Bang & Olufsen Group

Annual Report 2003/04

Headlines
Pretax profit of DKK 341 million, up DKK 51 million (17%) Turnover of DKK 3.613 million, down DKK 361 million (9%) Main reductions: - Restructuring other shop segment -DKK 87 million - Currency - DKK 100 million - Bang & Olufsen Medicom a/s -DKK 84 million Relative and absolute profitability improved Continued focus on product development and marketing

Net turnover

UK is the Groups largest market with a turnover of DKK 584 million. Growth in local currency of 6%. Turnover growth: (local currency) - Japan 29% - Other Asian markets 15% - Sweden 6% - UK 6% - Norway 3% - USA 3% Turnover decline: (local currency) - Germany 21% - Belgium 16% - Holland 15% - Italy 14% - Switzerland 14% Medicom turnover decline of DKK 84 million.

Operating profit

The Groups profitability has improved: - Gross margin increased by 3,2%. - Continued focus on product - development and marketing - efficiency. Trading loss in the US reduced from DKK 73 million to DKK 17 million.
Result from ordinary operations before tax
Positive development in net financial cost due to strong cash flow.

Result for the year

The tax expense for the year was DKK 75 million corresponding to a tax percentage at 21,9%. - ICEpower, positive result. - Conversion of debts (USA). - The Group continues not to - capitalise deferred tax - relating to the US market.

Total assets

Liquid funds increased by DKK 28 million to DKK 473 million. Due to sale of our electronics factory tangible fixed assets and inventories worth DKK 82 million transferred to other receivables.

Bang & Olufsen

Cash flow
DKK 145 million extraordinarily distributed to shareholders: - Share by back DKK 98 million. - Extraordinary dividend - DKK 47 million. No new loans during the year. Re-payment of loans amounted to DKK 56 million.
Turnover per market 2003/04 - Branded business
Growth rate turnover per market 2003/04 branded business

(local currency)

Growth rate turnover per market Q4 2003/04 branded business
Shops world-wide 1999/00 - 2003/04
Changes in number of shops -243: B1 +7 SIS +3 Other -25 ______________ Total -243 Turnover decrease due to shop closures in the other shop segment -DKK 87 million.
Total of B1 shops per market 31.05.04

Total of B1 shops: 642.

Turnover share per shop segment in 2003/04
Growth rate turnover in the B1 mature shop segment 2003/04
(Average turnover of all shops (2 years+) remained unchanged)
Bang & Olufsen AudioVisual a/s

New products 2003/04

BeoLab 5, August 2003
BeoVision 6, November 2003
BeoCenter 2, January 2004

BeoLab 3, February 2004

BeoVision 4, Q4 2003/04
Bang & Olufsen Medicom a/s
Turnover and result from ordinary operations before tax
Significant decrease in production level. Significant adjustments in the organisation have been carried through. Increased revenue from new development projects.
Bang & Olufsen ICEpower a/s
Improvements primarily due to increased Bang & Olufsen speaker sales and development activity.
Expectations - product launches 2004/05:
BeoVision 6 product line: - LCD-TV 26 (Q2) New concepts - Hard disc video recorder (Q2) - LCD-TV 32 with integrated DVD (Q3) BeoVision 4 product line: - Plasma-TV 37 (Q3) - Plasma-TV 65 (Q3) BeoLink Media (second half year)
Expectations - other business areas 2004/05:
Expects to close contract with European high-end automotive company. Medicom to reach small level of profit. ICEpower to continue positive development in weak component market.

Financial expectations for 2004/05:
Moderate turnover growth. Gross margin expected to drop slightly due to mix change (products). Increased product development costs. Maintained marketing pressure. Capital expenditure, same level as in 2003/04. Q1 2004/05 better than Q1 2003/04. A pre-tax result of DKK 360 - 390 million.

Shareholders:

Proposed year-end dividend of DKK 7 per share. Proposed share buy-back DKK 100 million.

