Cochlear Limited · ASX:COH
Cochlear — FY2004 Earnings Presentation
32 slides from Cochlear's earnings presentation, Aug 17, 2004
Slide 1: The world leader.
\ WN The world leader. ( Cochlear
Slide 2: Results for the year ended 30 June 2004
Cochlear Limited Results for the year ended 30 June 2004
Slide 3: Analyst Briefing – August 17th 2004
Cochlear Limited Analyst Briefing – August 17th 2004 Dr Chris Roberts Neville Mitchell
Slide 4: Background
Background • Cochlear Limited: 23 year old medical device company with dominant global position in cochlear implants, 57,000 recipients • F’04 result in line with guidance • F’04 – loss of market share (USA), profit downgrades, DOJ investigation, executive changes….. • New CEO appointed Feb 1st, 200
Slide 5: Summary Financial Performance
Summary Financial Performance F’04 F’03 % Change System Sales 9,306 9,342 - A$’m A$’m Total Revenue 285.8 307.6 ↓ 7% Operating Profit before tax 47.3 80.0 ↓ 41% PAT 36.8 58.2 ↓ 37% Full year dividend 79c 77c ↑ 3% Franking 100% 100%
Slide 6: What has changed at Cochlear?
What has changed at Cochlear? New CEO – appointed Feb ‘04 Go back to the basics Focus: priorities + stopping things! Cultural: • Issues onto the table • Regional/Corporate balance • Innovation The right people into the key positions
Slide 7: Group Unit Sales
Group Unit Sales Group Unit Sales 6,000 4,916 4,824 4,482 5,000 4,412 4,237 3,608 4,000 Units 3,000 2,000 1,000 0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 Period
Slide 8: Group Sales Revenue A$'m (Reported)
Group Sales Revenue A$’m (Reported) Group Sales Revenue AUD ' m (Reported) 160.0 141.8 146.6 137.5 131.3 140.0 121.2 120.0 117.3 100.0 $ 'm 80.0 60.0 40.0 20.0 0.0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 Period
Slide 9: Group Sales Revenue A$'m (Constant Currency)
Group Sales Revenue A$’m (Constant Currency) Group Sales Revenue AUD ' m (F'04 Exchange Rate) 140.0 131.3 127.5 121.2 122.3 120.0 111.4 95.1 100.0 80.0 $m 60.0 40.0 20.0 0.0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 Period
Slide 10: Americas Sales Revenue A$'m (Constant Currency)
Americas Sales Revenue A$’m (Constant Currency) Americas Sales Revenue AUD ' m (F' 04 Exchange Rate) 70.0 62.8 60.0 54.8 54.2 54.3 47.3 50.0 40.4 40.0 $' m 30.0 20.0 10.0 0.0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 Period
Slide 11: Regional Profile Americas
Regional Profile Americas • New President – Chris Smith • DOJ – status unchanged • Loss of market share • Now stabilised • Reimbursement • CMS reviewing expansion eligibility criteria
Slide 12: Europe Sales Revenue A$'m (Constant Currency)
Europe Sales Revenue A$’m (Constant Currency) Europe Sales Revenue AUD ' m (F' 04 Exchange Rate) 60.0 52.1 51.9 50.0 42.3 41.2 40.0 36.5 34.0 $ 'm 30.0 20.0 10.0 0.0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 Period
Slide 13: Regional Profile Europe
Regional Profile Europe • Market share maintained • Volatility of sales related to tender sales • Reimbursement – small incremental improvements • Direct in Belgium, The Netherlands and France • Direct business now > 50%
Slide 14: Asia Pacific Sales Revenue A$'m (Constant Currency)
Asia Pacific Sales Revenue A$’m (Constant Currency) Asia Pac Sales Revenue AUD ' m (Constant Currency) 30.0 25.8 24.3 25.0 22.9 21.5 21.7 20.6 20.0 $ 'm 15.0 10.0 5.0 0.0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 Period
Slide 15: Regional Profile Asia Pacific
Regional Profile Asia Pacific • 18% unit growth • New President – Mark Salmon • China strong • Australia growth strong ∼ 20% • Direct in Japan
Slide 16: Group Sales Revenue A$'m (Constant Currency)
Group Sales Revenue A$’m (Constant Currency) Group Sales Revenue AUD ' m (F'04 Exchange Rate) 140.0 131.3 127.5 121.2 122.3 120.0 111.4 95.1 100.0 80.0 $m 60.0 40.0 20.0 0.0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 Period
