Inspired by you
for 40 years
Cochlear Limited
Annual Report 2021
Cochlear has been the global leader in implantable hearing
solutions for 40 years, providing a range of implantable
hearing solutions and sound processor upgrades that
deliver a lifetime of hearing outcomes.
Our goal is to deliver value by helping more people to
hear, which contributes to building a healthier and more
productive society.
Contents
Overview
How we create value
FY21 highlights
Letter to shareholders
Our company
About Cochlear
Investment proposition
Financial history
Strategy
Our growth opportunity
Our strategy
Business risks
2
4
6
16
18
19
20
24
36
Performance
Operational review
Financial review
Governance
Overview
Board of directors
Executive team
Directors’ report
Remuneration report
Directors’ report
38
40
46
48
52
56
74
Financial report
Shareholder information
79
128
2021 shareholder reports
Available at the Investor section of the website www.cochlear.com.
Inspired by you
for 40 years
Inspired by you
for 40 years
Inspired by you
for 40 years
Cochlear Limited
Corporate Governance
Statement 2021
Cochlear Limited
Sustainability Report 2021
Cochlear Limited
Tax Contribution Report
2021
Inspired by you
for 40 years
Cochlear Limited
Annual Report 2021
Cochlear Limited Annual Report 2021
Our story
Graeme Clark wanted to fix ears
From a young age, Professor Graeme Clark knew what he wanted to do:
“I want to fix ears.” He had watched his father, a pharmacist, struggle with
hearing loss, and wanted to save others from the same hardship.
Then he spotted a shell
Professor Clark had a concept – and the ambition to see it through – but
the challenges of the time made it difficult to turn his idea into action. It was
an encounter on a beach that was the final step Graeme needed. In a shell
and a blade of grass – rigid at its roots but malleable at the tip – Graeme
saw the structure that would allow an electrode array to adapt to any curve.
It was here that the opportunity to connect hundreds of thousands of
people to a life of hearing first came to light.
It helped to establish a company to bring that vision to life
Professor Clark partnered with Australian entrepreneur Paul Trainor – and his Nucleus Group – and the
University of Melbourne to commercialise the cochlear implant. With funding from the Australian government,
they developed the Cochlear™ Nucleus® 22 Implant, the first multi-channel cochlear implant, and Cochlear, the
company, was formed.
Our work is far from over
Professor Clark changed the world when he and his team developed a new way of treating hearing loss. The
history of our organisation has always been about transforming lives – giving people the opportunity to enjoy a life
of hearing. Professor Clark was inspired to ‘fix ears’ – and so too was Dr Anders Tjellström, who performed the
world’s first bone conduction hearing implant surgery in Gothenburg in 1977.
The work of these pioneering researchers – and their brave first recipients – laid the foundation for our company.
This drive has always been a part of our DNA – we gain our inspiration from the people we serve and support.
That’s what inspires our journey forward.
Celebrating 40 years
Cochlear marks an important milestone in 2021,
celebrating 40 years since Professor Graeme Clark’s
dream to help people hear was realised.
From the realisation of one man’s dream four decades ago, hundreds
of thousands of people have experienced life’s opportunities through
hearing. And they form a global community of millions, through their
families, friends, colleagues, teachers and more.
In 1982, Graham Carrick from
Australia became the first
recipient of the commercial
Cochlear™ Nucleus® 22 Implant.
Today, we continue Professor Clark’s dream, connecting hearing
implant recipients everywhere. And they’re not just connected to
their own communities — each shares a link with each other and to
Professor Clark’s childhood desire to help people hear.
1
Cochlear Limited Annual Report 2021 How we create value
Our goal is to deliver value
by helping more people
to hear, which contributes
to building a healthier and
more productive society.
Our
mission
We have a responsibility
to be here to support a
lifetime of hearing for the
children, and adults, being
implanted with our devices,
which means we need to
deliver sustainable financial
growth, benefiting all our
stakeholders.
We achieve this through
market-leading innovation
capabilities in conjunction
with a global network of
experts and collaborators;
the strong and trusted
relationships we build with
our candidates, recipients,
professional customers and
payers; and our employees
who are central to how we
deliver our strategy and
create value.
The passion that drives the organisation
and focuses the strategy
We help people hear and be heard
We empower people to connect with others and live a full life
We transform the way people understand and treat hearing loss
We innovate and bring to market a range of implantable
hearing solutions that deliver a lifetime of hearing outcomes
The factors driving industry growth
• Hearing loss is prevalent and under-treated
• Cochlear implants are a cost-effective solution for all age groups
• Product indications are broadening and funding is expanding
• Cochlear implants can deliver superior outcomes to hearing
aids for indicated patients
• Good hearing is essential for healthy ageing
• Opportunity to drive deeper penetration of the bone
conduction segment
Our growth
opportunity
How we focus our resources
Our strategic priorities are focused on improving awareness of and access
to implantable hearing solutions for people indicated for our products.
Our
strategy
Retain market
leadership
Grow the hearing
implant market
Deliver consistent revenue
and earnings growth
Key
business
activities
What we do
Cochlear has been the global leader in
implantable hearing solutions for 40 years,
providing a range of implantable hearing
solutions and sound processor upgrades
that deliver a lifetime of hearing outcomes.
2
Cochlear Limited Annual Report 2021 The key inputs
to creating value
The value we create, driving success
now and into the future
Customers &
communities
Our capacity to create
value depends on the
strong and trusted
relationships we build
with our candidates,
recipients, professional
customers and payers.
Innovation
capability
We are pioneers
and global leaders
in the development,
manufacture and
commercialisation of
implantable hearing
solutions, collaborating
with a global network
of research partners.
People &
capabilities
Our people’s knowledge
and expertise are
central to how we
deliver our strategy.
Financial &
environmental
Prudent management
of financial capital and
responsible production
and consumption
underpins the
delivery of consistent
returns over time.
A healthier & more productive society
Transforming the way people understand and treat
hearing loss by improving awareness and access.
Societal benefits: healthy ageing, education and productivity
opportunities, standard treatment pathway for children and
adults, appropriate funding for a cost-effective intervention
Empowered customers
Improving the wellbeing of recipients and providing convenience
and confidence to our professional customers.
Customer benefits: positive customer experience, improving
quality of life
A lifetime of hearing solutions
Innovating to build a market-leading portfolio of products and
services that provides a lifetime of hearing solutions for recipients.
Innovation delivers: quality and reliability, improving hearing outcomes,
connected care solutions, easy to use products,
expanding product indications
Thriving people
An engaged, capable and high-performing workforce that delivers
on our strategy and supports the creation of sustained value.
People outcomes: employee engagement, inclusion and diversity,
health and safety
Sustained value
Maximising spending to grow the market and maintain
our competitive position. Agile, efficient and
environmentally responsible business processes
to support our growth ambitions.
Financial outcomes: consistent financial and
environmental performance, disciplined capital
management, strong corporate governance,
operational improvement, reduced
climate impact
Value
created
Resources &
relationships
3
Cochlear Limited Annual Report 2021 FY21 highlights
Record sales revenue was delivered as surgeries recovered following COVID
shutdowns. We continued to invest in research and development (R&D) and awareness
and access activities with solid progress made across the key value drivers.
FY21
value
creation
A healthier &
more productive society
Transforming the way people understand and treat
hearing loss by improving awareness and access.
Empowered
customers
Improving the wellbeing
of recipients and providing
convenience and confidence to
our professional customers.
Demand generation programs continue to strengthen
• Growing referrals from direct-to-consumer (DTC) marketing
activities and hearing aid channel referral programs.
Improving outcomes
through skills training
• Cochlear™ CoPilot app launched
Advocacy & awareness building activities
• Publication of the World Health Organization’s (WHO)
first ‘World Report on Hearing’ calling on governments
and societies to prioritise hearing health, with the report
recognising the effectiveness of cochlear implants.
• Publication of a global consensus on a minimum
standard of care for treating adult hearing loss with
a cochlear implant in JAMA Otolaryngology.
• Amplification of the consumer advocacy voice with
the launch of the Cochlear Implant International
Community of Action (CIICA), the first global
cochlear implant advocacy network.
Publication of global
consensus statement
Cost effectiveness studies
• Studies in Sweden and the Netherlands demonstrating
the cost-effectiveness of cochlear implants in
adults with the Netherlands study detailing the
significant cost, health and societal benefits from
cochlear implantation across all groups.
Benefits from expanded product indications
• Growing demand for our products in Belgium and
France following expanded reimbursement.
Cochlear implant v hearing aid trial
• Entered into a contract to conduct an independent,
randomised control trial to compare communication
and quality of life outcomes of cochlear implants
for adults compared to hearing aids.
to help adult recipients
improve hearing outcomes
through skills training.
Growing connectivity and
engagement with recipients
• Cochlear Family membership
increases 19% to >217,000.
Greater convenience
and confidence for
professional customers
• Remote Check rollout commences
in the US and Europe.
• Great feedback on new professional
customer tools, the Nucleus®
SmartNav System and Custom
Sound® Pro Fitting Software.
Remote Check rollout
in the US and Europe
4
Cochlear Limited Annual Report 2021 A lifetime of
hearing solutions
Innovating to build a
market-leading portfolio of
products and services that
provides a lifetime of hearing
solutions for recipients.
Thriving
people
An engaged, capable and
high-performing workforce
that delivers on our strategy
and supports the creation
of sustained value.
Market-leading technology
underpins growing global
market share
• Eight new products and
services achieve FDA approval
over the past 18 months.
• Accelerated connected
care development.
Pioneering new implant
categories
• Cochlear™ Osia® 2 System driving
category shift in the US and
achieving CE Mark accreditation.
Targeting gender equality
• 38% women in senior and
executive management
roles, up from 36%.
• 30% women on the board
of directors, with the
transition in August 2021 to
our first female Chair.
Growing employee
engagement
• Increased focus on
organisational culture.
• Employee engagement
up 1% to 80%.
Cochlear™ Osia® 2
System driving
category shift in the US
Employee engagement
up 1% to 80%
Providing the latest technology
to our existing customers
• Cochlear™ Nucleus® Kanso® 2
Sound Processor driving demand
for sound processor upgrades.
• Cochlear™ Nucleus® 7 Sound
Processor for Nucleus® 22
implant recipients providing the
latest technology to our first
commercial implant recipients.
Broadening incentives to
benefit more employees
• New short-term incentive (STI)
plan and employee equity plan
to broaden STIs and employee
ownership of Cochlear.
