GN Store Nord A/S, Ballerup Annual General Meeting 2019 Thursday, March 21, 2019 Congratulations to GN with 150 years C.F. Tietgen, GN’s founder
Welcome by Chairman Per Wold-Olsen
1869 From Morse code………...via radio waves………….to advanced sound 2019
3 10 years development in the share price
March, 2009 (DKK) March, 2019 (DKK) 15 315
4 Share price development in 2018
December 31, 2017 (DKK) December 31, 2018 (DKK) 200 243
5 Enthusiasm from top analysts and media
"GN’s FY report should make it the envy of many companies…both GNH og GNA above consensus…Outlook: More than approved”
"Strong exit to 2018 and a more robust than expected 2019"
”Strong Q4 with both GNH and GNA reporting substantially ahead of expectations"
"Blowout numbers by GN Audio, outlook stronger than expected"
6 New member of Executive Management
René Svendsen-Tune Jakob Gudbrand Marcus Desimoni
7 Agenda a) Report by the Board of Directors on the activities of the company during the past year b) Submission of the audited annual report for approval c) Resolution of discharge to the Board of Directors and the Executive Management d) Decision on application of profits in accordance with the approved annual report e) Approval of remuneration to the Board of Directors for the current financial year f) Election of members to the Board of Directors g) Election of a state-authorized public accountant to serve until the company’s next annual general meeting h) Proposals from the Board of Directors and shareholders i) Any other business
8 Report by the Board of Directors on the activities of the company etc.
Agenda items A, B, C and D
The year 2018 – GN Store Nord
– GN Hearing
– GN Audio
The coming year – 2019
1907: GN's cable-laying in Libau in Latvia attracted a crowd 9 9 This was our guidance for 2018...
GN Store Nord GN Hearing GN Audio
Guidance Guidance Guidance
Organic growth > 6% > 7%
EBITA ~ (135) > 20% > 17%
Effective tax rate ~ 22%
10 ... we delivered better than promised results in 2018
GN Store Nord GN Hearing GN Audio
Guidance 2018 Guidance 2018 Guidance 2018
Organic growth 13% > 6% 7% > 7% 21%
EBITA ~ (135) (143) > 20% 20.5% > 17% 19.0%
Effective tax rate ~ 22% 22%
11 GN Store Nord reached important milestones in 2018
Revenue (DKK billion) To shareholders (DKK billion) 10.6 1.2 + 13% organic growth vs 2017
EBITA (DKK billion) Earnings Per Share 12 9,25 7,34 8,07 2.0 4,61 4,79 + 12% vs 2017 (EBITA) 2014 2015 2016 2017 2018 We will continue to deliver on well-defined strategies
2008 - 2009 2010 - 2013 2014 - 2016 2017 – 2019 2020 – …
• Planning started
• Core competencies provide further opportunities “Hear More, Do More, • Build on leading technologies Be More” and partnerships “Innovation & Growth” • New opportunities in adjacent business areas “SMART” Operations “FAST” R&D focus
13 Core areas that GN can address with its sound expertise
Det digitally connected society
• Increasing emphasis on software, apps and wireless • Digital ecosystems and interaction with users
Technology adapted to the individual
• Big Data and Artificial Intelligence • Personalized hearing aids and headsets
Health and well-being
• Active, informed and tech-savvy consumer • Solutions that support a healthy life
14 Artificial Intelligence makes headset and hearing aids even smarter
GN utilizes its combined strength from headsets and hearing aids
Investments over several years in AI: Activate my outdoor sound Activate my • Own researchers office sound • AudEERING • Partnerships and ecosystems • Universities and external Activate my researchers Activate my home sound traffic sound
15 A very strong portfolio of brands – targeted for purpose and customer groups
Medical Consumer Professionel Special
Leading technology Technology leader in and audiology headsets
Easy technology at affordable cost
Business support for Targeted headsets hearing clinics for noisy workplaces Targeted defense Focus on care Video- and security forces and service communication solutions
