Slide 1: Cochlear Limited Results for Year Ended 30 June 2008
For personal use only Cochlear Limited Results for Year Ended 30 June 2008 Chris Roberts - CEO Neville Mitchell - CFO
Slide 2: Cochlear Background
Cochlear Background For personal use only • Leader in implantable devices for hearing impaired: – Cochlear implants (CI) for sensorineural hearing loss (SNHL) – Bone anchored hearing implants (Baha®) for conductive hearing loss, mixed losses and single sided deafness – Electro-Acoustic Stimulation (
Slide 3: Cochlear's Implant Systems
Cochlear’s Implant Systems For personal use only Nucleus® Freedom™: Implant + Speech Processor Baha® System RF Transmission Coil Baha® Implant body System (receiver/stimulator) Bone Electrode array Conduction Speech Processor (inserted to cochlea) (BTE shown)
Slide 4: Record Financial Results for F08
Record Financial Results for F08 For personal use only F08 F07 $ million $ million Growth Cochlear implants 504.5 480.2 5% Bone Anchored (Baha) 75.9 62.7 21% FX Contracts 21.3 16.5 29% Revenue 601.7 559.4 8% EBITDA 193.3 170.9 13% Net Profit After Tax 115.2 100.1 15% Core Earnings 123.7 107.6 15% Co
Slide 5: Record Financial Results for F08
Record Financial Results for F08 For personal use only F08 F07 $ million $ million Growth Cochlear implants 504.5 480.2 5% Bone Anchored (Baha) 75.9 62.7 21% FX Contracts 21.3 16.5 29% Revenue 601.7 559.4 8% EBITDA 193.3 Impact of F08 AUD 170.9 13% Net Profit After Tax 115.2 appreciation 100.1 was15
Slide 6: Year Sales in Constant Currency
5 Year Sales in Constant Currency* For personal use only 600 500 • During F08 there was 400 significant significant appreciation appreciation CC Sales $millions of AUD, e.g. up 14% against USD, up 10% 300 against GBP 200 • In constant currency terms, F08 sales revenue up 18% 100 0 F04 F05 F06 F07 F0
Slide 7: Cochlear Implant Unit Sales
5 Year Cochlear Implant Unit Sales For personal use only 1 8 ,0 0 0 1 6 ,0 0 0 1 4 ,0 0 0 • Cochlear implant unit sales for F08 1 2 ,0 0 0 of 18,228 units, up CI Unit Sales 1 0 ,0 0 0 14% over F07 8 ,0 0 0 • H2 F08 cochlear implant unit sales 6 ,0 0 0 up 16% over 4 ,0 0 0 H2 F07 2 ,0 0 0 - F04 F05 F
Slide 8: Sales of Bone Anchored Solutions in Constant Currency
Sales of Bone Anchored Solutions For personal use only (BAS) in Constant Currency* 80 •• BAS BAS (Baha (Baha implants) implants) sales sales of of $75.6 $75.6 million million 60 up up 21% 21% •• Up Up 27% 27% in in constant constant CC Sales #039;millions currency currency terms terms 40 •• FDA FDA Imp
Slide 9: F08 Sales Revenue Split and Constant Currency Growth by Region
F08 Sales Revenue Split and For personal use only Constant Currency* Growth by Region Europe Americas 44% (↑30%) 40% (↑6%) Asia-Pacific 16% (↑20%) * CC means sales restated at F08 FX rates
Slide 10: Americas Sales in Constant Currency
5 Year Americas Sales in For personal use only Constant Currency* 250 •• 6% 6% growth growth inin constant constant 200 currency currency terms terms forfor F08 F08 •• Upgrade sales ↓34% Upgrade sales ↓34% on on F07 F07 due due toto fast fast CC Sales #039;millions 150 uptake uptake ofof upgrades upgra
Slide 11: Asia Pacific Sales in Constant Currency
5 Year Asia Pacific Sales in For personal use only Constant Currency* 100 80 •• 20% 20% growth growth inin constant constant currency currency terms terms for for F08 F08 CC Sales #039;millions •• Established Established direct direct 60 operation operation in in Korea Korea •• ∼∼ 700 700 CICI units un
