2020
Annual Report
Changes to reporting structure
In this Annual Report 2020, we have made several changes
to our reporting structure to further enhance transparency
in the value created by each of our different business areas.
• The changes include disclosing separate income state-
ments to the EBIT level for two business segments:
Hearing Healthcare comprises four business areas:
Hearing Aids, Hearing Care, Hearing Implants and
Diagnostics.
Communications comprises only our headset business,
which operates under the EPOS brand. This business
was fully consolidated in the Group’s financial state-
ments with financial effect from 1 January 2020 as a
result of the demerger of Sennheiser Communications,
our 50/50 joint venture with Sennheiser electronic GmbH
& Co. KG. Due to the previous set-up as a joint venture,
there are no comparative figures to report for 2019.
• We have changed the descriptive name of our hearing
aid wholesale business to Hearing Aids. At the same
time, the name of our hearing aid retail business has
been changed to Hearing Care.
• We now report revenue separately for each of our
Hearing Aids and Hearing Care business areas (as
well as separate growth rates, as we have also done
historically).
• We no longer report growth rates separately for our
cochlear implants and bone anchored hearing systems
businesses but only a growth rate for Hearing Implants
as a whole.
Front page photo from Oticon More campaign
In 2020, Oticon launched the new agship product
Oticon More, which processes and balances the full
sound scene to give people with a hearing loss
access to all relevant sounds.
2
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights
Key gures and nancial ratios 4
CEO letter 6
This is Demant 8
2020 in brief 12
Highlights in 2020 14
Financial review 18
Outlook 24
Our business 26
Hearing Healthcare 27
Hearing Aids 30
Hearing Care 34
Hearing Implants 36
Diagnostics 38
Communications 40
Communications - EPOS 42
Corporate information
Shareholder information 44
Risk management activities 49
Sustainability 52
Corporate governance 58
Executive Board and Board of Directors 61
Financial report
Management statement 65
Independent auditor’s report 66
Consolidated nancial statements 71
Notes to consolidated nancial statements 79
Parent nancial statements 135
Notes to Parent nancial statements 140
Subsidiaries, associates and joint ventures 148
Contents
Life-changing
hearing health
3
Demant · Annual Report 2020
Insights and highlights · Key gures and nancial ratios
Key gures and nancial ratios – year
(DKK million)
2020 2019 2018 2017 2016
Hearing Healthcare
Revenue 13,163 14,946 13,937 13,189 12,002
Organic growth -13% 4% 7% 9% 6%
Gross margin 73.6% 75.8% 77.4% 76.0% 75.2%
Operating prot (EBIT) 1,211 2,085 2,428 2,295 1,891
EBIT margin 9.2% 14.0% 17.4% 17.4% 15.8%
Communications
Revenue 1,306 - - - -
Organic growth - - - - -
Gross margin 50.3% - - - -
Operating prot (EBIT)* 102 66 104 43 51
EBIT margin 7.8% - - - -
Group
Income statement
Revenue 14,469 14,946 13,937 13,189 12,002
Adjusted gross margin** 71.5% 75.8% 77.7% 76.3% 75.8%
Gross margin 70.4% 75.8% 77.4% 76.0% 75.2%
EBITDA 2,578 3,110 2,978 2,742 2,346
EBITDA margin 17.8% 20.8% 21.4% 20.8% 19.5%
Adjusted EBIT** 1,313 2,151 2,652 2,504 2,130
Adjusted EBIT margin** 9.1% 14.4% 19.0% 19.0% 17.7%
Operating prot (EBIT) 1,530 2,151 2,532 2,338 1,942
EBIT margin 10.6% 14.4% 18.2% 17.7% 16.2%
Net nancial items -194 -240 -164 -111 -101
Prot for the year 1,134 1,467 1,830 1,759 1,464
Balance sheet
Total assets 21,927 21,798 17,935 16,222 15,548
Net interest-bearing debt (NIBD) 7,135 8,185 5,835 4,030 4,036
Equity 8,279 7,645 7,059 7,433 6,966
Cash ow statement
Adjusted cash ow from operating activities (CFFO)** 2,710 2,149 1,765 2,023 1,756
Cash ow from operating activities (CFFO) 2,621 2,149 1,683 1,872 1,679
Investment in property, plant and equipment, net 493 561 409 292 299
Free cash ow 2,023 1,338 1,185 1,387 1,223
Share buy-backs 197 946 1,751 1,031 1,050
Other key gures
Return on equity 14.3% 19.5% 25.7% 24.0% 21.5%
Equity ratio 37.8% 35.1% 39.4% 45.8% 44.8%
Gearing multiple (NIBD/EBITDA) 2.8 2.6 2.0 1.5 1.7
Earnings per share (EPS)*** 4.68 6.00 7.32 6.84 5.53
Free cash ow per share (FCFPS)*** 8.44 5.49 4.76 5.41 4.64
Price/earnings (P/E) ratio 51.4 35.0 25.3 25.4 22.2
Share price, end of period*** 240.60 209.80 184.90 173.50 122.80
Average number of shares outstanding 239.78 243.55 249.14 256.56 263.75
Market capitalisation 57,718 50,470 45,308 43,864 31,829
Average number of employees 16,155 15,352 14,250 13,280 12,339
Financial ratios are calculated in accordance with “Recommendations and Ratios” from CFA Society Denmark. The free cash ow is calculated as the sum of
cash ow from operating activities (CFFO) and investing activities (CFFI) before acquisitions and disposals of enterprises, participating interests and activities.
On computation of the return on equity, average equity is calculated, duly considering share buy-backs. The gearing multiple is calculated as net interest-bearing
debt relative to EBITDA.
*EBIT for Communications in 2016-2019 relates to the Group’s share of prot after tax from our former joint venture Sennheiser Communications.
**Adjusted for costs related to the 2016-2018 restructuring programme and for EPOS one-offs in 2020.
***Per share of nominally DKK 0.20.
4
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights · Key gures and nancial ratios
Key gures and nancial ratios – year
(DKK million)
2020 2019 2018 2017 2016
Hearing Healthcare
Revenue 13,163 14,946 13,937 13,189 12,002
Organic growth -13% 4% 7% 9% 6%
Gross margin 73.6% 75.8% 77.4% 76.0% 75.2%
Operating prot (EBIT) 1,211 2,085 2,428 2,295 1,891
EBIT margin 9.2% 14.0% 17.4% 17.4% 15.8%
Communications
Revenue 1,306 - - - -
Organic growth - - - - -
Gross margin 50.3% - - - -
Operating prot (EBIT)* 102 66 104 43 51
EBIT margin 7.8% - - - -
Group
Income statement
Revenue 14,469 14,946 13,937 13,189 12,002
Adjusted gross margin** 71.5% 75.8% 77.7% 76.3% 75.8%
Gross margin 70.4% 75.8% 77.4% 76.0% 75.2%
EBITDA 2,578 3,110 2,978 2,742 2,346
EBITDA margin 17.8% 20.8% 21.4% 20.8% 19.5%
Adjusted EBIT** 1,313 2,151 2,652 2,504 2,130
Adjusted EBIT margin** 9.1% 14.4% 19.0% 19.0% 17.7%
Operating prot (EBIT) 1,530 2,151 2,532 2,338 1,942
EBIT margin 10.6% 14.4% 18.2% 17.7% 16.2%
Net nancial items -194 -240 -164 -111 -101
Prot for the year 1,134 1,467 1,830 1,759 1,464
Balance sheet
Total assets 21,927 21,798 17,935 16,222 15,548
Net interest-bearing debt (NIBD) 7,135 8,185 5,835 4,030 4,036
Equity 8,279 7,645 7,059 7,433 6,966
Cash ow statement
Adjusted cash ow from operating activities (CFFO)** 2,710 2,149 1,765 2,023 1,756
Cash ow from operating activities (CFFO) 2,621 2,149 1,683 1,872 1,679
Investment in property, plant and equipment, net 493 561 409 292 299
Free cash ow 2,023 1,338 1,185 1,387 1,223
Share buy-backs 197 946 1,751 1,031 1,050
Other key gures
Return on equity 14.3% 19.5% 25.7% 24.0% 21.5%
Equity ratio 37.8% 35.1% 39.4% 45.8% 44.8%
Gearing multiple (NIBD/EBITDA) 2.8 2.6 2.0 1.5 1.7
Earnings per share (EPS)*** 4.68 6.00 7.32 6.84 5.53
Free cash ow per share (FCFPS)*** 8.44 5.49 4.76 5.41 4.64
Price/earnings (P/E) ratio 51.4 35.0 25.3 25.4 22.2
Share price, end of period*** 240.60 209.80 184.90 173.50 122.80
Average number of shares outstanding 239.78 243.55 249.14 256.56 263.75
Market capitalisation 57,718 50,470 45,308 43,864 31,829
Average number of employees 16,155 15,352 14,250 13,280 12,339
Financial ratios are calculated in accordance with “Recommendations and Ratios” from CFA Society Denmark. The free cash ow is calculated as the sum of
cash ow from operating activities (CFFO) and investing activities (CFFI) before acquisitions and disposals of enterprises, participating interests and activities.
On computation of the return on equity, average equity is calculated, duly considering share buy-backs. The gearing multiple is calculated as net interest-bearing
debt relative to EBITDA.
*EBIT for Communications in 2016-2019 relates to the Group’s share of prot after tax from our former joint venture Sennheiser Communications.
**Adjusted for costs related to the 2016-2018 restructuring programme and for EPOS one-offs in 2020.
***Per share of nominally DKK 0.20.
Key gures and nancial ratios – half-year
(DKK million)
H2 2020 H1 2020 H2 2019 H1 2019 H2 2018 H1 2018
Hearing Healthcare
Revenue 7,631 5,532 7,596 7,350 7,160 6,777
Organic growth 2% -27% 3% 5% 6% 7%
Gross margin 74.5% 72.3% 74.0% 77.6% 78.0% 76.7%
Operating prot (EBIT) 1,425 -214 1,000 1,085 1,247 1,181
EBIT margin 18.7% -3.9% 13.2% 14.8% 17.4% 17.4%
Communications
Revenue 760 546 - - - -
Organic growth - - - - - -
Gross margin 52.9% 46.7% - - - -
Operating prot (EBIT)* 81 21 38 28 59 45
EBIT margin 10.7% 3.8% - - - -
Group
Income statement
Revenue 8,391 6,078 7,596 7,350 7,160 6,777
Adjusted gross margin** 72.5% 70.0% 74.0% 77.6% 78.4% 76.9%
Gross margin 72.1% 68.2% 74.0% 77.6% 78.0% 76.7%
EBITDA 1,949 629 1,528 1,582 1,537 1,441
EBITDA margin 23.2% 10.3% 20.1% 21.5% 21.5% 21.3%
Adjusted EBIT** 1,506 -193 1,038 1,113 1,380 1,272
Adjusted EBIT margin** 17.9% -3.2% 13.7% 15.1% 19.3% 18.8%
Operating prot (EBIT) 1,416 114 1,038 1,113 1,306 1,226
EBIT margin 16.9% 1.9% 13.7% 15.1% 18.2% 18.1%
Net nancial items -106 -88 -121 -119 -92 -72
Prot for the year 1,013 121 700 767 936 894
Balance sheet
Total assets 21,927 22,067 21,798 20,759 17,935 17,224
Net interest-bearing debt (NIBD) 7,135 8,388 8,185 7,613 5,835 5,061
Equity 8,279 7,449 7,645 7,596 7,059 6,943
Cash ow statement
Adjusted cash ow from operating activities (CFFO)** 1,944 766 1,102 1,047 714 1,051
Cash ow from operating activities (CFFO) 1,892 729 1,102 1,047 687 996
Investment in property, plant and equipment, net 251 242 310 251 211 198
Free cash ow 1,534 489 636 702 239 946
Share buy-backs - 197 682 264 849 902
Other key gures
Return on equity 25.7% 3.2% 18.0% 21.0% 27.0% 24.4%
Equity ratio 37.8% 33.8% 35.1% 36.6% 39.4% 40.3%
Gearing multiple (NIBD/EBITDA) 2.8 3.9 2.6 2.3 2.0 1.7
Earnings per share (EPS)*** 4.18 0.50 2.87 3.12 3.74 3.55
Free cash ow per share (FCFPS)*** 6.40 2.04 2.62 2.87 0.97 3.77
Price/earnings (P/E) ratio 57.6 349.8 73.1 65.4 49.4 72.3
Share price, end of period*** 240.60 174.90 209.80 204.10 184.90 256.80
Average number of shares outstanding 239.78 239.90 243.55 244.40 249.14 251.15
Market capitalisation 57,718 41,917 50,470 49,783 45,308 63,887
Average number of employees 16,203 16,107 15,660 15,044 14,565 13,934
5
Demant · Annual Report 2020
Insights and highlights · CEO letter
The Demant Group entered 2020 at a high pace, which we
kept in the first months of the year. Then, in the unprece-
dented period from mid-March and a couple of months
onwards, the coronavirus pandemic caused almost a com-
plete halt to activities in the hearing healthcare market.
Restrictions all over the world forced especially the elderly
population to stay at home, and consequently hearing aid
clinics had to close. Conversely, EPOS experienced tailwind
and benefitted from the surge in demand for virtual collab-
oration tools and entered the market under the best condi-
tions for a company that is active in audio solutions.
Approaching the second half-year, we saw positive recov-
ery in almost all our markets, and the trend continued until
almost the end of the year, resulting in strong revenue
growth in local currencies of 14% in the second half-year
compared to -18% in the first half. Faced with a second
wave of coronavirus, we closed 2020 with uncertainties
about the hearing healthcare market but also with confi-
dence that vaccines will pave the way for the release of
pent-up demand for hearing care solutions from both cur-
rent and first-time users, who were put on hold in 2020.
The essential link conrmed
Our experience from the impact of coronavirus in 2020 is,
however, not entirely discouraging. The crisis proved that
hearing care and a person’s ability to be an active part
of society matter more than ever. Remote service surely
picked up during the most extensive restrictions, but as
soon as hearing aid clinics started to reopen, we saw the
need for access to both person-centred care and the latest
technology, with users literally queuing up outside our clin-
ics. This emphasises that what we do is essential not only
for the individual user but indeed for society as a whole.
The need for personal hearing care also underlines
Demant’s all-important engagement in hearing aid retail,
and in 2021, we are happy to increase the transparency
of reporting in this business area, renamed Hearing Care.
Hearing care professionals are indeed frontline staff, and
their ability and willingness to show flexibility in difficult
times have been very important, most notably the impres-
sive speed at which they managed to reopen clinics and
offer their services while never compromising on safety
and health.
Access to all sounds
The ability to hear is one of the finest senses we have, and
audio stimulation is fundamental for all people. From our
research in hearing and the brain, we have found that the
brain needs access to all sounds in the environment to
function optimally. By applying this knowledge to hearing
technology, we enable the hearing aid users to enjoy more
complete sound landscapes with less effort and simply get
more out of life when they use our products. The new plat-
forms recently launched in all our hearing aid brands are
further testament to these claims, and with Oticon More,
we took a giant leap forward by being the first manufac-
turer to apply new innovative technology to a hearing
aid in the form of an on-board deep neural network. With
CEO letter
In the light of the coronavirus challenges that
the hearing healthcare market faced in 2020,
I am very satised with our performance,
particularly with the strong second half-year
and generally with the accomplishments of our
new Communications brand, EPOS. In a tough
year, our ability to steer the company in the right
direction by balancing cost savings and invest-
ments and by supplying products and services
to our highly valued customers has been crucial.
This only goes to show the innovative capabil-
ities and can-do attitude of every employee of
this Group: We take initiative, we nd solutions
and we act.
6
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights · CEO letter
these groundbreaking new products, we are in excellent
shape to deliver on our ambition to becoming the biggest
provider of hearing aids in a market with tough compe-
tition.
As soon as clinics started to reopen,
we saw the need for access to both
person-centred care and the latest
technology, with users literally
queuing up outside our clinics
Shared opportunities
In Demant, we take advantage of our shared opportunities
in the Group. Evidently, our market presence and shared
functions can be leveraged across the Group, but equally
important is it to harvest synergies across our core R&D
activities. The BrainHearing paradigm used for the devel-
opment of hearing aids is also used for sound processing
in hearing implants. Keeping a high pace in our R&D activi-
ties and successfully introducing new products and ser-
vices in Oticon Medical are key for us to be able to help
more people with severe or profound hearing loss. So, in
a difficult year, I am very pleased with Oticon Medical’s
ability to take market shares in bone anchored hearing
systems and also with the ability of Oticon Medical’s
cochlear implants business to keep pace with the market.
Furthermore, we have succeeded in submitting the final
application to the FDA for approval of the Neuro system
in the US, and we expect to get the approval in the second
half of 2021.
A long tradition for creating business
The year turned out to be much more positive for our
Diagnostics business area than we had dared to hope
when the market was hit the hardest. The fact that we
continue to take market shares and sustain almost neutral
growth levels in a very difficult market proves the impor-
tance of diagnostics in hearing healthcare. From a modest
market position in the mid-90s, Demant’s Diagnostics busi-
ness has for more than a decade been global market lead-
er thanks to the development of existing and addition of
new business activities.
This ability to create business and expand the Group con-
tinues with EPOS. For transparency purposes, we have
split our business into two financial segments, Hearing
Healthcare and Communications. EPOS addresses a differ-
ent market, but there is major technological overlap to
hearing healthcare, and even though EPOS fundamentally
provides very different products and solutions, the results
we aim to achieve are similar: To enable people to connect
through solutions that are free of noise or poor sound qual-
ity, which challenges dialogue.
I am extremely pleased that our audio solution activities
have now been fully integrated into the Group and also
with EPOS’s ability to meet the unforeseen surge in de-
mand for headsets caused by coronavirus. Also in this
business area, we have seen how a crisis can confirm
that what we offer is essential, namely high-quality virtual
meeting and collaboration tools, which – together with
digital platforms – make up for the physical meetings we
could not have, a trend that we believe will extend into
the future.
Sustainable behaviour
I would like to extend my thanks to all Demant’s stakehold-
ers: Users who show trust and loyalty, customers, suppliers
and employees who are dedicated to making things work
in difficult times as well as investors, banks, local authori-
ties, politicians and society at large that have all supported
hard hit businesses like ours, removed uncertainties and
given us the confidence to maintain our investments in the
future. To me, this is sustainability and brings me to our
own responsibility, our own sustainable behaviour.
I am happy that we have launched a new strategic direc-
tion for our work with sustainability, and we have indeed
made progress this year, especially in the area of business
ethics with the launch of a new Code of Conduct and
Whistleblower scheme. The core of our sustainability
efforts is life-changing hearing health and the quality of
life that we bring to our users. In addition to focusing on
our core contribution to society, we will also strengthen
sustainability in our operational practices, and we have
two main priorities in this regard: Diversity and inclusion,
with focus on fostering an unbiased and inclusive culture
with equal opportunities, and our climate footprint, with
focus on reducing our packaging and waste, on sourcing
green energy and on ambitious CO2 reductions.
I take an optimistic view of 2021. Due to coronavirus, many
people did unfortunately not have access to the high-quali-
ty hearing care they should have received in 2020, so we
at Demant are ready to support them with our broad and
unmatched portfolio of products and services.
Søren Nielsen
7
Demant · Annual Report 2020
Hospital & Clinic
Local Service Desk
Hearing Care
Diagnostics
• Developing, manufacturing and
marketing a wide range of solu-
tions for hearing and balance
assessment, including instruments,
consumables, services and instal-
lation
• Products include audiometers,
ABR equipment for hearing screen-
ing of newborns, tympanometers,
hearing aid fitting solutions, bal-
ance equipment, otoacoustic emis-
sion instruments as well as other
solutions used by audiologists and
ear, nose and throat specialists
Communications
• Developing and marketing premium
audio solutions designed for enterprise
and gaming applications under the
EPOS brand
• Products include headsets, speaker-
phones, software and accessories
• EPOS is established with own sales
companies in 16 countries and addresses
markets in more than 50 countries
Hearing Implants
• Providing implantable hearing
solutions to patients facing the
hardest hearing challenges
• Cochlear implants and bone
anchored hearing systems can
bypass the challenged parts of
the inner, outer or middle ear,
thereby helping patients hear
better
• Performing the surgical proce-
dures at hospitals or in an out-
patient setting
Hearing Aids
• Covering all ranges of hearing loss
from mild to severe-to-profound
• Boasting the industry’s most advanced
centre of excellence for research in
audiology and hearing loss and the
development of hearing aids
• Manufacturing and distributing hearing
aids to hearing clinics, benefitting
people in more than 100 countries
• Providing local service, support and
training of hearing care professionals
Insights and highlights · This is Demant
This is Demant
Hearing Care
• Global network of approx. 2,500
clinics, providing hearing care to
people with hearing loss in 18
countries
• Performing hearing tests and fitting
hearing aids to help users get the
right hearing aid for their specific
hearing loss
• Providing service, individualised
care and aftercare to ensure that
every hearing aid is active and
used correctly
8
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights · This is Demant
Communications
Hearing AidsHearing Care
Hearing Healthcare Communications
Diagnostics
Hearing
Implants
In every aspect, at every touchpoint, Demant is active and engaged:
From hearing aids and hearing care to hearing implants, diagnostic equipment
and services to premium audio and video solutions.
9
Demant · Annual Report 2020
Strategy and purpose
Operating model: Becoming the
world’s leading hearing healthcare
company
Innovation
Infrastructure
Global distribution
Hearing Implants Hearing Aids & Care
Diagnostics Communications
Favourable demographic trends – particularly the growing
ageing population – as well as general consumer trends
continue to drive growth in the hearing healthcare market.
Similarly, we see an attractive and fast-growing market for
intelligent audio and video solutions, which represents a
great opportunity to further expand our Communications
business.
To achieve our purpose, the strategic ambition is to further
expand our position as the leading global hearing health-
care company with the broadest, deepest and most inno-
vative product offering. Hence, we invest heavily in R&D,
including new areas, such as artificial intelligence as well
as cloud and connectivity solutions. In all our business
areas – where each of the activities are run separately
– we are focused on delivering the best services and
products to our customers.
Apart from excelling in different business areas, we focus
on harvesting synergies across our business areas and
thus enabling our customers and users to benefit from our
multi-business approach backed by a comprehensive glob-
al distribution set-up and efficient infrastructure. We have
a strong local presence in all regions and key markets, and
we continue to expand significantly in markets with great
potential. In all our businesses, capacity and scale are be-
coming increasingly important, and as a Group, we have
the necessary scale to compete effectively. There is a clear
technology overlap between hearing aids and hearing im-
plants and also between hearing aids and headsets, and
we exploit the synergies, but essentially Hearing Health-
care and Communications address different markets in
different ways and are run as two individual segments.
To deliver on our ambition, we strongly rely on our thor-
oughly tested and well-functioning operating model and
an organisation that is agile and shaped to deal with the
opportunities of the future. Our strongest asset to ensure
our success is a diverse group of competent people who
make sure that the plans and strategies are realised.
In the Demant Group, we want to contribute to live-chang-
ing hearing health, and we are committed to caring for and
acting responsibly towards our employees, users, custom-
ers, partners, investors and the surrounding society. This is
our way of ensuring a positive impact on our surroundings,
and at Demant, we work every day to ensure financially
viable, socially balanced and environmentally sustainable
business results.
To create life-changing differences through hearing health
Demant is a purpose-driven company. For more than 115 years, our company has provided
hearing health, and from this platform, we have taken new steps into broader areas of audio.
Our roots are in hearing health, and in the Demant Group, we share a common purpose of creating
life-changing differences through hearing health. Equally important, with our new company
EPOS in the Communications business area, we strive to perfect audio and video
experiences to optimise communication and collaboration between people.
Insights and highlights · This is Demant
Highlights 2020
10
Demant · Annual Report 2020 Demant · Annual Report 2020
Established in 1904 out of a desire to help people with
hearing loss, Demant’s positive contribution to a healthy
society has always driven our business, and every day,
our employees strive to make life-changing differences
for millions of people.
Therefore, the core of our sustainability efforts are the
life-changing hearing health and the quality of life that
we bring to our users.
Alongside this commitment, we work to strengthen
sustainability in our operational practices with special
focus on our climate footprint and on diversity and inclusion.
The Demant Group contributes directly or indirectly to a
large number of the UN’s Sustainable Development Goals.
We have chosen to focus our efforts on the goals where
we have the biggest and most direct impact. Read more
about our approach to sustainability on page 54 and in
our separate Sustainability Report.
Main priorities
Strategic sustainability
projects
Continuous
improvement
Other areas of
special attention
Purpose and core
contribution
Life-changing differences
through hearing health
Our sustainability
strategy at a glance
Insights and highlights · This is Demant
584426
42% 58%
Gender distribution
Due predominantly to corona-
virus restrictions, the Group’s
greenhouse gas (GHG) emis-
sions per employee decreased
by 20%.
1 percentage point increase in
female managers since 2019.
New Group Code of Conduct
and Whistleblower scheme.
Highlights 2020
GHG emissions
per employee
decrease
20%
11
Demant · Annual Report 2020
2020 in brief
Insights and highlights · 2020 in brief
Revenue by geographic region FY 2020
A very strong start to the year was disrupted in mid-March
by the coronavirus pandemic. Consequently, revenue in H1
was significantly below expectations. However, we saw
strong recovery in the hearing healthcare market towards
the end of H1 and throughout most of H2.
Growth in Hearing Healthcare in H2 was also positively
impacted by low comparative figures due to the IT Incident
in H2 2019. Communications contributed with significant
growth from mid-March, which accelerated further in H2.
Group revenue
Europe
45%
North
America
37%
Pacic
6%
Asia
9%
Other
countries
3%
Hearing Healthcare Communications
Gross margin
Hearing Aids Hearing Care
Hearing
Implants
Diagnostics
Communications
H1 DKK 6,078 MILLION (-17%) H2 DKK 8,391 MILLION (11%)
1,313
DKK MILLION
EBIT
FY 2020 DKK 14,469 MILLION (-3%)
Revenue by business area
71.5%
Before positive EPOS one-offs of DKK 217 million
DKK 5,701 MILLION DKK 5,464 MILLION
DKK 523 MILLION
DKK 1,475
MILLION
DKK 1,306
MILLION
Adjusted for EPOS one-offs
FY 2020 DKK 13,163 MILLION (-12%)
39% 38% 4% 10% 9%
EBIT
MARGIN
9.1%
12
Demant · Annual Report 2020 Demant · Annual Report 2020
16,591
EMPLOYEES
Insights and highlights · 2020 in brief
1.3
DKK BILLION
R&D
Demant plays a vital part in developing
innovative technologies and gathering
know-how to help improve people’s
hearing and break new grounds in
the field of audio. In 2020, we invested
DKK 1,261 million in R&D across all our
business areas, which corresponds to
8.7% of revenue (7.5% in 2019).
Hearing Healthcare
-11%
GROWTH
1.2
DKK BILLION
Communications
1.3
DKK BILLION
102
DKK MILLION
EBIT EBITREVENUE
• Revenue of DKK 546 million in H1 and
DKK 760 million in H2
• Gross margin of 50.3% for FY 2020
• Growth contribution of 9 percentage points
to the Group’s total growth for FY 2020
• EBIT margin of 7.8% for FY 2020
• Revenue of DKK 13,163 million for FY 2020
• Revenue growth in H1 of -25% and in H2
of 4% in local currencies (LCY)
• Gross margin of 73.6% for FY 2020
• EBIT margin of 9.2% for FY 2020
DKK BILLION
Group free cash ow
before acquisitions
2.02.6
DKK BILLION
Group cash ow from
operating activities (CFFO)
• Group organic revenue growth: 23-27%
• Group acquisitive revenue growth: 1%
• Group exchange rate growth: -2%
• Share buy-backs of more than DKK 2 billion
EBIT RANGE 2021
2,850-3,150
DKK MILLION
Outlook for 2021
IN LOCAL
CURRENCIES
13
Demant · Annual Report 2020
Highlights in 2020
Insights and highlights · Highlights in 2020
Successful launch
of new premium
audio brand EPOS
Oticon launches new
brand platform and new
logo – with ‘life-changing
technology’ as core
promise
Oticon Ruby – new
mid-priced hearing aids
providing high sound
quality and effective
feedback management
Neuro 2 updates
provide cochlear
implant users with
swim kit and
connectivity
January to March
www.demant.com/investor-relations/annual-report-2020
Literature review
conrms the advantages
of Oticon Medical’s
Ponto system
Selection of important events in 2020. To learn more about each story, please follow this link:
www.demant.com/investor-relations/annual-report-2020
14
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights · Hightlights in 2020
April to June
A letter from a relative
shows the importance of
hearing health
Oticon awarded best
employer for engineers
Oticon’s remote care
solution offers a new
tool to hearing care
professionals
Safe and successful
reopening of our
hearing care clinics
www.demant.com/investor-relations/annual-report-2020
EPOS launches
“Understanding Sound
Experiences” report and
highly successful “Bad
Audio is Bad Business”
campaign
15
Demant · Annual Report 2020
Insights and highlights · Activities in 2020
EPOS launches
global gaming
campaign delivering
“Out of this world
gaming audio”
July to September
New scientic report
shows that active
hearing aid use may
protect against
dementia
www.demant.com/investor-relations/annual-report-2020www.demant.com/investor-relations/annual-report-2020
New brain research
results emphasise the
importance of Oticon’s
BrainHearing
approach
Scientic paper
suggests cochlear
implants as minimum
standard of care
for adults with severe
to profound hearing
loss
GSI AMTAS frees up
time for audiologists
to attend to more
patients
16
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights · Activities in 2020
July to September
October
to December
Demant’s Hearing Aids
business launches new
agship hearing aids
across all brands
Audika Group:
One brand
One culture
One operating
model
Philips Hearing
Solutions available
in 25 countries around
the globe
www.demant.com/investor-relations/annual-report-2020
MedRx implements
walk-in hearing
screening in the US,
Europe and Australia
Interacoustics launches
new solution for
diagnosing dizzy
patients
Demant’s
Hearing Aids business
launches greener
hearing aid
packaging
17
Demant · Annual Report 2020
Insights and highlights · Financial review
H2
Hearing
Healthcare
2020
Communi-
cations
2020
Group
adjusted
2020
Group
2019
Group
growth
Group
one-offs
2020
Group
reported
2020
Group
growth
(DKK million)
Revenue 7,631 760 8,391 7,596 10% - 8,391 10%
Production costs -1,948 -358 -2,306 -1,972 17% -38 -2,344 19%
Gross prot 5,683 402 6,085 5,624 8% -38 6,047 8%
Gross margin 74.5% 52.9% 72.5% 74.0% - 72.1%
R&D costs -552 -91 -643 -568 13% - -643 13%
Distribution costs -3,310 -213 -3,523 -3,760 -6% -52 -3,575 -5%
Administrative expenses -435 -17 -452 -436 4% - -452 4%
Share of prot after tax, associates
and joint ventures
39 - 39 78 -50% - 39 -50%
Other operating income - -
-
100 - - - -100%
Operating prot (EBIT) 1,425 81 1,506 1,038 45% -90 1,416 36%
EBIT margin 18.7% 10.7% 17.9% 13.7% - 16.9%
FY
Hearing
Healthcare
2020
Communi-
cations
2020
Group
adjusted
2020
Group
2019
Group
growth
Group
one-offs
2020
Group
reported
2020
Group
growth
(DKK million)
Revenue 13,163 1,306 14,469 14,946 -3% - 14,469 -3%
Production costs -3,480 -649 -4,129 -3,621 14% -147 -4,276 18%
Gross prot 9,683 657 10,340 11,325 -9% -147 10,193 -10%
Gross margin 73.6% 50.3% 71.5% 75.8% - 70.4%
R&D Costs -1,092 -169 -1,261 -1,120 13% - -1,261 13%
Distribution costs -6,621 -357 -6,978 -7,421 -6% -89 -7,067 -5%
Administrative expenses -811 -29 -840 -851 -1% - -840 -1%
Share of prot after tax, associates
and joint ventures
52 - 52 118 -56% 453 505 328%
Other operating income - -
-
100 - - - -100%
Operating prot (EBIT) 1,211 102 1,313 2,151 -39% 217 1,530 -29%
EBIT margin 9.2% 7.8% 9.1% 14.4% - 10.6%
Group nancial review
H1
Hearing
Healthcare
2020
Communi-
cations
2020
Group
adjusted
2020
Group
2019
Group
growth
Group
one-offs
2020
Group
reported
2020
Group
growth
(DKK million)
Revenue 5,532 546 6,078 7,350 -17% - 6,078 -17%
Production costs -1,532 -291 -1,823 -1,649 11% -109 -1,932 17%
Gross prot 4,000 255 4,255 5,701 -25% -109 4,146 -27%
Gross margin 72.3% 46.7% 70.0% 77.6% - 68.2%
R&D costs -540 -78 -618 -552 12% - -618 12%
Distribution costs -3,311 -144 -3,455 -3,661 -6% -37 -3,492 -5%
Administrative expenses -376 -12 -388 -415 -7% - -388 -7%
Share of prot after tax, associates
and joint ventures
13 - 13 40 -68% 453 466 1,065%
Other operating income - - - - - - - -
Operating prot (EBIT) -214 21 -193 1,113 -117% 307 114 -90%
EBIT margin -3.9% 3.8% -3.2% 15.1% - 1.9%
18
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights · Financial review
14,469
GROUP REVENUE
DKK MILLION
(-3%)
13,163
HEARING
HEALTHCARE
DKK MILLION
(-12%)
1,306
COMMUNICATIONS
DKK MILLION
Introduction
Unless otherwise indicated, the commentary below on our
financial results is based on adjusted figures, i.e. 2020 fig-
ures are shown before one-offs related to the formation of
EPOS with financial effect from 1 January 2020 following
the demerger of Sennheiser Communications. For
detailed financial reviews of our Hearing Healthcare
and Communications segments, please refer to page
27 and 40, respectively. For further clarification of our
updated reporting structure, please refer to page 2.
