Demant

Earnings Release • Mar 1, 2016

Company announcement no 2016-02 1 March 2016

Publication of Annual Report 2015

William Demant delivers solid growth in both revenue and earnings

Organic growth of 8% in wholesale of hearing aids in second half-year

Oticon will launch the first-ever dual-radio hearing aid in late second quarter

This announcement includes the highlights from the Annual Report 2015:

-- Consolidated revenue totalled DKK 10,665 million, matching a growth rate of
14% or 7% in local currencies of which organic growth accounted for more
than half.
-- Driven by the successful launch of Oticon’s Inium Sense platform, the Group
saw an 8% organic growth rate in the wholesale of hearing aids in the
second half-year, thereby exceeding the market growth rate.
-- The reported operating profit (EBIT) increased by 7% to DKK 1,878 million.
The underlying profit increased by 8%, corresponding to an EBIT margin of
19.4% or an increase of 0.5 percentage point.
-- Cash flow from operating activities (CFFO) increased by 6% to DKK 1,592
million, corresponding to a continued high cash conversion ratio of 85%
(CFFO/EBIT). Free cash flow grew by 8%, amounting to DKK 1,129 million.
-- At the end of the second quarter of 2016, Oticon will reach a landmark with
the introduction of the first-ever dual-radio hearing aid, combining the
audiological advantages of our new near field magnetic induction system for
fast and ultra-low-power ear-to-ear communication and a 2.4 GHz system for
streamer-free connectivity and programming. The completely new audiological
platform delivers new groundbreaking technology and unmatched end-user
benefits. The global launch will impact sales in the second half of the
year.
-- In 2016, we expect to generate growth in all our business activities. We
are guiding for an operating profit (EBIT) in the range of DKK 2.0-2.3
billion.

Comments by the President & CEO

“2015 was a strong year for our wholesale and retail hearing aid businesses,
and we are particularly satisfied with the solid performance of our wholesale
business that generated an organic growth rate of 8% in the second half-year.
We have in the Group seen satisfactory improvement in our profitability for the
full year driven by encouraging results in the hearing aid business, which more
than compensated for the continued investments in our implant business,
challenging market conditions in Russia, which negatively impacted our
diagnostics business, and negative exchange rate movements in Brazil,” says
Niels Jacobsen, President & CEO of William Demant Holding.

Financial review

Consolidated revenue amounted to DKK 10,665 million, corresponding to a growth
rate of 14% or 7% growth in local currencies. Organic growth and acquisitions
contributed by 4 and 3 percentage points, respectively, with organic growth
accelerating through the year.

The positive currency translation effect on consolidated revenue of 9% is to a
great extent attributable to the strengthening of some of our major invoicing
currencies, especially the US dollar, the British pound sterling and the
Japanese yen. However, we have also seen a negative currency transaction effect
of 2% and consequently, we have seen a total positive exchange rate impact on
revenue of 7% in 2015.

In 2015, the reported operating profit (EBIT) increased by 7% to DKK 1,878
million, which was within the recently guided range of DKK 1,800-2,000 million.
Significant exchange rate movements, hedging and one-off elements in 2014 and
2015 have affected our EBIT and diluted our reported EBIT margin. When
adjusting for currency and one-off elements, we have seen an increase in the
underlying EBIT of 8%, corresponding to an EBIT margin of 19.4% or an
improvement of 0.5 percentage point. Reported earnings per share (EPS) were DKK
26.6, which is an increase of 12% on last year.

Consolidated cash flow from operating activities (CFFO) increased by 6% to DKK
1,592 million in 2015. This equals a very high cash conversion ratio of 85%
(CFFO/EBIT). The free cash flow amounted to DKK 1,129 million, or an increase
of 8% on 2014.

Hearing aid market conditions

We estimate that the global unit growth rate was approximately 5% in 2015. We
estimate that the average selling price (ASP) on the hearing aid market
declined by a few percentage points in 2015, primarily due to product and
channel mix shifts and generally intense competition, which were, however,
partly offset by a positive country mix driven by strong growth in the US. In
terms of value, the overall market growth rate was, in our estimation, 1-3%.

