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Edited Transcript of AMP.MI earnings conference call or presentation 30-Jul-19 1:00pm GMT

Q2 2019 Amplifon SpA Earnings Call

Milan Aug 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Amplifon SpA earnings conference call or presentation Tuesday, July 30, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Enrico Vita

Amplifon SpA - CEO & Executive Director

* Francesca Rambaudi

Amplifon SpA - IR & Corporate Communication Director

* Gabriele Galli

Amplifon SpA - CFO

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Conference Call Participants

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* Catherine Tennyson

BofA Merrill Lynch, Research Division - Analyst

* Domenico Ghilotti

Equita SIM S.p.A., Research Division - Co-Head of Research

* Markus Gola

MainFirst Bank AG, Research Division - VP

* Niccolò Guido Storer

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Nyeok Lee

Jefferies LLC, Research Division - Equity Associate

* Romain Zana

Exane BNP Paribas, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon First Half 2019 Results Conference Call. (Operator Instructions)

At this time, I would like to turn the conference over to Ms. Francesca Rambaudi. Please go ahead, madam.

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Francesca Rambaudi, Amplifon SpA - IR & Corporate Communication Director [2]

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Thank you. Good afternoon, and welcome to Amplifon's Conference Call on H1 2019 Results. Before we start, a few logistic comments. This morning, we issued a press release related to our H1 2019 results, and this presentation is posted on our website in the Investors section. The call can be accessed also via webcast and dial-in details are on Amplifon's website as well as also in the press release.

Let's move to the disclaimer on Slide 1. Some of the statements made during this call may be considered forward-looking statements. Lastly, please note that from January 2019, we adopted the accounting principle, IFRS 16 Leases. The comparative data for 2018 have not been restated, while the key data for 2019 is also presented without the application of IFRS 16. Therefore, the comparative analysis in this presentation and the commentary on H1 and Q2 2019 results refers, unless otherwise specified, to 2019 key data without the application of IFRS 16.

With that, I am now pleased to turn the call over to our CEO, Enrico Vita.

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Enrico Vita, Amplifon SpA - CEO & Executive Director [3]

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Thank you, Francesca, good afternoon, everyone, and welcome to our conference call, also from me. So today, I'm again, I'm very pleased to comment with you, on one side, another very strong sets of results for the second quarter, continuing the excellent momentum of the first one. On the other side, very positive development in our key initiatives for 2019. On this regard, I first refer to the integration process of GAES in Spain, which is progressing extremely well. In fact, also in Q2, our performance in Spain was excellent and also above our initial expectations, both in terms of revenues, here our growth was again double digit, and also in terms of profitability.

But I also refer to the continued rollout of the Amplifon product experience in Europe. And in Q2, was the turn of The Netherlands and Germany, which is also progressing very well.

And now let's move to the next chart, Chart #3, to comment together a bit more in detail the main numbers for the quarter and then for the first half. Revenues in the quarter were up by circa 25% at constant exchange rate despite a very challenging comparable basis versus the same period of previous year. The organic growth was at 5.6%, a significant acceleration versus Q1.

With regards to profitability, we increased the EBITDA recurring margin by 20 basis points from 19.1% to 19.3%. And again, this was possible also thanks to the already mentioned, better-than-expected performance in Spain and even after our increased marketing investments in the period of about 18% at the same perimeter.

Finally, the net profit was up by almost 30% almost EUR 42 million, versus the same period of last year.

So let's now move to the following chart, Chart #4, to review the numbers for the first half. Here, you can find very similar numbers. In the first half, revenues were up by 25% at constant exchange rate and circa 26% at current exchange rate. And I would like to highlight once again that the quality of the revenue growth was extremely healthy with organic growth at the circa 5%. EBITDA recurring increased by more than 28%, while margin improved by 30 basis points from 16.7% to 17%, even after the consolidation of the business of GAES. The net profit recurring was close to EUR 62 million, up by more than 30% versus the same period of last year.

Finally, I would like to highlight the very strong recurring free cash flow generation, up by over 45% versus the first half of previous year.