Revenue
After a severely negative impact of coronavirus in H1,
revenue for the Group improved signicantly in H2, although
it remained below the normal level. Revenue for H2 amounted
to DKK 8,391 million, corresponding to a growth rate of 14%
in local currencies, which is in line with the latest guidance
of 12-14%. Organic growth was 2%, and growth from acqui-
sitions was 12%, including 10 percentage points from the con-
solidation of EPOS. Exchange rates (FX) had an impact of -3%,
including exchange rate hedging, and total reported growth
for H2 was 11%.
For the full year, revenue for the Group amounted to DKK
14,469 million, corresponding to a growth rate of -2% in local
currencies. Organic growth was -13%, and acquisitive growth
was 11%. The latter included 9 percentage points from the
consolidation of EPOS. Exchange rates had an impact on
revenue of -1%, and total reported growth for the period
was -3%.
Growth rates by business segment
H1 20 H2 20 FY 20
Hearing Healthcare Organic -27% 2% -13%
Acquisitions 2% 2% 2%
LCY -25% 4% -11%
FX 0% -3% -1%
Total -25% 0% -12%
Communications Organic - - -
Acquisitions - - -
LCY - - -
FX - - -
Total - - -
Group Organic -27% 2% -13%
Acquisitions 9% 12% 11%
LCY -18% 14% -2%
FX 0% -3% -1%
Total -17% 11% -3%
*Growth rates for Communications are not available as there is no directly
comparable base (EPOS was not consolidated in 2019).
19
Demant · Annual Report 2020
The Group’s revenue in H2 2019 was negatively impacted
by an estimated DKK 575 million due to the IT incident
that occurred on 3 September 2019. The low comparative
figures represent a positive impact on the Group’s organic
growth of 7 percentage points in H2 2020 and of 3 per-
centage points for the full year. Please refer to page 27
for an overview of underlying organic growth rates in our
Hearing Healthcare segment (not relevant for Communi-
cations).
In terms of geography, revenue in Europe recovered well in
H2 relative to the low point in Q2, and organic growth was
positive, although it was mainly driven by low comparative
figures due to the IT incident in 2019. We also saw a large
acquisitive impact in the region due to the fact that our
Communications business, which is reported as acquisitive
growth, generates a large share of its revenue in Europe.
In North America, we also saw some recovery in revenue
growth, but the pace was slower than in other developed
markets. We saw the strongest recovery in Asia but also
strong growth in Pacific aided by weak comparative fig-
ures, as the IT incident in 2019 had a large relative impact
on that region. Both regions delivered double-digit organic
growth rates, whereas our Other countries region, which
includes a number of emerging markets, continued to be
severely impacted by coronavirus throughout H2.
Insights and highlights · Financial review
Operating expenses (OPEX)
Thanks to tight cost control, the Group saw material sav-
ings in OPEX throughout 2020, and in H2, OPEX growth
was flat in local currencies, which is in line with the latest
guidance. In organic terms, OPEX decreased by 9% in H2
driven by strong savings in distribution costs, whereas
R&D costs only decreased slightly, as we were focused
on maintaining high momentum in our innovation efforts.
Administrative expenses, which generally vary less with
the activity level in the business, saw slight organic growth.
Acquisitions added more than 9 percentage points to the
Group’s OPEX in H2 of which the consolidation of EPOS
accounted for around 7 percentage points.
Gross prot
The Group’s gross profit increased by 8% to DKK 6,085
million in H2, corresponding to a gross margin of 72.5%.
This is a decrease of 1.5 percentage points compared to
H2 2019 due to the consolidation of EPOS, which had a
dilutive effect of 2.0 percentage points on the gross mar-
gin. Hearing Healthcare improved its gross margin slightly
in H2 supported by weak comparative figures due to the IT
incident. For the full year, the Group’s gross profit amount-
ed to DKK 10,340 million, corresponding to a gross margin
of 71.5%, or a decrease of 4.3 percentage points of which
2.1 percentage points relate to the dilution attributable to
the consolidation of EPOS, and the rest primarily relates to
the severe impact of coronavirus on revenue in H1.
OPEX by function
Change
(DKK million) H2 20 H2 19 DKK LCY Org.
R&D costs
643
568 13% 14% -3%
Distribution costs
3,523
3,760 -6% -3% -12%
Admin. expenses 452
436 4% 7% 3%
Total 4,618 4,764 -3% 0% -9%
Revenue by geographic region
Change
(DKK million)
H2 20 H2 19 DKK LCY Org.
Europe 3,850 3,114 24% 25% 7%
North America 3,082 3,131 -2% 3% -5%
Pacic 526 449 17% 19% 10%
Asia 738 614 20% 25% 13%
Other countries 195 288 -32% -21% -22%
Total 8,391 7,596 11% 14% 2%
6%
Pacific
9%
Asia
2%
Other countries
46%
Europe
37%
North
America
Revenue by geographic region H2 2020
20
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights · Financial review
Operating prot (EBIT)
Consolidated operating profit (EBIT) for H2 amounted to
DKK 1,506 million before EPOS one-offs and thus reached
the upper end of our latest guidance range of DKK 1,400-
1,550 million. Hearing Healthcare contributed DKK 1,425
million and Communications DKK 81 million. Compared to
H2 2019, which was negatively impacted by an estimated
DKK 550 million related to the IT incident, growth in EBIT
was 45%. The resulting EBIT margin for H2 was 17.9%,
which is an increase of 4.2 percentage points. The strong
EBIT margin was driven, in particular, by the cost savings
described in Operating expenses (OPEX).
Including the negative results in H1, EBIT for the full year
amounted to DKK 1,313 million, corresponding to an EBIT
margin of 9.1%.
Due to the consolidation of EPOS with financial effect from
the beginning of the year, we realised one-offs of DKK -90
million in H2, which are shown in the income statement on
page 18. The one-offs comprise the following elements:
• A negative adjustment of inventory purchased as part
of the demerger of DKK -38 million (DKK -109 million in
H1) with no effect on cash flows. The adjustment is rec-
ognised in production costs.
• Costs related to extraordinary spending on the branding
of EPOS of DKK 52 million (DKK 37 million in H1) with
direct effect on cash flows. The costs are recognised
in distribution costs.
For the full year, one-offs were positive by net DKK 217
million, which also includes a positive fair value adjustment
of DKK 453 million recognised in H1. The fair value adjust-
ment is recognised in share of profit after tax, associates
and joint ventures and has no effect on cash flows.
Consequently, the Group’s reported EBIT after EPOS one-
offs amounted to DKK 1,416 million in H2 and to DKK
1,530 million for the full year.
Financial items
Reported net financial items for H2 amounted to DKK 106
million, or a decrease of DKK 15 million on the same period
in 2019. This is mainly due to lower interest expenses,
resulting from both a lower average interest rate and a
decrease in the net interest-bearing debt in the period.
For the full year, net financial items amounted to DKK 194
million, or a decrease of DKK 46 million on 2019.
2019
9,392
2020
9,079
20182017
8,386
10,000
7,500
5,000
0
7,741
2016
7,169
2,500
Five-year OPEX (DKK million)
Our Hearing Healthcare segment accounts for all the
savings realised in H2, which were both of a temporary
and a structural nature. The structural savings amount to
around DKK 250 million on an annual basis and had full
effect in H2 2020. Please refer to the financial review of
Hearing Healthcare on page 27 for more details on both
temporary and structural cost savings.
For the full year, OPEX decreased by 2% in local currencies
of which -10 percentage points were organic growth and 8
percentage points relate to acquisitions, the latter including
around 6 percentage points from the consolidation of EPOS.
Europe
2019*
2,151
2020
1,313
20182017
2,652
3,000
2,250
1,500
0
2,504
2016
2,130
750
Adjusted EBIT per full-year (DKK million)
*EBIT for 2019 was negatively impacted by an estimated DKK 550 million as
a result of the IT incident.
1,000
0
-500
H1 19H2 18H1 18
1,113
1,380
1,272
H2 19*
1,038
2,000
500
1,500
-193
H1 20 H2 20
1,506
Adjusted EBIT per half-year (DKK million)
*EBIT for H2 2019 was negatively impacted by an estimated DKK 550 mil-
lion as a result of the IT incident.
21
Demant · Annual Report 2020
Insights and highlights · Financial review
Cash ow statement
In H2 2020, the Group’s cash flow from operating activities
(CFFO) grew by 72% to DKK 1,892 million after EPOS one-
offs. Besides the improvement in EBIT compared to 2019,
the very strong growth was driven by tight working capital
management. Despite the significantly lower EBIT, CFFO for
the full year amounted to DKK 2,621 million, corresponding
to an increase of 22% compared to 2019.
Our net investments in tangible and intangible assets
(CAPEX) in H2 amounted to DKK 340 million, which is
a decrease of 19% on H2 2019. The decrease reflects the
temporary suspension of non-essential investments from
mid-March and into H2. For 2020 as a whole, CAPEX
decreased by 12% to DKK 667 million.
Net investments in other non-current assets amounted to
DKK 18 million, a minor decrease of DKK 27 million. For the
full year, cash flow from other non-current assets was posi-
tive by DKK 69 million driven by the settlement of a loan in
connection with an acquisition in France at the beginning
of the year.
Free cash flow before acquisitions and divestments in-
creased significantly by 141% to DKK 1,534 million in H2
and by 51% to DKK 2,023 million for the year as a whole.
Cash flow relating to acquisitions decreased by 65% to
DKK 101 million in H2, as we saw a temporary pause in
transactions at the beginning of the period. However, the
M&A activity level increased towards the end of the year.
Prot for the year
The Group’s reported profit before tax for H2 amounted to
DKK 1,310 million, or an increase of 43% compared to the
same period in 2019. Tax amounted to DKK 297 million,
resulting in an effective tax rate of 22.7%, which is a de-
crease of 1.0 percentage point compared to 2019.
For the full year, profit before tax amounted to DKK 1,336
million, or a decrease of 30% on 2019, while tax amounted
to DKK 202 million. The resulting effective tax rate of only
15.1% reflects a net tax gain of DKK 95 million in H1 due
to the fact that the Group is exempt from paying tax on the
positive one-off fair value adjustment realised as part of the
consolidation of EPOS. Adjusted for this, the effective tax
rate was 22.9%, or a decrease of 0.3 percentage point
on 2019.
Reported net profit for H2 was DKK 1,013 million, or an
increase of 45%, resulting in earnings per share (EPS) of
DKK 4.18, which is an increase of 46% from DKK 2.87 in
H2 2019. For the full year, net profit was DKK 1,134 million,
or a decrease of 23%, resulting in EPS of DKK 4.68, which
is a decrease of 22% from DKK 6.00 in 2019. As outlined
earlier, growth in net profit and EPS was partly driven by
the adverse impact of the IT incident on profits in H2 2019.
At the annual general meeting, the Board of Directors will
propose that the entire profit for the year be retained and
transferred to the company’s reserves.
4.68
2020
7.32
6.84
5.53
8.00
6.00
4.00
2.00
0.00
201820172016
6.00
2019
2020
667
0.0
%
2.0
%
4.0
%
6.0%
0
2
00
4
00
800
2016 2017 2018 2019
CAPEX
756
598
451
418
CAPEX (% of revenue)
6
00
CAPEX (DKK million)
2020
2,621
2,250
1,500
750
0
201820172016
1,683
1,872
1,679
2019
2,149
3,000
CFFO (DKK million)
(DKK million)
H2 20 H2 19 Change
CFFO before one-offs 1,944 1,102 76%
Cash ow from one-offs -52 - -
CFFO 1,892 1,102 72%
Net investments -358 -466 -23%
Free cash ow 1,534 636 141%
Acquisitions etc. -101 -285 -65%
Share buy-backs - -682 -100%
Other nancing activities -1,381 500 -376%
Cash ow for the period 52 169 -69%
Cash ow by main items
Earnings per share (EPS) (DKK)
22
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights · Financial review
Balance sheet
As of 31 December 2020, the Group’s total assets amounted
to DKK 21,927 million, which is a marginal decrease of 1%
compared to 30 June 2020. The decrease primarily related to
a decrease in other non-current assets, including goodwill
and deferred tax assets, whereas we saw an increase in
trade receivables related to the increase in revenue in H2
compared to H1. Relative to the end of 2019, total assets
increased by 1% driven entirely by acquisitive growth of 6%,
primarily in the form of goodwill. This includes growth re-
lated to the consolidation of EPOS. Organic growth in total
assets was -1%, driven to a large extent by a reduction in
our net working capital, and exchange rate effects were -5%.
Reflecting our tight working capital management, the
Group’s net working capital was DKK 2,452 million at the
end of 2020, a slight decrease of 2% since 30 June 2020
despite the increased activity level in H2. Relative to the
end of 2019, our net working capital was down by 24%.
Thanks to the strong cash flow generation in 2020, particu-
larly in H2, our net interest-bearing debt (NIBD) decreased
by 15% in H2 and by 13% for the full year and amounted
to DKK 7,135 million at 31 December 2020. The decrease
relates to a decrease in the short-term part of our inter-
est-bearing debt, which more than outweighed an increase
in the non-current part of our interest-bearing debt. The
resulting gearing multiple (NIBD/EBITDA) was 2.8, which is
slightly above our medium- to long-term target of 2.0-2.5
(target is unchanged and corresponds to 1.7-2.2, excluding
the impact of leasing). The above-normal gearing is a natu-
ral consequence of the depressed EBITDA in 2020, particu-
larly in H1.
Total equity increased by 11% in H2 to DKK 8,279 million of
which DKK 29 million is attributable to non-controlling inter-
ests and DKK 8,250 million to the shareholders of Demant
A/S. The increase was a result of the strong profitability real-
ised in H2 combined with the suspension of share buy-backs
in the reporting period. For the full year, equity increased by
8% driven by the realised profit after tax but was partly off-
set by share buy-backs of DKK 147 million made in H1 and
by customary currency translation adjustments of subsidiar-
ies reported as other comprehensive income.
Share buy-backs recognised in the Group’s balance sheet
totalled 667,702 shares bought at an average price of DKK
220.31, totalling DKK 147 million. The difference between
this amount and the DKK 197 million stated in the Group’s
cash flow statement relates to shares bought back as part
of a voluntary salary-for-shares conversion scheme offered
to most Danish employees, which are expensed as OPEX in
the income statement.
Employees
As of 31 December 2020, the Group had 16,591 employees
(2,016 in Denmark) compared to 15,678 (1,991 in Denmark)
as of 30 June 2020, an increase of 6% of which most was
relates to an increase in staffing at our production sites
and to acquisitions. The number of employees increased
by 5% for the full year relative to the 15,837 employees
(1,689 in Denmark) at the end of 2019. The increase
relates solely to the consolidation of EPOS and other
acquisitive impacts, and organic growth was flat, as
growth in certain business areas and geographies was
offset by structural reductions in others.
Events after the balance sheet date
There have been no events that materially change the
assessment of this Annual Report 2020 from the balance
sheet date and up to today.
For the full year, cash flow relating to acquisitions was down
by 35% and amounted to DKK 394 million.
Share buy-backs have been suspended between 15 March
2020 and today. Prior to the suspension, the Group had
bought back shares worth DKK 197 million.
After other financing activities of DKK -1,381 million, mostly
related to changes in short-term bank facilities, the net cash
flow in H2 was DKK 52 million. For the full year, the net cash
flow was DKK 194 million.
Change
(DKK million)
FY 19 H1 20 FY 20 H2 20 FY 20
Lease assets 1,937 1,785 1,847 3% -5%
Other non-current
assets
12,947 13,871 13,393 -3% 3%
Inventories 1,852 1,936 1,968 2% 6%
Trade receivables 3,209 2,518 2,808 12% -12%
Cash 792 919 952 4% 20%
Other current assets 1,061 1,038 959 -8% -10%
Total assets 21,798 22,067 21,927 -1% 1%
Equity 7,645 7,449 8,279 11% 8%
Lease liabilities 1,964 1,831 1,893 3% -4%
Other non-current
liabilities
3,763 3,697 4,837 31% 29%
Trade payables 652 643 802 25% 23%
Other current
liabilities
7,774 8,447 6,116 -28% -21%
Total equity and
liabilities
21,798 22,067 21,927 -1% 1%
Balance sheet by main items
23
Demant · Annual Report 2020
Insights and highlights · Outlook
Outlook
Medium- to long-term outlook
Recent developments
After a very challenging 2020 where the hearing health-
care market was severely impacted by coronavirus, we
expect to see very strong growth in 2021, as the market
gradually recovers and also as a result of low comparative
figures from around mid-March. However, due to increas-
ing infection rates and the tightening of restrictions in most
markets at the end of 2020, the hearing healthcare market
continues to be negatively impacted by coronavirus at the
beginning of 2021 where the Group’s revenue remains be-
low the normal level. This is especially the case in the UK,
in several emerging markets and to a lesser extent in the
important US market. Of all our business areas, Hearing
Implants is still the business area that is impacted the
most.
Conversely, the market for enterprise and gaming headsets
has entered 2021, experiencing continued strong demand
driven by the increased use of virtual collaboration tools,
and we have so far seen high double-digit growth rates
supported partly by relatively soft comparative figures
from the beginning of 2020.
Assumptions
Given these recent developments, our outlook for 2021 is
clearly subject to greater uncertainty than usual. Below,
we highlight the key assumptions on which our outlook
is based:
• The global hearing healthcare market will gradually
normalise during H1 supported by the global roll-out
of coronavirus vaccines, which will make it possible to
lift coronavirus-related restrictions in developed markets.
• We expect a slower pace of normalisation in certain
government channels and in emerging markets, and
for the latter, the normalisation process may even go
beyond 2021.
• We expect to see the release of some pent-up demand,
predominantly in H2, but we also expect that some of
this pent-up demand will not be released until 2022
or beyond.
• Despite strong comparative figures for 2020, we expect
that the demand for headsets will continue to grow
roughly in line with our medium- to long-term market
growth estimates of 8-10%.
2021 outlook
Metrics Outlook for 2021
Group organic
growth
23-27%, with Hearing Healthcare realising a higher organic growth rate than Communications.
Group acquisitive
growth
1% based on revenue from acquisitions completed as of 8 February 2021.
Group exchange
rate growth
-2% based on exchange rates as of 8 February 2021 and including the impact of exchange rate hedging.
EBIT DKK 2,850-3,150 million, with EBIT skewing towards H2.
Effective tax rate Around 23%.
Gearing Gearing multiple at the end of 2021 in line with our medium- to long-term target of 2.0-2.5 measured as
NIBD relative to EBITDA.*
Share buy-backs More than DKK 2 billion.
*Our gearing target no longer excludes the impact of leasing. The target remains unchanged if adjusted for the estimated impact of leasing on our gearing of 0.3.
24
Demant · Annual Report 2020 Demant · Annual Report 2020
Insights and highlights · Outlook
At Demant, a key objective is to continue our long-standing
track record of growing our business. To achieve this, our
strategic ambition is to further expand our position as a
leading global hearing healthcare Group by offering the
broadest, deepest and most innovative portfolios of prod-
ucts and services across all distinct business areas. At the
same time, we want to succeed in the highly attractive
and fast-growing market for premium audio and video
solutions.
In this section, we share our view of how our respective
markets will grow in the medium to long term, and to
ensure transparency for external stakeholders, we pro-
vide an overview of a number of other medium- to long-
term targets.
Our markets
At their core, the two markets we address today, i.e. the
hearing healthcare market and the market for audio solu-
tions for enterprise and gaming applications, both benefit
from strong structural drivers of demand:
For our Hearing Healthcare segment, the market is first
and foremost driven by favourable demographic trends.
Hearing loss strongly correlates with ageing, and as the
size of the ageing population and the average life ex-
pectancy are increasing globally, the growth trajectory
is – except during the global pandemic – both stable and
predictable. At the same time, penetration rates are in-
creasing in several emerging markets, as awareness
grows, hearing healthcare infrastructures improve, and
the purchasing power increases – all supporting growth.
For our Communications segment, the market for headsets
is driven by the secular trend of increasing virtual collabo-
ration and digital communication. The trend is not least
supported by the widespread focus by enterprises on re-
ducing the costs and environmental footprint of business
travelling and meetings and on increasing flexibility for
employees. The coronavirus pandemic has significantly
accelerated the adoption of virtual collaboration tools,
and we expect continued growth due to this “new normal”.
As far as gaming headsets are concerned, the key driver
is increasing focus on home entertainment, including
gaming, and the increasing extent to which gaming
involves live communication between players.
Our estimates of medium- to long-term value growth rates
for each of our addressable markets are shown below.
Medium- to long-term outlook
Estimated value growth rates and market size by business area
Hearing Aids
2-4%
USD 6 billion
Hearing Care
2-4%
USD 14 billion
Hearing Implants
10-15%
USD 1.8 billion
Diagnostics
3-5%
USD 0.5 billion
Hearing Healthcare
~4%
USD 23 billion
Communications
8-10%
USD 6 billion
Metrics Medium- to long-term outlook
Organic growth For the Group, we aim to generate an organic growth rate above the market growth rate, which we
estimate at around 4% per year in Hearing Healthcare and 8-10% per year in Communications. We
thus aim to increase our market share in both segments.
EBIT margin We aim to increase the EBIT margin in each of our business areas over time. For the Group as a whole, the
EBIT margin is subject to changes in business mix as well as to acquisitions and exchange rate effects.
Capex On an annual basis, we expect to invest around 4% of the Group’s revenue in tangible and intangible
assets (i.e. excluding customer loans and acquisitions).
Gearing We target a gearing multiple of 2.0-2.5 measured as net interest-bearing debt relative to EBITDA
(NIBD/EBITDA).*
Capital allocation Subject to our gearing target, we will return any excess free cash ow after acquisitions to shareholders
in the form of share buy-backs.
*Our gearing target no longer excludes the impact of leasing. The target remains unchanged if adjusted for the estimated impact of leasing on our gearing of 0.3.
25
Demant · Annual Report 2020
Our business
Hearing Healthcare
Hearing Healthcare
Communications
Hearing ImplantsHearing Aids Hearing Care Diagnostics
Communications - EPOS
26
Demant · Annual Report 2020 Demant · Annual Report 2020
Our business · Hearing Healthcare
Our business
Hearing Healthcare
-11%
GROWTH
IN LOCAL
CURRENCIES
13,163
REVENUE
DKK MILLION
Income statement
(DKK million)
H1 H2 FY
2020 2019 Growth 2020 2019 Growth 2020 2019 Growth
Revenue 5,532 7,350 -25% 7,631 7,596 0% 13,163 14,946 -12%
Production costs -1,532 -1,649 -7% -1,948 -1,972 -1% -3,480 -3,621 -4%
Gross prot 4,000 5,701 -30% 5,683 5,624 1% 9,683 11,325 -14%
Gross margin 72.3% 77.6% 74.5% 74.0% 73.6% 75.8%
R&D costs -540 -552 -2% -552 -568 -3% -1,092 -1,120 -3%
Distribution costs -3,311 -3,661 -10% -3,310 -3,760 -12% -6,621 -7,421 -11%
Administrative expenses -376 -415 -9% -435 -436 0% -811 -851 -5%
Share of prot after tax,
associates and joint
ventures
13 12 8% 39 40 0% 52 52 2%
Other operating income - - - - 100 -100% - 100 -100%
Operating prot (EBIT) -214 1,085 -120% 1,425 1,000 43% 1,211 2,085 -42%
EBIT margin -3.9% 14.8% 18.7% 13.2% 9.2% 14.0%
Revenue by business area
H1 H2 FY
(DKK million)
2020 2019 Growth 2020 2019 Growth 2020 2019 Growth
Hearing Aids 2,937 3,852 -24% 3,886 3,927 -1% 6,823 7,779 -12%
Hereof sales to
Hearing Care
-465 -607 -23% -657 -613 7% -1,122 -1,220 -8%
Hearing Care 2,154 3,128 -31% 3,310 3,150 5% 5,464 6,278 -13%
Hearing Implants 246 304 -19% 277 318 -13% 523 622 -16%
Diagnostics 660 673 -2% 815 814 0% 1475 1487 -1%
Hearing Healthcare 5,532 7,350 -25% 7,631 7,596 0% 13,163 14,946 -12%
27
Demant · Annual Report 2020
Revenue
For H2 2020, revenue in our Hearing Healthcare segment
amounted to DKK 7,631 million, corresponding to a growth
rate of 4% in local currencies with organic growth of 2%
and acqusitive growth of less than 2%. Exchange rates
had an impact on revenue of -3%, and total reported
growth for the period was around 0%. For the full year,
growth in local currencies in Hearing Healthcare was -11%
with organic growth of -13% and acquisitive growth of
2%. As such, reported growth in Hearing Healthcare was
-12% in 2020.
After the severe impact of coronavirus in H1, we saw
significant recovery in H2 in Hearing Healthcare, particu-
larly in the first months of the period. Growth in local cur-
rencies in Hearing Aids amounted to 1% with good perfor-
mance in sales to independent hearing care professionals
and chains, particularly in Europe, while sales in the US
were hampered by a relatively slower recovery. Moreover,
low sales to government systems, including the NHS and
VA, and to export markets continued to be a drag on reve-
nue. In Hearing Care, we saw strong performance in a
number of European markets, whereas the US market
saw relatively slower recovery. Revenue grew by 9% in
local currencies supported by acquisitive growth of 4%.
While revenue in Hearing Implants recovered partly from
H1 to H2, growth in local currencies remained negative by
9% in H2, as elective procedures, such as cochlear implant
surgeries, were postponed in many markets. Diagnostics
showed strong resilience to difficult market conditions and
returned to growth in H2 and delivered 6% growth in local
currencies, not least driven by the service business.
Due to the IT incident in September 2019, revenue in the
comparative period was negatively impacted by an esti-
mated DKK 575 million, of which roughly DKK 300 million
relates to Hearing Aids and DKK 275 million to Hearing
Care. The table below shows underlying organic growth
rates by business area adjusted for the estimated negative
impact of the IT incident.
Gross prot
Gross profit increased by 1% to DKK 5,683 million in H2,
resulting in a gross margin of 74.5%, or an increase of 0.5
percentage point compared to H2 19. The gross margin
expansion was primarily driven by an increased share of
revenue generated by our Hearing Care business, which
has a higher structural gross margin than our other
Hearing Healthcare businesses. We only saw modest
changes in gross margins within each of the business
areas.
Operating expenses (OPEX)
OPEX amounted to DKK 4,297 million in H2, corresponding
to a decline in local currencies of 7%, reflecting the realisa-
tion of material savings throughout the year. The savings
realised in H2 were both of a temporary and of a structural
nature. The most important temporary savings included
savings in sales and marketing costs and in travelling ex-
penses. However, we also benefitted from global support
from government compensation schemes of around DKK
100 million (around DKK 350 million in H1) and from the
reversal of part of a provision for bad debt recognised in
H1 of DKK 50 million.
Our business · Hearing Healthcare
Growth rates by business area
H1 20 H2 20 FY 20
Hearing Aids Organic -25% 1% -12%
Acquisitions 1% 0% 1%
LCY -25% 1% -12%
FX 1% -2% -0%
Total -24% -1% -12%
Hearing Care Organic -35% 4% -16%
Acquisitions 4% 4% 4%
LCY -31% 9% -12%
FX 0% -4% -2%
Total -31% 5% -13%
Hearing Implants Organic -18% -9% -13%
Acquisitions 0% 0% 0%
LCY -18% -9% -13%
FX -1% -4% -3%
Total -19% -13% -16%
Diagnostics Organic -3% 4% 1%
Acquisitions 1% 1% 1%
LCY -3% 6% 2%
FX 1% -5% -3%
Total -2% 0% -1%
Hearing Healthcare Organic -27% 2% -13%
Acquisitions 2% 2% 2%
LCY -25% 4% -11%
FX 0% -3% -1%
Total -25% 0% -12%
Organic growth by business area
Underlying*
H1 20 H2 20 FY 20 H2 20 FY 20
Hearing Aids -25% 1% -13% -8% -16%
Hearing Care -35% 4% -16% -4% -19%
Hearing Implants -18% -9% -13% -9% -13%
Diagnostics -3% 4% 1% 4% 1%
Hearing
Healthcare
-27% 2% -13% -5% -16%
*Growth rates are adjusted for the estimated negative impact of the IT
incident in 2019.
OPEX by function
Change
DKK million
H2 20 H2 19 DKK LCY Org.
R&D costs 552 568 -3% -2% -3%
Distribution costs 3,309 3,760 -12% -9% -12%
Adm. expenses 436 436 0% 3% 3%
Total 4,297 4,764 -10% -7% -9%
28
Demant · Annual Report 2020 Demant · Annual Report 2020
We also implemented structural savings of around DKK
250 million on an annual basis, which had full effect in H2.
