Information  X 
Enter a valid email address

GN Great Nordic Ld (03GY)

  Print      Mail a friend

Thursday 02 September, 1999

GN Great Nordic Ld

Interim Results - Part 1

GN GREAT NORDIC LIMITED 
31 August 1999


PART ONE

INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 1999

At a meeting today, the Board of Directors of GN Great Nordic Ltd approved the
Interim Report for the six months ended 30 June 1999 for the Parent Company and
the Group, and is accordingly issuing the present Interim Report for the six
months ended 30 June 1999.

Copenhagen, 31 August 1999



INTERIM REPORT 1999

Summary:

* Total revenue up 22% to DKK 2,295 million

* Operating income up from DKK 121 million to DKK 207 million

* Income before taxes and extraordinary items up from DKK 129 million to DKK
  193 million

* GN ReSound (the merger between GN Danavox and ReSound Corporation) has ensured
  the company a leading position in the global markets for hearing aids and
  audiological measuring equipment

* For the whole of 1999, a 20-25% increase in income before taxes and
  extraordinary items, and a significantly higher rise in operating income
  (based on current accounting principles) are forecast

For further details, please contact:

Jorgen Lindegaard
President & CEO
Tel: (+45) 72 111888


Group Financial Highlights

                                               1999          1998         1998
(DKK million)                            First half    First half    Full year

Earnings
Total revenue                                 2,295         1,886        4,050
Operating income                                207           121          363
Income before taxes and extraordinary items     193           129          352
Net income                                      140            96          260
GN Great Nordic's share of net income           138            94          255

Balance sheet
Share capital (GN Great Nordic)                 750           731          744
Equity                                          467         2,121        1,945
Total assets                                  6,499         5,291        5,476

Cash flow
Cash flow from operations                       281           167          498
Cash flow from investments                   (1,824)         (239)        (615)

Development costs
Group                                           128            99          202

Investments
Plant and equipment                             237           134          209
Property                                         18            57           82
Telecom systems                                  33            38          230
Total                                           288           229          521

Acquisition of companies                      1,557             3          302
Depreciation and write-offs                     195           157          331

Employees 
Average number of employees                   3,375         2,948        3,099


Directors' Report

REVENUE AND PROFIT TRENDS
GN Great Nordic had a satisfactory first half of 1999 with revenue and earnings
developing better than forecast. The acquisition of GN ReSound is included as
from 11 June, whereas the acquisition of PK Technology is included in the
balance end of period.

Total group revenue rose 22% compared to the first half of 1998, Growth was
primarily organic and was due especially to continuing progress and to the
introduction of new products and services in SONOFON, GN Netcom, GN Nettest and
GN ReSound.

The greatest increase in revenue was reported by SONOFON, where GN Great
Nordic's share of revenue rose by DKK 166 million (29% increase). GN Netcom
reported growth in first half revenue of DKK 110 million (up 31%), of which
some was due to last year's acquisition of ACS Wireles Growth has also been
highly satisfactory at GN ReSound which reported an increase of DKK 84 million
(up 29%), of which about half is attributable to the inclusion of ReSound from
11 June 1999, and with the Danalogic digital hearing aid selling better than
expected. GN Nettest also reported satisfactory growth of DKK 54 million (up
18%).

Revenue at the Telegraph Company was considerably higher than expected as a
result of significant accelerated repayments on individual cable projects. GN
Comtext still has difficultes and the transition from traditional telex
services to such new services as fax and e-mail is progressing more slowly than
expected. Accordingly, revenue has declined which is not satisfactory.

GN Great Nordic's operating income rose 71% from DKK 121 million to DKK 207
million.

Despite very considerable marketing expenses, SONOFON has with an operating
income of DKK 70 million (GN Great Nordic's share) more than doubled its
operating income compared to the first half of 1998. GN Netcom's operating
income improved 40% to DKK 91 million whilst GN ReSound's operating income rose
65% to DKK 38 million. Growth in GN ReSound has primarily been driven by GN
Danavox' earnings and is an indication that the recent years' focus on the new
generation of open software-based digital hearing aids is now paying of. ReSound
Corporation, too, made a positive contribution to the results.

GN Nettest reported an operating deficit of DKK 7 million which was as expected
and by and large unchanged compared to last year GN Nettest's business is highly
seasonal and after a difficult start to the year and a very satisfactory second
quarter, significantly better sales are forecast for the second half as in
previous years. The inflow of orders in the first half of 1999 was as
expected and 20% up on 1998. Orders in hand at the end of the half year were
thus DKK 73 million greater than at the same time last year. This ensures
continuation of the positive trend in GN Nettest.

At DKK 48 million, the Telegraph Company's operating income was considerably
better than forecast. GN Comtext's operating income improved DKK 21 million to a
deficit of DKK 3 million and hence lived up to the forecast even though results
remain unsatisfactory.

Financial items show a deficit of DKK 25 million based on an average net
interest-bearing debt of about DKK 1 billion.

Group income before taxes and extraordinary items was DKK 193 million compared
to DKK 129 million during the same period in 1998.