* Constant currency. ** Excluding one-off and non-recurring items.
Sustained
value
Maximising spending to grow
the market and maintain our
competitive position. Agile,
efficient and environmentally
responsible business processes
to support our growth ambitions.
Investing to grow
• Delivered record sales revenue
of $1,493m, up 19% in CC.
• R&D investment of $195m on
target @ ~12% of sales revenue.
• Increased investment in growth
activities with COVID-related
savings in travel and conferences.
Record sales revenue
up 19% to $1,493m in CC*
Operational improvement
• Commenced a major process
transformation and IT systems
upgrade to improve agility and provide
an even better customer experience.
Strong financial position
• Underlying net profit** of
$237m, up 54% on FY20 and
within the guidance range.
• Strong cash flow generation drives
$108m increase in net cash position.
• Dividend re-introduced at H1
with the full year payout in line
with the 70% target payout.
Emission reduction targets
• Commitment to reduce business
travel related carbon emissions by at
least 50% by FY25, contributing to
a 25% reduction in total emissions.
5
Cochlear Limited Annual Report 2021 Letter to shareholders
2021 marks Cochlear’s 40th anniversary and four decades serving as the global
leader in implantable hearing solutions. In such an important year, we are pleased
to report growing momentum in our operations with surgery rates and profitability
improving following COVID shutdowns.
Our clear growth opportunity, the progress made on key strategic priorities and
strong balance sheet mean we are well placed to create value for our stakeholders
now, and over the long term.
Operational and financial review
We experienced improving momentum across the year as surgeries recovered
following COVID shutdowns. While hospitals and clinics have adapted to operating
during the pandemic, surgery rates continue to be variable across many countries as
infection waves continue.
Record sales revenue of $1,493 million, up 10% (19% in constant currency (CC)*), was
driven by a combination of market share gains, market growth and rescheduled surgeries.
The US, Japan, Korea and China delivered strong growth in sales revenue on last year,
as well as on FY19, the last financial year unaffected by COVID. Western Europe saw
improving momentum, with many emerging markets experiencing a slower recovery.
Underlying net profit** of $237 million increased 54% on last year’s result, with an
underlying net profit margin of 16%, a big improvement on FY20 and a little below our
18% longer-term target. We increased our investment in market growth initiatives,
benefitting from lower travel-related expenses as a result of COVID restrictions.
Statutory net profit of $327 million benefited from $90 million in one-off gains.
Sales revenue
↑ 19%
in CC*
Underlying
net profit**
↑ 54%
6
* Constant currency (CC) removes the impact of foreign exchange (FX) rate movements to facilitate comparability of operational performance.** Excluding one-off and non-recurring items. Cochlear Limited Annual Report 2021 Creating long-term value
Our goal is to deliver value by helping more people to hear, which contributes to building a healthier and more
productive society. To outline how we aim to achieve this, we have introduced a value creation model that
demonstrates how our business creates value over the long term. For us, this means describing the outcomes
of our activities in broader terms than just the progress against our strategic priorities and the financial
returns we generate. Genuine value creation describes the impact we have on all our key stakeholders – our
customers, our people, our shareholders as well as society more broadly.
The following pages describe how the key inputs into our business – our customers and communities,
our innovation capability, our people and financial capital – create value. For us, success will be defined
by building a healthier and more productive society, having empowered customers, providing a lifetime of
hearing solutions for our recipients and having thriving employees. Doing these things well should enable us
to achieve sustainable financial returns over time.
A healthier & more productive society
We are focused on building a healthier and more productive society. We do this by transforming the way people
understand and treat hearing loss through awareness and access activities. Over the past few years, we have
been expanding our programs for driving growth of the adults and seniors segment through direct-to-consumer
marketing activities and building referrals from hearing aid and ENT (ear, nose and throat) clinics.
An important long-term goal for us is to contribute to the development of a consistent treatment pathway to a
cochlear implant for adults with severe or higher hearing loss. There were a number of important developments
made this year with the World Health Organization (WHO) calling on governments and societies to prioritise
hearing health, the publication of a global consensus on a minimum standard of care for treating adult hearing
loss with a cochlear implant, the release of new adult cost-effectiveness studies and funding finalised to support
an independent cochlear implant versus hearing aid head-to-head trial.
WHO calls on governments and societies to prioritise hearing health
In March, we joined people with hearing loss, hearing care experts and
advocates in welcoming the WHO’s landmark ‘World Report on Hearing.
Hearing Care for All. Screen. Rehabilitate. Communicate’, which calls on
governments and societies to prioritise hearing health.
The report affirms the effectiveness and cost effectiveness of cochlear implants
and highlights the benefits for both children and adults. It calls upon member states
of the WHO to integrate ear and hearing care into primary health care programs.
Launched on World Hearing Day (March 3), the WHO’s first ever World Report
on Hearing contains a roadmap for governments to adopt hearing screening,
treatment and rehabilitation into primary health care systems to help curtail a
worldwide rise in hearing loss.
It comes as new WHO figures reveal that globally, 1.5 billion people live with
some degree of hearing loss. This includes around 60 million people who live
with severe or higher hearing loss.1
In response to the rapidly rising prevalence of hearing loss, the report sets out
hearing care actions for all societies and age groups, including babies, children
and adults. It follows a 2017 World Health Assembly resolution that reinforced
hearing loss as a significant public health issue, requiring all governments to
make it a higher priority and develop national action plans.
World Report on Hearing
front cover. Geneva: World
Health Organization; 2021.
Licence: CCBY-NC-SA 3.0 IGO.
The number of people living with disabling hearing loss is continuing to rise year-on-year. This landmark report
shows how hearing care leaders and policy makers can step up now to tackle this significant global public
health challenge. This report should place hearing loss on the agenda of policy makers so that governments and
communities can improve hearing care over the coming years through action.
7
Cochlear Limited Annual Report 2021 Letter to shareholders
It is significant that the WHO have affirmed that age should not be a barrier to cochlear implant treatment,
highlighting the importance for policymakers to take a ‘life-course’ approach to ear and hearing care. The WHO
points out that age-related hearing loss poses the greatest societal and economic burden from hearing loss
across the life course and is expected to increase with the current demographic shifts.
We are an active member of the WHO’s World Hearing Forum, a global network promoting ear and hearing
care worldwide.
Global consensus statement publication
In August 2020 we saw the publication of a global consensus2 on a minimum standard of care for treating
adult hearing loss with a cochlear implant in the international peer-reviewed medical journal, JAMA
Otolaryngology. The publication is an important step forward, providing the foundation for the development
of formal clinical practice guidelines in the coming years. It is anticipated that these guidelines for hearing
health professionals will be important in building a clear and consistent referral path for adults from hearing
aids to cochlear implants.
Data suggests that fewer than one in 20 adults who could benefit from a cochlear implant have one, which
could mean missing out on social connections and participating in everyday life. While cochlear implant
technology has improved remarkably over the past few decades, awareness continues to be low and access
needs to improve. The consensus paper will help professionals know when the time is right to refer for a
cochlear implant assessment. We look forward to collaborating with experts across the world to help improve
hearing for more adults living with hearing loss.
Growing recognition of cost effectiveness of cochlear implants for adults
There are a growing number of cost-effectiveness studies highlighting the economic and societal benefits of
adult implantation. These studies play an important role in educating payers and providers of the economic
benefits to society achievable in addition to the quality of life benefits to recipients.
In April, a study3 demonstrated the cost-effectiveness of cochlear implants in Sweden. The study, a collaboration
between Macquarie University Centre for Health Economics and Cochlear, demonstrates the cost-effectiveness
of unilateral cochlear implantation in adults when compared to hearing aids, and highlights the inequality of
access and low uptake of cochlear implants when compared to other common interventions.
In May, a study4 in the Netherlands detailed the significant cost, health and societal benefits from cochlear
implantation across all groups. In particular, it found that for seniors, people over the age of 70, cochlear
implantation was highly cost effective with net health benefits to society of EUR 76,000.
Benefits from expanded product indications
Market access activities have been focused on expanding indications and reimbursement for our products,
contributing to growth in many markets. Belgium experienced a lift in demand following the expansion of
reimbursement criteria for cochlear implants to include adult candidates with a severe hearing loss while
expanded reimbursement for the Baha brand of bone conduction sound processors boosted acoustics upgrade
revenue in France.
Cochlear implant versus hearing aid head-to-head trial
A challenge for professionals and consumers is understanding the potential improvement in hearing outcomes
that can be attained from a cochlear implant. There is a growing body of evidence of the superior outcomes
of cochlear implants over hearing aids for many people with a severe or higher hearing loss (>70dB). In 2018,
a Cochlear study of recipient experiences5 found that the number of participants reporting satisfaction with
their hearing performance increased significantly after receiving a cochlear implant, rising from 9% when using
hearing aids only to 95% after receiving a cochlear implant.
To build on the evidence, we have provided funding to the University of Nottingham for an independent,
randomised control trial to compare communication and quality of life outcomes of cochlear implants for adults
compared to hearing aids that will commence shortly in the UK. The trial aims to provide gold standard clinical
evidence of the relative efficacy of cochlear implants for this patient group with results expected in the next
several years. These studies are important in helping to educate hearing aid professionals and cochlear implant
candidates on the benefits of cochlear implants when compared to hearing aids.
8
Cochlear Limited Annual Report 2021 Empowered customers
We aim to improve the wellbeing of our recipients by providing them with the latest
sound processor technology as well as easy-to-use after-care to support a lifetime
of hearing outcomes. And we invest in education and clinical support tools to ensure
our professional customers have convenience and confidence in caring for implant
candidates and recipients.
Improving adult cochlear implant outcomes through skills training
Many adults with cochlear implants don’t actively seek appropriate hearing rehabilitation
because of a common belief that the hearing technology alone is enough.6 While a
cochlear implant provides access to sound, research shows that rehabilitation that
involves knowledge building and hearing skills training will help recipients improve
listening and communication in real-world everyday situations.7,8
In May, we launched Cochlear™ CoPilot, a new mobile app designed to improve hearing
techniques. The iPhone app provides cochlear implant recipients with information,
personalised support and practical tips for hearing, listening and communication. It
features articles by clinical experts and cochlear implant recipients with tips on a range
of topics, from listening in noise and managing listening fatigue to reconnecting to music
and communicating in the workplace. Developed using the latest clinical evidence and
proven rehabilitation practices, Cochlear CoPilot also features interactive skill builders
designed to help improve listening and communication skills.
