Amplifon SpA

MIL:AMP

Earnings Call Transcript 2019-Q3

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon Third Quarter and 9 Months 2019 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Ms. Francesca Rambaudi, Investor Relations, Director of Amplifon. Please go ahead, Madam.

[Francesca Rambaudi, executive]

Thank you. Good afternoon, and welcome to Amplifon's Conference Call on Q3 and 9 Months 2019 Results. Before we start, a few logistic comments. This morning, we issued a press release related to our first 9 months 2019 results, and this presentation is posted on our website. The call can be accessed also via webcast and dial-in details are on Amplifon's website as well as on the press release.

I have to bring now your attention 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 principles, 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 and commentary in this presentation refers, unless otherwise specified, the 2019 key data without the application of IFRS 16.

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

[Enrico Vita, executive]

Thank you, Francesca. Good afternoon, everyone, and welcome to our conference call on Q3 and 9 months '19 results also from me.

Today, I'm very pleased to comment with you the results of one of our best quarters ever. And in fact, in Q3, we reported one of the highest organic growth ever, close to 10%, which, as usual, is not even including the double-digit organic performance of GAES. Moreover, today, I'm pleased to share with you our progress on some of our key initiatives for this year. On this regard, I first refer to the progressive rollout of the Amplifon product experience across our key markets. And in Q3, in fact, perfectly in line with our plans was the turn of France and Australia and the Miracle-Ear business in the U.S.

Then, obviously, I also refer to the integration with GAES in Spain, which continues to progress extremely well. So this time before commenting the main numbers for the quarter and for the first 9 months, let's move to the next chart, the chart #3 to share the most recent updates on the integration with GAES in Spain. As stated, the integration is

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progressed with integration of our 2 store networks, GAES and Amplifon, completing in just the 3 months, the rebranding of the stores and the harmonization of the consumer offering. Then on October 28, after only 40 days from the beginning of the process, we finalized the collective agreements with the worker representatives and employees for the reorganization of mainly the back office workforce. So today, we are in a -- in the position to raise with confidence our forecast regarding the run rate synergies by 2021 to the high end of the range previously communicated, and therefore, circa EUR 25 million. In addition, and actually in parallel to all of this, Spain reported in Q3 and for the third quarter in a row, another excellent performance, certainly above our initial assumptions, both in terms of revenues and profitability. In fact, also in this quarter, our growth there was double digit, obviously, all organic.

So let's now move to the Chart #4 to comment together a bit more in detail the main numbers for the quarter and then for the first 9 months. Revenues in the quarter were up nearly by 30% at current exchange rates and up by 28.5% at constant exchange rate. As said earlier, the organic growth was excellent, 9.2%, most probably the best ever reported by our group and then significant acceleration versus the first 6 months of the year. With regards to profitability, we increased the EBITDA recurring by more than 30%, and the margin from 13.4% to 13.6%. Finally, the net profit recurring was also up by nearly 20% versus Q3 2018 at EUR 17.7 million.

So let's now move to the following chart, Chart #4 (sic) [ Chart #5 ] to review the numbers for the first 9 months. Yes, you can find again very strong numbers. In the first 9 months, the revenues were up by over 27% at current exchange rate and by 26.1% at constant exchange rates. Moreover, I would like to highlight once again that the quality of the revenue growth was extremely healthy with organic growth over 6%. The EBITDA recurring increased by nearly 30%, also after stronger marketing investments with margin improving by circa 30 basis points from 15.6% to 15.9%. The net profit recurring was close to EUR 80 million, up by 28.3% versus the same period of previous year. Finally, I would like to highlight the very strong recurring free cash flow generation, up by more than 50% versus the first 9 months of last year.