Business trends

Hearing Devices: Strong second half-year growth in core business and upcoming
landmark launch

Our core business – the development, manufacture and wholesale of hearing aids
– realised an organic growth rate of 8% in the second half-year, which is twice
as high as the organic growth rate realised in the first half-year, resulting
in a full-year organic growth rate of 6%. In 2015, organic growth was driven by
a unit growth rate of 6% and a stable ASP, which means that we continued to
gain market share.

Growth can primarily be attributed to the successful launch of Oticon’s
ultra-fast Inium Sense platform. The launch was the biggest and broadest
product launch ever undertaken by Oticon. The platform was launched in all
styles, at all price points and in all markets in the course of only a few
weeks. In the fourth quarter, Oticon strengthened its product portfolio by
launching three new innovative Power solutions. Built on the Inium Sense
platform, the new Power solutions deliver higher gain and output, they improve
the feedback control and they give the user a more personalised listening
experience. Our two additional brands, Bernafon and Sonic, both delivered
encouraging growth in the second half-year after a weak first half-year.

At the end of the second quarter of 2016, Oticon’s position as technology
leader will be reaffirmed with the launch of the first-ever dual-radio hearing
aid, combining the audiological advantages of our new near field magnetic
induction system and a 2.4 GHz system for streamer-free connectivity and
programming. This very exciting hearing aid is based on a completely new
platform offering multiple new advantages not seen in existing solutions in the
market, and we are proud to take hearing aid performance to an entirely new
level. The global launch will be an important growth driver in our core
business in the second half of 2016.

After a slow start to the year, especially in the US, our retail business
gradually picked up momentum in 2015 and thus realised a satisfactory increase
in revenue driven by a combination of organic growth and acquisitions. In 2015,
our organic growth rate was in line with the market growth rate in the markets
where we operate, and in the second half of the year, we even saw growth
acceleration. Acquisition growth exceeded organic growth, which can mainly be
attributed to the recent acquisition of Audika, but also to a number of minor
acquisitions.

Hearing Implants: New CI system successfully prelaunched

The business activity generated a 12% reported growth rate, or 7% in local
currencies, of which the main part could be attributed to organic growth. Our
growth rate was close to the estimated market growth rate.

In late 2015, we successfully completed the prelaunch clinical activities in
France, Denmark, Germany and the Netherlands pertaining to the first-ever CI
system to carry the Oticon Medical name with excellent results. The new CI
system, Neuro, was not commercially launched until the beginning of 2016, so in
the second half of 2015 we saw a slowdown in sales of our older CI system, as
clinics were awaiting the new CI system. Our bone-anchored hearing system
(BAHS) business saw satisfactory growth in 2015, and we gained market share in
the traditional percutaneous segment of the market. In the fourth quarter of
2015, we carried through three exciting launches and additional ones have been
planned for 2016.

Diagnostic Instruments: Weak markets dampening growth

The global market for hearing-diagnostic equipment slowed down in 2015 and is
estimated to have grown by a mere 0-2%. The low market growth rate is mainly a
consequence of an unusually low tender activity level and can be directly
attributed to the very weak markets, Russia and Belarus. Conversely, we have
seen encouraging market growth in Asia.

In 2015, the business activity did not fully meet the initial expectations set,
mainly due to the mentioned market slowdown, but also due to the delayed launch
of our new clinical impedance product from Grason-Stadler. The business
activity thus delivered 0% growth in local currencies (10% on a reported
basis), which is clearly below the previous five-year average growth rate
(CAGR) of almost 18% in local currencies. Outside Russia and Belarus, our
Diagnostic Instruments business activity delivered a 4% growth rate in local
currencies.

Other business areas: Unified Communication contributes to satisfactory growth
in SeCom

Sennheiser Communications (SeCom), our 50/50 joint venture with Sennheiser KG,
realised a satisfactory 16% organic growth rate, which clearly exceeds the
market growth rate. Driven by Unified Communication (UC), the CC&O (Call Center
and Office) segment was the main growth contributor, whereas the two other
business segments, Gaming and Mobile, only saw modest growth.

