Cochlear Limited · ASX:COH
Cochlear — H1 FY2005 Earnings Presentation
32 slides from Cochlear's earnings presentation, Feb 15, 2005
Slide 1: The world leader. Cochlear
(0 The world leader. Cochlear
Slide 2: Cochlear Limited Results for the half year ended 31 December 2004
Cochlear Limited Results for the half year ended 31 December 2004
Slide 3: Cochlear Limited Briefing – February 15th 2005
Cochlear Limited Briefing – February 15th 2005 Chris Roberts Neville Mitchell
Slide 4: Background
Background • Medical device company (24yr) with dominant global position (60+% share) in cochlear implants (bionic ear) • Cochlear implants directly stimulate the auditory nerve providing speech understanding for profound and severely hearing impaired • The patients include infants (∼ 1 year) throug
Slide 5: Record Financial Results for H1 F05
Record Financial Results for H1 F05 • Total Revenue $163.6 million ↑ 18% • Sales (pre-FX) $148.5 million ↑ 21% • Unit Sales 5014 units ↑ 12% • EBITDA $44.8 million ↑ 12% • PAT $29.5 million ↑ 10% • Dividend maintained at 35c (fully franked)
Slide 6: Unit Sales: H1/H2 Split
Unit Sales: H1/H2 Split 10000 8000 6000 ↑12% Units 4000 2000 0 F97 F98 F99 F00 F01 F02 F03 F04 F05 Period
Slide 7: Group Sales Revenue A$'m
Group Sales Revenue A$’m 146.8 148.5 150 137.7 141.8 129.7 117.3 122.8 100 $'m 50 0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 H1 F05
Slide 8: Group Sales Revenue A$'m Constant Currency (at F05 rates)
Group Sales Revenue A$’m Constant Currency (at F05 rates) 148.5 150 127.5 131.3 122.3 121.2 111.4 95.1 100 $'m 50 0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 H1 F05
Slide 9: Sales Revenue (AUD) by Geographic Region H1 F05
Sales Revenue (AUD) by Geographic Region H1 F05 Americas Europe 42% (↑16%) 40% (↑44%) Asia-Pacific 18% (↑2%)
Slide 10: Americas Sales Revenue - USD
Americas Sales Revenue - USD 47.4 50 44.8 38.8 38.7 39.1 40 32.9 27.9 30 US$’M 20 10 0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 H1 F05 Period
Slide 11: Regional Profile - Americas
Regional Profile - Americas • New President – Chris Smith started 8/04 • 22% sales increase in local currency (USD) • USA reimbursement: positive changes • CMS supports candidature eligibility criterion increasing from 30% 40% sentence score • CMS increase in Medicare funding • DOJ – status unchange
Slide 12: Europe Sales Revenue - Euros
Europe Sales Revenue - Euros 40 35 33.4 32.7 30 31.5 28.3 24.9 25 23.0 22.8 20 ’M 15 10 5 0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 H1 F05 Period
Slide 13: Regional Profile - Europe
Regional Profile - Europe • 34% sales increase in local currency (euros) • Sales growth across European markets • Belgium and The Netherlands – acquired distributor effective July 04 • France – acquired distributor effective Nov 04 • Integration gone well for Benelux and France • Italy – direct from
Slide 14: Asia Pacific Sales Revenue - AUD
Asia Pacific Sales Revenue - AUD 30 25.8 26.7 24.3 25 24.9 25.1 23.7 23.0 20 $'m 15 10 5 0 H1 F02 H2 F02 H1 F03 H2 F03 H1 F04 H2 F04 H1 F05
Slide 15: Regional Profile - Asia Pacific
Regional Profile - Asia Pacific • New President – Mark Salmon joined 7/04 • Revenue increased by 3% • Sales in China below expectations due to Customs review (relating to CI tax exempt status) • COH’s relationships in China are excellent (CRRCDC, CDPF etc) • Investigation has caused uncertainty and
Slide 16: Competitive Dynamics
Competitive Dynamics • Two main competitors • Advanced Bionics (BSX) • Product recall from late Sep 04 (~ 6 weeks) • COH’s extra unit sales of ~ A$2.5M (~ 100 units) mostly in the USA • Med-El • Med-El received FDA warning letter and importation ban (into the USA) (~ Dec 04) • COH gained market shar
Slide 17: Cumulative Failure Rate (%)
COH’s implant reliability is a differentiator 7 6 Cumulative Failure Rate (%) 5 Data published by competitors 4 show COH 3 CI22M implant is up to 4 times less likely 2 CI24M All to fail than CI24M Mod competitors’ 1 Contour implant 0 -1 0 1 2 3 4 5 16 Years Implanted