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

[Gabriele Galli, executive]

Thanks, Enrico, and good afternoon to everybody. Moving to Slide #6, we have a look at the EMEA, which posted in the 9 months and outstanding performance boosted by a very strong acceleration of organic growth in Q3 and by the continued excellent results of Spain. In the first 9 months, EMEA showed an outstanding revenue growth of 32.4% (sic) [ 32.7% ] in local currency. The revenue growth was driven by an excellent 7.3% organic growth, excluding guys, which was entirely accounted in the M&A growth and by an extraordinary M&A contribution of 25.1%. 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 Q3, revenue growth in local currency was 36%, driven by an all-time high organic growth of 11.4%, thanks to double-digit organic growth reported across most EMEA markets. Contribution from acquisitions accounted for 24.6%. The resulting revenue growth, both in the 9 months and in Q3, compared with the challenging comparable basis of 11.7% and 12.8% growth reported respectively in the 9 months and Q3 of '18 versus previous year. In the 9 months, Italy posted an outstanding performance driven by the Amplifon product experience rollout and by the new advertising campaign. Spain showed an excellent and above expectation, organic performance, growing double-digit for both GAES, which is reported in the M&A growth and Amplifon businesses. As anticipated by Enrico, in fact, the GAES integration is proceeding faster and with stronger results than initially expected. Also, France and Germany reported excellent performance, thanks to a very strong organic growth and acquisitions.

Finally, as anticipated by Enrico, after the successful launch of our Amplifon product experience in both the Netherlands and Germany in Q2, we progressed with the rollout also in France during Q3. In terms of profitability, the excellent top line growth, coupled with increased operational efficiency and scale reach in core countries allowed in the 9 months an EBITDA recurring increase of 36.3%, with a 40 basis point margin improvement from 16.5% to 16.9%, even after a very strong increase of marketing investments. In Q3, EBITDA recurring increased around 46% to EUR 39.2 million, with the margin improving 100 basis points also after GAES integration.

Moving to Slide #7. We have a look at Americas performance, which posted in the 9 months, a strong revenue growth in local currency of 14.9%. The growth was driven by a 2.9% organic growth, 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 revenue growth in the period. Currency tailwind for U.S. dollar appreciation gave a further 6.1% contribution to revenue growth.

In Q3, revenue increased by 17% in local currency with organic growth accelerating to 4%, driven by a strong performance of Miracle-Ear and Amplifon Hearing Health Care. M&A contribution was 13%.

Moving to profitability. EBITDA recurring in the 9 months increased strongly by 28.8% versus last year from EUR 32.3 million to EUR 41.6 million, with 120 basis points margin improvement. In Q3, the EBITDA margin improved by 80 basis points to 20.3% from 19.5% 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 #8. We have a look at APAC performance. In the 9 months, revenues increased by 7.5% in local currency, significantly above the reference market. The revenue growth was driven by a 4% organic growth, coupled with a 3.5% contribution from M&A due to our joint venture in China. Currency headwind had a negative contribution of around minus 1%, leading total revenue growth to 6.6% from EUR 131 million to EUR 140 million. In Q3, revenues increased by 8.8% in local currency, driven by a strong 5.1% organic growth despite a still flattish market, both in Australia and New Zealand. M&A contribution amounted to 3.7%. In the 9 months, Australia reported a robust sales performance, well above market and all organic. New Zealand performance was still impacted by low-returning customers for the anniversary of the regulatory change, although improving from beginning of the year. EBITDA in the 9 months was EUR 33.9 million, while Q3, EBITDA was EUR 11.8 million, up 4.2% versus Q3 '18 with margin contracting versus previous year, but sequentially improving versus Q2 2019. The margin contraction in both the 9 months and Q3 was due to lower fixed cost absorption, primarily related to investments to strengthen our organization in Australia in a still-flattish market environment in addition to the dilutive effect of the Chinese joint venture consolidation. We expect the profitability in APAC to improve in the next quarter, and therefore, achieve a margin for 2019, broadly in line with the one reported in 2018.