Increasing connectivity and engagement with recipients
We invest to provide our recipients with a world-class customer experience with
increased connectivity and engagement. Cochlear Family, the recipient membership
program, provides us with the opportunity to connect directly with recipients to provide
service and support.
Membership continues to grow rapidly, increasing by 19% over the last 12 months,
to now exceed 217,000 members with a 60% join rate for new Cochlear™ Nucleus®
implant recipients. An acceleration in recruitment in recent years has been driven by a
combination of direct outreach programs and improvements in customer onboarding.
Over the last 12 months we have provided special edition newsletters and webinar
virtual events about COVID safety, with special considerations for those living with a
hearing device.
Cochlear™ CoPilot
Ethan, Cochlear Family member
9
Cochlear Limited Annual Report 2021 Letter to shareholders
Providing greater convenience and confidence to professional
customers
Over the past year we have strengthened our product and service offering to our
professional customers through the rollout of a number of new products all progressing to
plan, with positive engagement and feedback from customers.
Remote Check is the first telehealth patient assessment tool for cochlear implant
recipients. It is designed to be a convenient, at-home testing tool that allows people with a
Cochlear™ Nucleus® 7 or Kanso® 2 Sound Processor to complete a series of hearing checks
from their compatible iOS device using the Nucleus Smart App. Results are then sent
remotely to the recipient’s clinic for review by their clinician.
Remote Check can provide significant cost savings by offering a convenient, time-saving
option for care that does not require travel to a clinic. It enables clinicians to provide a
more convenient care option, redirect in-clinic time to manage patients with the greatest
need and free up time to manage the anticipated growth in the number of people needing
cochlear implants.
Remote care is a core pillar of our long-term innovation strategy, with access to care
crucial to people who rely on a cochlear implant.
The Nucleus® SmartNav System is a new tool to support surgeons in optimising
electrode placement during cochlear implant surgery. It delivers wireless, actionable
intraoperative insights to support electrode insertion with real-time navigation, providing
surgeons with added assurance of a successful surgical outcome for their patients.
Custom Sound® Pro Fitting Software supports clinicians in fitting our cochlear implant
sound processors.
A lifetime of hearing solutions
We innovate to build a market-leading portfolio of products and services that supports
a lifetime of hearing outcomes for recipients. We have achieved this through a multi-
decade philosophy of investing to grow and an unwavering commitment to innovation.
In FY21 we invested $195 million in R&D, representing 13% of sales revenue, with eight
new products and services achieving FDA approval over the past 18 months across all
parts of the portfolio.
Pioneering new implant categories
Our new implantable product offering, the Cochlear™ Osia® 2 System, represents
a significant improvement in performance, aesthetics and quality of life for bone
conduction patients and has received an enthusiastic response from surgeons and
patients in the US since launch in February 2020. It has quickly been established as the
primary implant for clinics that have started implanting it, representing around 70% of
acoustic implants in those clinics.
We are excited about the potential for the Osia 2 System with the opportunity for both
increased penetration of bone conduction implants as well as geographic expansion in
the coming years. We received regulatory approval in Europe during the second half
with the rollout commencing in a few Western European countries by June.
Providing the latest technology to our existing customers
The Cochlear™ Nucleus® Kanso® 2 Sound Processor commenced its rollout in the US
and Europe during the first half, bringing the features of the Cochlear™ Nucleus® 7 Sound
Processor into an off-the-ear form factor.
The rollout is progressing well, with the Kanso 2 Sound Processor contributing to growth
since its launch.
Cochlear™
Remote Check
Cochlear™
Osia® 2 System
Cochlear™
Nucleus® Kanso® 2
Sound Processor
10
Cochlear Limited Annual Report 2021 We received FDA clearance and CE Mark certification for the Cochlear™ Baha® 6
Max Sound Processor with the launch in the US and Europe during the second half.
The launch is progressing well with strong demand experienced for the new sound
processor. The Baha 6 Max Sound Processor provides a fitting range of up to 55 dB
sensorineural hearing loss in the same small size as current 45 dB devices, with
longer battery life and direct streaming from both Android and Apple devices.
Thriving people
Our people are our most valuable asset and are an engaged, capable and high-
performing team that delivers on our strategy and supports the creation of sustained
value. We have a diverse workforce with over 4,000 people across the globe. Their
knowledge, expertise, passion and focus on delivering excellence is key to achieving
future success.
Shaping our culture
We have an inclusive organisation and a healthy corporate culture that is strongly
connected to our mission and puts the customer at the centre of everything we
do. As our workforce continues to expand, we work hard to intentionally shape the
culture that will enable us to grow and deliver for our customers in the future.
Work continued this year to build on the organisational culture we want to support
our business strategy and long-term growth goals. Our executive team focused on
‘leading by example’ in recognition of the critical role they play, and the example they
each set for the rest of the organisation. We introduced culture champions, a group
of 100 people focused on actively shaping our culture through communications,
training and education. We implemented inclusive leadership and unconscious bias
training, support in understanding and living our HEAR behaviours and better aligned
our remuneration and reward structures to our cultural objectives.
We are pleased to report that overall employee engagement continues to remain
strong at 80%, growing 1% on last year, with 93% of employees reporting that they
feel proud to tell people they work at Cochlear.
Broadening incentives to benefit more employees
Our total reward framework is an important part of building a strong and cohesive
culture. From FY22, we are introducing changes to our reward offering to achieve
greater alignment and consistency of how we reward employees across the business.
The key highlights include aligning employees to the Global Short Term Incentive (STI)
plan, ensuring more of our employees have some form of performance-based reward,
and introducing a new global employee share plan. These changes support our cultural
priorities, improve our market competitiveness to ensure we are able to attract and
retain talent across all the markets in which we operate, and provide an opportunity for
our employees to own shares in the company and be part of our future success.
Focus on gender equality
Achieving gender equality is one important element of our ‘Diversity
and Inclusion’ strategy. We strive for a gender balance of 40:40:20,
which means that 40-60% of either gender is represented (40% women,
40% men, 20% open). We have a target to achieve at least 40% female
representation amongst our senior leaders by June 2023, with 38% today.
And at Board level, we are targeting at least 30% female representation, a
target which we achieved during the year with 30% today.
Cochlear™ Baha® 6 Max
Sound Processor
80%
Employee
engagement
11
Cochlear Limited Annual Report 2021 Letter to shareholders
Achievement of this target is being supported by focused activities in the areas of talent and succession
planning and talent acquisition, with the aim of increasing our pipeline of female talent. A range of additional
activities and policies recognised as key enablers to gender equality continue to be implemented to support
improved access to work for all employees. These include a focus on continuing to embed flexible working for
employees globally, further deployment of our inclusive leadership programs with a focus on unconscious bias
education for all leaders, and continuing work to ensure gender pay equity across our global workforce.
Support and flexibility
We are committed to ensuring the safety and wellbeing of our people. With many of our employees continuing
to work remotely due to COVID, we have provided additional support with a focus on staying connected to
colleagues. We have increased communications and provided additional education and resources to support
both physical and mental health.
As employees return to the workplace, we are seeing a greater uptake of flexible working arrangements, which
is working well, supported by the rapid evolution of our IT infrastructure to enable efficient and inclusive remote
working capabilities. We continue to educate and support our employees working in a hybrid work environment
to ensure we maintain our culture of inclusiveness.
Appointment of Alison Deans as Cochlear Chair
Alison Deans has been appointed as Chair of Cochlear from 21 August
2021 following the retirement of Rick Holliday-Smith. Alison is a highly
respected company director with extensive business experience
across a broad range of industries and organisations. She has been a
non-executive director on Cochlear’s board since January 2015.
Alison’s deep understanding of the company, breadth of experience
as a non-executive director and extensive experience leading
technology-enabled businesses means she will be an excellent and
well-qualified Chair.
Commenting on her appointment, Alison said, “Rick has instilled a
relentless focus on our Mission and the importance of investment
to drive long-term sustainable growth. Under his stewardship, the
corporate culture has thrived and ongoing investment in innovation
and market development has strengthened our market position and
growth outlook.
“Our goal is to ensure that we can support a lifetime of hearing to the
children, and adults, being implanted with our devices today while
also delivering leading hearing solutions for our future recipients. It is
an honour to be appointed Chair of such a remarkable company, and I
look forward to working with the Board and the management team to
continue to build on these strengths.”
Alison Deans, Chair
Rick Holliday-Smith has been a member of the Board since 2005 and has served as Chairman since mid-2010.
Commenting on his decision to retire from the Board, Mr Holliday-Smith said, “I have greatly enjoyed my time
on the Board and especially as Chairman for the past 11 years. It has been a privilege to work with an exceptional
Board and management team.
“Cochlear is an incredible company that has stayed true to its Mission to help more people hear, marking a major
milestone this year in celebrating its 40th birthday. We have provided more than 650,000 implant devices to
people globally and continue to be the global market leader in implantable hearing solutions.”
12
Cochlear Limited Annual Report 2021 Sustained value
To deliver consistent revenue and earnings growth over time, we balance maximising spending to grow
the market with investment to maintain our competitive position while ensuring we have agile, efficient and
environmentally responsible business processes to support our growth ambitions.
Underlying net profit increases 54% to $237 million
For FY21, underlying net profit increased 54% to $237 million, within the
guidance range of $225-245 million. The underlying net profit margin of 16%
was well above last year and a little below our longer-term target of 18%.
There were a number of factors contributing to the underlying net profit result. The
recovery in trading was solid with the business delivering record sales revenue of
$1,493 million, an increase of 19% in CC, driven by a combination of market share
gains, market growth and rescheduled surgeries from FY20. Sales revenue was 6%
ahead of FY19 in CC, the last financial year unaffected by COVID.
Gross margin declined from 75% to 73% with around half of the decline
currency related, the result of the strengthening of the Australian dollar.
Operating expenses were maintained in line with last year (up 5% in CC).
Continued investment was made in R&D, market growth activities, standard
of care and market access initiatives. The increase in growth investment and
re-establishment of the short-term incentive provision was partially offset by
COVID-related savings including travel and conference expenses.
Statutory net profit of $327m benefits from $90m in one-
off gains
We recorded $59 million in patent litigation-related tax and other benefits after-
tax primarily relating to the receipt of a private ruling from the Australian Tax
Office in December 2020 which clarified the deductibility of elements of the
patent litigation expense treated as non-deductible as of 30 June 2020.
