Demant Hldg U/Adr

Good afternoon everyone and welcome to the conference call for DEMAND's interim report for 2026. My name is Peter Pudselykke and I'm heading up the investor relations activities here in DEMAND. With me today I have our usual crew, our president and CEO Søren Nielsen, our CFO René Schneider, as well as one of my good colleagues in the IR team, Gustav Hoegh. As you should have seen by now, there were a couple of announcements out from us last night. One relating to the interim report, and one relating to the launch of our new premium hearing aid, Oticon Reveal. We will be discussing both during today's call, and we plan to kick off with a presentation, which will be followed up by a Q&A session. The total session is expected to last no more than one hour, and the presentation should be online by now. When we get to the Q&A, we kindly remind you to limit yourselves to two questions at a time, please, to allow as many as possible to ask a question. Before we dig into the presentation, please do pay notice to the disclaimer slide on slide two, and with that onto slide three, where I will leave it to Søren to start with the agenda, please.

Thank you very much, Peter, and welcome everybody. Today's agenda, no surprise, highlights and financial takeaways, big business area review. René will take us through more details on the group financials. We'll discuss the outlook or present the revised outlook and take Q&A. And first half in highlights for Demand 2026, strong momentum in all business areas, ahead of expectation with growth accelerating from first quarter into second. This is driven by strong performance in hearing aids, where we, fueled by the success of Oticon Seal, have seen a further strengthening of the momentum. Market growth remains to be in line with what we saw in the first quarter, but which is in the higher end of our, I would say, lower-than-normal expectations. In hearing care, we have seen very solid execution and, of course, also growth. Significant contribution from the acquisition of Kind, which all in all have delivered very strong performance. Kind not the least. Cost saving initiatives announced in February 2026 are progressing ahead of plans and supporting underlying margin improvements. René will go through that in more details. The divestment of the implant and communication business was completed in Q1. and we are now a fully focused hearing healthcare company. Key financial takeaways from the first half, group reported growth of 15%, a strong momentum in all business areas and 10% of these are acquisitive growth primarily coming from Kint, but also other acquisitions. A key highlight is the increased gross margin, increased by one percentage point, driven by a strong geography channel product mix in hearing aids, leading to a strong ASP, and supported by the acquisition of Kind in hearing care. Hearing care retail business structurally have a slightly higher gross margin than the wholesale business, and therefore of course the mix also pulls it up, but I would also say here higher than we expected. OPEX increased by 5% organically, partly supported by cost-saving initiative announced earlier in the year in February. Acquisitions Predominantly Kind added 14% to group OPEX. EBIT before special items was 2.134 billion Danish kroner, corresponding to an EBIT margin of 16.5. Below that, again, René will elaborate on that, strong underlying performance improvement and also underlying margin improvement. Strong cash flow, cash flow from operation of 1.6 billion, corresponding to a 6% increase compared to first half 2025. And based on our performance in the first half and reassessment of the momentum and the outlook for second half, we have upgraded our financial outlook for 2026. The organic revenue growth is now expected to be 6 to 7% and EBIT before special items 4.4 to 4.8 billion Danish kroner. And for the business areas, starting with hearing aids, the global hearing aid market in the first half of 2026, we estimate that it has in value grown 4%, 3% in units. The unit growth in the second quarter comes out a little bit different than the first quarter. with U.S. Commercial being zero and U.S. VA being one. This is less than first quarter, but the comps are also different, so 30,000 feet unchanged market conditions. Still below the normal expectation of 4 to 6, but a little more positive on the ASP development, where we normally anticipate flat. We have seen an estimate and improved pricing of 1% also in the second quarter. In second quarter, highlights by geography, growth in Europe was driven by Germany and France, whereas NHS was negative. This is purely due to phasing of purchase there. Excluding UK, Europe saw 6% growth. So quite solid in North America, as I already spoke to. Flat or modest growth in North America, depending on channel. Canada saw strong growth. Rest of the world, we estimate, well, we have no statistics, but we estimate that China maintained some positive momentum despite continuously challenged market conditions. In Australia, growth has also returned to positive development following a soft Q1. But again, all these with a grain of salt, depending on last year's phasing. All in all, we see the market conditions in line with what we saw in the first quarter. Hearing aids in the second quarter. Further acceleration of growth, driven by a full rollout of Odecon Seal into all channels and geographies. and that has delivered 10% growth. I would say it's broad-based. It is sealed that in many ways is the spearhead on the growth and changed the momentum, but we have really seen a nice broad pickup, most predominantly in North America, where we deliver double-digit growth, which is obviously way ahead of the underlying market growth, also strong in Canada. Solid in Germany and UK, France and Spain also strong growth, and in Asia Pacific, highlights are Japan and to some extent Australia, whereas China saw negative growth primarily due to the challenging mild