Moving to Slide 9. We appreciate the profit and loss evolution in Q3. Total revenues increased by 29.5% to EUR 392.7 million, driven by an outstanding organic growth, accounting for 9.2%, an extraordinary M&A contribution, accounting for 19.2% fostered by GAES consolidation, GAES double-digit top line growth and bolt-on acquisition for countries. And the currency tailwind accounting for 1%, thanks to the U.S. dollar appreciation. Continued profitability improvement, also after GAES integration led recurring EBITDA margin to 13.6%, with an increase of 20 basis points versus '18. Total recurring EBITDA posted an increase of 31.6% to EUR 53.4 million versus EUR 40.6 million last year. G&A increased by EUR 7.2 million to EUR 25.1 million, following the important growth of investments made during past quarters, and the purchase price allocation related to GAES acquisition, leading EBIT to EUR 28.4 million, with a growth of 24.7% versus previous year.

Financial expenses posted a growth of EUR 1.8 million to EUR 4.1 million, following the increase in net financial position for the GAES acquisition. Profit before tax was at EUR 24.3 million versus EUR 20.5 million in Q3 '18, with an increase of 18.4%. Tax rate posted a reduction of around 10 basis points to 27%, leading recurring net profit to EUR 17.7 million versus EUR 15 million last year, with 18% increase. The reported figures include EUR 12.7 million one-off expenses related to the GAES integration versus EUR 6.0 million for the GAES acquisition last year. Just a few words on application of IFRS 16, which, as you know, as all-in accounting impacted, leaving cash flow unchanged. The capitalization of the right-of-use led to a stronger EUR 22.6 million EBITDA increase due to the different accounting of the rental cost. With a result in recurring EBITDA of EUR 76 million with a ratio to sales of 19.4%.

Moving to Slide #10. We have a look at the profit and loss evolution in the 9 months. Total revenue grew by around EUR 262 million to EUR 1.224 billion, with an outstanding at 27.2% growth, driven by a strong organic growth at 6.2%, coupled with an extraordinary 19.9% M&A growth and a positive contribution coming from the dollar appreciation accounting for around 1%. Strong operating leverage led recurring EBITDA margin to 15.9%, with an increase of 30 basis points versus previous year. Total recurring EBITDA increased by an excellent 29.3% or EUR 44 million to EUR 194.6 million.

Following the increased investments than in the past quarter and the PPA related to GAES acquisition, G&A increased by around EUR 21.7 million, leading EBIT to EUR 121 million with a growth of 22.6%. Net financial expenses posted a reduction of EUR 0.8 million after the refinancing of the bond made in July 18, partially offset by the increased net financial position, leading profit before tax to EUR 109.9 million, with a growth of 26.7% versus 9 months '18. Tax rate posted a reduction of 100 basis points from 28.6% to 27.6%. The improvement in EBITDA, financial expenses and tax rate led the increase of net profit to 28.3%, plus EUR 17.6 million from EUR 62 million to EUR 79.6 million. EPS adjusted for one-off items and EPA amortization posted an outstanding increase of 35.3% from EUR 0.333 to EUR 0.45 per share. The reported figure include EUR 18.6 million one-off expenses related to the GAES integration in '19 and EUR 6 million one-off expenses related to the GAES acquisition in 2018. With the application of IFRS 16, recurring EBITDA came in at EUR 262.6 million, with a ratio to sales of 21.4%.

Moving to Slide #11. We have a look at 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 187 million and minus EUR 59.6 million. Operating cash flow in the period was equal to EUR 127.4 million versus EUR 93 million in the 9 months '18, with a strong EUR 34.3 million improvement versus last year, following the outstanding conversion of EBITDA increase. On every current basis, operating cash flow was EUR 136.9 million versus EUR 93.2 million in the 9 months '18, with an improvement of around 47%. Net CapEx increased by EUR 16.5 million to EUR 58.7 million. Finally, for the perimeter change due to GAES consolidation and further CapEx related to our new group's ERP system.