Over the past few years, the innovation fund has made several small investments
in companies with novel technologies that may, over the longer term, enhance
or leverage our intellectual property. The innovation fund includes investments
in Saluda, Nyxoah, EpiMinder and Seer Medical, with $31 million in non-cash net
gains after-tax realised from investments including Nyxoah and EpiMinder.
Nyxoah listed in September with a $24 million after-tax gain realised based
on the value of our shareholding in Nyxoah at listing. We invested a further
€5 million (A$8 million) in the initial public offering and a further US$23 million
(A$30 million) in the July 2021 capital raising.
The $13 million after-tax gain in EpiMinder represents the increase in value
of our shareholding following a financing round which saw Cochlear invest a
further $3 million.
Strong financial position
The balance sheet remains strong with operating cash flows sufficient to
fund investing activities and capital expenditure whilst delivering dividends to
shareholders.
13
* Constant currency. ** Excluding one-off and non-recurring items.Cochlear Limited Annual Report 2021 Letter to shareholders
Net cash increased $108 million to $565 million, driven by strong free cash flow generation, with operating cash
flows increasing by $429 million to $271 million and free cash flow of $180 million.
The dividend was re-introduced at the half as a result of improved trading conditions and cash flow generation. A
final dividend of $1.40 per share has been determined, with full year dividends declared of $2.55, an increase of
59% on last year and representing a payout of 71% of underlying net profit.
The dividend is unfranked with the franking balance depleted as a result of the losses incurred by the business in FY20.
Taking action on carbon emissions
We have a relatively low level of carbon emissions as a business, with around 50% of total FY19 reported carbon
emissions generated from Scope 3 – or indirect – emissions. For Cochlear, business travel is our single biggest
source of carbon emissions.
COVID has driven changes in the way our customers and our people operate. The rapid adoption of technology
to enable effective remote collaboration has been an important contributor to continuing to work with
customers and an enabler to continued investment in R&D and market growth activities.
Many of the new ways of doing business remotely, both internally and with our customers, have been incredibly
successful and will continue to be a part of how we do business going forward and this will enable us to reduce
the amount of business travel. As a result, we are committing to a 50% absolute reduction in business flight-
related carbon emissions by FY25, equivalent to around 25% in overall reported carbon emissions compared to
our FY19 baseline. We will achieve this through a combination of reductions in business flights, with a targeted
20% reduction in business flights per full-time employee, and investment in carbon offsets.
This initiative forms part of the development of a more comprehensive approach to understanding, reporting
and reducing our carbon emissions and environmental impact.
Decision to return FY21 COVID government assistance
We note our decision to repay $25 million in pre-tax COVID government assistance received in FY21 as a result
of improved trading conditions. Most of the assistance, $23 million, was received from the Australian Federal
Government’s JobKeeper program, with JobKeeper repaid in February.
We met the eligibility requirements to participate in these programs, which were designed to support jobs
during the first wave of COVID infections, providing an important safety net at a time of great disruption and
uncertainty. Trading conditions since July have improved, and while there is still uncertainty ahead, we consider
returning the COVID government assistance payments the appropriate thing to do.
Australian government announces patent box tax concession
We welcome the Australian Government’s announcement of a tax incentive to encourage companies to
commercialise home grown medical and health ideas in Australia. Subject to the final design and successful
passage of legislation through parliament, the patent box tax regime for medical technology and biotechnology
should encourage the development of innovation in Australia by taxing corporate income derived from patents
at a concessional effective corporate tax rate of 17%, with the concession applying from income years starting
on or after 1 July 2022.
A globally competitive Australian patent box regime will support local manufacturing of medical products and
help reverse the trend of Australian research being commercialised offshore. It should result in more highly
skilled, well-paid jobs and more investment in the commercialisation of Australia’s world-leading medical
research. It also enables Australia to compete with other advanced economies for investment in critical medical
product research and manufacturing capability.
We are actively involved in current consultations on the detailed design of the patent box to ensure it delivers on
the stated policy objectives of government – encouraging companies to base their medical and biotechnology
R&D operations, and commercialise innovation, in Australia; and to retain ownership of eligible patented
inventions in Australia.
14
Cochlear Limited Annual Report 2021 To achieve these objectives the Australian patent box must:
• be competitive with similar incentives offered in peer nations;
• strike an appropriate balance between administrative integrity and being workable and practical for those
using the regime; and
• reflect the nature of the sector that it is seeking to target and attract.
Subject to the final design of the patent box, we would expect to benefit from a reduced tax rate in the medium term.
FY22 outlook
As we look to the future, we remain confident of the opportunity to grow our markets. There remains a significant,
unmet and addressable clinical need for cochlear and acoustic implants that is expected to continue to underpin the
long-term sustainable growth of the business. Our clear growth opportunity and strategy, combined with a strong
balance sheet, mean we are well placed to create value for our stakeholders now, and over the long term.
For FY22, we expect to deliver net profit of $265-285 million, a 12-20% increase on underlying net profit for FY21,
based on a 74 cent AUD/USD. Sales revenue is expected to benefit from market growth, with a continuing recovery
in surgery rates across many countries more affected by COVID. We will continue our investment in market growth
activities, with the net profit margin expected to remain a little below our longer-term target of 18%.
Developed markets are expected to continue to grow in FY22. While hospitals and clinics have adapted to operating
during the pandemic, surgery rates continue to be variable across many countries. The US has adapted quickly to
COVID with the market growing well. Western Europe and parts of Asia Pacific have not recovered to the same
extent due to impact from more recent COVID disruptions. We expect the rate of recovery to be protracted in a few
markets as a result of waiting lists affecting all elective surgery procedures, potentially restricting the pace of growth.
The rate of recovery in emerging markets has varied and we expect continued improvement but at a slower rate than
developed markets, with some countries still well down on FY19 levels and not likely to recover fully in FY22.
Guidance factors in some continuing near-term COVID impact. A more material disruption from COVID that
significantly impacts sales or the supply chain remains a risk factor that does not form part of guidance. We are
confident of the resilience of our hearing implant business given the improvements in surgery rates experienced
across FY21. While we did see a moderation in demand at times of high hospitalisation rates for COVID patients, the
deployment of COVID vaccines and the recovery of surgeries that followed COVID surges gives us some confidence
that any further surgery deferrals could also recover quickly.
Our investment priorities continue to be focused on market growth activities and strengthening our competitive
position. Operating expenses are expected to increase with the acceleration of a number of growth projects
and some uplift in travel and conference expenses following constrained spending as a result of COVID. The
commissioning of our China manufacturing facility will have a small negative gross margin impact over the coming
years as we commission and then scale up production.
Capital expenditure is expected to be around $70-90 million for FY22 and includes around $20 million related
to a major process transformation and IT systems upgrade, a program that is expected to be a $100-120 million
investment over the next four to five years. It is not yet clear how much of this investment will be capitalised versus
expensed as a result of a change in the accounting interpretation for cloud computing investment. We have not
factored any expensing resulting from this accounting change into the net profit guidance. We expect to finalise the
quantum of the impact by December 2021 and adopt the change in the HY22 result.
The effective tax rate is expected to decline to around 25% as a result of the introduction of changes to the R&D
tax concession by the Australian government, with legislated changes to take effect from 1 July 2021. The changes
include an increase in the $100 million R&D expenditure threshold and an increase in the deduction rate.
The Board is committed to maintaining the dividend policy which targets a 70% payout of underlying net profit.
Rick Holliday-Smith
Chairman
Dig Howitt
CEO & President
15
Cochlear Limited Annual Report 2021
Our company
About Cochlear
For 40 years, Cochlear has been the global leader in implantable
hearing solutions.
Cochlear commenced operations in 1981 as part of the Nucleus
group and in 1995 listed on the Australian Securities Exchange.
Today, it is a Top 50 listed Australian company with a market
capitalisation of over $15 billion.
We aim to improve awareness of and access to implantable hearing
solutions for people indicated for our products. We have provided
more than 650,000 implant devices to people who benefit from
one – or two – of our implantable solutions. Whether these hearing
solutions were implanted today or many years ago, we continue to
bring innovative new products to market as well as sound processor
upgrades for prior generations of recipients.
We invest more than $190 million each year in R&D and participate
in over 100 collaborative research programs worldwide. Our global
headquarters are on the campus of Macquarie University in Sydney,
with regional offices in Asia Pacific, Europe and the Americas. We
have a deep geographical reach, selling in over 180 countries, with a
direct presence in over 30 countries and a global workforce of over
4,000 employees.
For 40 years,
Cochlear has been
the global leader
in implantable
hearing solutions
We have a deep
geographical reach,
selling in over
180 countries
Our mission
We help people hear and be heard.
We empower people to connect with others and
live a full life.
We transform the way people understand and
treat hearing loss.
We innovate and bring to market a range of
implantable hearing solutions that deliver a
lifetime of hearing outcomes.
16
Cochlear Limited Annual Report 2021 Cochlear at a glance
Business segments
Cochlear implant
systems
61%
Cochlear
implants*
29%
Services*
Sound processor
upgrades, accessories
& other
10%
Acoustics*
Bone conduction
systems and sound
processor upgrades
Cochlear™ Nucleus® Profile™
Plus with Slim Modiolar
Electrode (CI632)
Cochlear™
Nucleus® 7
Sound Processor
Cochlear™
Nucleus® Kanso® 2
Sound Processor
Cochlear™
Osia® 2
System
Cochlear™
Baha® 6 Max
Sound Processor
Global sales
~$1.5b
in sales revenue
~80%
Developed markets*
~20%
Emerging markets*
48%
Americas*
35% 17%
EMEA*
Asia Pacific*
Market leader
$190m+
in annual R&D
>60%
global market share**
650,000+
implants sold***
Growing scale
4,000+
employees
30+
countries with
direct operations
100+
collaborative
research programs
6
key manufacturing
sites
17
* Based on sales revenue. ** Based on Cochlear estimates for cochlear implants. *** Includes cochlear and acoustic implants.Cochlear Limited Annual Report 2021 Our company
Investment proposition
Cochlear provides shareholders with an opportunity to invest in the global leader in implantable hearing
solutions, in an industry that has the potential to grow over the long term.
Global leader in implantable hearing solutions for 40 years with over
60% global market share and more than 650,000 devices sold
Long-term market growth opportunity with a significant, unmet and
addressable clinical need for implantable hearing solutions and less
than 5% market penetration
Unrivalled commitment to product innovation, bringing innovative
new products to market as well as sound processor upgrades for prior
generations of our recipient base
Growing annuity income stream from servicing of the expanding
recipient base
Strong free cash flow generation provides funding for market growth
18
* Cash flow generation and dividends disrupted in FY20 by the impact of COVID and cost of an adverse litigation outcome.Cochlear Limited Annual Report 2021 Financial history
Cochlear has a long track record of delivering growing sales revenue, profits* and dividends, disrupted in FY20
by the impact of COVID.
