date in a particular country. The effect of any changes in tax rates on deferred tax is included in tax on profit for the year, unless such deferred tax is attributable to items previously recognised directly in equity or in other comprehensive income. In the latter case, such changes will also be recognised directly in equity or in other comprehensive income. The tax base of a loss, if any, which may be set off against future taxable income, is carried forward and set off against deferred tax in the same legal tax entity and jurisdiction.
5.2 Deferred tax
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Deferred tax recognised in the balance sheet: | ||
| Deferred tax assets | 542 | 538 |
| Deferred tax liabilities | -633 | -620 |
| Deferred tax, net at 31.12. | -91 | -82 |
| Deferred tax, net at 1.1. | -82 | 126 |
| Foreign currency translation adjustments | 8 | -8 |
| Changes in deferred tax | -31 | -79 |
| Additions relating to acquisitions | 5 | -18 |
| Adjustment of deferred tax, prior years | -4 | -10 |
| Impact of changes in corporate tax rates | -1 | -2 |
| Deferred tax relating to changes in equity, net | 14 | -59 |
| Transferred to assets held for sale | - | -32 |
| Deferred tax, net at 31.12. | -91 | -82 |
5.2 Deferred tax (continued)
Accounting estimates and judgements Deferred tax assets (significant estimate) Deferred tax assets, including the tax value of any tax losses allowed for carryforward, are recognised in the balance sheet at the estimated realisable value of such assets, either by a set-off against a deferred tax liability or by a net asset to be set off against future positive taxable income. At the balance sheet date, an assessment is made as to whether it is probable that sufficient taxable income will be available in the future against which the deferred tax asset can be utilised. Deferred tax on temporary differences between the carrying amounts and the tax values of investments in subsidiaries and associates is recognised, unless the Parent is able to control the time of realisation of such deferred tax, and it is probable that such deferred tax will not be realised as current tax in the foreseeable future. Deferred tax is recognised in respect of eliminations of intra-group profits and losses.
| Temporary differences (DKK million) | Recognised at 1.1. | Foreign currency translation adjustments | Recognised in profit for the year | Transferred to assets held for sale | Other adjustments | Acquisi- tions | Recognised in other comprehensive income | at 31.12. |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |# Section 6 Acquisitions
Demant – Annual Report 2023 105
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Section 6 Acquisitions
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Section 6 Acquisitions
Demant – Annual Report 2023 106
As part of the capital allocation policy, a portion of the cash flow from operating ac- tivities is allocated to value-adding acqui- sitions. In 2023, a total of 31 acquisitions were completed within the Hearing Healthcare segment at an estimated total consideration of DKK 1,074 million. The in- dividual acquisitions are not considered to be material and therefore not disclosed separately, but grouped together with other acquisitions within the geographical region.
Acquisitions in Hearing Healthcare
In 2023, the Group acquired a number of businesses or obtained significant stakes in hearing healthcare businesses, the most significant ones being Mr. Optik and Flem- ming & Klingbeil both in Germany, the hearing aid-related activities of Goed Hulpmiddelen in Belgium and Virtualis in France.
On 5 January 2023, the Group acquired 55% of the shares in Virtualis, a developer and manufacturer of virtual reality rehabil- itation equipment based in France. As part of the agreement, a forward contract was entered into for the remaining 45% of the shares, meaning that Demant agreed to buy and the seller to sell in three tranches based on an agreed revenue multiple. The purchase price for the remaining shares is estimated based on Virtualis’ current per- formance and on expectations of the fu- ture. The purchase price is not capped.
On 1 March 2023, the Group acquired the remaining 51% of the shares in Mr. Optik
6.1 Acquisitions of enterprises and activities (DKK million)
| 2023 | 2022 | |
|---|---|---|
| Hearing Healthcare | ||
| Intangible assets | 55 | 149 |
| Property, plant and equipment | 53 | 11 |
| Other non-current assets | 167 | 22 |
| Inventories | 47 | 39 |
| Current receivables | 105 | 48 |
| Cash and cash equivalents | 56 | 49 |
| Non-current liabilities | -413 | -57 |
| Current liabilities | -131 | -51 |
| Acquired net assets | -61 | 210 |
| Goodwill | 1,078 | 299 |
| Acquisition cost | 1,017 | 509 |
| Carrying amount of non-controlling interests on obtain-ing control | -80 | - |
| Fair value adjustment of non-controlling interests on obtaining control | -26 | - |
| Contingent consideration and deferred payments | -151 | -33 |
| Acquired cash and cash equivalents | -56 | -49 |
| Cash acquisition cost | 704 | 427 |
| North America | Europe | Asia | Total | Hearing Healthcare | North America | Europe | Asia | Wang Total | |
|---|---|---|---|---|---|---|---|---|---|
| Intangible assets | 4 | - | 59 | 149 | 5 | 4 | 82 | 240 | |
| Property, plant and equipment | 1 | 16 | 40 | 70 | 11 | 3 | 16 | 40 | |
| Other non-current assets | 21 | 17 | 139 | 184 | 22 | 6 | 17 | 139 | |
| Inventories | 2 | 2 | 38 | 49 | 39 | 4 | 2 | 38 | |
| Current receivables | 7 | 1 | 101 | 112 | 48 | 7 | 1 | 101 | |
| Cash and cash equivalents | 2 | 3 | 41 | 58 | 49 | 4 | 3 | 41 | |
| Non-current liabilities | -5 | -11 | -96 | -418 | -57 | -7 | -11 | -96 | |
| Current liabilities | -9 | -34 | -201 | -140 | -51 | -16 | -34 | -201 | |
| Acquired net assets | 23 | -2 | 144 | 358 | 210 | 6 | -2 | 144 | |
| Goodwill | 34 | - | 1,112 | 2,366 | 299 | 235 | 96 | 1,736 | |
| Acquisition cost | 57 | - | 1,880 | 2,724 | 509 | 241 | 94 | 1,880 | |
| Carrying amount of non-controlling interests on obtaining control | -4 | - | -15 | -15 | - | - | - | - | |
| Fair value adjustment of non-controlling interests on obtaining control | -1 | - | -14 | -14 | - | - | - | - | |
| Contingent consideration and deferred payments | -5 | - | -426 | -478 | -33 | -19 | - | -426 | |
| Acquired cash and cash equivalents | -2 | -3 | -41 | -97 | -49 | -4 | -3 | -41 | |
| Cash acquisition cost | 45 | - | 1,413 | 2,120 | 427 | 189 | 91 | 1,413 |
Figures are shown at fair value on the acquisition date.
Demant – Annual Report 2023 107
and now holds 100% of the shares. Mr. Optik operates hearing clinics across East- ern Germany. The step-up resulted in a fair value adjustment of Demant’s existing shares of DKK 26 million.
On 31 August 2023, the Group acquired 100% of the shares in Flemming & Kling- beil, which operates hearing clinics across Berlin, Germany.
On 31 August 2023, the Group acquired all the hearing aid-related activities of Goed Hulpmiddelen. The transaction was struc- tured as an asset purchase. The activities in Goed Hulpmiddelen consist of hearing clinics in the northern part of Belgium. The activities were integrated into our existing retail business in Belgium.
In addition, the Group made a number of other minor acquisitions in North America and Europe in 2023.
In 2022, the Group acquired 100% of the shares in Sheng Wang, first 20% as a mi- nority investment on 4 March 2022 and subsequently the remaining 80% of the shares on 1 July 2022.
Accounting treatment
In respect of the acquisitions, the Group paid a total acquisition cost of DKK 1,074 million, which exceeded the fair values of the acquired assets, liabilities and contin- gent liabilities. Such positive balances in value can be attributed to expected syner- gies between the activities of the acquired entities and our existing activities, to the future growth opportunities and to the value of staff competencies in the acquired businesses. These synergies are not recog- nised separately from goodwill, as they are not separately identifiable.
Total goodwill recognised in respect of the acquisitions made in 2023 amounted to DKK 1,112 mil- lion. Of the total acquisitions made in 2023, the fair value of the estimated contingent con- siderations in the form of earn-outs or de- ferred payments accounted for DKK 156 million (DKK 478 million in 2022). Earn- outs depend on the results of the acquired entities for a period of 1-5 years. The max- imum of earn-outs and other contingent considerations related to the acquisitions are estimated to be DKK 158 million (DKK 482 million in 2022), excluding Virtualis where the earn-out that is not capped.
The fair values of acquisitions are not con- sidered final until 12 months after the ac- quisition date. Adjustments to acquisitions completed more than 12 months prior to the time of the adjustments, including changes in estimated contingent consider- ations, are recognised in the income state- ment.
In 2023, adjustments were made to the preliminary recognition of acquisitions rec- ognised in 2022. These adjustments relate to payments made, contingent considera- tions provided as well as net assets and goodwill acquired. The impact of these ad- justments on goodwill was DKK 5 million (DKK 10 million in 2022) and DKK 2 million (DKK 2 million in 2022) on contingent con- sideration. In 2023, adjustments were also made to contingent considerations related to acqui- sitions before 2022. These adjustments amount to DKK 5 million (DKK 9 million in 2022) and are recognised as part of distri- bution costs for acquisitions.
Step-up acquisitions
At the time of acquisition of non-control- ling interests, the shares of the acquisi- tions are measured at their proportionate share of the total fair value of the acquired entities, including goodwill. On obtaining a controlling interest through step acquisi- tions, previously held non-controlling inter- ests are, at the time of obtaining control, remeasured at fair value with fair value adjustments recognised in the income statement. The total impact on the income statement of fair value adjustments of non-control- ling interests in step acquisitions was DKK 27 million (DKK 14 million in 2022).
The above statements of fair values of ac- quisitions are not considered final until 12 months after the acquisition date.
