Cochlear : Half Year Report 2015

HALF YEAR REPORT 2015

A hearing life

Dear Shareholder
I am pleased to provide you with extracts from our half year report lodged with the Australian Securities Exchange on 10 February 2015.
Highlights - Revenue
A focus for the first half of fiscal year ended 31 December 2014
(H1 F15) was continuing the sales momentum for products launched during the fiscal year ended 31 June 2014 (F14). Feedback on these products throughout the half was extremely positive. These products continue to improve the lives of the hearing impaired in line with Cochlear's mission.
Total revenue for H1 F15 was $438.3 million, up 18% on H1 F14.
Sales, excluding FX contracts, were $440.5 million, up 17%. In constant currency (that is restating H1 F14 at H1 F15 FX rates) H1 F15 sales
were up 15%.
Cochlear implant sales revenue, which included sound processor upgrades, was $383.0 million, up 16% on the prior year and up 14% in constant currency.
Sales of sound processor upgrades of $82.2 million were up 98%. The doubling of revenue from sound processor upgrades reflected strong market enthusiasm for the Nucleus® 6 Sound Processor.
Cochlear implant (CI) unit sales were 11,689, in line with H1 F14. CI unit growth was stronger in developed countries, for example Western Europe up 8% and North America up 17%. This was offset by weaker CI unit tender sales in developing countries.
Bone Anchored Solutions, (including acoustic implant sales) of $57.5 million were up 25% and up 22% in constant currency again reflecting the impact of the Baha® 4 and Baha Attract Systems.
The Australian dollar (AUD) depreciated against the United States dollar (USD) during the half which benefits foreign sales when translated into AUD. From a translation perspective, sales benefited by net $7.3 million. Offsetting this was a loss from FX contracts. FX contract losses were
$2.2 million for H1 F15 compared to a loss of $5.9 million in H1 F14.
Dr Chris Roberts
Chief Executive Officer / President 10th February 2015

Cochlear Limited and its controlled entities

Interim Income Statement

For the half year ended 31 December 2014

31 Dec 2014 $000	31 Dec 2013 $000
Revenue Cost of sales	438,346 (127,369)	371,060 (123,669)
Gross profit Selling and general expenses Administration expenses Patent dispute provision Research and development expenses Other income Other expenses	310,977 (122,686) (28,559) - (61,360) 2,086 -	247,391 (114,276) (19,351) (22,545) (65,057) 1,255 (537)
Results from operating activities Finance income Finance expense	100,458 90 (5,542)	26,880 150 (4,740)
Net finance expense	(5,452)	(4,590)
Profit before income tax Income tax expense	95,006 (23,631)	22,290 (1,245)
Net profit Basic earnings per share (cents) Diluted earnings per share (cents)	71,375 125.3 124.9	21,045 37.0 36.9

Cochlear Limited and its controlled entities

Interim Balance Sheet

As at 31 December 2014

31 Dec 2014 $000	30 Jun 2014 $000
Current assets Cash and cash equivalents Trade and other receivables Inventories Current tax receivables Prepayments	58,871 227,329 138,495 9,759 13,414	56,127 214,953 128,613 8,600 12,586
Total current assets Non-current assets Trade and other receivables Property, plant and equipment Intangible assets Deferred tax assets	447,868 1,061 75,122 231,304 72,403	420,879 5,505 75,776 234,115 52,761
Total non-current assets	379,890	368,157
Total assets Current liabilities Trade and other payables Foreign exchange contracts Loans and borrowings Current tax liabilities Provisions Deferred revenue	827,758 85,030 24,677 3,061 16,297 61,677 18,497	789,036 78,644 6,643 3,141 8,442 57,557 15,151
Total current liabilities Non-current liabilities Foreign exchange contracts Loans and borrowings Provisions	209,239 11,505 227,417 58,151	169,578 2,624 234,274 53,355
Total non-current liabilities	297,073	290,253
Total liabilities	506,312	459,831
Net assets Equity Share capital Reserves Retained earnings	321,446 144,136 (38,856) 216,166	329,205 144,136 (32,191) 217,260
Total equity	321,446	329,205

Cochlear Limited and its controlled entities

Interim Statement of Cash Flows

For the half year ended 31 December 2014

31 Dec 2014 $000	31 Dec 2013 $000
Cash flows from operating activities Cash receipts from customers Cash payments to suppliers and employees Grant and other income received Interest received Interest paid Income taxes paid	440,141 (325,495) 1,508 99 (5,436) (20,875)	402,668 (350,926) 1,216 166 (4,821) (14,692)
Net cash from operating activities Cash flows from investing activities Acquisition of property, plant and equipment Acquisition of enterprise resource planning system	89,942 (7,768) (2,683)	33,611 (10,247) (3,661)
Net cash used in investing activities Cash flows from financing activities Repayment of borrowings Proceeds from borrowings Dividends paid by the parent	(10,451) (79,382) 72,382 (72,469)	(13,908) (18,500) 74,500 (72,442)
Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Effect of exchange rate fluctuation on cash held	(79,469) 22 56,127 2,722	(16,442) 3,261 52,689 4,042
Cash and cash equivalents at 31 December	58,871	59,992

Cochlear Limited and its controlled entities

Financial Highlights

For the half year ended 31 December 2014

31 Dec 2014 $000	31 Dec 2013 $000
Total Revenue Sales revenue Earnings before interest and tax and patent dispute provision * (EBIT) Net profit after tax but before patent dispute provision * Patent dispute provision, net of tax* Profit attributable to members Basic earnings per share (cents) Diluted earnings per share (cents) Interim dividend per share (cents)	438,346 440,481 100,458 71,375 - 71,375 125.3 124.9 90.0	371,060 376,967 49,425 36,826 (15,781) 21,045 37.0 36.9 127.0

* The patent dispute provision costs were nil for the six months ended 31 December 2014 and $22,545,000 before tax and $15,781,000 after tax for the six months ended 31

December 2013.

Given the significance of the FX movements and patent dispute the directors believe the presentation of non-IFRS financial measures is useful for the users of this document as they reflect the underlying financial performance of the business.

The non-IFRS financial measures included in this document have been calculated on the following basis:

• Constant currency: restatement of IFRS financial measures in comparative years using

F15 FX rates

• Excluding patent dispute provision: IFRS measures adjusted for the expense of the patent dispute provision.

These non-IFRS financial measures have not been subject to review or audit. However, KPMG have separately undertaken a set of procedures to agree the non-IFRS financial measures disclosed to the books and records of the consolidated entity.

For further information, please contact:
Cochlear Limited
1 University Avenue
Macquarie University NSW 2109 Australia
Telephone: [phone]
Facsimile: 61 2 9428 6353
Share Registry Services
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne VIC 3001 Australia
Telephone: [phone]
Within Australia: 1300 850 505

D703825 ISS1 MAR 15