With this, I now hand over to Gabriele to give you more details about our financial performance.

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Gabriele Galli, Amplifon SpA - CFO [4]

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Thanks, Enrico, and good afternoon to everybody. Moving to Slide #5, we have a look at the EMEA financial performance, which posted in H1 an outstanding performance, boosted by an acceleration of organic growth in Q2 and by the excellent results of Spain. EMEA showed, in fact, in H1, an outstanding revenue growth of 31% in local currency. The revenue growth was driven by a strong 5.5% organic growth, excluding GAES, which was entirely accounted in the M&A growth and by an extraordinary M&A contribution of 25.4% for the combined effect of GAES consolidation, the strong double-digit organic growth of GAES and the continuous bolt-on M&A program, primarily in Germany and France.

In Q2, revenue growth in local currency was also around 31%, with a very strong organic growth of 6.9%, while acquisitions accounted for 23.6%. Italy posted a continued sustained performance, also fostered by the ongoing successful rollout of Amplifon product experience. Spain showed an excellent and above-expectation organic performance, growing double-digit in both GAES, which was reported in M&A growth, and Amplifon businesses. In Spain, the GAES integration remains fully on track and continues delivering on 2019 synergies. These initiatives implemented in Q2, include in particular, the launch of GAES in the advertising campaign, further alignment of commercial practices, finalization of the appointment of the whole leadership team in Spain, and moreover, on July 1, we also completed the legal merger of GAES into Amplifon (inaudible).

France posted a robust performance in H1. In fact, after the impact on revenue related to the introduction of the mandatory 30 days trial in Q1, we posted a double-digit growth in Q2. Germany reported an excellent performance, thanks to a strong organic growth and acquisitions. As anticipated by Enrico, in mid-May, we launched our Amplifon Product Experience in both the Netherlands and Germany, with first very positive results.

In terms of profitability, the excellent top-line growth, coupled with increased operational efficiency and scale reach in core countries allowed, in H1, an EBITDA recurring increase of 33.1%, around EUR 27.2 million, with a 30 basis point margin improvement from 17.7% to 18% even after a very strong increase of market investments. In Q2, EBITDA recurring increased 28.5% to EUR 66.3 million with the margin slightly contracting due to GAES different seasonality.

Moving to Slide #6. We have a look at Americas performance which posted, in H1, a strong revenue growth in local currency of 13.7%. The growth was driven by a 2.3% organic growth, despite a 1% negative impact from IFRS 15. The organic growth was coupled with a strong contribution from M&A, primarily reflecting the GAES LATAM business consolidation as of beginning of '19, further boosted by a double-digit organic growth in the period. Currency tailwind for U.S. dollar appreciation versus euro gave a further 6.9% contribution to growth of revenues increasing to EUR 131.9 million from EUR 109.3 million last year. In Q2, revenues increased by 13.7% in local currency, with an organic growth of 1.7% after a negative IFRS 15 impact of over 1%. The growth was driven by a good performance of Miracle-Ear and Amplifon Hearing Health Care.

Moving to profitability. EBITDA recurring in H1 increased strongly by around 30% versus last year from EUR 20.8 million to EUR 27.0 million, with a significant 140 basis points EBITDA margin improvement. In Q2, the EBITDA margin improved by 160 basis points to 22.3% from 20.7% in Q2 last year. The excellent profitability in America was driven by a strong operational efficiency, which also more than compensated the dilutive effect of GAES LATAM consolidation.

Moving to Slide #7, we have a look at APAC performance. In H1, revenues increased by 6.8% in local currency, significantly above the reference market. Revenue growth was driven by 3.4% organic growth, coupled with a 3.4% contribution from M&A, entirely due to our recent JV in China. The results in revenue growth also compared with a challenging comparable basis of 7.4% growth in local currency, reported in '18. Currency headwind had a negative contribution of around minus 1%, leading total revenues growth to 5.7% from EUR 86.1 million to EUR 91 million.