19
* Excluding one-off and non-recurring items. ** Constant currency.Cochlear Limited Annual Report 2021 Our growth opportunity
1.3.5 ESTIMATES OF HEARING LOSS9
Growing awareness of the cost-effectiveness and quality of life benefits
of our products has the potential to underpin long-term industry growth.
Hearing loss currently affects more than 1.5 billion people or 20% of the global
population; the majority of these (1.16 billion) have mild hearing loss. However,
a substantial portion, or 430 million10 people (i.e. 5.5% of the global population)
experience moderate or higher levels of hearing loss which, if unaddressed, will
most likely impact their daily activities and quality of life. More detailed information
about the severity and distribution of hearing loss is presented in the following data.
Opportunity
Description
HEARING LOSS ACCORDING TO SEVERITY
How we are responding
Hearing loss is
prevalent and
under-treated
The World Health Organization
estimates that there are over
60 million people worldwide
who experience severe
or higher hearing loss.1
A challenge for hearing care
providers is that less than 5% of
the people that could benefit
from an implantable hearing
solution have received one.9
Cochlear implants
are a cost-effective
solution for all
age groups
Cochlear implants provide
life changing outcomes for
recipients, empowering
them to connect with
others and live a full life.
Besides the 1.16 billion people worldwide with mild hearing loss, about 400 million
live with hearing loss that ranges from moderate to severe; nearly 30 million have
profound or complete hearing loss in both ears (Figure 1.5).
Figure 1.5 Number of people and percentage prevalence according to grades
of hearing loss
>60m people with severe or
higher hearing loss
Figure 1.5 Number of people and percentage prevalence according to grades of hearing loss
1153
million
266
million
103
million
30.7
million
17.2
million
12.6
million
14.9%
3.4% 1.3% 0.4% 0.2%
0.2%
by segment.
Mild
Moderate
Moderately
severe
Severe
Profound
Complete
Globally 1.5 billion people live with hearing loss
Source: World Health Organization; 2021
9 GBD 2019 Hearing Loss Collaborators. Hearing loss prevalence and years lived with disability, 1990–2019: findings from the Global
Burden of Disease Study 2019. The Lancet. (2021). doi: 10.1016/S0140-6736(21)00516-X.
10 Refers to number of people with hearing threshold higher than 35 dB in the better hearing ear.
The estimated lifetime societal
costs for a pre-lingual deaf
child in developed markets
exceeds US$1.5 million.10-12
40
WORLD REPORT ON HEARING
They also provide a cost-
effective solution for all age
groups, delivering significant
returns on the investment
made by the healthcare system.
The effective use of implants
is cost-effective in adults and
seniors with an estimated
return on investment of 10:1.
Cochlear implants
can deliver superior
outcomes to
hearing aids for
indicated patients
Cochlear implants can provide
a significant improvement
in hearing outcomes and
quality of life when compared
to hearing aids for many
people with a severe or
higher hearing loss (>70dB).
We are the market leader in cochlear
implants but a small player in the severe
or higher hearing loss segment where
hearing aids dominate
>60%
global market share
~4%
global market share
Cochlear implant
market share
Hearing devices treating the severe
or higher hearing loss segment
20
We are focused on transforming the way people understand and treat hearing loss through awareness and access
activities aimed at improving the penetration of implantable hearing solutions.
Three key market segments have been prioritised comprising adults and seniors in developed markets, children in
developed markets and children in emerging markets, with strategies to improve awareness and access that vary
We collaborate closely with governments, academic and research institutions, hearing care providers, consumer
and professional representative NGO’s and significant health setting bodies such as the WHO to build awareness
of the importance of properly treating hearing loss. And our investment in R&D continues to focus on improving
outcomes for recipients which broadens the population of candidates that can benefit from our hearing solutions.
The cost-effectiveness of health interventions is becoming a more important consideration in the allocation of
healthcare spending with payers increasingly demanding cost-effectiveness data to support funding for health
interventions. We believe we are well positioned with many studies demonstrating the cost-effectiveness of
cochlear implants for both children and adults with severe or higher hearing loss.
For a pre-lingual deaf child, the return to society is more than 13 times every dollar spent on a cochlear implant
solution based on the cost savings in education and improved productivity as an adult.10-12
Dementia and other cognitive decline diseases are some of the costliest conditions to treat in the world13, at an
estimated US$1 trillion in 2018 and estimated to double by 2030.14 Unfortunately, individuals with severe hearing
loss are almost five times more likely to develop dementia than people without hearing loss. The effective use of
hearing aids and implants is cost-effective and has been proven in adults and seniors with an estimated return on
investment of 10:1.15a
A challenge for professionals and consumers is understanding the potential improvement in hearing outcomes
that can be attained from a cochlear implant. There is a growing body of evidence of the superior outcomes
of cochlear implants over hearing aids for many people with a severe or higher hearing loss (>70dB).16 In 2018, a
Cochlear study of recipient experiences5 found that the number of participants reporting satisfaction with their
hearing performance increased significantly after receiving a cochlear implant, rising from 9% when using hearing
aids only to 95% after receiving a cochlear implant.
In 2021, an independent, randomised control trial to compare communication and quality of life outcomes of
cochlear implants for adults compared to hearing aids will commence in the UK. Cochlear has provided funding
to the University of Nottingham for the trial which will aim to provide gold standard clinical evidence of the relative
efficacy of cochlear implants for this patient group with results expected in the next several years. These studies
are important in helping to educate hearing aid professionals and cochlear implant candidates on the benefits of
cochlear implants when compared to hearing aids.
Cochlear Limited Annual Report 2021 Our growth opportunity
Growing awareness of the cost-effectiveness and quality of life benefits
of our products has the potential to underpin long-term industry growth.
Opportunity
Description
How we are responding
Hearing loss is
prevalent and
under-treated
The World Health Organization
estimates that there are over
60 million people worldwide
who experience severe
or higher hearing loss.1
A challenge for hearing care
providers is that less than 5% of
the people that could benefit
from an implantable hearing
solution have received one.9
Cochlear implants
are a cost-effective
solution for all
age groups
Cochlear implants provide
life changing outcomes for
recipients, empowering
them to connect with
others and live a full life.
They also provide a cost-
effective solution for all age
groups, delivering significant
returns on the investment
made by the healthcare system.
Cochlear implants
can deliver superior
outcomes to
hearing aids for
indicated patients
Cochlear implants can provide
a significant improvement
in hearing outcomes and
quality of life when compared
to hearing aids for many
people with a severe or
higher hearing loss (>70dB).
We are focused on transforming the way people understand and treat hearing loss through awareness and access
activities aimed at improving the penetration of implantable hearing solutions.
Three key market segments have been prioritised comprising adults and seniors in developed markets, children in
developed markets and children in emerging markets, with strategies to improve awareness and access that vary
by segment.
We collaborate closely with governments, academic and research institutions, hearing care providers, consumer
and professional representative NGO’s and significant health setting bodies such as the WHO to build awareness
of the importance of properly treating hearing loss. And our investment in R&D continues to focus on improving
outcomes for recipients which broadens the population of candidates that can benefit from our hearing solutions.
The cost-effectiveness of health interventions is becoming a more important consideration in the allocation of
healthcare spending with payers increasingly demanding cost-effectiveness data to support funding for health
interventions. We believe we are well positioned with many studies demonstrating the cost-effectiveness of
cochlear implants for both children and adults with severe or higher hearing loss.
For a pre-lingual deaf child, the return to society is more than 13 times every dollar spent on a cochlear implant
solution based on the cost savings in education and improved productivity as an adult.10-12
Dementia and other cognitive decline diseases are some of the costliest conditions to treat in the world13, at an
estimated US$1 trillion in 2018 and estimated to double by 2030.14 Unfortunately, individuals with severe hearing
loss are almost five times more likely to develop dementia than people without hearing loss. The effective use of
hearing aids and implants is cost-effective and has been proven in adults and seniors with an estimated return on
investment of 10:1.15a
A challenge for professionals and consumers is understanding the potential improvement in hearing outcomes
that can be attained from a cochlear implant. There is a growing body of evidence of the superior outcomes
of cochlear implants over hearing aids for many people with a severe or higher hearing loss (>70dB).16 In 2018, a
Cochlear study of recipient experiences5 found that the number of participants reporting satisfaction with their
hearing performance increased significantly after receiving a cochlear implant, rising from 9% when using hearing
aids only to 95% after receiving a cochlear implant.
In 2021, an independent, randomised control trial to compare communication and quality of life outcomes of
cochlear implants for adults compared to hearing aids will commence in the UK. Cochlear has provided funding
to the University of Nottingham for the trial which will aim to provide gold standard clinical evidence of the relative
efficacy of cochlear implants for this patient group with results expected in the next several years. These studies
are important in helping to educate hearing aid professionals and cochlear implant candidates on the benefits of
cochlear implants when compared to hearing aids.
21
Cochlear Limited Annual Report 2021 Our growth opportunity
Opportunity
Description
How we are responding
Product indications
are broadening and
funding is expanding
Product indications and
funding are expanding as
payers increasingly recognise
the improved outcomes and
cost-effectiveness of our
implantable solutions.
US: lowered the
age of cochlear
implantation from
12 to 9 months
for Cochlear’s
Nucleus implant
Japan, UK and
Belgium: expansion
of reimbursement
criteria for cochlear
implants to include
severe hearing loss
New Zealand:
cochlear implant
funding to
reduce the adult
waiting list
Czech Republic:
funding for cochlear
implants for adults
France:
reimbursement
approved for Baha
sound processors
Good hearing
is essential for
healthy ageing
Hearing loss is particularly
prevalent in people over
the age of 60, with one in
four suffering moderate or
higher hearing loss.17 There
is a growing understanding
of the importance of
properly treating hearing
loss in this age group. It
affects communication and
is associated with social
isolation, anxiety, depression
and cognitive decline.18
Growing understanding of the link between
good hearing and healthy ageing
Cognitive decline
Hearing loss associated
with accelerated cognitive
decline and dementia in
older adults.20
Depression
Significant association
between hearing
impairment and moderate
to severe depression.21-23
Falls
Higher risk of
dizziness causing
falling.22
Opportunity to drive
deeper penetration
of the bone
conduction segment
The bone conduction
market is under-penetrated
and currently has limited
geographic reach. We have
developed a product that
we believe provides the
opportunity to drive deeper
category penetration.