Transaction costs
Transaction costs in connection with ac- quisitions made in 2023 amounted to DKK 14 million (DKK 15 million in 2022), which were recognised in distribution costs.
Acquired assets and proforma figures
The acquired assets include contractual receivables amounting to DKK 59 million (DKK 55 million in 2022) of which DKK 1 million (DKK 2 million in 2022) was thought to be uncollectible at the date of the acqui- sition.
Of total goodwill in the amount of DKK 1,112 million (DKK 2,366 million in 2022), DKK 209 million (DKK 193 million in 2022) can be amortised for tax purposes.
Revenue and profit after tax generated by the acquired enterprises since our acquisi- tion in 2023 amount to DKK 311 million (DKK 326 million in 2022) and DKK 13 million (DKK -20 million in 2022), re- spectively. Had such revenue and profit been consolidated on 1 January 2023, we estimate that consolidated pro forma reve- nue and profit after tax would have been DKK 22,636 million (DKK 20,070 million in 2022) and DKK 1,805 million (DKK 2,542 million in 2022), respectively. Without tak- ing synergies from our core business into account, we believe that these pro forma figures reflect the level of consolidated earnings after our acquisition of the enter- prises.
Acquisitions after balance sheet date
From the balance sheet date and until the date of financial reporting in 2024, we have acquired a number of retail busi- nesses. We are in the process of assessing their fair value. The acquisition cost is ex- pected to relate primarily to goodwill.
Demant – Annual Report 2023 108
Accounting policies
Newly acquired or newly established en- terprises are recognised in the consoli- dated financial statements from the time of acquisition or formation. The time of acquisition is the date when control of the enterprise is transferred to the Group. For Group accounting policies on control, please refer to the consolidated financial statements in Note 9.1.
In respect of newly acquired enterprises, comparative figures and key figures will not be restated.# Section 6 Acquisitions
6.1 Acquisition of enterprises and activities (continued)
On acquiring new enterprises of which the Group obtains control, the purchase method is applied according to which their identified assets, liabilities and contingent liabilities are measured at their fair values on the acquisition date. Any non-current assets acquired for the purpose of resale are, however, measured at their fair values less expected cost of disposal. Restructuring costs are solely recognised in the pre-acquisition balance sheet if they are a liability for the acquired enterprise. Any tax effect of revaluations will be taken into account.
The acquisition cost of an enterprise consists of the fair value of the consideration paid for the enterprise with the addition of the fair values of previously held interests in the acquiree. If the final consideration is conditional upon one or more future events, the consideration will be recognised at the fair value on acquisition. Any subsequent adjustment of contingent consideration is recognised directly in the income statement, unless the adjustment is the result of new information about conditions prevailing on the acquisition date, and this information becomes available up to 12 months after the acquisition date. Transaction costs are recognised directly in the income statement when incurred.
If the purchase price exceeds the fair values of the assets, liabilities and contingent liabilities identified on acquisition, any remaining positive differences (goodwill) are recognised in the balance sheet under intangible assets and tested for impairment at least annually. If the carrying amount of an asset exceeds its recoverable amount, it is written down to such lower recoverable amount.
If, on the acquisition date, there are any uncertainties with respect to identifying or measuring acquired assets, liabilities or contingent liabilities or uncertainty with respect to determining their cost, initial recognition is made on the basis of provisionally calculated values. Such provisionally calculated values may be adjusted, or additional assets or liabilities may be recognised up to 12 months after the acquisition date, if new information becomes available about conditions prevailing on the acquisition date, which would have affected the calculation of values on that day, had such information been known.
Accounting estimates and judgements
Identification of assets and liabilities (significant judgement)
On recognition of assets and liabilities from acquisitions, Management judgements may be required for the identification of the following:
• Intangible assets, resulting from technology, customer relationships, client lists or brand names.
• Contingent consideration arrangements.
Contingent consideration (estimate)
Acquisitions may include provisions to the effect that additional payments of contingent considerations be paid to the previous owners when certain events occur or certain results are obtained. Management assesses on a regular basis the judgements made in respect of the particular acquisitions, taking sales run rates of the acquired entity into account.
In 2022, Demant announced the decision to discontinue its Hearing Implants business area. In 2023, the transaction with Cochlear was amended to only include the cochlear implants (CI) business. The bone anchored hearing systems (BAHS) business is no longer part of the transaction and will thus remain with Demant for now, pending a review of strategic options. The amended transaction has no impact on the decision to exit Hearing Implants and both the BAHS and CI business are considered discontinued operations. Due to the amended scope, no consideration will be paid as part of the transaction.
In 2023, discontinued operations thus comprise the Hearing Implants business area, which realised a profit after tax of DKK -757 million (2022: DKK -192 million). The negative result can be attributed to non-recurring, non-cash write-downs of assets related to the CI despite slightly higher revenue compared to 2022. The BAHS business delivered slightly positive growth in the year, following growth related to the launch of the Ponto 5 sound processor in 2022. Revenue for Hearing Implants was low following the voluntary field corrective action in 2021.
Accounting policies
Discontinued operations represent a separate line of businesses disposed of or being prepared for sale. The results of discontinued operations are presented separately in the income statement, and comparative figures are restated. Cash flows from discontinued operations are presented separately in the cash flow statement.
6.2 Discontinued operations and assets held for sale
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Revenue | 509 | 497 |
| Expenses | -666 | -737 |
| Amortisation, depreciation and impairment losses | -632 | -10 |
| Profit before tax - discontinued operations | -789 | -250 |
| Tax on profit for the period | 32 | 58 |
| Profit for the period - discontinued operations | -757 | -192 |
| Profit for the period for discontinued operations attributable to: | ||
| Demant A/S shareholders | -757 | -192 |
| -757 | -192 | |
| Earnings per share (EPS), DKK | -3.39 | -0.85 |
| Diluted earnings per share (DEPS), DKK | -3.39 | -0.85 |
| Cash flow from discontinued operations | ||
| Cash flow from operating activities (CFFO) | -225 | -232 |
| Cash flow from investing activities (CFFI) | -23 | -4 |
| Cash flow from financing activities (CFFF) | 183 | -17 |
| Cash flow for the period, net - discontinued operations | -65 | -253 |
Assets classified as held for sale at 31 December 2023 comprise assets in the Hearing Implants business areas. Cochlear will take over the obligations to service existing CI customers. The transaction is subject to regulatory approval and other customary closing conditions, and closing is expected in the first six months of 2024.
The amended transaction has no impact on the decision to exit Hearing Implants, and the BAHS business will continue to be disclosed as held for sale.
Accounting policies
Assets and liabilities relating to the discontinued operations are classified as held for sale. Assets held for sale, except financial assets etc., and liabilities related to assets held for sale are measured at the lower of their carrying amount and their fair value less costs to sell. Non-current assets held for sale are not depreciated.
6.2 Discontinued operations and assets held for sale (continued)
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Balance sheet items: | ||
| Intangible assets | 97 | 577 |
| Property, plant and equipment | 1 | 27 |
| Lease assets | 1 | 18 |
| Deferred tax assets | 44 | 32 |
| Other non-current assets | 1 | 2 |
| Non-current assets | 144 | 656 |
| Current assets | 139 | 308 |
| Assets held for sale | 283 | 964 |
| Provisions | 8 | 28 |
| Lease liabilities | 1 | 19 |
| Other liabilities | 80 | 128 |
| Liabilities related to assets held for sale | 89 | 175 |
Section 7 Provisions, other liabilities etc.
PROVISIONS 278 DKK MILLION
OTHER LIABILITIES 3,158 DKK MILLION
Miscellaneous provisions relate to provisions for disputes etc. The majority of these provisions are expected to be realised within the next five years.
7.1 Provisions
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Staff- related | Miscel- laneous | |
| Other provisions at 1.1. | 59 | 58 |
| Foreign currency translation adjustments | - | -5 |
| Additions relating to acquisitions | - | 17 |
| Provisions during the year | 6 | 27 |
| Realised during the year | - | -9 |
| Reversals during the year | - | -9 |
| Transfer to/from liabilities related to assets held for sale | - | 19 |
| Other provisions at 31.12. | 65 | 98 |
| Breakdown of provisions: | 2023 | 2022 |
|---|---|---|
| Non-current provisions | 65 | 24 |
| Current provisions | - | 74 |
| Other provisions at 31.12. | 65 | 98 |
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Staff-related provisions | 65 | 59 |
| Miscellaneous provisions | 98 | 58 |
| Other provisions | 163 | 117 |
| Defined benefit plan liabilities, net | 115 | 91 |
| Provisions at 31.12. | 278 | 208 |
| Breakdown of provisions: | ||
| Non-current provisions | 201 | 175 |
| Current provisions | 77 | 33 |
| Provisions at 31.12. | 278 | 208 |
Generally, the Group does not offer defined benefit plans, but it has such plans in Switzerland, France and Germany where they are required by law. Defined benefit plan costs recognised in the income statement amount to DKK 12 million (DKK 15 million in 2022), and the accumulated actuarial gain recognised in the statement of comprehensive income amounts to DKK 10 million (gain of DKK 28 million in 2022).
In 2024, the Group expects to pay approx. DKK 24 million (DKK 15 million in 2023) into defined benefit plans. Defined benefit obligations in the amount of DKK 132 million (DKK 130 million in 2022) will mature within 1-5 years and obligations in the amount of DKK 324 million (DKK 299 million in 2022) after five years. If the discount rate was 0.5% higher (lower), the defined benefit obligation would decrease by 7% (increase by 8%). If the expected salary growth rate was 0.5% higher (lower), the defined benefit obligation would increase by 1% (decrease by 1%).# Section 7 Provisions, other liabilities etc.