Slide 18: Cochlear's current technology is ahead of the competition
Cochlear’s current technology is ahead of the competition Compared to the competition, System 3 with Nucleus® 24 Contour™ has … • Higher spatial resolution (electrodes) • Higher spectral resolution (bandwidth filtering) • Higher temporal resolution (time interval) • Capability to represent fine time
Slide 19: Technologic Innovation
Technologic Innovation • Excellent progress of “System 4” during H1 F05 • “System 4” launch starts H2 F05 • Significant platform for current and future innovation • Timing dependent on regulatory approvals • Early clinical feedback very positive
Slide 20: Outlook: H2 F05 System 4 Financial Guidance
Outlook: H2 F05 System 4 • Launch on schedule, however, limited revenue impact for F05 • H2 F05: invest ~$4 million extra “System 4” Financial Guidance • Increase F05 PAT guidance from $50 - 51 million to $53 – 55 million
Slide 21: Cochlear: H1 F05 Summary
Cochlear: H1 F05 Summary • Record H1 financial results • Revenue $163.6 million (↑18%) • PAT $29.5 (↑10%) • Particularly strong growth in Europe and Americas (market share gains) • Implant reliability a differentiator (regulatory actions against competitors) • Next generation technology on track for
Slide 22: Financial Results – F'04
Financial Results – F’04 Neville Mitchell Chief Financial Officer
Slide 23: H1 F05 Financial Performance
H1 F05 Financial Performance F’05 F’04 % Dec Dec Change System Sales 5,014 4,482 ↑ 12% A$’m Total Revenue 163.6 139.2 ↑ 17.5% Operating Profit before tax 40.0 36.4 ↑ 10% PAT 29.5 26.9 ↑ 10% EPS 54.3 50.1 ↑ 8% Half year dividend 35c 35c Franking 100% 100%
Slide 24: Sales Revenue Reconciliation F'05 – F'04
Sales Revenue Reconciliation F’05 – F’04 Deferred Revenue Recall 2.4 Direct from 2.5 Distributor 2.5 Additional Sales 20.3 FX 122.8 (2.0) 148.5 Dec ‘03 Dec ‘04
Slide 25: PAT Reconciliation F'05 – F'04
PAT Reconciliation F’05 – F’04 GM SG&A 16.1 (10.3) F’05 Profit $29.5 Increase/ R&D (Decrease) (1.1) Tax A$m (1.3) FX Minorities (1.0) 0.2 F’04 Profit $26.9
Slide 26: Foreign Exchange
Foreign Exchange Rates applied F’05 vs F’04 F’05 F’04 Average rates (used for translating P&L) USD 0.74 0.69 GBP 0.40 0.42 JPY 80 79 Contract rates (used to bring FX to Australia) USD 0.62 0.53 GBP 0.38 0.35 JPY 56 56
Slide 27: Foreign Exchange Rates Going Forward
Foreign Exchange Rates Going Forward Average Contract Rates USD GBP JPY 6 months ending June ’05 0.60 0.37 52 12 months ending June ’06 0.63 0.36 52 • Total mark to market FX gain at 31 December 2004 A$31.9m • Hedge book profit rolling off
Slide 28: Working Capital H1 F05
Working Capital H1 F05 Dec ‘04 June ‘04 A$m A$m Current assets Cash (net) 43.0 50.0 Receivables 55.5 54.0 Inventory 40.7 44.8 Current liabilities Payables 37.5 31.7 Provisions 20.0 22.4 Intangibles 21.7 7.2
Slide 29: Purchase of Distributors
Purchase of Distributors •Total net cash outlay $16.7m (Japan, France, Benelux) •Goodwill component $14.2m • Goodwill being written off over 20 years • $0.3m write-off in H1 F’05 • IFRS – No goodwill write-off
Slide 30: IFRS Update (F06 start)
IFRS Update (F06 start) FX • Existing FX hedging qualifies => no change to existing disclosure • FCTR no change R&D • Need to capitalise all development • ~ 50% of spend per annum • write off period - 3 years after commercialisation Stock Options • Expense - already disclosed in notes Defined benefi
Slide 31: Key Highlights
Key Highlights • Revenue, unit sales and profit are all record first half results • Implant reliability a differentiator (regulatory actions against competitors) • Rollout of new products on track • Regional highlights: • Europe up 44% • Positive developments in the USA • Growth in Australia and Nor
Slide 32: Hear now. And always
Hear now. And always N00 | Cochlear