Free cash flow posted an outstanding growth of around EUR 17.8 million, ending up at EUR 68.6 million on a recurring basis, the free cash flow in 9 months of '19 was EUR 78.1 million versus EUR 51 million last year. Improving around EUR 27 million or plus 53% versus previous year. The M&A activity after the cash absorption of EUR 53 million, around EUR 19 million lower than previous year, while cash use in financing activities was substantially aligned to 2018 despite higher dividend distribution. Net cash flow generated in the period was negative by EUR 15.4 million versus a cash absorption of EUR 52.3 million in the 9 months '18 resulting in a net financial position at EUR 856 million versus EUR 348 million at September '18 and EUR 841 million at year-end '18.

Moving to Slide 12. We can have a look at the debt profile trend and addictive financial ratios. As mentioned in the previous chart, the net financial debt closed at EUR 856.8 million, with liquidity accounting for positive EUR 125.2 million, short-term debt accounting for EUR 178.3 million and medium long-term debt accounting for EUR 803.7 million. The application of IFRS 16 led to accounting of lease liabilities, which amounted to EUR 433.5 million, leading the total of financial debt and lease liability to EUR 1.29 billion.

Total equity was at EUR 636 million. According to the new definition of covenants, I agreed with the banks and investors at the beginning of the year, the ratio, net debt over EBITDA, decreased from 2.46 at year-end '18 to 2.20 as of September 2019.

I will now hand over to Enrico for 2019 outlook.

[Enrico Vita, executive]

Thank you, Gabriele. So with this chart, also today, we are at the end of the presentation. Obviously, we are extremely satisfied about the results we posted in the Q3 and in the first 9 months. Which position us fully on track for another excellent year. And for the fifth record year in a row. Moreover, with the finalization of the reorganization activities. In Spain, we can now consider the first part of the integration with GAES successfully completed. Finally, we are confident that the continuation of the rollout of the Amplifon product experience in key markets will continue to support and actually to boost our performance in the coming future. With this, I leave back the floor to Francesca.

[Francesca Rambaudi, executive]

Thank Enrico. Now let's have a very quick look to our financial calendar on Slide 14 for 2020. Full year 2019 results will take place on March 4, 2020. The Shareholders' General Meeting on April 24, Q1 2020 results will be on April 29. Q2 results on July 29. And lastly, Q3 results on October 28, 2020.

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

[Operator]

[Operator Instructions] The first question is from Niccolò Storer with Kepler Cheuvreux.

[Niccolò Guido Storer, analyst]

I have 3 questions. The first one is on the trend in the U.S. market, apparently you recovered a bit in the third quarter, but still your figures are below market growth, which according to my surface is around 7-plus percent. So what's the reason behind that, still issues with the leads or what is driving the performance there? The second one on restructuring charges that you posted in third quarter were quite high. What should we expect for 2019 and then for 2020, still around EUR 20 million, maybe more on 2019 with a little left for 2020? Last question on the outstanding performance that you posted in Europe, if you can comment a bit on trends in term of volumes, pricing and mix. So if this plus 11.2% we have also some effects from the rollout of the branded products.

[Enrico Vita, executive]

Okay. Thank you, Nicolas, for your questions. So I will answer to the questions number 1 and 3, and then I will leave to Gabriele the 2 on the restructuring charges. So with regards to our performance in the U.S., we are, of course, quite happy about the performance because it is performance, which has improved quite steadily throughout the year in terms of organic growth of 4%, in my opinion, is quite a good number. When we refer to the market data, you're right, the market data published by HIVE actually say, a growth in the U.S. more in the region of 7%, but please consider that these numbers, first of all, must be normalized by working days in the U.S. There was 1 working day more so. And normalized by working days, we are more in the region of 5%, 6%. Then also, you have, also to consider that these are selling data. So they can also reflect some selling initiatives by some manufacturers. And we have some information that some of the manufacturers also at some quite strong selling in the Q3. So I would say that our performance in the U.S. in the quarter 3 was more or less broadly in line with the performance, the true underlying performance of the market.

With regards to the third question. So the performance in the EMEA region, the performance was really outstanding, in my opinion. And this was the result of a very strong performance, as Gabriele said in his part, almost by -- from all the markets in which we operated in the region. And of course, when you have such a strong organic performance, double digit, there is a contribution of all the different elements, components. So for sure, there is a strong volume effects, but there is also some effect coming from the pricing, the mix and also, certainly, with regards to this surprising mix, quite a strong contribution came also from the rollout of the Amplifon product experience.