In Q2, revenues increased by 5.2% in local currency driven by 1.9% organic growth, despite 1 trading day less. And in any case, above market, which was still flattish in both Australia and New Zealand. M&A contribution amounted to 3.3%. In H1, Australia reported a robust sales performance above market in the [all] organic. New Zealand performance was still impacted by low return customer for the anniversary of the regulatory change. In the coming months, we expect an improvement as demonstrated by the strong start we reported in both markets in July.

EBITDA in H1 came in at EUR 24.1 million and in Q2 at EUR 10.7 million. The margin contraction in Q2 was particularly due to lower fixed cost absorption for a still flattish market environment in both Australia and New Zealand and fewer trading days, in addition to the dilutive effect of the Chinese joint venture consolidation. We expect profitability in APAC to improve significantly in the next quarters.

Moving to Slide #8, we can appreciate the profit and loss evolution in Q2. Total revenues increased by 25.7% to EUR 440 million, with an organic growth accounting for 5.6%, a growth from acquisition for 19.1%, and the currency tailwind impacted positively by 1%. Solid operational leverage led recurring EBITDA margin to 19.3%, with an increase of 20 basis points versus '18. Total recurring EBITDA increased by EUR 18 million to EUR 84.9 million. Reported figures include EUR 4.4 million one-off cost entirely related to GAES integration.

Following the strong investment increased during the past quarters and the consolidation of GAES business with a related depreciation and PPA-related amortization D&A increased by around EUR 8 million, leading EBIT to EUR 59.9 million, with a growth of 21% or EUR 10.4 million versus prior year.

Net financial expenses accounting for EUR 3.4 million, improved by over 33%, despite the strong increase of net debt to fund the GAES acquisition, leading profit before tax to EUR 56.5 million from EUR 44.4 million last year with a 27.1% or EUR 12.1 million improvement versus '18. Tax rate posted a 120 basis point reduction from 27% to 25.8%, with full year expectation confirmed in line with 3-year planned target at a lower than 30% tax rate.

Net profit increased by 29.3% to EUR 41.9 million, with a 20 basis point margin increase to 9.5% from 9.3% last year. EPS adjusted for one-off item and PPA-related amortization, posted an outstanding increase of 35.7% from EUR 0.165 to EUR 0.223 per share.

Just few words on application of IFRS 16, which, as you know, has only an accounting impact and leaving cash flow unchanged. The capitalization of the right of user led to a strong EUR 22.8 million EBITDA increase due to different accounting on the rental cost with a result in recurring EBITDA with IFRS 16 application of EUR 107.6 million, with a ratio to sales of 24.5%.

Moving to Slide #9, we have a look at profit and loss evolution in H1. Total revenues grew 26.1% to EUR 832 million, driven by 4.8% organic growth, coupled with a 20.2% acquisition growth and currency tailwind impacted positively by 1.1%. EBITDA recurring came in at EUR 141.2 million, with a 28.4% increase versus previous year and with a margin increase of 30 basis point. The reported number for H1 '19 include nonrecurring expenses of EUR 5.8 million entirely related to GAES integration. Following the increased investment done in past quarter and the consolidation of GAES, D&A increased by around EUR 14.5 million, leading EBIT to EUR 92.8 million, with a growth of 22% or EUR 16.7 million versus last year. Net financial expenses improved by 27.1%, leading profit before tax to EUR 85.6 million, with a growth of 29.2% or EUR 19.4 million versus H1 '18.

Tax rate posted a reduction of 140 basis point from 29.1% in H1 '18 to 27.7% in H1 '19, in line with a lower than 30% tax rate guidance. The strong improvement of financial expenses and tax rate led the net profit to EUR 61.9 million, increasing by 31.6% versus EUR 47 million in H1 '18, with the margin on net revenues of 7.4% versus 7.1% last year.

EPS adjusted for one-off item and PPA-related amortization posted an outstanding increase of 37.7% from EUR 0.248 to EUR 0.341 per share. With the application of IFRS 16, recurring EBITDA came in at EUR 186.6 million, with a ratio to sales of 22.4%.