These include savings related to the headcount reductions
made in H1, which primarily relate to the elimination of
double functions after the full integration of a large retail
network acquired in the US in 2018. Also, we have aligned
our marketing model in our US retail network, which has
improved efficiency in our sales and marketing activities.
Our store network remains largely unchanged. Lastly, we
expect to continue to achieve savings in travelling and con-
ference expenses, as we will continue to meet and collabo-
rate virtually to a larger extent than before the pandemic.
By far, the major part of the structural savings impact dis-
tribution costs, whereas R&D costs and administrative
expenses are only impacted to a minor degree.
For the full year, OPEX decreased by 8% in local curren-
cies. Apart from the material savings mentioned above,
the full-year decrease includes a net effect of DKK 100
million in extra costs from the provision for bad debt as
well as support of approx. DKK 450 million from govern-
ment compensation schemes.
Operating prot (EBIT)
EBIT in H2 amounted to DKK 1,425 million, corresponding
to a growth rate of 43% compared to the same period in
2019. The resulting EBIT margin was 18.7%, or an increase
of 5.0 percentage points from the reported margin in H2
2019. Despite subdued revenue in the reporting period,
we managed to lift profitability materially, first and fore-
most due to tight cost control but also due to support from
government compensation schemes and the partial rever-
sal of the provision for bad debt made in H1 as mentioned
above. Furthermore, EBIT in the comparative period was
negatively impacted by an estimated DKK 550 million as
a result of the IT incident.
Profitability was especially strong in Hearing Care, which
benefitted from some pent-up demand in Europe that
resulted in a higher-than-normal return on sales and mar-
keting activities, but we also saw improved profitability in
Hearing Aids and Hearing Implants driven by material cost
savings, while profitability was flattish in Diagnostics.
For the full year, EBIT amounted to DKK 1,211 million with
a corresponding margin of 9.2%.
Our business · Hearing Healthcare
2019
9,392
2020
8,524
20182017
8,386
10,000
5,000
0
7,741
2016
7,169
2,500
7,500
Five-year OPEX (DKK million)
3,000
1,500
750
0
201820172016
2,428
2,295
1,891
2019*
2,085
2,250
1,211
2020
EBIT per full-year (DKK million)
*Reported EBIT for 2019 was negatively impacted by an estimated DKK 550
million as a result of the IT incident.
1,000
250
-500
H1 19H2 18H1 18
1,085
1,247
1,181
H2 19*
1,000
1,750
-214
H1 20 H2 20
1,425
EBIT per half-year (DKK million)
*Reported EBIT for H2 2019 was negatively impacted by an estimated DKK
550 million as a result of the IT incident.
29
Demant · Annual Report 2020
Hearing Aids
Market developments
Based on available market statistics, covering around two
thirds of the market, and on our own internal assumptions,
we estimate that the global hearing aid market saw unit
growth of around -15% in 2020 after having been signifi-
cantly impacted by coronavirus and the resulting lock-
downs, particularly in Q2.
We saw significant recovery in the global hearing aid
market in Q3 and at the beginning of Q4, but the spike in
new coronavirus infections that swept across most major
markets from around the end of October caused the recov-
ery to pause at the end of the year. At the very end of the
year, growth even decelerated in some markets, including
the UK and to a lesser extent the US. For Q4, we estimate
that global unit growth was around -4%.
Despite the negative market growth in 2020, we see no
changes in the fundamental drivers of demand for hearing
aids: The size of the ageing population continues to in-
crease globally, we live longer, and infrastructure and
purchasing power are improving in a number of emerging
markets. Consequently, we believe that the underlying
need for hearing aids is largely unaffected by coronavirus
and that the market will return to the structural level of
4-6% unit growth per year. In fact, we believe that the
hearing aid market will see some tailwinds over the coming
years when at least part of the pent-up demand from 2020
is released. We estimate that total sales in the global hear-
ing aid market dropped by more than 3 million units com-
pared to what we would have seen if coronavirus had not
occurred. This clearly indicates that many users – existing
as well as new ones – are likely to seek assistance over the
coming years, but both the magnitude and the timing of
the release of such pent-up demand remain uncertain.
North America was severely impacted by coronavirus
with estimated unit growth of -18% in 2020. In the US,
the impact on the large public channel, Veterans Affairs
(VA), was particularly severe in Q2 and subsequently, VA
saw slower recovery than the commercial market. Growth
in Canada was slightly less negative than in the US.
In Europe, we estimate that unit growth was around -15%
in 2020. All markets were severely impacted by coronavi-
rus, but the commercial markets in Europe recovered at a
faster pace than the US market and also showed better
resilience when the second wave of coronavirus hit in Q4.
However, unit growth in the large public channel in the UK,
the NHS, lagged considerably behind unit growth in the
commercial market and thus had a negative impact on
the total growth rate in Europe.
Looking beyond the US and Europe, we estimate that unit
growth in Japan was less negative than in Europe and that
unit growth in Australia was flattish.
There are no reliable industry statistics available on the
development of prices in the global hearing aid market,
and given the dynamic market environment in 2020, we
are unable to accurately estimate the development in
ASPs on the hearing aid market.
With regard to the new over-the-counter (OTC) category
of hearing aids, the US Food and Drug Administration
(FDA) has yet to issue a draft ruling in order to establish
the new category, and the timing remains uncertain. Such
draft ruling will go out for consultation before a final ruling
is issued. We maintain our view that any impact of the
OTC category will be limited.
Hearing Healthcare > Hearing Aids
-12%
GROWTH
IN LOCAL
CURRENCIES
6,823
REVENUE
DKK MILLION
Estimated market unit growth in 2020 by region
Q1 Q2 Q3 Q4 Total
Europe -10% -50% 1% 0% -15%
North America 0% -59% -4% -7% -18%
US (commercial) 1% -52% 0% -6% -14%
US (VA) 0% -83% -34% -15% -34%
Rest of world -5% -35% -5% -5% -11%
Global -6% -48% -3% -4% -15%
Our business · Hearing Healthcare
30
Demant · Annual Report 2020 Demant · Annual Report 2020
Business update
In 2020, total revenue in Hearing Aids saw growth of
-12% in local currencies. Organic growth was -12%,
and growth from acquisitions was less than 1%.
Internal revenue from sales to our Hearing Care business
area accounted for 16% of total revenue and external sales
for 84%. Our commentary below focuses on total revenue,
including revenue from sales through our own retail clinics,
and thus encompasses our total wholesale activities. How-
ever, internal revenue is eliminated from the reported reve-
nue for our Hearing Healthcare segment and for the Group.
Hearing Aids
Philips
Hearing Solutions
Revenue and growth
(DKK million)
Revenue
Growth
(local currencies)
H1 20 H2 20 FY 20 H1 19 H2 19 FY 19 H1 20 H2 20 FY 20
Hearing Aids 2,937 3,886 6,823 3,852 3,927 7,779 -25% 1% -12%
Hereof sales to Hearing Care* 465 657 1,122 607 613 1,220 -24% 12% -6%
Hereof sales to external customers 2,472 3,229 5,701 3,245 3,314 6,559 -25% -1% -13%
*Revenue from internal sales to Hearing Care is eliminated from the reported revenue for Hearing Healthcare and for the Group, i.e. we only include revenue
from external customers. The pricing used in internal transactions is determined on an arm’s length basis and thus reects normal commercial terms.
(DKK million) H1 20 H2 20 FY 20
2,937 3,886 6,823
Growth
Organic -25% 1% -12%
Acquisitions 1% 0% 1%
Local currencies -25% 1% -12%
FX 1% -2% 0%
Total -24% -1% -12%
Revenue
31
Demant · Annual Report 2020
Hearing Healthcare > Hearing Aids
The negative impact of coronavirus was most pronounced
in H1 where a strong start to the year was disrupted by
strict lockdowns in virtually all major markets from around
mid-March. Supported by pent-up demand in Europe, we
saw better-than-expected recovery in most markets and
channels from the beginning of H2. Growth in H2 was 1%
in local currencies, which includes around 8 percentage
points from the negative impact of the IT incident last year
on the comparative figures. Growth was supported by
sales to Hearing Care, which grew by 12% thanks to the
strong recovery of that particular business area in the pe-
riod combined with a slight increase in the share of wallet.
The ASP grew by 6% in H2, as differences in the pace of
recovery between channels and markets led to positive
mix changes. Unit growth was -5%.
On 30 November 2020, we announced the launch of
new flagship hearing aids in all our four hearing aid
brands: Oticon, Philips Hearing Solutions, Bernafon and
Sonic. These include Oticon More™, which is the world’s
first hearing aid with an on-board deep neural network
that provides superior sound processing (please refer to
the text box on page 33 for more details). In addition to
market- leading audiological concepts, the new products
feature both iOS and Android connectivity and are pre-
pared for Bluetooth LE Audio. The products have now been
rolled out in most major markets in the powerful miniRITE
rechargeable style and at three upper price points, and
we have received excellent feedback from customers and
users. Due to the timing of the launch, the new range
of products had no material financial impact in 2020, but
we are now very well positioned to address the needs of
customers and users in 2021 and beyond.
In terms of geographies, Europe saw relatively fast-paced
recovery in Q3 after a challenging H1, and the second
wave of coronavirus, which started in autumn, and the
ensuing lockdowns only had limited effect on our revenue.
Overall, our growth in 2020 was most persistent – and
positive – in the Scandinavian countries, but several of our
other major markets also performed well under the circum-
stances, including Germany, France and Spain. Despite the
improvements we saw towards the end of the year, the
UK was a drag on growth, which is mostly due to the slow
recovery in sales to the NHS.
Our growth in North America was more heavily impacted
by coronavirus than growth in Europe. In the US, the low
point in terms of growth came slightly later than in Europe,
but the recovery was also significantly slower and ulti-
mately stalled in the last months of the year, as infections
resurged and new restrictions were imposed in most
states. Especially the recovery in VA was very slow. In
Canada, the impact of coronavirus was less severe. For
North America as a whole, pent-up demand did not ma-
terialise in 2020, which represents a potential upside for
the coming years.
In Asia, we saw solid organic growth despite the pan-
demic. This was primarily driven by the success in China
following the introduction of Philips Hearing Solutions at
the beginning of 2020. At the same time, we saw solid
growth in South Korea and only slightly negative organic
growth in Japan. The Pacific region delivered slightly ne-
gative organic growth, whereas the Other countries region
– which comprises a number of emerging markets – was
severely impacted by coronavirus.
Our business · Hearing Healthcare
H1 20 H2 20 FY 20
Units -31% -5% -18%
ASP 9% 6% 8%
Total -25% 1% -12%
Unit and ASP growth (local currencies)
32
Demant · Annual Report 2020 Demant · Annual Report 2020
Our business · Hearing Aids
Oticon More™
and charger
The revolutionary Oticon More™ is the world’s first
hearing aid with an on-board deep neural network,
which mimics the way the brain functions to allow
users to hear all relevant sounds. Trained with 12
million sound scenes from real life, Oticon More makes
sounds more distinct and delivers 30% more informa-
tion to the brain than Oticon Opn S, while reducing the
listening effort of the user and improving speech under-
standing by 15%. These improvements are made possi-
ble by an entirely new chipset, Polaris™, which boasts
an eightfold increase in memory and has twice the
processing power of the previous generation, Velox S™.
In addition to superior audiological performance, Oticon
More features state-of-the-art direct streaming from
both iOS and compatible Android devices, using the
ASHA (Audio Streaming for Hearing Aids) protocol,
and it is prepared for the next generation of connectivi-
ty based on the upcoming Bluetooth LE Audio standard.
33
Demant · Annual Report 2020
Audika
Coronavirus precautions
Hearing Healthcare > Hearing Care
Our business · Hearing Care
Hearing Care
A resilient business model in Hearing Care
In 2020, our global Hearing Care business area was
challenged by several rounds of lockdowns in most
of our markets, but our business model proved very
resilient thanks to new and innovative approaches and
the flexibility and dedication of our employees. During
the first lockdowns in March and April, almost all our
clinics all over the world were closed. However, fol-
lowing the general reopenings in May, we found new
ways of operating our business and servicing our
customers, while ensuring their safety as well as the
safety of our employees. This included combining
remote services via app and telephone with safe
physical visits to our clinics where we use both gloves
and face masks. Consequently, we have since May
managed to keep most of our clinics open, even in
times when other retail shops have been closed
and general instructions have been to stay at home.
Hearing healthcare is considered essential healthcare
by public authorities, and in these extraordinary cir-
cumstances, we have thus been able to service both
existing and new customers at a level that comes
very close to our normal level.
34
Demant · Annual Report 2020 Demant · Annual Report 2020
Audika
Coronavirus precautions
Hearing Healthcare > Hearing Care
Our business · Hearing Care
Hearing Care
Market developments
Please refer to Market developments in the Hearing Aids
section above for details on developments in the hearing
aid market in 2020. Under normal circumstances, growth
rates in the hearing aid retail and wholesale markets are
relatively similar, but we have seen notable differences in
2020 as a result of coronavirus, especially in the hearing
aid wholesale market, which includes government chan-
nels, such as VA in the US and the NHS in the UK, which
have both been hit relatively harder by coronavirus than
the commercial market. Consequently, we estimate that
unit growth in the hearing aid retail market was slightly
better than in the hearing aid wholesale market.
Business update
In 2020, our Hearing Care business, covering our hearing
aid retailing activities, saw growth of -12% in local curren-
cies with organic growth of -16% and acquisitive growth
of 4%, primarily in France. Exchange rate effects were
-2%, resulting in growth of -13% in reported terms.
Naturally, coronavirus had a very significant negative
impact on growth in 2020. The peak impact was seen
in spring where revenue dropped by almost 80%. Sub-
sequently, we saw healthy recovery in H2, not least in
Europe, despite new lockdowns in most markets from
around the end of October in response to the rising number
of infections. In H2, growth was to 9% in local currencies,
which includes around 9 percentage points from the nega-
tive impact of the IT incident last year on the comparative
figures.
When lockdowns were re-enforced in H2, hearing aid clin-
ics were generally classified as essential healthcare, and
they were thus allowed to remain open. Many people had
then learned to cope with some level of restrictions being
part of their everyday life, and hearing aid users were gen-
erally comfortable visiting our clinics thanks to our efforts
to maintain very high standards for cleaning and hygiene.
When lockdowns were originally enforced in spring, we
saw a temporary increase in the demand for remote care
solutions and telephone consultations, but we have largely
seen this demand return to the normal level, and we be-
lieve that this clearly confirms the need for in-person coun-
selling and for hearing care professionals playing an active
part throughout the user journey.
In Europe, our revenue saw strong recovery in H2 and al-
most reached the normal level. Our key growth drivers in
2020 were France and Ireland, whereas the UK and Italy
were most severely impacted by coronavirus. The UK was
relatively slow to recover but saw significant improvement
during most of H2, until the situation started to deteriorate
again at the very end of the year.
The recovery in North America was slower than in Europe,
and in both the US and Canada, it stalled towards the end
of the year. In the US, the impact of coronavirus has dif-
fered significantly from state to state, but the halt in the
recovery towards the end of the year was relatively broad-
based. In Canada, acquisitions contributed slightly to
growth.
In Australia, the impact of coronavirus in H1 was slightly
less severe than in Europe. In H2, however, revenue re-
mained below the normal level due to regional lockdowns,
although we saw positive reported growth driven by low
comparative figures due to the IT incident.
(DKK million) H1 20 H2 20 FY 20
2,154 3,310 5,464
Growth
Organic -35% 4% -16%
Acquisitions 4% 4% 4%
Local currencies -31% 9% -12%
FX 0% -4% -2%
Total -31% 5% -13%
-12%
GROWTH
IN LOCAL
CURRENCIES
5,464
REVENUE
DKK MILLION
Revenue
35
Demant · Annual Report 2020
Hearing Implants
Market developments
With less than 5% of the people that could benefit from
an implantable solution actually being treated, the cochlear
implant (CI) market remains heavily underpenetrated and
the unfulfilled need remains significant. While CI solutions
have become the standard of care for children born with
a profound hearing loss in developed markets, increased
awareness and clinical research continue to fuel the
adoption of CI solutions among adults and seniors. In
addition, improved hearing healthcare infrastructure,
public funding and higher purchasing power are some
of the drivers of the increase in the adoption of CI solu-
tions among children in developing markets. Aside from
the significant improvement of the patient’s quality of life,
the benefits of CI solutions are from a societal standpoint
gaining more and more ground. The aggregated societal
lifetime cost of profound hearing loss and deafness greatly
outweighs the cost of cochlear implant surgery, and the
economic rationale behind cochlear implants is one of
the growth drivers in the industry.
The market for bone anchored hearing solutions (BAHS)
is considered one of the fastest growing segments in
hearing healthcare with annual growth rates in value
of 10-15%, although annual growth rates are subject to
significant fluctuations year-over-year, depending on the
timing of product launches. The penetration of BAHS
solutions is still very low – even in developed markets
– and the fundamental growth drivers of the BAHS market
include increasing awareness and improved reimbursement
schemes. In addition, better patient outcomes and contin-
ued product innovation are key to fuelling market growth
and further penetrating the market. There are several
solutions in the marketplace that address some of the
clinical indicators pointing towards the advantages of
using bone conduction devices, including passive and
active transcutaneous systems (without abutment but
with an implant that is connected to an external sound
processor through magnetic attraction) as well as percu-
taneous systems (with abutment), which are still the gold
standard. The widespread penetration of other solutions
will depend heavily on whether the solutions are adopted
for distribution through the highly diverse reimbursement
systems that exist around the world.
The hearing implants market was heavily impacted by the
outbreak of coronavirus in 2020. As the virus spread across
the globe and hospitalisations increased, resources were
allocated to patients infected with coronavirus, while elec-
tive surgeries, such as CI procedures, were postponed.
While the overall market recovered from the low point in
spring, the pace of the recovery was slower than in other
areas of hearing healthcare, not least in emerging markets,
and with the resurge in the number of infections in autumn
and winter, elective surgeries were once again postponed.
Overall, we estimate that the CI market declined by around
20% in 2020, which is significantly below our expectations
of 10-12% growth under normal circumstances. We esti-
mate that the BAHS market declined by more than 20%,
which is also significantly below our normal expectations
of market growth of 10-15%. However, we expect to see
a normalisation of the market in 2021, but it is still too
early to conclude if the market will benefit from pent-up
demand, which is highly dependent on capacity and
resource allocation.
Business update
In 2020, our Hearing Implants business area, which oper-
ates under the Oticon Medical brand, realised -13% growth
in local currencies, which was entirely organic growth.
Sales were heavily impacted by widespread lockdowns
in virtually all markets and the resulting postponement of
elective surgeries, particularly in the CI market. Our BAHS
business was also severely impacted, but sales of sound
processors, including upgrades, supported the business
during the year.
Hearing Healthcare > Hearing Implants
-13%
GROWTH
IN LOCAL
CURRENCIES
523
REVENUE
DKK MILLION
Our business · Hearing Implants
(DKK million) H1 20 H2 20 FY 20
246 277 523
Growth
Organic -18% -9% -13%
Acquisitions 0% 0% 0%
Local currencies -18% -9% -13%
FX -1% -4% -3%
Total -19% -13% -16%
Revenue
36
Demant · Annual Report 2020 Demant · Annual Report 2020
Coclear implants
Our CI business was heavily impacted by the outbreak of
coronavirus in spring, and the activity level quickly dropped
to almost zero, as hospitals in virtually all markets where
we are present prioritised coronavirus treatment. While we
have seen recovery in sales since the low point in spring,
this has happened at a slower pace than in other parts of
the hearing healthcare market, and hospitals have priori-
tised surgeries of paediatric patients, which is an area
where our exposure is lower than in the adult segment.
Still, we started to see revenue growth in a number of mar-
kets in H2, including Germany and Italy, whereas France,
our biggest market, continued to record negative growth,
albeit to a much lesser extent than in H1. While the devel-
opment was encouraging in most of the developed mar-
kets, sales to emerging markets continued to be a drag
in H2 with only limited tender activity owing to the contin-
ued impact of coronavirus on both healthcare systems
and public finances.
Our R&D efforts have continued in 2020, and earlier this
year, we submitted our final application to the FDA for
pre-market approval of the Neuro system in the US. We
expect to be able to access the US market in H2 2021 at
the earliest. We also published an updated reliability
report, demonstrating that our Neuro system is one of
the most reliable systems in the industry, which continues
to be a driver in our dialogue with key opinion leaders and
enables us to increase our penetration into clinics all over
the world.
Bone anchored hearing systems
Our BAHS business was also impacted by coronavirus,
albeit to a lesser extent than the CI business, and despite
a negative development in revenue, we gained significant
market share in 2020. The business entered 2020 on a
high note by continuing the very strong growth we had
seen in 2019 after the launch of the Ponto 4 sound pro-
cessor with its industry-leading audiology and wireless
streaming from smartphones. However, coronavirus also
impacted BAHS sales significantly, and growth in H1 was
slightly negative. We have seen encouraging recovery from
the low point in spring driven by sound processor upgrades
and temporary soft-band solutions that allow patients to
start using the system while waiting for the actual implan-
tation. On a sequential basis, we saw a material uplift in
sales in H2, but due to strong comparative figures, growth
was slightly more negative than in H1. From a geographic
perspective, we recorded strong growth in a range of mar-
kets, including France, Germany and the Netherlands,
whereas growth was negative in the US and the UK,
our two largest markets.
In early spring, Oticon Medical introduced connectivity
solutions for Neuro 2 worldwide, which was an impor-
tant step for the Neuro system to become a truly pre-
mium offering in the market for cochlear implants. A few
months later, in summer, the Neuro 2 Swim Kit solution
was launched, featuring a waterproof solution that is
highly functional, reliable and reusable. With these re-
leases, Neuro 2 is a highly attractive solution for new
candidates and existing users looking for the ultimate
combination of sound quality, aesthetics and ease of use.
37
Demant · Annual Report 2020
Diagnostics
Market developments
We estimate that in 2020, the global market for diagnostic
instruments and accessories related to hearing healthcare
declined by approx. 10% compared to 2019 due to corona-
virus. The impact of coronavirus varied significantly be-
tween product categories and segments, with audiometers
and equipment for hearing aid fitting, impedance and
otoacoustic emissions (OAE) declining by around 20%,
while other categories, including disposables, balance
equipment and diagnostic auditory brainstem response
(ABR) equipment, only saw modest declines or even slight
growth. The negative market growth is significantly below
our long-term growth expectations of 3-5%, which we
believe are intact despite the significant – but temporary
– impact of coronavirus. Despite coronavirus, the market
for diagnostic equipment for hearing and balancing pur-
poses is constantly developing – not only from a product
perspective but also due to the increasing importance of
software solutions and customer database management
as well as ongoing consolidation in the industry.
Business update
With 2% growth in local currencies of which organic
growth accounted for 1 percentage point, we succeeded
in expanding our market-leading position in Diagnostics
in 2020 with significant market share gains in a market
that had declined due to coronavirus.
At the beginning of 2020, Diagnostics continued its strong
momentum from the year before and delivered strong
growth. However, in line with the development in other
parts of the hearing healthcare market, the outbreak of
coronavirus in spring had a severe negative impact on
the sales of diagnostic equipment, and we saw a mate-
rial slowdown in new orders. In H2, we saw encouraging
recovery and returned to growth in local currencies. Al-
though instrument sales continued to be impacted by
a lower activity level in some customer segments, we
saw strong recovery in revenue generated by our
service business thanks to pent-up demand.
From a geographic perspective, we saw full-year growth
in both Pacific and Asia driven by Australia, China and
South Korea. In Europe, revenue rose in H2 with strong
sales growth in a number of markets, including Germany,
France and Switzerland. Despite the positive recovery in
H2, growth was flat in Europe for the full year. We also
saw recovery in sales in the US in H2, but it lagged behind
other regions due to the continued impact of coronavirus.
Diagnostics has a higher share of sales to emerging mar-
kets than other hearing healthcare businesses in the Group,
which has been a drag on revenue growth during the year
due to the severe impact of coronavirus in these markets.
The past year has been another successful year for our
multi-brand strategy, which allows us to focus on separate
segments and customers and thereby increasing our al-
ready significant market share in the market as a whole.
Our success is, among other factors, due to strong per-
formance by our biggest brand, Interacoustics, which
managed to grow its business even in a year that was
heavily impacted by coronavirus. The strong performance
was partly driven by Affinity Compact in the hearing aid
fitting segment and by significant growth in the balance
segment.
Hearing Healthcare > Diagnostics
Our business · Diagnostics
(DKK million) H1 20 H2 20 FY 20
660 815 1,475
Growth
Organic -3% 4% 1%
Acquisitions 1% 1% 1%
Local currencies -2% 6% 2%
FX 0% -5% -3%
Total -2% 0% -1%
2%
GROWTH
IN LOCAL
CURRENCIES
1,475
REVENUE
DKK MILLION
Revenue
38
Demant · Annual Report 2020 Demant · Annual Report 2020
Our business · Diagnostics
Interacoustics launches new solution for diagnosing
dizzy patients
A new milestone in diagnosing patients with balance
conditions was reached in autumn 2020 when the
third generation of Micromedical VisualEyes™ by
Interacoustics was launched. The product is the new
generation of diagnostic equipment aimed at helping
patients with balance and dizziness issues both in the
vestibular system and in the central nervous system.
The new VisualEyes™ system features more applica-
tions, for example the EyeSeeCam vHIT and several
new tests, which makes the product relevant to more
patient and customer groups.
39
Demant · Annual Report 2020
Communications
1,306
REVENUE
DKK MILLION
Our business · Communications
Income statement
H1 H2 FY
DKK million
2020 2019 Growth 2020 2019 Growth 2020 2019 Growth
Revenue 546 760 1,306
Production costs -291 -358 -649
Gross prot 255 402 657
Gross margin 46.7% 52.9% 50.3%
R&D costs -78 -91 -169
Distribution costs -144 -213 -357
Administrative expenses -12 -17 -29
Share of prot after tax,
associates and joint
ventures
- 28 - 38 - 66
Operating prot (EBIT) 21 28 -25% 81 38 113% 102 66 55%
EBIT margin 3.8% 10.7% 7.8%
40
Demant · Annual Report 2020 Demant · Annual Report 2020
Communications
Introduction
In the following sections, we review the income statement
for our Communications segment, which only comprises
our headset business and operates under the EPOS brand.
EPOS was fully consolidated into the Group with financial
effect from 1 January 2020 as a result of the demerger of
Sennheiser Communications, our 50/50 joint venture with
Sennheiser electronic GmbH & Co. KG. The joint venture
only focused on R&D and production and had no external
distribution activities, as products were distributed through
the subsidiaries of our joint venture partner. Consequently,
the composition of the income statement has changed, so
there are no accurate comparative figures for 2019.
Revenue
In H2, revenue in Communications amounted to DKK 760
million, which is significantly above our initial plans for the
half-year. This reflects sequential growth of 39% compared
to H1 driven by an acceleration of the already strong de-
mand for virtual collaboration tools, which started in mid-
March. All in all, revenue for the full year amounted to DKK
1,306 million, which is significantly above our initial plans
despite a slow start to the year.
Performance was strong in both Enterprise Solutions and
Gaming, and revenue in both areas exceeded our plans to
roughly the same extent. From a geographic perspective,
sales exceeded our plans in all regions, but we saw extra-
ordinarily strong performance in Europe, the historic strong-
hold of the business, and almost two-thirds of EPOS’s reve-
nue in 2020 was generated in this region. Revenue in North
America accounted for roughly one fourth of total revenue
followed by Asia and Pacific, and we see ample opportu-
nities to grow our market shares in these regions.
Gross prot
Gross profit was DKK 402 million in H2, resulting in a gross
margin of 52.9%. This corresponds to a margin expansion
of 6.2 percentage points compared to H1 where significant-
ly higher-than-normal freight charges and a particularly high
demand for USB headsets, which have a relatively lower
gross margin, had a dilutive effect on the gross margin.
For the full year, the gross margin was 50.3%.
Operating expenses (OPEX)
OPEX amounted to DKK 321 million in H2, corresponding
to a sequential growth rate of 37% from H1. The significant
sequential growth reflects the strong revenue growth we
have seen in the business, as we have continued to invest
further in R&D and distribution activities, including sales and
marketing activities. As outlined in the financial review for
the Group, extraordinary branding costs were recognised
as one-offs in 2020, but the total level was below our origi-
nal expectations, as trade fairs and other activities were to
a large extent cancelled in 2020 due to coronavirus. Some
of these activities are, however, likely to take place in 2021
instead.
Operating prot (EBIT)
EBIT for H2 amounted to DKK 81 million, corresponding to
an EBIT margin of 10.7%. Compared to H1, the significant
margin improvement of 6.9 percentage points was driven
by higher revenue and an improved gross margin. Although
not directly comparable, EBIT was 113% higher than the
Group’s share of profit after tax in the joint venture in H2
2019, i.e. prior to the demerger.
EBIT for the full year was DKK 102 million, corresponding
to a growth rate of 55% compared to the Group’s share of
profit after tax in the joint venture in 2019 and to an EBIT
margin of 7.8%.
EPOS
ADAPT660
41
Demant · Annual Report 2020
Our business · EPOS
Communications - EPOS
Market developments
Enterprise headsets
In the past year, the market witnessed a surge in demand
for headsets and virtual collaboration tools following the
outbreak of coronavirus, and we estimate that the enter-
prise headset market has seen growth of around 30% in
2020. The global pandemic has led to a significant increase
in remote working and a general acceleration of digitali-
sation, and enterprises around the world have become
accustomed to online meetings as a substitute for travel-
ling. This has naturally boosted the demand for profession-
al audio and video devices significantly. Our expectations
of a structural growth rate in the underlying market remain
unchanged at 8-10% per year, and while the coronavirus
pandemic has boosted market growth in 2020, we expect
that the enterprise headset market will continue to grow
at these historic rates in the coming years.
Gaming headsets
The market for gaming headsets has also experienced sig-
nificant tailwind from the pandemic due to the increase in
online gaming that we have seen in the past year, and the
market grew significantly more than the 8-10% that we
see as the structural growth rate for the market. Aside
from the abnormal tailwind in 2020, the gaming commu-
nity continues to grow with the increasing popularity of
esports across the globe. As the average age of gamers
continues to go up, the demand for high-end solutions and
premium headsets is expected to develop favourably and
support growth in the overall market value. On the product
side, the wireless trend we have seen in the past years in
consumer headsets is now also catching on in the gaming
segment, driving an opportunity for smaller in-ear form
factors.
Business update
Our Communications business specialises in premium
audio and video solutions for enterprises and gamers,
offering cutting-edge design and performance based
on leading and advanced technologies under the EPOS
brand. Driven by the surge in demand for headsets and
virtual collaboration tools, the performance of EPOS
greatly exceeded our initial expectations for 2020 and
contributed 9 percentage points to the Group’s growth
in local currencies.
After a soft start to the year where supply chain head-
winds hampered sales, EPOS succeeded in exploiting the
strong demand for headsets that arose as the pandemic
spread across the globe from around mid-March. In par-
ticular, we experienced strong demand for USB-wired
products, and we also saw significant growth in sales
through online channels. The strong demand continued
throughout the year, and in H2, we successfully increased
our production capacity and thus unit sales, the former
having been a limiting factor in H1. Despite the increased
production capacity, we still had a higher-than-normal
level of open orders at the end of 2020.
