Slide 1: Results for the half year ended 31 December 2002
Cochlear Limited Results for the half year ended 31 December 2002
Slide 2: Agenda
Cochlear Limited Agenda Overview Jack O’Mahony Results Neville Mitchell Technology John Parker Outlook Jack O’Mahon
Slide 3: Overview
Overview Delivery of growth targets with strong cash flow backed by leading technology and reliable products * System sales units up 22% « Long term growth trend maintained ¢ Global market share increased ¢ Strong cash flow / Dividend increase * Investment in Marketing Cochlear 3 Half Year 18/02/03
Slide 4: Financial Performance
Financial Performance Sales Operating Profit before tax PAT Final dividend Franking 4 Half Year 18/02/03 Dec 2002 A$’m 146.6 36.0 27.0 33c¢ 100% Dec2001 A$’m 120.3 20.6 17.2 21c 100% 422% 475% 457% 457% Cochlear
Slide 5: Characteristic of Result
Characteristic of Result * 20% growth profile confirmed * Margins improved * FX contracts benefits result * Investment in Sales and Marketing - $12m * Working capital controlled ¢ Strong cash flow Cochlear 5 Half Year 18/02/03
Slide 6: Financial Performance: Revenue by region
Financial Performance Revenue by region @ F'03 @ F'02 78.4 A#039;m Americas Europe Asia Pacific Cochlear 6 Half Year 18/02/03
Slide 7: Issues Impacting High PAT Growth
Financial Performance 7 Half Year 18/02/03 Issues Impacting High PAT Growth * Strong sales * Improved foreign exchange contracts * R&D running rate maintained * Investments in marketing ¢ F’02 Implex technology purchase * Higher tax rate in F’03 * 175% R&D V * Overseas ESOP J Cochlear
Slide 8: Foreign Exchange Benefit
Financial Performance 8 Half Year 18/02/03 Foreign Exchange Benefit ¢ Portfolio of currencies - USD, EURO, JPY, HKD ¢ Policy maintained to hedge out 2 years on rolling basis ¢ Improvement in AUD offset by FX contracts ¢ Net effect benefit $1.0m Cochlear
Slide 9: Financial Position
Financial Position Dec 2002 A$m Current assets Cash (net) 16.5 Receivables 61.5 Inventory 40.6 Current liabilities Provisions 18.7 9 Half Year 18/02/03 June 2001 A$m (13.7) 69.3 36.4 34.1
Slide 10: Financial Position: Receivables
Financial Position F’03 F’02 A$m A$m Receivables 61.5 69.3 Days outstanding 74 75 ¢ Strong F’02 4th quarter collected ¢ Mix of sales countries ¢ A$1m added to provision — now A$4.6m * Days outstanding within internal targets 10 Half Year 18/02/03
Slide 11: Financial Position: Provisions
Financial Position 11 Half Year 18/02/03 F’03 F’02 A$m A$m Provisions 18.7 34.1 ¢ Warranty provision * AASB 1044 - $0.3m reduction opening balance * $1m added current year * $17.5m dividend — note only (F’02 - $15.7m) Cochlear
Slide 12: Technology Review
Technology Review Sustaining Innovation * Soft Tip Electrode ¢ New Insertion Tool ¢« Other feature enhancements Cochlear 12 Half Year 18/02/03
Slide 13: Design Goals
13 Design Goals Half Year 18/02/03 Softip electrode enhancement, design goals * Facilitate smooth movement through the scala « Minimise lateral wall forces ¢ Minimize trauma to delicate cochlea structures ¢ Aid more consistent perimodiolar positioning Cochlear Press down arrow to advance slide
Slide 14: Insertion dynamics in cochlear model
Insertion dynamics in cochlear model (G Cochlea 14 Half Year 18/02/03
Slide 15: ues
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Slide 16: Phase contrast X-ray
Phase contrast X-ray Cochlear 16 Half Year 18/02/03
Slide 17: International Status
International Status ° International Market Acceptance Test Proceeding . Production preparation Cochlear 17 Half Year 18/02/03
Slide 18: Insertion Tool
Insertion Tool 18 Half Year 18/02/03 LMM ‘i in ee
Slide 19: Insertion Tool Design Goals
Insertion Tool Design Goals - Facilitate Advance Off-Stylet™ technique ° Optional ° Adjustable (L/R ears, L/R hands) . Smooth action ° Easy removing tool 19 Half Year 18/02/03
Slide 20: Insertion Tool - Fluoroscopy
Insertion Tool - Fluoroscopy Cochlear 20 Half Year 18/02/03
Slide 21: Other Enhancements
Other Enhancements Micro Link adapter Provides Ear level access To Phonak FM micro link for ESPrit 3G users Software R126 V2 — Nucleus 22 support Cochlear 21 Half Year 18/02/03
Slide 22: Next Generation Implant
Next Generation Implant New electronics in the implant package 22 Half Year 18/02/03
Slide 23: New Implant — Features
New Implant — Features * High stimulation rates * New stimulation modes * Low power consumption ¢ Advanced voltage telemetry functions * Improved NRT Cochlear 23 Half Year 18/02/03
Slide 24: Clinical Results — Speech Coding
Clinical Results — Speech Coding ¢ More than 6 implants to date * Initial testing using current speech coding algorithms * Speech perception performance equivalent to or better than older devices * Stronger preference for some new algorithms already tested Cochlear 24 Half Year 18/02/03
Slide 25: Technology Outlook
Technology Outlook * Work continues on our totally implanted technologies ¢ Further improvements in programming software Cochlear 25 Half Year 18/02/03
Slide 26: Operational Review
Operational Review Building for the longer term * Long term growth profile confirmed * Achievement of strong financial results and cash flow * Successful product launches with strong technology pipeline * Organisation strengthened « Investment in infrastructure Cochlear 26 Half Year 18/02/03
Slide 27: Market position
Market position Increased global market share to 65-70% * Meningitis impact * COH gains market share * Slight pause in adult uptake * No long term impact ¢ Portfolio impact * Strong USA « Mixed within regions Cochlear 27 Half Year 18/02/03
Slide 28: Market position
Market position * Main competitors - Med El, ABC * Long term average global industry growth of 20% Cochlear 28 Half Year 18/02/03
Slide 29: Organisational issues
Organisational issues * New Chairman, Mr. Tommie Bergman ¢ Increased emphasis on Committee work * Audit * Remuneration * Technology * Medical ¢ Strengthened strategic development Cochlear 29 Half Year 18/02/03
Slide 30: F'03 Full Year Outlook
F’03 Full Year Outlook ¢ Unit sales growth of over 20% * EPS growth of in the order of 40% ¢ Maintain market share in 65-70% range ¢ Long term unit average global sales growth trend of 20% sustainable Cochlear 30 Half Year 18/02/03