Leading Intimate Healthcare. Roadshow presentation Q3 2008/09

Transcription

1 1 Leading Intimate Healthcare Roadshow presentation Q3 2008/09

2 2 Forward-looking statements The forward-looking statements contained in this presentation, including forecasts of sales and earnings performance, are not guarantees of future results and are subject to risks, uncertainties and assumptions that are difficult to predict. The forward-looking statements are based on Coloplast s current expectations, estimates and assumptions and based on the information available to Coloplast at this time. Heavy fluctuations in the exchange rates of important currencies, significant changes in the healthcare sector or major changes in the world economy may impact Coloplast's possibilities of achieving the long-term objectives set as well as for fulfilling expectations ti and may affect the company s financial i outcomes.

3 3 Key messages Satisfying underlying EBIT margin at 17% 5% organic sales growth below expectations ti Germany continues to challenge 2008/09 growth Strong free cash flow development Remaining share buy back cancelled Revised organic full year guidance for 2008/09: Organic growth rate of ~6% (DKK 5%) EBIT margin in fixed currencies of 16-17% from previously around 16% (DKK 15-16%) Operating profit 11% / /09 Operating margin 14% 15% 2007/ /09 Sales +4% 6,307 6,558 Capex of DKK ~600m from previously DKK ~700m Effective tax rate of 28% 2007/ /09

4 4 Sales overview In DKK, revenues were up by 4% to DKK 6.6bn and the organic growth was 5% -slightly below the current market growth. Excluding Germany organic growth was above market at 8% Ostomy Care growth of 3% driven by SenSura sales. Excluding Germany growth was 7% Urology and Continence Care growth of 8% with continued strong performance in North America Wound and Skin Care growth of 4% with continued price competition in main European markets Sales by business area 1,128 (4%) 2,748 (8%) OC UCC WSC 1,024 (12%) Sales by region (9%) 512 DKKm (organic growth) 2,682 (3%) DKKm (organic growth) Restructuring of WSC and DSU progress according to plan Product launches include SpeediCath Compact Girl and Virtue male sling Europe Americas RoW 5,022 (4%)

5 5 Satisfactory profitability and good cash generation Gross margin of 58% down 1% due to weaker currencies. Improvements in production costs offset by price and product mix changes Significant decrease of SGA to sales ratio impacted particularly by lower admin costs EBIT margin of 15% with underlying margin at 17% NIBD to EBITDA of 1.6 and ROE of 33% Working capital to sales ratio development maintains positive trend CAPEX to sales decreases to 7%. USHQs opened in June 09 FCF increases to DKK 748m 9M 07/08 9M 08/09 Gross profit Gross margin 59% 58% SGA to sales 41% 39% EBIT-margin 14% 15% EBIT-margin adj. 15% 17% NIBD/EBITDA 2.1 1,6 ROE 38% 33% ROIC OCafter tax 12% 14% NWC-to-sales 31% 28% CAPEX CAPEX-to-sales 8% 7% Free cash flow

6 6 Guidance for 2008/09 adjusted Guidance 08/09 Guidance 08/09 (DKK) Long-term guidance Sales growth ~6% (organic) ~5% Market + EBIT margin 16-17% (Fixed) 15-16% >20% CAPEX (DKKm) ~ % of sales Tax rate ~28% DKK GBP USD HUF EUR Average exchange rate 2007/08* Spot rate 10 August Estimated average exchange rate 2008/ Change in estimated average exchange -12% 11% -10% 0% rates compared with last year** *) average exchange rates 2007/08 are used when calculating the organic revenue growth rates and the EBIT margin in local currencies. **) Estimated average exchange rate is calculated as the average exchange rate year to date combined with the spot rate for the remainder of the year.