After having assumed end-to-end responsibility for distri-
bution and establishing sales subsidiaries in many markets
as part of the demerger process, EPOS was ready for an
eventful year with focus on ensuring the successful launch
of a completely new brand as well as new premium prod-
ucts. As a consequence of coronavirus, we had to adjust
the launch of the EPOS brand in 2020, which was originally
planned – among other marketing initiatives – to be fuelled
by our presence at a range of trade fairs and conferences,
which were, however, cancelled. Instead, we converted to
virtual set-ups, and marketing initiatives were to a large
extent conducted online due to the increased working-
from-home trend.
Communications > Communications - EPOS
1,306
REVENUE
DKK MILLION
H1 H2 FY H1* H2* FY*
Communications 546 760 1,306 7pp 10pp 9pp
Revenue
*Contribution to the Group’s total growth in local currencies (no comparative
gures as Communications was not consolidated in 2019).
42
Demant · Annual Report 2020 Demant · Annual Report 2020
EPOS launches “Understanding Sound Experiences”
report and highly successful “Bad Audio is Bad
Business” campaign
Bad audio is bad business, and “what?” is the most
expensive word in business today. This is the clear
conclusion of the latest survey performed by EPOS, which
finds that 95% of audio end-users and decision-makers
experience pain points relating to sound that affect their
concentration or efficiency at work. Launched along with
the successful “Bad Audio is Bad Business” campaign,
EPOS’s marketing efforts have secured maximum global
reach, strong brand engagement and a significant
increase in the voice of the EPOS brand.
Our business · EPOS
43
Demant · Annual Report 2020
Oticon Medical
Neuro 2
Corporate
information
Shareholder information
44
Demant · Annual Report 2020 Demant · Annual Report 2020
Share capital and price development
As of 31 December 2020, Demant’s nominal share capital
was DKK 48,138,234 divided into 240,691,168 shares of
DKK 0.20 each.
All shares are the same class and carry one vote each. The
change compared to the year before is due to the reduction
of the company’s nominal share capital by DKK 919,173
through the cancellation of treasury shares approved at
the annual general meeting on 10 March 2020.
The Board of Directors has been authorised by the annual
general meeting to increase the company’s share capital
by a nominal value of up to DKK 6,664,384. Furthermore,
the Board of Directors has been authorised to increase
the share capital by an additional nominal value of up to
DKK 2,500,000 in connection with the issued shares being
offered to employees. Both authorisations are valid until
1 April 2021.
The price of Demant shares increased by 14.7% in 2020,
and on 31 December 2020, the share price was DKK
240.60, corresponding to a market capitalisation of DKK
57.7 billion (excluding treasury shares). The average daily
trading turnover was DKK 99.8 million. The company is
a constituent of the OMX Copenhagen 25 Index (C25),
which covers the 25 largest and most frequently traded
shares on Nasdaq Copenhagen. The C25 Index increased
by 33.7% during the year.
Ownership
William Demant Foundation holds the majority of shares in
Demant through its investment company William Demant
Invest and has previously communicated its intention to
maintain an ownership interest of 55-60% of Demant’s
share capital. As of 31 December 2020, William Demant
Foundation held – either directly or indirectly – approx.
58% of the share capital.
As per company announcement no. 2017-08 dated 27
July 2017, Canada Pension Plan Investment Board owned
20,352,691 shares, or 7.86% of the share capital, at the
time.
No other shareholders had flagged an ownership interest
of 5% or more as of 31 December 2020.
As of 31 December 2020, the company held 793,959 trea-
sury shares, corresponding to 0.33% of the share capital.
*
Excluding treasury shares.
Corporate information · Shareholder information
Specication of movements in share capital
(DKK 1.000)
2020 2019 2018 2017 2016
Share capital at 1.1. 49,057 50,474 51,793 53,216 54,425
Capital reduction -919 -1,416 -1,319 -1,423 -1,209
Share capital at 31.12. 48,138 49,057 50,474 51,793 53,216
Nominal value per share, DKK 0.20 0.20 0.20 0.20 0.20
Total number of shares, thousand 240,691 245,287 252,368 258,966 266,081
Share information
Highest share price, DKK 244.4 237.2 318.6 188.9 145.0
Lowest share price, DKK 132.2 160.45 167.4 122.3 105.6
Share price, year-end, DKK 240.6 209.8 184.9 173.5 122.8
Market capitalisation, DKK million* 57,718 50,470 45,308 43,864 31,829
Average trading turnover, DKK million* 99.8 112.4 128.6 69.3 63.1
Average number of shares, million* 239.78 243.55 249.14 256.6 263.75
Number of shares at 31.12., million* 239.90 240.56 245.22 252.82 259.19
Number of treasury shares at 31.12., million 0.8 4.7 7.1 6.1 6.9
Shareholder information
45
Demant · Annual Report 2020
Corporate information · Shareholder information
0
50
10
0
15
0
20
0
25
0
30
0
35
0
40
0
45
0
10
0
12
0
14
0
16
0
18
0
20
0
22
0
24
0
26
0
28
0
30
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Daily turnover (DKK million)
Sh
are price (DKK)
Turnover Demant OMX C25 (rebased)
Dividend and share buy-backs
The company uses its substantial cash flow from operating
activities for investments and acquisitions, and any excess
liquidity will be used for continuous share buy-backs.
Until the next annual general meeting in March 2021, the
Board of Directors has been authorised to let the company
buy back shares at a nominal value of up to 10% of the
share capital. The purchase price may, however, not de-
viate by more than 10% from the price quoted on Nasdaq
Copenhagen.
Investor Relations (IR)
Demant strives to ensure a steady and consistent flow
of information to IR stakeholders in order to promote the
basis for a fair pricing of the company’s shares – pricing
that will at any time reflect the company’s strategies,
financial capabilities and outlook for the future. The flow
of information will contribute to a reduction of the com-
pany-specific risk associated with investing in Demant
shares, thereby leading to a reduction of the company’s
cost of capital.
We aim to reach this goal by continuously providing rele-
vant, correct, adequate and timely information in our com-
pany announcements. In addition to the statutory publi-
cation of annual reports and interim reports, we publish
quarterly interim management statements, containing
updates on the Group and its financial position and re-
sults in relation to the full-year outlook, including updates
on important events and transactions in the period under
review. Our interim management statements do not in-
clude actual figures.
With the release of the Annual Report 2020, we have
increased the level of disclosure by providing segmental
profit and loss statements for Hearing Healthcare and
Communications, and with respect to the former, we have
decided to report revenue separately for our Hearing Aids
and Hearing Care businesses. Both initiatives serve the
purpose of providing relevant, correct and adequate
information about our Group.
We strive to maintain an active and open dialogue with
analysts as well as current and potential investors, which
helps us stay updated on the views, interests and opinions
of the company’s various stakeholders. At our annual ge-
neral meeting and through presentations, individual meet-
ings, participation in investor conferences, webcasts, capi-
tal market days etc., we aim to maintain an ongoing dia-
logue with a broad spectrum of IR stakeholders, and in
2020, we held more than 450 investor meetings and pre-
sentations. In 2020, the vast majority of these meetings
were held in virtual settings because of travel restrictions
and social distancing measures, but we expect – and
welcome – an increase in the number of virtual meetings
in the coming years. We also use our website,
www.demant.com, as a means of communication with
our stakeholders. At the end of 2020, 26 equity analysts
were covering Demant. We refer to our website for a full
list of analyst coverage.
Demant has a three-week quiet period prior to publication
of annual reports, interim reports and interim management
statements where communication with IR stakeholders is
restricted.
46
Demant · Annual Report 2020 Demant · Annual Report 2020
Corporate information · Shareholder information
Company announcements
and investor news in 2020
2 Jan Managers’ transactions
4 Feb Annual Report 2019
4 Feb Notice to annual general meeting
10 Mar Decisions of annual general meeting
15 Mar Effects of coronavirus – outlook for 2020
withdrawn due to uncertainty
20 Apr Capital reduction as well as total number
of voting rights and capital
5 May Interim Management Statement
9 Jun New dates for Demant Capital Market Days
– investor news
17 Jun Update on the effects of coronavirus
2 Jul Managers’ transactions
17 Aug Interim Report 2020
25 Sep Updated financial calendar 2020
13 Oct Interim Management Statement
26 Nov Financial calendar 2021
30 Nov Demant announces launch of new flagship
hearing aids – investor news
9 Dec Updated outlook for H2 2020
Financial calendar 2021
22 Jan Deadline for submission of items for the
agenda of the AGM
9 Feb Annual Report 2020
5 Mar Annual general meeting
4 May Interim Management Statement
16-17 Jun Capital Market Days
12 Aug Interim Report 2021
2 Nov Interim Management Statement
Annual general meeting 2021
The annual general meeting will be held on Friday, 5 March
2021 at 3:00 p.m. as a fully online meeting due to corona-
virus. By participating online, it is possible to follow the live
webcast, ask the Board of Directors questions via chat and
cast votes.
Contact information
for investors and analysts
Phone: +45 3917 7300
E-mail: info@demant.com
Mathias Holten Møller
Head of Investor Relations
Christian Lange
Investor Relations Ofcer
47
Demant · Annual Report 2020
William Demant Foundation, Demant’s majority share-
holder, was founded in 1957 by William Demant, son of
the company’s founder Hans Demant. Its primary goal is
to safeguard and expand the Demant Group’s business
and provide support for various commercial and charitable
causes with particular focus on the fields of audiology and
hearing impairment. William Demant Invest, which is a
wholly owned holding company for all William Demant
Foundation’s investment activities, holds the Foundation’s
shares in Demant. Charitable tasks are thus handled by
the Foundation itself and the Foundation’s investment
activities by William Demant Invest. Voting rights and
decisions to buy and sell Demant shares are still exercised
and made, respectively, by William Demant Foundation.
In accordance with William Demant Invest’s investment
strategy, the Foundation’s investments – apart from an
ownership interest in Demant – also include other assets,
as William Demant Invest can make active investments in
companies whose business model and structure resemble
those of the Demant Group but fall outside the Group’s
strategic sphere of interest. The investments include,
among others, majority ownership of Össur and Vision RT.
The Foundation has made a management agreement
on a commercial arm’s length basis with Demant, which
governs the exchange of various investment support and
administrative services between the Foundation, William
Demant Invest and Demant. Please also see Note 8.1.
William Demant
Foundation
Concert at Ofelia Beach,
Copenhagen 2019
Supported by William
Demant Foundation
48
Demant · Annual Report 2020 Demant · Annual Report 2020
Risk management
activities
Risk management activities
Risk management activities in the Demant Group first and
foremost focus on the business-related and financial risks
to which the Group is fairly likely to be exposed. In connec-
tion with the preparation of the Group’s strategic, budget-
ary and annual plans, the Board of Directors considers the
risks identified.
In general, we act in a stable market with a limited number
of players, and under normal circumstances, the risks to
which the Group may be exposed do not change in the
short term.
Business risks
The major risks to which the Group may be exposed are of
a business nature – be they risks within the Group’s control
or external risks due to, for instance, the behaviour of the
competition.
Coronavirus
For most of 2020, coronavirus presented a challenge to
the Group beyond comparison, and while we are always
exposed to the inherent risk of working in physical proxi-
mity to our users, patients and customers, the global pan-
demic was unprecedented. We faced widespread lock-
downs in virtually all hearing healthcare markets, and
many activities in our Group came to an almost complete
stop, which included the temporary closure of hearing
clinics and the postponement of elective surgeries, such
as cochlear implant surgeries. Going into 2021, coronavirus
continues to pose a risk to our business, but as we learned
in 2020 where we saw remarkable recovery in the hearing
healthcare market as governments eased restrictions, there
have been no changes to the fundamental driver of de-
mand for hearing healthcare.
Innovation
Aside from coronavirus, the hearing healthcare market
in which we act is a highly product-driven market where
our significant R&D initiatives help underpin our market
position. It is thus vital in the long term to maintain our
innovative edge and to attract the most qualified and
competent staff. Our continuous development of new
products carries inherent product risks, including the risk
of delay of launches of new products. An important part
of our ongoing product innovation is to take out, protect
and maintain patents for our own groundbreaking product
development and technology. These are indeed complicated
processes in the hearing healthcare industry, and we
therefore continue to maintain and develop our competen-
cies in this area. It is our policy to continuously watch that
third-party products do not infringe our patents and that
our products do not infringe third-party patents. From time
to time, the Group is involved in legal disputes, but we
are of the opinion that these do not or will not significantly
affect the Group’s financial position. As a rule, we seek to
make adequate provisions for legal proceedings.
Supply
We closely monitor our supply situation and seek to ensure
that we always have an inventory level that can counter
any interruptions in production. In 2020, the outbreak of
coronavirus presented a challenge to the supply of goods
and raw materials in many industries, including the mar-
kets for hearing healthcare and professional headsets, but
due to the close monitoring of our supply situation, we did
not face any critical disruptions to our operations. We do,
on a continuous basis, evaluate the geographical location
and dependency of key suppliers of raw materials and
components to ensure that we strike the right balance
between flexibility, exposure and costs.
Product recalls
Product recalls also constitute a business risk in relation
to bone anchored hearing systems and cochlear implants,
specifically in relation to claims-related costs, such as the
cost of replacing products, medical expenses, compensa-
tion for actual damage as well as legal fees. We seek to
minimise the risk of product recalls by meeting detailed
production requirements, by living up to well-defined
quality control standards and by extensive testing.
Regulatory risks
As a major player in the hearing healthcare market, the
Group is also exposed to certain regulatory risks in terms
of changes to product requirements, reimbursement
schemes and public tenders in the markets where we
operate. In August 2017, US lawmakers passed new
legislation, requiring the Food and Drug Administration
(FDA) to introduce a new over-the-counter (OTC) cate-
gory of hearing aids within three years. The formal dead-
line for the release of the draft legislation has now been
exceeded, and it remains unclear when the OTC category
will be established. In any case, we expect any impact of
this legislation on the hearing aid industry to be limited, but
until the final design of the category has been defined by
the FDA, the impact of this legislation is considered part
of the regulatory risks to which the Group is exposed.
Over the past couple of years, we have seen an increasing
part of hearing aid purchases in the US being covered
either partly or fully by insurance. The resulting emergence
of a number of large managed care organisations could
potentially pose a risk to the ASP in Hearing Aids due to
consolidation on fewer hands of large volumes of hearing
aids. It could, however, also pose a risk to our Hearing Care
Corporate information · Risk management activities 49
Demant · Annual Report 2020
Corporate information · Risk management activities
business, as managed care organisations aim to capture
the margin on product sales at the expense of hearing aid
retailers by only offering retailers a fee for performing the
actual fitting of the hearing aids. In response to this trend,
we are working on adapting our operating model to a
higher level of efficiency, which we have already done in
other markets that have seen changes to reimbursement
schemes over the years.
On a similar note, discussions are currently ongoing in
the US about potentially introducing Medicare coverage
for hearing aids. Even though these discussions are still
at an early stage, the passing of legislation to that effect
could potentially pose a risk for hearing aid sales in the
US, depending on the final design of such legislation.
While we closely follow the progress of the UK’s exit from
the EU (Brexit), we do not expect any significant impact
on our business, as medical equipment is exempt from
import duty. In addition, we have sufficient inventory in
local stock, and we do not expect Brexit to result in any
significant disruption of the supply of medical equipment
into the UK. It is the nature of our business to operate
across markets with different characteristics, including
different customs clearance processes. Our logistical and
operational set-ups are flexible, and short lead times allow
us to adapt to the business environment.
Overall, we feel well positioned to respond to regulatory
changes, and our broad presence in the hearing health-
care market should help minimise any impact on the
Group as a whole.
IT infrastructure
Being a large, global organisation, we are naturally de-
pendent on a number of IT systems and on the general
IT infrastructure to operate efficiently across our value
chain. This entails the risk of system errors, human errors,
data breaches or other interruptions that may impact the
Group financially. We continuously seek to minimise these
risks, and our IT strategy includes both prevention and
contingency plans.
As our Group becomes increasingly digitalised, more de-
vices and control systems are connected online, resulting
in a broader interface across the IT infrastructure that
could potentially be compromised. Threats may include
attempts to access information, computer viruses, denial
of service and other digital security breaches. In September
2019, the Group’s IT infrastructure was hit by cybercrime.
After thorough investigations, we concluded that no per-
sonal data had been exposed, extracted or accessed as
a result of the incident. The IT incident was reported to the
Danish Data Protection Agency (DDPA) in accordance with
the EU General Data Protection Regulation (GDPR), and
in 2020, we received the Agency’s final assessment of the
incident. The Agency found that we had processed person-
al data in accordance with the provisions of the GDPR, and
it did not express any criticism of Demant’s security level or
handling of the matter. The final assessment concluded the
Agency’s investigation of the matter. The US Office for
Consumer Rights (OCR) is also reviewing our response
to the IT incident based on concern raised by a consumer.
We are still awaiting the assessment from the OCR.
We are – and will continue to be – committed to continu-
ously improving the Group’s IT security. During the recovery
process from the IT incident, we took steps to initiate a
wide range of security activities and detection measures
to further improve the level of IT security. We have con-
ducted a maturity assessment of our IT security based
on the Cybersecurity Framework of the National Institute
of Standards and Technology (NIST) to focus our work on
relevant parameters. The increasing digitalisation also
means increased volume and complexity of the personal
data collected by the Group.
Sustainability risks
The Demant Group is by nature an impact business that
seeks to make a true difference for people living with
hearing loss, and the Group thus contributes directly to
improving world health. As a natural part of operating our
business, we seek to limit the risk of adversely impacting
our employees, society and the environment – in such areas
as human and labour rights, retention, CO2 emissions as
well as anti-bribery and anti-corruption – by working with
the four pillars of our sustainability framework, which pri-
marily have to do with our operational practices: people
and culture, society and local community, environment and
climate and business ethics and governance. For each pil-
lar, we have individual ambitions, initiatives and targets
that drive our progress. Please also refer to our 2020
Sustainability Report.
Financial risks
Financial risk management concentrates on identifying
risks in respect of exchange rates, interest rates, credit
and liquidity with a view to protecting the Group against
potential losses and ensuring that our forecasts for the
current year are only to a limited extent affected by changes
or events in the surrounding world. It is the Group’s policy
to exclusively hedge financial risks arising from our com-
mercial activities and not to undertake any financial trans-
actions of a speculative nature.
Exchange rate risks
With around two-thirds of the Group’s sales being invoiced
in other currencies than Danish kroner and euros, reported
revenue is significantly affected by movements in the
Group’s trading currencies. The Group seeks to hedge
against exchange rate risks – mainly through forward
exchange contracts with a horizon of up to 18 months.
In relation to exchange rate fluctuations, hedging provides
some predictability in terms of profit and gives us the
opportunity – and necessary time – to potentially redirect
business arrangements in the event of persistent changes
in foreign exchange rates. Besides entering into forward
exchange contracts, the Group aims to hedge such chang-
es in foreign exchange rates by seeking to match positive
and negative cash flows in the main currencies as much
as possible.
50
Demant · Annual Report 2020 Demant · Annual Report 2020
Corporate information · Risk management activities
Please see Note 2.2 for the impact on consolidated operat-
ing profit (EBIT) and equity for the year, given a change of
5% in the currencies with the highest exposure.
Please see Note 2.3 for an overview of the material forward
exchange contracts in place as of 31 December 2020 to
hedge against the Group’s exposure to movements in ex-
change rates.
At the end of 2020, the fair value of the Group’s forward
exchange contracts was DKK 68 million, consisting of
unrealised gains of DKK 80 million and losses of DKK 12
million. Please refer to Note 2.3 and 4.4 for more details.
Interest rate risks
In order to secure attractive interest rates for the Group
in the long term and as a consequence of our attractive
funding possibilities in the financial market, more than
half of the Group’s debt is funded through medium-term
committed facilities with fixed rates and through financial
instruments, which limits the interest rate risk. All in all, the
Group’s interest expenses are very low with a manageable
interest rate risk.
The Group’s net interest-bearing debt (NIBD) was DKK
7,135 million as of 31 December 2020. Based on this level,
a rise of 1 percentage point in the general interest rate
level will cause an increase in annual interest expenses
before tax of DKK 10 million (DKK 17 million in 2019).
Credit risks
The Group’s credit risks relate primarily to trade receivables
and loans to customers or business partners. Our customer
base is fragmented, so in general, credit risks only involve
minor losses on loans to individual customers. The accumu-
lated revenue from our ten largest customers accounts for
approx. 11% of total consolidated revenue. Furthermore,
when granting loans, we require that our counterparties
provide security in their business. Overall, we therefore
estimate that the risk relative to our total credit exposure
is well-balanced at Group level.
The maximum credit risk relating to receivables matches
the carrying amounts of such receivables. Overall, the
Group has limited deposits with financial institutions for
which reason the credit risk of deposits is considered to
be low. In 2020, the Group made an additional provision
for bad debt of DKK 150 million, reflecting the increased
risk of customers defaulting on their debt due to coronavirus.
The provision was partly reversed by DKK 50 million to-
wards the end of the year as a result of an updated risk
assessment.
Liquidity risks
The Group aims to have sufficient cash resources at its
disposal to be able to take appropriate steps in case of
unforeseen fluctuations in both cash inflows and cash
outflows. We have access to considerable undrawn credit
facilities, and the liquidity risk is therefore considered to
be low. In light of the uncertainty related to the outbreak
of coronavirus in spring 2020, we expanded our available
credit facilities considerably during the year, and through-
out the process, we have had strong support from both
commercial and non-commercial banks. We are of the
opinion that the Group has strong cash flows and a satis-
factory credit rating, and the Group has not defaulted on
loan agreements neither in the financial year 2020 nor in
previous years.
Financial reporting process and internal control
Once a year, we carry through a very detailed planning
and budgetary process, and any deviations from the
plans and budgets resulting from this process are care-
fully monitored month by month. In terms of sales and
costs, month-over-month development is very similar from
one year to the other, and due to the repetitive nature of
our business, deviations will normally become visible fairly
quickly. To ensure high quality in the Group’s financial
reporting systems, the Board of Directors and Executive
Board have adopted policies, procedures and guidelines
for financial reporting and internal control to which the
subsidiaries and reporting units must adhere, including:
• Continuous follow-up on the results achieved
compared to the approved budgets
• Policies for IT, insurance, cash management,
procurement etc.
• Reporting instructions as well as reporting and
finance manuals
The responsibility for maintaining sufficient and efficient
internal control and risk management in connection with
financial reporting lies with the Executive Board. The
Board of Directors has assessed the Group’s existing
control environment and concluded that it is adequate.
Safeguarding corporate assets
Management continuously seeks to minimise the financial
consequences of any damage to corporate assets, including
operating losses resulting from such damage. We have
invested in security and surveillance systems to prevent
damage and to minimise such damage, should it arise.
Major risks, which cannot be adequately minimised, are
identified by the company’s Management, which will en-
sure that appropriate insurance policies are, on a conti-
nuous basis, taken out under the Group’s global insu-
rance programme administered by recognised and cred-
it-rated insurance brokers and that such insurances are
taken out with insurance companies with high credit rat-
ings. The Group’s insurance programme has deductible
clauses in line with normal market terms. Following the
IT incident in 2019, the company has increased its cyber
insurance coverage. The Board of Directors reviews the
company’s insurance policies once a year, including the
coverage of identified risks, and is briefed regularly on
developments in identified risks. The purpose of this re-
porting is to keep the Board members fully updated and
to facilitate corrective action to minimise any such risks.
51
Demant · Annual Report 2020
From Demant’s I am sound
corporate film
52
Demant · Annual Report 2020 Demant · Annual Report 2020
Corporate information · Sustainability
Sustainability
In 2020, we further developed our sustainability approach
to reflect our commitment to and ambitions for our work.
Aside from focusing on our main contribution to society, we
are strengthening sustainability in our operational practic-
es. In the coming years, we have two main priorities in this
regard: Diversity and inclusion as well as climate impact.
While we focus on these areas in our new sustainability
strategy, we will continue to improve other important
areas of our business.
Demant is and has always been a responsible and well-functioning business.
Established in 1904 out of a desire to help people with hearing loss, Demant’s positive
contribution to a healthy society has always driven our business.
Sustainability reporting
In addition to our annual report, we publish a
Sustainability Report every year. The report serves
as Demant’s Communication on Progress report to
the United Nations Global Compact and as our
statement on the UK Modern Slavery Act.
Furthermore, the report serves as the statutory
report to be presented under sections:
99a, 99b and 107d of the Danish Financial
Statements Act.
On the following pages, we highlight our main
sustainability achievements of the year.
The full report is available on our website
www.demant.com/about/sustainability
53
Demant · Annual Report 2020
Our approach to
sustainability
The new direction we have taken for our sustainability
work builds on a thorough assessment of the most impor-
tant sustainability topics for Demant and our stakeholders
as well as on our current and potential contributions to the
UN Sustainable Development Goals.
Our main contribution to society is clear: Life-changing
differences through hearing health. This is the core of our
sustainability framework. Connected to the core, we have
four pillars of our sustainability work that primarily have to
do with our operational practices. For each pillar, we have
individual ambitions, projects and targets that drive our
progress.
Society &
local community
People &
culture
Life-changing
differences through
hearing health
Business ethics
& governance
Environment
& climate
Corporate information · Sustainability
54
Demant · Annual Report 2020 Demant · Annual Report 2020
Demant is an impact business. For more than 115 years,
our company has contributed to hearing health, and from
this platform, we have expanded into the broader area of
audio.
Hearing and our ability to innovate this area are the es-
sential reference points for the whole Group. We enable
millions of people to experience the joy of sound and good
hearing, and with our groundbreaking research, innovative
technologies and services, we are let into people’s lives and
involved in some of the most important aspects of living:
The ability to communicate, socialise and be actively en-
gaged without constraints.
In 2020, we have:
• Helped nearly 2 million hearing aid users
• Helped well above 10,000 implant users suffering
from profound, conductive or single-sided hearing loss
• Facilitated the diagnosing of a three-digit million
number of people with suspected hearing loss
• Facilitated the hearing screening of a two-digit million
number of newborns
• Conducted research in cooperation with academia,
health authorities and the industry to deepen our
understanding of hearing, health and the brain
The core:
Life-changing differences through hearing health
MAICO
easyScreen_BERAphone
55
Demant · Annual Report 2020
People & culture
Our employees are our greatest strength and our most valuable resource. Their well-being and
engagement are fundamental to our success and our Management’s top priority.
Main results in 2020
Global engagement score
up from 3,83 to 3,93 on
a scale from 1-5.
42% female managers
globally. 1 percentage
point increase in the
number of female
managers since 2019.
Another female member
elected to the Board of
Directors. 40% of the Board
members elected by the
shareholders are female.
New diversity and inclusion
policy and framework under
development.
584
(473)
426
(326)
42% 58%
(41%) (59%)
Gender distribution
Society & local community
A company is an important part of society, and for the Demant Group, it is paramount to be
a good neighbour in the communities in which we operate. That means sharing our resources,
donating to purposeful causes and engaging in impactful projects around the world.
Main results in 2020
DKK 111.9 million
donated by William
Demant Foundation.
DKK 61.1 million to hearing
health, research and educa-
tion and DKK 50.8 million to
cultural and social projects.
Campaign for Better
Hearing: 52,342 people
screened, USD 267,277
raised and 55 free hearing
aids provided.
TOTAL
111.9
DKK MILLION
2020
3.93
2019
3.83
Corporate information · Sustainability
56
Demant · Annual Report 2020 Demant · Annual Report 2020
Environment & climate
In the Demant Group, we want to leave the planet in good shape for future generations.
Therefore, we need to address our impact and limit our footprint.
Main results in 2020
Business ethics & governance
In Demant, we comply with all rules and regulations and place great emphasis
on always conducting our business in an ethical manner. We believe that going the extra mile
and very often going beyond what local law requires can be necessary and
can have a positive impact on local governments and practices.
Main results in 2020
Due predominantly to
coronavirus restrictions,
the Group’s greenhouse
gas (GHG) emissions per
employee decreased by
20%.
Launch of smarter
and greener hearing
aid packaging.
Redesigned wax filter
containers and optimised
manufacturing process
to save 11,5 tonnes of
plastic per year.
Project launched in late
2020 to expand our
emission reporting to scope
3, to identify actions for
emission reductions and
to set measurable targets.
Increased focus on working
from home in accordance
with all necessary data
privacy and IT security
measures due to
coronavirus.
Contributing to
green energy
production
Through its investment company,
William Demant Invest (WDI),
William Demant Foundation made
an active choice in 2012 to contrib-
ute to a cleaner world by investing
in the Borkum Riffgrund 1 wind
farm. WDI’s share of electricity
produced amounts to 183,700,000
kWh annually. By comparison, the
Demant Group uses around 20% of
that amount or 33,700,000 kWh of
electricity annually.
New business ethics compliance programme launched with
the Demant Group Code of Conduct and Whistleblower
scheme. The launch included online training of employees,
special training sessions for internal champions, country
managers and all other top managers as well as a global
communication campaign.
Corporate information · Sustainability
GHG emissions
per employee
decrease
20%
57
Demant · Annual Report 2020
The work on corporate governance is an ongoing process
for the Board of Directors and Executive Board. Once a
year, the Board of Directors and Executive Board review
the company’s corporate governance principles. In that
context, we consider the corporate governance principles
that derive from legislation, recommendations and good
practices. We focus on developing and maintaining a
transparent corporate governance structure that pro-
motes responsible business behaviour and long-term
value creation.
Recommendations issued by the Danish Committee
on Corporate Governance and adopted by Nasdaq
Copenhagen are best-practice guidelines for the
governance of companies admitted to trading on
a regulated market in Denmark. When reviewing our cor-
porate governance structures, we determine the extent to
which the company complies with the recommendations
and regularly assess whether the recommendations give
rise to amendments to our rules of procedure or manageri-
al processes.
When reporting on corporate governance, we follow the
“comply or explain” principle. Demant follows 44 of the 47
recommendations. The few cases (three) where we have
chosen to deviate from a recommendation are well-founded,
and we explain what we do instead. To further increase
transparency, we provide supplementary and relevant
information, even when we follow the recommendations.
Corporate governance
EPOS
EXPAND 80T
Corporate information · Corporate governance
58
Demant · Annual Report 2020 Demant · Annual Report 2020
Corporate information · Corporate governance
A complete presentation of the recommendations and how
we comply, the statutory report on corporate governance,
is available on our website,
www.demant.com/about/sustainability/
The report as well as the financial reporting process and
internal control described in Risk management activities
in this Annual Report, constitute Demant’s statement on
corporate governance, cf. section 107b of the Danish
Financial Statements Act.
Tasks and responsibilities
of the Board of Directors
In accordance with Danish legislation, Demant has a two-
tier management system comprising the Board of Directors
and the Executive Board, with no individual being a mem-
ber of both. The division of responsibilities between the
Board of Directors and the Executive Board is clearly out-
lined and described in the Rules of Procedure for the Board
of Directors and the Instructions for the Executive Board.
The Board of Directors is responsible for the overall stra-
tegic management and for the financial and managerial
supervision of the company, the ultimate goal being to
ensure long-term value creation. On an ongoing basis,
the Board of Directors evaluates the work of the Executive
Board as for instance reflected in the annual plan prepared
for the Board of Directors.