Slide 12: Europe Sales in Constant Currency
5 Year Europe Sales in For personal use only Constant Currency* 280 240 •• 30% 30% growth growth inin constant constant currency currency terms terms for for F08 F08 200 •• Direct Direct presence presence CC Sales #039;millions established established in in Turkey Turkey 160 •• Growth Growth in in both
Slide 13: Manufacturing and Supply Chain
Manufacturing and Supply Chain For personal use only • Significant progress in manufacturing and supply chain areas, resulting in increased flexibility, response time, capacity and quality • This includes significant progress on externals manufacturing in Brisbane (key external supplier, Crystalaid,
Slide 14: Core Earnings Growth
5 Year Core Earnings* Growth For personal use only 120 •• Core Core earnings earnings growth growth in in F08 F08 of of 15% 15% 100 •• F08 F08 core core earnings earnings as as % % of of revenue revenue 20.6% 20.6% Core Earnings #039;millions 80 (F07: (F07: 19.2%) 19.2%) 42% ↑of •• 42% ↑of AUD AUD vv U
Slide 15: Competitive Position Strengthening
Competitive Position Strengthening For personal use only • F08 product launches: – Freedom™ sound processor for N22 implant recipients (in addition to Freedom sound processor for N24 implant recipients) – Freedom sound processor for ABI and Double Electrode Array implant recipients – Custom Sound™ S
Slide 16: Cochlear's Strategic Vision
Cochlear’s Strategic Vision For personal use only Delivering profitable sustainable growth through a focus on implantable solutions for the hearing impaired Building internal Driving product Innovating the capability innovation business model •• Competencies Competencies •• Across Across aa range: r
Slide 17: Growth Drivers Include....
Growth Drivers Include…. For personal use only • Binaural hearing as standard – 15-20% of cochlear implants in established markets are for recipients going bilateral • New technologies/products → R&D continues as major focus • Widening indications (e.g. Baha for mixed hearing loss) • Increasing pene
Slide 18: Growth Initiatives Include Evolving the Business Model
Growth Initiatives Include Evolving the For personal use only Business Model Building awareness Freeing up Ç Ç services and driving consumer clinic capacity to customers demand •Expanding consumer •Expanding Sound • Recipient services, eg advocacy network Partnership program “Hear Always” supporting
Slide 19: F08 Overview: Growth Continues
F08 Overview: Growth Continues For personal use only • Record financial results (despite currency headwind) – Revenues of $601.7 million ↑8% – In constant currency terms, sales ↑18% – EBITDA ↑13% of $193.3 million – Core Earnings ↑15% $123.7 million • Nucleus Freedom cochlear implant is best system
Slide 20: Financial Results
For personal use only Financial Results Neville Mitchell - CFO
Slide 21: F08 Financial Performance
F08 Financial Performance For personal use only F08 F07 % $m $m Change Total Revenue 601.7 559.4 Ç 8% NPAT 115.2 100.1 Ç 15% Core Earnings 123.7 107.6 Ç 15% Dividends Final Dividend 80c 70c Ç 14% Record Date 4th September 2008 Payable Date 25th September 2008 Full Year (Interim and final) 150c 125c
Slide 22: F08 Core Earnings Calculations
