Slide 1: Results for the year ended 30 June 2005
Cochlear Limited Results for the year ended 30 June 2005 Chris Roberts CEO Neville Mitchell CFO Hear now. And always Cochlear~
Slide 2: Cochlear: Background
Cochlear: Background * Medical device company (24yr): global leader in implantable solutions for the hearing impaired, including » Leading global position (~70% share) in cochlear implants (bionic ear) for sensorineural hearing loss » Bone anchored hearing implants (Baha) from recent (3/05) acquisit
Slide 3: Record Financial Results for F05
Record Financial Results for F05 » Total Revenues: $348.5 million * Cl Unit Sales: 10,802 units » EBITDA: $88.5 million EBITDA 25% of revenues » PAT (excluding intangibles): $58.3m » Strong second half: - Cl unit sales T20% Nucleus Freedom launched » Sales T31% (Freedom/Baha drivers) Hear now. And a
Slide 4: COH: Unit Sales F96 to F05
COH: 10 year Unit Sales: F96 to F05 8000 | 10 yr CAGR 16.4% 4000 + 2000 + i I ; ; 0 . . . . 2 . . . Fos F97 F98 F99 FOO FO1 FO2 FO3 FO4 FO Unit Sales Q oOo Oo oO Hear now. And always
Slide 5: Unit Sales: Consecutive Half Years
Unit Sales: Consecutive Half Years Unit Sales Ww Q Q fo) & S Ss S LS HB LS LS Hear now. And always
Slide 6: COH: F97 to F05 Sales Revenue
COH: F97 to F05 Sales Revenue* 350 5 250 - ® 200 4 o 7) ss 150- FA 100 "] i i 0 T T T T T T T T F'o7) F'98-— F'99.— F'00s—sF'01. Ss F'02—s ‘03s F'04 F'05 *Total Revenue ($348.5 million for F05) is Sales Revenue plus other items, principally FX contracts Hear now. And always
Slide 7: Constant Currency (CC) Sales
Constant Currency (CC) Sales* a— Entific 300 - 29% 250 - 200 - 150 - 100 4 50 - 0 T T T T 1 FO1 Fo2 FO3 FO4 FO5 * CC is sales revenues restated at FO5 exchange rates Constant Currency Sales Hear now. And always
Slide 8: F05 Sales Revenue and constant currency growth by Region
F05 Sales Revenue (AUD) and constant currency” growth by Region Americas Europe 41% (127%) 41% (137%) Asia-Pacific 18% (714%) * CC is Sales revenues restated at F05 exchange rates Cochlear”
Slide 9: Americas
Americas: F05 Sales in Constant Currency (Fos Fx Rates) 21400, 127% Americas = 12004 Nucleus Freedom launched in June qtr * 100.0 | o » Tdeferred revenue and 80.0 | J in hospital shelf stock associated with this first 60.0 | quarter phase of launch » F04 market share 400 | losses were regained / in
Slide 10: Europe
Europe: F05 Sales in Constant Currency (Fos Fx Rates) T 37% 80.0 - 60.0 - . 40.0 - 20.0 - FOI FO2 F03 FO4 FOS Hear now. And always eo = o fo o i i \ Constant Currency Sales A$ millions Q o Europe Strong result across all European countries Nucleus Freedom launch started June gtr Benefits from direct
Slide 11: Asia-Pacific
Asia-Pacific: F05 Sales in Constant Currency (Fos Fx Rates) 60.0 + T 14% Asia-Pacific 2nd half T20% as China returned to 40.0 4 growth 30.0 « Value speech | processor for China launched 20.0 4 » Nucleus Freedom launch 10.0 starting June gtr 00 1 1 1 1 1 FOt FO2 FOS FO4 FO5 Hear now. And always Const
Slide 12: Cochlear: What did we do in F05?
Cochlear: What did we do in F05? Expanded our vision Strengthened global distribution Reworked marketing approach Focused on differentiators » Hearing performance and reliability Acquired Entific Launched Nucleus Freedom Continued building operational capability All in a way that makes financial sen
Slide 13: Nucleus Freedom Cochlear Implant
Nucleus Freedom Cochlear Implant Best hearing across widest range of listening situations Most suitable for every age and lifestyle Assured reliability » The best recipient lifelong solution + Advanced, clinician friendly programming system (eg Auto NRT) Hear now. And always
Slide 14: Baha Update
Baha Update Direct Bone Conduction Technology Baha® System “ Cochiea » Entific Medical Systems acquired 3/05 » Baha implant for conductive hearing loss and single sided deafness Bone Conduction » Truly complementary product line » Distribution integrated into the 3 regions « Bone Anchored Solutions
Slide 15: Reliability Improves Over Generations
Reliability Improves Over Generations 7 {4% 6 5 _ Cl22M Cl24M All Cl24M Mod deo Contour Cumulative Failure Rate (%) wo 0 1 2 3 4 5 Years Implanted Hear now. And always
Slide 16: Key Growth Drivers
Key Growth Drivers Increasing awareness Both patient & medical community Expanding patient access Eg Clinic/surgeon kinetics, reimbursement, health economics (cost/benefit) Product portfolio Range of implantable solutions Expanding indications Eg bilateral, more residual hearing Geographic expansion
Slide 17: Cochlear implant
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Slide 18: Cochlear Summary