Composition and organisation
The Board of Directors has eight members: five members
elected by the shareholders at the annual general meeting
and three members elected by staff in Denmark. Niels B.
Christiansen has been Chairman of the Board since 2017.
Shareholders elect Board members for a term of one year,
and staff elect Board members for a term of four years.
Staff-elected members are elected in accordance with
the provisions of the Danish Companies Act.
Although the Board members elected by the annual
general meeting are up for election every year, the
individual Board members are traditionally re-elected
and sit on the Board for an extended number of years.
This ensures consistency and maximum insight into the
conditions prevailing in the company and the industry.
Such consistency and insight are considered important in
order for the Board members to bring value to the company.
Of the five Board members presently elected by the
shareholders at the annual general meeting, Benedikte
Leroy, Anja Madsen and Lars Rasmussen are considered
independent. Niels B. Christiansen and Niels Jacobsen are
not considered independent as they are associated with
William Demant Foundation.
Niels B. Christiansen, Niels Jacobsen and Anja Madsen
stand for re-election at the annual general meeting in
March 2021. Lars Rasmussen and Benedikte Leroy do
not stand for re-election. The Board proposes that Sisse
Fjelsted Rasmussen and Kristian Villumsen be elected new
members of the Board. If the proposals are adopted, they
will be considered independent. Kristian Villumsen brings
excessive knowledge and commercial insights into the
MedTech industry. Sisse Fjelsted Rasmussen has strong
competences in finance, accounting and tax and will
become chairman of the audit committee after Lars
Rasmussen.
The Board is composed to ensure the right combination
of competencies and experience, with extensive interna-
tional managerial experience and board experience from
major listed companies carrying particular weight. This
also applies when new Board candidates are selected.
Since 2012, Demant has had a diversity policy and has
taken specific initiatives aimed at ensuring gender equality.
The age, gender, education and competences of the mem-
bers of our Board of Directors are listed in the Annual
Report 2020. At the annual general meeting in March
2020, the Board of Directors reached its target to have
at least two female members before the end of 2020,
and with 40% female members and 60% male members,
we have now reached an even distribution between the
Board members elected by the shareholders.
As part of our ambitions to ensure diversity and inclusion
in the Group, we have worked on preparing a new Demant
diversity and inclusion policy, which will cover a broader
definition of diversity than merely gender. We are still
working on amending this policy for the Group and will
in that context decide on our need to have a diversity
policy with a broader definition of diversity for the
Board of Directors and Executive Board.
On our website, www.demant.com/about/management/,
we describe the competencies and qualifications that the
Board of Directors deems necessary to have at its overall
disposal in order for the Board to be able to perform its
tasks for the company.
Board committees
The company’s Board of Directors has set up an audit
committee. The Board of Directors appoints the chairman
of the audit committee, who must be independent and
must not be Chairman of the Board of Directors. Lars
Rasmussen is chairman of the audit committee.
The company’s Board of Directors has also set up a no-
mination committee. The members are the Chairman and
the Deputy Chairman of the company’s Board of Directors,
the Chairman and the Deputy Chairman of the company’s
major shareholder, William Demant Foundation, and the
President & CEO of the company. The Chairman of the
Board also chairs the nomination committee.
59
Demant · Annual Report 2020
Corporate information · Corporate governance
A remuneration committee, consisting of the Chairman
and the Deputy Chairman of the company’s Board of
Directors, has also been set up. Additionally, the Board
of Directors set up an IT security committee in 2019 whose
members are the Chairman and the Deputy Chairman of
the company’s Board of Directors and the chairman of
the audit committee.
Meetings in 2020 and attendance
In 2020, the Board of Directors convened on seven
occasions. The audit committee held three meetings
in connection with ordinary Board meetings. The nomi-
nation committee held two meetings, the remuneration
committee held three meetings and the IT security
committee held three meetings.
Evaluation of the performance
of the Board of Directors
Once a year, the Chairman of the Board of Directors
performs an evaluation of the Board’s work. The evalu-
ation is performed either through personal, individual
interviews with the Board members or by means of a
questionnaire to be filled out by the individual Board
members. In both instances, the findings of the evaluation
are presented and discussed at the subsequent Board
meeting. At least every third year, the evaluation is per-
formed with external assistance.
At the evaluation in 2020, external assistance was included,
and the feedback was based on individual meetings with
each Board member. Overall, the evaluation confirmed that
the Board performs high-quality work and that it is diligent
and well-functioning. The collaboration between the Board
of Directors and the Executive Board works very well, and
there is an open and trustful working atmosphere. The
work performed by the Board takes its starting point in
the annual wheel, which is continuously refined and up-
dated and ensures the Board’s commitment and immersion
into relevant areas. As a result of the evaluation, the Board
decided to dedicate more time and effort to the long-term
strategic development of the company to continuously
ensure that the potential of the company is exploited
to the fullest.
Board of Directors’ and
Executive Board’s remuneration
Demant has a remuneration policy and publishes a remu-
neration report. At the annual general meeting in March
2020, a revised remuneration policy was approved to com-
ply with the new provision in section 139(a) of the Danish
Companies Act.
The remuneration report is available on our website
www.demant.com. The report will be submitted for
advisory vote at the annual general meeting.
January
February
March
April
May
JuneJuly
August
September
October
November
December
Board meetings
Audit committee meetings
Nomination committee meetings
Remuneration committee meetings
IT security committee meetings
Monthly reports
Annual general meeting
Strategy focus
Evaluation of the Board of Directors
Budget for the coming year
60
Demant · Annual Report 2020 Demant · Annual Report 2020
Corporate information · Executive Board
Søren Nielsen (male)
President & CEO
Born 1970
21,637 shares (+3,270)
René Schneider (male)
CFO
Born 1973
14,150 shares (+2,171)
Joined the company in 1995
Education: Holds a M.Sc. in Engineering from the Technical
University of Denmark
Competences: Broad business and leadership experience
from various management positions in the Group, including
the commercial area, product innovation, quality and stra-
tegic development. International board experience, strong
insights into the MedTech industry as well as a wide net-
work in the global hearing healthcare community
Other positions: HIMPP A/S (M), HIMSA A/S (C), HIMSA II
A/S (C), EHIMA (C), Vision RT Ltd. (M), Committee on Life
Science under the Confederation of Danish Industry (C),
Committee on Business Policy under the Confederation
of Danish Industry (M), Central Board of the Confederation
of Danish Industry (M)
Joined the company in 2015
Education: Holds a M.Sc. in Economics from Aarhus
University
Competences: Broad business and financial leadership
experience from various management positions with
major listed companies leading to international experience
in such areas as streamlining and re-establishing compa-
nies, conducting M&A and driving value creation
Areas of responsibility: Finance, HR, IT and Corporate
Functions
Executive Board
Abbreviations
C = Chairman, DC = Deputy Chairman, M = Member
61
Demant · Annual Report 2020
Corporate information · Board of Directors
Joined the Board in 2017
Member of the audit, nomination, remuneration and IT
security committees
Considered independent: No
Position: CEO, William Demant Invest A/S
Other positions: KIRKBI A/S (DC), Nissens A/S (C), Thomas
B. Thrige Foundation (C), ABOUT YOU Holding GmbH (DC),
EKF Danmarks Eksportkredit (M). Related to William Demant
Invest: Jeudan A/S (C), Össur hf. (C), Vision RT Ltd. (C),
Founders A/S (C), Boston Holding A/S (M)
Education: Holds a M.Sc. in Economics from Aarhus University
Competences: International leadership experience from
major, global companies in the global healthcare and
MedTech industry, business management and board
experience as well as in-depth insights into financial
matters, accounting, risk management and M&A
Attendance in Board and committee meetings: No absence
Joined the Board in 2008
Chairman of the nomination, remuneration and IT security
committees and member of the audit committee
Considered independent: No
Position: LEGO A/S, CEO & President
Other positions: William Demant Foundation (DC), William
Demant Invest A/S (M) and Committee on Business Policy
under the Confederation of Danish Industry (C)
Education: Holds a M.Sc. in Engineering from the Technical
University of Denmark and an MBA from INSEAD
Competences: International leadership experience from
major, global industrial, consumer goods and high-tech
companies, business management and board experience
as well as strong insights into industrial policy
Attendance in Board and committee meetings: No absence
Niels B. Christiansen (male)
Chairman since 2017
Born 1966
8,060 shares (unchanged)
Board of Directors
Niels Jacobsen (male)
Deputy Chairman since 2017
Born 1957
1,001,340 shares (unchanged)
Joined the Board in 2014
Member of the audit committee
Considered independent: Yes
Position: Senior Vice President and General Counsel, Volvo
Trucks
Education: Holds a Master of Laws degree from the
University of Copenhagen
Competences: International leadership experience as
general counsel in large, global technology companies
within both consumer and business-to-business segments;
lived and worked in the UK and Belgium for many years
Attendance in Board and committee meetings: No absence
Benedikte Leroy (female)
Born 1970
3,000 shares (unchanged)
Joined the Board in 2020
Member of the audit committee
Considered independent: Yes
Position: Executive Vice President, Føtex
Other positions: Lemvigh-Müller A/S (M)
Education: Holds a B.Sc. in Economics from London School
of Economics and an MBA from INSEAD
Competences: International leadership experience from
large companies in the retail segment; experienced leader of
operations and transformation with focus on strategy exe-
cution; lived and worked in the UK for the past many years
Attendance in Board and committee meetings: No absence
Anja Madsen (female)
Born 1976
1,500 shares
62
Demant · Annual Report 2020 Demant · Annual Report 2020
Corporate information · Board of Directors
Staff-elected Board member since 2017 and also from
2011-2015. Re-elected in 2019 for a term of four years
Considered independent: N/A
Position: Project Manager, Demant facility in Ballerup,
Denmark
Has been with the Demant Group since 2001
Education: Holds a M.Sc. in Electrical Engineering from the
Technical University of Denmark and a Diploma in Business
Administration (Organisation and Strategy)
Attendance in Board and committee meetings: No absence
Jørgen Møller Nielsen (male)
Born 1962
366 shares (unchanged)
Joined the Board in 2016
Chairman of the audit committee and member of the IT
security committee
Considered independent: Yes
Other positions: Coloplast A/S (C), H. Lundbeck A/S (C),
Igenomix s.l. (C), Committee on Diversity under the
Confederation of Danish Industry (C), Danish Committee
on Corporate Governance (DC)
Education: Holds a B.Sc. in Engineering from Aalborg
University and an Executive MBA from SIMI
Competences: International leadership experience from
global MedTech companies, management experience from
such areas as innovation, globalisation, commercial models
and efficiency improvements
Attendance in Board and committee meetings: No absence
Lars Rasmussen (male)
Born 1959
22,500 shares (unchanged)
Abbreviations
C = Chairman, DC = Deputy Chairman, M = Member
Staff-elected Board member since 2015. Re-elected in
2019 for a term of four years
Considered independent: N/A
Position: Director of Configuration & Test, R&D, Demant
Has been with the Demant Group since 2002
Other positions: Danske Sprogseminarer A/S (M), Oticon
A/S (M, staff-elected)
Education: Holds a M.Sc. in Electrical Engineering from the
Technical University of Denmark
Attendance in Board and committee meetings: No absence
Thomas Duer (male)
Born 1973
1,335 shares (unchanged)
Staff-elected Board member in 2019 for a term of four
years
Considered independent: N/A
Position: Vice President of Sales, Interacoustics, a
subsidiary company of the Demant Group
Has been with the Demant Group since 2012
Education: Holds an MBA from Coventry University
Attendance in Board and committee meetings: Absent
from 1 meeting
Casper Jensen (male)
Born 1979
500 shares (unchanged)
63
Demant · Annual Report 2020
Financial report
Sonic
Captivate
64
Demant · Annual Report 2020 Demant · Annual Report 2020
The Board of Directors and Executive Board have today
reviewed and approved the Annual Report 2020 of
Demant A/S for the financial year 1 January
– 31 December 2020.
The consolidated financial statements are prepared and
presented in accordance with International Financial
Reporting Standards as adopted by the EU and additional
requirements in the Danish Financial Statements Act. The
Parent financial statements are prepared and presented
in accordance with the Danish Financial Statements Act.
Further, the Annual Report 2020 has been prepared in
accordance with Danish disclosure requirements for
listed companies.
In our opinion, the consolidated financial statements and
the Parent financial statements give a true and fair presen-
tation of the Group’s and the Parent’s assets, liabilities and
financial position at 31 December 2020, of the results of
the Group’s and the Parent’s operations and of the Group’s
cash flows for the financial year 1 January – 31 December
2020.
In our opinion, Management’s commentary includes a true
and fair view of the development in the operations and
financial circumstances of the Group and the Parent, of
the results for the year and of the financial position of the
Group and the Parent as well as a description of the most
significant risks and uncertainties facing the Group and
the Parent.
In our opinion, the Annual Report 2020 for Demant A/S
with the file name DEMA-2020-12-31.zip for the financial
year 1 January – 31 December 2020 for the Group and the
Parent is prepared in compliance with the ESEF regulation.
We recommend that the Annual Report 2020 be adopted
at the annual general meeting on 5 March 2021.
Smørum, 9 February 2021
Management
statement
Søren Nielsen, President & CEO
Niels B. Christiansen, Chairman
Thomas Duer
Anja Madsen
Casper Jensen
Jørgen Møller Nielsen
René Schneider, CFO
Niels Jacobsen, Deputy Chairman
Benedikte Leroy
Lars Rasmussen
Executive Board
Board of Directors
Financial report · Management statement 65
Demant · Annual Report 2020
Financial report · Independent auditor’s report
Independent
auditor’s report
Opinion
We have audited the consolidated financial statements
and the Parent financial statements of Demant A/S for
the financial year 1 January to 31 December 2020, which
comprise the income statement, balance sheet, statement
of changes in equity and notes, including a summary of
significant accounting policies, for the Group as well as
the Parent, and the statement of comprehensive income
and the cash flow statement of the Group. The consoli-
dated financial statements are prepared in accordance
with International Financial Reporting Standards as
adopted by the EU and additional requirements of the
Danish Financial Statements Act, and the Parent financial
statements are prepared in accordance with the Danish
Financial Statements Act.
In our opinion, the consolidated financial statements give
a true and fair view of the Group’s financial position as of
31 December 2020 and of the results of its operations and
cash flows for the financial year 1 January 2020 to 31
December 2020 in accordance with International Financial
Reporting Standards as adopted by the EU and additional
requirements under the Danish Financial Statements Act.
Further, in our opinion, the Parent financial statements give
a true and fair view of the Parent’s financial position as of
31 December 2020 and of the results of its operations for
the financial year 1 January 2020 to 31 December 2020
in accordance with the Danish Financial Statements Act.
Our opinion is consistent with our audit book comments
issued to the audit committee and the Board of Directors.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs) and the additional require-
ments applicable in Denmark. Our responsibilities under
those standards and requirements are further described
in the Auditor’s responsibilities for the audit of the consoli-
dated financial statements and the Parent financial state-
ments section of this auditor’s report. We are independent
of the Group in accordance with the International Ethics
Standards Board of Accountants’ Code of Ethics for Pro-
fessional Accountants (IESBA Code) and the additional
requirements applicable in Denmark, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis
for our opinion.
To the best of our knowledge and belief, we have not pro-
vided any prohibited non-audit services as referred to in
Article 5(1) of Regulation (EU) No 537/2014.
After Demant A/S was listed on Nasdaq OMX Copenhagen,
we were appointed auditors for the first time on 29 April
1996 for the financial year 1996. We have been reappoint-
ed annually by decision of the general meeting for a total
contiguous engagement period of 24 years up to and
including the financial year 2020.
Key audit matters
Key audit matters are those matters that, in our profes-
sional judgement, were of most significance in our audit
of the consolidated financial statements and the Parent
financial statements for the financial year 1 January 2020
to 31 December 2020. These matters were addressed in
the context of our audit of the consolidated financial state-
ments and the Parent financial statements as a whole, and
in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Accounting for business combinations
Refer to Note 6.1 in the consolidated financial statements.
The allocation of the purchase price in business combina-
tions to other intangible assets acquired relies on assump-
tions and judgements made by Management. Management
has performed fair value calculations, which include judge-
ments and estimates, including the future cash flow antici-
pated from the acquired customer base and the discount
rate applied.
We have tested internal controls that address the account-
ing for business combinations and tested the reasonable-
ness of the key assumptions, including market potential,
revenue and cash ow growth and discount rates. We
assessed and challenged Management’s assumptions
used in its fair value models for identifying and measuring
customer bases and for other intangible assets, including:
To the shareholders of Demant A/S
66
Demant · Annual Report 2020 Demant · Annual Report 2020
Financial report · Independent auditor’s report
• The future cash flow projections by discussing with
Management and key employees.
• Consulted with subject matter experts regarding the
valuation methodologies applied.
• Tested the valuation model, including mathematical
accuracy and obtained supporting evidence for future
cash flow projections, estimates and key assumptions,
including the applied discount rate.
• Considered the impact of reasonably possible changes
in key assumptions and performed sensitivity calcula-
tions to quantify the impact of potential downside
changes to Management’s models.
• Assessed the adequacy and appropriateness of dis-
closures in the notes and compliance with the require-
ments of IFRS 3.
Accounting for the business
combination related to the demerger
of Sennheiser Communications A/S
Refer to Note 6.1 in the consolidated financial statements.
On 1 January 2020, Demant A/S obtained control over
the Gaming and Enterprise Solutions business within the
joint venture Sennheiser Communication A/S through a
demerger and thus effectively dissolved the joint venture.
Consequently, Management has determined the purchase
price based on fair value calculation of the business ob-
tained and allocated this to the identifiable assets and
liabilities. The business combination was recognised as
of 1 January 2020 in the consolidated financial statements.
The Gaming and Enterprise Solutions segments represent
the new Communications segment in the consolidated
financial statements.
The determination of fair value and the allocation of the
purchase price to identifiable assets and liabilities as well
as the step-up gain recognised rely on Management’s
judgements and assumptions, including the future cash
flow anticipated from the business and the discount rate
applied.
We have evaluated the judgements and tested the reason-
ableness of the key assumptions, including market poten-
tial, revenue and cash ow growth and discount rate. We
assessed and challenged Management’s assumptions used
in its assessment of the fair value of the acquired business
and determination of the purchase price, including:
• Assessed Management’s process for determining the
purchase price, including consulting with subject matter
experts regarding the methodology and judgements
made.
• Considered Management’s process for identifying assets
and liabilities acquired, including intangible assets and
fair value of inventory, considering the rationale for the
acquisition and the nature of the business.
• Tested the valuation model, including mathematical
accuracy and obtained supporting evidence for future
cash flow projections, estimates and key assumptions,
including the applied discount rate.
• Considered the impact of reasonably possible changes
in key assumptions and performed sensitivity calcula-
tions to quantify the impact of potential downside
changes to Management’s models.
• Assessed the adequacy and appropriateness of dis-
closures in the notes and compliance with the require-
ments of IFRS 3 Business Combinations.
Statement on the Management
commentary
Management is responsible for the Management com-
mentary.
Our opinion on the consolidated financial statements and
the Parent financial statements does not cover the man-
agement commentary, and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements and the Parent financial statements, our re-
sponsibility is to read the Management commentary and,
in doing so, consider whether the Management commen-
tary is materially inconsistent with the consolidated finan-
cial statements and the Parent financial statements or our
knowledge obtained in the audit or otherwise appears to
be materially misstated.
67
Demant · Annual Report 2020
Financial report · Independent auditor’s report
Moreover, it is our responsibility to consider whether the
Management commentary provides the information
required under the Danish Financial Statements Act.
Based on the work we have performed, we conclude
that the Management commentary is in accordance with
the consolidated financial statements and the Parent fi-
nancial statements and has been prepared in accordance
with the requirements of the Danish Financial Statements
Act. We did not identify any material misstatement of the
Management commentary.
Management’s responsibilities for the
consolidated nancial statements and
the Parent nancial statements
Management is responsible for the preparation of consoli-
dated financial statements that give a true and fair view
in accordance with International Financial Reporting
Standards as adopted by the EU and additional require-
ments of the Danish Financial Statements Act as well as
the preparation of Parent financial statements that give a
true and fair view in accordance with the Danish Financial
Statements Act and for such internal control as Manage-
ment determines is necessary to enable the preparation
of consolidated financial statements and Parent financial
statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements and the
Parent financial statements, Management is responsible for
assessing the Group’s and the Parent’s ability to continue
as a going concern, for disclosing, as applicable, matters
related to going concern and for using the going concern
basis of accounting in preparing the consolidated financial
statements and the Parent financial statements, unless
Management either intends to liquidate the Group or the
entity or to cease operations or has no realistic alternative
but to do so.
Auditor’s responsibilities for the
audit of the consolidated nancial
statements and the Parent nancial
statements
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements and the
Parent financial statements as a whole are free from ma-
terial misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but
is not a guarantee that an audit conducted in accordance
with ISAs and the additional requirements applicable in
Denmark will always detect a material misstatement when
it exists. Mis-statements can arise from fraud or error and
are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the eco-
nomic decisions of users taken on the basis of these
consolidated financial statements and these Parent
financial statements.
As part of an audit conducted in accordance with ISAs
and the additional requirements applicable in Denmark,
we exercise professional judgement and maintain profes-
sional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement
of the consolidated financial statements and the Parent
financial statements, whether due to fraud or error,
design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional
omissions, misrepresentations or the override of in-
ternal control.
• Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness
of the Group’s and the Parent’s internal control.
• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by Management.
• Conclude on the appropriateness of Management’s use
of the going concern basis of accounting in preparing
the consolidated financial statements and the Parent
financial statements, and, based on the audit evidence
obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt
on the Group’s and the Parent’s ability to continue as
a going concern. If we conclude that a material uncer-
tainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the conso-
lidated financial statements and the Parent financial
statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause
the Group and the entity to cease to continue as a going
concern.
• Evaluate the overall presentation, structure and content
of the consolidated financial statements and the Parent
financial statements, including the disclosures in the
notes, and whether the consolidated financial state-
ments and the Parent financial statements represent
the underlying transactions and events in a manner
that gives a true and fair view.
• Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business
activities within the Group to express an opinion on
the consolidated financial statements. We are respon-
sible for the direction, supervision and performance of
the Group audit. We remain solely responsible for our
audit opinion.
68
Demant · Annual Report 2020 Demant · Annual Report 2020
__________________________
Anders Vad Dons
State-Authorised
Public Accountant
MNE no 25299
__________________________
Kåre Kansonen Valtersdorf
State-Authorised
Public Accountant
MNE no 34490
We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we iden-
tify during our audit.
We also provide those charged with governance with
a statement that we have complied with relevant ethical
requirements regarding independence and communicate
with them all relationships and other matters that may
reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with those charged
with governance, we determine those matters that were
of most significance in the audit of the consolidated finan-
cial statements and the Parent financial statements of the
current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter
or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report
because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest
benefits of such communication.
Report on compliance with the ESEF
Regulation
As part of our audit of the consolidated financial state-
ments and the Parent financial statements of Demant A/S,
we performed procedures to express an opinion on wheth-
er the annual report of Demant A/S for the financial year
1 January 2020 to 31 December 2020 with the file name
DEMA-2020-12-31.zip is prepared, in all material respects,
in compliance with the Commission Delegated Regulation
(EU) 2020/815 on the European Single Electronic Format
(ESEF Regulation), which includes requirements related to
the preparation of the annual report in XHTML format.
Management is responsible for preparing an annual report
that complies with the ESEF Regulation. This responsibility
includes the preparing of the annual report in XHTML for-
mat. Our responsibility is to obtain reasonable assurance
on whether the annual report is prepared, in all material
respects, in compliance with the ESEF Regulation based
on the evidence we have obtained and to issue a report
that includes our opinion. The procedures consist of testing
whether the annual report is prepared in XHTML format.
In our opinion, the annual report of Demant A/S for the
financial year 1 January 2020 to 31 December 2020 with
the file name DEMA-2020-12-31.zip is prepared, in all
material respects, in compliance with the ESEF Regulation.
Management is responsible for preparing an annual report
that complies with the ESEF Regulation. This responsibility
includes:
• The preparing of the annual report in XHTML format;
• The selection and application of appropriate iXBRL tags,
including extensions to the ESEF taxonomy and the
anchoring thereof to elements in the taxonomy, for
financial information required to be tagged using
judgement where necessary;
• Ensuring consistency between iXBRL tagged data
and the consolidated financial statements presented
in human readable format; and
• For such internal control as Management determines
necessary to enable the preparation of an annual
report that is compliant with the ESEF Regulation.
Our responsibility is to obtain reasonable assurance on
whether the annual report is prepared, in all material
respects, in compliance with the ESEF Regulation based
on the evidence we have obtained and to issue a report
that includes our opinion. The nature, timing and extent of
procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material depar-
tures from the requirements set out in the ESEF Regulation,
whether due to fraud or error. The procedures include:
• Testing whether the annual report is prepared in
XHTML format;
• Obtaining an understanding of the company’s iXBRL
tagging process and of internal control over the
tagging process;
• Evaluating the completeness of the iXBRL tagging of
the consolidated financial statements;
• Evaluating the appropriateness of the company’s use
of iXBRL elements selected from the ESEF taxonomy
and the creation of extension elements where no suita-
ble element in the ESEF taxonomy has been identified;
• Evaluating the use of anchoring of extension elements
to elements in the ESEF taxonomy; and
• Reconciling the iXBRL tagged data with the audited
consolidated financial statements.
In our opinion, the annual report of Demant A/S for the
financial year 1 January to 31 December 2020 with the
file name DEMA-2020-12-31.zip is prepared in all material
respects, in compliance with the ESEF Regulation.
Copenhagen, 9 February 2021
Deloitte
Statsautoriseret Revisionspartnerselskab
Business Registration No 33 96 35 56
Financial report · Independent auditor’s report 69
Demant · Annual Report 2020
Consolidated
nancial statements
Demant’s Hearing Aids business
Greener hearing aid packaging
70
Demant · Annual Report 2020 Demant · Annual Report 2020
Consolidated
nancial statements
71
Demant · Annual Report 2020
Financial report · Consolidated nancial statements
Consolidated income statement
(DKK million)
Note 2020 2019
Revenue 1.2 14,469 14,946
Production costs 1.3 / 1.4 / 1.6 / 8.3 -4,276 -3,621
Gross prot 10,193 11,325
R&D costs 1.3 / 1.4 / 8.3 -1,261 -1,120
Distribution costs 1.3 / 1.4 / 8.3 -7,067 -7,421
Administrative expenses 1.3 / 1.4 / 8.2 / 8.3 -840 -851
Share of prot after tax, associates and joint ventures 3.4 / 6.1 505 118
Other operating income - 100
Operating prot (EBIT) 1,530 2,151
Financial income 4.2 38 41
Financial expenses 4.2 -232 -281
Prot before tax 1,336 1,911
Tax on prot for the year 5.1 -202 -444
Prot for the year 1,134 1,467
Prot for the year attributable to:
Demant A/S' shareholders 1,121 1,462
Non-controlling interests 13 5
1,134 1,467
Earnings per share (EPS), DKK 1.5 4.68 6.00
Diluted earnings per share (DEPS), DKK 1.5 4.68 6.00
72
Demant · Annual Report 2020 Demant · Annual Report 2020
Financial report · Consolidated nancial statements
Consolidated statement of comprehensive income
(DKK million)
2020 2019
Prot for the year 1,134 1,467
Items that have been or may subsequently be reclassied to the income statement:
Foreign currency translation adjustment, subsidiaries -467 131
Foreign currency translation adjustment, reclassied to the income statement - -14
Value adjustment of hedging instruments:
Value adjustment for the year 110 -101
Value adjustment transferred to revenue -12 91
Tax on items that have been or may subsequently be reclassied to the income statement -3 7
Items that have been or may subsequently be reclassied to the income statement -372 114
Items that will not subsequently be reclassied to the income statement:
Actuarial gains/losses on dened benet plans -2 -55
Tax on items that will not subsequently be reclassied to the income statement 10 10
Items that will not subsequently be reclassied to the income statement 8 -45
Other comprehensive income/loss -364 69
Comprehensive income 770 1,536
Comprehensive income attributable to:
Demant A/S’ shareholders 757 1,531
Non-controlling interests 13 5
770 1,536
Breakdown of tax on other comprehensive income:
Foreign currency translation adjustment, foreign enterprises 19 5
Value adjustment of hedging instruments for the year -25 22
Value adjustment of hedging instruments transferred to revenue 3 -20
Actuarial gains/losses on dened benet plans 10 10
Tax on other comprehensive income 7 17
73
Demant · Annual Report 2020
Financial report · Consolidated nancial statements
Consolidated balance sheet 31 December
(DKK million)
Note 2020 2019
Assets
Goodwill 8,320 7,826
Patents and licences 12 21
Other intangible assets 489 508
Prepayments and assets under development 283 221
Intangible assets 3.1 9,104 8,576
Land and buildings 980 887
Plant and machinery 217 240
Other plant, xtures and operating equipment 350 372
Leasehold improvements 411 427
Prepayments and assets under construction 181 135
Property, plant and equipment 3.2 2,139 2,061
Lease assets 3.3 1,847 1,937
Investments in associates and joint ventures 3.4 833 963
Receivables from associates and joint ventures 3.4 / 4.3 / 4.4 247 182
Other investments 4.3 / 4.5 14 16
Other receivables 1.7 / 3.4 / 4.3 / 4.4 503 598
Deferred tax assets 5.2 553 551
Other non-current assets 3,997 4,247
Non-current assets 3.5 15,240 14,884
Inventories 1.6 1,968 1,852
Trade receivables 1.7 / 4.3 2,808 3,209
Receivables from associates and joint ventures 4.3 111 178
Income tax 63 106
Other receivables 1.7 / 4.3 / 4.4 441 521
Unrealised gains on nancial contracts 2.3 / 4.3 / 4.5 81 13
Prepaid expenses 263 243
Cash 4.3 / 4.4 952 792
Current assets 6,687 6,914
Assets 21,927 21,798
74
Demant · Annual Report 2020 Demant · Annual Report 2020
Financial report · Consolidated nancial statements
Consolidated balance sheet 31 December
(DKK million)
Note 2020 2019
Equity and liabilities
Share capital 48 49
Other reserves 8,202 7,587
Equity attributable to Demant A/S' shareholders 8,250 7,636
Equity attributable to non-controlling interests 29 9
Equity 8,279 7,645
Borrowings 4.3 / 4.4 3,499 2,512
Lease liabilities 3.3 1,437 1,546
Deferred tax liabilities 5.2 339 314
Provisions 7.1 305 283
Other liabilities 4.3 / 7.2 313 203
Deferred income 7.3 381 451
Non-current liabilities 6,274 5,309
Borrowings 4.3 / 4.4 3,612 5,513
Lease liabilities 3.3 456 418
Trade payables 4.3 802 652
Payables to associates and joint ventures 5 3
Income tax 131 66
Provisions 7.1 17 38
Other liabilities 4.3 / 7.2 1,801 1,521
Unrealised losses on nancial contracts 2.3 / 4.3 / 4.4 / 4.5 14 43
Deferred income 7.3 536 590
Current liabilities 7,374 8,844
Liabilities 13,648 14,153
Equity and liabilities 21,927 21,798
75
Demant · Annual Report 2020
Financial report · Consolidated nancial statements
Consolidated cash ow statement
(DKK million)
Note 2020 2019
Operating prot (EBIT) 1,530 2,151
Non-cash items etc. 1.8 855 966
Change in receivables etc. 266 -527
Change in inventories -73 -218
Change in trade payables and other liabilities etc. 236 174
Change in provisions 41 46
Dividends received 41 183
Cash ow from operating prot 2,896 2,775
Financial income etc. received 20 25
Financial expenses etc. paid -232 -280
Realised foreign currency translation adjustments -2 1
Income tax paid -61 -372
Cash ow from operating activities (CFFO) 2,621 2,149
Acquisition of enterprises, participating interests and activities -394 -603
Investments in and disposal of intangible assets -174 -195
Investments in property, plant and equipment -507 -571
Disposal of property, plant and equipment 14 10
Investments in other non-current assets -219 -329
Disposal of other non-current assets 288 274
Cash ow from investing activities (CFFI) -992 -1,414
Repayments of borrowings 4.4 -82 -90
Proceeds from borrowings 4.4 1,446 1,647
Change in short-term bank facilities 4.4 -2,157 -352
Repayments of lease liabilities 3.3 -442 -446
Transactions with non-controlling interests -3 -5
Share buy-backs -197 -946
Cash ow from nancing activities (CFFF) -1,435 -192
Cash ow for the year, net 194 543
Cash and cash equivalents at the beginning of the year 792 248
Foreign currency translation adjustment of cash and cash equivalents -34 1
Cash and cash equivalents at the end of the year 952 792
Breakdown of cash and cash equivalents at the end of the year:
Cash 4.3 / 4.4 952 792
Overdraft 4.3 / 4.4 - -
Cash and cash equivalents at the end of the year 952 792
Acquisition of enterprises, participating interests and
activities includes loans of DKK 120 million (DKK 56 million
in 2019) classified as other non-current assets, which have
been settled as part of acquisitions without cash payments.