Bang & Olufsen a/s Interim report for the period 1 June February 2004

Announcement no 03.11

Copenhagen Stock Exchange Nikolaj Plads Copenhagen K
Struer, 20 April 2004 Interim report for the period 1 June February 2004 for Bang & Olufsen a/s The Groups turnover was DKK 2,658 million against DKK 3,083 million for the same period last year, i.e. DKK 425 million or 14% less. Ordinary profit before tax was DKK 271 million against DKK 251 million for the same period last year. This represents an increase of DKK 20 million, or 8%. The growth in profit is largely owing to the continued improvement in the Groups gross margin, which is now 45.5%. Turnover in the third quarter was DKK 949 million against DKK 1,025 million in the third quarter last year. This is DKK 76 million, or 7% less. In the third quarter, the Group launched BeoLab 3, a compact loudspeaker based on some of the BeoLab 5 technologies. Moreover, the Group launched BeoCenter 2, a new AV center product. Both BeoLab 3 and BeoCenter 2 have been very well received by retailers and customers as well as by the trade press. On the basis of the realised interim result, the Group maintains its full-year expectations for pre-tax profits in the region of DKK million, based on a lower turnover than the previous year.

Jrgen Worning

Chairman
Torben Ballegaard Srensen

President, CEO

Main figures Bang & Olufsen a/s the Group (unaudited)
(DKK million) 1/- 29/Net turnover Operating profit Financial items Profit from ordinary operations before tax Tax on ordinary result Profit for the period after tax Of which minority interests Bang & Olufsen a/s share of the profit for the period 2003/04 2,658.3 271.0 0.4 271.4 (72.1) 199.3 0.3 199.6 2002/03 3,083.4 253.7 (2.4) 251.3 (75.9) 175.4 (4.4) 171.0
Corporation tax has been calculated as the share of the financial years expected tax liability relating to the result for the 9 months. Tax on ordinary result is influenced positively by DKK 23 million as a result of debt conversions of the account with the American subsidiary.
Balance sheet information Equity Assets Assets, excluding liquid funds Development in equity Equity as at June 1 Dividend paid Repurchase of own shares Sale of own shares Dividend own shares Capital increase used for employee shares Exchange rate adjustment of investments in subsidiaries Retained earnings Equity as at February 29
Parentheses denote negative figures or amounts to be deducted.
29/1,588.1 2,658.6 2,090.2 2003/04 1,551.1 (94.0) (95.9) 10.8 9.1 3.6 3.8 199.6 1,588.1
28/1,533.6 2,667.6 2,243.4 2002/03 1,406.9 (46.9) 3.1 1.6 (2.1) 171.0 1,533.6
Comments to developments in the period Bang & Olufsen a/s Turnover for the Bang & Olufsen a/s group was DKK 2,658 million against DKK 3,083 million over the same period last year. This is DKK 425 million, or 14%, lower than last year. The decrease in turnover is primarily due to the following factors: Germany, Switzerland, Austria and Holland recorded a decrease in turnover of DKK 195 million. Unfavourable exchange rates, mainly in USD and GBP, resulted in a decrease in turnover of DKK 96 million. Bang & Olufsen Medicom a/s recorded a decrease in turnover of DKK 73 million on the year.
Turnover in the third quarter was DKK 949 million against DKK 1,025 million in the third quarter last year, i.e. a decrease of DKK 76 million or 7%. Third quarter turnover, therefore, declined less than the turnover in the two first quarters. Turnover for the core business, the branded business, was DKK 910 million for the third quarter against DKK 974 million in the third quarter last year, i.e. DKK 64 million, or 7% below the third quarter of last year. Of this DKK 33 million relates to the development in exchange rates. Ordinary profits before tax totalled DKK 271 million against DKK 251 million last year, corresponding to an advance of DKK 20 million or 8%. Ordinary profits before tax for the third quarter was DKK 162 million against DKK 116 million in the third quarter last year. This represents a growth of DKK 46 million or 40%. The improved result is primarily due to continuous increase in the Groups gross margin which rose by 3.9 percentage points on the same period last year. The improvement in the gross margin is partly due to a product mix with greater emphasis on audio and acoustic products, areas where the Group has traditionally achieved higher margins than on video products, and partly to the continued successful implementation of the efficiency programmes in respect of production, development and purchasing. Continuing tight capacity cost management and fewer non-recurring costs resulted in a decrease in capacity costs of DKK 92 million. Of this, the trend in USD and GBP accounts for DKK 24 million while DKK 26 million is due to the elimination of non-recurring costs in the US.