7.1 Provisions (continued)
Plan assets are recognised as follows:
Equity 28%
Bonds 31%
Property 27%
Other 14%
Accounting policies
Provisions are recognised if, as a result of an earlier event, the Group has a legal or constructive obligation, and if the settlement of such obligation is expected to draw on corporate financial resources, but there is uncertainty about the timing or amount of the obligation. Provisions are measured on a discounted basis based on Management’s best estimate of the amount at which a particular liability may be settled. The discount effect of any changes in the present value of provisions is recognised as a financial expense.
The Group has defined benefit plans and similar agreements with some of its employees. When it comes to defined contribution plans, the Group pays regular, fixed contributions to independent pension companies. Contributions are recognised in the income statement for the period in which employees have performed work entitling them to such pension contributions. Contributions due are recognised in the balance sheet as a liability.
When it comes to defined benefit plans, the Group is obliged to pay a certain contribution when an employee covered by such a plan retires, for instance a fixed amount or a percentage of the employee’s final salary. An actuarial calculation is prepared periodically of the accrued present value of future benefits to which employees through their past employment with the Group are entitled and which are payable under the defined benefit plan. This defined benefit obligation is calculated annually, using the projected unit credit method based on judgements in respect of the future development in for instance wage levels, interest rates, mortality and inflation rates. The defined benefit obligation less the fair value of any assets relating to the defined benefit plan is recognised in the balance sheet under provisions.
Defined benefit costs are categorised as follows:
* Service costs, including current service costs, past-service costs as well as gains and losses on curtailments and settlements
* Net interest expenses or income
* Remeasurements
Remeasurements, comprising actuarial gains and losses, any effects of changes to the asset ceiling as well as returns on defined benefit assets, excluding interest, are reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income for the period in which it occurs. Remeasurements recognised in other comprehensive income are reflected immediately in retained earnings and are not reclassified to the income statement. Service costs and net interest expenses or income are included in the income statement as staff costs.
Other non-current employee benefits are recognised using actuarial calculation. Actuarial gains or losses on such benefits are recognised directly in the income statement.
Accounting estimates and judgements
Assessment of provisions (estimate)
Management assesses, on an ongoing basis, provisions for amongst others restructuring costs and the likely outcome of pending and probable lawsuits etc. (other provisions). When assessing the likely outcome of lawsuits, Management bases its assessment on internal and external legal advice and established precedent. Provisions for restructuring costs are based on the estimated costs of implementing restructuring initiatives and thus on a number of assumptions about future costs and events. For all provisions, the outcome and final expense depend on future events, which are by nature uncertain.
Product-related liabilities include standard warranties and returned products etc. Staff-related liabilities include holiday pay and payroll costs due. The carrying amounts of other liabilities approximate the fair values of such liabilities.
Accounting policies
Other non-financial liabilities are recognised if, as a result of an earlier event, the Group has a legal or constructive obligation, and if the settlement of such obligation is expected to draw on corporate financial resources. Other non-financial liabilities are measured on a discounted basis, and the discount effect of any changes in the present value of the liabilities is recognised as a financial expense.
On the sale of products with a right of return, a refund liability and a right to the returned products are recognised as a refund liability and a current asset (included in prepaid expenses), respectively. The refund liability is deducted from revenue, and the right to the returned products is offset in production costs. Warranty commitments include an obligation to remedy faulty or defective products during the warranty period.
Accounting estimates and judgements
Warranty and return liabilities (estimates)
Liabilities in respect of service packages and warranties are calculated on the basis of information on products sold, related service and warranty periods and past experience of costs incurred by the Group to fulfil its service and warranty liabilities. Liabilities in respect of returns are calculated based on information on products sold, related rights concerning returns and past experience of products being returned in the various markets. Consolidated product-related liabilities are the sum of a large number of small items, the sum changing constantly due to a large number of transactions.
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Present value of defined benefit obligations: | ||
| Defined benefit obligations at 1.1. | 429 | 541 |
| Foreign currency translation adjustments | 24 | 22 |
| Current service costs | 10 | 15 |
| Calculated interest on defined benefit obligations | 8 | 2 |
| Actuarial gains/losses | 34 | -134 |
| Net benefits paid | -57 | -21 |
| Contributions from plan participants | 8 | 10 |
| Transfer to liabilities related to assets held for sale | - | -6 |
| Defined benefit obligations at 31.12. | 456 | 429 |
| Fair value of defined benefit assets: | ||
| Defined benefit assets at 1.1. | 338 | 348 |
| Foreign currency translation adjustments | 21 | 16 |
| Actuarial gains/losses | 21 | -29 |
| Contributions | 18 | 24 |
| Net benefits paid | -57 | -21 |
| Defined benefit assets 31.12. | 341 | 338 |
| Defined benefit obligations recognised in the balance sheet, net | 115 | 91 |
| Return on defined benefit assets: | ||
| Actual return on defined benefit assets | 21 | -29 |
| Actuarial gains/losses on defined benefit assets | 21 | -29 |
| Assumptions: | ||
| Discount rate | 1.7% | 2.3% |
| Expected return on defined benefit assets | 0.0% | 0.0% |
| Future salary increase rate | 1.6% | 1.4% |
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Product-related liabilities | 543 | 460 |
| Staff-related liabilities | 1,022 | 980 |
| Other debt, public authorities | 356 | 277 |
| Contingent considerations | 380 | 420 |
| Other costs payable | 857 | 874 |
| Other liabilities | 3,158 | 3,011 |
| Due within 1 year | 2,497 | 2,445 |
| Due within 1-5 years | 661 | 566 |
7.2 Other liabilities
Free products, service and some of the warranty-related services mentioned are provided free of charge to the customer. Certain other services and warranty-related services are paid by the customer simultaneously with delivery of the related goods, but delivery of the service takes place 1-4 years after delivery of the goods. Please refer to Note 1.2 for a description of the nature of the deferred income.
Accounting policies
Deferred income includes income received or future performance obligations relating to subsequent financial years and is recognised as revenue when the Group performs its obligations by transferring the goods or services to the customers.
7.3 Deferred income
| Expected recognition of revenue (DKK million) | Less than 1 year | 1-2 years | 2-4 years | More than 4 years | Total |
|---|---|---|---|---|---|
| 2023 | |||||
| Prepayments from customers | 62 | - | - | - | 62 |
| Deferred warranty-related revenue | 247 | 232 | 104 | 8 | 591 |
| Deferred free products revenue | 75 | 35 | 15 | 1 | 126 |
| Deferred service revenue | 164 | 116 | 94 | 30 | 404 |
| Total | 548 | 383 | 213 | 39 | 1,183 |
| 2022 | |||||
| Prepayments from customers | 68 | - | - | - | 68 |
| Deferred warranty-related revenue | 267 | 220 | 89 | 6 | 582 |
| Deferred free products revenue | 48 | 36 | 8 | 6 | 98 |
| Deferred service revenue | 130 | 95 | 37 | 4 | 266 |
| Total | 513 | 351 | 134 | 16 | 1,014 |
| (DKK million) | 2023 | 2022 |
|---|---|---|
| Prepayments from customers | 62 | 68 |
| Future performance obligations: | ||
| Deferred warranty-related revenue | 591 | 582 |
| Deferred free products revenue | 126 | 98 |
| Deferred service revenue | 404 | 266 |
| Total | 1,183 | 1,014 |
7.4 Contingent liabilities
The Demant Group is involved in minor litigations, claims, disputes etc. Management is of the opinion that such disputes do not or will not significantly affect the Group’s financial position. The Group seeks to make adequate provisions for legal proceedings. As part of our business activities, the Group has entered into normal agreements with customers and suppliers etc. as well as agreements for the purchase of shareholdings.
William Demant Foundation, Kongebakken 9, 2765 Smørum, Denmark, is the only related party with a controlling interest. Controlling interest is achieved through a combination of William Demant Foundation’s own shareholding and the shareholding of William Demant Invest A/S for which William Demant Foundation exercises the voting rights.# Section 8 Other disclosure requirements
Demant – Annual Report 2023 118
8.1 Related parties
Subsidiaries and associated enterprises of William Demant Invest A/S are related parties to the Demant Group. Related parties with significant influence are the company’s Board of Directors and their related parties. Furthermore, related parties are the Executive Board and companies in which the above persons have significant interests. Subsidiaries and associates as well as the Demant Group’s ownership interests in these companies appear from Subsidiaries and associates in Section 11. For financial information on transactions with associates, please refer to Note 3.4.
In 2023, William Demant Foundation paid administration fees to the Group of DKK 2 million (DKK 2 million in 2022). The Group paid administration fees to William Demant Invest A/S of DKK 3 million (DKK 2 million in 2022) and received service fees of DKK 6 million (DKK 4 million in 2022) from William Demant Invest A/S. In 2023, the Group paid service fees to Össur hf., a subsidiary of William Demant Invest A/S, of DKK 4 million (DKK 4 million in 2022) and received service fees of DKK 44 million (DKK 47 million in 2022) from Össur hf. In 2023, the Group was reimbursed by Vision RT, a subsidiary of William Demant Invest A/S, for pass-through expenses in the amount of DKK 115 million (DKK 113 million in 2022). At year-end 2023, the Group had receivables of DKK 18 million for services provided to Vision RT and Össur hf. (DKK 18 million in 2022).
In 2023, William Demant Foundation donated DKK 27 million to Eriksholm Research Centre (DKK 0 million in 2022) and DKK 4 million to industrial PhD projects in Oticon A/S (DKK 0 million in 2022). Further, William Demant Foundation acquired diagnostic and Oticon equipment worth DKK 2 million and DKK 6 million (DKK 3 million and DKK 1 million in 2022), respectively, from the Group.
Since 2011, the Group has settled Danish tax on account and residual tax with William Demant Invest A/S, which is the administration company for the joint taxation. There have been no transactions with the Executive Board and the Board of Directors apart from normal remuneration. Please refer to Note 1.3.