Slide 17: F'05 Strategies
F’05 Strategies: • Internal effectiveness and efficiency • Product Development: System 4 - number one priority • Regional Presidents • Chris Smith – President of Americas (Aug ’04) • Richard Brook – President of Europe (May ‘03) • Mark Salmon – President of Asia-Pacific (Jul ‘04)
Slide 18: F'05 Strategies
F’05 Strategies: • Marketing • New marketing appointments in all regions • Fact based marketing decisions (market research) • Distribution • Direct in key markets • Purchased distributors in Japan, France, Belgium, Netherlands • Culture - innovation, regional/corporate balance • Quarterly planning
Slide 19: New Executives to Grow Business
New Executives to Grow Business Regional Presidents • Americas – Chris Smith appointed August ‘04 • Europe – Richard Brook appointed May ‘03 • Asia Pacific – Mark Salmon appointed July ‘04 Marketing • All regions expanded functions Quality • Snr VP Quality – Dr Adrian Oates
Slide 20: R&D Refocused on Core Business
R&D Refocused on Core Business • Focus on hearing impairment • All FES & peripheral products stopped • New Generation System 4 is immediate focus • Strong product pipeline • Alternate approaches to severely hearing impaired
Slide 21: The Way Ahead
The Way Ahead • Technologic innovation • Implant criteria • Simplification • Reimbursement • Favourable health economics • Ref. August 2004 Ear & Hearing article • Ongoing issue • Overall market growth • Unmet clinical need • Growing market
Slide 22: Financial Results – F'04
Financial Results – F’04 Neville Mitchell Chief Financial Officer
Slide 23: Financial Performance F'04
Financial Performance F’04 Group Revenue 350 F'04 290.8 288.6 300 252.5 F'04 at F'03 rates 250 F'03 200 A$'m 150 100 50 0 Group
Slide 24: Financial Performance F'04
Financial Performance F’04 Revenue by region F'04 160 142.2 132.6 F'04 at F'03 rates 120 109.1 103.7 F'03 93.3 98.3 80 A$'m 50.1 54.5 48 40 0 Americas Europe Asia Pacific Growth in constant currency – Asia / Europe
Slide 25: PAT Reconciliation F'04 – F'03
PAT Reconciliation F’04 – F’03 In constant currency GM & Hedge F’04 Profit Book $36.7 (10.5) F’03 Profit $58.2 SG&A (13.8) Tax Minorities Increase/ 8.1 0.6 R&D (Decrease) A$m (7.6) Interest 1.7
Slide 26: Successful Currency Management
Successful Currency Management • Board approved Treasury Policy • External review of FX trading – no issues • Full Year Impact: • Foreign sales revenue translation impact (A$38.3m) • FX contract profit A$30.3m
Slide 27: Foreign Exchange
Foreign Exchange Rates applied F’04 vs F’03 F’04 F’03 Average rates (used for translating P&L) USD 0.71 0.59 GBP 0.41 0.37 JPY 80 71 Contract rates (used to bring FX to Australia) USD 0.54 0.52 GBP 0.35 0.36 JPY 55 59
Slide 28: Foreign Exchange Rates Going Forward
Foreign Exchange Rates Going Forward Average Contract Rates USD GBP JPY 12 months ending June ’05 58 0.36 52 12 months ending June ’06 62 0.36 52 • Total mark to market FX gain at 30 June 2004 A$22m • Hedge book rolling off
Slide 29: Financial Performance F'04
Financial Performance F’04 Expenses F’04 F’03 A$m A$m COGS 85.0 82.6 3% SG&A 108.4 107.2 1% R&D 44.4 37.0 20% Individually Significant 12.5 -
Slide 30: Financial Performance F'04
Financial Performance F’04 F’04 F’03 Tax rate 23.5% 27.2% Rate decline • High R&D deduction at 175% 3.4% • Lower overseas profits at high rates 0.3% 3.7%
Slide 31: Working Capital F'04
Working Capital F’04 June ‘04 June ‘03 A$m A$m Current assets Cash (net) 50.0 28.9 Receivables 54.0 56.9 Inventory 44.8 45.0 Current liabilities Payables 31.7 28.5 Provisions 22.4 18.8
Slide 32: Cochlear
(0 Cochlear Hear now. And always