Slide 1: Results for the full year ended 30 June 2012 (F12)
Cochlear Limited For personal use only Results for the full year ended 30 June 2012 (F12) Chris Roberts, CEO Neville Mitchell, CFO
Slide 2: Cochlear Overview
Cochlear Overview For personal use only • Cochlear Limited (ASX:COH) is the global leader in implantable devices (e.g. cochlear implants) for the hearing impaired • ~ 2,500 employees • Direct operations in 20+ countries, and products sold in 100+ countries • Fundamentals of the business remain posit
Slide 3: F12: A Review
F12: A Review For personal use only Programming • Unimplanted CI500 series implants Cochlear Implant Sound Processor Remote Assistant Software. Custom recalled Sep 2011 with significant Sound™ financial expense ($138.8 million pre-tax provision) However • Implant component of Nucleus cochlear implan
Slide 4: CI500 Series Recall – Current Status
CI500 Series Recall – Current Status For personal use only 1. As at 31st July 2012, the proportion of registered CI500 implants that had failed was 4.2% 2. Newly reported failures reducing, e.g. July failures approximately one third of peak month (October 2011). 3. Implant failure mode remains consi
Slide 5: Nucleus CI24RE Implant
Nucleus CI24RE Implant For personal use only • Switching to CI24RE implant has been successful because – No compromise in hearing performance (functionally equivalent) – Excellent reputation and reliability of the CI24RE – Nucleus 5 externals set new benchmarks – Manufacturing ramp up and supply cha
Slide 6: Financial Results for F12
Cochlear: Financial Results for F12 For personal use only F12 F11 % $m $m Change Cochlear Implant Sales 626.7 648.0 È3 % Bone Anchored Solutions (Baha) Sales 77.9 84.2 È7 % FX Contracts Gains 74.4 77.4 È4 % Total Revenue 779.0 809.6 È4 % EBIT * 215.3 242.7 È11 % Net profit after tax * 158.1 180.1 È1
Slide 7: Sales in Constant Currency (CC)
Cochlear: Sales in Constant Currency (CC) For personal use only • Total revenues of $779.0 million, down 4% • Sales up 1% in constant currency (prior periods restated at F12 rates) H2 H1 Nucleus CI422 Slim Straight Electrode Baha 3 Power System Nucleus 5 for N24 recipients
Slide 8: Cochlear Implant (CI) Unit Sales
Cochlear: Cochlear Implant (CI) Unit Sales For personal use only • F12 CI unit sales down 6% to 23,087 units • No donation or tender CI unit sales in Mainland China for F12 (unrelated H2 to recall as CI500 was never released in Mainland China) • H2 CI unit sales up 15% on H1 H1
Slide 9: Sales of Bone Anchored Solutions (BAS) in Constant Currency
Cochlear: Sales of Bone Anchored Solutions (BAS) in Constant Currency For personal use only • BAS sales (including Baha implants) $77.9 million for F12, down 4% in constant currency • Completed global launch H2 of Baha 3 Power • Increased competitive environment • New product releases due in F13 H1
Slide 10: F12 Regional Split of Sales
Cochlear: F12 Regional Split of Sales For personal use only EMEA1 Americas 41% 42% CC2 growth Ç2% CC growth È2% Asia Pacific 17% CC growth Ç4% 1 EMEA is Europe, Middle East and Africa 2 CC is constant currency
Slide 11: Americas: Sales in Constant Currency
Cochlear Americas: Sales in Constant Currency For personal use only • Americas sales of $297.0 million, down 2% in constant currency • BAS sales down 8% in constant currency H2 • Nucleus CI422 (Slim Straight) electrode implant launched June 2012 • Distribution for Latin and Central America from H1 P
Slide 12: EMEA: Sales in Constant Currency
Cochlear EMEA: Sales in Constant Currency For personal use only • EMEA (Europe, Middle East and Africa) sales of $284.7 million, up 2% in constant currency • Portfolio effect of product and geography H2 • Codacs clinical trial expanded with excellent clinical outcomes H1
Slide 13: Asia Pac: Sales in Constant Currency
Cochlear Asia Pac: Sales in Constant Currency For personal use only • Asia Pacific sales of $122.9 million, up 4% in constant currency • Nucleus 5 externals launched in China and India H2 • CI422 (Slim Straight) implant launched in Australia, Korea and SE Asia in H2 H1 H1
Slide 14: Free Cash Flow and Dividends
Cochlear: Free Cash Flow and Dividends For personal use only • Free cash flow (after recall costs) of $142.7 million • $2.9 million net cash at 30 June 2012 • Final dividend $1.25 per share (35% franked, 25% CFI), up 4% • Full year dividend (interim and final) $2.45 up 9%
Slide 15: Clinical Trends
Cochlear – Clinical Trends For personal use only • Bilateral implantation continues growing (developed economies) • In developed economies, ~30% of all new recipients are aged 65+ • Cochlear implantation increasingly accepted and reimbursed for children in emerging economies, e.g. in Asia Pacific, o