76
Demant · Annual Report 2020 Demant · Annual Report 2020
Financial report · Consolidated nancial statements
Consolidated statement of changes in equity
(DKK million)
Other reserves
Share
capital
Foreign
currency
translation
reserve
Hedging
reserve
Retained
earnings
Demant A/S’
share-
holders’
share
Non-
controlling
interests’
share
Equity
Equity at 1.1.2020
49 34 -21 7,574 7,636 9 7,645
Comprehensive income in 2020:
Prot for the year - - - 1,121 1,121 13 1,134
Other comprehensive income:
Foreign currency translation
adjustment, subsidiaries - -467 - - -467 - -467
Foreign currency translation
adjustment reclassied to income
statement - - - - - - -
Value adjustment of hedging
instruments:
Value adjustment, year - - 110 - 110 - 110
Value adjustment transferred to
revenue - - -12 - -12 - -12
Actuarial gains/losses on dened
benet plans - - - -2 -2 - -2
Tax on other comprehensive income - 19 -22 10 7 - 7
Other comprehensive income/loss - -448 76 8 -364 - -364
Comprehensive income/loss, year
- -448 76 1,129 757 13 770
Share buy-backs - - - -147 -147 - -147
Share-based compensation - - - 4 4 - 4
Capital reduction through
cancellation of treasury shares -1 - - 1 - - -
Transactions with non-controlling
interests - - - - - -3 -3
Non-controlling interest on acquisition
- - - - - 10 10
Equity at 31.12.2020 48 -414 55 8,561 8,250 29 8,279
77
Demant · Annual Report 2020
Financial report · Consolidated nancial statements
Consolidated statement of changes in equity (continued)
(DKK million)
Other reserves
Share
capital
Foreign
currency
translation
reserve
Hedging
reserve
Retained
earnings
Demant A/S’
share-
holders’
share
Non-
controlling
interests’
share
Equity
Equity at 1.1.2019 50 -88 -13 7,101 7,050 9 7,059
Comprehensive income in 2019:
Prot for the year - - - 1,462 1,462 5 1,467
Other comprehensive income:
Foreign currency translation
adjustment, subsidiaries
- 131 - - 131 - 131
Foreign currency translation
adjustment reclassied to income
statement
- -14 - - -14 - -14
Value adjustment of hedging
instruments:
Value adjustment, year - - -101 - -101 - -101
Value adjustment transferred to
revenue
- - 91 - 91 - 91
Actuarial gains/losses on dened
benet plans
- - - -55 -55 - -55
Tax on other comprehensive income - 5 2 10 17 - 17
Other comprehensive income/loss - 122 -8 -45 69 - 69
Comprehensive income/loss, year - 122 -8 1,417 1,531 5 1,536
Share buy-backs - - - -946 -946 - -946
Share-based compensation - - - 1 1 - 1
Capital reduction through
cancellation of treasury shares
-1 - - 1 - - -
Transactions with non-controlling
interests
- - - - - -5 -5
Equity at 31.12.2019 49 34 -21 7,574 7,636 9 7,645
78
Demant · Annual Report 2020 Demant · Annual Report 2020
Financial report · Consolidated nancial statements
Section 1 – page 80
Operating activities and cash ow
1.1 Segment disclosures
1.2 Revenue from contracts with customers
1.3 Employees
1.4 Amortisation, depreciation and impairment losses
1.5 Earnings per share
1.6 Inventories
1.7 Receivables
1.8 Specification of non-cash items etc.
Section 2 – page 91
Exchange rates and hedging
2.1 Exchange rate risk policy
2.2 Sensitivity analysis in respect of exchange rates
2.3 Hedging and forward exchange contracts
2.4 Exchange rates
Section 3 – page 95
Asset base
3.1 Intangible assets
3.2 Property, plant and equipment
3.3 Leases
3.4 Other non-current assets
3.5 Non-current assets by geographic region
3.6 Impairment testing
Section 4 – page 106
Capital structure and
nancial management
4.1 Financial risk management and capital structure
4.2 Net financial items
4.3 Categories of financial instruments
4.4 Net interest-bearing debt, liquidity
and interest rate risks
4.5 Fair value hierarchy
Notes to consolidated
nancial statements
Section 5 – page 114
Tax
5.1 Tax on profit
5.2 Deferred tax
Section 6 – page 118
Acquisitions
6.1 Acquisition of enterprises and activities
Section 7 – page 122
Provisions, other liabilities etc.
7.1 Provisions
7.2 Other liabilities
7.3 Deferred income
7.4 Contingent liabilities
Section 8 – page 128
Other disclosure requirements
8.1 Related parties
8.2 Fees to Parent’s auditors appointed at the
annual general meeting
8.3 Government grants
8.4 Events after the balance sheet date
Section 9 – page 131
Basis for preparation
9.1 Group accounting policies
9.2 Accounting estimates and assumptions
79
Demant · Annual Report 2020
Section 1
Operating activities
and cash ow
Revenue
14,469
DKK MILLION
Free cash ow
2,023
DKK MILLION
80
Demant · Annual Report 2020 Demant · Annual Report 2020
81Section 1 · Operating activities and cash ow
1.1 Segment disclosures
(DKK million)
2020 2019
Hearing
Healthcare
Commu-
nications
Consoli-
dated
Hearing
Healthcare
Commu-
nications
Consoli-
dated
Revenue 13,163 1,306 14,469 14,946 - 14,946
Production costs -3,480 -796 -4,276 -3,621 - -3,621
Gross prot 9,683 510 10,193 11,325 - 11,325
R&D costs -1,092 -169 -1,261 -1,120 - -1,120
Distribution costs -6,621 -446 -7,067 -7,421 - -7,421
Administrative expenses -811 -29 -840 -851 - -851
Share of prot after tax, associates and joint ventures 52 453 505 52 66 118
Other operating income - - - 100 - 100
Operating prot (EBIT) 1,211 319 1,530 2,085 66 2,151
Distribution costs include intra-segment costs of DKK 4
million (DKK 0 million in 2019). There are no other in-
tra-segment transactions.
Other segment disclosures
2020 2019
Hearing
Healthcare
Commu-
nications
Consoli-
dated
Hearing
Healthcare
Commu-
nications
Consoli-
dated
Depreciation 843 17 860 795 - 795
Amortisation 143 8 151 129 - 129
Step-up gain - 453 453 - - -
Description of products and services for each reportable
segment
Based on IFRS 8 Operating Segments and the internal
reporting model used by Management for the assessment
of results and the use of resources, Management has iden-
tified Hearing Healthcare and Communications as the
reportable segments in the Group.
This reflects Management’s approach to the organisation
and management of activities.
Hearing Healthcare comprises the four business areas:
Hearing Aids, Hearing Care, Hearing Implants and
Diagnostics, which provides Hearing Healthcare solutions
involving manufacturing, servicing and sale of hearing aids
and implants as well as Diagnostics products and services.
Communications comprises only our headset business,
which operates under the EPOS brand and provides
solutions for the professional call centre and office market
(Enterprise headsets) and gaming headsets (Gaming).
Segment performance is evaluated on EBIT level and is
based on the accounting policies for the consolidated
income statement.
The Group’s financial income and expenses as well as
income taxes are managed on a Group basis and are not
allocated to operating segments.
81
Demant · Annual Report 2020
Segment assets and liabilities are based on the accounting
policies for the consolidated balance sheet and allocated
based on the operation of the segment. The Group’s
borrowings, derivative financial instruments and income
tax related assets and liabilities are managed on a Group
basis and not allocated to operating segments.
Section 1 · Operating activities and cash ow
1.1 Segment disclosures
(DKK million)
2020 2019
Hearing
Health-
care
Commu-
nications
Elimi-
nations
Not
allocated
Consoli-
dated
Hearing
Health-
care
Commu-
nications
Elimi-
nations
Not
allocated
Consoli-
dated
Goodwill 7,903 417 - - 8,320 7,826 - - - 7,826
Other intangible assets 717 67 - - 784 750 - - - 750
Intangible assets 8,620 484 - - 9,104 8,576 - - - 8,576
Property plant and equipment 2,123 16 - - 2,139 2,061 - - - 2,061
Lease assets 1,802 45 - - 1,847 1,937 - - - 1,937
Investments in associates 766 67 - - 833 939 24 - - 963
Other assets 763 46 - 508 1,317 796 - - 551 1,347
Other non-current assets 3,331 158 - 508 3,997 3,672 24 - 551 4,247
Total non-current assets 14,074 658 - 508 15,240 14,309 24 - 551 14,884
Inventories 1,710 258 - - 1,968 1,852 - - - 1,852
Trade receivables 2,468 340 - - 2,808 3,209 - - - 3,209
Intragroup receivables 635 - -635 - - - - - - -
Other current assets 873 86 - - 959 942 - - 119 1,061
Cash 911 41 - - 952 792 - - - 792
Total current assets 6,597 725 -635 - 6,687 6,795 - - 119 6,914
Total assets 20,671 1,383 -635 508 21,927 21,104 24 - 670 21,798
Equity 14,970 359 - -7,050 8,279 15,375 24 - -7,778 7,645
Borrowings - - - 3,499 3,499 - - - 2,512 2,512
Lease liabilities 1,400 37 - - 1,437 1,546 - - - 1,546
Other non-current liabilities 982 30 - 326 1,338 937 - - 314 1,251
Total non-current liabilities 2,382 67 - 3,825 6,274 2,483 - - 2,826 5,309
Borrowings - - - 3,612 3,612 - - - 5,513 5,513
Lease liabilities 448 8 - - 456 418 - - - 418
Intragroup payables - 635 -635 - - - - - - -
Other current liabilities 2,871 314 - 121 3,306 2,804 - - 109 2,913
Total current liabilities 3,319 957 -635 3,733 7,374 3,222 - - 5,622 8,844
Total equity and liabilities 20,671 1,383 -635 508 21,927 21,104 24 - 670 21,798
82
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 1 · Operating activities and cash ow
1.2 Revenue from contracts with customers
(DKK million)
2020 2019
Disaggregation of revenue from contracts with customers
Revenue by geographic region:
Denmark 262 233
Other Europe 6,262 5,877
North America 5,340 6,194
Pacic 932 908
Asia 1,313 1,188
Other countries 360 546
Revenue from contracts with customers 14,469 14,946
Consolidated revenue mainly derives from the sale of goods and is broken down by the customers' geographical region.
The ten largest single customers together account for less than 11% (13% in 2019) of total consolidated revenue.
(DKK million)
2020 2019
Revenue by segments:
Hearing healthcare 13,163 14,946
Communications 1,306 -
Revenue from contracts with customers 14,469 14,946
(DKK million)
2020 2019
Value adjustments transferred from equity relating to derivatives made for hedging
foreign exchange risk on revenue
12 -91
(DKK million)
2020 2019
Liabilities related to contracts with customers:
Customer prepayments* 93 66
Future performance obligations* 824 975
Expected volume discounts and other customer-related items** 213 191
Expected product returns*** 116 140
Contract liabilities with customers 1,246 1,372
(DKK million)
2020 2019
Changes in contract liabilities with customers:
Contract liabilities at 1.1. 1,372 1,416
Foreign currency translation adjustment -54 29
Changes to transaction price estimates from prior years - -18
Revenue recognised and included in the contract liability balance at 1.1. -553 -541
Increases due to cash received, excluding amounts recognised as revenue during the year 448 495
Changes from expected volume discounts and other customer-related items 28 -8
Changes from product returns -13 -1
Business combinations 18 -
Contract liabilities at 31.12. 1,246 1,372
*Included in deferred income.
**Included in other cost payables under Other liabilities.
***Included in product-related liabilities under Other liabilities.
83
Demant · Annual Report 2020
Section 1 · Operating activities and cash ow
1.2 Revenue from contracts with customers
Accounting policies
Revenue is recognised when obligations under the terms of
the contract with the customer are satisfied, which usually
occurs with the transfer of control of our products and
services within Hearing Healthcare and Communications.
Revenue is measured as the consideration we expect to
receive in exchange for transferring goods and providing
services net of the estimated discounts or other custom-
er-related reductions.
Nature of goods and services
Control is normally transferred to the customer when the
goods are shipped to the customer, though delivery terms
can vary and control may be transferred at a later point.
When selling hearing aids to end-users, we transfer control
and recognise revenue when a hearing aid is initially fitted
to the customer’s specific hearing loss, and the hearing aid
is delivered to the customer at a given point in time. In
some countries, the customers are granted a trial period.
In such cases, the transfer of control occurs when the trial
period expires.
In some countries, customers are given the right to return
the hearing aid during a certain period. In such cases, the
expected returns are estimated based on an analysis of
historical experience adjusted for any known factors
impacting expectations for future return rates. Revenue
and cost of goods sold are adjusted accordingly, and
contract liabilities (refund liabilities) and rights to the
returned goods (included in prepaid expenses) are
recognised for the expected returns.
Our activities also involve delivery of various services,
such as extended warranties, warranty-related coverages
(loss and damage) and after-sales services (e.g. fine-tuning
of the hearing aid, additional hearing test and cleaning).
Revenue from these services is recognised on a straight-
line basis over the warranty or service period as the
customer makes use of the service continuously. Some
customers purchase a battery package or are given batter-
ies free of charge as part of the purchase of the hearing
aid, entitling them to free batteries for a certain period.
Revenue is recognised when the customer receives the
batteries or is given batteries free of charge as part of the
purchase of the hearing aid. When available, we use an
observable price to determine the stand-alone selling price
for the separate performance obligations related to these
services, and in countries where observable prices are not
available, we use a cost-plus-margin method.
The standard warranty period for hearing aids and
diagnostic equipment varies across countries, typically
between 12 and 24 months and for certain products up to
48 months. The extended warranty covers periods beyond
the standard warranty period or standard warranty terms.
Payment terms vary significantly across countries and
depend on whether the customer is a private or public
customer.
The majority of hearing aids sold to end-users are invoiced
and paid for after the initial fitting, but some customers
choose to have the hearing aid financed by us. The trans-
action price of such arrangements is adjusted for any
significant financing benefit, and the financing component
is recognised as financial income.
Accounting estimates and judgements
Discounts, returns etc.
Discounts, loyalty programmes and other revenue reduc-
tions are estimated and accrued when the related revenue
is recognised. To make such estimates is a matter of judge-
ment, as all conditions are not known at the time of sale,
e.g. the number of units sold to a given customer or the
expected utilisation of loyalty programmes. Sales dis-
counts, rebates and loyalty programmes are adjusted, as
we gain better information on the likelihood that they will
be realised and the value at which they are expected to
be realised. Sales discounts and rebates are recognised
under other cost payables in other liabilities, and loyalty
programmes are recognised in deferred income.
Depending on local legislation and the conditions to which
a sale is subject, some customers have the option to return
purchased goods for a refund. Based on historical return
rates, an estimate is made of the expected returns and
a provision is recognised. This provision is updated, as
returns are recognised or when we collect more accurate
data on return rates.
After-sales services
After-sales services are provided to end-users of our
hearing aids and are based on estimates as not all end-
users make use of these services. The estimate is a matter
of judgement and is based on the number of visits, the
duration of an average customer’s visits and the expected
number of end-users that make use of the after-sales
services.
84
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 1 · Operating activities and cash ow
President & CEO, Søren Nielsen, is entitled to 24 months’
notice in the event of dismissal. CFO, René Schneider, is
currently entitled to 17 months’ notice in the event of
dismissal, which increases with seniority.
In 2020, the basic remuneration for a member of the
Parent’s Board of Directors was DKK 350,000 (DKK
350,000 in 2019). The Chairman of the Board of Directors
receives three times the basic remuneration and the Deputy
Chairman twice the basic remuneration. The members of
the audit committee each receive a basic remuneration of
DKK 50,000 (DKK 50,000 in 2019), and the chairman of
the audit committee receives three times the basic remu-
neration.
When the Hearing Healthcare business was severely
impacted by coronavirus, the Executive Board made a
voluntary reduction of 10% of their fixed salary from 1 April
until the end of the year. For the same reason, the Board of
Directors decided to reduce their fee by 20% from 1 May
until the end of the year.
1.3 Employees
(DKK million)
Note 2020 2019
Staff costs:
Wages and salaries 5,953 5,787
Share-based remuneration 12 7
Dened contribution plans 79 78
Dened benet plans 7.1 28 22
Social security costs etc. 627 631
Staff costs 6,699 6,525
Staff costs by function:
Production costs 892 873
R&D costs 839 725
Distribution costs 4,289 4,304
Administrative expenses 679 623
Staff costs 6,699 6,525
Average number of full-time employees 16,155 15,352
Remuneration to Executive Board and Board of Directors (included in staff costs)
(DKK million)
2020 2019
Wages and
salaries*
Share-based
remune-
ration**
Total Wages and
salaries*
Share-based
remune-
ration**
Total
Søren Nielsen, President & CEO 11.9 2.9 14.8 12.5 2.2 14.7
René Schneider, CFO 5.2 1.3 6.5 5.5 1.0 6.5
Executive Board 17.1 4.2 21.3 18.0 3.2 21.2
Fee to Board of Directors 3.6 - 3.6 4.2 - 4.2
*No member of the Executive Board has remuneration in the form of pension or other benets of more than DKK 0.5 million (DKK 0.5 million in 2019). These
expenses are therefore included in wages and salaries.
**In 2020, DKK 4.2 million (DKK 3.6 million in 2019) of the share-based remuneration was paid out.
85
Demant · Annual Report 2020
Section 1 · Operating activities and cash ow
The Group has two types of share-based remuneration
programmes, which consist of RSU (restricted stock units)
and “shadow share” programmes. The RSU programme
was introduced in 2019 and is equity-settled, whereas the
“shadow share” programme, which was introduced in
2016, is cash-settled. Both programmes are contingent on
the employee still being employed and not under termina-
tion when the three years have passed from the time of
the grant. Further, the fair value of the shares granted
under both programmes is based on the average share
price of the first five trading days after publication of the
annual report.
RSU programme
The fair value of RSU granted to 13 employees (10 employ-
ees in 2019) was DKK 5 million (DKK 2 million in 2019)
at the time of the grant (21,899 shares), and in 2020, the
Group recognised costs of DKK 2 million (DKK 1 million
in 2019) in the income statement related to the RSU
programme. The costs are recognised on a straight-line
basis, as the service is rendered.
At 31 December 2020, the remaining average contractual
life of equity-settled share programmes was 21 months.
The employees under the RSU programme are not entitled
to dividend during the vesting period.
“Shadow shares” programme
The fair value of “shadow shares” granted to six employees
(eight in 2019) was DKK 10 million (DKK 9 million in 2019)
at the time of the grant, and at 31 December 2020, the
Group had liabilities of DKK 16 million (DKK 12 million in
2019) related to the shadow share programme. The liability
is recognised on a straight-line basis, as the service is
rendered, and the liability is remeasured at each reporting
date and at the settlement date based on the fair value
of the “shadow shares”. Fair value adjustments are recog-
nised as financial income or financial expenses. If relevant,
the liability is adjusted to reflect the expected risk of
non-vesting as a result of resignations.
Any changes to the liability are recognised in the income
statement. The Group bought back shares to cover the
financial risk of share price fluctuations related to the
programmes. At 31 December 2020, the remaining
average contractual life of cash-settled remuneration
programmes was 19 months (16 months in 2019).
Accounting policies
Employee costs comprise wages, salaries, social security
contributions, annual and sick leave, bonuses and
non-monetary benefits and are recognised in the year
in which the associated services are rendered by the
employees. Where Demant provides long-term employee
benefits, the costs are accrued to match the rendering of
the service by the employees concerned.
Accounting estimates and judgements
Management must evaluate the likelihood of vesting
conditions for the share-based programmes being fulfilled.
Vesting is entirely dependent on the persons enrolled in the
share-based programmes remaining employed until the
end of the vesting period.
The estimate made based on this likelihood is used to
calculate the fair value of the share-based programmes.
Furthermore, the shares must be valued. For this purpose,
Management uses the share price quoted at Nasdaq
Copenhagen.
1.3 Employees (continued)
Share-based remuneration ("shadow share" programme)
(DKK million)
2020 2019
Executive
Board
Other senior
members of
Manage-
ment
Executive
Board
Other senior
members of
Manage-
ment
Liabilities at 1.1. 6.3 7.3 5.7 5.5
Expensed during the year in wages and salaries 4.2 5.1 3.1 4.8
Fair value adjustments 0.7 0.8 1.1 1.1
Settled during the year -4.2 -4.2 -3.6 -4.1
Liabilities at 31.12. 7.0 9.0 6.3 7.3
Granted during the year 6.0 3.7 4.5 6.5
Unrecognised commitment at 31.12.* 7.3 5.3 5.0 7.9
*Unrecognised commitment is the part of granted ”shadow shares” not expensed at 31 December.
86
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 1 · Operating activities and cash ow
For accounting policies on amortisation and depreciation,
please refer to Note 3.1, Note 3.2 and Note 3.3.
1.4 Amortisation, depreciation and impairment losses
(DKK million)
Note 2020 2019
Amortisation of intangible assets 3.1 151 129
Depreciation on property, plant and equipment 3.2 367 325
Depreciation on leased assets 3.3 493 470
Amortisation, depreciation and impairment losses 1,011 924
Amortisation, depreciation and impairment losses by function:
Production costs 103 86
R&D costs 69 73
Distribution costs 633 651
Administrative expenses 206 114
Amortisation, depreciation and impairment losses 1,011 924
1.5 Earnings per share
2020 2019
Demant A/S' shareholders' share of prot for the year, DKK million 1,121 1,462
Average number of shares, million 242.09 247.47
Average number of treasury shares, million -2.31 -3.92
Average number of shares outstanding, million 239.78 243.55
Earnings per share (EPS), DKK 4.68 6.00
Diluted earnings per share (DEPS), DKK 4.68 6.00
87
Demant · Annual Report 2020
Section 1 · Operating activities and cash ow
Write-downs for the year are shown net, as breakdown
into reversed write-downs and new write-downs is not
possible. Inventories are generally expected to be sold
within one year.
Accounting policies
Raw materials, components and goods for resale are
measured at cost according to the FIFO principle (according
to which the most recently purchased items are considered
to be in stock) or at their net realisable value, whichever is
lower.
Group-manufactured products and work in progress are
measured at the value of direct cost, direct payroll costs,
consumables and a proportionate share of indirect produc-
tion costs, which are allocated on the basis of the normal
capacity of the production facility. Indirect production costs
include the proportionate share of capacity costs directly
relating to Group-manufactured products and work in
progress.
The net realisable value of inventories is calculated as the
estimated selling price less costs of completion and costs
to sell.
Accounting estimates and judgements
Indirect production cost allocations to inventory
Indirect production cost allocations are based on relevant
judgements related to capacity utilisation at the production
facility, production time and other product-related factors.
The judgements are reviewed regularly to ensure that
inventories are measured at their actual production cost.
Changes in judgements may affect gross profit margins
as well as the valuation of work in progress, finished
goods and goods for resale.
Obsolescence provision
The obsolescence provision for inventories is based on the
expected sales forecast for the individual types of hearing
devices, diagnostic equipment and hearing implants.
Sales forecasts are based on Management’s expectations
of market conditions and trends, and the obsolescence
provision is subject to changes in these judgements.
1.6 Inventories
(DKK million)
2020 2019
Raw materials and purchased components 682 732
Work in progress 108 76
Finished goods and goods for resale 1,178 1,044
Inventories 1,968 1,852
Write-downs, provisions for obsolescence etc. included in the above 125 136
Included in the income statement under production costs:
Write-downs of inventories for the year, net 77 42
Cost of goods sold for the year 3,192 2,733
88
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 1 · Operating activities and cash ow
1.7 Receivables
(DKK million)
2020 2019
Trade receivables 2,808 3,209
Customer loans 610 714
Other receivables 334 405
Receivables 3,752 4,328
Credit risk
(DKK million)
Balance
not due
0-3 months
overdue
3-6 months
overdue
6-12 months
overdue
More than
12 months
overdue
2020
Expected loss rate 1% 4% 11% 22% 92%
Gross carrying amount – trade receivables 1,939 525 182 251 317
Gross carrying amount – customer loans 619 3 1 - 7
Gross carrying amount – other receivables 334 - - - -
Loss allowance 31 21 20 55 299
2019
Expected loss rate 1% 2% 8% 25% 60%
Gross carrying amount – trade receivables 2,042 645 235 249 358
Gross carrying amount – customer loans 728 2 - 1 2
Gross carrying amount – other receivables 405 - - - -
Loss allowance 28 14 19 63 215
(DKK million)
2020 2019
Allowance for impairment:
Allowance for impairment at 1.1. -339 -280
Foreign currency translation adjustments 26 -4
Applied during the year 145 69
Additions during the year -267 -129
Reversals during the year 9 5
Allowance for impairment at 31.12. -426 -339
89
Demant · Annual Report 2020
Section 2
Exchange rates
1.8 Specication of non-cash items etc.
(DKK million)
2020 2019
Amortisation and depreciation etc. 1,048 959
Share of prot after tax, associates and joint ventures -505 -118
Gain on sale of intangible assets and property, plant and equipment 2 -
Bad debt provisions 114 105
Exchange rate adjustments 156 -6
Employee salary share programme 50 -
Covid-19 rent concessions -12 -
Other non-cash items 2 26
Non-cash items etc. 855 966
Section 1 · Operating activities and cash ow
Of the total amount of trade receivables, DKK 243 million
(DKK 239 million in 2019) is expected to be collected after
12 months. For information on security and collateral,
please refer to Credit risks in note 4.1.
In 2020 the Group has made a provision for additional bad
debt of DKK 100 million due to the uncertainties caused by
the Covid-19 pandemic. The additional provision for bad
debt is recognised in loss allowance for trade receivables
more than 12 months overdue. The expected loss rate is 92
% for amounts more than 12 months overdue including the
provision for additional bad debt. The adjusted loss rate is
61% excluding the provision for additional bad debt.
Accounting policies
Receivables include trade receivables, customer loans and
other receivables. Receivables are financial assets with
fixed or determinable payments, which are not listed on
an active market and are not derivatives.
On initial recognition, receivables are measured at fair
value with the addition of transaction costs. Receivables
with a definite maturity date are measured at amortised
cost.
Receivables without a definite maturity date are measured
at cost. Current receivables arisen as a result of the Group’s
ordinary activities are measured at nominal value.
Impairment is based on expected credit losses, which
include the use of the lifetime expected loss provision for
trade receivables.
Accounting estimates and judgements
Allowance for impairment is calculated for both trade
receivables and other receivables. For trade receivables,
the allowance is calculated for expected credit losses
based on an assessment of the debtor’s ability to pay.
This assessment is made by local management and is
made for uniform groups of debtors based on a maturity
analysis. When indicated by special circumstances,
impairments are made for individual debtors. Other
receivables, including customer loans, are assessed on
an individual basis based on expected credit loss.
1.7 Receivables (continued)
90
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 2
Exchange rates
EPOS
IMPACT 5066
91
Demant · Annual Report 2020
Section 2 · Exchange rates and hedging
The Group seeks to hedge against any exchange rate risks,
first and foremost through forward exchange contracts. In
relation to exchange rate fluctuations, hedging ensures
predictability in the profit and gives Management the
opportunity – and the necessary time – to redirect business
arrangements in the event of persistent changes in foreign
exchange rates.
The Group aims to hedge such changes in foreign
exchange rates by seeking to match positive and negative
cash flows in the main currencies as much as possible and
by entering into forward exchange contracts. The Group
predominantly hedges estimated cash flows with a horizon
of up to 18 months.
The below tables show the impact on the year’s operating
profit (EBIT) and consolidated equity, given a change of 5%
in the currencies with the highest exposures. The exchange
rate impact on EBIT has been calculated on the basis of
the Group’s EBIT for each currency and does not take into
account a possible exchange rate impact on balance sheet
values in those currencies.
Effect on EBIT, 5% positive change in exchange rates* Effect on equity, 5% positive change in exchange rates
DKK million
2020 2019
DKK million
2020 2019
USD +19 +49 USD +179 +164
GBP +16 +22 GBP +20 +18
CAD +15 +19 CAD +48 +51
AUD +11 +8 AUD +13 +21
JPY +5 +4 JPY +4 +4
PLN -22 -23 PLN +27 +26
*Estimated on a non-hedged basis, i.e. the total annual exchange rate effect, excluding forward exchange contracts.
2.2 Sensitivity analysis in respect of exchange rates
2.1 Exchange rate risk policy
92
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 2 · Exchange rates and hedging
Accounting policies
On initial recognition, derivatives are measured at fair value
at the settlement date. After initial recognition, derivatives
are measured at fair value at the balance sheet date. Any
positive or negative fair values of derivatives are recog-
nised as separate items in the balance sheet. Forward
exchange contracts are measured based on current market
data and by use of commonly recognised valuation meth-
ods. Please refer to Note 4.5.
Any changes in fair values of derivatives classified as
hedging instruments and satisfying the criteria for hedging
the fair value of a recognised asset or a recognised liability
are recognised in the income statement together with any
changes in the fair value of the hedged asset or hedged
liability. Any changes in fair values of derivatives classified
as hedging instruments and satisfying the criteria for
effective hedging of future transactions are recognised in
other comprehensive income. The ineffective portion is
recognised directly in the income statement. On realisation
of the hedged transactions, the accumulated changes are
recognised together with the related transactions.