16 GN must remain a technology leader
Strong leadership and organization Innovation Synergistic M&A leader
Attractive Agil megatrends distribution HEAR DO BE MORE MORE MORE
Strong Lean business partnerships model
Attractive shareholder returns
17 Report by the Board of Directors on the activities of the company etc.
Agenda items A, B, C and D
The year 2018 – GN Store Nord
– GN Hearing
– GN Audio
The coming year – 2019
GN's cycling Telegraph- Messenger in Shanghai, China 18 18 GN Hearing Jakob Gudbrand
19 GN Hearing – Highlights in 2018
GN Hearing had a strong exit from 2018 Revenue (DKK) - driven by ReSound LiNX 3D and ReSound LiNX Quattro 5.8 mia. 7%* • Revenue growth of 10%, of which organic growth was 7% EBITA (DKK) • 10% organic growth in Q4 2018
• Strong growth based on successful global 1.2 mia. 4% rollout of the ReSound LiNX 3D and the launch of the ReSound LiNX Quattro EBITA-margin • 4% increase in EBITA reflects revenue growth combined with investment in growth initiatives 20.5%
* Organic growth
20 The strong organic growth was driven across regions and countries
North America Europe Rest of World Double digit organic Solid growth in Continued double growth with Europe with digit organic growth independents. Strong particularly strong with China as the pick-up in VA. Growth performance in main driver in Beltone below France group growth rate
GN Hearing has taken market shares 8 years in a row
21 The world's first Premium Plus hearing aids
The world's most advanced Replaceable battery rechargeable solution version
ReSound LiNX 3D™ product range still available as a Premium option
22 Successful introduction of ReSound LiNX Quattro
Available in almost 50 countries around the world, including: • United States • France • Germany • Italy • Spain • United Kingdom • Australia • Japan
23 Artificial Intelligence powered hearing aid app launched at CES – The world's first hearing solution employing Artificial Intelligence
Just swipe: Automatic profile shift Just talk: Voice-guided profile shift
24 Report by the Board of Directors on the activities of the company etc.
Agenda items A, B, C and D
The year 2018 – GN Store Nord
– GN Hearing
– GN Audio
The coming year – 2019
GN engineer at work 25 25 GN Audio René Svendsen-Tune
26 GN Audio – Highlights in 2018
Exceptionally strong results in both the Revenue (DKK) professional and the consumer business 4.8 mia. 21%* • Revenue growth of 20%, of which organic growth was 21% • 28% organic growth in Q4 2018 EBITA (DKK) • Several successful product launches during the year 0.9 mia. 26% • EBITA increased by 26% reflecting the strong revenue growth and operational leverage EBITA margin • EBITA margin of 19.0% compared to 18.2% in 2017 19%
* Organic growth
27 2018 was a year worth remembering
• Consolidating the position as No. 1 in the Unified Communications market • Jabra Engage set the agenda in call- centres • The consumer is now back on track – powered by true wireless headsets • Excellent execution throughout the company: 21% organic growth – market leading products Strong and broad based organic growth in CC&O continues
North America Europe Rest of World Solid organic growth Strong organic growth Strong organic driven by GN Audio’s driven by a portfolio of growth across strong professional countries and a strong several countries product portfolio public sector incl. India and ANZ performance. Fastest growing region in 2018
GN Audio’s professional business continues its strong momentum. The positive trend continues in 2019
29 Powered by Launching Jabra Elite 85h Sound+ Engineered for the best wireless calls and music experience with SmartSound SmartSound. Sound that automatically adapts to the environment based on artificial intelligence
100% Handsfree voice control
Calls & Music as never before, including active noise canceling and superior battery life GN Audio acquires Altia Systems
• GN Audio can offer plug & play audiovisual communications to businesses • New solutions that increase business productivity and make cross-country collaboration easier • Founded in 2011 • The acquisition gives GN Audio immediate • Headquartered in Cupertino, California, U.S. access to the highly attractive market for • Leading innovative developer of premium video integrated audio and video solutions for communication solutions Huddle rooms • Leverage GN Audio’s' already leading position in the professional audio market PanaCast 3 PanaCast 2 (Coming soon)
31 Report by the Board of Directors on the activities of the company etc.
Agenda items A, B, C and D
The year 2018 – GN Store Nord
– GN Hearing
– GN Audio
The coming year – 2019
First class of students at GN's Telegraphist school in Foochow, China, 1877
32 Financial guidance for 2019
GN Store Nord GN Hearing GN Audio
Guidance Guidance Guidance
Organic growth ~ 7% > 15%
EBITA > 20% > 19%*
Effective tax rate ~ 23%
* Before extraordinary one-off costs related to the acquisition of Altia Systems Inc., which impact GN Audio’s EBITA margin negatively by around 1 percentage point in 2019
33 34 The future of GN
• Strong finish to 2018
• Strong new products provide good foundation in 2019
• Solid strategy execution
• Strong innovation culture
1903: GN telegraph cable lands in Honolulu, Hawaii
34 For the second consecutive year, GN is J.P. Morgan's preferred European Medtech share
”GN continues to look compelling into 2019”
(J.P. Morgan, December 3, 2018)
35 36 Report by the Board of Directors on the activities of the company etc.
