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 levels with strong revenue growth in HY19 (up 21% in CC)

Acoustics decline ahead of Osia launch

• Loss of market share combined with market slow down in anticipation of the launch of the Cochlear™ Osia® System

Investing to grow on track

• Growing investment in R&D to advance the long-term technology development pipeline
• Expansion of direct-to-consumer marketing and hearing aid channel referral programs
• Investment in activities to support cochlear implants becoming the standard of care for adults and seniors

Strong financial position

• Underlying net profit in line with HY19, with operating profit growth offset by foreign currency contract losses
• Cash flow generation sufficient to fund market growth activities, increased capex and increased dividends whilst maintaining conservative gearing levels

11 FEBRUARY 2020

Cochlear reduces earnings guidance for FY20 due to coronavirus impact in Greater China

Cochlear Limited today advises that it is reducing the guidance outlook for FY20 from $290-300 million, a 9-13% increase on underlying net profit for FY19, to $270-290 million, a 2-9% increase on FY19 due to an expected impact from the novel coronavirus (2019-nCoV) in Greater China.

Hospitals across Greater China, which includes Hong Kong and Taiwan, are currently deferring

surgeries, including cochlear implants, to limit the

risk of infection from the coronavirus. Cochlear’s

CEO & President, Dig Howitt said, “It has become clear that the coronavirus will impact the number of cochlear implant surgeries in Greater China, a top 5 market for Cochlear. Limiting the risk of exposure to the virus is an appropriate precaution. While we cannot predict how long surgeries will be delayed, the low end of guidance factors in a significant decline in sales for Greater China for the second half.

“During the SARS epidemic, Cochlear experienced a material reduction in sales in China over a three-month period, followed by an uplift as the backlog of delayed surgeries cleared. We are confident that many of the delayed surgeries will progress once hospitals resume normal operations. No allowance has been made for any impact on sales outside Greater China.”

Cochlear also assumes there will not be any material disruption to the supply chain, including the importation of components from China. Mr Howitt said, “Our Chinese suppliers are expected to resume production of components, which are used primarily for our sound processors and accessories, after the Lunar New Year shutdown. We have at least three months inventory of most components and at this stage do not expect any disruption to our ability to supply products to our customers.”

Cochlear has been increasing its commitment to China over the last few years. Mr Howitt said, “Cochlear continues to invest in expanding its market presence and developing a manufacturing footprint in China as we believe in the long-term potential of the market. The Chinese cochlear implant market is important now and into the future and we remain committed to maintaining a leading position.”

...

In a recent interview with James Marlay (livemarkets.com) Michelle Lopez who is the head of Australian Equities at Aberdeen Standard Investments shared some of her views on senior manageement at Cohlear.
 The management team stands out for her. The things that strike her: strategic long term thinking (they have 80% market share),
 They are very humble. They do not cut on R&D spend which a 12% of their sales (more than all their competitors put together).
 They have a startup implantables tech business. They are thinking about what other industries that implanatables can disrupt. They appreciate being challenged.
 This is all part of their culture and DNA.

Cohlear has received FDA approval for the Nucleus ®Profile™ Plus Series cochlear implant.

(FDA - U.S. Food and Drug Administration)