Some of the Group's subsidiaries are not subject to auditing by PricewaterhouseCoopers. In 2023, the fee for non-audit services delivered by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab, Denmark, amounted to DKK 0 million (DKK 2 million in 2022).
8.2 Fees to auditors
(DKK million)
| 2023 | 2022 | |
|---|---|---|
| Fees to Parent´s auditors appointed at the annual general meeting | ||
| Statutory audit fee | 18 | 14 |
| Other services | 1 | 2 |
| Total | 19 | 16 |
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8.3 Government grants
In 2023, the Demant Group received government grants in the amount of DKK 20 million (DKK 25 million in 2022) of which DKK 5 million (DKK 12 million in 2022) are Covid-19-related publicly funded compensation schemes. Non-Covid-19 grants are offset against R&D costs.
Accounting policies
Government grants are recognised when there is reasonable certainty that the conditions for such grants are satisfied and that they will be awarded. Grants received as compensation for costs incurred are recognised proportionately in the income statement over the periods in which the related costs are recognised in the income statement and are offset against costs incurred. Government grants relating to the acquisition of non-current assets are deducted from the cost of such assets.
(DKK million)
| 2023 | 2022 | |
|---|---|---|
| Government grants by function: | ||
| Production costs | - | 1 |
| R&D costs | 16 | 17 |
| Distribution costs | 3 | 7 |
| Administrative expenses | 1 | - |
| Total | 20 | 25 |
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8.4 Events after the balance sheet date
On 5 February 2024, the Group announced the decision to undertake a review of strategic options for its Communications business. The purpose of the review is to explore whether a different owner may be better positioned to accelerate growth and allow the business to realise its full potential. The review is expected to be completed by the end of the first six months of 2024.
As this review of strategic options has been initiated after 31 December 2023, the criteria for Communications to be classified as held for sale and/or discontinued operations are not met on the balance sheet date. After the balance sheet date for the 2023 financial statements, but before the submission of this Annual Report, Communications meets the criteria for being classified as held for sale and discontinued operations, and will be presented as such in 2024. The results, outcome and financial impact from the strategic review cannot be estimated at this time. All assets and liabilities presented as part of the Communications segment in note 1.1, to which we refer, will be included in the review of strategic options for the Communications business.
No other events have occurred after the reporting date that might affect the consolidated financial statements.
Section 9 Basis for preparation
Demant – Annual Report 2023 119
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Section 9 Basis for preparation
Demant – Annual Report 2023 120
The Group’s general accounting policies are described below. In addition to this, specific accounting policies are described in each of the individual notes to the consolidated financial statements as outlined here:
- 1.1 Segment disclosures
- 1.2 Revenue
- 1.3 Employees
- 1.6 Inventories
- 1.7 Trade receivables
- 1.8 Customer loans
- 2.3 Hedging and forward exchange contracts
- 3.1 Intangible assets
- 3.2 Property, plant and equipment
- 3.3 Leases
- 3.4 Other non-current assets
- 3.6 Impairment testing
- 4.2 Net financial items
- 4.3 Categories of financial instruments
- 4.5 Fair value hierarchy
- 5.1 Tax on profit
- 5.2 Deferred tax
- 6.1 Acquisition of enterprises and activities
- 6.2 Discontinued operations and assets held for sale
- 7.1 Provisions
- 7.2 Other liabilities
- 7.3 Deferred income
- 8.3 Government grants
General
The consolidated financial statements are presented in accordance with IFRS Accounting Standards as adopted by the EU and Danish disclosure requirements for annual reports published by reporting class D (listed) companies, cf. the Danish executive order on IFRS issued in compliance with the Danish Financial Statements Act. The registered office of Demant A/S is in Denmark. The consolidated financial statements are presented in Danish kroner (DKK), which is the functional currency of the Parent. The consolidated financial statements are presented based on historical costs, except for obligations for contingent consideration in connection with business combinations, share-based remuneration, derivatives and financial assets classified as assets available for sale, which are measured at fair value.
The financial statements for the Parent as well as the Parent’s accounting policies are presented separately from the consolidated financial statements and are shown on the last pages of this Annual Report 2023.
Effect of new accounting standards
The Group has adopted the new, amended and revised accounting standard and interpretation as published by the IASB and adopted by the EU effective for the accounting period beginning 1 January 2023. The new, updated and amended standard and interpretation did not result in any changes to the accounting policies for the Group nor had it any significant impact on the consolidated financial statements for 2023.
IASB has issued new accounting standards and amendments effective for accounting periods beginning after 1 January 2024, which have been adopted by the EU. The changes to these standards are not expected to have any significant impact on the Group.
The Group has applied the exception to recognise deferred tax on OECD’s/EU’s Pillar Two Model Rules and local implementation hereof. Except for the implementation of the new and amended standards, the accounting policies remain unchanged compared to last year.
Consolidated financial statements
The consolidated financial statements comprise Demant A/S (the Parent) and the enterprises in which the Parent can or does exercise control by either directly or indirectly holding more than 50% of the voting rights, or in which the Parent exercises control in some other manner. Enterprises in which the Group holds 20-50% of the voting rights and/or in some other manner can or does exercise significant influence are considered associates or joint ventures and are incorporated proportionately into the consolidated financial statements using the equity method.
Consolidation principles
The consolidated financial statements are prepared based on the financial statements of the Parent and its subsidiaries by aggregating uniform items. Enterprises that, by agreement, are managed jointly with one or more other enterprises are recognised using the equity method. The consolidated financial statements are prepared in accordance with the Group’s accounting policies. Intra-group income, expenses, shareholdings, balances and dividends as well as unrealised intra-group profits on inventories are eliminated. The accounting items of subsidiaries are recognised 100% in the consolidated financial statements. On initial recognition, non-controlling interests are measured either at fair value or at their proportionate share of the fair value of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiary. The method is chosen for each individual transaction.# Section 9 Basis for preparation
9.1 Group accounting policies
Non-controlling interests are subsequently adjusted according to their proportionate share of changes in equity of the subsidiary. Comprehensive income is allocated to non-controlling interests whether or not, as a result hereof, the value of such interests is negative. The purchase or sale of non-controlling interests in a subsidiary, which does not result in obtaining or discontinuing control of such subsidiary, is treated as an equity transaction in the consolidated financial statements, and any difference between the consideration and the carrying amount is allocated to the Parent’s share of the equity.
Foreign currency translation
The Group’s presentation currency is Danish kroner. On initial recognition, transactions in foreign currencies are translated at the exchange rates prevailing at the date of the transaction. The functional currencies of the enterprises are determined by the economic environment in which the enterprises operate, normally the local currency. Receivables, payables and other monetary items in foreign currencies are translated into Danish kroner at the exchange rates prevailing at the balance sheet date. Realised and unrealised foreign currency translation adjustments are recognised in the income statement as part of gross profit or net financial items, depending on the purpose of the underlying transaction.
Property, plant and equipment, intangible assets, inventories and other non-monetary assets purchased in foreign currencies and measured on the basis of historical cost are translated at the exchange rates prevailing at the transaction date. Non-monetary items, which are revalued at their fair values, are translated using the exchange rates at the revaluation date.
On recognition in the consolidated financial statements of enterprises presenting their financial statements in a functional currency other than Danish kroner, the income statement is translated using average exchange rates for the months of the year in question, unless they deviate materially from actual exchange rates at the transaction dates. In case of the latter, actual exchange rates are applied. Balance sheet items are translated at the exchange rates prevailing at the balance sheet date. Goodwill is considered as belonging to the acquired enterprise in question and is translated at the exchange rate prevailing at the balance sheet date.
All foreign currency translation adjustments are recognised in the income statement, except for the following, which are recognised in other comprehensive income:
- The translation of income statements of foreign subsidiaries using monthly average exchange rates for the respective months of the year, whereas balance sheet items of such foreign subsidiaries are translated using exchange rates prevailing at the balance sheet date.
- The translation of non-current, intra-group receivables that are considered to be an addition to or deduction from net investments in foreign subsidiaries.
- The translation of investments in associates.
Income statement
Income and costs are recognised on an accruals basis. The income statement is broken down by function, and all costs, including depreciation, amortisation and impairment losses, are therefore charged to production, distribution, administration and R&D.
Production costs
Production costs are costs incurred to generate revenue. Distribution companies recognise cost of goods sold as part of production costs. Production companies recognise cost of raw materials, consumables, production staff as well as maintenance of and depreciation, amortisation and impairment losses on property, plant and equipment and intangible assets used in the production process as part of production costs.
R&D costs
Research costs are always recognised in the income statement as such costs incur. Development costs include all costs not satisfying capitalisation criteria but incurred in connection with the development, prototype construction, development of new business concepts and amortisation of capitalised development costs.
Distribution costs
Distribution costs include costs relating to training, sales, marketing, promotion materials, distribution, bad debts as well as depreciation and amortisation of and impairment losses on assets used for distribution purposes.
Administrative expenses
Administrative expenses include administrative staff costs, office expenses as well as depreciation and amortisation of and impairment losses on assets used for administrative purposes.
Other operating income
Other operating income includes income from all activities not related to the core business activities of the Group.
Prepaid expenses
Prepaid expenses recognised as part of assets include costs relating to the subsequent financial years. Prepaid expenses are measured at cost.
Equity
Foreign currency translation reserves include foreign currency translation adjustments on the translation of financial statements of foreign subsidiaries and associates from their respective functional currencies into Danish kroner. Foreign currency translation adjustments are recognised in the income statement on realisation of the net investment. Hedging reserves include fair value adjustments of derivatives and loans satisfying the criteria for hedging of future transactions. The amounts are recognised in the income statement or the balance sheet at the same time as hedged transactions are recognised.