Moving to Slide #10, we can appreciate the cash flow evolution. Following IFRS 16 application, we slightly modified the cash flow representation, introducing the operating cash flow before repayment of lease liabilities and the repayment of lease liabilities, which were respectively equal in the period to EUR 139.5 million and minus EUR 39.7 million. Operating cash flow was in the period equal to around EUR 99.8 million versus EUR 70.4 million last year, with a strong EUR 29.4 million improvement versus '18, following the outstanding conversion of EBITDA improvement.

On a recurring basis, operating cash flow was around EUR 107 million, more than 51% higher than last year. Net CapEx increased by around EUR 16 million to EUR 42 million, primarily for the perimeter changes due to GAES consolidation before the CapEx related to our new growth ERP system. CapEx is also in line with our full year expectation of around EUR 90 million. Free cash flow posted an outstanding growth of around EUR 13.4 million, ended up at EUR 57.9 million. On a recurring basis, the free cash flow in H1 '19 was EUR 64.8 million versus EUR 44.5 million last year, improving around EUR 20 million or 45.7% versus '18. The M&A activity posted a cash absorption of EUR 27.7 million, around EUR 10 million lower than previous year, while cash used in financing activities improved by EUR 1 million despite higher dividend distribution.

Net cash flow generated in the period was positive for EUR 0.4 million versus cash absorption of EUR 23.7 million last year, resulting in the net financial position at EUR 841 million versus EUR 319.6 million at June '18 and EUR 841 million at year-end 2018.

Moving to Slide 11, we have a look at the debt for 5 trend and key financial ratios. As mentioned in the previous chart, the net financial debt closed at EUR 841 million, stable versus year-end '18, with liquidity accounting for positive EUR 128 million, short-term debt accounting for around EUR 157 million and medium, long-term debt accounting for around EUR 812 million. The application of IFRS 16 led to accounting of lease liabilities, which amounted to EUR 436 million, leading the total financial debt and lease liability to EUR 1.28 billion. Total net equity was at EUR 625 million. According to the newest definition of covenants agreed with banks and investors at beginning of the year, the ratio of net debt over EBITDA decreased from 2.46 at year-end '18 to 2.23 as of June 30 '19. The 2.23 correspond to around 2.74 of the old covenant definition, proving that the group is rapidly deleveraging after the GAES acquisition.

I would now hand over to Enrico for 2019 outlook.

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Enrico Vita, Amplifon SpA - CEO & Executive Director [5]

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Thank you, Gabriele. So with this chart, we are, again, at the end of today's presentation. We are extremely satisfied about our -- about the progress we made in the first half, which allow us to enter the second half with a strong confidence. In fact, on one side, our financial performance in Q2 and H1 gives us great confidence for the second half of the year, both in terms of revenue growth and profitability. In particular, in terms of profitability, we now expect the EBITDA recurring margin to be higher than 2018, even after the consolidation of GAES. On the other side, I believe that all the work we made on the integration with GAES in Spain and on the Amplifon Product Experience in Europe, will continue to support and actually to boost our performance in the coming quarters and next years.

With this, I leave back the floor to Francesca.

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Francesca Rambaudi, Amplifon SpA - IR & Corporate Communication Director [6]

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Thank you. I turn now the call over to Ariana in order to open the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now begin the question-and-answer session. (Operator Instructions) The first question is from Niccolò Storer with Kepler Cheuvreux.

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Niccolò Guido Storer, Kepler Cheuvreux, Research Division - Equity Research Analyst [2]

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I have three questions. The first is on the revenues trend in the U.S., North America. How much this was influenced by the performance of Elite in the second quarter? And can you help us understanding what's going on there in more detail? And if this is something that is driven by some of your business decisions or by changes in customer attitude? The second one is on the margins in APAC. I understand that you had virtually no growth in Q2, lower trading days, China, et cetera, but margins in the region have been on a declining spot for a while. So are you experiencing some worrisome trends on the pricing side there? And very last and short questions. On EMEA, organic growth in second quarter, did the 6.9% figure benefit from an year-on-year (inaudible) in the trading days?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [3]

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Thank you, Niccolò, for the questions. I will start from the last one. So on the EMEA region, actually, no in terms of trading days, the trading days in the second quarter of this year was exactly the same of last year. So there is no effect from that, actually. The performance in terms of organic growth was very strong, almost in all of the countries in which we operate. And please remember that it is also not included the organic growth of Spain, which -- of GAES, which also was extremely strong in the quarter. So it is just very, very strong performance that we reported in Q2.

