Morningstar | GN Store Nord Finishes 2018 on Strong Note, With Sales Growth Beating Consensus and Our Expectations
Narrow-moat GN Store Nord reported full-year revenue of DKK 10.6 billion, or 11% growth year over year, with a 1% acquisition contribution offset by a 3% currency decline. The 13% full-year organic growth was mainly driven by GN Audio at 21% organic growth, above our expectations, while GN Hearing delivered 7% organic growth, fueled by an impressive 10% in the last quarter. The shares reacted positively to the results, but for now, we are maintaining our DKK 250 fair value estimate and narrow moat rating.All main regions contributed to GN Hearing sales growth. North America recorded double-digit organic growth in the competitively advantaged independent channel. The important Veterans Affairs channel and Beltone, GN's own U.S retail, reported growth below the overall group. GN Hearing also recorded strong growth in Europe, highlighting France, and double digits in the rest of the world, with China and India as the main contributors. The new ReSound LiNX Quattro played its part in the quarterly solid results, with a strong average selling price increase. However, technological ramp-up costs caused the lack of gross margin improvement year on year.
In the audio business, strong double-digit organic growth was mainly driven by the call center and office and consumer segments. Geographically, CC&O growth was attributable to all regions. GN Audio announced this month the acquisition of Altia Systems, a U.S.-based firm. Altia provides plug-and-play multimedia solutions for unified communications in small and midsize corporate rooms; the rationale for the acquisition is market expansion of GN's unified communications offering.
Group EBITA reached almost DKK 2 billion, a 12% increase compared with last year, while EBITA margin at 18.4% was mainly in line with 2017's level at 18.2%. Earnings per share at DKK 9.25, a 15% increase from last year, came in below consensus and our expectation.
GN Store Nord is an electronics communication products group based in Denmark. Co. is engaged in the manufacture and marketing of products for personal communication. Co.'s product offering includes hearing instruments, corded and wireless headsets, and audiologic diagnostics equipment used to test people's hearing and sense of balance. In addition, Co. offers products and accessories such as speakers, amplifiers, headset telephones, and adapters, as well as software and equipment for fitting hearing instruments. Co.'s operations are organized along two business divisions: GN Netcom (headsets) and GN ReSound (advanced hearing instruments).
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