7 7 Appendices Newly launched male sling with the product name Virtue

8 8 Quarterly sales overview 1,200 1, Q07/08 2Q07/08 3Q07/08 4Q07/08 1Q08/09 2Q08/09 3Q08/09 OC UCC WSC

9 9 Germany impacts Ostomy Care growth Organic sales growth of 3% impacted by lower than expected sales primarily in Germany. Excluding the German market organic growth was 7%. Reported growth was 1% Biggest growth driver continues to be the SenSura product line % , DKKm than expected sales primarily in 4lower Coloplast maintains its position as market leader with 35-40% global market share 2002/ / / / / /08 % DKKm Q 06/074Q 06/071Q 07/082Q 07/083Q 07/084Q 07/081Q 08/092Q 08/093Q 08/09 Revenues Reported growth Organic growth

10 10 Satisfactory Urology and Continence Care growth Organic sales growth of 8% and reported growth of 7% High growth in sale of intermittent catheters especially SpeediCath and SelfCath Satisfactory sales in our US and European urology business High growth rates in sales of Peristeen and Conveen product ranges Maintains market leader position with a global market share of 30-35% in Continence Care and ~10% in Urology % DKKm 2002/ / / / / / % DKKm Q 06/ Q 06/ Q 07/ Q 07/ Q 07/ Q 07/ Q 08/ Q 08/ Q 08/09 Revenues Reported growth Organic growth Note: Mentor was acquired 3Q 05/06

11 11 Action taken within Wound and Skin Care Organic sales growth of 4% and reported growth of 4% Growth is driven by Biatain foam bandages Continued price pressure in the main European markets CCP sales impacted by quarterly fluctuations Global market share estimated at ~9% Restructuring programme progressing according to plan % DKKm % / / / / / / Q 06/ Q 06/ Q 07/ Q 07/ DKKm 3Q 07/ Q 07/ Q 08/ Q 08/ Q 08/09 Note: 2007/08 impacted by inclusion of contract production Revenues Reported growth Organic growth

12 12 Currencies reduced gross profit margin Gross profit increased by 3% to DKK 3,824m. Production costs increased by 5% mainly due to lower production volumes than last year Gross margin of 58% down 1% due to weaker currencies. Improvements in production costs offset by price and product mix changes DKKm % DKKm % 6, , ,000 4,000 3,000 2,000 1, , ,731 3, , ,834 60,1 4, , / / / / / / ,300 1,250 1,200 1,150 1,100 1,050 1,000 1,213 3Q 06/ ,273 4Q 06/ ,284 1Q 07/ ,169 2Q 07/ ,262 3Q 07/ ,283 4Q 07/ ,300 1Q 08/ , Q 08/09 1, Q 08/ Gross profit Gross profit margin Gross profit Gross profit margin

13 13 Underlying EBIT margin remains stable at 17% EBIT before special items was DKK 1,049m up 17% Distribution and R&D costs in line with last year, whereas admin costs decreased further from continued cost containment Reported EBIT margin was 15% - underlying EBIT margin was 17% against 15% last year DKKm 1,200 1, , / / / / / /08 EBIT 749 EBIT-margin 994 % DKKm Q / Cost to sales ratios (%) 31.4 R&D Dist. Adm Q 4Q 1Q 2Q 3Q Q4 Q1 Q2 Q3 06/07 06/07 07/08 07/08 07/08 07/08 08/09 08/09 08/ Q 1Q 06/07 07/ Q 07/ Q 07/08 EBIT 101 4Q 07/ Q 08/09 EBIT-margin Q 08/09 % Q -2 08/

14 14 ROIC and ROE improvements The equity amounted to DKK 2,631m, corresponding to an equity ratio of 33%. Return on equity was 33% Net interest bearing debt was DKK 2,929m, down by 19% compared with last year impacted by purchase of own shares, dividend idend payment and FCF. Net interest bearing debt to EBITDA was 1.6 DKK ~2bn in total unused committed credit facilities ROIC after tax amounted to 14%, up 2%-points compared with same period last year DKKm ,23 1,13 0, , ,24 2, /03 03/04 04/05 05/06 06/07 07/08 2,50 2,00 1,50 1,00 0,50 0,00 50% 40% 30% 20% 10% 0% 42% 13% 3Q 06/07 31% 10% 4Q 06/07* 29% 29% 29% 29% 28% 14% 1Q 07/08 9% 2Q 07/08 14% 3Q 07/08 4% 4Q 07/08 31% 13% 12% 1Q 08/09 2Q 08/09 33% 14% 3Q 08/09 NIBD NIBD to EBITDA Equity ratio ROIC Q4 2006/07 adjusted for HSC impairment