F08 Core Earnings Calculations For personal use only F08 F07 $m $m NPAT 115.2 100.1 Adjustment items (after tax) • Net R&D (capitalisation & amortisation) 1.2 1.6 • Acquired intangible amortisation 2.6 2.3 • Share based compensation 4.7 3.6 Total adjustments 8.5 7.5 Core earnings 123.7 107.6
Slide 23: F07 – F08 Core Earnings Reconciliation
F07 – F08 Core Earnings Reconciliation For personal use only 200.0 72.4 (23.1) 180.0 2.0 (14.2) 160.0 (4.2) (20.9) 140.0 4.1 123.7 120.0 107.6 100.0 80.0 60.0 40.0 20.0 0.0 107.6 72.4 -23.1 2.0 -14.2 -4.2 -20.9 4.1 123.7 F'07 Core Gross Sales & Admin R&D costs Interest FX Tax F'08 Core Earnings Marg
Slide 24: Impact of Appreciating AUD on F08 Core Earnings
Impact of Appreciating AUD on F08 Core Earnings For personal use only A$m F/(U) Income Statement Translation Impact Sales Revenue (47.0) Difference F08 Total Expenses including tax 13.2 actual vs F08 at F07 rates (33.8) Transaction Impact - Increase over F07 of FX gain on hedged Net difference sales
Slide 25: F08 Income Tax Reconciliation
F08 Income Tax Reconciliation For personal use only F08 F07 $m $m Profit before tax 156.7 143.5 Income tax expense at 30% 47.0 43.0 Foreign tax rates (0.2) 1.9 Amortisation and other non-deductible 2.7 4.1 R&D allowance (3.7) (4.7) Share based payment deductions (2.6) - Under/(over) provided from pr
Slide 26: F08 Debt
F08 Debt For personal use only 30 30 June June 2008 2007 $m $m Loans and Borrowings Current 15.4 161.3 Non-current 154.6 37.6 Total Debt 170.0 198.9 Net Debt 133.3 115.2 Net gearing ratio 29% 31% All debt covenants met
Slide 27: F08 Working Capital
F08 Working Capital For personal use only Inventory (Days Stock Held) 120.0 250 • F08 Inventory at 100.0 200 214 days, $99.2m Inventory ($ millions) Days stock held 80.0 150 • June 30 2008 60.0 Inventory down 100 on December 2007 40.0 20.0 50 • Implementation of Oracle assisted 0.0 - inventory Jun-0
Slide 28: F08 Working Capital
F08 Working Capital For personal use only Debtors (Days Outstanding) • Decrease in debtor days to 81 from $160.0 90 85 at Dec 07 Net Receivables ($ millions) $140.0 80 $120.0 70 $100.0 60 • Europe and Days 50 $80.0 40 Americas debtor $60.0 30 days improved $40.0 20 $20.0 10 • Asia Pacific debtor $0.
Slide 29: Thank you
For personal use only Thank you Any questions?
Slide 30: Foreign Exchange
Foreign Exchange For personal use only • Rates applied F08 vs. F07 F08 F07 % Average rates (used for translating P&L) USD 0.90 0.79 14% Euro 0.61 0.61 - JPY 99.3 94.4 5% GBP 0.45 0.41 10% Contract rates (used to bring FX to Aust) USD 0.80 0.74 8% Euro 0.59 0.57 4% JPY 84.3 67.5 25%
Slide 31: Foreign Exchange Rates Going Forward
Foreign Exchange Rates For personal use only Going Forward Average Contract Rates USD Euro JPY Weighted average – exchange rates going forward 0.83 0.57 86.5 • Total mark to market FX gain at 30 June 2008: $33.1 m (year-end USD rate 0.96)
Slide 32: F08 Core Earnings Reconciliation
F08 Core Earnings For personal use only Reconciliation F08 F07 $m $m Earnings before interest and tax 167.3 150.2 Core earnings adjustments pre-tax • R&D 2.8 2.3 • Acquired intangible amortisation 2.6 2.3 • Share based compensation 2.8 3.6 Core EBIT 175.5 158.4 Net interest (10.6) (6.7) Core tax exp
Slide 33: F08 Net Finance Expense
F08 Net Finance Expense For personal use only F08 F07 $m $m Net finance (expense)/income Interest (expense) (10.6) (6.7) Net foreign exchange gain on translation of assets 4.7 - Net foreign exchange loss on translation of assets - (3.4) Net finance (expense) (5.9) (10.1)