Derivatives not fulfilling the conditions for treatment as
hedging instruments are considered trading investments
and measured at fair value, with fair value adjustments
being recognised on an ongoing basis in the income
statement.
Forward exchange contracts
(DKK million) Expiry Hedging period* Average
hedging rate
Contractual
value
Fair value Positive
fair value
at year-end
Negative
fair value
at year-end
2020
USD 2021 11 months 638 -1,193 65 65 -
AUD 2021 10 months 457 -281 -4 - 4
GBP 2021 9 months 825 -384 2 3 1
CAD 2021 9 months 484 -372 7 7 -
JPY 2021 9 months 6.00 -120 3 3 -
PLN 2021 10 months 166 402 -6 1 7
EUR** 2024 48 months 741 895 2 2 -
-1,053 69 81 12
2019
USD 2020 10 months 656 -1,115 -4 5 9
AUD 2020 7 months 457 -84 -2 - 2
GBP 2020 10 months 835 -351 -15 - 15
CAD 2020 10 months 489 -343 -13 - 13
JPY 2020 11 months 6.07 -94 -1 - 1
PLN 2020 11 months 170 391 8 8 -
EUR** 2024 60 months 741 899 -1 - 1
-697 -28 13 41
*Hedging periods represent the estimated periods for which the exchange rate exposure of a relative share of our revenue in a
currency will be covered by forward exchange contracts.
**Forward exchange contracts in EUR hedged a xed committed nancial loan.
2.3 Hedging and forward exchange contracts
Open forward exchange contracts at the balance sheet
date may be specified as shown below, with contracts for
the sale of currency being shown at negative contract
values. The expiry dates reflect the periods in which the
hedged cash flows are expected to be realised.
Realised forward exchange contracts are recognised in the
income statement together with the items, typically the
revenue in foreign currency, that such contracts are
designed to hedge. In 2020, our forward exchange
contracts realised a gain of DKK 12 million (loss of DKK 91
million in 2019), which increased reported revenue for the
year. In addition, we raised loans in foreign currencies to
balance out net receivables. At year-end 2020, we had
entered into forward exchange contracts with a total
contractual value of DKK 1,053 million (DKK 697 million
in 2019) and a total net fair value of DKK 69 million
(DKK -28 million in 2019).
93
Demant · Annual Report 2020
Section 2 · Exchange rates and hedging
2.4 Exchange rates
The Group’s presentation currency is Danish kroner.
The following table shows the exchange rates for our
main trading currencies according to the central bank of
Denmark. Depending on the phasing of revenue, EBIT and
payments, the exchange rate effect on the consolidated
income statement can vary from the below averages.
Average exchange rate DKK per 100 Year-end exchange rate DKK per 100
2020 2019 Change 2020 2019 Change
EUR 745 747 -0.3% EUR 744 747 -0.4%
USD 654 667 -1.9% USD 606 668 -9.3%
AUD 451 464 -2.8% AUD 464 467 -0.6%
GBP 839 851 -1.4% GBP 824 877 -6.0%
CAD 488 503 -3.0% CAD 474 511 -7.2%
JPY 6.13 6.12 0.2% JPY 5.88 6.11 -3.8%
PLN 168 174 -3.4% PLN 163 175 -6.9%
Section 3
Asset base
Accounting policies
On initial recognition, transactions in foreign currencies are
translated at the exchange rates prevailing at the date of
the transaction. The functional currencies of the enterprises
are determined by the economic environment in which the
enterprises operate, normally the local currency.
Receivables, payables and other monetary items in foreign
currencies are translated into Danish kroner at the
exchange rates prevailing at the balance sheet date.
Realised and unrealised foreign currency translation
adjustments are recognised in the income statement
under gross profit or net financial items, depending on the
purpose of the underlying transaction.
Property, plant and equipment, intangible assets, invento-
ries and other non-monetary assets purchased in foreign
currencies and measured on the basis of historical cost
are translated at the exchange rates prevailing at the
transaction date. Non-monetary items, which are revalued
at their fair values, are translated using the exchange rates
at the revaluation date.
On recognition in the consolidated financial statements
of enterprises presenting their financial statements in a
functional currency other than Danish kroner, the income
statement is translated using average exchange rates for
the months of the year in question, unless they deviate
materially from actual exchange rates at the transaction
dates. In case of the latter, actual exchange rates are
applied.
Balance sheet items are translated at the exchange rates
prevailing at the balance sheet date. Goodwill is considered
as belonging to the acquired enterprise in question and is
translated at the exchange rate prevailing at the balance
sheet date.
All foreign currency translation adjustments are recognised
in the income statement, except for the following, which
are recognised in other comprehensive income:
• The translation of net assets of foreign subsidiaries
using exchange rates prevailing at the balance sheet
date
• The translation of income statements of foreign subsidi-
aries using monthly average exchange rates for the
respective months of the year, while the balance sheet
items of such foreign subsidiaries are translated using
exchange rates prevailing at the balance sheet date
• The translation of non-current, intra-group receivables
that are considered to be an addition to or deduction
from net investments in foreign subsidiaries
• The translation of investments in associates and joint
ventures
94
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 3
Asset base
Property, plant
and equipment
2,139
DKK MILLION
Other non-current
assets
3,997
DKK MILLION
Intangible
assets
9,104
DKK MILLION
95
Demant · Annual Report 2020
3.1 Intangible assets
(DKK million)
Goodwill Patents and
licences
Other
intangible
assets
Prepayments
and assets
under
development
Total intangible
assets
Cost at 1.1.2020 7,826 120 919 221 9,086
Foreign currency translation adjustments -373 1 -15 -5 -392
Additions during the year - - 41 133 174
Additions relating to acquisitions 867 1 22 - 890
Disposals during the year - - -11 - -11
Transfer to/from other items - - 99 -66 33
Cost at 31.12.2020 8,320 122 1,055 283 9,780
Amortisation at 1.1.2020 - -99 -411 - -510
Foreign currency translation adjustments - - 11 - 11
Amortisation for the year - -11 -140 - -151
Depreciation transfer - - -30 - -30
Disposals during the year - - 4 - 4
Amortisation at 31.12.2020 - -110 -566 - -676
Carrying amount at 31.12.2020 8,320 12 489 283 9,104
Cost at 1.1.2019 7,211 132 739 181 8,263
Foreign currency translation adjustments 124 -1 4 - 127
Additions during the year - 1 66 128 195
Additions relating to acquisitions 491 - 27 - 518
Disposals during the year - -12 -5 - -17
Transfer to/from other items - - 88 -88 -
Cost at 31.12.2019 7,826 120 919 221 9,086
Amortisation at 1.1.2019 - -97 -300 - -397
Foreign currency translation adjustments - - -1 - -1
Amortisation for the year - -14 -115 - -129
Disposals during the year - 12 5 - 17
Amortisation at 31.12.2019 - -99 -411 - -510
Carrying amount at 31.12.2019 7,826 21 508 221 8,576
Section 3 · Asset base
96
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 3 · Asset base
Accounting policies
On initial recognition, goodwill is recognised and measured
as the difference between the acquisition cost – including
the value of non-controlling interests in the acquired enter-
prise and the fair value of any existing investment in the
acquired enterprise – and the fair values of the acquired
assets, liabilities and contingent liabilities. Please refer to
Accounting policies in Note 6.1.
On recognition, goodwill is allocated to corporate activities
that generate independent payments (cash-generating
units). The definition of a cash-generating unit is in line
with the Group’s managerial structure as well as the
internal financial management reporting.
Goodwill is not amortised, but is tested for impairment
at least once a year. If the recoverable amount of a cash-
generating unit is lower than the carrying amounts of
property, plant and equipment and intangible assets,
including goodwill, attributable to the particular cash-
generating unit, the particular assets will be written down.
Patents and licences acquired from third parties are
measured at cost less accumulated amortisation and
impairment losses. Patents and licenses are amortised on
a straight-line basis over their estimated useful lives.
Other intangible assets consist of software, other rights
than patents and licenses and other intangible assets
acquired in connection with business combinations,
primarily brand value, customer bases and non-compete
agreements.
Other intangible assets are measured at cost less accumu-
lated amortisation and impairment losses. Other intangible
assets are amortised on a straight-line basis over their
estimated useful lives, except other rights, which are
not amortised, as the residual value of other rights is
considered to exceed the cost price and is instead tested
for impairment annually. Please refer to Note 3.6.
Assets under development include internally developed IT
systems. Assets under development are measured at cost,
which includes direct salaries, consultant fees and other
direct costs attributable to the development of such assets.
Assets under development are not amortised, as they are
not available for use.
Accounting estimates and judgements
Impairment testing is carried out annually on preparation
of the annual report or on indication of impairment in
which discounted values of future cash flows are compared
with carrying amounts. Group enterprises cooperate closely
on R&D, purchasing, production, marketing and sale, as the
use of resources in the individual markets is coordinated
and monitored by Management in Denmark. Group enter-
prises are thus highly integrated. Regardless of this the
products and services within Hearing Healthcare and
Communications address different customer demands
and customer groups, which would not be comparable in
nature. Management therefore considers it most appropri-
ate to separate the activities into two reportable segments,
Hearing Healthcare and Communications. Impairment test-
ing is therefore carried out for the Group´s two cash-gener-
ating units, Hearing Healthcare and Communications.
Please refer to Note 3.6.
It is Management’s opinion that the product development
undertaken by the Group today cannot meaningfully be
allocated to either the development of new products or the
further development of existing products. Moreover, as the
products are subject to approval by various authorities, it is
difficult to determine the final completion of new products.
3.1 Intangible assets (continued)
Patents and licenses 5-20 years
Software 3-10 years
Brand value 5-10 years
Customer bases 5-7 years
97
Demant · Annual Report 2020
Section 3 · Asset base
3.2 Property, plant and equipment
(DKK million)
Land and
buildings
Plant and
machinery
Other plant,
xtures and
operating
equipment
Leasehold
improve-
ments
Prepay-
ments
and assets
under
construction
Total
property
plant and
equipment
Cost at 1.1.2020 1,147 712 1,368 950 135 4,312
Foreign currency translation adjustments -35 -25 -59 -30 -1 -150
Additions during the year 60 49 100 110 150 469
Additions relating to acquisitions 5 3 33 5 4 50
Disposals during the year - -8 -94 -54 -1 -157
Transferred to/from other items 77 11 -7 -8 -106 -33
Cost at 31.12.2020 1,254 742 1,341 973 181 4,491
Depreciation and impairment losses at 1.1.2020 -260 -472 -996 -523 - -2,251
Foreign currency translation adjustments 10 17 46 19 - 92
Depreciation for the year -24 -88 -145 -110 - -367
Disposals during the year - 7 85 52 - 144
Transferred to/from other items - 11 19 - - 30
Depreciation and impairment losses at 31.12.2020 -274 -525 -991 -562 - -2,352
Carrying amount at 31.12.2020 980 217 350 411 181 2,139
Cost at 1.1.2019 1,097 703 1,269 783 76 3,928
Foreign currency translation adjustments 9 4 19 15 - 47
Additions during the year 38 31 172 169 126 536
Additions relating to acquisitions - 1 15 9 - 25
Disposals during the year -1 -86 -110 -26 -1 -224
Transferred to/from other items 4 59 3 - -66 -
Cost at 31.12.2019 1,147 712 1,368 950 135 4,312
Depreciation and impairment losses at 1.1.2019 -238 -482 -943 -442 - -2,105
Foreign currency translation adjustments -2 -2 -19 -11 - -34
Depreciation for the year -21 -72 -138 -94 - -325
Disposals during the year 1 84 104 24 - 213
Depreciation and impairment losses at 31.12.2019 -260 -472 -996 -523 - -2,251
Carrying amount at 31.12.2019 887 240 372 427 135 2,061
98
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 3 · Asset base
Accounting policies
Property, plant and equipment are recognised at cost less
accumulated depreciation and impairment losses. Cost is
defined as the acquisition price and costs directly relating
to the acquisition until such time as the particular asset is
ready for use. For assets produced by the Group, cost
includes all costs directly attributable to the production of
such assets, including materials, components, sub-supplies
and payroll. If the acquisition or the use of an asset
requires the Group to defray costs for the demolition or
restoration of such asset, the calculated costs hereof are
recognised as a provision and as part of the cost of the
particular asset, respectively.
The cost of a total asset is divided into various elements,
which will be depreciated separately if their useful lives
are not the same.
Property, plant and equipment are depreciated on a
straight-line basis over their estimated useful lives. Land
is not depreciated.
Accounting estimates and judgements
The depreciation basis is cost less the estimated residual
value of an asset after the end of its useful life. The
residual value is the estimated amount, which could after
deduction of costs to sell be obtained through the sale of
the asset today, such asset already having the age and
being in the state of repair expected after the end of its
useful life. The residual value is determined at the time of
acquisition and is reviewed annually. If the residual value
exceeds the carrying amount, depreciation will be
discontinued.
Buildings 30-50 years
Technical installations 10 years
Plant and machinery 3-5 years
Other plant, fixtures and
operating equipment 3-5 years
IT hardware 3-5 years
Leasehold improvements Up to 10 years
Depreciation methods, useful lives and residual values
are reviewed annually. Property, plant and equipment are
written down to their recoverable amounts, if these are
lower than their carrying amounts.
3.2 Property, plant and equipment
99
Demant · Annual Report 2020
Section 3 · Asset base
3.3 Leases
(DKK million)
2020 2019
Lease assets at 1.1. 1,937 2,029
Foreign currency translation adjustments -59 35
Additions during the year 391 372
Additions relating to acquisitions 122 35
Disposals during the year -51 -64
Depreciations during the year -493 -470
Lease assets at 31.12. 1,847 1,937
Lease liabilities at 1.1. 1,964 2,038
Foreign currency translation adjustments -71 36
Additions during the year 388 372
Additions relating to acquisitions 119 35
Covid-19-related rent concessions -12 -
Disposals during the year -53 -71
Payments -442 -446
Lease liabilities at 31.12. 1,893 1,964
Current lease liabilities 456 418
Non-current lease liabilities 1,437 1,546
Amounts recognised in the income statement:
Variable lease payments 20 20
Short-term lease expenses 21 14
Low-value assets 6 3
100
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 3 · Asset base
The Group’s leases primarily comprise agreements
regarding properties. The lease terms are of various length
and may contain extension and termination options.
Management exercises significant judgement in determin-
ing whether it is reasonably certain that these extension
and termination options will be exercised.
Accounting policies
Lease assets
Lease assets and liabilities are recognised in the balance
sheet at the commencement date of the contract, if it is or
contains a lease. Lease assets are recognised at cost less
accumulated depreciation and impairment. Cost is defined
as the lease liability adjusted for any lease payments made
at or before the commencement date. Lease assets are
depreciated on a straight-line basis over the lease term.
Lease liabilities
Lease liabilities are measured at the present value of
future payments, using the interest rate implicit in the lease
agreement. Lease payments are discounted using the
Group’s incremental borrowing rate adjusted for the
functional currencies and length of the lease term, if the
interest rate implicit in the lease agreement cannot be
determined. Lease payments contain fixed payments less
any lease incentives receivable, variable lease payment
that depend on an index or a rate as well as payments of
penalties for terminating the lease, if the terms of the lease
warrants that the Group exercises that option.
The lease liability is remeasured if or when the future
payment or lease term changes. Any net remeasurement
of the lease liability is recognised as an adjustment to the
lease asset. If the carrying amount of the lease asset is
reduced to zero, the adjustment will be recognised in the
income statement.
Additional information
Short-term lease expenses, low-value assets and variable
lease payments are classified as operating expenses in the
income statement.
IFRS 16 Covid-19-Related Rent Concessions amendment
IFRS 16 is amended to exempt lessees, who have received
rent concessions as a direct consequence of the Covid-19
pandemic, from the requirement to assess whether the
concession is a lease modification. The Group has decided
to apply the practical expedient to all rent concessions that
meet the conditions as outlined in paragraph 46B of IFRS
16. This resulted in accounting for the concession as a
variable lease payment. The rent concessions recognised in
the income statement for 2020 amount to DKK 12 million.
Accounting estimates and judgements
Expired leases
The lease term is the period during which the lease
contract is enforceable. If the original expiry date of a
lease contract has passed, typically in the case of property
leases, but the contract continues without a determined
expiry date, the lease term is set for an estimated period
during which the lease contract is expected to be enforcea-
ble. This estimate is based on Management’s judgement
and takes into consideration the location of the lease,
capitalised leasehold improvements and the experience
with similar leases for the specific area.
Extension and termination options
When determining the lease term for lease agreements
containing extension and termination options, Management
considers circumstances that create a financial incentive
to exercise an extension option or not to exercise a termi-
nation option. Extension and termination options are only
included in the lease term if it is reasonably certain that
a lease will be extended/terminated.
3.3 Leases (continued)
101
Demant · Annual Report 2020
3.4 Other non-current assets
Other receivables
(DKK million)
Investments
in associates
and joint
ventures
Receivables
from
associates
and joint
ventures
Customer
loans
Other
Cost at 1.1.2020 946 182 531 94
Foreign currency translation adjustments -38 -11 -43 -5
Additions during the year 7 92 131 3
Additions relating to acquisitions 132 7 - 1
Disposals related to step-up acquisitions of associates -165 - - -
Disposals, repayments etc. during the year -83 -23 -83 -3
Movement to current assets - - -90 -4
Cost at 31.12.2020 799 247 446 86
Value adjustments at 1.1.2020 17 - -8 -19
Foreign currency translation adjustments 1 - 1 2
Share of prot after tax 48 - - -
Dividends received -41 - - -
Disposals relating to step-up acquisitions of associates -74 - - -
Other adjustments 83 - -2 -2
Disposals during the year - - - -1
Value adjustments at 31.12.2020 34 - -9 -20
Carrying amount at 31.12.2020 833 247 437 66
Cost at 1.1.2019 895 167 522 86
Foreign currency translation adjustments 8 6 21 -1
Additions during the year 84 55 247 17
Additions relating to acquisitions 46 - - 2
Disposals related to step-up acquisitions of associates -87 - - -
Disposals, repayments etc. during the year - -44 -82 -6
Movement to current assets - -2 -177 -4
Cost at 31.12.2019 946 182 531 94
Value adjustments at 1.1.2019 88 - -26 -18
Foreign currency translation adjustments - - -1 -2
Share of prot after tax 111 - - -
Dividends received -183 - - -
Disposals relating to step-up acquisitions of associates 1 - - -
Other adjustments - - -7 1
Disposals during the year - - 26 -
Value adjustments at 31.12.2019 17 - -8 -19
Carrying amount at 31.12.2019 963 182 523 75
Please refer to Subsidiaries, associates and joint ventures
on page 148 for a list of associates and joint ventures.
Section 3 · Asset base
102
Demant · Annual Report 2020 Demant · Annual Report 2020
Transactions with associates and joint ventures
In 2020, the Group recognised revenue from associates
and joint ventures of DKK 294 million (DKK 457 million in
2019), received royalties from and paid license fees to
associates and joint ventures, amounting to net income of
DKK 1 million (net income of DKK 1 million in 2019) and
received dividends from associates and joint ventures in
the amount of DKK 41 million (DKK 183 million in 2019).
In 2020, the Group received interest income from associ-
ates and joint ventures in the amount of DKK 4 million
(DKK 3 million in 2019).
Under the provisions of contracts concluded with associ-
ates and joint ventures, the Group is not entitled to receive
dividends from certain associates and joint ventures. This
is reflected in the profit included in the income statement,
as no profit is recognised if the Group is not entitled to
receive dividends.
Accounting policies
Investments in associates and joint ventures are
recognised and measured using the equity method, i.e.
investments are recognised in the balance sheet at the
proportionate share of the equity value determined in
accordance with the Group’s accounting policies after the
deduction and addition of proportionate intra-group gains
and losses, respectively, and after the addition of the
carrying amount of any goodwill. The proportionate
shares of profit after tax in associates and joint ventures
are recognised in the income statement after the year’s
changes in unrealised intra-group profits less any
impairment loss relating to goodwill.
The proportionate shares of all transactions and events,
which have been recognised in other comprehensive
income in associates and joint ventures, are recognised
in consolidated other comprehensive income. On the
acquisition of interests in associates and joint ventures,
the acquisition method is applied.
Associates Joint ventures
(DKK million)
2020 2019 2020 2019
Financial information from nancial statements(Group share)
Revenue 518 699 - 563
Net prot for the year 50 52 - 66
Comprehensive income 50 52 - 66
3.4 Other non-current assets (continued)
Section 3 · Asset base
103
Demant · Annual Report 2020
Section 3 · Asset base
For accounting policies on segment information, please
refer to Note 1.1.
3.5 Non-current assets by geographic region
(DKK million)
2020 2019
Denmark 2,261 1,880
Other Europe 5,940 5,588
North America 5,840 6,308
Pacic 798 813
Asia 272 252
Other countries 129 43
Non-current assets 15,240 14,884
104
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 3 · Asset base
3.6 Impairment testing
Impairment testing is carried out for the Group´s two
cash-generating units, Hearing Healthcare and
Communications. Based on the impairment tests per-
formed, a material excess value was identified in each
cash-generating unit, compared to the carrying amount,
for which reason no impairment of goodwill was made at
31 December 2020.
Future cash flows are based on the budget for 2021,
on strategy plans and on projections hereof. Projections
extending beyond 2021 are based on general parameters,
such as expected market growth, selling prices and
profitability assumptions. The terminal value for the period
after 2025 is determined on the assumption of 2% growth.
The pre-tax discount rate is 7% for Hearing Healthcare
and 12% for Communications. Sensitivity calculations
show that even a significant increase in the discount rate
or a significant reduction of the growth assumptions will
not change the outcome of the impairment test. Apart from
goodwill, all intangible assets have limited useful lives.
The market capitalisation of the Company on Nasdaq
Copenhagen by far exceeds the equity value of the
Company, lending further support to the conclusion that
we had no need for impairment in 2020.
Accounting policies
The carrying amounts of property, plant and equipment
and intangible assets with definite useful lives as well as
investments in associates and joint ventures are reviewed
at the balance sheet date to determine whether there are
indications of impairment. If so, the recoverable amount of
the particular asset is calculated to determine the need for
impairment, if any. The recoverable amounts of goodwill
and other intangible assets with indefinite useful lives will
be estimated, whether or not there are indications of
impairment.
The recoverable amount is estimated for the smallest
cash-generating unit of which the asset is part. The
recoverable amount is determined as the higher of the fair
value of the asset or cash-generating unit less costs to sell
and the value in use of such asset or unit. On determina-
tion of the value in use, estimated future cash flows will
be discounted to their present values using a discount rate
that reflects partly current market valuations of the time
value of money, and partly the special risks attached to the
particular asset or cash-generating unit for which no
adjustment has been made in the estimated future cash
flows. If the recoverable amount of a particular asset or
cash-generating unit is lower than its carrying amount,
such asset or unit is written down to its recoverable
amount.
Impairment losses are recognised in the income statement.
On any subsequent reversal of impairment losses due to
changes in the judgements on which the calculation of the
recoverable amount is based, the carrying amount of an
asset or cashgenerating unit is increased to the adjusted
estimate of the recoverable amount, however not exceed-
ing the carrying amount of the asset or cash-generating
unit, had the particular asset or cash-generating unit not
been written down. Impairment of goodwill is not reversed.
105
Demant · Annual Report 2020
Section 4
Capital structure
and nancial
management
Net
interest-bearing debt
including lease liabilities
7,135
DKK MILLION
Net nancial items
194
DKK MILLION
106
Demant · Annual Report 2020 Demant · Annual Report 2020
4.1 Financial risk management and capital structure
Policies relating to financial risk management and
capital structure
Financial risk management concentrates on identifying
risks in respect of exchange rates, interest rates, credit and
liquidity with a view to protecting the Group against
potential losses and ensuring that Management’s forecasts
for the current year are only to a limited extent affected by
changes or events in the surrounding world – be they
changes in exchange rates or in interest rates. It is Group
policy to exclusively hedge commercial risks and not to
undertake any financial transactions of a speculative
nature.
Interest rate risks
In previous years, we only hedged interest rate risks on
Group loans to a limited extent, as the Group only had
limited debt compared to its volume of activities. Because
of the Group’s high level of cash generation and relatively
low financial gearing, the majority of our loans are raised
on floating terms and predominantly as short-term
commitments, resulting in a low level of interest expenses.
In order to secure relatively low interest rates for the Group
on the long term and as a consequence of our attractive
funding possibilities in the financial market, the Group now
partly funds its debt through medium-term committed
facilities with fixed rates and through financial instruments,
which limits the interest rate risk. The Group’s net inter-
est-bearing debt amounted to DKK 7,135 million as of
31 December 2020, and the gearing multiple was 2.8
(NIBD/EBITDA).
Credit risks
The Group’s credit risks relate primarily to trade receivables
and loans to customers or business partners. Our customer
base is fragmented, so in general, credit risks only involve
minor losses on loans to individual customers. The accu-
mulated revenue from our ten largest customers accounts
for approx. 11% of total consolidated revenue. Further-
more, when granting loans, we require that our counter-
parties provide security in their business. Overall, we
therefore estimate that the risk relative to our total credit
exposure is well-balanced at Group level.
The maximum credit risk relating to receivables matches
the carrying amounts of such receivables. Overall, the
Group has limited deposits with financial institutions for
which reason the credit risk of deposits is considered to
be low. In 2020, the Group made an additional provision
for bad debt of DKK 150 million, reflecting the increased
risk of customers defaulting on their debt due to coronavi-
rus. The provision was partly reversed by DKK 50 million
towards the end of the year as a result of an updated risk
assessment.
Liquidity risks
The Group aims to have sufficient cash resources to be
able to take appropriate steps in case of unforeseen
fluctuations in cash outflows. We have access to consider-
able undrawn credit facilities, and the liquidity risk is
therefore considered to be low. We are of the opinion that
the Group has strong cash flows and a satisfactory credit
rating to secure the current inflow of working capital and
funds for potential acquisitions. Neither in previous years
nor in the financial year 2020 has the Group defaulted
on any loan agreements.
Section 4 · Capital structure and nancial management 107
Demant · Annual Report 2020
Section 4 · Capital structure and nancial management
In addition to the foreign exchange items above, the
consolidated income statement is also affected by foreign
exchange hedging instruments as described in Note 2.3 as
well as by foreign exchange effects of balance sheet items,
affecting production costs by a loss of DKK 83 million in
2020 (a loss of DKK 5 million in 2019).
Accounting policies
Net financial items mainly consist of interest income and
interest expenses, credit card fees and bank fees and also
include interest on lease liabilities, the unwinding of
discounts on financial assets and liabilities, fair value
adjustments of “shadow shares” under share-based
remuneration programmes as well as certain realised and
unrealised foreign exchange gains and losses. Interest
income and interest expenses are accrued based on the
principal amount and the effective interest rate.
The effective interest rate is the discount rate used for
discounting expected future payments attaching to the
financial asset or financial liability in order for the present
value to match the carrying amount of such asset or
liability.
4.2 Net nancial items
(DKK million)
2020 2019
Interest on cash and bank deposits 1 3
Interest on receivables, customer loans etc. 32 36
Other nancial income 1 1
Financial income from nancial assets measured at amortised cost 34 40
Foreign exchange gains, net 4 1
Financial income 38 41
Interest on bank debt, mortgages etc. -72 -117
Interest expense on lease liabilities -45 -46
Financial expenses on nancial liabilities measured at amortised cost -117 -163
Foreign exchange losses, net -1 -
Transaction costs -114 -118
Financial expenses -232 -281
Net nancial items -194 -240
108
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 4 · Capital structure and nancial management
As regards financial assets and liabilities, their carrying
amounts approximate their fair values. The following
non-financial item is included in the balance sheet and
represents the difference between the table above and
the balance sheet: Other liabilities DKK 351 million (DKK
405 million in 2019).
Accounting policies
Debt to credit institutions is recognised at the date of
borrowing at the proceeds received less transaction costs.
For subsequent periods, financial liabilities are measured
at amortised cost in order for the difference between
proceeds and the nominal value to be recognised as a
financial expense over the term of the loan.
On initial recognition, other financial liabilities are
measured at fair value and subsequently at amortised cost
using the effective interest method, and the difference
between proceeds and the nominal value is recognised in
the income statement as a financial expense over the term
of the loan.
4.3 Categories of nancial instruments
(DKK million)
2020 2019
Unrealised gains on nancial contracts 81 13
Financial assets used as hedging instruments 81 13
Receivables from associates and joint ventures 358 361
Customer loans 610 714
Other receivables 334 405
Trade receivables 2,808 3,209
Cash 952 792
Financial assets at amortised cost 5,062 5,481
Other investments 14 16
Financial assets at fair value through prot/loss 14 16
Unrealised losses on nancial contracts -14 -43
Financial liabilities used as hedging instruments -14 -43
Debt to credit institutions etc. -5,930 -4,687
Short-term bank facilities etc. -1,181 -3,338
Lease liabilities -1,893 -1,964
Trade payables -802 -652
Other liabilities -1,763 -1,379
Financial liabilities measured at amortised cost -11,569 -12,020
109
Demant · Annual Report 2020
Trade payables and other liabilities have a contractual
maturity of less than one year, with the exception of other
liabilities of DKK 313 million (DKK 203 million in 2019),
which have a contractual maturity of 1-10 years. The
contractual cash flows approximate their carrying
amounts.
Borrowings broken down by currency: 29% in US dollars
(23% in 2019), 55% in Danish kroner (51% in 2019), 16%
in euros (24% in 2019), 0% in Canadian dollars (1% in
2019) and 0% in other currencies (1% in 2019).
Reconciliation of liabilities arising from financing
activities
The table below shows the changes in consolidated
liabilities arising from financing activities, including both
cash and non-cash changes. Liabilities arising from
financing activities are those for which cash flows were,
or future cash flows will be, classified in the consolidated
cash flow statement as cash flows from financing
activities.
4.4 Net interest-bearing debt, liquidity and interest rate risks
(DKK million)
Contractual cash ows
Carrying
amount
Weighted
average
effective
interest
rate
Less than
1 year
1-5 years More than
5 years
Total
2020
Interest-bearing receivables 241 491 218 950 917
Cash 955 - - 955 952
Interest-bearing assets 1,196 491 218 1,905 1,869 1.6%
Debt to credit institutions etc. -2,441 -3,525 -1 -5,967 -5,930
Short-term bank facilities etc. -1,201 - - -1,201 -1,181
Borrowings -3,642 -3,525 -1 -7,168 -7,111 0.6%
Net interest-bearing debt -2,447 -3,034 217 -5,263 -5,242 0.2%
Lease liabilities -436 -1,255 -411 -2,102 -1,893
Net interest-bearing debt including lease liabilities -2,882 -4,289 -194 -7,365 -7,135
2019
Interest-bearing receivables 318 477 248 1,043 1,012
Cash 792 - - 792 792
Interest-bearing assets 1,110 477 248 1,835 1,804 1.9%
Debt to credit institutions etc. -2,070 -2,371 -165 -4,606 -4,687
Short-term bank facilities etc. -3,489 - - -3,489 -3,338
Borrowings -5,559 -2,371 -165 -8,095 -8,025 1.0%
Net interest-bearing debt -4,449 -1,894 83 -6,260 -6,221 0.8%
Lease liabilities -464 -1,251 -454 -2,169 -1,964
Net interest-bearing debt including lease liabilities -4,913 -3,145 -371 -8,429 -8,185
Section 4 · Capital structure and nancial management
110
Demant · Annual Report 2020 Demant · Annual Report 2020
The fair value of the interest cap (a strip of call options)
outstanding at the balance sheet date is DKK -2 million
(DKK -2 million in 2019), and the contractual value of
interest cap is DKK 650 million (DKK 650 million in 2019).