Cochlear Summary * FO05: Momentum gathered during the year » Revenue up 22% to $348.5 million » Core earnings up 58% to $58.3 million « Delivery of key strategic objectives * Strengthened internal capability » Launch of Nucleus Freedom on time » Broadened vision with acquisition of Entific « Well Po
Slide 19: Financial Results — F'05
Financial Results — F’05 Neville Mitchell Chief Financial Officer Hear now, And always
Slide 20: F'05 Financial Performance
F’05 Financial Performance F’05 F’04 % Change Cl Unit Sales 10,802 9,306 7 16% AS’m AS’m Total Revenue 348.5 285.8 ~~ 22% EBITDA 88.5 54.9 * 61% Core Earnings 58.3 36.8 * 58% Core EPS (cents per share) 107.0 68.2 * 57% Final dividend (payable 22/9/05) 45c 44c * 2% Franking 100% 100% Hear now. And al
Slide 21: Core Earnings Definition
Core Earnings Definition F’05 F’04 $m $m Reported earnings 54.5 36.8 Adjustment items R&D fully expensed - - » No goodwill write-off * No other intangible write-off * No share based compensation expense Core earnings Record core earnings Hear now. And always
Slide 22: PAT Reconciliation F'04 — F'05
PAT Reconciliation F’04 — F’05 GM SG8A 56.7 Entific Infgration Intang- ibles sete Increase/ 07 Gq wil (Decrease) : Interest Tax Agm + 48 + FOS PAT ia $54.5m F'04 PAT $36.8m Hear now. And always Cochlear~
Slide 23: Entific Contribution F'05
Entific Contribution F’05 Consolidated for 4 months Revenue $14.8m nterest exp $1.6m > Goodwill write-off ntangible write-off ntegration costs Entific continues to meet our expectations Hear now. And always
Slide 24: Working Capital Drivers
Working Capital Drivers: Days Sales Outstanding (DSO) and Inventory (Days Stock Held) $80.0 — i { "0 FO5 z 360.0 + | . DSO at 65 days 3 eno | | 40 = » Inventory at 207 days ; i : : : [ . No significant impact from @ $20.0 + Entific acquisition 3 $0.0 . | : DSO will increase as ro1 roe r03 ros ros di
Slide 25: Debt Management
Debt Management A$m Cash on hand Interest bearing liabilities, current & non current Net (debt) / cash Debt / equity ratio 30 June 05 30 June 04 106.1 75.9 (203.5) (25.9) 97.4 50 58% N/A Manageable levels of debt (effective cost of debt is 2.8%) Hear now. And always
Slide 26: AIFRS: Key Messages
AIFRS: Key Messages > FRS will not impact cash flow eneration nor commercial decisions © FRS adjustments to retained earnings ill not impact ability to pay dividends > ePY FRS will result in increased volatility in Cochlear’s reported earnings “Core earnings” will be reported in addition to reported
Slide 27: Goodwill Intangibles
Goodwill Intangibles AGAAP * Goodwill amortised over 20 years AIFRS Policy Goodwill will no longer be amortised Carrying values tested for impairment annuals FY 05 N PAT $3.1 Hear now. And always
Slide 28: R&D Capitalisation
R&D Capitalisation AGAAP Policy AIFRS * All R&D Expensed as * Development costs capitalised incurred until product commercialised Amortisation over 1 to 3 years Considerations Impact No changes to cash flow No changes to “core F'05 earnings” NPAT » Increased variability of earnings kaa $2.2m R&D cap
Slide 29: Income Statement — AIFRS
Income Statement — AIFRS Share based payments Fair value of executive and employee shares and options charged over vesting period Decommissioning & other costs AASB 116 requires estimation of restoring lease sites at lease end. Results in additional dilapidation charge Hear now. And always
Slide 30: Income Statement - AIFRS
Income Statement - AIFRS Treasury Shares CELTIP Trust must now be Fos consolidated NpAT » Shares in Trust now to be held as treasury stock $0.5m Revenue Recognition F'05 Recognition of F04 deferred NPAT revenue in F’°05 Pim LE » One off impact $2.7m Hear now. And always
Slide 31: AIFRS 2005 Net Profit After Tax
AIFRS 2005 Net Profit After Tax A$m +3.1 45 0.8 59.6 A GAAP R&D Shared Based Revenue Goodwill Treasury Misc AIFRS Payments Recognition Shares Compliant Hear now. And always
Slide 32: Cochlear Summary
Cochlear Summary * FO05: Momentum gathered during the year » Revenue up 22% to $348.5 million » Core earnings up 58% to $58.3 million « Delivery of key strategic objectives * Strengthened internal capability » Launch of Nucleus Freedom on time » Broadened business with acquisition of Entific « Well
Slide 33: ee i ye
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Slide 34: Foreign Exchange
Foreign Exchange ‘Rates applied F’05 vs F’04 Average rates (used for translating P&L) USD Euro GBP JPY Contract rates (used to bring FX to Australia) USD Euro GBP JPY Hear now. And always F’05 0.75 0.60 0.41 81 0.65 0.56 0.38 55 F’04 0.71 0.60 0.41 80 0.54 0.56 0.35 55
Slide 35: Foreign Exchange Rates Going Forward
Foreign Exchange Rates Going Forward Average Contract Rates USD Euro JPY 6 months ending Dec ’05 67 55 53 12 months ending June ‘06 70 56 48 > Total mark to market FX gain at 30 June 2005: A$27.3m » Hedge book profit rolling off Hear now. And always