Composition of the Board
Evaluation of the Board
Remuneration
Dividends and share buyback
Data entry from before the PC age
36 Composition of the Board
Elected by the Annual General Meeting Elected by the employees
Per Wold-Olsen Bill Hoover Wolfgang Reim Leo Larsen Morten Andersen Chairman Deputy Chairman
Hélène Barnekow Gitte Pugholm Aabo Ronica Wang Marcus Stuhr Perathoner 37 Continued structured annual evaluation of the Board
The evaluation includes, inter alia: • Contribution and results • Cooperation with Executive Management • Chairman’s leadership of the Board • The composition of the Board (including competencies, diversity and the number of members) • The work in the committees and the committee structure • The organization and quality of the material that is submitted to the Board
Cable repair from the GN ship ‘Edouard Suenson’ in the North Sea after the 2nd World War 38 38 Board remuneration for 2018
• At the Annual General Meeting in 2018, a Board remuneration of DKK 7,342,500 was approved
• The total realized remuneration to the Board was DKK 7,342,500 million as stated in the Annual Report 2018 New separate remuneration report complements the Annual Report
39 Dividends and share buyback
General policies Recommendations for 2018 results
Dividend policy Dividend for 2018 GN aims to pay out a dividend The board of directors proposes to pay out a total dividend of corresponding to 15-25% of the annual DKK 197 million for 2018 net results (DKK 182 million in 2017) DKK 1.35 per share with a nominal value of DKK 4 (DKK 1.25 in 2017) Share buyback policy The remaining profit is proposed to be transferred to the The company will also, with shareholder company’s reserves authorization and the communicated long- term capital structure policy of maintaining Share buyback program a capital structure consisting of equity and The Board of Directors requests authorization under item h. 1.1 debt with the net interest-bearing debt of the agenda to buy back shares of DKK 1 billion over the next amounting between one to two times 12 months, in accordance with what we communicated at the EBITDA, initiate share buyback programs general meeting in 2016 when appropriate
40 Thank you for your attention Agenda items a), b), c) og d) a) Report by the Board of Directors on the activities of the company during the past year b) Submission of the audited annual report for approval c) Resolution of discharge to the Board of Directors and the Executive Management d) Decision on application of profits in accordance with the approved annual report
42 e) Approval of remuneration to the Board of Directors for the current financial year
• The base fee for serving on the Board of Directors of GN Store Nord A/S remains at DKK 275,000 with 2 times the base fee to the deputy chairman and 3 times the base fee to the chairman. • The base fee for serving on the Board of Directors of GN Audio A/S and GN Hearing A/S, respectively, remains at DKK 110,000 with 1.75 times the base fee to the deputy chairman and 2.5 times the base fee to the chairman. • The base fee for serving on the Audit Committee, the Remuneration Committee and the Strategy Committee, respectively, remains at DKK 165,000 with 2 times the base fee to the chairman. • The base fee for serving on the Nomination Committee remains at DKK 82,500 with 2 times the base fee to the chairman. • In addition to reimbursement of travel expenses, members of the Board of Directors are entitled to receive a fixed allowance in connection with participation in Board meetings held outside the Board members’ country of residence with EUR 3,000 per meeting held on the same continent as the Board member resides, and EUR 6,000 per meeting held on a continent other than the continent on which the Board member resides. • In addition to the above-mentioned fees, the company pays statutory contributions to social security and similar taxes and charges within the EU / EEA that the company is obligated to pay according to applicable law in relation to a member of the Board of Directors’ position with the company.
43 f) Election of members to the Board of Directors
• Pursuant to Article 15.1 of the Articles of Association, all members of the Board of Directors elected by the general meeting are up for election every year. Accordingly, Per Wold-Olsen, William E. Hoover, Jr., Gitte Pugholm Aabo, Wolfgang Reim, Hélène Barnekow and Ronica Wang are up for election. • The Board of Directors proposes that Per Wold-Olsen, William E. Hoover, Jr., Gitte Pugholm Aabo, Wolfgang Reim, Hélène Barnekow and Ronica Wang are re-elected. • Per Wold-Olsen, Gitte Pugholm Aabo, Wolfgang Reim, Hélène Barnekow and Ronica Wang are considered independent as defined by the Committee on Corporate Governance Recommendations. • William E. Hoover, Jr. was elected to the Board of Directors in 2007. As a consequence of his tenure on the Board of Directors, he is not considered independent under the Danish Corporate Governance Recommendations as of the financial year 2019. • Information on directorships and management positions of each candidate proposed for re-election to the Board of Directors may be found on www.gn.com/agm and in the Annual Report 2018 and was attached to the notice to convene as appendix 1.