Social isolation
Hearing loss linked to
withdrawal from social
interactions, which can
have a significant impact on
psychological well-being
and physical health.24-25
Ability to work
Hearing loss can affect
sufferers’ ability to
work or stay in the
workforce.25-28
Loss of
independence
Seniors with hearing
loss less likely to be
able to self-care.23
Pre-market trials have demonstrated
significant improvements in outcomes
for patients using the Cochlear™ Osia® 2
System29 over traditional bone conduction
hearing solutions
22
Cochlear implants started as a solution for people with a profound hearing loss, equivalent to a hearing loss
of greater than 90 decibels (dB). Advancements in the technology have driven significant improvements in
hearing outcomes for patients with our products today able to provide life-changing outcomes for people
with a severe or higher hearing loss (>70dB).
At the same time, there is a better understanding of the importance of properly treating hearing loss as we age
and a growing body of evidence supporting the cost-effectiveness of cochlear implants. These factors have
driven an expansion of indications and/or funding in many markets over the past few years, including the UK, US,
Japan, France and Belgium.
Our job is to continue to work with governments and payers to recognise the benefits of treating hearing loss so
we can continue to increase access to our products.
Cochlear implantation for seniors is an important trend, with hearing loss ranked as the leading cause of
global years lived with disability for people over the age of 70.19 We have been increasing our public advocacy
engagement, our investment in health economics, our market access capability and the collaborations we have
with the medical research community to build on the clinical evidence that demonstrates the effectiveness of
our products, particularly for seniors.
In 2018, we pledged to gift US$10 million over 10 years to the Johns Hopkins Bloomberg School of Public
Health to establish the ‘Cochlear Center for Hearing and Public Health’. The Center is the first of its kind at any
academic institution focused on addressing hearing loss as a global public health priority.
The Cochlear™ Osia® 2 System expands the Acoustics portfolio into the next generation of bone conduction
hearing solutions, providing a significant improvement in performance and aesthetics for bone conduction patients.
Pre-market trials have demonstrated significant improvements in outcomes for patients29 over traditional bone
conduction hearing solutions, and we are already experiencing high demand for the new implant in the US.
We believe the Osia 2 System has the opportunity to become the gold standard acoustics implant in our current
markets, more effectively competing with reconstructive surgery and is the right product to pursue geographic
expansion, with our Acoustics business today generating the majority of revenue from the US and UK.
Cochlear Limited Annual Report 2021 Our growth opportunity
Product indications
are broadening and
funding is expanding
Product indications and
funding are expanding as
payers increasingly recognise
the improved outcomes and
cost-effectiveness of our
implantable solutions.
Good hearing
is essential for
healthy ageing
Hearing loss is particularly
prevalent in people over
the age of 60, with one in
four suffering moderate or
higher hearing loss.17 There
is a growing understanding
of the importance of
properly treating hearing
loss in this age group. It
affects communication and
is associated with social
isolation, anxiety, depression
and cognitive decline.18
Opportunity to drive
The bone conduction
deeper penetration
of the bone
conduction segment
market is under-penetrated
and currently has limited
geographic reach. We have
developed a product that
we believe provides the
opportunity to drive deeper
category penetration.
Opportunity
Description
How we are responding
Cochlear implants started as a solution for people with a profound hearing loss, equivalent to a hearing loss
of greater than 90 decibels (dB). Advancements in the technology have driven significant improvements in
hearing outcomes for patients with our products today able to provide life-changing outcomes for people
with a severe or higher hearing loss (>70dB).
At the same time, there is a better understanding of the importance of properly treating hearing loss as we age
and a growing body of evidence supporting the cost-effectiveness of cochlear implants. These factors have
driven an expansion of indications and/or funding in many markets over the past few years, including the UK, US,
Japan, France and Belgium.
Our job is to continue to work with governments and payers to recognise the benefits of treating hearing loss so
we can continue to increase access to our products.
Cochlear implantation for seniors is an important trend, with hearing loss ranked as the leading cause of
global years lived with disability for people over the age of 70.19 We have been increasing our public advocacy
engagement, our investment in health economics, our market access capability and the collaborations we have
with the medical research community to build on the clinical evidence that demonstrates the effectiveness of
our products, particularly for seniors.
In 2018, we pledged to gift US$10 million over 10 years to the Johns Hopkins Bloomberg School of Public
Health to establish the ‘Cochlear Center for Hearing and Public Health’. The Center is the first of its kind at any
academic institution focused on addressing hearing loss as a global public health priority.
The Cochlear™ Osia® 2 System expands the Acoustics portfolio into the next generation of bone conduction
hearing solutions, providing a significant improvement in performance and aesthetics for bone conduction patients.
Pre-market trials have demonstrated significant improvements in outcomes for patients29 over traditional bone
conduction hearing solutions, and we are already experiencing high demand for the new implant in the US.
We believe the Osia 2 System has the opportunity to become the gold standard acoustics implant in our current
markets, more effectively competing with reconstructive surgery and is the right product to pursue geographic
expansion, with our Acoustics business today generating the majority of revenue from the US and UK.
23
Cochlear Limited Annual Report 2021 Our strategy
Our strategy is focused on improving awareness of and access to implantable
hearing solutions for people indicated for our products.
We are committed to maintaining our technology leadership position in the industry by investing in R&D to
improve hearing outcomes and expand reimbursement and indications for our implantable solutions. We aim to
grow the hearing implant market by growing awareness and access for implant candidates. And with a growing
recipient base, we are actively strengthening our servicing capability to provide products, programs and
services to support our lifetime relationship with recipients. In achieving our goals, we will be disciplined in our
investment, aiming to deliver consistent revenue and earnings growth over time.
Strategic priorities
Retain market leadership
Market-leading technology I World-class customer experience
Grow the hearing implant market
Awareness I Market access I Clinical evidence
Deliver consistent revenue & earnings growth
Invest to grow I Operational improvement I Strong financial position
In developing our strategy,
we have factored in the
shifting demographics of
our recipient base.
Over the last 10 years, there has
been a greater uptake of cochlear
implantation by older adults,
particularly seniors, as awareness of
the intervention has grown, and the
body of evidence builds connecting
good hearing with healthy ageing.
At the same time, funding has
expanded in emerging markets as
awareness of cochlear implants
grows and wealth increases, driving
implantation of children across the
emerging world.
s
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Growth is shifting to under-penetrated segments
Adults and
seniors in
developed markets
Greater uptake by adults
and seniors as awareness
grows and evidence
builds connecting hearing
with healthy ageing.
Children in
emerging markets
Funding expands in
emerging markets as
awareness of cochlear
implants grows and
wealth increases.
Children in developed markets
The intervention grows with the
introduction of neonatal screening,
growing reimbursement and improved
outcomes which leads to the expansion
of indications across many markets.
1980
1990
2000
2010
2020
24
Cochlear Limited Annual Report 2021
25
Cochlear Limited Annual Report 2021 Retain market leadership
We innovate to bring to market a range of implantable hearing solutions that
deliver a lifetime of hearing outcomes.
Cochlear has been the global leader in implantable hearing solutions for 40 years. The investment in R&D
aims to strengthen our leadership position through the development of market-leading technology. We
invest around 12% of sales revenue each year in R&D, with over $2 billion invested since listing.
We have a global innovation network with over 350 R&D employees across the globe. Primary R&D is
co-located with the Australian Hearing Hub in Sydney, with the ‘Cochlear Technology Centre’ in Belgium
focused on advanced innovation. We have over 100 research partners in over 20 countries and a global
network of design consultants and suppliers.
Our market-leading product & services portfolio
Innovations that make a difference to the moments that matter over time.
Cochlear implants
Acoustic implants
Benchmark in size, implant reliability and neural
interface, with proven perimodiolar advantage
Benchmark in performance
and aesthetics
Cochlear™ Nucleus®
Profile™ Plus implant
Slim Modiolar
electrode
Cochlear™ Osia® 2
System
Sound processors
Benchmark in size, smartphone connectivity and hearing performance
Cochlear™
Nucleus® 7
Sound Processor
Cochlear™
Nucleus® Kanso® 2
Sound Processor
Cochlear™
Baha® 6 Max
Sound Processor
26
Cochlear Limited Annual Report 2021 Convenience & confidence
Apps and rehabilitation tools aimed at improving ease of use and quality of life for
recipients
Nucleus, Baha & Osia Smart Apps
Cochlear™ CoPilot
Clinical & surgical support
Streamlining customer care for surgeons and clinicians
Custom Sound® Pro Fitting Software
Nucleus® SmartNav System
Telehealth solutions
Convenient, at-home testing for routine cochlear
implant checks outside the hearing clinic
Responsive &
convenient service
Cloud-based service reducing
time spent ‘off air’ when recipients
need a replacement processor
Remote Check solution
for cochlear implants
Cochlear™ Link
27
Not all products are available in all countries.Cochlear Limited Annual Report 2021 Grow the hearing implant market
We grow the market by transforming the way people understand and treat hearing
loss through awareness and access activities. Three key market segments have been
prioritised with strategies to improve awareness and access, which vary by segment.
Segment
Description
What are we doing
Children in
developed markets
Cochlear implantation has
been established as the
standard of care for newborns
across many developed
markets, with bilateral implants
indicated across most markets
as evidence supports the
benefit of binaural hearing.
Addressable market*
~130,000 people
Current penetration*
>80% under 3-year-old children
Adults and seniors in
developed markets
Adults and seniors in the
developed markets provide
the biggest opportunity for
us to address the unmet need
for hearing implants given the
large, and growing, market size
as the population ages and the
low levels of penetration.
Addressable market*
>6m people
Current penetration*
~3%
Children in
emerging markets
Cochlear’s emerging markets
business has been growing
rapidly as awareness of
cochlear implants increases
and wealth grows across many
emerging economies.
Addressable market*
>1.3m people
Current penetration*
<10%
28
Cochlear implants started as a solution for children with a profound hearing loss. Over the last 30 years, neonatal
screening has been successfully established across the developed world leading to high penetration levels.
The key priority for this segment is to maintain our leadership position while aiming to deepen our penetration
in a few markets where rates of implantation for newborns with severe or higher hearing loss, and uptake of
bilateral implantation, are below average.
