In 2008, Cochlear achieved a record reported profit of $115.2 million up 15% on last year.
This record profit result was achieved in the context of a rapidly falling US dollar against the Australian dollar (which rose from 78 US cents to 96 US cents over the year), rising interest rates and financial uncertainty in many of the countries in which we do business.
Europe and Asia Pacific produced strong results that were ahead of their long-term growth trends, while the Americas region consolidated its position after two very strong years of growth in 2006 and 2007.
Earnings per share of 208.1 cents was up 14% on last year and return on equity was 40%.
Gearing reduced to 29% and debt was reduced to $170 million. The long-term committed debt of $154.6 million is 91% of Cochlear’s total debt.
Dividend
The year’s financial performance and an ongoing confidence of sustainable growth enabled the Board to increase the final dividend to 80 cents per share, fully franked, making a total for the year of 150 cents per share. This is up 20% on last year and is consistent with the Company’s long standing payout ratio of approximately 70%.
Increased shareholder value
In line with our view of long-term sustainable growth, Cochlear has a rolling three year view of total shareholder return (TSR). For the three years ended 30 June 2008, Cochlear’s TSR of 35% was ranked in the top 25% of the ASX 100 companies in terms of TSR. This is the second year in a row that Cochlear has been in the top 25% and the result was achieved despite a fall in the share price in the second half of the year.
Cochlear’s long-term strategy in place
Cochlear’s strategy remains focused on sustainable growth through the four areas we have identified in the implantable hearing space. These are:
- cochlear implants;
- electro-acoustic stimulation;
- bone conduction implants – the Baha; and
- direct acoustic cochlear stimulator.
This impressive product portfolio combines short-term innovations and product releases with the prospect of entering new market segments in the future. The strategy should be viewed in the context of a presence in over 100 countries. This creates a portfolio effect of both geography and product, thereby reducing the overall risk of the Company.
Supporting long-term growth, internal projects aimed at productivity gains in the supply chain and sales and administration areas continued to receive focus and deliver results. Continued growth of the Company is underpinned by projects such as these.
Sustainability
While Cochlear is committed to long-term sustainable financial growth, it is also committed to sustainability in the other important areas of the environment and society.
An independent study commissioned by Cochlear shows that our carbon footprint is relatively low. Internal teams are working on reducing our carbon footprint even further. In view of our low level of carbon emissions, Cochlear does not qualify for inclusion in the National Greenhouse and Energy Reporting Act 2007 reporting requirements which started on 1 July 2008. Cochlear will continue to closely monitor new regulatory compliance obligations in this field.
Cochlear has a long history of support to the society and communities with which it works through sponsorships, charity donations and the time our employees freely give to provide expertise where it is most needed. This continues to be encouraged and details of some of this year’s activities are included in the Annual Report. In addition, Cochlear also continues to support the Cochlear Foundation.
Office of Inspector General (OIG) inquiry
As advised in March 2004, our American subsidiary Cochlear Americas received a request for information from the US Department of Justice (DOJ). The request sought a variety of documents including those concerning Cochlear Americas’ relationships with healthcare professionals.
Last year, the DOJ passed the investigation on to the OIG for administrative processing.
During 2008, we have continued to cooperate fully with the OIG. However, there is nothing further to report at this stage.
Contribution
Both the Board and the senior management team were unchanged during the year. This stability has been important in dealing with the complex global challenges that are so much part of Cochlear’s environment.
Cochlear now has approximately 1,800 employees in over 21 countries. Cochlear has a broad base short-term and long-term incentive plan for its employees. Over 140 managers who influence and implement our strategies have options or performance shares and over 1,000 employees are currently shareholders! This involvement is an important part of the overall alignment of Cochlear and its staff.
On behalf of the Board, I would again like to thank all of our staff for their contributions this year. Cochlear’s success reflects their passion and dedication and we are all justifiably proud of the Company’s record.
Outlook
Cochlear is well positioned to continue with its history of growth and market leadership. Record investments in R&D and ongoing investments in growth initiatives and internal capabilities will support Cochlear’s continued positive development.
Mr Tommie CE Bergman
Chairman