EQUITY
During the period, equity was considerably influenced by goodwill write-offs and
totals DKK 467 million as per 30 June 1999 according to GN Great Nordic's
current accounting principles. Equity according to IAS (International Accounting
Standards), see below, is estimated at approx. DKK 3 billion.

INVESTMENTS AND ACQUISITIONS
During the first half of 1999, GN Great Nordic continued its focused expansion
and acquisition strategy. New companies are only acquired if they support
organic growth in individual business areas or if they provide access to new,
closely related business areas or technologies. Investments in new companies
amounted to DKK 1,557 million in the first half of 1999 compared to DKK 3
million during the first half of 1998.

On 11 June 1999, GN Great Nordic acquired the US company, ReSound Corporation,
which is a leading global manufacturer of hearing aids. A comprehensive program
to integrate ReSound and GN Danavox has been initiated. Under its new name GN
ReSound, the group has headquarters in Redwood City, California, and is one of
the largest manufacturers of hearing aids and audiological equipment in the
world, with a strong position in all the most important markets.

With effect from 30 June 1999, GN Nettest acquired the US company, PK
Technology, which is a leading manufacturer of test and measuring equipment for
optical fiber cables and networks. The acquisition has made GN Nettest's Fiber
Optic Division the world's largest supplier of test and measuring equipment for
optical communication.

After the close of the first half, GN ReSound acquired Danplex, a Danish company
that is a significant supplier of audiological equipment for measuring hearing
loss, etc. Danplex will be merged with GN ReSound's Madsen Division. Madsen's
Aurical products already lead the market for audiological equipment and this
acquisition will help enhance the position.

The Telegraph Company has after the end of the first half made a joint
investment with Russian companies Rostelecom and Sweet in RTC Page, a Russian
company with a licence to operate a national paging system based on the digital
ERMES standard. This investment is part of a continuing positioning process in
the Russian market.

Investments in fixed assets amounted to DKK 288 million during the first half
of 1999 compared to DKK 229 million last year. Most of the investments related
to SONOFON.

ORGANIZATION AND MANAGEMENT
At the Annual General Meeting in the spring, the Chairman of the Board of
Directors, Erik B. Rasmussen, retired on reaching GN Great Nordic's 70-year age
limit for directors. Peter Foss was elected as new member of the Board of
Directors, which after the Annual General Meeting is chaired by Elvar Vinum,
with Mogens Hugo Jorgensen as new Deputy Chairman.

After the close of the first half, GN Comtext's Chief Executive, Graham Hanson,
resigned due to disagreement with GN Great Nordic's management about the future
strategy of GN Comtext. GN Great Nordic's President & CEO, Jorgen Lindegaard,
has temporarily assumed responsibility for the management of GN Comtext.

During the first half of 1999, GN Great Nordic continued working intensively on
introducing a new personnel policy and a Human Resources Management strategy to
ensure that as a Group, GN Great Nordic has a strong profile which can attract
and retain well trained and highly qualified employees. Considerable resources
have also been invested in preparing the integration of new employees, primarily
from ReSound Corporation and PK Technology. At the end of the half year, the
Group had a total of 4,481 employees, which is an increase of 35% since year-end
1998. The increase is especially due to acquisitions but employees have also
been taken on by SONOFON, GN Netcom, GN Nettest and GN ReSound as these
companies have expanded their activities.

GN Great Nordic has decided to extend its existing share option program for
leading employees to include a larger number of leading Danish and foreign
employees in the Group.

At the end of the first half of 1999, all the companies had only few remaining
Year 2000 problems e.g. in their IT systems, production plant and products. The
greatest uncertainty about the transition to the new millennium continues to be
whether alliance partners, suppliers and customers will be able to maintain
their operations after the transition. The GN Great Nordic Group has
systematically identified external risks and there has been extensive act and
dialogue with the most significant external suppliers and alliance partners to
minimise the consequences of any millennium problems. Further, contingency plans
are in place in all critical business areas and functions. The work external
suppliers and alliance partners and preparing for any emergencies will
continue during the second half of 1999.

Despite the tremendous effort, it is not possible to exclude operational
problems during the transition to the new millennium, but it is expected that
the measures that have been taken will counter the effects of any millennium
problems in the best way possible.

OUTLOOK FOR 1999 RESULTS
For the whole of 1999, revenue is forecast at approx. DKK 5.3 billion, up
approx. 30% on 1998. About DKK 500 million of this derives from the new
acquisitions ReSound Corporation (now part of GN ReSound) and PK Technology (now
part of GN Nettest).

Calculated in accordance with GN Great Nordic's present accounting principles,
the Group expects in l999 to report a 20-25% increase in income before taxes
and extraordinary items and a significantly higher rise in operating income
compared to 1998.

IAS ACCOUNTING
The interim statement for the six months ended 30 June 1999 has been prepared
according to the same accounting principles as the 1998 accounts and is not
audited.