The Group has maintained its product development levels and has continued to improve and increase efficiency within the area of sales and marketing. The Groups cash flow for the period was positive at DKK 123 million against DKK 272 million last year. Adjusted for extraordinary shareholder initiatives in the form of increased dividend and repurchased own shares totalling DKK 143 million, the Groups cash flow for the period was on a par with last year. Branded business Turnover in the Groups branded business totalled DKK 2,564 million against DKK 2,919 million last year, i.e. DKK 355 million or 12% below the same period last year. Of this, third quarter turnover accounted for DKK 910 million against DKK 974 million last year, i.e. DKK 64 million or 7% lower than the third quarter last year. Ordinary profits before tax were DKK 292 million against DKK 268 million for the same period last year. This represents a growth of DKK 24 million or 9%. In the third quarter, ordinary profits before tax were DKK 163 million against DKK 120 million last year. This equates to an advance of DKK 43 million or 36%. Development in markets
The percentage changes are calculated in local currency
The UK recorded an advance in turnover of 4%. Due to the lower exchange rate, turnover in DKK was DKK 434 million against DKK 452 million last year. During the third quarter, the UK recorded an advance in turnover of 8% on the same period last year. During the period under review, the Danish market recorded a turnover of DKK 352 million against DKK 361 million last year. This corresponds to a decrease of DKK 9 million, or 3%. The German market recorded a turnover of DKK 290 million against DKK 383 million for the same period last year. This is DKK 93 million, or 24%, below the level of the same period last year. The decline in turnover should be viewed within the context of the planned qualitative improvement of the German distribution network which has resulted in a reduction in retail outlets of 165 compared to the third quarter last year. Sales also reflect a certain restraint among German consumers. Turnover in the Swiss market totalled DKK 153 million against DKK 207 million for the same period last year, i.e. a decline of DKK 54 million or 22%. Again, this reflects a certain restraint among consumers. Over the period, the Dutch market recorded a turnover of DKK 149 million against DKK 186 million for the same period last year. This equates to a decline of DKK 37 million or 20%.
The southern European markets experienced a weak development and furthermore, they were characterised by trends favouring flat-screen technology. The Italian market, for instance, recorded a turnover of DKK 131 million against DKK 159 million last year. Turnover in the French market totalled DKK 135 million against DKK 155 million last year, while the Spanish/Portuguese market recorded a turnover of DKK 149 million against DKK 172 million for the same period last year. In the US, the Group recorded a turnover of DKK 214 million against DKK 252 million for the same period last year. The decline is due to the unfavourable exchange rate development for USD which amounted to DKK 38 million. Measured in local currency, turnover was on a par with last year. During the quarter there were no non-recurring costs in connection with the discontinuation of activities or shop closures and the operating loss for the nine months was limited to DKK 16 million against DKK 59 million last year, of which DKK 26 million were nonrecurring costs. This means that the operating result improved by DKK 17 million. In the third quarter, the operating loss was limited to DKK 1 million. Work aimed at achieving a positive operating result in the US market continues. Asian markets achieved a satisfactory increase in turnover of DKK 15 million, from DKK 112 million last year to DKK 127 million this year. Product launches During the third quarter, Bang & Olufsen launched BeoLab 3, a compact loudspeaker based on some of the technologies used in BeoLab 5. BeoLab 3 has been well received by retailers and customers and deliveries are on schedule. The trade and lifestyle press have welcomed BeoLab 3, which, owing to its high performance and compact shape, is regarded as a unique product, technologically as well as conceptually. BeoCenter 2, a pioneering AV center product, was also launched in the third quarter. The product, which is outstanding in respect of both design and mechanics, was also well received and deliveries are on schedule. Distribution development At the close of the third quarter, there are 648 B1 shops worldwide against 635 both at the end of the third quarter last year and at the end of the previous financial year. During the period under review, work aimed at further enhancing the quality of the distribution resulted in the opening of 39 new B1 shops, while six shops were upgraded to B1 shop status. Throughout the period, 27 B1 shops were closed and 5 were downgraded so that the net addition over the past 9 months is 13 B1 shops. 70% of the branded business turnover is now accounted for by B1 shops against 66% for the same period last year. The number of shop in shops was 671 at the end of the third quarter, which is largely unchanged compared to the third quarter last year and the end of the previous financial year. The proportion of turnover for shop in shops is 24% against 23% for the same period last year.