With regards to the second question, related to the APAC region. So on the margin side, we -- as Gabriele has said actually, we see margins recovering actually quite significantly in the second half of this year. I have to say that maybe we were not expecting the market still to be quite soft in Q2, we were expecting a bit of a recovery. So it is not -- the dilution in terms of profitability is not related to pricing, that is more related to our, let's say, to the absorption of our fixed cost. As I said, we expect the profitability in APAC to improve significantly in -- already from this quarter, quarter 3, and also in the coming quarters. We have seen also that July is going to be very strong. So I still confirm my positive outlook for the quarter with regards to the profitability and in general to the performance of the APAC region.

With regards to the Americas, just to remind that unfortunately the application of the new IFRS 15 (sic)[IFRS 16] accounted for something more than 1% on our total growth. But as Gabriele said, we had quite good performance, both in Miracle-Ear and Amplifon Hearing Health Care.

With regards to Elite, in the quarter 2, we took -- we went through the last step of the reorganization of Elite. In particular, we completely reorganized our field team. We changed the purpose of our teams in the field. Most probably, we had some effect related to this reorganization. But again, also here, I expect the performance of Elite to improve also, starting from this quarter. The performance also here of Elite in July is going to be, we believe, quite good. So it's more related also to reorganizational change that we completed during Q2.

The performance of the region was also affected by our performance in Canada. In Canada, also here, we went through our program of rebranding of the stores. You know that in Canada, we were operating under the Miracle-Ear brand. We have taken the decision to move to Amplifon because differently from the U.S., in Canada, the Miracle-Ear brand has not a very strong brand awareness, recognition and equity. So we thought that was good to move from a Miracle-Ear as a brand to Amplifon. So in Q2, also we went through the rebranding of our stores. So most probably, also this exercise actually created some disruption, but also here I'm quite positive also on the future performance of this area in Canada.

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Operator [4]

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The next question is from Romain Zana with Exane BNP Paribas.

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Romain Zana, Exane BNP Paribas, Research Division - Research Analyst [5]

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I have 3, please. The first one is related to GAES in Spain. Given the robust double-digit growth, first, do you think it will be sustainable through 2020? And if yes, is it accordingly fair to expect at least 1 percentage point of incremental organic growth for the group related to this network? The second question is related to Australia. Correct me if I'm wrong, but you will roll out the private label in Q3. So should we expect a boost on the top line in Q4, especially given the very easy comps you will face this quarter? And the last question is more for Gabriele regarding APAC EBITDA margin. Can you give us a fair assumption of what we should expect for the full year 2019?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [6]

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Okay. So I will start with the first 2, and then I will pass it to Gabriele for the last one. So with regards to GAES, I say again, I'm super happy about how we are performing in GAES. We were not expecting GAES performing so well. I have to say that all the work that's in preparation of the closing that we did actually starting already from September of last year, I think that at the end of the day allowed us to enter into the company with clear plans, which are now paying good dividends. The performance in the first half, Romain, it was very strong with double digit. As we said, we expect GAES to continue to perform very well this year, for sure. To say now that we should expect also double-digit growth in 2020, I think it's too early. But what it is important, I think, for me is to see that all the activities that we were planning in terms of -- for the integration of GAES are going at full steam; the organization is responding extremely well; and we are leveraging, of course, our scale, the scale of the group in order to improve the performance of GAES. So all in all, very happy about the first half, very positive also for the coming months, coming quarters. This is too early to say that next year we can replicate double-digit growth in GAES in 2020.

