Slide 1: HY20 Result Presentation
HY20 Result Presentation 18 February 2020 Dig Howitt CEO & President Brent Cubis CFO 1
Slide 2: HY20 highlights
HY20 highlights Strong growth in cochlear implants with units up 13% • Market share gains from the launch of the Nucleus Profile™ Plus Series cochlear implant • Emerging markets benefitting from investment in capability over many years Services revenue up 5% in CC • Penetration rates reaching high l
Slide 3: Strong growth in cochlear implants with units up 13%
Strong growth in cochlear implants with units up 13% Developed market units 7% Cochlear implant • US up >10% driven by market share gains and Sales revenue CC* $m market growth • Western Europe up 5% with growth weighted to Q2 as availability expanded across the half • Western Europe market growth
Slide 4: Services revenue up 5% in CC
Services revenue up 5% in CC Sales revenue 5% in CC* Services • Penetration rates high for Nucleus® 7 Sound Sales revenue CC* $m Processor at this point in the upgrade cycle • Strong revenue growth in HY19 (up 21% in CC) • Continued focus on recipient engagement with Cochlear Family membership up
Slide 5: Acoustics decline ahead of Osia launch
Acoustics decline ahead of Osia launch Sales revenue 13% in CC* Acoustics • Some share loss from competitor product launch Sales revenue CC* $m as well as market slow down in anticipation of the launch of the Osia 2 System which received FDA clearance in November • OSIA is the next generation of b
Slide 6: Cochlear Osia 2 System: A hearing implant reimagined
Cochlear™ Osia® 2 System A hearing implant reimagined High power, high gain & advanced signal processing. For hearing performance in noise & quiet Slim, connected & off‐the‐ear. Designed to implant. Made to last. To help patients hear without For minimally invasive surgery getting in their way and r
Slide 7: Cochlear's market leading portfolio of electrodes
Cochlear’s market leading portfolio of electrodes Slim Modiolar Electrode: An electrode designed to fit the natural Slim Modiolar shape of the inner ear Electrode • World’s thinnest and most advanced true perimodiolar electrode • Reliable placement preserving cochlea structures • Precise and effecti
Slide 8: Regional review
Regional review Americas EMEA Asia Pacific Sales revenue Sales revenue Sales revenue CC* $m CC* $m CC* $m HY20 result Sales revenue 3% in CC Sales revenue 3% in CC Sales revenue 13% in CC • Strong CI growth with low • Strong CI growth with low • Strong CI growth in Japan and growth in Services
Slide 9: HY20 Result Presentation
HY20 Result Presentation 18 February 2020 Brent Cubis CFO 9
Slide 10: Financial highlights
Financial highlights Continued investment to drive market growth • Growing R&D and sales & marketing investment • Continued investment in longer-term initiatives – market access, standard of care, CPN, clinical trials Strong balance sheet and cash flow generation fund investment • Cash flow generati
Slide 11: Profit & loss
Profit & loss Continued investment in market growth activities and technology leadership Change Change $m HY20 HY19 (reported) (CC) Sales revenue 777.6 711.9 9% 5% % GM 75% 75% 0 pts 0 pts Selling, marketing and general expenses 243.5 216.1 13% 9% R&D expenses 94.4 88.2 7% 6% % of sales revenue 12%
Slide 12: Cash flow
Cash flow Cash flow declines driven by increases in working capital and capex (China manufacturing facility, Denver office fitout and IT platform development) $m HY20 HY19 $ change EBIT (excluding revaluation of innovation fund) 183.7 180.5 3.2 Depreciation and amortisation (excl AASB 16 impact)* 21
Slide 13: Capital employed
Capital employed Increase driven by working capital, investments in China manufacturing facility and Denver office fitout and revaluation of investment in Nyxoah $m Dec19 Jun19 $ change Trade receivables 295.6 299.5 (3.9) Inventories 204.0 195.4 8.6 Less: Trade payables (147.4) (160.8) 13.4 Working
Slide 14: Dividends
Dividends Interim dividend increased by 3%, fully franked, with the payout* on target at ~70% $m HY20 HY19 % change Interim ordinary dividend (per share) $1.60 $1.55 3% Payout ratio* % 70% 68% Franking % 100% 100% HY20 result Growing dividends with a payout of ~70% (or above) of net profit since FY0
Slide 15: HY20 Result Presentation
HY20 Result Presentation 18 February 2020 Dig Howitt CEO & President 15
Slide 16: Strategic priorities
Strategic priorities Retain market leadership Market-leading technology I World-class customer experience Grow the hearing implant market Awareness I Market access I Clinical evidence Deliver consistent revenue and earnings growth Invest to grow I Operational improvement I Strong financial position
Slide 17: Strategies to improve awareness and access vary by segment
Strategies to improve awareness and access vary by segment Adults & seniors Developed markets Increase penetration Current penetration*: 3% Children Developed markets Grow share Grow the Current penetration*: 60% hearing implant market Children Emerging markets Increase penetration, funding and affo
Slide 18: Cochlear is investing operating cash flows to drive growth
Cochlear is investing operating cash flows to drive growth Investment priorities • Building awareness and access requires multi-year investment in Investing sales, marketing and R&D activities to grow • Aim: invest to grow, maintaining the net profit margin Delivering • Optimising cost of production
Slide 19: Revenue growth drivers
Revenue growth drivers Cochlear implants • Growing awareness and uptake by adults and seniors • Emerging market expansion • New products driving market growth and market share Services Deliver • Growing recipient base consistent • Greater connectivity and engagement with revenue recipients and • Nex
Slide 20: FY20 outlook
FY20 outlook FY20 net profit guidance* of $270-290m, up 2-9% on underlying net profit Key guidance considerations: • Expect strong H2 growth in cochlear implant units in developed markets • Services revenue expected to grow although at a lower rate than previous years • Acoustics revenue expected to
Slide 21: Appendix
Appendix Hear now. And abuaugs Cochleare
Slide 22: Cochlear at a glance
Cochlear at a glance Key products Global sales Market leader Cochlear implants1 Cochlear™ Nucleus® Profile™ Plus with $1.4b+ $180m+ 60 Slim Modiolar in sales revenue % 60% Electrode (CI632) in annual R&D ~ 49 % 34 % 17 % global market Americas EMEA Asia Pacific 550,000 + share2 implants sold3 Servic
Slide 23: Financial history
Financial history Cochlear has a long track record of delivering growing sales revenue, profits and dividends * FY12 excludes product recall costs of $101 million after tax, FY14 excludes patent dispute provision of $16 million after tax and FY19 excludes a net $11 million gain after tax from the re
Slide 24: Investing to grow
Investing to grow Cochlear takes a long term approach to investing and has invested in growing the market for implantable solutions since listing in 1995 Consistent investment in sales and marketing Our investment in sales and marketing activities is building awareness of and access to implantable s
Slide 25: Operational improvement
Operational improvement Disciplined capital investment and optimising cost of production strengthens our competitive position Stable gross margin Cochlear’s gross margin has been relatively stable since listing. We use our scale to generate efficiency gains to reinvest back into market growth activi
Slide 26: Strong financial position
Strong financial position Strong free cash flow generation provides funding for market growth activities and R&D as well as the ability to reward shareholders with a growing dividend stream Quality operating cash flows One of the highlights of Cochlear’s financial history has been the conversion of
Slide 27: Strong financial position
Strong financial position Strong free cash flow generation provides funding for market growth activities and R&D as well as the ability to reward shareholders with a growing dividend stream Conservative gearing levels Cochlear has a strong balance sheet. It is a growth company that, since listing, h
Slide 28: 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