The number of other multibrand shops is 226 against 497 at the close of the third quarter last year and 468 at the beginning of the financial year. The relatively large reduction in the number of multibrand shops is primarily due to the ongoing efforts towards improving the quality of the distribution in the German market. Turnover in B1 shops with a minimum of two full years of operations declined by 7% measured in fixed foreign exchange rates. This, however, covers considerable differences among markets, ranging from advances of 42% to declines of 34%. In the most important European markets, however, there is a clear downward trend. Non-branded business Bang & Olufsen Medicom a/s Bang & Olufsen Medicom a/s recorded a turnover of DKK 100 million for the period against DKK 173 million last year. This equates to a decrease of DKK 73 million. The ordinary pre-tax loss for Bang & Olufsen Medicom amounted to DKK 19 million, against DKK 6 million last year. As expected, the company recorded a near zero result for the third quarter and a similar result is expected for the fourth quarter. Consequently, Bang & Olufsen Medicom expects a loss of approx. DKK 20 million for the full year. Production and deliveries to the pharmaceutical and diagnostic industries proceeded as planned. In addition, new license agreements have been signed for Medicoms proprietary, electronic tablet dispensers. However, the full potential from current and new development projects will only materialise in 2-3 years.
Bang & Olufsen ICEpower a/s Bang & Olufsen ICEpower a/s recorded a turnover of DKK 25 million against DKK 20 million for the same period last year. This equates to an advance of DKK 5 million or 25%. As announced in the quarterly statement of 10 October, 2003, an important development contract was signed with a key supplier of consumer electronics. The results of the contract, however, will not materialise in the current financial year.
Expectations for the financial year
Product launches As previously announced, the current financial year will see the launch of a substantial number of new products, of which almost all were launched at the close of the third quarter. In the fourth quarter, the Group expects to launch: BeoVision 4, a 42 module-based flat-screen product of the same high quality as BeoVision 5.

BeoLab 3 and BeoCenter 2 were both launched towards the end of the third quarter and have, therefore, not yet contributed significantly towards turnover. As previously mentioned, our new products have been particularly well received and the Group expects that these, as well as other launches during the financial year, will contribute positively to the result for the fourth quarter. Turnover and result The Group continues to strive to increase profitability and internal efficiency in order to secure the necessary resources for our development and to counter the increasing uncertainties in the markets. In the annual report, we expressed our expectations for the financial year as follows: The Group will maintain its profitability-oriented focus and expects, on the basis of a very moderate increase in turnover, earnings for the full year of between DKK 300 and 330 million before tax. This interval holds the Groups three-year objective as stated in the Stock Exchange announcement of 17 April, 2002 for an annual growth in earnings of between 10% and 15%. New product launches are expected to make a positive contribution to the turnover, however, due to the less favourable developments in southern and central European markets during the period, the Group does not expect to see an increase in turnover for the current financial year. Based on this, the Group maintains its expectations for a pre-tax profit in the region of DKK 300 DKK 330 million.

Appendix 1

Interim report for the period 1/to 29/Branded business (DKK million) Net turnover Internal turnover External turnover Operating profit/loss Profit/loss on ordinary operations before tax Bang & Olufsen 2,563.7 (21.2) 2,542.5 289.3 292.0 Non-branded business B&O Medicom a/s 100.2 (1.4) 98.8 (16.5) (18.5) B&O ICEpower a/s 24.7 (7.7) 17.0 (1.8) (2.1) Other/ eliminations (30.3) (30.3) (0.0) B&O a/s Group 2,658.3 0.0 2,658.3 271.1 271.4
Interim report for the period 1/to 28/Branded business (DKK million) Net turnover Internal turnover External turnover Operating profit/loss Profit/loss on ordinary operations before tax Bang & Olufsen 2,919.4 (22.6) 2,896.8 267.1 267.9 Non-branded business B&O Medicom a/s 172.9 (1.3) 171.6 (2.7) (5.7) B&O ICEpower a/s 19.9 (4.9) 15.0 (10.7) (10.9) Other/ eliminations (28.8) (28.8) (0.0) B&O a/s Group 3,083.4 0.0 3,083.4 253.7 251.3

Appendix 2

Turnover and distribution, Bang & Olufsen Branded Business Turnover (DKK million) 1/6 29/2 2003/04 2002/03 United Kingdom Denmark Germany USA Switzerland Holland Spain/Portugal France Italy Asian markets, excl. Japan Expansion Markets Sweden Belgium Norway Japan Austria Telephone distribution Other Total branded business 2,27 2,897 Growth in local currency 4% (3%) (24%) (0%) (22%) (20%) (13%) (12%) (18%) 14% (9%) (2%) (22%) (2%) 25% (23%)

Appendix 3

Development in the number of shops - Bang & Olufsen AudioVisual a/s Shop segment B1 Shop in shop Other Total
Parentheses denote negative figures.
Number of shops per 29/226 1,545
Change during the period 1/29/(242) (225)
Share of turnover per segment 70% 24% 6% 100%
Definitions of shop segments: B1 Shop in shop Shops that are dedicated retailers of Bang & Olufsen products. Shops with a dedicated sales area for Bang & Olufsen products.