Major proposals from the Board of Directors for adoption by the annual general
meeting

At the annual general meeting on 7 April 2016, the Board of Directors will
propose that Lars Rasmussen, President & CEO, Coloplast A/S, be elected as new
member of the Board of Directors.

Further, the Board of Directors will propose that the minimum nominal value of
the Company's shares may be amended from DKK 1 to DKK 0.20 with the purpose of
splitting the Company's shares at a ratio of 1:5 at a later time.

Other matters

In 2015, the Company bought back 1,095,954 shares at a total price of DKK 605
million. At the end of the year, the Company held a total of 960,355 treasury
shares purchased at a total price of DKK 541 million. As of 1 March 2016, the
Company has bought back an additional 248,515 shares at a price of DKK 152
million.

Outlook for 2016

As far as the hearing aid market is concerned, we expect to see a unit growth
rate of 4-5%, which will however be partly offset by a decline in the market’s
average selling price due to continued mix changes and fierce competition. In
terms of value, we expect the market to grow slightly in 2016.

In 2016, we expect to generate growth in sales in all the Group’s three
business activities: Hearing Devices, Hearing Implants and Diagnostic
Instruments. Based on exchange rates in early 2016 and including the impact of
exchange rate hedging, we expect the exchange rate impact on revenue to be
neutral in 2016. Acquisitions made in 2015 will impact consolidated revenue by
approximately 6% in 2016.

In 2016, we plan to continue to buy back shares and complete the announced
buy-back of shares in the amount of DKK 2.5-3.0 billion for the period from
2014 to 2016. From 2014 to 1 March 2016, the Company has bought back shares at
a total price of DKK 1.64 billion.

All in all, we are guiding for an operating profit (EBIT) of DKK 2.0-2.3
billion.

Lars Nørby Johansen
Niels Jacobsen

Chairman of the Board
President & CEO

The full Annual Report 2015 for William Demant Holding A/S totalling 94 pages
will be published immediately after this announcement.

                              ¨ ¨ ¨ ¨ ¨ ¨ ¨

Further information: Other contacts:
Niels Jacobsen, President & CEO René Schneider, CFO
Phone +45 3917 7300 Søren B. Andersson, VP IR
www.demant.com Rasmus Sørensen, IR Officer

                               2015    2014    2013   2012   2011  Developme
                                                                          nt
                                                                   2014-2015

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Key figures, DKK million

-------------------------------- -------- ----------
Revenue 10,665 9,346 8,959 8,555 8,041 14%
---------------- --------------
Gross profit 7,895 6,813 6,518 6,127 5,777 16%
---------------- --------------
Operating profit (EBIT) 1,878 1,761 1,736 1,653 1,709 7%
---------------- --------------
Net financial items -69 -70 -72 -132 -103 -1%
---------------- --------------
Profit before tax 1,809 1,691 1,664 1,521 1,606 7%
---------------- --------------
Profit for the year 1,439 1,327 1,286 1,151 1,199 8%
---------------- --------------
Assets 14,390 11,219 10,318 8,777 7,646 28%
---------------- --------------
Equity 6,500 5,584 5,056 4,059 3,304 16%
---------------- --------------
Cash flow from operating 1,592 1,495 1,282 1,272 1,381 6%
activities (CFFO)

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Financial ratios

-------------------------------- -------- ----------
Gross profit margin 74.0% 72.9% 72.8% 71.6% 71.8% -
---------------- --------------
Profit margin (EBIT margin) 17.6% 18.8% 19.4% 19.3% 21.3% -
---------------- --------------
Earnings per share (EPS), DKK 26.6 23.8 22.7 20.2 20.6 12%
---------------- --------------
Return on equity 23.7% 24.7% 28.0% 31.8% 41.7% -

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Key figures and financial ratios for 2011 and 2012 have not been adjusted to
the changes in accounting policies from 2014.