15 15 Strong cash flow performance Cash flow from operations amounted to DKK 1,095m, impacted by positive contribution from operations partly offset by on account payment of taxes of DKK 165m CAPEX was DKK 473m, corresponding to a capex to sales ratio of 7% related to investments in production equipment as well as new US headquarters Free cash flow was DKK 748m compared with DKK 239m last year DKKm % DKKm % 1, / / / / / / / / / / / /08 FCF FCF-to-sales CAPEX Capex-to-sales Note: Excluding acquisitions and divestments

16 16

17 17 Leading Intimate Healthcare Introduction to Coloplast Q3 2008/09

18 18 Coloplast is a leading medtech company specialising in intimate healthcare needs years of innovation and growth: Global no. 1 in Ostomy Care Global no. 1 in Urology & Continence Care Global no. 4 in Advanced Wound & Skin Care Headquartered in Denmark Production in Denmark, Hungary, China, US and France ~7,100 employees globally Sales (DKK mill) 8,463 CAGR +23% 3,

19 19...with DKK 8.5bn in annual sales... Full year sales 2007/08 The Americas RoW Wound & Skin Care Ostomy Care Europe 6.7 Urology & Continence Care 3.4

20 20 Trends in the intimate healthcare market Influence on CP Business Healthcare reforms Demographics + Emerging markets + Consumer healthcare awareness Surgical and medical trends + -/ + Reimbursement reforms - Group buying and tender process Focus on overall treatment costs - Health Economics - + The demand for products and services will continue to grow in terms of volume, but pressure on prices and margins will remain Market growth within Coloplast s business areas is approx. 6%

21 21 Ostomy Care market Coloplast revenue in 2007/08 DKK 3.6bn Market share (%) 100 Europe RoW Americas Market size: DKK ~10bn Market growth: 4-5% 80 Competitors Coloplast Market Share: 35-40% 60 For people who have lost their normal bowel or bladder function typically due to cancer or inflammatory bowel diseases 40 Main competitors are ConvaTec and Hollister/Dansac Market value (DKK bn)

22 22 Continence Care market Coloplast revenue in 2007/08 DKK 2.8bn Market share (%) Europe 100 RoW Americas Market size: DKK ~9bn Market growth: 6-8 % 80 Competitors Coloplast Market share: 30-35% 60 For people who have lost their bladder functions, for example Spinal Cord Injured, Spina Bifida, Multiple Sclerosis patients 40 Main competitor AstraTec 20 Global market leader in continence Market value (DKK bn) Distribution of revenue 07/08 Intermittent catheters Urine bags Male external catheters Other

23 23 Urology market Coloplast revenue in 2007/08 DKK 0.7bn Market size: DKK ~9 bn Market share: ~10% Market growth: 8-10 % Main competitors include American Medical Systems and BSX Market share (%) Europe RoW Competitors Coloplast Americas Distribution ib ti of revenue 07/08 Market value (DKK bn) Disposable Surgical Urology Men s Health Women s Health

24 24 Wound & Skin Care market Coloplast revenue in 2007/08: DKK 1.5bn Organic growth 2007/08: 5% Market size: DKK 12bn, growing at 5-7% (wound care only) ~9% global l market share Wound Care Market size in DKKbn Dry wound healing Acute 11 Chronic 8 Share of Moist Wound Healing market EU and US Other ConvaTec 3M 18% 20% Moist wound healing Drugs and bio products VAC Urgo 6% 7% 7% J&J 9% Coloplast 15% Mölnlycke 18% Smith & Nephew

25 25 Debt policy and capital markets exposure NIBD/EBITDA ratio Interest cover ratio NIBD/EBITDA target of staying between NIBD/EBITDA 9M 2008/ ~60% unused committed credit facilities (DKK ~2bn) ~90% of debt at fixed interest rates No significant refinancing risks until 2013

26 26 Cash distribution DKKm 1,200 Ratio 50% Ordinary dividend per share of DKK 6 in 2007/08 45% 1,000 40% 30% ~36% pay-out ratio 35% Extraordinary dividend per share of 800 DKK 4 in 2006/ / / / / / / / /08 25% 20% 15% 10% 5% 0% Share buy-backs of DKK 500m in 2007/2008 Remaining share buy-back programme of DKK 500m for 2008/2009 cancelled Dividendsid d Share buy-backb Pay-out ratio

