Slide 1: HY19 Result Presentation
HY19 Result Presentation 19 February 2019 Dig Howitt CEO & President Brent Cubis CFO
Slide 2: HY19 – Result highlights
HY19 – Result highlights Strong growth in upgrades • Upgrade revenue increased by 26% in CC* with strong uptake of Nucleus® 7 Sound Processor • Growing recipient base driving Services to ~30% of revenue Cochlear implant units up 5% • Developed markets flat on HY18 with increased competitor activity
Slide 3: Cochlear implants – 58% of sales revenue
Cochlear implants – 58% of sales revenue CI units in line for developed markets with strong emerging markets growth Units up 5% and sales revenue in line in CC* • Developed market units and revenue in line with HY18 – increased competitor activity and health budget constraints in a few markets. Stro
Slide 4: Services – 29% of sales revenue
Services – 29% of sales revenue Increasing engagement with growing recipient base Sales revenue 21% in CC* • Importance of growing recipient base to revenue growth • Upgrade revenue up 26% in CC with strong demand for the Nucleus 7 Sound Processor, launched in Oct17 with the addition of the Nucleu
Slide 5: Acoustics – 13% of sales revenue
Acoustics – 13% of sales revenue Maintained strong market position for Baha products Sales revenue 1% in CC* • Demand continuing for the Baha 5 system • Longer-term opportunity for market expansion * constant currency (CC) 5
Slide 6: Regional review
Regional review Sales revenue 3%* Sales revenue 8%* Sales revenue 8%* • Lower rates of cochlear • Strong services revenue • Japan experienced strong implant growth in the US growth in Western Europe, unit growth, with Australia following a competitor product partly offset by impacts of deliver
Slide 7: Commitment to product innovation and technology leadership
Commitment to product innovation and technology leadership Latest products - market-leading technology, improved hearing outcomes, connectivity and lifestyle solutions Nucleus® Profile with Slim Nucleus® 7 Nucleus® CochlearTM Baha® Modiolar Electrode (CI532) Sound Processor Smart App SoundArc Streng
Slide 8: Patent dispute update contingent liability
Patent dispute update contingent liability • In November 2018, US$268m in damages awarded against Cochlear in AMF patent dispute. Cochlear has appealed the decision • AMF and AB have sought a further US$123 million in prejudgment interest which Cochlear has opposed • The Board has since obtained ind
Slide 9: HY19 Result Presentation – Brent Cubis CFO
HY19 Result Presentation 19 February 2019 Brent Cubis CFO
Slide 10: HY19 – Financial highlights
HY19 – Financial highlights Continued investment to drive growth • Strong upgrade cycle, improved GM and lower US tax rates fund investment in market growth activities • Continued investment in longer-term initiatives – market access, standard of care, clinical trials Strong balance sheet and cash f
Slide 11: Profit & loss
Profit & loss Strong upgrade cycle, improved GM and lower US tax rates fund investment in market growth activities Chg % Chg % A$m HY19 HY18 (reported) (CC) Sales revenue 711.9 639.6 11% 6% Cost of goods sold 179.5 176.4 2% (2%) % gross margin 75% 72% 3 pts 2 pts Selling, marketing and general expen
Slide 12: Cash flow
Cash flow Strong cash realisation with operating cash flows > net profit. Enables the business to self-fund growth activities, increase dividends and reduce debt A$m HY19 HY18 $ chg EBIT 177.0 160.4 16.6 Depreciation and amortisation 17.5 15.4 2.1 Change in working capital and other 19.0 (24.2) 43.2
Slide 13: Capital employed
Capital employed Increase in capital employed driven by investments in China manufacturing facility and IT platforms, partly offset by reductions in working capital A$m Dec18 Jun18 $ chg Trade receivables 275.0 299.1 (24.1) Inventories 176.5 167.4 9.1 Less: Trade and other payables (144.1) (140.5) (
Slide 14: Net debt
Net debt Lower net debt driven by improved earnings A$m Dec18 Jun18 $ chg Loans and borrowings Current 3.5 3.7 (0.2) Non-current 161.5 144.0 17.5 Total debt 165.0 147.7 17.3 Cash (92.3) (61.5) (30.8) Net debt 72.7 86.2 (13.5) Weighted average debt maturity (based on facility limits) 3.3 years 3.8 ye
Slide 15: Dividends
Dividends Interim dividend increased by 11%, fully franked, and at a payout of 70% of net profit A$m HY19 HY18 % chg Interim ordinary dividend $1.55 $1.40 11% Payout ratio % 70% 73% Franking % 100% 100% 15
Slide 16: HY19 Result Presentation – Dig Howitt CEO & President
HY19 Result Presentation 19 February 2019 Dig Howitt CEO & President
Slide 17: Strategic priorities
Retain mar Market-leading te Grow the h Awareness | Mar! Invest to grow | O Cochleare ART,
Slide 18: Expect to continue to grow revenue across all business units
Expect to continue to grow revenue across all business units Revenue growth drivers: Cochlear implants • DTC and sales force expansion • Growing awareness and uptake by adults and seniors • New products • Emerging market expansion Services • Growing recipient base • Greater connectivity and engageme
Slide 19: Cochlear is investing operating cash flows to drive growth
Cochlear is investing operating cash flows to drive growth Invest to grow • Building awareness and access to our products requires multi-year investment in sales, marketing and R&D activities • Through disciplined investment, we will aim to maintain the net profit margin Operational improvement • Op
Slide 20: FY19 outlook
FY19 outlook Maintaining FY19 net profit guidance of $265-275m, up 8-12% Key guidance considerations: • Revenue growth to be driven by the Services business, with strong uptake of the Nucleus 7 Sound Processor, particularly in the first half • Expect a lower rate of cochlear implant growth across th
Slide 21: Notes
Notes Forward looking statements Cochlear advises that this document contains forward looking statements which may be subject to significant uncertainties outside of Cochlear’s control. No representation is made as to the accuracy or reliability of forward looking statements or the assumptions on wh