Slide 1: Results for the full year ended 30 June 2003
. Cochlear Limited Results for the full year ended 30 June 2003
Slide 2: Agenda
Cochlear Limited Agenda Overview Jack O’Mahony Results Neville Mitchell Technology John Parker Outlook Jack O’Mahony Cochlear
Slide 3: Year in Review
Year in Review * Difficult year ¢ Meningitis scare ¢ Middle East war ¢ SARS in Asia * Currency Difficult year — delivered growth and profit Cochlear 3 Full Year 19/08/03
Slide 4: Year in Review: Key Messages
Year in Review Key Messages: ¢ Great year in adverse circumstances ¢ System Sales up 19% - Long term average growth trend of 20% maintained * Behind the Ear Processor Sales up 30%| * Continued robust balance sheet ¢ Strong cash flow * Dividend up 50% * Leveraging Intellectual Property Cochlear 4 Ful
Slide 5: Financial Performance
Financial Performance Units Sales revenue Operating Profit before tax PAT Full year’s dividend Franking 5 Full Year 19/08/03 F’03 A$’m 9,328 290.0 80.0 58.2 77c 100% F’02 A#039;m 7,845 256.2 51.0 40.1 51c 100% Cochlear
Slide 6: Characteristic of Result
Characteristic of Result * 20% long term average growth profile confirmed * FX affects composition of result - Small net PAT impact * Margin improvement * Investment in market & systems development - $19m * Working capital control ¢ Strong cash flow 6 Full Year 19/08/03 Cochlear
Slide 7: Financial Performance: Revenue by region
Financial Performance Revenue by region F'03 [1 F'03 at F'02 rates A F'02 Americas Europe Asia Pacific Cochlear 7 Full Year 19/08/03
Slide 8: Sales Revenue
Sales Revenue Reconciliation F’?02 Revenue to F’03 Revenue Incremental Revenue A$m 290m F'02 Sales Revenue $255m 8 255m @ Full Year 19/08/03 FX Def Rev eee SCESPrit 22 New Business —_— F’03 Sales Revenue $290m Cochlear
Slide 9: PAT Reconciliation
PAT Reconciliation Reconciliation F’02 to F’°03 PAT A Interest Market & Systems Iimplex 1 Develop PAT Increase/ F’03 Profit (Decrease) $68.2 A$m F'02 Profit $40.4 oe Cochlear 9 Full Year 19/08/03
Slide 10: Financial Performance: Foreign Exchange Benefit
Financial Performance Foreign Exchange Benefit * Portfolio of currencies - USD, EURO, JPY, HKD * Policy maintained to hedge out 3 years on rolling basis Year on year impact A$m Sales revenue impact - negative (21.6) 7 FX contracts & translation of foreign expenses | 21 9 pn Cochlear Net benefit year
Slide 11: Financial Position
Financial Position Current assets Cash (net) Receivables Inventory Current liabilities Provisions 1] Full Year 19/08/03 F’03 A$m 28.9 56.9 45.0 18.8 F’02 A$m (13.7) 69.3 36.4 34.1 Cochlear
Slide 12: Financial Position: Receivables
Financial Position 12 Full Year 19/08/03 F’03 F’02 A$m A$m Receivables 56.9 69.3 Days outstanding 69 75 * Days outstanding within internal targets * Provision $3.5m * Write-off South American debt $1.0m Cochlear
Slide 13: Financial Position: Provisions
Financial Position F’03 F’02 A$m A$m Provisions 18.8 34.1 ¢ Warranty provision * AASB 1044 - $0.3m reduction opening balance * $1m added current year ¢« Second half dividend AASB 1044 $23.4m not included (F’02 - $15. mm) Cochlear 13 Full Year 19/08/03
Slide 14: Technology and Product Development
Technology and Product Development * Nucleus System 3 updates « Contour Advance ¢ More automated programming R126 V2 * New Implant system Cochlear 14 Full Year 19/08/03
Slide 15: Contour Advance
Contour Advance ¢ Change in the tip of the electrode and the insertion technique * Long term goal to preserve residual hearing Cochlear 15 Full Year 19/08/03 Press down arrow to advance slide
Slide 16: Contour Advance update implants as at Aug03
Contour Advance update 200 implants as at Aug03 Study at NYU found improved : coiling = [ | ¢ Standard Contour 62% achieve >385 degrees curl * Contour Advance 82% achieve >410 degrees curl & closer perimodiolar position ie Side view 16 — Full Year 19/08/03
Slide 17: Extensive Histological Studies