There is also an opportunity to strengthen the treatment pathway for acquired or progressive hearing loss
in older children. Lack of screening for children who have progressive hearing loss in childhood means
that hearing loss often remains unidentified and without care. The WHO’s World Report on Hearing notes
the importance of hearing in education and says that the inclusion of ear and hearing care in school health
services is essential. It highlights pre-school and school children as a group ‘at risk’ and proposes that
screening and early intervention programs be put in place for this group as part of the holistic package of ear
and hearing care interventions it proposes all countries adopt.
According to the WHO, hearing loss is particularly prevalent in people over the age of 60, with 65%
experiencing hearing loss and one in four people suffering moderate or higher hearing loss. It affects
communication and is associated with social isolation, anxiety, depression and cognitive decline.14 The
segment is however challenging to penetrate as most candidates suffer from a progressive hearing loss
and, together with their care providers, either do not know about cochlear and acoustic implants or do not
understand the indications for them.
While penetration rates are currently very low, at around 3%, the seniors segment has been the fastest
growing segment for us over the past few years as awareness begins to improve. We have three programs for
driving growth of the adults and seniors segment which include:
• Direct-to-consumer (DTC) marketing – building awareness directly with candidates motivated to find a
• Hearing aid channel referrals – building a referral path from hearing aid and ENT clinics to cochlear and
• Standard of care initiatives – supporting initiatives to deliver a consistent treatment pathway for all adults
better solution for their hearing loss;
acoustic implants; and
with severe or higher hearing loss.
China has become a leading market for cochlear implants driven by a commitment from the government to
fund implants for children which has driven the development of clinical infrastructure. Most other markets
however remain under-penetrated. Our priorities for this segment are focused around market expansion with
activities targeted at:
• Building awareness – public education campaigns, direct-to-consumer marketing and hearing screening;
• Expanding funding – driven by the compelling health economics of implantation in children;
• Expanding our presence – distributor relationships combined with an expanding direct presence;
• Developing professional capability – surgeon training and audiology education; and
• Maximising penetration through a tiered product offering.
* Cochlear estimates of segment prevalence of severe or higher hearing loss.Cochlear Limited Annual Report 2021 Grow the hearing implant market
We grow the market by transforming the way people understand and treat hearing
loss through awareness and access activities. Three key market segments have been
prioritised with strategies to improve awareness and access, which vary by segment.
Segment
Description
What are we doing
Children in
developed markets
Cochlear implantation has
been established as the
standard of care for newborns
across many developed
markets, with bilateral implants
indicated across most markets
as evidence supports the
benefit of binaural hearing.
Adults and seniors in
Adults and seniors in the
developed markets
developed markets provide
the biggest opportunity for
us to address the unmet need
for hearing implants given the
large, and growing, market size
as the population ages and the
low levels of penetration.
Children in
emerging markets
Cochlear’s emerging markets
business has been growing
rapidly as awareness of
cochlear implants increases
and wealth grows across many
emerging economies.
Cochlear implants started as a solution for children with a profound hearing loss. Over the last 30 years, neonatal
screening has been successfully established across the developed world leading to high penetration levels.
The key priority for this segment is to maintain our leadership position while aiming to deepen our penetration
in a few markets where rates of implantation for newborns with severe or higher hearing loss, and uptake of
bilateral implantation, are below average.
There is also an opportunity to strengthen the treatment pathway for acquired or progressive hearing loss
in older children. Lack of screening for children who have progressive hearing loss in childhood means
that hearing loss often remains unidentified and without care. The WHO’s World Report on Hearing notes
the importance of hearing in education and says that the inclusion of ear and hearing care in school health
services is essential. It highlights pre-school and school children as a group ‘at risk’ and proposes that
screening and early intervention programs be put in place for this group as part of the holistic package of ear
and hearing care interventions it proposes all countries adopt.
According to the WHO, hearing loss is particularly prevalent in people over the age of 60, with 65%
experiencing hearing loss and one in four people suffering moderate or higher hearing loss. It affects
communication and is associated with social isolation, anxiety, depression and cognitive decline.14 The
segment is however challenging to penetrate as most candidates suffer from a progressive hearing loss
and, together with their care providers, either do not know about cochlear and acoustic implants or do not
understand the indications for them.
While penetration rates are currently very low, at around 3%, the seniors segment has been the fastest
growing segment for us over the past few years as awareness begins to improve. We have three programs for
driving growth of the adults and seniors segment which include:
• Direct-to-consumer (DTC) marketing – building awareness directly with candidates motivated to find a
better solution for their hearing loss;
• Hearing aid channel referrals – building a referral path from hearing aid and ENT clinics to cochlear and
acoustic implants; and
• Standard of care initiatives – supporting initiatives to deliver a consistent treatment pathway for all adults
with severe or higher hearing loss.
China has become a leading market for cochlear implants driven by a commitment from the government to
fund implants for children which has driven the development of clinical infrastructure. Most other markets
however remain under-penetrated. Our priorities for this segment are focused around market expansion with
activities targeted at:
• Building awareness – public education campaigns, direct-to-consumer marketing and hearing screening;
• Expanding funding – driven by the compelling health economics of implantation in children;
• Expanding our presence – distributor relationships combined with an expanding direct presence;
• Developing professional capability – surgeon training and audiology education; and
• Maximising penetration through a tiered product offering.
29
Cochlear Limited Annual Report 2021 Grow the hearing implant market
Developing a treatment pathway for adults
Standard of care initiatives aim to establish a consistent process for diagnosing
and referring adult cochlear implant candidates by all healthcare professionals.
Adults and seniors in the developed markets provide the biggest opportunity for us given the large, and
growing, market size as the population ages and the low levels of penetration. One of our challenges is that
there is no consistent treatment pathway to a cochlear implant for adults with severe or higher hearing loss. In
addition, there is low awareness of cochlear implant indications amongst key hearing health professionals – ear,
nose and throat (ENT) surgeons and hearing aid audiologists.
The development of a standard treatment pathway for care has many aspects and requires a co-ordinated effort
between industry, hearing health professionals and public policy makers. It’s a familiar journey for us, with the
development of cochlear implants as the standard of care for children being the driver of growth for us during
the 1990s and early 2000s. The key elements of that journey are highlighted in the chart below.
Development of cochlear implants as the standard of care
for children in the US
Clinical evidence supporting
the benefits of bilateral
implantation. By 2010, 50%
of children under 3 receive
two implants (70% by 2019)
Expanded
reimbursement for
public patients and
broadened
indications
Development of health economic data
supporting cost-effectiveness of cochlear
implants for children
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Research demonstrating the cost savings
(eg: attendance at mainstream schools) and
quality of life benefits from implantation
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S
U
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l
Adoption of universal
newborn hearing
screening from mid
1990s – mid 2000s
FDA approval for
implantation in children
from 12 months of age
(Cochlear's Nucleus 24) -
Nov00
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
First implant
Second implant
30
Cochlear Limited Annual Report 2021
The evidence is building to support the establishment of a clinical pathway for adults with growing recognition
that good hearing is an essential part of healthy ageing. We are also rapidly understanding that treating age-
related hearing loss is cost-effective.
In 2020 a global consensus on a minimum standard of care for treating adult hearing loss with a cochlear implant
was published in the leading journal JAMA Otolaryngology, the Journal of the American Medical Association.
The publication is an important step forward, providing the foundation for the development of formal clinical
practice guidelines in the coming years. It is anticipated that these guidelines for hearing loss professionals will
be important in building a clear and consistent referral path for adults from hearing aids to cochlear implants. In
the coming years, we will continue to support hearing health professionals in the development of formal clinical
practice guidelines.
We are making investments in long-term initiatives to develop a standard clinical pathway for adults that aims to
establish a more sustained referral model. These investments are geared to:
• Develop consistent guidelines to enable early identification and referral;
• Build a body of clinical and economic evidence that compels early adult referral and coverage; and
• Drive awareness and advocacy through hearing professionals.
The table below illustrates what good standard of care for adults would look like.
What standard of care looks like for adults
Links between good hearing and healthy ageing established
Links to cognitive decline and dementia are understood by all medical professionals
Primary care providers routinely assess hearing loss in older patients
Professionals know when to refer for a cochlear implant assessment
The hearing aid channel is educated and the referral process is simple for a cochlear implant
After-care is simple
31
Cochlear Limited Annual Report 2021 Deliver consistent revenue and
earnings growth
To deliver consistent revenue and earnings growth over time, we balance
maximising spending to grow the market with investment to maintain our
competitive position while ensuring we have agile, efficient and environmentally
responsible business processes to support our growth ambitions.
Investment priorities
Invest to
grow
Building awareness and access requires multi-year investment in sales, marketing and
R&D activities.
Aim: invest to grow, maintaining the net profit margin
Operational
improvement
Optimising cost of production strengthens our competitive position.
Aim: reinvest efficiency gains from growing scale into market growth activities
Strong financial
position
Strong cash flow generation funds investment in growth.
Aim: maintain the strong balance sheet position and target a dividend payout of around
70% of underlying net profit
Investment
priority
Invest to grow
We take a long-
term approach
to investing and
have invested in
growing the market
for implantable
solutions since
listing in 1995.
Consistent investment in sales and marketing
Growing R&D capability
Delivering stable net profit margins
Our investment in sales and marketing activities is building awareness of and
access to implantable solutions and driving market growth.
The increase in investment in selling, marketing & general expenses (SG&A) over
many years has supported sales force expansion and investment in awareness
building activities, particularly direct-to-consumer marketing initiatives, across a
growing number of markets.
The investment in R&D continues to strengthen our
We will continue to invest operating cash flows
leadership position through the development of
into market growth activities with the objective of
market-leading technology.
delivering consistent revenue and earnings growth
We have a wide range of fully featured products and
over the long term.
a broad patent portfolio that protects our intellectual
Through disciplined investment, we are targeting
property. Over $2 billion has been invested in R&D
to maintain the net profit margin, reinvesting any
since listing with 13% of sales revenue invested in
efficiency gains, currency or tax benefits into market
R&D in FY21.
growth activities.
32
Cochlear Limited Annual Report 2021 Revenue drivers
Cochlear implants
• Growing awareness and uptake by adults
and seniors
• Emerging market expansion
• New products driving market growth and
market share
Services
• Growing recipient base
• Greater connectivity and engagement with
recipients
• Next generation sound processor upgrades
Acoustics
• New products
• Market expansion led by Cochlear™ Osia® 2
System
Investment
priority
Invest to grow
We take a long-
term approach
to investing and
have invested in
growing the market
for implantable
solutions since
listing in 1995.