Treasury shares and dividend
On the buy-back of shares or sale of treasury shares, the purchase price or selling price, respectively, is recognised directly in equity as other reserves (retained earnings). A capital reduction through the cancellation of treasury shares will reduce the share capital by an amount corresponding to the nominal value of such shares. Proposed dividends are recognised as a liability at the time of adoption at the annual general meeting.
Cash flow statement
The cash flow statement is prepared according to the indirect method and reflects the consolidated net cash flow broken down into operating, investing and financing activities.
Cash flow from operating activities includes inflows from the year’s operations adjusted for non-cash operating items, changes in working capital, financial income received, financial expenses paid, and income tax paid. Cash flow from operating activities also includes short-term lease payments, lease payments of low-value assets and variable lease payments.
Cash flow from investing activities includes payments in respect of the acquisition or divestment of enterprises and financial assets as well as the purchase, development, improvement or sale of intangible assets and property, plant and equipment. In addition to this, cash flow from investing activities also includes movement in receivables from associates as well as customer loans.
Cash flow from financing activities includes payments to and from shareholders and the raising and repayment of non-current and current debt and lease liabilities. Cash flow in currencies other than the functional currency is recognised at average exchange rates for the months of the year unless they deviate significantly from actual exchange rates on the transaction dates. Repayments of lease liabilities are included as well.
Cash and cash equivalents are cash less overdrafts, which consist of uncommitted bank facilities that often fluctuate from positive to overdrawn. Any short-term bank facilities that are consistently overdrawn are considered cash flow from financing activities.
iXBRL tagging
The Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) has introduced a single electronic reporting format for the annual financial reports of issuers with securities listed on the EU regulated markets. The combination of XHTML format and iXBRL tags makes it possible for annual financial reports to be read by both humans and machines, thus enhancing accessibility, analysis and comparability of the information included in the annual financial reports.
The Group’s iXBRL tags have been prepared in accordance with the ESEF taxonomy, which is included in the ESEF Regulation and developed based on the IFRS taxonomy published by the IFRS Foundation. The line items in the consolidated financial statements are tagged to elements in the ESEF taxonomy. For financial line items that are not directly defined in the ESEF taxonomy, an extension to the taxonomy has been created. Extensions are anchored to elements in the ESEF taxonomy, except for extensions that are subtotals.
The annual report submitted to the Danish Financial Supervisory Authority (the Officially Appointed Mechanism) consists of the XHTML document together with the technical files, all of which are included in the ZIP file DEMANT-2023-12-31-en.zip.
Key definitions
- XHTML (eXtensible HyperText Markup Language) is a text-based language used to structure and mark up content such as text, images and hyperlinks in documents that are displayed in a web browser.
- iXBRL tags (or Inline XBRL tags) are hidden metainformation embedded in the source code of an XHTML document that enables the conversion of XHTML-formatted information into a machine-readable XBRL data record using appropriate software.
- A financial reporting taxonomy is an electronic dictionary of business reporting elements used to report business data.# Section 9 Basis for preparation
9.1 Group accounting policies (continued)
Key figures and financial ratios
Organic growth
Organic growth is measured as the year-on-year change excluding impact from acquisitions, divestments and foreign exchange adjustments in per-centage
EBITDA
Operating profit before amortisation, depreciation and impairment losses
EBIT
Operating profit
Adjusted EBIT
Operating profit adjusted for non-recurring transactions
Free cash flow
Cash flow from operating activities (CFFO) and investing activities (CFFI) before acquisitions and disposals of enterprises, participating interests and activities
Net interest-bearing (NIBD)
Net amount of borrowings and lease liabilities less interest-bearing receivables and cash
Net working capital
Net amount of current assets (excluding tax, financial contracts and cash) less trade payables, the current part of other liabilities and deferred income
EPS
Earnings per share
Per share
Financial ratios per share are calculated per share of nominally DKK 0.20
Average number of shares outstanding
Average number of shares excluding the average number of treasury shares for the year
Gender diversity, all people managers
Gender distribution between women and men in percentage among all managers with one or more reports
Gender diversity, management
Gender distribution between men and women at management levels from top-level manage-Vice Presidents and up
Gender diversity, top-level management teams
The percentage of top-level management teams that are on or off the top-level manage-target of 75% of all teams having a maximum of 75% of one gender ment teams
Gender diversity, Board of Directors
Gender distribution between women and men of shareholder-elected Board of Directors members
| Gross profit Revenue | *100 | Gross margin |
| Operating profit Revenue | *100 | EBIT margin |
| Net interest-bearing debt | *100 | Gearing multiple |
| EBITDA | Profit for the year attributable to Demant A/S' shareholders | EPS |
| Average number of shares outstanding | Profit for the continuing operations for the year attributable to Demant A/S' shareholders | EPS - continuing operations |
| Average number of shares outstanding | Profit for the discontinuing operations for the year attributable to Demant A/S' shareholders | EPS - discontinuing operations |
| Average number of shares outstanding | Free cash flow | Free cash flow per share |
| Average number of shares outstanding | Total annual remuneration of the CEO | CEO remuneration ratio |
| Average remuneration of Demant employees excluding the CEO |
Financial ratios are calculated in accord-ance with “Recommendations and Ratios” from CFA Society Denmark.
Gender diversity is calculated based on the data from the countries enrolled in our global HR data management system. In 2023, 90% of our employees were regis- tered in the system.
Carbon emissions are measured using the carbon dioxide equivalent (CO2e) to in- clude relevant greenhouse gasses accord- ing to the Greenhouse Gas Protocol. The consolidated emissions data comprise en- tities where Demant has operational con- trol. These include emissions data from leased facilities.
Scope 1 emissions (direct GHG emissions) cover CO2e emissions from actual and es- timated consumed natural gas, liquefied petroleum gas, gasoline and diesel. De- partment for Environment, Food & Rural Affairs (Defra) emissions factors were used.
Scope 2 emissions (own indirect GHG emissions) cover CO2e emissions from ac- tual and estimated purchased and con- sumed electricity and district heating. In- ternational Energy Agency (IEA) CO2 Emissions from Fuel Combustion factors were used for location-based emissions and residual mix for market-based emis- sions (when available) generated from electricity. Department for Environment, Food & Rural Affairs (Defra) emissions fac- tors were used for district heating.
As part of the preparation of the consoli- dated financial statements, Management makes a number of accounting estimates and judgements. These relate to the recog- nition, measurement and classification of assets and liabilities. Many items can only be estimated rather than accurately meas- ured. Such estimates are based on the most recent information available on prep- aration of the financial statements. Esti- mates and assumptions are therefore re- assessed on an ongoing basis. Actual fig- ures may, however, deviate from these es- timates. Any changes in accounting esti- mates will be recognised in the reporting period in which such changes are made.
Significant accounting estimates and judgements are described in the individual notes to the consolidated financial state- ments as outlined below:
1.2 Revenue
1.6 Inventories
3.3 Leases
3.6 Impairment (identification of CGUs)
5.2 Deferred tax
6.1 Acquisition of enterprises and activities
Specific accounting estimates and judge- ments are described in each of the individ- ual notes to the consolidated financial statements as outlined below:
1.2 Revenue
1.3 Employees
1.6 Inventories
1.7 Trade receivables
1.8 Customer loans
3.1 Intangible assets
3.2 Property, plant and equipment
3.3 Leases
5.2 Deferred tax
6.1 Acquisition of enterprises and activities
7.1 Provisions
7.2 Other liabilities
9.2 Accounting estimates and judgements
Parent Financial statement
Parent income statement (DKK million)
| Note | 2023 | 2022 | |
|---|---|---|---|
| Revenue | - | - | |
| Administrative expenses | 10.1 / 10.2 | -116 | -73 |
| Operating loss (EBIT) | -116 | -73 | |
| Share of profit after tax, subsidiaries | 10.8 | 1,742 | 1,584 |
| Share of profit after tax, associates | 10.8 | -2 | -3 |
| Financial income | 10.3 | 158 | 49 |
| Financial expenses | 10.3 | -413 | -147 |
| Profit before tax | 1,369 | 1,410 | |
| Tax on profit for the year | 10.4 | 6 | 29 |
| Profit for the year | 10.5 | 1,375 | 1,439 |
Parent balance sheet 31 December (DKK million)
| Note | 2023 | 2022 | |
|---|---|---|---|
| Assets | |||
| Goodwill | 20 | 23 | |
| Intangible assets | 10.6 | 20 | 23 |
| Land and buildings | 24 | 24 | |
| Property, plant and equipment | 10.7 | 24 | 24 |
| Lease assets | 1 | 1 | |
| Investments in subsidiaries | 10.8 | 16,211 | 15,028 |
| Loans to subsidiaries | 10.8 | 3,014 | 1,284 |
| Investments in associates | 10.8 | 30 | 33 |