With regards to Australia, yes, you are absolutely right, we are going to roll out the Amplifon product experience in the coming months. And of course, we expect also this to give us a boost in terms of revenues, but also in terms of profitability. But also, what I would like to highlight is that I'm very positive about the performance of Australia regardless of the implementation of the APE, which will certainly contribute to our performance. I think that Australia will start to perform well -- better already from this quarter. As I said, July has been very strong -- very strong growth. So we are very positive on -- I'm very positive on the revenue growth as well as we are positive on the profitability. And maybe on this regard, Gabriele you can add some more colors.

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Gabriele Galli, Amplifon SpA - CFO [7]

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Absolutely. So I confirm what Enrico was saying in terms of a very strong start of Q3. We don't have any price issue as Enrico was saying before. Because the market is evolving positively. It was just flattish market in Q1 and Q2. And so our ability to say, leverage on fixed cost was a little bit lower due to flattish market condition. For Q3 and Q4, we expect strong quarters with profitability significantly improving versus previous year. And for the end of the year, we are targeting a profitability which is not lower than the previous year.

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Operator [8]

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Your next question is from Domenico Ghilotti with Equita.

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Domenico Ghilotti, Equita SIM S.p.A., Research Division - Co-Head of Research [9]

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My first question is related, in general, on the dilutive impact that you have been mentioning on the margin, I mean, in the first half. So China, you were mentioning GAES in some areas and in general, some market weakness or softness in some areas. Do you see this trend to continue? So do you see the headwinds on margin becoming stronger in the second half or not? And in particular, if you can give us a sense of what is the profitability [today, say from that is --] or the dilution maybe from the Chinese joint venture affecting APAC? The second question is on the -- still on Australia. You are -- sound quite confident. I don't understand why you have been investing quite a lot starting from Q3 last year in marketing, but you didn't get any traction. And so if you can elaborate on the reason why it was less affected than in other areas. And if the improvement in profitability going forward is more top-line driven or is it, say related to the fact that you are spending less compared to last year?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [10]

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Yes. Thank you for the question. So with regards to, let's say, this point about the dilution of profitability. Yes, first of all, I would like to underline again that the overall profitability of the company despite of the integration of GAES actually has been increasing year-over-year. The main effect, of course, is related to GAES, but this is, let's say, mainly due to a different seasonality of the revenues of GAES and therefore, of the profitability of GAES because revenues of GAES are more, let's say, stable throughout the quarters, and why you see that there is quite a significant, let's say, difference quarter-over-quarter in the rest of the EMEA region. So in the first quarter, GAES was not dilutive. In the second quarter, GAES was a bit below the average of the EMEA region. That is more GAES being more stable and EMEA having material changes quarter-over-quarter for seasonality reasons rather than the opposite.

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Domenico Ghilotti, Equita SIM S.p.A., Research Division - Co-Head of Research [11]

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Yes. Does it mean that -- so Q4 will be a bit more challenging in terms of dilutive impact compared to the rest of the year, given the seasonality that you have?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [12]

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Let's say, that Q3 will be more favorable, Q4 less favorable. But overall, let's say, the profitability of GAES is much more stable than the one of the rest of the EMEA region.

With regards to other effects, they are very negligible. What I mean is that China, yes, at the moment is lower than the average of the company is -- but certainly still quite stronger because it's above 10%. So it's quite a good profitability, but in terms of impact, is very negligible. With regards to the second question regarding Australia. Yes, I confirm that I'm -- we are very positive on the profitability. You are absolutely right we have been investing quite significantly on the marketing side. It is also true that we were expecting the market to recover more rapidly. Whilst also in Q2, we estimated that the market in Australia and also in New Zealand was flattish, I would say, plus or minus a few points. So the profitability was mainly, let's say, affected by the fixed cost of our structure rather than from the marketing side.

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Domenico Ghilotti, Equita SIM S.p.A., Research Division - Co-Head of Research [13]

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So you didn't see any issue, any problem in the way in which you launch in [these markets]…

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Enrico Vita, Amplifon SpA - CEO & Executive Director [14]

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No, no, no, the point is that we were expecting the market to come back to significant growth, which did not happen in the second quarter. As I say, the market we estimate was flattish, maybe 1%. Also in the second quarter, 2%, both in Australia and New Zealand. So it's more related to that.