As previously announced, GN Great Nordic's Board has decided that the annual
accounts for 1999 will be prepared in accordance with IAS (International
Accounting Standards). The change to IAS will ensure that GN Great Nordic's
accounts harmonise with the Group's increasingly international profile and the
increasing international interest in, and ownership of, GN Great Nordic shares.

The most significant differences between GN Great Nordic's present accounting
principles and IAS may be described as follows:

According to current accounting principles, goodwill is immediately written
off against equity and the costs of restructuring are typically included in
goodwill. In IAS, goodwill is capitalised and written off and certain
restructuring costs must be expensed in the profit and loss account in the year
of acquisition. GN Great Nordic's Board of Directors has opted for a 20-year
depreciation period, unless other factors specifically warrent a shorter period.

Intangible assets in GN Great Nordic, including development costs, are expensed
when acquired under current accounting principles. In IAS, development costs
fulfilling certain criteria are capitalised and depreciated over the period in
which the project is expected to generate revenue. In addition, patents and
rights must be capitalised and written off.

In SONOFON, the following costs are capitalised in accordance with current
accounting principles: 1) operating losses incurred during the establishment
phase up to 30 June 1994; 2) customer acquisition costs; and 3) full-service
telco establishment costs. Onwards, these costs will be expensed when incurred.

In current accounting principles, the Telegraph Company's cable systems are
depreciated by the straight-line method over the term of the contracts, which is
typically 15 years. In IAS, cable systems are depreciated in line with
utilisation/traffic.

According to current accounting principles, own shares are stated under current
assets at current Stock Exchange prices. In IAS, proceeds from the purchase/sale
of own shares are taken directly to equity.

In current accounting principles, GN Great Nordic does not state taxation
assets in the balance sheet. In IAS, deferred taxation assets are stated in the
balance sheet when it is probable they could be utilised.

The implementation of IAS will have a considerable impact on GN Great Nordic's
accounts from 1999 and henceforth. When equity as per 30 June 1999 and according
to current accounting principles totals DKK 467 million, it is estimated at DKK
3 billion after the implementation of IAS, the difference primarily due to
goodwill capitalisation. The effect in the profit and loss account from writing
off goodwill and other intangible assets will on an annual basis total approx.
DKK 150 million.


Consolidated Profit and Loss Account

                                               1999          1998         1998
(DKK million)                            First half    First half    Full year
 
Total revenue                                 2,295         1,886        4,050
Production costs                             (1,106)         (977)      (2,065)
Gross profit                                  1,189           909        1,985
   
Development costs                              (128)          (99)        (202)
Sales and distribution costs                   (559)         (466)        (942)
Management and administration costs            (290)         (229)        (489)
Other operating revenue                           3             6           13
Share of results of associated companies         (8)            -           (2)
Operating Income                                207           121          363
   
Gains on sale of properties                      11            35           40
Financial income                                 34            32           68
Financial expenses                              (59)          (59)        (119)
Income before taxes and extrainary Items        193           129          352
   
Tax on ordinary profit                          (53)          (33)         (92)
Income before extraordinary Items               140            96          260
   
Net Income                                      140            96          260

Minority interests' share of net income          (2)           (2)          (5)
GN Great Nordles share of net income            138            94          255

   
Movements in equity and reserves

                                               1999          1998         1998
(DKK million)                            First half    First half    Full year

Group equity beginning of period              1,945         1,931        1,931
Effect from change in accounting principles       -           (22)         (22)
Group equity 1 January                        1,945         1,909        1,909
Net income                                      138            94          255
Proposed dividend                                 -             -          (89)
Share issue proceeds                              -             -           17
Converted bonds                                  40            23           60
Goodwill on acquisitions                     (1,699)            -         (273)
Revaluation reserve                              23            91           97
Adjustment on consolidation of foreign 
subsidiaries                                     20             4          (31)
Group equity end of period                      467         2,121        1,945


Consolidated Balance Sheet - Assets

                                               1999          1998         1998
(DKK million)                            First half    First half    Full year

Assets

Fixed assets
Residential properties                          129           191          127
Factory and office buildings                    302           264          275 
Plant and machinery                             897           844          876 
Operating assets and equipment                  364           163          175 
Telecom systems                                 701           742          748 
Plant under construction                        146           137          169 
Total tangible fixed assets                   2,539         2,341        2,370

Interest in associated companies                 15             7           20
Receivables from associated companies           276           264          270
Other securities                                  6            12            6
Total financial fixed assets                    297           283          296
Total fixed assets                            2,836         2,624        2,666

Current assets
Property                                         97            14           93
Inventories                                     637           375          397

Receivables from the sale of goods 
and services                                  1,333           878        1,033
Receivables from associated companies            10            16            6
Other receivables                                99           310          100
Prepayments                                     166            64          134
Total receivables                             1,608         1,268        1,273
Own shares in GN Great Nordic                   410           246          343
Listed bonds and shares                          73           394          296
Cash funds                                      838           370          408
Total current assets                          3,663         2,667        2,810

Total assets                                  6,499         5,291        5,476


Consolidated Balance Sheet - Liabilities

                                               1999          1998         1998
(DKK million)                            First half    First half    Full year

