Slide 1: Results for the half year ended 31 December 2011 (H1 F12)
Cochlear Limited For personal use only Results for the half year ended 31 December 2011 (H1 F12) Chris Roberts, CEO Neville Mitchell, CFO
Slide 2: Cochlear Overview
Cochlear Overview For personal use only • Cochlear Limited (ASX:COH): global leader in implantable devices for the hearing impaired (eg cochlear implants, bone conduction implants..) • ~ 2,500 employees • Direct operations in 20+ countries, and products sold in 100+ countries • A focus on a long ter
Slide 3: Strategy post 11 September 2011
Strategy post 11 September 2011 For personal use only 1. 11 Sep 2011: recalled unimplanted CI500 series implants (a component of Nucleus cochlear implant system) 2. Replaced with CI24RE implant (without any compromise in hearing performance) 3. Focus on global execution, for example, communication,
Slide 4: Communication has been a major focus
Communication has been a major focus For personal use only • Communication around the recall has been critical • Objective was to be open, transparent and fact based • Different external regulators, across different countries can make co- ordination of communication complex • Overall, feedback from
Slide 5: CI500 Series Recall – Current Status
CI500 Series Recall – Current Status For personal use only 1. As at 31st January 2012, the proportion of registered CI500 implants that had failed was 2.4% 2. Newly reported implant failures have reduced every month since October 3. Implant failure mode consistent: loss of hermeticity causing malfun
Slide 6: Financial Results for H1 F12
Cochlear: Financial Results for H1 F12 For personal use only H1 F12 H1 F11 % $m $m Change Cochlear Implant Sales 311.5 309.6 Ç 1% Bone Anchored Solutions (Baha) Sales 39.7 45.6 È 13% FX Contracts Gains 36.3 21.9 Ç 66% Total Revenue 387.5 377.1 Ç 3% EBIT * 108.7 121.1 È 10% Net Profit after Tax * 80.
Slide 7: Sales in Constant Currency (CC)
Cochlear: Sales in Constant Currency (CC) For personal use only • H1 F12 revenues up 3% to $387.5 million in reported currency • H1 F12 sales in constant H2 currency (prior periods restated at H1 F12 rates) up 5% H1
Slide 8: Cochlear Implant (CI) Unit Sales
Cochlear: Cochlear Implant (CI) Unit Sales For personal use only • H1 F12 CI unit sales ↓9% to 10,724 implants • This 10,724 excludes 2,300+ units shipped post recall not recognised as revenue (replacing H2 unimplanted CI500) • Given limited implant supply (post recall), shipments were to scheduled
Slide 9: Manufacturing and Global Supply Chain
Manufacturing and Global Supply Chain For personal use only • Rapid response to recall by manufacturing – by December weekly production of cochlear implants was significantly above pre recall levels – Investments in agility and flexibility over the past 5 years were critical to implementing this rap
Slide 10: H1 F12 Regional Split of Sales
Cochlear: H1 F12 Regional Split of Sales For personal use only EMEA1 Americas 41% 42% CC growth Ç8% CC growth Ç1% Asia Pacific 17% 1 EMEA is Europe, Middle East CC growth Ç11% and Africa 2 CC refers to constant currency
Slide 11: Americas: Sales in Constant Currency
Cochlear Americas: Sales in Constant Currency For personal use only • H1 F12 Americas sales of $149 million, up 1% in constant currency • Clinic destocking due to implant supply constraint • Continued Hearing Health Seminars (market growth H2 & awareness initiatives) • On-line strategy roll out H1
Slide 12: EMEA: Sales in Constant Currency
Cochlear EMEA: Sales in Constant Currency For personal use only • H1 F12 EMEA sales of $143 million, up 8% in constant currency • Portfolio effect of products eg CI422 (Slim Straight H2 Electrode) and geographies • On-line strategy beginning to roll-out H1
Slide 13: Asia Pac: Sales in Constant Currency
Cochlear Asia Pac: Sales in Constant Currency For personal use only • H1 F12 Asia Pacific sales of $60 million, up 11% in constant currency • Direct operations in India working well, including H2 investment in infrastructure & people • CI500 implant was not available in certain countries (eg Japan,
Slide 14: Nucleus System
Cochlear™ Nucleus® System For personal use only Programming Sound Remote Cochlear Implant Software. Processor Assistant Custom Sound™
Slide 15: Investing for long term growth
Cochlear: Investing for long term growth For personal use only • Deepening global footprint /customer experience & service • Technologic innovation (~13% of revenues) • Significant investments in manufacturing and global supply chain • Macquarie University hearing precinct as catalyst for global col