So the result was due to a combination of different factors, all contributing in a very positive way. With regards then to the question number 2, I'll leave to Gabriele.

[Gabriele Galli, executive]

Now as you may recall, our initial estimate for total restructuring and integration cost was EUR 20 million, EUR 15 million, the first year, EUR 5 million second year with synergies in the range from EUR 20 million to EUR 25 million. As Enrico was saying before, we updated the guidance [indiscernible] actually on the synergies. And today, we are sure that we are going to achieve some higher synergies. So in the higher part of the guidance, EUR 25 million. In order to achieve these higher efficiencies, we are going to have some -- a little bit higher integration cost in the range of EUR 22 million, EUR 23 million as a total program, out of which the biggest part is going to be in 2019, since we have been anticipating all the action, such as the closing of the collective dismissal in order to achieve the synergies even before.

So at the end, EUR 5 million higher synergies to EUR 3 million higher restructuring cost, one-off cost, of course.

[Operator]

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

[Catherine Tennyson, analyst]

I have 2 quick ones. My first would be, you previously gave us helpful information on the penetration rate of the own brand rollout in Italy, do you have similar data for the U.S. or France or Germany that you could share with us? That will be my first one. And then my second would be from your dealings in the U.S., have you heard any updates on the OTC legislation? Do you still think that we'll probably hear something in November, regarding the update?

[Enrico Vita, executive]

Thank you, Catherine, for your questions. So with regards to the question number one, and therefore, with the penetration of the Amplifon product experience, I remind you that in Q2, we -- it was the turn of the Netherlands and Germany, whilst in Q3, we rolled it out in France, Australia and also Miracle-Ear in the U.S. Let's say, that the most, let's say, material data related to Netherlands and Germany, too early for France, Australia and the U.S. So in the Netherlands and Germany, we had very strong KPIs. In the Netherlands, the share of the new Amplifon product line in the eligible market. I remember you -- I remind you that we are implementing the new Amplifon product line in the private market, mainly is today quite strong, above 75%. So very strong numbers as well as in Germany, we are already well above 60%. So I would say that we are progressing extremely, extremely well in terms of penetration, definitely in line with our expectations.

As I said, early days in France, Australia and Miracle-Ear, but I can anticipate that also Australia is progressing extremely well. So we are confident that we can hit our targets of very, very high level of penetrations in all the markets where we are rolling out the new Amplifon product experience. With regards to the second question, and therefore, the OTC rule-making process, this is our interpretation, of course. We believe that the proposed rule will not meet the target deadline of November given that certain internal time lines have not met as of today. So we now expect that the proposed rule can be published early 2020.

[Operator]

The next question is from Veronika Dubajova with Goldman Sachs.

[Veronika Dubajova, analyst]

I have 2, please. The first one is, I'm just trying to understand the significant growth acceleration in Europe. And I know, Enrico that you've made some comments. But are there any specific markets that you see standing out as driving this double-digit growth. It's highly unusual to see this in Europe and even for you guys. So would be great to get some color on you and the degree of sustainability that you see for this high single, low double-digit growth as you move into the fourth quarter and next year. Let me leave it at that, and I'll ask my second question after that.

[Enrico Vita, executive]

Okay. Thank you, Veronika, for your question. So with regards to Europe. Clearly, the performance in Q3 was really excellent. And that was the result, as you said, actually, of a very strong performance almost everywhere. I mean, we had a double-digit growth in Italy, we had a double-digit growth in France, we had also double-digit growth in Germany, even in the U.K. actually was very strong in terms of growth. So that was the result of very strong performance by almost all the markets in which we operate in the U.S. and as I said, I think that it's a combination of all the activities that we put in place in terms of marketing, in terms of in-store excellence in the recent months, but also was part of this performance was also certain related to the rollout of the Amplifon product experience. So in terms of sustainability, we expect -- I expect the EMEA region to continue to perform strongly. Certainly, well above the market also in Q4 and hopefully also next year, then to say that 10%, 11% is going to be the normal. This is not possible. I mean, the performance has been extremely strong in Q3.