conditions. And we also, as Peter said yesterday, released the news that we will be introducing very shortly new flagship product, Oticon Reveal, our latest innovation, and I'll share a few highlights on the core technology that now takes performance of hearing aids to a new level. We introduced the world's first dual AI system. And what's the core of that? The core of that is that so far, most AI systems, if not all, have centered around trying to somehow detect noise and suppress this, more or less, depending on your philosophy. We have now added a parallel AI system that focuses on speech and the content of the speech and the details of the speech, so you can say the contrast, the clarity of the speech is further enhanced. These two systems work in parallel, but of course synchronized and optimized towards one another, so all in all working as one system in real time, all the time, very strong. And this is powered by a brand new Reveal AI platform. It is still built, as we have done things for a number of years now, to support the way the brain makes sense of things, the way we translate from what we get in to what it means, to what it is that's being said, that we can give a response or enjoy what we hear. The world's first dual AI system supports speed, precision, balancing of things. And a part of that is one thing is to know what you want to do very fast and be able to adjust the gain very precisely in the instrument, but in case you don't have a very strong We have significantly improved our feedback prevention system so we can deliver much more gain at much faster and higher precision to a level we don't believe any competitors are near. This is in reality also very important in delivering the benefits to the end user, because this is often about providing a lot of gain for soft sounds, so you get again the small details out of things. Then also a new connectivity platform that brings even stronger stability and longer range, so users again can enjoy the connection to the phone, even if the phone is quite remotely placed, and basically here it's ringing, or enjoying music, whatever. And with this dual AI system, which is the Corvid, this is created by a new platform, a platform that still, based on our philosophy, is based on a single chip. This is a major benefit to power consumption, to size, integration level. and the optimization of that allows us to do the two AI systems in parallel without destroying power consumption so things are still on all the time working seamlessly for the end user and there's no limitation to how much you can be in noise or how many hours or minutes you can use it these things are always on and will help you getting an unmatched precision of speech and an unmatched clarity In noise environments, but also while maintaining a level of contextual sound, so you actually know that you're in the restaurant or in the traffic or wherever you are. There is a very, very solid basis for documenting these benefits. Some would say in a slightly scientific way, but this is to make sure things actually work. We see a very significant improvement in the signal-to-noise ratio presented to the end user without taking things out, but balancing them differently. We see a very significant improvement to the speech intelligibility index, as it's called, meaning how can I actually understand and make sense of things. We see a very strong response to when the brain can actually see or hear. We see a very significant improvement, which is also confirmed in our trials. Very strong comfort in Oticon Reveal, going to bring excitement to the market and significant benefit for end-users, whether it's your first hearing aid or whether it's an upgrade from an already well-functioning premium product of latest technology, then you will see a significant benefit improvement. In hearing care, second quarter, very strong performance with significant contribution from Kint in local currencies, impressive 31% growth, of which 23 come from the acquisitions, mainly Kint, but also a larger acquisition in UK made in March. Strong 8% organic growth in the quarter, supported a little bit by the comps from last year, but also sequentially expressing an uplift to the momentum in the business and strong execution broadly across geographies. Kinney itself delivered strong performance, and we also explicitly comment on that. and that's super good for of course scale and profit and also good to see after uncertainty related to the immediate takeover is gone. So we're very comfortable about the further benefit of having the kin business in our group. Looking at geography, strong performance across the region, particularly in Germany, but also several other markets. A little less growth in France, but that's due to the way the distribution system continues to expand in France, where a number of new players get into the field. Strong or good organic growth in North America was driven, it was strong and driven by both US and Canada. NUS growth was supported by slightly easier comparison figures than we had in Q1. We all remember last year all the uncertainty that came from, let's say, political uncertainty. In Australia, strong organic growth, and we saw negative growth in China driven by tough market conditions, but also tough comparison figures. There was some release of reimbursement last year that's no longer there, which has definitely lowered both product mix and also demand. Diagnostic in second quarter, very strong performance. We are very, very happy to see return to solid growth rates now in the quarter, 9%. Again, last year, uncertainty in Q2, super high, and we saw a lot of holding back on the execution of orders. So, of course, partly also due to that. But we also there definitely feel an improved momentum and that we gained share and growth was coming both from instrument sales as well as service and consumable business. Growth was broad-based, but particularly strong in UK, but also US, Canada, etc. So all in all very good.