27 27 Long-term financial targets Sales growth above market growth EBIT margin of more than 20% Continued sales growth through: Product innovation to drive pricing and improved product mix in existing markets Continued expansion in US and emerging markets Increasing margin by: Transfer of production to low cost countries Reducing costs by optimising existing organisation Continuous prudent cost control in supply chain Average Market growth 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 0,15 0,16 Minimum Target 0,16 0,16 0,16 0, / / / / / / / /08 0,13 Annual sales growth EBIT-margin

28 28 Targeting at least 20% EBIT margin 16-17% 1% 1% 1% 1% 2-3% +20% 15-16% 16% 2008/09 est. Restructuring costs Restructuring savings Sales force WSC/DSU Efficiency 3-5 years EBIT in fixed currencies: 16-17% EBIT in DDK: 15-16% MDKK ~80 in expected restructuring costs in 2008/09 Cost savings from elimination of positions September 2008 (remaining) and January 2009 Identified efficiency improvements in sales organisation executed in 2008/09 Efficiency improvement from within Wound & Skin Care and Disposable Surgical Urology Transfer of production, cost savings, efficiencies and general market uncertainties Execution in 2008/09 and 2009/10

29 29 Leading Intimate Healthcare Appendices

30 30 The Coloplast share The Coloplast share has been listed on NASDAQ OMX Copenhagen since 1983 Market cap. DKK ~16bn (USD 380 per share Active sell-side side analyst coverage by 9 Nordic banks 7 International banks ~10% of share capital registered outside of Denmark Six months average daily traded volume: DKK 38m (USD 6m) Two share classes: 3.6 million A shares carry 10 votes (family) 41.4 million B shares carry 1 vote (freely traded) As per September 30, 2008 Free float approx. 52% (B shares)

31 31 Introducing Ostomy Care Disease Areas Customer Groups Call points Colorectal cancer (est. 55%) Primary Hospital nurses Bladder cancer (est. 10%) Nurses, mainly stoma care nurses Community nurses Inflammatory bowel disease (est. People with a stoma Hospital buyers 35%) Secondary Distributors Crohn Whole sellers/distribution Dealers Ulcerative culitis Hospital purchasers and GPOs Wholesalers Surgeons Homecare companies Key products SenSura 1 and 2 piece Launched in Assura 1 and 2 piece 2nd generation launched Easiflex, 2 piece flex Launched in 2003 Corsinel launched in 2003 Fistula launched in 2006

32 32 The worldwide market for ostomy devices Market development in value Worldwide estimate 4-5% Estimated market value split by region, 2007 RoW Europe North America Market Drivers Market Limiters Market trends Increasing incidence of Colorectal Reimbursement system reforms National health care reforms aiming cancer and IBD, particularly in Usage patterns geared towards reuse to reduce price and volume developing countries of products outside Europe general Increasing influence of financial Well-developed usage patterns with strong key opinion leaders in Europe lack of education within stoma care in developing markets decision makers within distribution and hospitals Improving treatment of stoma patients in developing economies

33 33 Introducing Continence Consumables Management of urinary incontinence Disease Areas Customer Groups Urinary Incontinence (management Spinal Cord Injured, SCI products only) Spina Bifida, SB Multiple Sclerosis, MS BPH patients Prostatectomy patients Elderly Diabetes Neurogenic patients Key products (management products) Call points Rehabilitation centers Urology wards Pediatric clinics Continence advisors Various hospital wards Elderly homes Distributors Dealers Wholesalers SpeediCath Compact intermittent Speedicath intermittent catheter Conveen Optima external catheter Conveen Security+ urine bag catheter Launched in 99/00 Launched in 05/06 Launched 10+ years ago Launched in 03/04

34 34 The market for urinary incontinence management products Market development in value Worldwide estimate 6-8% Estimated market value split by region, 2007 RoW Americas Europe Market Drivers Market Limitersit Market trends Large, under-penetrated population Purchasing decision centralized for intermittent catheters Moving users away from old solutions (uncoated caths, diapers) Patient associations influence Reimbursement system reforms (single price reimbursement on product categories) Commoditization and low-spec competitors entering Diagnose Related Groups and tender business Health economic approach enables price premiums