44 g) Election of a state-authorized public accountant to serve until the company’s next annual general meeting
• Pursuant to Article 19.2 of the Articles of Association, a state-authorized public accountant must be elected for the term until the next annual general meeting. • During the fall of 2018, the company completed a tender process headed by the Audit Committee regarding audit services in accordance with applicable law. Based on a thorough evaluation of proposals received during the tender process as well as meetings with the participating audit firms, two candidates were selected and the Audit Committee decided to recommend that PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab (”PwC”) be elected as new auditor. The Audit Committee found that PwC best addresses and fulfills the selection criteria defined for the tender process and further possess the qualifications and competencies required to fulfill the role as the company’s auditor. • In accordance with the recommendation from the Audit Committee, the Board of Directors proposes election of PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab, CVR no.: 33771231, as new auditor of the company. • The Audit Committee has not been influenced by third parties nor has it been subject to any contractual obligations restricting the annual general meeting’s choice of certain auditors or audit firms.
45 h) Proposals from the Board of Directors and shareholders h.1) Proposals from the Board of Directors h.1.1) Proposal from the Board of Directors to authorize the Board of Directors to acquire treasury shares h.1.2) Proposal from the Board of Directors to reduce the share capital through the cancellation of treasury shares h.1.3) Proposal from the Board of Directors to approve a new remuneration policy, including general guidelines for incentive pay h.2) Proposals from shareholders There are no proposals from shareholders
46 h.1.1) Proposal from the Board of Directors to authorize the Board of Directors to acquire treasury shares
• On May 23, 2017, the company issued convertible bonds consisting of bonds with warrant units, allowing holders to convert such warrants into shares. As stated in company announcement no. 25 of 23 May 2017, the company hedged this obligation and is continuously hedging its obligations under its long-term incentive programs with a holding of around 10.7 million treasury shares, corresponding to approximately 7.4% of the share capital. • In order to allow the company to continuously buy back shares, the Board of Directors proposes that, until the next annual general meeting, the Board of Directors is authorized to allow the company and its subsidiaries to acquire additional shares in the company up to a total nominal value equivalent to 10% of the company’s share capital. The shares are to be acquired at the market price applicable at the time of purchase subject to a deviation of up to 10%. The company's holding of treasury shares, including previously acquired shares, may at no time exceed 15% of the company’s share capital.
47 h.1.2) Proposal from the Board of Directors to reduce the share capital through the cancellation of treasury shares
• As part of the company's share buyback program – see announcement no. 15 of 2 May 2018 – the Board of Directors proposes to reduce the share capital by nominally DKK 13,664,456 through cancellation of 3,416,114 treasury shares of DKK 4 each, corresponding to 2.3% of the total share capital. Upon completion of the capital reduction, the company's share capital will be DKK 569,072,400. • As a consequence of the capital reduction, it is proposed to amend the company's Articles of Association with the effect that Article 3.1 will read as follows: • “The company’s share capital amounts to DKK 569,072,400 divided into shares in denominations of DKK 1 or multiples thereof.” • Pursuant to section 188(1) of the Danish Companies Act, it is noted that the purpose of the capital reduction is to cancel the treasury shares referred to above, which, according to the practice of the Danish Business Authority, is considered comparable with a capital reduction for distribution to the shareholders. The shares were bought by the company for a total amount of DKK 948,342,978 implying that DKK 934,678,522 has been distributed to the shareholders in addition to the nominal reduction amount. The average purchase price has thus been DKK 278 per share (rounded). • Prior to completion of the capital reduction a four-week notice will be issued to creditors of the company in accordance with section 192(1) of the Danish Companies Act.
48 h.1.3) Proposal from the Board of Directors to approve a new remuneration policy, including general guidelines for incentive pay
• The Board of Directors proposes that the general meeting approves the company’s new remuneration policy, including general guidelines for incentive pay, for the Board of Directors and Executive Management as adopted by the Board of Directors.
• The new remuneration policy includes general guidelines for incentive pay which ensures the required flexibility to introduce a new long-term incentive plan for the company’s Executive Management following the annual general meeting. The remuneration policy, including general guidelines for incentive pay, includes the possibility, subject to certain limitations and restrictions and at the Board of Directors’ discretion, to grant the Executive Management share options. To incentivize the Executive Management, vesting of such share options will be subject to certain vesting criteria and a vesting period of three years as further described in the new remuneration policy.
• The remuneration policy, including general guidelines for incentive pay, also includes a description of the determination, review and implementation process for the policy as well as updates thereof to ensure that the Board of Directors has the necessary flexibility to deviate from the policy in exceptional circumstances.
• The proposed new remuneration policy, including general guidelines for incentive pay, is available at the company’s website at www.gn.com/agm and attached as appendix 2.
49 i) Any other business
• No decisions nor proposals can be adopted under this item i) • Questions regarding the company can be addressed to the Board
50 Thank you