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Slide 4: Background
Background Cochlear Limited: 23 year old medical device company with dominant global position in cochlear implants, 57,000 recipients F’04 result in line with guidance F’04 — loss of market share (USA), profit downgrades, DOJ investigation, executive changes..... New CEO appointed Feb 15, 2004 Issue
Slide 5: Summary Financial Performance
Summary Financial Performance System Sales Total Revenue Operating Profit before tax PAT Full year dividend Franking F’04 9,306 A$’m 285.8 47.3 36.8 79¢ 100% F’03 9,342 A$’m 307.6 80.0 58.2 ee % Change ey Hear now. And akways =
Slide 6: What has changed at Cochlear?
What has changed at Cochlear? New CEO - appointed Feb ‘04 Go back to the basics Focus: priorities + stopping things! Cultural: ¢ Issues onto the table ¢ Regional/Corporate balance ¢ Innovation The right people into the key positions _ a ee ey we Wear now, And always“
Slide 7: Group Unit Sales
Group Unit Sales Group Unit Sales 4,916 4,824 5,000 | 4,412 4,482 4,237 3,608 Units wo °° Qo coy i H1 Fo2 H2 Fo2 Hi F03 H2 Fos Hi Fo4 H2 F04 Period
Slide 8: Group Sales Revenue A#039;m
Group Sales Revenue A$’m (Reported) Group Sales Revenue AUD 'm (Reported) 141, 146.6 137.5 8 131.3 j : 121.2 Hi Fo2 H2 FO2 H1 FO3 H2 FO03 H1 Fo4 H2 Fo4 Period
Slide 9: Group Sales Revenue A#039;m (Constant Currency)
Group Sales Revenue A$’m (Constant Currency) 95.1 Group Sales Revenue AUD 'm (F'04 Exchange Rate) 111.4 127.5 122.3 121.2 131.3 Ht Fo2 H2 Fo2 H1 FO3 H2 FO3 Period Ht Fo4 H2 Fo4
Slide 10: Americas Sales Revenue A#039;m
Americas Sales Revenue A$’m (Constant Currency) 40.4 Americas Sales Revenue AUD ‘m (F'04 Exchange Rate) 47.3 62.8 $4.3 54.8 | H1 F02 H2 F02 Hi Fo3 H2 F03 Period Hi Fo4 H2 F04
Slide 11: Regional Profile
Regional Profile Americas ¢ New President — Chris Smith ¢« DOJ — status unchanged ¢« Loss of market share « Now stabilised ¢« Reimbursement * CMS reviewing expansion eligibility criteria ae ey a Hear now. And akways =
Slide 12: Europe Sales Revenue A#039;m
Europe Sales Revenue A$’m (Constant Currency) Europe Sales Revenue AUD 'm (F'04 Exchange Rate) 60.0 - 2.1 51.9 5 50.0 4 41.2 42.3 40.0 4 36.5 34.0 #039;m 30.0 + 20.0 5 10.0 4 0.0 1 1 1 1 1 H1 Fo2 H2 Fo2 H1 F038 H2 F03 H1 Fo4 H2 FO4 Period
Slide 13: Regional Profile
Regional Profile Europe ¢ Market share maintained ¢ Volatility of sales related to tender sales ¢« Reimbursement — small incremental improvements ¢ Direct in Belgium, The Netherlands and France ¢ Direct business now > 50% ae ey a Hear now. And akways =
Slide 14: Asia Pacific Sales Revenue A#039;m
Asia Pacific Sales Revenue A$’m (Constant Currency) Asia Pac Sales Revenue AUD 'm (Constant Currency) 30.0 5 25.8 24.3 25.0 4 21.5 O17 22.9 20.6 20.0 + #039;m 15.0 + 10.0 5 5.0 4 0.0 1, Cr —_ Cr Cr H1 Fo2 H2 FO02 Ht FO3 H2 FO3 H1 Fo4 H2 F04 Period
Slide 15: Regional Profile
Regional Profile Asia Pacific ¢ 18% unit growth ¢ New President — Mark Salmon ¢ China strong ¢ Australia growth strong ~ 20% ¢ Direct in Japan ae io we Wear now, And always“
Slide 16: Group Sales Revenue A#039;m
Group Sales Revenue A$’m (Constant Currency) Group Sales Revenue AUD 'm (F'04 Exchange Rate) 140.0 5 131.3 127. 1023 | 5 121.2 —- 120.0 4 111.4 95.1 : Ht Fo2 H2 Fo2 H1 FO3 H2 Fo3 Ht Fo4 H2 Fo4 Period
Slide 17: F'05 Strategies
F’05 Strategies: ¢ Internal effectiveness and efficiency ¢ Product Development: System 4 - number one priority « Regional Presidents ¢ Chris Smith — President of Americas (Aug '04) ¢ Richard Brook — President of Europe (May ‘03) ¢ Mark Salmon — President of Asia-Pacific (Jul ‘04) ee ey Hear now. And