35 35 Competitor landscape: Continence Consumables European competitor landscape (management products only) Market share (%) 100 Coloplast Hollister Manfred Sauer AstraTech Braun Other 0 Market size Collecting Devices Intermittent (urine bags and male external catheters) Catheters

36 36 Introducing Bowel Management Management of faecal incontinence Disease Areas Customer Groups Call points Faecal Incontinence (management Spinal Cord Injured, SCI Rehab centers products only) Spina Bifida, SB Pediatric clinics Multiple Sclerosis, MS Urology wards Key products (management products) Distribution of revenue 07/08 Anal irrigation Anal plug Market Drivers Market Limiters Market trends Growing awareness Huge under-penetrated and unserved population Still taboo area and non-focus for professionals (doctors) Very little patient awareness Purchasing decision centralized Health economic approach enables reimbursement, but Anal plug Peristeen i anal irrigation t marketcanalsobedeveloped New devices addressing the many Training required (nurses, patients) also Launched 10+ years ago Launched in 02/03 without reimbursement unmet needs Lack of reimbursement

37 37 Introducing Urology Care Treatment (surgical) of urological disorders Disease Areas Urinary Incontinence Pelvic Organ Prolapse Erectile Dysfunction Enlarged prostate Kidney and Urinary Stones Other urological disorders Customer Groups Surgeons Purchasing departments and organizations End-customers Call points Urologists Uro-gynaecologists Gynaecologists Purchasing departments and organizations Key products (Implants and Surgical Disposables) Aris vaginal sling Launched in 2005 Women s Health Titan OTR penile implant Launched in 2008 Men s Health JJ stents Launched in 1998 Disposable Surgical Urology Prostatic catheters Launched in 1995 Disposable Surgical Urology

38 38 Product market for urological disorders Market development in value Worldwide estimate 8-10% Estimated market value split by region, 2007 RoW Europe Americas Market Drivers Market Limiters Market trends Large, under-penetrated population Lack of gold standard treatment Ageing and obese population Minimally invasive surgeries Cost containment Increased competition Increased scrutiny on clinical proof Crowded IP landscape limits opportunities Less invasive treatment methods Office-based treatments Cost containment Innovation key source of competitive advantage

39 39 Urology market players Coloplast AMS BSX Cook Bard Gynecare Medtronic Other Market share, (%) Male incontinence Enlarged prostate Female incontinence Pelvic prolapse Erectile dysfunction Stones Market size DKK ~5bn US and EU competitor landscape excl. diagnostics, cap. equipment, and management products, Coloplast segments only.

40 40 Introducing Wound Care Clinical Focus Areas Chronic Wounds Leg Ulcers Diabetic foot ulcers Pressure ulcers Focus Customer Groups Hospitals Wound care committees Specialist nurses/doctors Distribution of revenue 07/08 (Purchasers) Community Specialist nurses/doctors General practitioners District/general nurses Large nursing homes Biatain range Comfeel range Skin care Other Biatain range Comfeel [insert pic] [insert pic] [insert pic] [insert pic] Biatain Ibu Wound pain reducing foam dressing Launched in 2006 Biatain Ag Antimicrobial foam dressing Launched in 2002 Biatain High exudate mgt. foam dressing Launched in 1998 Comfeel Plus Transparent Transparent hydrocolloid dressing Launched in 1994

41 41 Executive management Lars Rasmussen, CEO (50) With Coloplast since 1988 Educational background E*MBA, Scandinavian International Management Institute, 1995 BSc (Eng), Aalborg University, 1986 Management assignments with other Danish companies include: MT Højgaard A/S (BM) Højgaard Holding A/S (BM) Lars Rasmussen, CEO Lene Skole, CFO (50) With Coloplast since 2005 Educational background BCom, Copenhagen Business School, 1986 The A.P. Moller Group International Shipping Education, 1980 Management assignments with other Danish companies include: DFDS A/S (BM) Lene Skole, CFO