Liabilities

Equity
Share capital                                   750           731          744
Share premium fund                               93           617           60
Revaluation reserve                             294           277          238
Reserve for own shares                          410           246          343
Net revaluation - equity method                   -             2            -
Other reserves                               (1,080)          248          560
Total equity                                    467         2,121        1,945

Minority interests                                7            18           20

Provisions
Provisions for pension commitments               23             6            3
Provisions for deferred tax                     224           175          196
Other provisions                                321            88          126
Total provisions                                568           269          325

Debt
Mortgage debt                                    12            69           28
Bank debt                                     2,145           321          270
Convertible bond loan                             -           266          230
Other debt                                      287           284          276
Total long-term debt                          2,444           940          804

Repayment of long-term debt                      83            28           42
Bank debt                                     1,320         1,178        1,386
Convertible bond loan                           190             -            -
Trade payables                                  424           277          347
Tax                                              21            35           43
Other debt                                      920           368          413
Prepayments                                      55            57           62
Dividend for the fiscal year                      -             -           89
Total short-term debt                         3,013         1,943        2,382
Total debt                                    5,457         2,883        3,186


Total liabilities                             6,499         5,291        5,476


Consolidated Cash Flow Statement

                                               1999          1998         1998
(DKK million)                            First half    First half    Full year

Operations
Operating income                                207           121          363
Depreciations                                   195           157          331
Other adjustments                                (8)            3            8
Change in receivables                           (86)          (81)        (186)
Change in inventories                           (44)            5           (2)
Change in payables etc.                          70            15          122
Cash flow on primary operations before 
 financial items                                333           220          636
Interest and dividends, etc. received            53            35           38
Interest paid                                   (59)          (60)        (119)
Tax paid                                        (46)          (28)         (57)
Cash flow from operations                       281           167          498

Investments
Acquisition of tangible fixed assets and 
 property                                      (314)         (275)        (470)
Disposal of tangible fixed assets and property   47            39          157
Acquisition of financial fixed assets             -             -          (14)
Disposal of financial fixed assets                -             -           14
Acquisition of companies                     (1,557)           (3)        (302)
Cash flow from investments                   (1,824)         (239)        (615)
Cash flow from operations and investments    (1,543)          (72)        (117)

Fianancing
Share issue proceeds                              -             -           17
Change in long-term debt                      1,931            17          (89)
Change in short-term debt                       (49)           70          232
Dividends paid to shareholders                  (89)          (87)         (87)
Cash flow from financing                      1,793             0           73
Total net change in cash funds                  250           (72)         (44)

Cash funds at 1 January
Cash in hand and at bank                        408           407          407
Listed bonds and shares                         639           578          578
Adjustments of cash funds and listed securities  24            96          106
Total cash funds at 1 January                 1,071         1,081        1,091

Cash funds at end of period
Cash in hand and at bank                        838           370          408
Listed bonds and shares                         483           639          639
Total cash funds at end of period             1,321         1,009        1,047

The cash effect from subsidiaries purchased and sold is only included for that
period in which the companies were part of the Group.


Group operation

                                               1999          1998         1998
(DKK million)                            First half    First half    Full year

Revenue
SONOFON                                         740           574        1,256
GN Comtext                                      239           273          519
GN Great Northern Telegraph Company             117            81          155
GN Netcom                                       468           358          796
GN Nettest                                      352           298          726
GN ReSound                                      375           291          583

Operating income                                               
SONOFON                                          70            33          123
GN Comtext                                       (3)          (24)         (41)
GN Great Northern Telegraph Company              48            46           67
GN Netcom                                        91            65          145
GN Nettest                                       (7)           (5)          65
GN ReSound                                       38            23           40

Income before taxes and extraordinary items
SONOFON                                          48            10           76
GN Comtext                                       (8)          (21)         (29)
GN Great Northern Telegraph Company              52            47           68
GN Netcom                                        96            64          140
GN Nettest                                      (14)          (17)          44
GN ReSound                                       34            19           35


Result in Group companies

SONOFON
During the first half of 1999, SONOFON reported highly satisfactory growth in
revenue. GN Great Nordic's share of revenue rose 29% from DKK 574 million to DKK
740 million. This growth is organic and due to more customers and higher traffic
volumes but new services also contributed.

At the end of the first half of 1999, SONOF0N had 815,000 customers (including
Debitel customers), which is up 34% from the first half of 1998. In closing the
first half of 1999, SONOFON did not include inactive prepaid customers to
get a truer picture of its customer base.

With an operating income of DKK 70 million (GN Great Nordic's share), SONOFON
more than doubled its earnings compared to the first half of 1998, The increase
was especially due to the benefits of scale from greater volumes of traffic on
SONOFON's network, Income before taxes and extraordinary items improved
accordingly from DKK 10 million to DKK 48 million.