The cap will run until 2023.
Sensitivity analysis in respect of interest rates
Based on consolidated net debt at the end of the 2020
financial year, a rise of 1 percentage point in the general
interest rate level will cause an increase in consolidated
annual interest expenses before tax of approx. DKK 10
million (DKK 17 million in 2019). About 59% (56% in 2019)
of consolidated interest-bearing debt is subject to fixed or
limited interest rates, partly due to a bought cap (a strip of
call options), and partly due to loans being raised at fixed
interest rates.
4.4 Net interest-bearing debt, liquidity and interest rate risks (continued)
Non-cash changes
(DKK million)
2019 Cash ow
from
nancing
activities
Net cash
ow from
overdraft
IFRS 16
transition
Acqui-
sitions
Foreign
exchange
movement
Other
additions
Disposals 2020
Lease liabilities -1,964 442 - - -119 71 -388 65 -1,893
Debt to credit institutions etc. -4,687 -1,364 154 - -40 7 - - -5,930
Short-term bank facilities -3,338 2,157 -154 - - 154 - - -1,181
Liabilities from nancing
activities -9,989 1,235 - - -159 232 -388 65 -9,004
Interest-bearing liabilities -9,989 1,235 - - -159 232 -388 65 -9,004
Non-cash changes
(DKK million)
2018 Cash ow
from
nancing
activities
Net cash
ow from
overdraft
IFRS 16
transition
Acqui-
sitions
Foreign
exchange
movement
Other
additions
Disposals 2019
Lease liabilities - 446 - -2,039 -35 -35 -372 71 -1,964
Debt to credit institutions etc. -3,113 -1,557 - - -16 -1 - - -4,687
Short-term bank facilities -3,633 734 -382 - - -57 - - -3,338
Liabilities from nancing
activities
-6,746 -377 -382 -2,039 -51 -93 -372 71 -9,989
Overdraft -382 - 382 - - - - - -
Interest-bearing liabilities -7,128 -377 - -2,039 -51 -93 -372 71 -9,989
The Group has limited the maximum interest rates on part of its
non-current debt through an interest rate cap.
Interest cap
(DKK million)
2020 2019
Expiry Interest
rate/strike
Contractual
amount
at year-end
Positive
fair value
at year-end
Negative
fair value
at year-end
Expiry Interest
rate/strike
Contractual
amount
at year end
Positive
fair value
at year-end
Negative
fair value
at year-end
DKK/DKK 2023 0% 650 - 2 2022 0% 650 - 2
650 - 2 650 - 2
Section 4 · Capital structure and nancial management
111
Demant · Annual Report 2020
4.5 Fair value hierarchy
Methods and judgements for calculation of fair values
Other investments
Other investments are assessed on the basis of their equity
value.
Derivatives
Forward exchange contracts are assessed using discounted
cash flow valuation techniques. Future cash flows are
based on forward exchange rates from observable forward
exchange rates at the end of the reporting period and on
contractual forward exchange rates discounted at a rate
that reflects the credit risk related to various counterpar-
ties.
Interest swaps are assessed using discounted cash flow
valuation techniques. Future cash flows are based on
observable forward yield curves at the end of the reporting
period and on contractual interest rates discounted at a
rate that reflects the credit risk related to various counter-
parties.
The value of a cap is assessed using discounted cash flow
valuation techniques. A cap consists of a series of interest
rate options (IRGs) with the same strike rate. The individual
interest rate options each cover an interest period. The key
elements when pricing interest rate options are strike rate,
forward rate, maturity and volatility. The value of an
interest rate option is made up of the intrinsic value and
the time value of such option. The value of a cap is the
combined value of the individual IRGs.
Contingent considerations
Contingent considerations are measured at their fair values
based on the contractual terms of the contingent consider-
ations and on non-observable inputs (level 3), such as the
financial performance and purchasing patterns of the
acquired enterprises for a period of typically 1-5 years
after the date of acquisition.
Fair value hierarchy for assets and liabilities measured at
fair value in the balance sheet
Financial instruments measured at fair value are broken
down according to the fair value hierarchy:
• Listed prices in an active market for the same type
of instrument (level 1)
• Listed prices in an active market for similar assets or
liabilities or other valuation methods, with all significant
inputs being based on observable market data (level 2)
• Valuation methods, with any significant inputs not being
based on observable market data (level 3)
Accounting policies
On initial recognition, other investments are classified
as assets available for sale, recognised at fair value and
subsequently measured at fair value through profit and
loss. Unrealised value adjustments are recognised in other
comprehensive income. On realisation, value adjustments
are transferred to net financial items in the income state-
ment. The determination of fair values is based on equity
values. Contingent considerations arising from the
acquisition of enterprises and activities are recognised at
fair value at the time of acquisition. The obligations are
re-evaluated on a recurring basis at fair value.
Section 4 · Capital structure and nancial management
112
Demant · Annual Report 2020 Demant · Annual Report 2020
There have been no transfers between level 1 and 2 in the
2020 and 2019 financial years
Financial instruments measured at fair value in the balance
sheet based on valuation methods, with any significant
inputs not being based on observable market data (level 3):
4.5 Fair value hiearchy (continued)
(DKK million)
2020 2019
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Financial assets used as hedging
instruments - 81 - 81 - 13 - 13
Other investments - - 14 14 - - 16 16
Financial liabilities used as hedging
instruments - -14 - -14 - -43 - -43
Contingent considerations - - -121 -121 - - -128 -128
Level 3 Assets and liabilities
Financial assets Contingent considerations
(DKK million)
2020 2019 2020 2019
Carrying amount at 1.1. 16 14 -128 -170
Foreign currency translation adjustment -1 1 7 -2
Acquisitions - - -76 -36
Disposals, repayments, settlements etc. -1 - 56 70
Other adjustments - 1 20 10
Carrying amount at 31.12. 14 16 -121 -128
Section 4 · Capital structure and nancial management
113
Demant · Annual Report 2020
Tax on prot
202
DKK MILLION
Effective tax rate*
15.1%
Section 5
Tax
*The effective tax rate for 2020 reects the
non-taxable nature of the positive one-off
fair value adjustment realised as part of the
consolidation of EPOS.
114
Demant · Annual Report 2020 Demant · Annual Report 2020
The permanent differences are extraordinarily high in 2020
due to the fact that the Group is exempt from paying tax
on the positive one-off fair value adjustment of DKK 453
million realised as part of the consolidation of EPOS.
Accounting policies
Tax on the year’s profit includes current tax and any
changes in deferred tax. Current tax includes taxes payable
determined on the basis of the estimated taxable income
for the year and any prior-year tax adjustments. Tax on
changes in equity and other comprehensive income is
recognised directly in equity and in other comprehensive
income, respectively. Foreign currency translation adjust-
ments of deferred tax are recognised as part of the year’s
adjustments of deferred tax.
Current tax liabilities or tax receivables are recognised in
the balance sheet and determined as tax calculated on the
year’s taxable income adjusted for any tax on account. The
tax rates prevailing at the balance sheet date are used for
calculation of the year’s taxable income.
5.1 Tax on prot
(DKK million)
2020 2019
Current tax on prot for the year -224 -405
Adjustment of current tax, prior years 48 21
Change in deferred tax 8 -42
Adjustment of deferred tax, prior years -32 -14
Impact of changes in corporate tax rates -2 -4
Tax on prot for the year -202 -444
Reconciliation of tax rates:
Danish corporate tax rate 22.0% 22.0%
Differences between tax rates of non-Danish enterprises and Danish corporate tax rate 1.3% 1.5%
Impact of changes in corporate tax rates 0.2% 0.2%
Impact of unrecognised tax assets, net 1.1% 0.2%
Permanent differences -11.6% -0.4%
Other items including prior-year adjustments 2.1% -0.3%
Effective tax rate 15.1% 23.2%
Section 5 · Tax
115
Demant · Annual Report 2020
Section 5 · Tax
5.2 Deferred tax
(DKK million)
2020 2019
Deferred tax recognised in the balance sheet:
Deferred tax assets 553 551
Deferred tax liabilities -339 -314
Deferred tax, net at 31.12. 214 237
Deferred tax, net at 1.1. 237 281
Foreign currency translation adjustments -2 2
Changes in deferred tax assets 8 -42
Additions relating to acquisitions -2 -3
Adjustment of deferred tax, prior years -32 -14
Impact of changes in corporate tax rates -2 -4
Deferred tax relating to changes in equity, net 7 17
Deferred tax, net at 31.12 214 237
The tax value of deferred tax assets not recognised is DKK
111 million (DKK 130 million in 2019) and relates mainly to
tax losses and tax credits for which there is considerable
uncertainty about their future utilisation. The tax losses
carried forward will not expire in the near future.
116
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 5 · Tax
(DKK million)
Temporary
differences
at 1.1.2020
Foreign
currency
translation
adjust-
ments
Acquisi-
tions
Recognised
in prot
for the year
Recognised
in other
comprehen-
sive income
Temporary
differences
at
31.12.2020
Breakdown of the Group's temporary
differences and changes:
Intangible assets -365 21 -1 -56 - -401
Property, plant and equipment -29 - 2 -16 - -43
Leased assets 6 -1 - 6 - 11
Inventories 241 -2 - 14 - 253
Receivables 58 -5 - 13 - 66
Provisions 79 17 -1 -1 - 94
Deferred income 183 -23 - -1 - 159
Tax losses 63 -9 - 40 - 94
Other 1 - -2 -25 7 -19
Total 237 -2 -2 -26 7 214
(DKK million)
Temporary
differences
at 1.1.2019
Foreign
currency
translation
adjust-
ments
Acquisi-
tions
Recognised
in prot
for the year
Recognised
in other
comprehen-
sive income
Temporary
differences
at
31.12.2019
Breakdown of the Group's temporary
differences and changes:
Intangible assets -230 -4 -3 -128 - -365
Property, plant and equipment -26 - - -3 - -29
Leased assets - - - 6 - 6
Inventories 209 - - 32 - 241
Receivables 38 - - 20 - 58
Provisions 83 2 - -6 - 79
Deferred income 137 2 - 44 - 183
Tax losses 84 2 - -23 - 63
Other -14 - - -2 17 1
Total 281 2 -3 -60 17 237
Accounting policies
Deferred tax is recognised using the balance sheet liability
method on any temporary differences between the tax base
of assets and liabilities and their carrying amounts, except
for deferred tax on temporary differences arisen either on
initial recognition of goodwill or on initial recognition of a
transaction that is not a business combination, with the
temporary difference ascertained on initial recognition
affecting neither net profits nor taxable income.
Deferred tax is determined on the basis of the tax rules and
rates prevailing at the balance sheet date in a particular
country. The effect of any changes in tax rates on deferred
tax is included in tax on the year’s profit, unless such
deferred tax is attributable to items previously recognised
directly in equity or in other comprehensive income. In the
latter case, such changes will also be recognised directly in
equity or in other comprehensive income. The tax base of
a loss, if any, which may be set off against future taxable
income, is carried forward and set off against deferred tax
in the same legal tax entity and jurisdiction.
Accounting estimates and judgements
Deferred tax assets, including the tax value of any tax losses
allowed for carryforward, are recognised in the balance
sheet at the estimated realisable value of such assets, either
by a set-off against a deferred tax liability or by a net asset
to be set off against future positive taxable income. At the
balance sheet date, an assessment is made as to whether it
is probable that sufficient taxable income will be available
in the future against which the deferred tax asset can be
utilised. Deferred tax on temporary differences between the
carrying amounts and the tax values of investments in
subsidiaries, associates and joint ventures is recognised,
unless the Parent is able to control the time of realisation of
such deferred tax, and it is probable that such deferred tax
will not be realised as current tax in the foreseeable future.
Deferred tax is recognised in respect of eliminations of
intra-group profits and losses.
5.2 Deferred tax (Continued)
117
Demant · Annual Report 2020
Section 6
Acquisitions
118
Demant · Annual Report 2020 Demant · Annual Report 2020
Section 6 · Acquisitions
6.1 Acquisition of enterprises and activities
Hearing Healthcare Communi-
cation
Total
(DKK million)
North
America
Europe Asia
Pacic
Global 2020
2020
Intangible assets 8 6 - 9 23
Property, plant and equipment 5 30 - 15 50
Other non-current assets 14 235 - 16 265
Inventories 5 13 - 73 91
Current receivables 14 124 - 112 250
Cash and cash equivalents 8 27 - 34 69
Non-current liabilities -12 -101 - -13 -126
Current liabilities -11 -127 - -186 -324
Acquired net assets 31 207 - 60 298
Goodwill 185 265 - 417 867
Acquisition cost 216 472 - 477 1,165
Carrying amount of non-controlling interests on obtaining control -7 -204 - -24 -235
Fair value adjustment of non-controlling interests on obtaining
control
2 -3 - -453 -454
Contingent consideration and deferred payments -62 -14 - - -76
Acquired cash and cash equivalents -8 -27 - -34 -69
Cash acquisition cost 141 224 - -34 331
Figures are shown at fair value on the aquisition date.
2019
Intangible assets 10 17 - - 27
Property, plant and equipment 5 10 10 - 25
Other non-current assets 55 28 2 - 85
Inventories 7 - 14 - 21
Current receivables 20 15 16 - 51
Cash and cash equivalents 25 25 5 - 55
Non-current liabilities -8 -24 -3 - -35
Current liabilities -22 -32 -27 - -81
Acquired net assets 92 39 17 - 148
Goodwill 286 127 78 - 491
Acquisition cost 378 166 95 - 639
Carrying amount of non-controlling interests on obtaining control -55 - -31 - -86
Fair value adjustment of non-controlling interests on obtaining
control
- -8 -5 - -13
Contingent consideration and deferred payments -28 -7 -1 - -36
Acquired cash and cash equivalents -25 -25 -5 - -55
Cash acquisition cost 270 126 53 - 449
Figures are shown at fair value on the aquisition date.
119
Demant · Annual Report 2020
On 1 January 2020, the ownership structure of Sennheiser
Communications A/S was changed through a demerger
whereby Demant A/S obtained full control of the Gaming
and Enterprise Solutions segments, and German
Sennheiser electronic GmbH & Co. KG (“Sennheiser KG”)
obtained control of the Mobile segment. The purchase
price for the Gaming and Enterprise Solutions segments
was DKK 477 million. The demerger is based on a cashfree
split of ownership.
On 2 January 2020, Demant A/S acquired an additional
interest in Audilab SAS, which is a large retail network of
hearing aid clinics in France, based on a model of shared
ownership with audiologists. We previously held a
non-controlling interest in the network, and we are now
the direct owner of 95% of the shares in Audilab SAS.
The total fair value of 95% of the shares in Audilab SAS,
on the acquisition date, was DKK 381 million.
The Group’s other acquisitions in 2020 consist of a number
of minor retail acquisitions, in North America and Europe.
In respect of these acquisitions, we paid acquisition costs
exceeding the fair values of the acquired assets, liabilities
and contingent liabilities. Such positive balances in value
can be attributed to expected synergies between the
activities of the acquired entities and our existing activities,
to the future growth opportunities and to the value of staff
competencies in the acquired entities. These synergies are
not recognised separately from goodwill, as they are not
separately identifiable.
At the time of acquisition, non-controlling interests’ shares
of acquisitions were measured at their proportionate
shares of the total fair value of the acquired entities includ-
ing goodwill. On obtaining a controlling interest through
step acquisitions, previously held non-controlling interests
are at the time of obtaining control included at fair value
with fair value adjustments in the income statement.
In 2020, a few adjustments were made to the preliminary
recognition of acquisitions made in 2019. These
adjustments were made in respect of payments made,
contingent considerations provided, and net assets and
goodwill acquired. The impact of these adjustments on
goodwill was DKK 1 million (DKK 2 million in 2019), the
impact on contingent considerations was DKK 0 million
(DKK 3 million in 2019). In relation to acquisitions with final
recognition in 2015-2019, adjustments were made in 2020
in respect of estimated contingent considerations. Such
adjustments are recognised in the income statement.
The total impact on the income statement of fair value
adjustments of non-controlling interests in step acquisi-
tions amounted to DKK 454 million (DKK 13 million in
2019), and adjustments of contingent considerations made
via the income statement of DKK 16 million (DKK 9 million
in 2019) are recognised under Distribution costs for acqui-
sitions and DKK 5 million are recognised in Share of profit
after tax, associates and joint ventures for associates and
joint ventures.
Of the total acquisition entries in 2020, the fair value
of estimated contingent considerations in the form of
earn-outs or deferred payments accounted for DKK 76
million (DKK 36 million in 2019). Such payments depend on
the results of the acquired entities for a period of 1-5 years
after takeover and can total a maximum of DKK 82 million
(DKK 39 million in 2019) for acquisitions.
The acquired assets include contractual receivables
amounting to DKK 126 million (DKK 38 million in 2019)
of which DKK 1 million (DKK 1 million in 2019) was
thought to be uncollectible at the date of the acquisition.
Of total goodwill in the amount of DKK 867 million
(DKK 491 million in 2019), DKK 91 million (DKK 198 million
in 2019) can be amortised for tax purposes.
Transaction costs in connection with acquisitions made in
2020 amounted to DKK 2 million (DKK 2 million in 2019),
which has been recognised under Distribution costs.
Revenue and profit generated by the acquired enterprises
since our acquisition in 2020 amount to DKK 1,428 million
(DKK 125 million in 2019) and DKK 143 million, excluding
one-off in EPOS of DKK 217 million (DKK 6 million in 2019),
respectively. Had such revenue and profit been consolidat-
ed on 1 January 2020, we estimate that consolidated pro-
forma revenue and profit would have been DKK 14,524
million (DKK 15,060 million in 2019) and DKK 1,136 million
(DKK 1,472 million in 2019), respectively. Without taking
synergies from our core business into account, we believe
that these pro forma figures reflect the level of consolidat-
ed earnings after our acquisition of the enterprises.
The above statements of the fair values of acquisitions are
not considered final until 12 months after takeover.
From the balance sheet date and until the date of financial
reporting in 2021, we have acquired additional distribution
enterprises. We are in the process of assessing their fair
value. The acquisition cost is expected to relate primarily
to goodwill.
6.1 Acquisition of enterprises and activities (continued)
Section 6 · Acquisitions
120
Demant · Annual Report 2020 Demant · Annual Report 2020
Accounting policies
Newly acquired or newly established enterprises are
recognised in the consolidated financial statements from
the time of acquisition or formation. The time of acquisition
is the date when control of the enterprise is transferred to
the Group. For Group accounting policies on control, please
refer to the consolidated financial statements in Note 9.1.
In respect of newly acquired enterprises, comparative
figures and key figures will not be restated. On acquiring
new enterprises of which the Group obtains control, the
purchase method is applied according to which their
identified assets, liabilities and contingent liabilities are
measured at their fair values on the acquisition date. Any
non-current assets acquired for the purpose of resale are,
however, measured at their fair values less expected cost
of disposal. Restructuring costs are solely recognised in the
pre-acquisition balance sheet if they are a liability for the
acquired enterprise. Any tax effect of revaluations will be
taken into account.
The acquisition cost of an enterprise consists of the fair
value of the consideration paid for the enterprise with
addition of fair value of previously held interests in the
acquiree. If the final consideration is conditional upon one
or more future events, the consideration will be recognised
at the fair value on acquisition. Any subsequent adjust-
ment of contingent consideration is recognised directly in
the income statement, unless the adjustment is the result
of new information about conditions prevailing on the
acquisition date, and this information becomes available
up to 12 months after the acquisition date. Transaction
costs are recognised directly in the income statement
when incurred. If costs exceed the fair values of the assets,
liabilities and contingent liabilities identified on acquisition,
any remaining positive differences (goodwill) are recog-
nised in the balance sheet under intangible assets and
tested for impairment at least annually. If the carrying
amount of an asset exceeds its recoverable amount, it is
written down to such lower recoverable amount.
If, on the acquisition date, there are any uncertainties
with respect to identifying or measuring acquired assets,
liabilities or contingent liabilities or uncertainty with
respect to determining their cost, initial recognition is
made on the basis of provisionally calculated values.
Such provisionally calculated values may be adjusted, or
additional assets or liabilities may be recognised up to
12 months after the acquisition date, if new information
becomes available about conditions prevailing on the
acquisition date, which would have affected the calcula-
tion of values on that day, had such information been
known.
Accounting estimates and judgements
Identification of assets and liabilities
On recognition of assets and liabilities from business
combinations, Management judgements may be required
for the following areas:
• Intangible assets resulting from technology, customer
relationships, client lists or brand names
• Contingent consideration arrangements
Contingent consideration
Business combinations may include provisions that
additional payments of contingent considerations be
paid to the previous owners when certain events occur or
certain results are obtained. Management assesses on a
regular basis the judgements made in respect of the
particular acquisitions, taking sales run rates of the
acquired entity into account.
6.1 Acquisition of enterprises and activities (continued)
Section 6 · Acquisitions 121
Demant · Annual Report 2020
Section 7
Provisions, other
liabilities etc.
Provisions
322
DKK MILLION
Other liabilities
2,114
DKK MILLION
122
Demant · Annual Report 2020 Demant · Annual Report 2020
7.1 Provisions
(DKK million)
2020 2019
Staff-related provisions 50 46
Miscellaneous provisions 29 47
Other provisions 79 93
Dened benet plan liabilities, net 243 228
Provisions at 31.12. 322 321
Breakdown of provisions:
Non-current provisions 305 283
Current provisions 17 38
Provisions at 31.12. 322 321
Miscellaneous provisions relate to provisions for disputes etc. and are essentially expected to be applied within the next
five years.
(DKK million)
Restructuring
costs
Staff-related Miscel-
laneous
Total
Other provisions at 1.1.2020 - 46 47 93
Foreign currency translation adjustments - - -2 -2
Additions relating to acquisitions - - 1 1
Provisions during the year - - 19 19
Applied during the year - - -10 -10
Reversals during the year - 4 -26 -22
Other provisions at 31.12.2020 - 50 29 79
Breakdown of provisions:
Non-current provisions - 50 12 62
Current provisions - - 17 17
Other provisions at 31.12.2020 - 50 29 79
Other provisions at 1.1.2019 10 56 31 97
Foreign currency translation adjustments - 1 - 1
Additions relating to acquisitions - 1 - 1
Provisions during the year - - 32 32
Applied during the year -9 - -3 -12
Reversals during the year -1 -12 -13 -26
Other provisions at 31.12.2019 - 46 47 93
Breakdown of provisions:
Non-current provisions - 46 9 55
Current provisions - - 38 38
Other provisions at 31.12.2019 - 46 47 93
Section 7 · Provisions, other liabilities etc.
123
Demant · Annual Report 2020
Generally, the Group does not offer defined benefit plans,
but it has such plans in Switzerland, France and Germany
where they are required by law.
Defined benefit plan costs recognised in the income state-
ment amount to DKK 28 million (DKK 22 million in 2019),
accumulated actuarial loss recognised in the statement
of comprehensive income amount to DKK 129 million
(DKK 128 million in 2019).
The Group expects to pay approximately DKK 23 million in
2020 (DKK 25 million in 2019) into defined benefit plans.
Defined benefit obligations in the amount of DKK 117
million (DKK 107 million in 2019) will mature within
1-5 years and obligations in the amount of DKK 447
million (DKK 412 million in 2019) after five years.
If the discount rate is 0,5% higher (lower), the defined
benefit obligation would decrease with 8% (increase with
9%). If the expected salary growth rate is 0,5% higher
(lower) the defined benefit obligation would increase with
1% (decrease with 1%).
7.1 Provisions (continued)
(DKK million)
2020 2019
Present value of dened benet obligations:
Dened benet obligations at 1.1 519 413
Foreign currency translation adjustments -2 13
Additions relating to acquisitions - 1
Current service cost 28 21
Calculated interest on dened benet obligations 1 4
Actuarial gains/losses 11 55
Net benets paid -1 3
Contributions from plan participants 8 9
Dened benet obligations at 31.12. 564 519
Fair value of dened benet assets:
Dened benet assets at 1.1. 291 257
Foreign currency translation adjustments - 7
Expected return on dened benet assets - 3
Actuarial gains/losses 9 -
Contributions 22 21
Net benets paid -1 3
Dened benet assets 31.12. 321 291
Dened benet obligations recognised in the balance sheet, net 243 228
Return on dened benet assets:
Actual return on dened benet assets 9 3
Expected return on dened benet assets - 3
Actuarial gains/losses on dened benet assets 9 -
Assumptions:
Discount rate 0.1% 0.2%
Expected return on dened benet assets 0.0% 0.2%
Future salary increase rate 1.2% 1.3%
Section 7 · Provisions, other liabilities etc.
124
Demant · Annual Report 2020 Demant · Annual Report 2020
Accounting policies
Provisions are recognised if, as a result of an earlier event,
the Group has a legal or constructive obligation, and if the
settlement of such an obligation is expected to draw on
corporate financial resources, but there is uncertainty
about the timing or amount of the obligation. Provisions
are measured on a discounted basis based on
Management’s best estimate of the amount at which a
particular liability may be settled. The discount effect of
any changes in the present value of provisions is recog-
nised as a financial expense.
The Group has defined benefit plans and similar agree-
ments with some of its employees. As regards defined
contribution plans, the Group pays regular, fixed contribu-
tions to independent pension companies. Contributions are
recognised in the income statement for the period in which
employees have performed work entitling them to such
pension contributions. Contributions due are recognised
in the balance sheet as a liability.
As regards defined benefit plans, the Group is obliged to
pay a certain contribution when an employee covered by
such a plan retires, for instance a fixed amount or a
percentage of the employee’s final salary. An actuarial
calculation is made periodically of the accrued present
value of future benefits to which employees through their
past employment with the Group are entitled and which
are payable under the defined benefit plan. This defined
benefit obligation is calculated annually using the projected
unit credit method on the basis of judgements in respect of
the future development in for instance wage levels, interest
rates and inflation rates. The defined benefit obligation less
the fair value of any assets relating to the defined benefit
plan is recognised in the balance sheet under provisions.
Defined benefit costs are categorised as follows:
• Service costs, including current service costs,
past-service costs as well as gains and losses on
curtailments and settlements
• Net interest expense or income
• Remeasurements
Remeasurements, comprising actuarial gains and losses,
any effects of changes to the asset ceiling as well as return
on defined benefit assets, excluding interest, are reflected
immediately in the balance sheet with a charge or credit
recognised in other comprehensive income in the period in
which it occurs.
Remeasurements recognised in other comprehensive
income are reflected immediately in retained earnings and
are not reclassified to the income statement. Service costs
and net interest expenses or income are included in the
income statement as staff costs.
Other non-current employee benefits are recognised using
actuarial calculation. Actuarial gains or losses on such
benefits are recognised directly in the income statement.
Accounting estimates and judgements
Management assesses, on an ongoing basis, provisions for
restructuring costs and the likely outcome of pending and
probable lawsuits etc. (other provisions). When assessing
the likely outcome of lawsuits, Management bases its
assessment on internal and external legal advice and
established precedent. Provisions for restructuring costs
are based on the estimated costs of implementing restruc-
turing initiatives and thus on a number of assumptions
about future costs and events. For all provisions, the
outcome and final expense depend on future events,
which are by nature uncertain.
7.1 Provisions (continued)
Section 7 · Provisions, other liabilities etc. 125
Demant · Annual Report 2020
Product-related liabilities include standard warranties
and returned products etc. Staff-related liabilities include
holiday pay and payroll costs due.
The carrying amounts of other liabilities approximate the
fair values of such liabilities
Accounting policies
Other non-financial liabilities are recognised if, as a result
of an earlier event, the Group has a legal or constructive
obligation, and if the settlement of such obligation is
expected to draw on corporate financial resources. Other
non-financial liabilities are measured on a discounted
basis, and the discount effect of any changes in the
present value of the liabilities is recognised as a financial
expense.
On the sale of products with a right of return, a liability
is recognised in respect of the profit on products expected
to be returned and of any costs incurred with the return
of such products. Warranty commitments include an
obligation to remedy faulty or defective products during
the warranty period.
Accounting estimates and judgements
Liabilities in respect of service packages and warranties
are calculated on the basis of information on products sold,
related service and warranty periods and past experience
of costs incurred by the Group to fulfil its service and
warranty liabilities. Liabilities in respect of returns are
calculated based on information on products sold, related
rights concerning returns and past experience of products
being returned in the various markets. Consolidated
product-related liabilities are the sum of a large number of
small items, the sum changing constantly due to a large
number of transactions.
7.2 Other liabilities
(DKK million)
2020 2019
Product-related liabilities 351 343
Staff-related liabilities 738 567
Other debt, public authorities 374 239
Contingent considerations 121 128
Other costs payable 530 447
Other liabilities 2,114 1,724
Due within 1 year 1,801 1,521
Due within 1-5 years 313 203
Section 7 · Provisions, other liabilities etc.
126
Demant · Annual Report 2020 Demant · Annual Report 2020
Free products, service and some warranty-related services
mentioned above are provided free of charge to the
customer. Certain other warranty-related services are
paid by the customer in connection with delivery of the
related goods, but delivery of the service takes place 1-4
years after delivery of the goods. Please refer to Note 1.2
for a description of the nature of the deferred income.
Accounting policies
Deferred income includes income received or future
performance obligations relating to subsequent financial
years and is recognised as revenue when the Group
performs its obligations by transferring the goods or
services.
7.3 Deferred income
(DKK million)
2020 2019
Prepayments from customers 93 66
Future performance obligations:
Deferred warranty-related revenue 494 593
Deferred free products revenue 151 195
Deferred service revenue 179 187
Total 917 1,041
Expected recognition of revenue
Less than
1 year
1-2 years 2-4 years More than
4 years
Total
2020
Prepayments from customers 88 5 - - 93
Deferred warranty-related revenue 262 160 69 3 494
Deferred free products revenue 99 44 7 1 151
Deferred service revenue 87 64 27 1 179
Total 536 273 103 5 917
2019
Prepayments from customers 61 2 2 1 66
Deferred warranty-related revenue 300 206 82 5 593
Deferred free products revenue 132 60 3 - 195
Deferred service revenue 97 69 20 1 187
Total 590 337 107 7 1,041
7.4 Contingent liabilities
The Demant Group is involved in a few disputes, lawsuits
etc. Management is of the opinion that such disputes do
not or will not significantly affect the Group’s financial
position. The Group seeks to make adequate provisions for
legal proceedings.
As part of our business activities, the Group has entered
into normal agreements with customers and suppliers etc.
as well as agreements for the purchase of shareholdings.
For the purposes of section 357 of the Republic of Ireland
Companies Act 2014, Demant A/S has undertaken to
indemnify the creditors of its subsidiaries incorporated in
the Republic of Ireland in respect of all losses and liabilities
for the financial year ending on 31 December 2020 or any
amended financial period incorporating the said financial
year. The company does not expect any material loss to
arise from this guarantee.
Section 7 · Provisions, other liabilities etc. 127
Demant · Annual Report 2020