| Other investments | 2 | - | |
| Other receivables | 9 | 8 | |
| Other non-current assets | |||
| Non-current assets | 19,267 | 16,354 | |
| Receivables from subsidiaries | 19,311 | 16,401 | |
| Income tax | - | 953 | |
| Other receivables | 11 | 30 | |
| Prepaid expenses | 2 | 32 | |
| Cash | 32 | 18 | |
| Receivables | - | 7 | |
| Current assets | 52 | 1,033 | |
| Assets | 52 | 1,033 | |
| 19,363 | 17,434 | ||
| Equity and liabilities | |||
| Share capital | 4,783 | 4,380 | |
| Other reserves | 45 | 46 | |
| Retained earnings | 2,312 | 1,812 | |
| Total equity | 2,426 | 2,522 | |
| Provisions | 4,783 | 4,380 | |
| Deferred tax liabilities | 10.4 | 498 | 124 |
| Provisions | 4 | 8 | |
| Borrowings | 502 | 132 | |
| Lease liabilities | 10,137 | 6,062 | |
| Other debt | 1 | 1 | |
| Non-current liabilities | 10.9 | 240 | 232 |
| Borrowings | 10,378 | 6,295 | |
| Debt to subsidiaries | 1,311 | 6,051 | |
| Other debt | 10.9 | 2,168 | 383 |
| Current liabilities | 221 | 193 | |
| Liabilities | 3,700 | 6,627 | |
| Equity and liabilities | 14,078 | 12,922 | |
| 19,363 | 17,434 |
Contingent liabilities
Related parties
Events after the balance sheet date
Parent accounting policies
Parent statement of changes in equity (DKK million)
| Share capital | Other reserves | Foreign currency translation reserve | Hedging reserve | Reserve according to equity method | Retained earnings | Total equity | |
|---|---|---|---|---|---|---|---|
| Equity at 1.1.2022 | 48 | -75 | 2 | 1,717 | 2,762 | 4,454 | |
| Profit for the year | - | - | - | - | 1,581 | -142 | 1,439 |
| Dividends received | - | - | - | - | -1,731 | 1,731 | - |
| Foreign currency translation adjustment of investments in subsidiaries etc. | - | -1 | - | 55 | - | - | -54 |
| Other changes in equity in subsidiaries | - | - | - | 256 | - | - | -256 |
| Value adjustment for the year | - | - | 16 | - | - | - | 16 |
| Tax relating to changes in equity | - | - | -4 | - | - | - | -4 |
| Share buy-backs | - | - | - | - | -1,840 | -1,840 | |
| Capital reduction through cancellation of treasury shares | -2 | - | - | 2 | - | - | - |
| Share-based compensation | - | - | - | - | 9 | 9 | |
| Other changes in equity | - | - | -4 | - | - | - | -4 |
| Equity at 31.12.2022 | 46 | -76 | 10 | 1,878 | 2,522 | 4,380 | |
| Profit for the year | - | - | - | - | 1,740 | -365 | 1,375 |
| Dividends received | - | - | - | - | -1,018 | 1,018 | - |
| Foreign currency translation adjustment of investments in subsidiaries etc. | - | -7 | - | -114 | - | - | -121 |
| Other changes in equity in subsidiaries | - | - | - | -72 | - | - | -72 |
| Value adjustment for the year | - | - | -37 | - | - | - | -37 |
| Tax relating to changes in equity | - | - | 8 | - | - | - | 8 |
| Share buy-backs | - | - | - | - | -846 | -846 | |
| Capital reduction through cancellation of treasury shares | -1 | - | - | 1 | - | - | - |
| Share-based compensation | - | - | - | - | 96 | 96 | |
| Equity at 31.12.2023 | 45 | -83 | -19 | 2,414 | 2,426 | 4,783 |
At the balance sheet date in 2023, the share capital was nominally DKK 45 mil- lion (DKK 46 million in 2022) divided into the corresponding number of shares of DKK 0.20. There are no restrictions on the negotiabil- ity or voting rights of the shares.# Notes to Parent financial statements
10.1 Employees
Remuneration to Executive Board and Board of Directors (included in employee costs)
(DKK million)
| 2023 | 2022 | |
|---|---|---|
| Executive Board*: | ||
| Wages and salaries | 25.6 | 25.9 |
| Cash bonus | 4.4 | 1.7 |
| Share-based remuneration | 11.6 | 8.7 |
| Remuneration in the notice period** | 22.1 | - |
| Total | 63.7 | 36.3 |
| Board of Directors: | ||
| Fee | 5.4 | 4.8 |
| Total | 5.4 | 4.8 |
The amounts are based on the principles set out in Note 1.3.
*As announced on 27 April 2023, Arne Boye Nielsen, former President of Diagnostics and Communications and member of the Executive Board, left his position in Demant.
(DKK million)
| 2023 | 2022 | |
|---|---|---|
| Employee costs | ||
| Wages and salaries | 83 | 59 |
| Share-based remuneration | 14 | 12 |
| Total | 97 | 71 |
| Average number of full-time employees | 44 | 32 |
For further details on the remuneration of the Executive Board and the Board of Directors and the share-based remuneration programme, please refer to Note 1.3 in the consolidated financial statements.
10.2 Fees to statutory auditors
(DKK million)
| 2023 | 2022 | |
|---|---|---|
| Statutory audit | 4 | 2 |
| Total | 4 | 2 |
10.3 Net financial items
(DKK million)
| 2023 | 2022 | |
|---|---|---|
| Interest from subsidiaries | 158 | 39 |
| Interest income | - | 10 |
| Financial income | 158 | 49 |
| Interest to subsidiaries | -31 | -5 |
| Interest expenses | -367 | -103 |
| Transaction costs | -7 | -2 |
| Foreign exchange losses, net | -8 | -37 |
| Financial expenses | -413 | -147 |
| Net financial items | -255 | -98 |
10.4 Tax on profit for the year and deferred tax
(DKK million)
| 2023 | 2022 | |
|---|---|---|
| Current tax on profit for the year | - | 30 |
| Adjustment of current tax, prior years | 2 | - |
| Change in deferred tax | 6 | -1 |
| Adjustment of deferred tax, prior years | -2 | - |
| Tax on profit for the year | 6 | 29 |
| Deferred tax recognised in the balance sheet: | ||
| Deferred tax, net at 1.1. | 8 | 7 |
| Changes in deferred tax | -6 | 1 |
| Adjustment of deferred tax, prior years | 2 | - |
| Deferred tax, net at 31.12. | 4 | 8 |
10.5 Proposed distribution of net profit
(DKK million)
| 2023 | 2022 | |
|---|---|---|
| Transferred to reserves for net revaluation according to the equity method | 1,740 | 1,581 |
| Retained earnings | -365 | -142 |
| Total | 1,375 | 1,439 |
10.6 Intangible assets
(DKK million)
| Goodwill | Rights and other intangible assets | Total intangible assets | |
|---|---|---|---|
| Cost at 1.1.2023 | 65 | 11 | 76 |
| Cost at 31.12.2023 | 65 | 11 | 76 |
| Amortisation at 1.1.2023 | -42 | -11 | -53 |
| Amortisation for the year | -3 | - | -3 |
| Amortisation at 31.12.2023 | -45 | -11 | -56 |
| Carrying amount at 31.12.2023 | 20 | - | 20 |
| Cost at 1.1.2022 | 65 | 11 | 76 |
| Cost at 31.12.2022 | 65 | 11 | 76 |
| Amortisation at 1.1.2022 | -39 | -11 | -50 |
| Amortisation for the year | -3 | - | -3 |
| Amortisation at 31.12.2022 | -42 | -11 | -53 |
| Carrying amount at 31.12.2022 | 23 | - | 23 |
10.7 Property, plant and equipment
(DKK million)
| Land and buildings | |
|---|---|
| Cost at 1.1.2023 | 31 |
| Cost at 31.12.2023 | 31 |
| Depreciation and impairment losses at 1.1.2023 | -7 |
| Depreciation and impairment losses at 31.12.2023 | -7 |
| Carrying amount at 31.12.2023 | 24 |
| Cost at 1.1.2022 | 31 |
| Cost at 31.12.2022 | 31 |
| Depreciation and impairment losses at 1.1.2022 | -7 |
| Depreciation and impairment losses at 31.12.2022 | -7 |
| Carrying amount at 31.12.2022 | 24 |
The carrying amount of investments in subsidiaries includes capitalised goodwill in the amount of DKK 8,059 million (DKK 7,819 million in 2022). Amortisation of capitalised goodwill for the year was DKK 627 million (DKK 562 million in 2022). Due to the planned divestment of the CI business to Cochlear with no consideration to be paid, a write-down of investments in subsidiaries of DKK 266 million was recognised in share of profit after tax. Loans to subsidiaries of DKK 3,014 million (DKK 1,284 million in 2022) are considered additions to the total investments in the particular enterprises and are therefore considered non-current. Please refer to Section 11 Subsidiaries and associates for further information on subsidiaries and associates.
10.8 Financial assets
(DKK million)
| Investments in subsidiaries | Loans to subsidiaries | Investments in associates | Investments in subsidiaries | Loans to subsidiaries | Investments in associates | |
|---|---|---|---|---|---|---|
| Cost at 1.1. | 13,009 | 1,284 | 50 | 10,843 | 1,429 | 50 |
| Foreign currency translation adjustments | - | -7 | - | - | 18 | - |
| Additions during the year | 257 | 1,801 | - | 2,166 | 173 | - |
| Disposals during the year | - | -64 | - | - | -336 | - |
| Cost at 31.12. | 13,266 | 3,014 | 50 | 13,009 | 1,284 | 50 |
| Value adjustments at 1.1. | 1,895 | - | -17 | 1,731 | - | -14 |
| Foreign currency translation adjustments | -114 | - | - | 54 | - | - |
| Share of profit after tax | 1,742 | - | -2 | 1,584 | - | -3 |
| Dividends received | -1,018 | - | - | -1,730 | - | -1 |
| Other adjustments | -58 | - | - | 256 | - | - |
| Value adjustments at 31.12. | 2,447 | - | -20 | 1,895 | - | -17 |
| Carrying amount at 31.12. | 15,713 | 3,014 | 30 | 14,904 | 1,284 | 33 |
| Subsidiaries with negative equity reclassified to provisions | 498 | - | - | 124 | - | - |
| Carrying amount after reclassification at 31.12. | 16,211 | 3,014 | 30 | 15,028 | 1,284 | 33 |
| Non-current financial assets | 16,211 | 3,014 | 30 | 15,028 | 1,284 | 33 |
A part of other debt of DKK 222 million (DKK 193 million in 2022) has a contractual maturity of less than one year, and a part of other debt of DKK 240 million (DKK 232 million in 2022) has a contractual maturity of 1-5 years. Interest-bearing debt broken down by currency: 74% in Danish kroner (74% in 2022), 22% in euros (20% in 2022), 4% in US dollars (4% in 2022), 0% in Canadian dollars (1% in 2022) and 0% in other currencies (1% in 2022). The fair value of the interest rate swap outstanding at the balance sheet date was DKK 18 million (DKK 0 million in 2022), and the contractual value of the interest swap was DKK 1,000 million (DKK 0 million in 2022). The interest rate swap matures in 2026. In 2022, part of the non-current debt was hedged via an interest rate cap with a contractual value of DKK 650 million. Sensitivity analysis in respect of interest rates Based on bank debt facilities at the balance sheet date, a rise of 1 percentage point in the general interest rate level will result in an increase in the Parent’s annual interest expenses before tax of approx. DKK 76 million (DKK 75 million in 2022). Around 33% (around 38% in 2022) of the interest-bearing debt is subject to fixed or limited interest rates, partly due to a bought interest rate swap, and partly due to loans being raised at fixed interest rates.
