Cochlear Limited · ASX:COH
Cochlear — H1 FY2007 Earnings Presentation
16 slides from Cochlear's earnings presentation, February 2007
Slide 1: Cochlear – Overview
Cochlear Limited Results for the half year ended 31 December 2006 Chris Roberts – CEO Neville Mitchell – CFO Cochlear – Overview • Medical device company (~25yr): global leader in implantable devices for the hearing impaired: – Leading global position (∼70% share) in cochlear implants (bionic ear) f
Slide 2: Record Financial Results for H1 F07
Record Financial Results for H1 F07 H1 F07 H1 F06 $ millions $ millions +/(-)% Cochlear implants 240.3 184.1 ↑ 31% Bone Anchored (Baha) 30.4 24.6 ↑ 24% FX Contracts 5.4 12.4 ↓ 56% Revenue 276.1 221.1 ↑ 25% EBIT 73.6 63.0 ↑ 17% Net Profit After Tax 48.8 43.8 ↑ 12% Core Earnings* 52.8 47.3 ↑ 12% Core
Slide 3: Strong Sales Growth in all regions
Cochlear Implant Sales up 22% to 7,939 units 12000 10000 C I U n it S a le s +22% 8000 2nd Half 6000 1st Half 4000 2000 0 F97 F98 F99 F00 F01 F02 F03 F04 F05 F06 F07 Strong Sales Growth in all regions….. H1 F07 Sales Revenue Regional Split (AUD) and constant currency (cc) growth* Americas Europe 46%
Slide 4: Americas and Europe Half Year Sales in Constant Currency
Americas: Half Year Sales in Constant Currency (at F07 FX Rates) 140.0 Constant Currency $’millions 120.0 Americas sales ↑ 36% (cc) from continuing impact of: 100.0 •Nucleus® Freedom™ performance •Freedom™ for N24 roll-out 80.0 •Expanded field force 60.0 •↑↑ consumer awareness network 40.0 •Upgraded
Slide 5: Asia-Pacific and Bone Anchored Solutions (Baha)
Asia-Pacific: Half Year Sales in Constant Currency (at F07 FX Rates) 45 Constant Currency $’millions Asia-Pacific sales ↑ 31% (cc) 40 •First sales of the China 35 donation, with first 30 surgeries in H2 F07 •↑ sales in the non-donation 25 market in China 20 •India continues with high 15 growth rates
Slide 6: Operating Expenses & EBIT Growth
Operating Expenses & EBIT Growth H1 F07 growth on PCP $ millions % Total Revenue $276.1 25% Sales (before FX C ontracts) $270.7 30% C ost of sales (29.1% of Revenue) $80.4 40% 28% Excluding PCP royalty* Selling General and Administration $84.1 12% Research and development $35.6 33% Operating expense
Slide 7: Global Supply Chain Update
Adult and Child Cumulative Failure Rates – Dec 06 Global Supply Chain Update • Global supply chain redesign for capacity expansion, flexibility, quality and cost – well underway • This includes major initiatives in manufacturing around – People: ↑ technical leaders, team work, new skills, continuous
Slide 8: Cochlear Brisbane Operations; Update on DACS and Hybrid
Cochlear Brisbane Operations • Acquired from key supplier in Jan 2007 – 200 people – All equipment – Leases on buildings – ~$35M annual production value of COH products • Builds electronics for all speech processors • Produces most Freedom™ accessories – Cable coils, battery holders – TV HiFi, PAC –
Slide 9: Cochlear Summary; Financial Results
Cochlear Summary • Record financial results for H1 F07 • Revenues $276.1 million ↑ 25% • Core Earnings $52.8 million ↑ 12% • Success of Nucleus® Freedom™ • ↑↑ hearing performance improvements • ↑↑ implant reliability • Freedom™ for N24 roll-out well received • Ongoing investments in internal capabil
Slide 10: H1 F07 Financial Performance and Core Earnings Calculation
H1 F07 Financial Performance H1 H1 F07 F06 $ millions $ millions +/(-)% Total Revenue 276.1 221.1 ↑ 25% Reported NPAT 48.8 43.8 ↑ 12% Core Earnings 52.8 47.3 ↑ 12% Dividends Interim Dividend 55c 45c ↑ 22% Record Date 2 March 2007 Payable Date 20 March 2007 Franking 100% 100% H1 F07 Core Earnings Cal
Slide 11: H1 F06 - F07 Core Earnings Reconciliation in Constant Currency
H1 F06 - F07 Core Earnings Reconciliation in Constant Currency $m 100 46.5 (5.4) (9.7) 90 (8.2) 80 (2.1) (10.6) 70 (5.0) 60 52.8 47.3 50 40 30 20 10 0 F06 Core Gross Margin Royalties SG&A costs R&D costs Interest Net FX Tax F07 Core Earnings (excl. Earnings Royalty) H1 F07 Net Financing Expenses H1
Slide 12: H1 F07 Income Tax Reconciliation; R&D Expense
H1 F07 Income Tax Reconciliation H1 F07 H1 F06 $ millions $ millions Profit before tax 70.9 62.1 Income tax expense at 30% 21.3 18.6 Add: Increases in income tax Foreign tax rates 0.8 0.6 Amortisation and other 1.1 1.2 Less: Income tax allowances R&D allowance (1.4) (1.1) Other (0.2) (0.1) 21.6 19.1
Slide 13: Cash Generated and Inventory Working Capital
Cash Generated H1 F07 H1 F06 $ millions $ millions Net cash provided by operating activities 57.5 51.3 before changes in assets and liabilities Changes in assets & liabilities (Increase) in trade debtors (16.2) (29.0) (Increase) in inventory (9.1) (7.2) (Increase)/decrease in net tax assets (3.4) 5.
Slide 14: Debtors Working Capital; Cochlear Summary
H1 F07 Working Capital Debtors (Days Outstanding) $120.0 80 • Improvement in Net Receivables ($ millions) 70 $100.0 $80.0 60 debtor days to 71 50 (F06 74) Days $60.0 40 $40.0 30 • Specific countries, $20.0 20 eg. Southern 10 $0.0 0 Mediterranean Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Dec-06 longe
Slide 15: Thank you… Any questions?
Thank you… Any questions? Foreign Exchange Core Earnings FX – H1 F07 vs F06 F07 $ millions Translation impacts (3.6) Transaction impact * H1 F06 (12.4) H1 F07 (5.4) (7.0) Net FX impact for H1 F07 (10.6) *FX gains on hedged sales 15
Slide 16: Foreign Exchange Rates
Foreign Exchange Rates applied F07 vs F06 H1 F07 H1 F06 Average rates (used for translating P&L) USD 0.76 0.76 Euro 0.60 0.63 JPY 90.3 86.5 Contract rates (used to bring FX to Aust) USD 0.74 0.68 Euro 0.57 0.56 JPY 65.9 59.0 Foreign Exchange Rates Going Forward Average Contract Rates USD Euro JPY SE