Slide 16: H1 F12 Overview
Cochlear H1 F12 Overview For personal use only • Very challenging half year! However: • Record revenue of $387.5 million • Record new Nucleus implant recipients • Recall costs fully expensed in H1 • Global Cochlear team executed well on challenges, eg supply chain management • The fundamentals of th
Slide 17: H1 F12 Financial Results
For personal use only Cochlear Limited H1 F12 Financial Results Neville Mitchell, CFO
Slide 18: H1 F12 Financial Performance
Cochlear H1 F12 Financial Performance For personal use only H1 F12 H1 F11 % $m $m Change Total Revenue 387.5 377.1 Ç 3% EBIT * 108.7 121.1 È 10% Net Profit after Tax * 80.1 87.2 È 8% Product Recall Costs, net of tax 100.5 - Net (loss)/profit attributable to members (20.4) 87.2 È 123% Dividends Inter
Slide 19: H1 F12 Product Recall
Cochlear H1 F12 Product Recall For personal use only Composition of Product Recall Expense H1 F12 $m Write down of Inventory 34.4 Impairment of Property, Plant and Equipment 14.0 Impairment of Intangibles 13.8 Warranty and other expenses 76.6 Cost of Sales – Product recall before interest and tax 13
Slide 20: H1 F11 – H1 F12 NPAT Reconciliation
Cochlear H1 F11 – H1 F12 NPAT Reconciliation For personal use only AUD Millions
Slide 21: Impact of Appreciating AUD on H1 F12 NPAT
Impact of Appreciating AUD on H1 F12 NPAT For personal use only A$m F/(U) Income Statement Translation Impact Sales Revenue (17.9) Difference H1 F12 Total Expenses including tax 8.0 actual vs H1 F12 at H1 F11 rates (9.9) Transaction Impact Net difference - Increase from H1 F11 of FX gain on hedged s
Slide 22: H1 F12 Working Capital
Cochlear H1 F12 Working Capital Inventory (Days Stock Held) / Debtors Days Outstanding For personal use only • H1 F12 Inventory days decreased to 168 (June F11 173 days) • Debtor days 78 (June F11 74 days) • Trade receivables at $148.3m (June F11 $165.9m)
Slide 23: H1 F12 Cash / (Debt)
Cochlear H1 F12 Cash / (Debt) For personal use only 31 Dec 30 Jun 2011 2011 $m $m Operations Loans and Borrowings Current (40.0) (60.0) Non-current (43.5) (3.0) Total Debt – operations (83.5) (63.0) Cash 75.0 72.4 Net (Debt)/Cash – operations (8.5) 9.4 Gearing ratio - operations 2% (2%) (net debt/ne
Slide 24: H1 F12 Overview
Cochlear H1 F12 Overview For personal use only • Very challenging half year! However: • Record revenue of $387.5 million • Record new Nucleus implant recipients • Recall costs fully expensed in H1 • Excellent performance of global Cochlear team in facing the challenges, eg supply chain management •
Slide 25: Thank you
For personal use only Thank you Any questions?
Slide 26: FX Contract Cover and Rates
FX Contract Cover and Rates as at 31 December 2011 For personal use only Total FX cover at USD EUR JPY 31 Dec 2011 expressed in 295.0m 168.0m 720m Foreign Currency FX Hedges AUD AUD AUD AUD Total Expressed in AUD 333.5m 255.6m 9.7m 598.8m % of total cover (in AUD) 56% 43% 1% 100% 3 yr weighted avera
Slide 27: Foreign Exchange
Foreign Exchange For personal use only Rates applied H1 F12 vs. H1 F11 H1 F12 H1 F11 % Change Average rates (used for translating P&L) USD 1.03 0.94 10% Euro 0.74 0.72 3% JPY 80.0 79.5 1% GBP 0.65 0.60 8% Contract rates (used to bring FX to Aust) USD 0.85 0.80 6% Euro 0.63 0.57 11% JPY 76.4 80.2 (5%
Slide 28: Foreign Exchange
Foreign Exchange For personal use only Period end rates applied F12 vs. F11 31 Dec 30 June % change 2011 2011 Period end rates (used for translating Bal Sheet) USD 1.02 1.05 (3%) Euro 0.78 0.73 7% JPY 79.0 84.8 (7%)
Slide 29: Property, Plant & Equipment
Property, Plant & Equipment For personal use only 31 Dec 2011 $m $m Gross value 30 June 2011 157.0 Accumulated depreciation (87.6) Net book value 69.4 F’12 movements Additions 9.6 Depreciation (8.2) Recall write-off (14.0) FX Impacts (0.4) Net book value December 2011 56.4
Slide 30: Corporate & Other Net Expenses
Corporate & Other Net Expenses For personal use only H1 F12 H1 F11 $m $m FX Contracts (36.3) (21.9) Research and Development 57.4 50.9 Corporate Administration & Marketing 31.3 24.0 Corporate Other Income (0.7) (6.7) Corporate and other net expense (note 7) 51.7 46.3
Slide 31: Non-IFRS Financial Measures
Non-IFRS Financial Measures For personal use only Non-IFRS financial measures Given the significance of the product recall and fx movements the directors believe the presentation of non-IFRS financial measures is useful for the users of this document as they reflect the underlying financial performa