10.9 Interest-bearing debt
Contractual cash flows
(DKK million)
| Less than 1 year | 1-5 years | More than 5 years | Total | Carrying amount | Weighted average effective interest rate | |
|---|---|---|---|---|---|---|
| 2023 | ||||||
| Debt to credit institutions etc. | 1,474 | 10,584 | 301 | 12,359 | 11,189 | |
| Short-term bank facilities etc. | 271 | - | - | 271 | 259 | |
| Lease liabilities | 1 | - | - | 1 | 1 | |
| Interest-bearing liabilities | 1,746 | 10,584 | 301 | 12,631 | 11,449 | 3.9% |
| 2022 | ||||||
| Debt to credit institutions etc. | 5,998 | 5,322 | 885 | 12,205 | 11,867 | |
| Short-term bank facilities etc. | 254 | - | - | 254 | 246 | |
| Lease liabilities | 1 | - | - | 1 | 1 | |
| Interest-bearing liabilities | 6,253 | 5,322 | 885 | 12,460 | 12,114 | 2.0% |
Demant A/S has provided security in respect of credit facilities established by Danish subsidiaries. These credit facilities totalled DKK 1,140 million in 2023 (DKK 1,517 million in 2022) of which DKK 103 million was utilised (DKK 257 million in 2022). Demant A/S has provided security in respect of rent as well as guarantees concerning the continuous operation and payment of liabilities in 2023 for some of our subsidiaries. The Parent is jointly taxed with William Demant Invest A/S, which is the administration company, and with all Danish subsidiaries of both. Under the Danish Corporation Tax Act, Demant A/S is first of all fully liable for corporate tax payments and for withholding tax at source in respect of interest, royalties and dividends in relation to its own subsidiaries and is secondly liable for tax payments due for William Demant Invest A/S and its partly owned subsidiaries. For the purposes of section 357 of the Republic of Ireland Companies Act 2014, Demant A/S has undertaken to indemnify the creditors of its subsidiaries incorporated in the Republic of Ireland in respect of all losses and liabilities for the financial year ending on 31 December 2023 or any amended financial period incorporating said financial year.# Demant – Annual Report 2023 137
Section 10
10.11 Related parties
William Demant Foundation, Kongebakken 9, 2765 Smørum, Denmark, is the only related party with a controlling interest. Controlling interest is achieved through a combination of William Demant Foundation’s own shareholding and the shareholding of William Demant Invest A/S for which William Demant Foundation exercises the voting rights. Subsidiaries and associated enterprises of William Demant Invest A/S are related parties to Demant A/S. Related parties with significant influence are the company’s Board of Directors and their related parties. Furthermore, related parties are the Executive Board and companies in which the above persons have significant interests.
10.12 Events after the balance sheet date
Please refer to Note 8.4 in the consolidated financial statements.
10.10 Contingent liabilities
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10.13 Parent accounting policies
The financial statements of the Parent, Demant A/S, are presented in accordance with the provisions of the Danish Financial Statements Act for class D entities. The Parent financial statements are presented in Danish kroner (DKK), which is also the functional currency for the Parent. The accounting policies are the same as last year. In respect of recognition and measurement, the Parent’s accounting policies are generally consistent with the Group’s accounting policies. The instances in which the Parent’s accounting policies deviate from those of the Group are described below. The Parent has decided to apply the recognition and measurement in accordance with IFRS 15 and 16. The standards affect the Parent’s proportionate share of its subsidiaries’ equity value, and IFRS 16 affects the Parent’s leases.
Changes to comparative figures
The 2022 comparative figures for investments in subsidiaries and provisions have been changed due to incorrect presentation of investments in subsidiaries with negative equity in the past.
Effect of the changes to the comparative figures for 2022:
* Reclassification from “Carrying amount” in subsidiaries: DKK 124 million
* Reclassification to provisions: DKK 124 million
Income statement
Tax
The Parent is jointly taxed with its Danish subsidiaries and its parent, William Demant Invest A/S. Current income tax is allocated to the jointly taxed Danish companies in proportion to their taxable income.
Balance sheet
Goodwill
Goodwill is amortised on a straight-line basis over 20 years, which is the useful life determined on the basis of Management’s experience in respect of the individual business activities. Goodwill is written down to its recoverable amount, if lower than its carrying amount.
Rights
Rights acquired are amortised on a straight-line basis over their estimated useful lives and measured at cost less accumulated amortisation and impairment losses. The amortisation period is five years. Rights acquired are written down to their recoverable value, if lower than their carrying value.
Investments in subsidiaries and associates
Investments in subsidiaries and associates are recognised and measured using the equity method, i.e. interest is measured at the proportionate share of the equity values of such subsidiaries and associates with the addition or deduction of the carrying amount of goodwill and with the addition or deduction of unrealised intra-group profits or losses, respectively. The Parent’s proportionate shares of profits or losses in subsidiaries and associates are recognised in the income statement after elimination of unrealised intra-group profits or losses less any amortisation and impairment of goodwill. Subsidiaries and associates with negative equity values are measured at DKK 0, and any receivables from such companies are written down with the Parent’s share of the negative equity value to the extent that such receivable is considered irrecoverable. If the negative equity value exceeds the value of receivables, if any, such residual amount is recognised under provisions to the extent that the Parent has a legal or constructive obligation to cover liabilities incurred by the particular subsidiary or associate. On distribution of profit or loss, net revaluation and net impairment losses on investments in subsidiaries and associates are transferred to reserves for net revaluation according to the equity method.
Other investments
On initial recognition, other investments are measured at cost. Subsequently, they are measured at fair value on the balance sheet date, and any changes in fair values are recognised in the income statement under net financial items.
Provisions
Provisions include liabilities, which are uncertain in respect of the amount or the timing of their settlement. Provisions may include different types of liabilities, such as deferred tax liabilities, pension obligations, investments in subsidiaries with negative equity as well as provisions for disputes etc.
Statement of changes in equity
In compliance with the format requirements of the Danish Financial Statements Act, any items included under comprehensive income in the consolidated financial statements are recognised directly in equity in the Parent financial statements.
Cash flow statement
In compliance with section 86(4) of the Danish Financial Statements Act, a cash flow statement is not prepared for the Parent, such statement being included in the consolidated cash flow statement.
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Demant – Annual Report 2023 138
Section 11
Subsidiaries and associates
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Demant – Annual Report 2023 138
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Demant – Annual Report 2023 139
Section 11
Subsidiaries and associates
| Company | Interest |
|---|---|
| Audmet New Zealand Limited, New Zealand* | 100% |
| Audmet Oy, Finland* | 100% |
| Audmet Srl, Italy* | 100% |
| AudPractice Group, LLC, United States | 100% |
| Beijing Shengwang Yuanbo Commerce and Trade Co., Ltd., China* | 100% |
| Bernafon (UK) Limited, United Kingdom* | 100% |
| Bernafon A/S, Denmark* | 100% |
| Bernafon AB, Sweden* | 100% |
| Bernafon AG, Switzerland* | 100% |
| Bernafon Hörgeräte GmbH, Germany | 100% |
| Bernafon, LLC, United States | 100% |
| Birdsong Hearing Benefits, LLC, United States | 100% |
| Braun Hören GmbH & Co. KG, Germany | 100% |
| Braun Hörgeräte GmbH & Co. KG, Germany | 100% |
| Braun Hörgeräte Offenburg GmbH & Co. KG, Germany | 100% |
| Centro Auditivo Telex Ltda., Brazil | 100% |
| CQ Partners, LLC, United States | 100% |
| Danacom Høreapparater A/S, Denmark* | 100% |
| Demant Australia Pty Ltd, Australia* | 100% |
| Demant Belgium B.V., Belgium* | 100% |
| Demant Business Services Poland Sp. z o.o., Poland* | 100% |
| Demant Iberica, S.A., Spain* | 100% |
| Demant İşitme Cihazları San. Tic. A.Ş, Turkey* | 100% |
| Demant Italia S.r.l., Italy* | 100% |
| Demant Japan K.K., Japan* | 100% |
| Demant Korea Co., ltd., Korea* | 100% |
| Demant Malaysia Sdn. Bhd., Malaysia* | 100% |
| Demant México, S.A. de C.V., Mexico | 100% |
| Demant Nederland B.V., Netherlands* | 100% |
| Demant New Zealand Limited, New Zealand* | 100% |
| Demant Operations Poland Sp. z o.o, Poland | 100% |
| Demant Operations S.A. de C.V., Mexico | 100% |
| Company | Interest |
| Demant A/S Parent | |
| Oticon A/S, Denmark* | 100% |
| Oticon AS, Norway* | 100% |
| Oticon Denmark A/S, Denmark* | 100% |
| Oticon GmbH, Germany | 100% |
| Oticon Limited, United Kingdom* | 100% |
| Oticon Medical A/S, Denmark* | 100% |
| Oticon Medical AB, Sweden | 100% |
| Oticon Medical Maroc, Morocco* | 100% |
| Oticon Medical, LLC, United States | 100% |
| Oticon Polska Sp. z o.o., Poland* | 100% |
| Oticon, Inc., United States | 100% |
| Oticon (Shanghai) Hearing Technology Co., Ltd., China* | 100% |
| ACS Audika Sp. z.o.o., Poland | 100% |
| Acustica Sp. z o.o., Poland* | 100% |
| Advanced Hearing Providers, LLC, United States | 100% |
| Akoustica Medica S.A., Greece* | 100% |
| Amplivox Limited, United Kingdom | 100% |
| Audika AB, Sweden* | 100% |
| Audika AG, Switzerland* | 100% |
| Audika ApS, Denmark* | 100% |
| Audika Australia Pty. Ltd., Australia | 100% |
| Audika GmbH, Germany | 100% |
| Audika Groupe S.A.S., France* | 100% |
| Audika Management GmbH, Germany | 100% |
| Audika New Zealand Limited, New Zealand* | 100% |
| Audilab SAS, France* | 100% |
| Audio Seleccion S.L., Spain* | 100% |
| Audiology Services Company USA, LLC, United States | 100% |
| AudioNet America, Inc., United States | 100% |
| Audmet Australia Pty Ltd., Australia | 100% |
| Audmet Canada Ltd., Canada | 100% |
*Directly owned by the Parent for 100%. The list includes the Group's active companies.