At the beginning of the year, and in facing intense competition in the mobile
telephone market SONOFON provided considerable subsidies for the sale of
subscriptions and prepaid SIM cards. During the period, SONOFON bore considera
ble sales and marketing costs which gave rise in January and February to a
significant inflow of new customers at the same level as the sharp growth in the
customer base noted especially in the fourth quarter of 19984. From February,
SONOFON has reduced its subsidies, which led to the growth of new customers
declining. As a result of SONOFON's very broad distribution network, and also
strong SONOFON products such as the prepaid SIM cards 'Taletid', the
company continued to acquire customers for the remainder of the first half of
1999 but at a more modest rate.

Traffic volumes on SONOFON's network during the whole of the first half of 1999
were far higher than those in the same period last year. During the first half
of 1999, the number of total traffic minutes thus rose 55% compared to the first
half of 1998. Traffic has risen considerably more than the increase in the
customer base, which emphasises that SONOFON's customers are increasingly making
use of their mobile phones.

With 815,000 customers and a considerable growth in traffic. SONOFON
successfully defended its position during the first half of 1999 in this highly
competitive market.

The prepaid SIM card continued to be a great success during the half year,
Another successful service was the SMS (Short Message Service). The number of
SMS messages rose sharply in the first half of 1999, also because it had become
possible for prepaid customers to use SMS. The trend towards increased use of
SMS has also been reported in the rest of Scandinavia and it is expected that
the SMS represents great earnings potential for SONOFON.

Sales to business customers continue to have high priority and represent an
important opportunity for developing SONOFON into a full-service telco offering
every kind of tele service, including fixed network services. In April,
negotiations with Tele Danmark on operating as a service provider on Tele
Danmark's fixed network were concluded. This finally provided SONOFON with the
possibility of offering fixed network solutions and introducing services
combining mobile and fixed network telephony.

DuoFon, which was launched in May, is a combined service in which the main
number is the mobile telephone number. Sales of DuoFon have been growing more
slowly than expected and during the second had of 1999, SONOFON will be focusing
on extra training for employees in its own shops to increase sales. At the same
time, SONOFON will be working on getting external distributors to show greater
commitment to DuoFon, Distribution is often focused on selling more simple
products and in certain instances, also products from competing telcos are sold.

SponsorFon, the mobile service financed by advertising spots, was launched in
the second quarter of 1999 and quickly became successful with approx. 60,000
customers at the end of the first half of 1999, However, the Consumer
Ombudsman's initial reaction on mobile telephony funded by advertising resulted
in that some advertisers stayed away, as the service was called illegal. Even
though it is clear today that the service is legal and approved by the Consumer
Ombudsman and despite especially many young showing a high level of interest in
SponsorFon, its reputation continues to suffer from the Consumer Ombudsman's
earlier initiative so that it has proved difficult to re-establish the large
advertiser interest in the service shown at the launch. The SponsorFon service
and other innovative services, such as GISMO (information, news etc. via SMS),
have ensured satisfactory penetration of new market segments such as the
teenager segment.

At the end of March, SONOFON introduced a new billing system, which is
millennium proof and is also an important precondition for being able to launch
innovative new services rapidly. For a while the new bills led to many questions
from customers which increased the pressure on SONOFON's Customer Service from
250,000 calls a month to more than 550,000. This unfortunately coincided whh the
introduction of new services such as DuoFon, which gave rise to further pressure
so, that for a while operations at Customer Service were unsatisfactory.
Pressure on SONOFON's Customer Service has begun to return to normal. SONOFON
has been characterised as having fresh, friendly and efficient customer service
and work is being focused on re-establishing a satisfactory level of customer
care.

SONOFON's aim is to establish competition in the Danish telecoms market and
hence provide a real alternative to Tele Danmark. Alter the dose of p(e half
year, Tele Danmark has announced cuts to all interconnect fees. These price cuts
are however insufficient to bring Danish interconnect fees down to the level of
the cheapest countries and they are not expected to have a significant impact on
SONOFON's results. SONOFON is continuing, therefore, to insist that Danish inter
connect fees should be significantly reduced to ensure competitive teleservices
for the benefit of the customers.

GN Great Nordic's share of SONOFON's revenue for the whole of 1999 is expected
to be more than DKK 1.5 billion (compared to almost DKK 1.3 billion in 1998)
with an improved profit margin (based on current accounting principles).

GN COMTEXT
During the first half of 1999, GN Comtext achieved revenue of DKK 239 million
compared to DKK 273 million in the same period last year and this trend is not
satisfactory. However, operating income improved by DKK 21 million compared to
the first half of 1998, and with a deficit of DKK 3 million, GN Comtext is
therefore in line with forecasts for the first half, but the company is still
far from achieving GN Great Nordic's targets for revenue and earnings.

Even though GN Comtexts core product, telex, continues to have a future in
sectors, which GN Comtext primarily penetrates and which all require a high
level of security lor transmission and confirmed receipt of messages, the
international telex market is generally in decline. It is estimated that in 1999
global telex traffic will fall by 10-15%. As a consequence, GN Comtext has been
focusing in recent years, and especially after the crisis in Asia, on developing
new fax and e-mail services to compensate for the decline in telex traffic. At
the end of 1998 and during the first part of 1999, GN Comtext launched a whole
series of new services, including PC-based fax and e-mail services based on the
Internet technology.