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Domenico Ghilotti, Equita SIM S.p.A., Research Division - Co-Head of Research [15]

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And just would like to follow-up. So you are running with something like 30 bps margin increase in the first half as you were mentioning. Do you think that is a sustainable level or something that can be exceeded going forward in the second half?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [16]

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Well, let's say that at the moment, we have upgraded our guidance for the year. We were expecting -- we discussed, we were expecting this year the profitability of the company to be, of course, affected by the lower -- initial lower profitability of GAES and now we say that is not going to be anymore the case. What I mean is that the very strong performance on GAES will allow us to end the year with a profitability which will be higher than the previous year, which, in my opinion, is a quite considerable achievement actually. You digest a very large acquisition in relative terms, starting with much lower profitability and you don't -- actually, you say that we are -- you say that you are going to even improve the profitability of the group, which, at the end of the day, means that overall, the group is doing very well. So now, let me say that it's maybe early to say if it's going to be 20 bps, 30 bps, or 40 bps but for sure our view is that this year profitability will be higher than last year.

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Domenico Ghilotti, Equita SIM S.p.A., Research Division - Co-Head of Research [17]

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Okay. On the bolt-on -- very last, sorry. On the bolt-on M&A investment, you were running, say, below EUR 30 million in the first half. Do you see an acceleration? Or do you the reasonable run rate looking at the pipeline?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [18]

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No, I think that we see an acceleration in the second half. What I mean is that we are continuing to invest in these 2 countries, in particular in Germany and France. And I think that we will see an acceleration in the second half. Our target will be closer -- in terms of investment for acquisition, will be closer to our, let's say, usual target of about EUR 80 million per year.

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Operator [19]

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The next question is from Kit Lee with Jefferies.

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Nyeok Lee, Jefferies LLC, Research Division - Equity Associate [20]

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I have 2 questions, please. Firstly, I guess, just to come back to the APAC profitability in the second half. I was just wondering -- sorry if I missed this. But I was just wondering if that's dependent on the market growth. Or are you sort of putting in place some cost efficiency programs in the second half to drive that improvement in the margin in APAC? And then second question, just on Americas. I think Q2, margin expansion was quite good at around 160 basis points, even though organic growth was still quite low. So I'm just wondering what were the drivers for that margin improvement? And as you mentioned, the sort of restructuring in Elite that has been completed. Is it fair to say that organic growth would sort of improve sequentially in Americas? And if so, would the scope for margin expansion be higher in second half compared to the first half for America?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [21]

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Yes. Thank you for the question. So with regards to the first question and to the profitability of the APAC region, as I said before, actually the main issue is related to the fact that we set up our machine in Australia, in particular, but also in New Zealand, expecting a higher market growth and, therefore, higher growth that we are currently delivering. So it is more about the fact that we were expecting higher growth on them in the market than it has happened. So nothing other than that. That's why also we expect actually the growth to improve in the second half. And therefore, we expect also the profitability to improve in the second half. With regard to the drivers of the margin in the Americas, it is not, let's say, related to anything in particular. It's the fact that we have been quite efficient in running our structure there, our organization there, our network there. I think that we will continue similar levels of profitability also in the second half.

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Operator [22]

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Your next question is from Markus Gola with MainFirst Bank.

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Markus Gola, MainFirst Bank AG, Research Division - VP [23]

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It's on Germany. So could you share with us by how much organic growth has accelerated in this country since the launch of the Amplifon private label? And is this acceleration fully driven by volume growth? Or did you also experience an improvement in the ASP so far? And maybe what is the share of wallet of the Amplifon product line in Germany right now?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [24]

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So no, actually, let's say, that in Q2, the impact of the Amplifon product line was minimal. This because we have launched the Amplifon product line basically at the end of May. We started in only 100 stores. So I would say that we have seen very little about the impact of the Amplifon product line in Q2. With regards to the total -- to the organic growth of Germany, it was very strong double-digit growth, organic growth, but was not really linked to the launch of the new Amplifon product line. With regards to our expectations of the impact of the Amplifon product line in the coming quarters, both in Germany, I would say, but also in the Netherlands, we expect positive effects, in particular on the average selling price also because in these 2 countries we are starting from a much lower average selling price than, for example, in Italy. So we expect, in particular, a positive effect of the selling price.