[Veronika Dubajova, analyst]

Understood. And then I'd love to get some feedback you can share with us on the China JV, how that has progressed and your appetite to expand that as you think about either towards the end of the year or into next year? Just give us an update on where you are with that strategically?

[Enrico Vita, executive]

Yes. I'm very happy about this question because the JV is progressing extremely well. We are growing year-over-year-over-year more than 10%. I would say that we are more in the region of 15%, 20% year-over-year, which is, of course, starting from quite a low basis, as you know. The appetite to expand with our presence in China with further JV is certainly very high. So we are working on that. Unfortunately, in China, I mean, in order to complete new JVs and the process is quite long, there are a lot of bureaucratic steps. So it is something that we are aiming to do next year, but not in the next month.

[Operator]

The next question is from Domenico Ghilotti with Equita.

[Domenico Ghilotti, analyst]

My first question is on the operating leverage. So first of all, we can't understand how much was the dilution coming from GAES, if any, in Q3? And given the strong performance? I'm trying to understand what is limiting the drop through. So if you are deliberately reinvesting what you would say, above your, say, 50 bps underlying assumption. So there is really a commitment to this 50 bps and to -- in particular, when I'm looking at 2020 and 2021, should we expect to see more operating leverage, considering also the GAES contribution. Second question, well, if you want, I can go also with the second.

[Enrico Vita, executive]

No, no, no. Please, please go ahead.

[Domenico Ghilotti, analyst]

Okay. Okay. Second question is on Asia Pacific. I was interested in understanding the very strong organic performance that we were mentioning in Australia after 2 quarters of ups and downs and what has been driving this performance? And if you see, let's say, the trend is sustainable or more, say, consistently quarter after quarter.

[Enrico Vita, executive]

Absolutely. So with regards to the first question. First of all, the impact of GAES in Q3 was higher than, let's say, the average because of seasonality reasons. What they mean is that the seasonality in Spain in the quarter of July, August, September is quite pronounced. So very, let's say, very low sales in comparison with the other quarters. So the profitability in GAES in Spain, actually, in a good Q3 is certainly lower than the average of the year. So we expect, actually, this is expected to be much, much lower, actually in Q4. It is -- with regards to the flow-through in general, it is also true what you were saying before. About the fact that we continue to invest, of course, we continue to invest in marketing. As you know, we continue also to invest in our organization in order to strengthen our organization also here in the corporate, very well all the investments that we have made, in particular, in order to develop our Amplifon product experience, which is delivering, in my opinion, very, very interesting results. With regards then to the last part of the question, and therefore, to -- if we are going to see higher flow through in the next year, I would say, yes, what I mean is that we absolutely confirm the guidance that we gave you in terms of EBITDA and therefore, EBITDA margin for next year, which should be in the region of 18.4%, 18.5%. And therefore, for sure, there will be a much higher, much higher improvement next year. Of course, I'm talking about 18.5% without the IFRS 16 so -- on a comparable basis.

[Domenico Ghilotti, analyst]

And -- sorry to interrupt. And as a follow-up also in 2021, you should have the...

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[Enrico Vita, executive]

The fact that we are extremely happy about the performance in Spain, even about our initial expectations. We have -- we are really progressing extremely fast in all the integration activities. The organization is responding extremely well. We have completed also the process regarding the reorganization in a very, very short period of time. I think that the team in Spain is doing a fantastic job and the evolution of the business, the growth of the business is confirming, in my opinion, the potential of the business, we acquired in Spain. On to the second question of Australia. You remember, we were quite positive on the APAC region in the last quarter despite lower growth because we knew that some of the activities that we've put in place, we're going to pay dividends in the next quarters.