Extensive Histological Studies Full Year 19/08/03 uh i
Slide 18: Contour Advance Action in Bone
Contour Advance Action in Bone Contour Electrode with Softip Manual Advance Off-Stylet Cochlear 18 Full Year 19/08/03
Slide 19: R126 V2 Programming Software Release
R126 V2 Programming Software Release A range of important new features ¢ Support for the Nucleus22 * NRT-based MAPping ¢ MAP Decompilation ¢ Bilateral MAP support ¢ Session History « Easier SP Connection Cochlear
Slide 20: Steps Toward Automated Programming
Steps Toward Automated Programming * ProgNRT-based MAPping ¢ NRT 3.0 data can be imported and used to generate MAPs NRT Tools Import ; << Progressive an N RT : Preset MAPs file = (eg, Almavist, Novy) Reset T-NRT Set TandC profile “ levels to zero Ss burg,” Determine (eg Franck) urg,, TIC Offset (eg,
Slide 21: Predicting new T/C Levels
Predicting new T/C Levels with changes in ACE rates Creates new MAPs using previous T/C data co 21 Pull Year 19/08/03
Slide 22: Next Generation Implants
Next Generation Implants High stimulation rates New stimulation modes Low power consumption Advanced voltage telemetry functions Improved NRT New electronics in the implant package .~ “ Cochlear 22 Full Year 19/08/03
Slide 23: Clinical Results — Speech Coding
Clinical Results — Speech Coding 23 Full Year 19/08/03 ¢ More than 25 implants to date * Initial testing has been performed using current speech coding algorithms. ¢ Speech perception performance measured — as good or better than CI24R. ¢ New algorithms are currently being trialed Cochlear
Slide 24: Technology Outlook
Technology Outlook 24 Full Year 19/08/03 ¢ Work continues on our totally implanted technologies ¢ Further improvements in programming software ¢ Development of new generation Speech processors « Development of Implantable device in collaboration with / Phonak has begun « SHI market segments ¢ Proof
Slide 25: 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 « Investment in infrastructure * Leveraging IP Cochlear 25 Full Year 19/08/03
Slide 26: Market position
Market position « Main competitors - Med El, ABC ¢ ABC launches new products - FDA approval - High rates / titanium package Cochlear 26 Full Year 19/08/03
Slide 27: Long Term Growth Profile
Long Term Growth Profile 27 Full Year 19/08/03 ¢ Independent review by Accenture ¢ Filters applied to the natural rate of patient in flow « Confirm annual inflow of patients of = 50,000 pa in major markets ¢ Adult progressive market significantly larger than children * Huge pool of patients not capt
Slide 28: Market Size - USA
Market Size - USA ¢ Approximately 28 million people in the USA with significant hearing impairment Source: US Department of Health & Human Services, 2000 ¢ Approximately 5% of this group (1.4 million) may be candidates for a cochlear implant Source: Dr B Gantz, University of lowa, USA, 2003 Cochlear
Slide 29: Market Size - UK
Market Size - UK « In the UK, Medical Research Council estimates 150 000 people with acquired deafness ¢ Acquired deafness affecting people who have grown up with normal hearing before becoming totally deaf in adulthood. * Inthe UK, estimated 8 000 deafened adults from black / : and minority ethnic
Slide 30: Leverage of Intellectual Property
Leverage of Intellectual Property ¢ Focus remains very much on cochlear implants * Own valuable Intellectual Property in addition to Neopraxis ¢ Will leverage through alliances, licensing, etc ¢ No distraction of resources or financial impact « No value in F’04 Cochlear 30 Full Year 19/08/03
Slide 31: F'04 Outlook
F’04 Outlook ° Unit sales growth in line with long term trend of 20% « EPS growth in the order of 20% ¢ Leverage of IP — no financial impact ¢ SARS impact limited in F’04, but no patient backlog ¢ Portfolio effect will continue Cochlear 31 Full Year 19/08/03
Slide 32: Hear now. And always Cochlear
Hear now. And always Cochlear