Over to you René for Group Financials. Thank you Søren and we move on to revenue in the first half which is a bit of repetition. We saw a broad-based organic growth of 7% in the first half, acquisitive growth of 10% Entirely related to acquisitions in hearing care of course predominantly kind but also a larger retail in the UK as well as some minor acquisitions and we saw a negative effect from FX of 3% driven by US dollar so all in all 15% growth in reported revenue. I highlight from the first half is the development in the gross profit. It increased by 17% to just shy of 10 billion with a margin expansion of 1 percentage point versus Last year which was above our expectation and the primary drivers of that was a very healthy solid development in ASP due to in hearing aids due to strong geography channel and product mix but also an equally supported by a strong contribution from the acquisition of KIND and its performance in hearing care. That brings us to operating expenses and EBIT. We saw 5% organic growth in the first half year, which was on the one hand partly supported by the cost-saving initiatives, but also included negative one-offs related to the restructuring of retail in the UK that I will come back to. In acquisitions predominantly again Kin added 14% to OPEX growth and exchange rate had a negative effect of 2%. Looking at EBIT before special items it was 2.134 billion. corresponding to a margin of 16.5 or 19% growth in local currencies. Included in that result and in that margin, we have absorbed a number of negative effects, one of them being an estimated 50 million negative effect from exchange rates, but also an additional 30 million kroner from the acquisition we did of a larger retail chain in the UK and the following restructuring that was executed in the first half year as part of our operating profit. If we exclude that, the underlying EBIT margin expansion would have been a 0.6 percentage point compared to last year, that reflecting a strong underlying operating leverage. Our special items in the first half was 216 million, predominantly related to Kent. The strong result in the first half here also means that when we talked about outlook for the year previously, we highlighted a back-end loaded EBIT Profile for the year. With this result, we now see a more normal phasing of EBIT between the two half years. Cash flow was strong, both on cash flow from operations, but also free cash flow. I would highlight the net cash inflow from acquisitions and divestments. So whilst we have done acquisitions, the divestments we have also done in the same period actually results in a net cash inflow of 91%. As you are likely aware, we have not done any share buybacks during the first half as we have had focus on reducing debt and leverage. Which brings us to The balance sheet development and also net interest bearing debt. On the graph on the right hand side, you see the spike in leverage after the acquisition of Kint, but you also see the strong deleveraging we have done since being actually ahead of plan on the deleveraging due to both strong cash generation as well as profit growth. So now we are 3.0 and our updated view on gearing is that we by end of 2026 expect to be slightly above the 2 to 2.5 range, which is our long-term guidance. With that, let's move on to outlook. Brief comment on the market. So we, I would say almost as normal, but we do base the market understanding on a competitive environment where we know competitors or expect competitors to launch new product in H2 that is built into our assumptions and we update Based on the hearing aid market performance in H1, we update our full year assumptions to be 3-4%. This continues to be a conservative assumption below our medium to long term fundamental assumption around the market. Our things to highlight are special items. We have adjusted special items to now total 400 million, previously 325. We have pushed hard on both the KIND integration and the cost savings initiatives and as a result of that we also see higher special items. Kind Integration Special Items is now estimated at 150, previously 125, as well as cost saving initiatives now 250 million, previously 200 million, primarily all related to severance payments and implementation costs. The other highlights on the outlook side is less negative effect on FX, as you have seen in the announcement, but also higher profit contribution from both CEI and Kint. The cost effectiveness program now is estimated to contribute 300 million. compared to 250 in the original outlook and the better performance in kind with that we expect a contribution to EBIT of 325 million previously 300 million lastly but more minor we expect to get a refund of tariffs in H2 of 25 million with that Summing up, our outlook now being 6-7% organic growth and an EBIT before special items in the range of 4.4 to 4.8 billion. So with that, we are ready to go to Q&A.