EUR 850.00 For Business Accounts Only

Morningstar | Full-Year William Demant Results in Line With Our Expectations; Fair Value Estimate Maintained

Narrow-moat William Demant announced Feb. 19 its full-year 2018 results and the group name re-brand from William Demant Holding to Demant. Full-year results came mainly in line with our forecast but operating income was below consensus. The share price was down 9% after the results announcement. We believe the share price reaction reflects the market disappointment with the full-year operating income at DKK 2.65 billion; which came in the lower end of the management guidance. We are maintaining our fair value estimate at DKK 209 and our narrow moat rating.

Top-line growth was strong at 7% organic and 6% reported growth, the result of negative 3% currency effect partially offset by positive 2% from acquisitions. Organic growth was good in almost all business segments, particularly in the wholesale segment and diagnostics instruments. Retail segment at 1% organic growth lagged behind wholesale, with large differences among regions. Retail in Australia was particularly weak. Unit and ASP growth in 2018 were materially impacted by loss of a large customer in the first half of 2018, two large low-priced tenders and negative growth in the NHS. Adjusted for these effects, Demant reports full-year ASP and unit increase at 5% each, with ASP largely driven by geographic, channel, and improved product mix.

Geographically, North America delivered 8% organic growth, driven by VA channel, independents, and own retail network in the U.S. France and Spain drove the growth in Europe, at 5% organic growth, partially due to strong presence of Audika. China drove high wholesale revenue growth in Asia, at 14% organic growth.