Slide 16: Investment for Maintaining Market Leadership
Investment for Maintaining Market Leadership For personal use only • Ongoing investment in R&D R&D • Technology partnerships, e.g. GN Resound, Otologics $ millions • Significant investment in online (digital) strategy • Continued investments in awareness, e.g. hearing health seminars • Development o
Slide 17: F12 Overview
Cochlear F12 Overview For personal use only • F12 was a challenging year • Recall resulted in a $138.8 million expense in H1 F12 • Ramp up of CI24RE well executed with minimal market share loss • Well positioned to take advantage of global clinical trends • Building blocks in place for long term sus
Slide 18: F12 Financial Results
Cochlear Limited For personal use only F12 Financial Results Neville Mitchell, CFO
Slide 19: F12 Financial Performance
Cochlear F12 Financial Performance For personal use only F12 F11 % Change $m $m Total Revenue 779.0 809.6 4È % EBIT * 215.3 242.7 11È % Net Profit after Tax * 158.1 180.1 12È % Product Recall Costs, net of tax 101.3 - Net profit attributable to members 56.8 180.1 68È % Dividends Final Dividend 125c
Slide 20: F12 Product Recall
Cochlear F12 Product Recall For personal use only Composition of Product Recall Expense F12 $m Write down of Inventory 34.9 Impairment of Property, Plant and Equipment 14.0 Impairment of Intangibles 13.8 Warranty and other expenses 76.1 Cost of Sales – Product recall before interest and tax 138.8 In
Slide 21: F11 – F12 NPAT Reconciliation
Cochlear F11 – F12 NPAT Reconciliation For personal use only AUD Millions $158.1m NPAT before recall costs
Slide 22: Impact of Appreciating AUD on F12 NPAT
Impact of Appreciating AUD on F12 NPAT For personal use only A$m F/(U) Income Statement Translation Impact Sales Revenue (29.8) Difference F12 Total Expenses including tax 11.9 actual vs F12 at F11 rates (17.9) Transaction Impact Net difference - Decrease from F11 of FX gain on hedged sales (3.0) ac
Slide 23: F12 Working Capital
Cochlear F12 Working Capital Inventory (Days Stock Held) / Debtors Days Outstanding For personal use only • F12 Inventory days increased to 182 (F11 173 days) • Debtor days 73 (F11 74 days) • Trade receivables at $144.7 million (F11 $165.9 million)
Slide 24: F12 Cash
Cochlear F12 Cash For personal use only 30 June 30 June 2012 2011 $m $m Operations Loans and Borrowings Current (45.7) (60.0) Non-current (19.9) (3.0) Total Debt (65.6) (63.0) Cash 68.5 72.4 Net Cash 2.9 9.4 Gearing ratio (1%) (2%) (net debt/net debt + equity) Total Loan Facilities 200.0 150.0 Unuse
Slide 25: F12 Overview
Cochlear F12 Overview For personal use only • F12 was a challenging year • Recall resulted in a $138.8 million expense in H1 F12 • Ramp up of CI24RE well executed with minimal market share loss • Well positioned to take advantage of global clinical trends • Building blocks in place for long term sus
Slide 26: Thank you
For personal use only Thank you Any questions?
Slide 27: FX Contract Cover and Rates
FX Contract Cover and Rates as at 30 June 2012 For personal use only Total FX hedges at USD EUR JPY 30 June 2012 expressed in Foreign Currency (millions) 243 162 1,039 FX Hedges at 30 June 2012 Total Expressed in AUD millions 261.0 234.3 13.7 509.0 % of total cover (in AUD) 51% 46% 3% 100% 3 yr weig
Slide 28: Foreign Exchange
Foreign Exchange For personal use only Rates applied F12 vs. F11 F12 F11 % Change Average rates (used for translating P&L) USD 1.03 0.98 5% Euro 0.77 0.73 5% JPY 81.1 82.0 (1%) GBP 0.65 0.62 5% Contract rates (used to bring FX to Aust) USD 0.84 0.83 1% Euro 0.66 0.58 14% JPY 77.1 78.4 (2%)
Slide 29: Foreign Exchange
Foreign Exchange For personal use only Period end rates applied F12 vs. F11 30 June 30 June % change 2012 2011 Period end rates (used for translating Bal Sheet) USD 1.01 1.05 (4%) Euro 0.81 0.73 11% JPY 80.1 84.8 (6%)
Slide 30: Property, Plant & Equipment & Leasehold Improvements
Property, Plant & Equipment & Leasehold Improvements For personal use only 30 June 2012 $m Gross value 30 June 2012 158.3 Accumulated depreciation 98.7 Net book value at 30 June 2012 59.6 F’12 movements Additions 20.8 Depreciation (15.8) Recall Impairment (14.0) Disposals (0.2) FX Impacts (0.6)
Slide 31: Corporate & Other Net Expenses
Corporate & Other Net Expenses For personal use only F12 F11 $m $m FX Contracts (74.4) (77.4) Research and Development 118.1 107.7 Corporate Administration & Marketing 63.5 59.7 Corporate Other Income (1.4) (7.7) FX (gains)/losses 0.3 (2.5) Corporate and other net expense (note 10) 106.1 79.8
Slide 32: 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