GN Comtext's new services are operating satisfactorily. Competition in the fax
and e-mail sectors is very keen, however, and profit margins are low, compared
to telex. What GN Comtext needs, therefore, are very high volumes to achieve
revenue and earnings which can compensate for declining revenue and earnings on
telex. GN Comtext did not succeed in achieving such volumes during the first
half of 1999. Sales of new services have not developed as expected and thus
revenue has fallen.

GN Comtext is continuing to cut its cost by way of rationalisation and
structural adaptation. Although this has contributed to improved results for the
half year, such changes, on the other hand, have a restrictive impact on
developing the company and the sale of new services.

FaxNet Corporation, in which GN Comtext has an approx. 22% holding, is
developing positively but more slowly than expected. With its innovative fax
services, FaxNet has now won all the US Bell telcos as customers with one
exception. A FaxNet investment in Argentina, which was performing
unsatisfactorily, is now under control.

After the close of the half year, GN Comtext Chief Executive, Graham Hanson,
resigned due to disagreement with GN Great Nordic about the future strategy of
GN Comtext. GN Great Nordic's President & CEO, Jorgen Lindegaard, has
temporarily taken over responsibility for the management of GN Comtext.

GN Comtext's core strength is that the company provides messaging services in
more than 40 countries. Also it has a modern global network which can support
all the services, which the company offers today. The network has just been
upgraded with new communication links between switches and network hubs. As GN
Comtext is also strongly placed in the shipping industry, its new services
will contribute to GN Comtext maintaining its position as one of leading
companies when it comes to global communication solutions for this industry.

The challenge will thus be to ensure that the company gains sufficient volumes
and hence earnings from the sale of its new services, but it is expected that
it will be very difficult for GN Comtext to achieve GN Great Nordic's targets
for growth and earnings without entering into a strategic alliance or finding a
partner. Work will therefore be systematically continued during the second half
of 1999 on finding a long-term solution for GN Comtext and all possibilities
will be considered.

GN Comtext is forecasting whole year revenue of about DKK 500 million (compared
to DKK 519 million in 1998) and an operating income near zero (based on current
accounting principles).

GN GREAT NORTHERN TELEGRAPH COMPANY
The first half went considerably better than expected with revenue rising to
DKK 117 million compared to DKK 81 million for the same period last year. The
increase in revenue gave an operating income of DKK 48 million, up from DKK 46
million for the same period last year, and income before tax and extraordinary
items rose DKK 5 million to DKK 52 million.

The positive trend in revenue and earnings was due to a series of significant
accelerated repayments on the Telegraph Company's cable systems.

In May, the Telegraph Company received via Danish Russian Telecommunications
Group (GN share 50%) an accelerated repayment of DKK 44 million from
Rostelecom for the Russia-Japan-Korea cable system. The payment will reduce the
Telegraph Company's future income from the cable system since a significant
reduction in the settlement rate is forecast for the remaining years of the
contract.

In connection with the privatisation of the Lithuanian telco, Lietuvos
Telekomas, the Danish Baltic Telecommunications Group (GN share 50%) was
requested to renegotiate the contracts on the Lithuanian cable systems. A
contract on a shortening of the contract period was entered into. The Telegraph
Company will receive the last payments from the systems in 2002.

The positive results for the first half were also due to traffic on the Polish
cable systems developing well. Operations are carried out by Danish Polish
Telecommunications Group (GN share 75%).

The Telegraph Company's brokerage activities in buying and selling international
network capacity are still modest but are under development.

After the close of the first half, the Telegraph Company has invested together
with Russian companies Rostelecom and Sweet in RTC Page which has a licence to
operate a national paging system based on the European ERMES standard. The
company is expected to begin operations in Moscow next year. The Telegraph
Company's investment of USD 2 million is part of a continuing positioning
program in Russia where the Telegraph Company is also joint owner of a paging
system and a pay-phone operator in St. Petersburg and an internet provider in
Moscow.

For the whole of 1999, the Telegraph Company is forecasting revenue of about DKK
200 million (compared to DKK 155 million in 1998), and somewhat better
operating results and income before taxes and extraordinary items than in 1998
(based on current accounting principles).

GN NETCOM
GN Netcom achieved revenue of DKK 468 million in the first half of 1999. This
is a satisfactory increase of 31 % on the same period last year. Earnings did
better than expected. Operatng income rose 40% to DKK 91 million whilst income
before tax and extraordinary items was up 50% to DKK 96 million.

The growth in earnings was due to rising sales especially in Europe, and to a
successful rationaiization program following the acquisition of ACS Wireless as
well as to reduction of costs by outscourcing. Over the past couple of years, GN
Netcom has outsourced many activities, especially production and assembly of
sub-assemblies for headsets, and this trend is expected to continue. GN Netcom's
constant focus on cost cutting by outsourcing production to subcontractors is a
significant reason for the constantly improving results reported in recent
years.