Slide 18: F'05 Strategies
F’05 Strategies: Marketing ¢ New marketing appointments in all regions ¢ Fact based marketing decisions (market research) Distribution ¢ Direct in key markets ¢ Purchased distributors in Japan, France, Belgium, Netherlands Culture - innovation, regional/corporate balance Quarterly planning ee ey Hea
Slide 19: New Executives to Grow Business
New Executives to Grow Business Regional Presidents * Americas — Chris Smith appointed August ‘04 * Europe — Richard Brook appointed May ‘03 * Asia Pacific - Mark Salmon appointed July ‘04 Marketing * All regions expanded functions Quality ¢ Snr VP Quality — Dr Adrian Oates ae Ma we Wear now, And al
Slide 20: R&D Refocused on Core Business
R&D Refocused on Core Business * Focus on hearing impairment ¢ All FES & peripheral products stopped ¢ New Generation System 4 is immediate focus ¢ Strong product pipeline ¢ Alternate approaches to severely hearing impaired er Me we Wear now, And always“
Slide 21: The Way Ahead
The Way Ahead ¢ Technologic innovation * Implant criteria * Simplification ¢ Reimbursement * Favourable health economics * Ref. August 2004 Ear & Hearing article * Ongoing issue * Overall market growth « Unmet clinical need ance ° Growing market Hear now, And always “
Slide 22: Financial Results — F'04
Financial Results — F’04
Slide 23: Financial Performance F'04
Financial Performance F’04 Group Revenue 350 - 300 + 250 + 290.8 288.6 mF 04 @F'04 at F'03 rates OF 03 Group SS Hear now. And always“
Slide 24: Financial Performance F'04
Financial Performance F’04 Revenue by region mF'04 160 5 142.2 ; ; 132, @ F'04 at F'03 rates 120 + 109.1 103.7 0 F'03 93.3 98.3 80 + 501 245 4g . | i 0 T T T 1 Americas Europe Asia Pacific Growth in constant currency — Asia / Europe
Slide 25: PAT Reconciliation F'04 — F'03
PAT Reconciliation F’04 — F’03 In constant currency 4 GM & Hedge F'0d Profit Book $36.7 F03 Profit $58.2 Tax Minorities Increase/ 84 0.6 (Decrease) ASm a Hear now. And akways =
Slide 26: Successful Currency Management
Successful Currency Management * Board approved Treasury Policy ¢ External review of FX trading — no issues ¢ Full Year Impact: * Foreign sales revenue translation impact (A$38.3m) * FX contract profit A$30.3m ae ey a Hear now. And akways =
Slide 27: Foreign Exchange
Foreign Exchange Rates applied F’04 vs F’03 F’°04 = F’03 Average rates (used for translating P&L) USD 0.71 0.59 GBP 0.41 0.37 JPY 80 71 Contract rates (used to bring FX to Australia) USD 0.54 0.52 GBP 0.35 0.36 JPY 55 59
Slide 28: Foreign Exchange Rates Going Forward
Foreign Exchange Rates Going Forward Average Contract Rates USD GBP JPY 12 months ending June ’05 58 0.36 52 12 months ending June ’06 62 0.36 52 * Total mark to market FX gain at 30 June 2004 A$22m ¢ Hedge book rolling off ae Me wear now, And always
Slide 29: Financial Performance F'04
Financial Performance F’04 Expenses COGS SG&A R&D Individually Significant F’04 A$m 85.0 108.4 44.4 12.5 F’03 A$m 82.6 107.2 37.0 ear now, And always ® 3% MN 1% MW 20%
Slide 30: Financial Performance F'04
Financial Performance F’04 F’°04 = F’03 Tax rate 23.5% 27.2% Rate decline * High R&D deduction at 175% 3.4% * Lower overseas profits at high rates 0.3% ey Hear now. And always“
Slide 31: Working Capital F'04
Working Capital F’04 Current assets Cash (net) Receivables inventory Current liabilities Payables Provisions June ‘04 A$m 50.0 54.0 44.8 31.7 22.4 28.9 96.9 45.0 June ‘03 A$m SS Hear now. And always“
Slide 32: Hear now. And always Cochlear
Hear now. And always Cochlear