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Markus Gola, MainFirst Bank AG, Research Division - VP [25]

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Okay. So is it fair to assume that growth in Germany and also the Netherlands will accelerate most likely in Q3?

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Gabriele Galli, Amplifon SpA - CFO [26]

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Let's say that, for sure, we expect positive impact from the launch of the Amplifon product line in both countries, for sure.

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Operator [27]

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Your next question is from Catherine Tennyson with Bank of America Merrill Lynch.

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Catherine Tennyson, BofA Merrill Lynch, Research Division - Analyst [28]

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I have 2, if I may. So my first one would be on the Amplifon product launch that you've had in the Netherlands and Germany. What other geographies are you anticipating rolling out in Q3? And also, are you expecting the positive ASP that you have experienced in Italy to be similar to what you're experiencing in Germany? And my second one would be on Canada. Could you just clarify that the headwinds that you saw to the margin because of the rebranding of stores will also carry on into Q3?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [29]

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Yes. With regards to the second question, when I mentioned about Canada, I was more referring on revenue growth because, as I said, in Q2 we have completed the rebranding of our stores. I think that this processing a small organization like the one that we have got in Canada might have had an impact on our sales and therefore on our revenue growth in Canada. But please consider that Canada is, let's say, much smaller business than the U.S. overall in the Americas region. With regards to the first question and for the next rollout, the next rollout includes France and Australia in July -- end of July, early August, and then it will be the turn of Miracle-Ear at the end of the year. So we expect, also, in these countries, the Amplifon product line deliver positive effect, both in terms of average selling price and maybe conversion. But for sure, also, in these countries, given the fact that the starting point is much lower than in Italy, we expect a positive impact on the average selling price.

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Operator [30]

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(Operator Instructions) Your next question is a follow-up from Domenico Ghilotti with Equita.

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Domenico Ghilotti, Equita SIM S.p.A., Research Division - Co-Head of Research [31]

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Follow-up on the Amplifon-branded products. You were mentioning the expectation on the ASP. What about in terms of penetration? So countries that have a different social market.

So can you elaborate on this topic also?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [32]

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Sorry, can you say again about (inaudible) social market, you say?

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Domenico Ghilotti, Equita SIM S.p.A., Research Division - Co-Head of Research [33]

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Yes, in the sense that what would be the -- your expectation in terms of the penetration that you can have on your own branded products (inaudible)...?

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Enrico Vita, Amplifon SpA - CEO & Executive Director [34]

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Sure. Sure. Absolutely, now I got -- absolutely. So yes, as we said, I think, since the beginning of the program, actually in terms of penetration in other countries than Italy, what we expect, overall, is maybe a lower penetration. For example, in the Netherlands, we are going to roll out the new Amplifon product line only in the private market. So not in the insurance market. The private market, of course, is the one with healthcare average selling price which represents about 40% of the total market in the Netherlands. Similar feature also in Germany. In Germany, we are not going to implement the Amplifon product line in let's say, social market, which represents about 40% of our total sales. So we expect lower penetration overall, but we expect better, higher impact on -- in terms of average selling price.

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Francesca Rambaudi, Amplifon SpA - IR & Corporate Communication Director [35]

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Operator, maybe we can ask for a final question, and then I think we can close the call after that.

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Operator [36]

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Ms. Rambaudi, at the moment, there are no more questions registered.

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Francesca Rambaudi, Amplifon SpA - IR & Corporate Communication Director [37]

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Okay.

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Enrico Vita, Amplifon SpA - CEO & Executive Director [38]

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Thank you, everyone, and see you soon.

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Francesca Rambaudi, Amplifon SpA - IR & Corporate Communication Director [39]

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Thank you, everybody. Bye-bye.

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Enrico Vita, Amplifon SpA - CEO & Executive Director [40]

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Thank you.

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Gabriele Galli, Amplifon SpA - CFO [41]

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Thank you.