During the first half of 1999, GN Netcom retained its position as the world's
leading supplier of cordless headsets. Sales of the Ellipse digital, cordless
headset, which was most successfully launched in 1998, have continued to grow
and have contributed to sales better than expected especialiy in Europe. After
the close of the half year, GN Netcom has launched a special American 2.4 GHz
version of the Ellipse in the USA, thus reinforcing its technological lead in
the USA as well. Like the European version, the American Ellipse has many
advanced features and offers superior performance compared to the otherwise
successful analogue MPA Satellite products.

In the first half, GN Netcom launched its GN Express product in various models.
This is an example of how GN Netcom is exploiting its technology to penetrate
the mobile telephone and PC headset markets. Headsets are becoming increasingly
widespread in new markets. GN Netcom has great expectations to earnings on these
new markets and will be following up its launch of GN Express with new products.

At the end of the first half, GN Netcom introduced an entirely new product,
Activa, which is the first headset in the world with a built-in amplifier in the
actual headset. It can be directly connected to practically any telephone
without an amplifier or converter. The product is aimed at the office segment
and has been well received. GN Netcom has great expectations to the product
contributing to increasing the number of headset users.

During the second half of 1999, GN Netcom will also be investing significant
resources in focused development and exploitation of such new technologies as
the so-called 'Bluetooth' technology. Such development will ensure GN Netcom a
leading position in its existing core business (call centres and offices) and in
such new business areas as mobile telephony and PC applications.

For the whole year, GN Netcom is forecasting revenue of DKK 950 million (up from
DKK 796 million in 1998), and an increasing profit margin compared to 1998
(based on current accounting principles).

GN NETTEST
GN Nettest achieved a satisfactory growth of 18% in revenue which rose to DKK
352 million in the first half of 1999. This growth was primarily organic and the
Telecom Division especially is reporting very positive developments.

GN Nettest's operating result was a deficit of DKK 7 million which was in line
with last year. This result was satisfactory in view of GN Nettest's business
being highly seasonal. After a difficult start to the year and a most
satisfactory second quarter, as in previous years, significantly higher sales
are forecast for the second half of 1999. The inflow of orders during the first
half of 1999 was as expected and was 20% up on 1998. Orders in hand at the end
of the half year were thus DKK 73 million up on the same time last year.
Positive developments are accordingly forecast to continue at GN Nettest.

Many of the orders in hand are for the QUEST7 management system for monitoring
telecommunications networks. Deliveries are awaiting new versions of system
software which will soon be ready. Accordingly, QUEST7 still looks like being a
success for the Telecom Division. GN Nettest is just about to deliver test
versions of QUEST7 to various telcos and if these function satisfactorily as
planned, the company is expecting to receive sizable orders from the telcos
concerned.

The French company, Fastware, which was acquired last year, has been living up
to expectations. Fastware has given GN Nettest an important portfolio of
products for data networks in companies (WAN - Wide Area Networks), considerable
know-how and important market references amongst the large network operators. It
has also proved possible to increase the sale of Fastware's products via GN
Nettest's internatioinal salesforce.

At the end of June 1999, GN Nettest acquired the US company PK Technology for
USD 43 million. PK Technology is a leading manufacturer of equipment for testing
and measuring optical fiber cables and networks. Immediately after the acquisi
tion, work started on incorporating PK Technology into GN Nettest's Fiber Optic
Division. The merged company now covers all market segments, i.e. manufacturers
of optical fiber and cables, companies which install and maintain optical cables
and finally total monitoring systems to network operators.

GN Nettest will also be offering products for the rapidly growing market for
Dense Wavelength Division Multiplexing (DWDM) networks and the new market for
All Optical Networks. With its acquisition of PK Technology, GN Nettest now has
a full range of products for testing and monitoring optical communications and
is now the world's leading supplier in this market.

Again in the first half of 1999, GN Nettest continued the high level of
development for all three of its divisions, and is expected to invest 15% of
annual revenue in the development of new products. GN Nettest is one of the few
companies in the world, which can offer a full range of products for testing
and monitoring tele/datacoms and optical fiber networks. The work on exploiting
the company's total distribution network to sell products from all the divisions
also received high priority in the first half of 1999. In USA, its largest
market, all activities have been placed at GN Nettest Inc., based in Boston,
which is responsible for the sale of products for all three divisions.

GN Nettest is expecting the positive trend to continue for the remainder of the
year. Revenue in 1999 is forecast at more than DKK 1 billion (up from DKK 726
million in 1998), with a higher profit margin than in 1998 (based on current
accounting principles).

GN RESOUND
GN ReSound which is the merger between GN Danavox and ReSound Corporation,
reported satisfactory growth of 29% during the first half of 1999. Revenue was
DKK 375 million, of which DKK 334 million derived from GN Danavox and DKK 41
million from ReSound Corporation which figured in the interim accounts from 11
June.

GN Danavox' revenue grew by 15% during the first half of 1999 and achieved a
profit margin of more than 10%. This remarkable progress was very largely due to
the digital hearing aid, Danalogic.

GN ReSound's operating income rose 65% to DKK 38 million, which was most
satisfactory. The full impact of all the effort made on the open software-based
platform for digital hearing aids is now leading to results with higher earnings
margins reported by GN Danavox as well as by ReSound Corporation.