42 Plan - Identify and prioritise issues - Identify and prioritise stakeholders - Define engagement objectives and scope Integrate - Build internal capability - Clarify roles - Establish processes and tools Engage - Design engagement - Consultation process - Prepare company participants - Engagement forum Apply -Evaluate engagement process and results - Apply engagement learning - Follow-up with stakeholders 42 CSR in Coloplast 18 August 2008 Protecting our reputation 2 Member of ISO Danish Committee Member of CSR-Forum Integrity Business Network Carbon Disclosure Project Included in: 18 August 2008 We must act in a way so that we do not become subject to criticism. That could close our business Framework at least provide for us Corporate Responsibility with an image loss which we cannot afford. It would take Based many on the years UN Global to re-compactestablish that. Corporate Reponsibility in Coloplast consist of: Governance Responsibility managing our company in a transparent manner, which reflects the interest of our stakeholders 18 August 2008 Business Conduct Responsibility acting fair and transparent in all business matters, towards customers, business-partners, investors, and societal groups whom we interact with Environmental Responsibility minimising our negative environmental impact throughout the value chain Governance Social Responsibility responsibility - ensuring a positive impact on people and local communities beyond legal requirements. Manage our company to reflect the interest of our stakeholders Examples: - Mission, Vision, Values -Corporate Governance - Stakeholder model (Business Excellence) - Labour relations/ involvement Examples - the four responsibility areas Business conduct responsibility Act fair and transparent 18 August 2008 Examples: - Anti corruption and bribery programme - Supply chain evaluation system - Job offer guarantee (lay offs) - Human and labour rights Code of Conduct - Commitment to reduce animal testing Social responsibility Our positive impact of people and local communities beyond legal requirements Examples: -Stakeholder Engagement Process - Training programmes - Coloplast Healthcare - Job trials - OHSAS 18001* - Sponsorships and donations Four larger programmes! * Occupational Health & Safety Management System 3 Environmental responsibility Minimise our negative environmental impact in the supply chain Examples: - Climate Strategy - EMS (ISO 14001) - DEHP Policy - Life-cycle analysis approach - Eco design - Reducing energy consumption and production waste - Environmental criteria in supplier evaluation 4 5 Based on risk CAP Audit High Climate strategy Site visit Self assessment Information Low

43 43 Income statement DKK million 9M 9M 2008/ /08 Net revenue Gross profit Gross margin 58,3% 58,9% SG&A costs R&D costs Operating profit (EBIT) before separate items EBIT margin before separate items 16,0% 14,2% Separate items Operating profit (EBIT) EBIT margin 15,1% 14,2% Net financial items Net profit, continuing activities

44 44 Balance sheet DKK million 9M 08/09 9M 07/08 Balance sheet total Equity Equity ratio (%) 33% 29% Net interest bearing debt Net debt to equity (%) 111% 157% Net debt to EBITDA 1,6 2,1 Invested capital

45 45 Cash flow DKK million 9M 2008/09 9M 2007/08 EBITDA Change in working capital Interest and tax Other Cash flow from operations CAPEX M&A 0-3 Other Cash flow from investments Free cash flow Dividends Trading of Coloplast shares Other cash changes Total Change in net debt

46 46 Transfer of production USA/France 20% 20% 13% China 1% 5% 17% Hungary 35% 40% 55% Denmark 44% 35% 15% 2006/ / /12 est.

47 47 Humlebæk DK Pilot Center Wound care products (foam) Number of employees in production: ~150 To be closed 2010 Kvistgård DK Consumer products (CCP) Compeed Number of employees in production: ~100 To be closed end of 2010 Machine development Thisted Ostomy care products Number of employees in production: ~300 DK Mørdrup DK Injection moulded parts and coated catheters (SpeediCath) Number of employees in production: ~200 Adhesives and Swiss roll elements To be closed before end of Espergærde Number of employees in production: ~ DK

48 48 Tatabanya HU Ostomy care products, adhesive Continence care products, urine bags Postponement centre Number of employees in production: ~1.000 Nyirbator HU Zhuhaih CN Catheter products, urisheaths Conveen Optima, wound care products Number of employees in production: ~500 Latex ae urisheaths, s, urine bags, local products Machine building Number of employees in production: ~300 Minneapolis US Mankato US Sarlat FR Latex products Men s and women s health urology products and implants Number of employees in production: ~50 Skin care products Wound care products Number of employees in production: ~50 Disposable Surgical Urology products Number of employees in production: ~150

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