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Demant – Annual Report 2023 140
Section 11
Subsidiaries and associates
| Company | Interest |
|---|---|
| Demant Sales Strategic Accounts A/S, Denmark* | 100% |
| Demant Schweiz AG, Switzerland* | 100% |
| Demant Singapore Pte Ltd, Singapore* | 100% |
| Demant South Africa (Pty) Ltd., South Africa* | 100% |
| Demant Sweden AB, Sweden* | 100% |
| Demant Technology & Innovation Centre Sdn. Bhd., Malaysia* | 100% |
| Demant Technology Centre Sp. z o.o., Poland* | 100% |
| DGS Diagnostics Sp. z o.o., Poland | 100% |
| Diagnostic Group LLC, United States | 100% |
| Diatec A/S, Denmark* | 100% |
| Diatec AG, Switzerland* | 100% |
| Diatec Canada Ltd., Canada | 100% |
| Diatec Diagnostics GmbH, Germany* | 100% |
| Diatec Diagnostics Ltd, United Kingdom | 100% |
| Diatec Polska Sp. z o.o., Poland* | 100% |
| Diatec Shanghai Medical Technology Co., Ltd., China* | 100% |
| Diatec Spain, S.L.U., Spain* | 100% |
| DSEA A/S, Denmark | 100% |
| e3 Diagnostics, Inc., United States | 100% |
| Entomed Medtech AB, Sweden* | 100% |
| EPOS Audio Australia Pty Ltd, Australia | 100% |
| EPOS Audio India Private Limited, India | 100% |
| EPOS Audio Ireland Limited, Ireland | 100% |
| EPOS Audio Singapore Pte. |
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Demant – Annual Report 2023
Company Interest
| Company Name | Percentage Interest |
|---|---|
| EPOS Audio Belgium BV, Belgium | 100% |
| EPOS Audio UK Ltd., United Kingdom | 100% |
| EPOS Austria GmbH, Austria | 100% |
| EPOS Canada Ltd., Canada* | 100% |
| EPOS France S.A.S, France | 100% |
| EPOS Germany GmbH, Germany | 100% |
| EPOS Group A/S, Denmark* | 100% |
| EPOS Hong Kong Limited, Hong Kong | 100% |
| EPOS Japan Kabushiki Kaisha, Japan | 100% |
| EPOS Netherlands B.V., Netherlands | 100% |
| EPOS Sales A/S, Denmark | 100% |
| EPOS Sweden AB, Sweden | 100% |
| EPOS Switzerland AG, Switzerland | 100% |
| EPOS USA, Inc., United States | 100% |
| Etymonic Design Inc., Canada* | 100% |
| Fluorite Sp. z o.o., Poland | 100% |
| Great Lakes Provider Network, LLC, United States | 100% |
| Guymark UK Limited, United Kingdom | 100% |
| Hearing Screening Associates, LLC, United States | 100% |
| HearingLife Canada Ltd., Canada* | 100% |
| Hidden Hearing (N.I.) Limited, United Kingdom | 100% |
| Hidden Hearing (Portugal), Unipessoal, Lda., Portugal* | 100% |
| Hidden Hearing International Plc, United Kingdom* | 100% |
| Hidden Hearing Limited, Ireland* | 100% |
| Hidden Hearing Limited, United Kingdom* | 100% |
| Hidden Hearing Properties Ltd, United Kingdom | 100% |
| Hörgeräte-Akustik Flemming & Klingbeil GmbH & Co. KG, Germany | 100% |
| Horgerate-Akustik Flemming & Klingbeil Verwaltungs-GmbH, Germany | 100% |
| IDEA Isitme Sistemleri Sanayi ve Ticaret A.S., Turkey* | 100% |
| Interacoustics A/S, Denmark* | 100% |
| Interacoustics Pty Ltd, Australia | 100% |
| Inventis North America Inc., United States | 100% |
| Inventis S.r.l., Italy* | 100% |
| Kuulopiiri Oy, Finland* | 100% |
| Langer Hörstudio GmbH, Germany | 100% |
| LeDiSo Italia S.r.l., Italy* | 100% |
| Maico Diagnostics GmbH, Germany* | 100% |
| Maico S.r.l., Italy* | 100% |
| Mediszintech Audiologica Kft., Hungary* | 100% |
| MedRx, Inc., United States | 100% |
| Moser Hörgeräte GmbH, Germany | 100% |
| Mr. Optik GmbH, Germany *** | 100% |
| Neurelec S.A.S, France* | 100% |
| Northeast Hearing Instruments, LLC, United States | 100% |
| Philiear Inc., Philippines* | 100% |
| Phonic Ear Inc., United States | 100% |
| Prodition S.A.S, France* | 100% |
| Ritter Hörgeräte GmbH, Germany | 100% |
| SBO Hearing A/S, Denmark* | 100% |
| SBO Hearing US, Inc., United States | 100% |
| SBO International Sales A/S, Denmark* | 100% |
| Shanghai YinPo Technology Co., Ltd., China | 100% |
| Shin Nihon Hochoki Kabushiki Kaisha, Japan* | 100% |
| Sonic AG (Sonic SA) (Sonic Ltd.), Switzerland* | 100% |
| Sonic Equipment Australia Pty Ltd, Australia | 100% |
| Sonic Innovations, Inc., United States | 100% |
| Synapsys S.A.S, France | 100% |
| Udicare S.r.l., Italy* | 100% |
| Value Hearing (Pty) Ltd., South Africa* | 100% |
| WDH Germany GmbH, Germany* | 100% |
| WDH UK Limited, United Kingdom* | 100% |
| WDH USA, Inc., United States* | 100% |
| Workplace Integra Inc., United States | 100% |
| Van Boxtel Hoorwinkels B.V., Netherlands | 100% |
| Audika NV, Belgium* | 100% |
| Medton Ltd., Israel | 90% |
| Colorado Hearing, LLC, United States | 80% |
| Destin Hearing Associates, LLC, United States | 70% |
| ADB Sarl, France | 60% |
| Audika Alpes Sarl, France | 60% |
| Institut de l'Audition du Var Sarl, France | 60% |
| Conc. Maico - Centro Otoacustico Marchesin S.r.l., Italy | 50% |
| Virtualis SAS, France* ** | 55% |
| European Hearing Care (Myanmar) Limited, Myanmar | 50% |
| Audiovita S.r.l., Italy | 49% |
| Exclusive Hearing Limited, United Kingdom | 49% |
| Microfon S.r.l., Italy | 49% |
| Otic Hearing Solutions Private Limited, India | 49% |
| Ma.Bi.Ge Bioacustica S.r.l., Italy | 49% |
| Audiology Concepts, LLC, United States | 40% |
| Audition Bahuaud SAS, France | 40% |
| Dencker A/S, Denmark | 40% |
| Vocechiara S.r.l., Italy | 40% |
| Acustica Umbra S.r.l., Italy | 35% |
| Centro Audioprotesico Lombardo S.r.l., Italy | 35% |
| Euro Hearing LLC, Uzbekistan | 35% |
| TruEar LLC, United States | 35% |
| Fonema Italia S.r.l., Italy | 30% |
| HearWell Audiology Clinics Inc., Canada | 25% |
| HIMSA A/S, Denmark | 25% |
| Imperial Hearing Limited, United Kingdom | 25% |
| Acufon S.r.l., Italy | 20% |
| Acustica Marche S.r.l., Italy | 20% |
| Audiovox Preduzece Za Izradu I Promet Ortopedskih Pomagaladoo, Serbia | 20% |
| Bontech Research CO D.o.o., Croatia | 20% |
| HIMSA II A/S, Denmark | 20% |
| Solaborate Inc., United States | 20% |
| The Hearing Doctors of Georgia, LLC, United States | 20% |
| K/S HIMPP, Denmark | 18% |
| HIMSA II K/S, Denmark | 15% |
| HIMPP A/S, Denmark | 13% |
| HearBase Limited, United Kingdom | 10% |
*Directly owned by the Parent for 100%.
**Sub-consolidated group of companies, including companies with non-controlling interests.
***Sub-consolidated group of companies, including associated companies. The list includes the Group's active companies.
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Demant A/S
Kongebakken 9
DK-2765 Smørum
Denmark
Phone +45 3917 7300
[email protected]
www.demant.com
CVR 71186911
Annual report
Auditor's report on audited financial statements
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