GN ReSound's Madsen Division also developed well in the first, half of 1999 with
growth in revenue.

With effect from 11 June, GN Great Nordic acquired ReSound Corporation for USD
180 million and by merging the company with GN Danavox, a significant company in
the hearing aids industry is expected to emerge. ReSound Corporation is a
leading manufacturer of hearing aids with production facilities in the USA and
Europe and sales companies in all significant markets in North America, Europe
and Asia. The acquisition has significantly strengthened GN Danavox in North
America, which is ReSound Corporation's traditional core market. The merged
company has the resources and capabilities required to develop the hearing aids
and audiological test equipment of the future. Since 1996, the two companies
have been working together on the development of a platform for digital hearing
aids and it is accordingly relatively simpie to harmonise their development
plans.

GN ReSound is based in Redwood City (California) and GN Danavox' President & CEO
Jesper Mailind, will take over as the company's CEO as per 1 September.

Immediately after the acquisition of ReSound Corporation, a significant
integration process was initiated. 17 integration groups were set up covering
everything from development and production to sales and HRM. During the second
half of 1999 and into 2000, a company will be created with the ability to extend
its position as one of the world's leading manufacturers of hearing aids and
audiological equipment and hence achieve GN Great Nordic's targets for growth in
revenue and earnings.

The first results of the integration have already been achieved, with a joint
sales organization in most places in Europe and the USA to sell products from
both GN Danavox and ReSound Corporation. ReSound has a good brand and is known
for innovative products, and the intention is accordingly to maintain the
company's products and trade marks. This also applies to Digital 5000, ReSound's
digital hearing aid which was launched in the first quarter and which is selling
satisfactorily. Generally integration proceeds as planned, and the most
important decisions have been made or will be made within the next 3 months.

By the end of June, for approx. DKK 4 million GN ReSound acquired IFU's 50%
holding in the production company in China, which was established in 1986. GN
ReSound now owns the Chinese production company 100%.

After the close of the first half, GN ReSound has for DKK 15 million acquired
Danplex, a Danish company which is a significant supplier of audiological
equipment for measuring hearing loss, etc. Danplex is being merged with GN
ReSound's Madsen Division. The merged company will thus be market leader in the
audiological equipment sector with e.g. the product Aurical.

For the whole of 1999, GN ReSound is forecasting revenue of about DKK 1.1
billion (up from DKK 583 million in 1998), and an increasing profit margin
compared with GN Danavox' profit margin for 1998 is expected (based on current
accounting principles).

The profit margin from the first half is expected to fall in the second half due
to ReSound with a low profit margin now weighting more than GN Danavox, and that
certain negatve sales synergies are expected.

The acquisition of ReSound will give one-off costs of around DKK 250 million
for the restructuring/integration program, and it is expected from a preliminary
assessment that approx. half hereof, according to the IAS, will be expensed in
1999, and the other half will be allocated to the opening balance sheet. The
merger is expected to provide annual synergy of at least DKK 100 million, the
full effect of which will be felt from 2001.

OTHER
Operations in the property sector went satisfactorily.

After the close of the half year, the property at Sydhavns Plads 4 in Copenhagen
was sold to The National Institute for Social Educators - Early Childhood and
Social Education.

Completion date is 1 September and the price for the two sites and the property
is approx. DKK 45 million. GN Great Nordic also sold GN Ejendomsaktieselskabet
Mobil to a company in the Topdanmark Group with effect from 1 July. GN
Ejendomsaktieselskabet Mobil owns two office blocks in Aalborg with a floor area
of 2,915 m2.

These sales are part of GN Great Nordic's strategy of disposing of its property
portfolio in a profitable controlled way so as to concentrate on operating and
developing its focus companies.

Results for the whole of 1999 for GN Ejendomme are expected to be in line with
1998.

GN Great Nordic's Board has decided to redeem the convertible bond loan of
originally DKK 300 million, which was issued in 1994. Redemption will be on 21
September and bond holders have had the options of converting their bonds to
shares or reimbursement in cash. On 19 August the time-limit for conversion
expired, and a total of 1,604,554 new shares have been issued, corresponding to
a 4.3% increase in the share capital. The total number of issued shares now
totals 39,117,368. Now a total of DKK 0.5 million is outstanding on the loan,
which will be paid to bond holders. Redemption of the loan will reduce the
Group's financial costs and strengthen equity.

Based on a net interest bearing debt of about DKK 3 billion as per 30 June 1999,
financial items are expected to show a deficit of a little more than DKK 100
million.

During the first half of 1999, GN Great Nordic reported the net acquisition of
200,000 of its own shares and as per 30 June 1999 GN Great Nordic holds
1,716,205 own shares.

As in 1998 an effective tax rate of 26% is expected for the whole of 1999.


Copenhagen 31 August 1999

MORE TO FOLLOW



IR CCDCPBDKDCFN
                                                                                                                                                                                                       
                                                                

a d v e r t i s e m e n t