I confirm that in Q4, we expect quite -- very strong growth in the region versus the same period of last year. This is also true to a more favorable comparable basis, for sure, but I would say that the trend of the underlying business in Australia is quite -- very positive, I would say. And therefore, I am quite positive about the fact that, that goes in terms of sustainability of the business going forward. This can certainly be the case.

[Domenico Ghilotti, analyst]

But is it the success in addressing the private market. It is -- is it, say, Amplifon product experience that is driving your view, the point of view.

[Enrico Vita, executive]

I would say that it's a combination again of different things. For sure, both elements that you say are contributing, but also we put in place activities in order to improve our CRM activities and so on and so forth, the digital activities. So is a contribution of many different things that we are implementing in order to accelerate the growth of Australia and of the region.

[Operator]

The next question is from Oliver Metzger with Commerzbank.

[Oliver Metzger, analyst]

The first one is, could you disclose the magnitude of external growth apart from GAES, please? The second one is about Europe. There's limited visibility on the underlying market growth in Europe. For Germany, it's basically now that market currency growth were double-digit territory. So how would you describe the underlying market growth in Europe as a whole, during the third quarter, just give us -- also a better view about your outperformance?

[Enrico Vita, executive]

Yes. With regards to the first question, and therefore, the organic growth of GAES, I would say that in quarter 3, the organic growth was extremely strong double digit. So above 10%, which is certainly a very strong result. With regards to...

[Oliver Metzger, analyst]

Sorry for interrupting you. I asked for the magnitude of external growth apart from GAES. So...

[Enrico Vita, executive]

Sorry. Sorry, I didn't get correctly your question. So you're referring to the, let's say, additional bolt-on acquisitions. So I would say that it was in the quarter about 3%, 4%. Between 3% or 4%, yes. With regards to the second question, and therefore, about the market growth in the EMEA region, according to our estimation in the region, we had the growth in the region of 4%. So not very different from the usual growth rate that we have seen in the past. With some markets doing better than others, but I would say, on average, in the region of 4%.

[Oliver Metzger, analyst]

You are talking on unit growth, don't you?

[Enrico Vita, executive]

Yes, yes, absolutely.

[Oliver Metzger, analyst]

And so what's your view about the value growth because all the new platforms, rechargeability, et cetera?

[Enrico Vita, executive]

Yes, for sure. In terms of value, there would be some additional growth coming from mix. And in particular, you mentioned correctly the rechargeable to say what would be the benefit in the market, that is very difficult, I would say, really one 1%, some 1% to 2%, maybe like that. But there are no statistics on that, of course.

[Operator]

The next question is a follow-up from Niccolò Storer with Kepler Cheuvreux.

[Niccolò Guido Storer, analyst]

Again, on Asia Pacific, you basically confirmed your indication to be able to reach previously profitability in the region by year-end, which would mean basically a massive jump in Q4. So apart from recovery in volumes from an easy comparison, is there anything else that should drive this jump? And second, very, very, very short on Spain. Did you see any impact from your activity from all the disorders in Catalonia?

[Enrico Vita, executive]

So with regards to the APAC profitability, yes, as Gabriele said, we now envisage the profitability in line, probably in line with last year. So for sure, we expect a significant improvement in Q4. This is also on the back of a more comparable basis with last year, but the target for the year is confirmed at 10 basis points more or 10 basis points less, but is the profitability of APAC will be in line with last year. With regards to Spain, we have seen some impact from the troubles in Barcelona, but not material ones. What I mean is that we had also a few stores in the city of Barcelona closed for few hours, but nothing that can have a material impact meter in -- on the performance of Spain or even more in the performance of the group. So nothing to be worried, at least so far.

[Operator]

[Operator Instructions]

Gentlemen, there are no more questions registered at this time.

[Enrico Vita, executive]

Thank you, everyone.

[Gabriele Galli, executive]

Thank you.

[Enrico Vita, executive]

Thank you, and see you soon.

[Francesca Rambaudi, executive]

I think we can close the call. Thanks to everybody. Bye-bye.

[Enrico Vita, executive]

Thank you. Bye. Thank you.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.