Consistent investment in sales and marketing
Growing R&D capability
Delivering stable net profit margins
Our investment in sales and marketing activities is building awareness of and
access to implantable solutions and driving market growth.
The increase in investment in selling, marketing & general expenses (SG&A) over
many years has supported sales force expansion and investment in awareness
building activities, particularly direct-to-consumer marketing initiatives, across a
growing number of markets.
The investment in R&D continues to strengthen our
leadership position through the development of
market-leading technology.
We have a wide range of fully featured products and
a broad patent portfolio that protects our intellectual
property. Over $2 billion has been invested in R&D
since listing with 13% of sales revenue invested in
R&D in FY21.
We will continue to invest operating cash flows
into market growth activities with the objective of
delivering consistent revenue and earnings growth
over the long term.
Through disciplined investment, we are targeting
to maintain the net profit margin, reinvesting any
efficiency gains, currency or tax benefits into market
growth activities.
33
* Excluding one-off and non-recurring items.Cochlear Limited Annual Report 2021 Deliver consistent revenue and
earnings growth
Disciplined use of capital
Stable gross margin
Capital employed
Operating cash flows have been primarily used to fund
dividends, capital expenditure and acquisitions.
The dividend policy has been to payout 70% of net profit
as dividends to shareholders since FY00.* Since listing, we
have cumulatively paid out around 70% of operating cash
flows as dividends.
Key acquisitions have been focused on building the core
implant business and include:
• Sycle – hearing aid practice management software
business (FY17)
• Otologics – implantable microphone technology (FY10)
• Brisbane manufacturing facility (FY07)
• Entific – bone conduction implant business (FY05)
The innovation fund has invested around $80 million in companies with novel
technologies that may, over the longer term, enhance or leverage our core technology.
The innovation fund includes investments in Saluda, Nyxoah, EpiMinder, Seer Medical
and Sensorion.
The gross margin has been relatively stable since listing.
Capital employed is comprised of three broad
We use our scale to generate efficiency gains to
reinvest back into market growth activities.
categories: Working capital (24%), which is primarily
inventory; Property, plant & equipment (21%) and
Intangibles & other (55%).
Property, plant & equipment includes our key
manufacturing equipment in Australia, Sweden,
Malaysia and China. Intangibles & other includes
goodwill from acquisitions and innovation fund
investments.
High return on capital employed (ROCE)
Quality operating cash flows
Conservative gearing levels
ROCE measures the cash return for each dollar invested in the business. We generate a high
ROCE reflecting our competitive position in the market and the high barriers to entry to the
cochlear implant industry which have proven to be robust over many decades.
The high ROCE is also a function of the relatively low level of tangible assets employed by
the business. Our competitive advantage is driven by our strong product and patent portfolio,
a result of investment in R&D over many years. As R&D investment is expensed through the
income statement, no value for this important asset is captured on the balance sheet.
One of the highlights of our financial history has been
We have a strong balance sheet. We are a growth
the conversion of reported profits to cash. There has
company that has, until FY20, been able to fund investing
been a strong and consistent correlation between
activities, dividends, capital expenditure and acquisitions
reported net profit and the operating cash flows
whilst maintaining conservative gearing levels.
generated by the business.*
A capital raising in FY20 was made to enhance liquidity in
response to the significant impact of an adverse litigation
judgement combined with the impact of COVID on sales
revenue.
Investment
priority
Operational
improvement
Disciplined capital
investment and
optimising cost
of production
strengthens our
competitive
position.
Investment
priority
Strong
financial
position
Strong free cash
flow generation
provides funding
for market growth
activities and R&D
as well as the
ability to reward
shareholders
with a growing
dividend stream.
34
Cochlear Limited Annual Report 2021 Disciplined use of capital
Stable gross margin
Capital employed
Operating cash flows have been primarily used to fund
dividends, capital expenditure and acquisitions.
The dividend policy has been to payout 70% of net profit
as dividends to shareholders since FY00.* Since listing, we
have cumulatively paid out around 70% of operating cash
flows as dividends.
Key acquisitions have been focused on building the core
implant business and include:
• Sycle – hearing aid practice management software
business (FY17)
• Otologics – implantable microphone technology (FY10)
• Brisbane manufacturing facility (FY07)
• Entific – bone conduction implant business (FY05)
The innovation fund has invested around $80 million in companies with novel
technologies that may, over the longer term, enhance or leverage our core technology.
The innovation fund includes investments in Saluda, Nyxoah, EpiMinder, Seer Medical
and Sensorion.
The gross margin has been relatively stable since listing.
We use our scale to generate efficiency gains to
reinvest back into market growth activities.
Capital employed is comprised of three broad
categories: Working capital (24%), which is primarily
inventory; Property, plant & equipment (21%) and
Intangibles & other (55%).
Property, plant & equipment includes our key
manufacturing equipment in Australia, Sweden,
Malaysia and China. Intangibles & other includes
goodwill from acquisitions and innovation fund
investments.
High return on capital employed (ROCE)
Quality operating cash flows
Conservative gearing levels
ROCE measures the cash return for each dollar invested in the business. We generate a high
ROCE reflecting our competitive position in the market and the high barriers to entry to the
cochlear implant industry which have proven to be robust over many decades.
The high ROCE is also a function of the relatively low level of tangible assets employed by
the business. Our competitive advantage is driven by our strong product and patent portfolio,
a result of investment in R&D over many years. As R&D investment is expensed through the
income statement, no value for this important asset is captured on the balance sheet.
One of the highlights of our financial history has been
the conversion of reported profits to cash. There has
been a strong and consistent correlation between
reported net profit and the operating cash flows
generated by the business.*
We have a strong balance sheet. We are a growth
company that has, until FY20, been able to fund investing
activities, dividends, capital expenditure and acquisitions
whilst maintaining conservative gearing levels.
A capital raising in FY20 was made to enhance liquidity in
response to the significant impact of an adverse litigation
judgement combined with the impact of COVID on sales
revenue.
Investment
priority
Operational
improvement
Disciplined capital
investment and
optimising cost
of production
strengthens our
competitive
position.
Investment
priority
Strong
financial
position
Strong free cash
flow generation
provides funding
for market growth
activities and R&D
as well as the
ability to reward
shareholders
with a growing
dividend stream.
35
* Disrupted in FY20 by the impact of an adverse litigation outcome and COVID. Dividends were suspended in March 2020 until trading conditions improve.Operating cash flow in FY20-21 excludes the cash impact of patent litigation expenses. Cochlear Limited Annual Report 2021 Business risks
Cochlear has a sound and robust risk management framework to identify, assess
and appropriately manage risks.
Our principal business risks are outlined below. These are risks that may materially adversely affect the business
strategy, financial position or future performance. It is not possible to identify every risk that could affect the
business and the actions taken to mitigate these risks cannot provide absolute assurance that a risk will not
materialise. Details of Cochlear’s risk management framework can be found in the Corporate Governance
Statement, available on the website.
Risk
Pandemics
Description and potential
consequences
As COVID has demonstrated, pandemics have
the potential to impact our markets as elective
surgeries may be deferred to reduce the strain on
healthcare systems. Travel restrictions, government
mandated shutdowns and potential supply chain
impacts could also have business impacts.
Strategies used to mitigate the risk
In addition to developed business continuity
and crisis management plans, our geographic
spread of customers may mitigate the impact
of a pandemic on our business.
Product innovation
and competition
Increased competition exposes us to the risk of
losing market share and lower average selling
prices. This risk may be exacerbated by failure to
produce innovative products and services. We
are also exposed to the risk that our products
are superseded by medical, biological and/
or technological advancements resulting
in alternative products or treatments being
commercialised which may impact new business.
Our active and continuous assessment of
markets (new and existing) informs our
strategy, operating plans and innovation
programs.
The creation and protection of intellectual
property is a key focus for us. In FY21, we
invested 13% of sales revenue in R&D, aimed
at retaining our market leadership position
and growing the hearing implant market.
Misappropriation
of Cochlear’s
know-how and
intellectual property
infringement
We are exposed to the risk that our proprietary
know-how may be misappropriated through
hacking of its systems, or by employees,
consultants or third parties who may have
access to systems. Our market share is at risk of
competitors accessing and using this information.
We are also exposed to allegations of infringement
by third parties including competitors which could
result in us paying damages and/or receiving
injunctions preventing us from selling our products
and/or paying royalties to continue selling.
Confidentiality agreements are in place with
staff and third parties with access to our
know-how. We limit access to key systems
by business need and monitor access by
individuals.
We have an increasing and evolving patent
portfolio across our technologies to assert
against competitors, and internal and external
legal resources to manage litigation, and our
internal product development processes
include ‘freedom to operate’ checks.
Medical device
regulations
Product quality
We operate in a highly regulated industry.
Medical devices and the information they
produce are strictly regulated in countries where
our products are sold. Failure to meet regulations
may result in product sanction or recall resulting
in loss of sales and reputational harm.
Regulatory uncertainty is assessed as part of
product development. We actively monitor
the regulatory environment with regulators
and incorporate requirements and changes
into our product quality assurance system.
Delivery of high quality and safe outcomes
for our customers is central to our ongoing
development of innovative product. As the
developer, manufacturer, marketer and
distributor, any failure in product quality might
lead to injury, litigation, liability, recall and
reputational harm.
Our focus on quality throughout the design,
testing, manufacture and post-market
monitoring of our products ensures high
standards of product safety and efficacy.
Effective collaboration with customers aligns
clinical processes and technology with
evidence-based practices. We also maintain
product liability insurance.
36
Cochlear Limited Annual Report 2021 Risk
Market access
Description and potential
consequences
The majority of our developed market customers
rely on a level of reimbursement from insurers
and government health authorities to fund their
purchases. Pressure on healthcare budgets globally
may lead to pressure on reimbursement levels.
Healthcare-related taxes by government agencies
could also impact candidates’ ability to access our
products.
Credit and currency We provide credit to a limited number
of governments, government-supported
universities and clinics or major hospital chains.
The extension of credit creates a risk that
borrowers fail to pay resulting in interrupted
cash flow and lower earnings.
Over 90% of our revenues and over 50% of
costs are denominated in currencies other
than Australian dollars. We bear exchange rate
risk from AUD fluctuation against primarily US
dollars, Euros, Japanese yen, Sterling, Swedish
kroner and Swiss francs. Long term permanent
changes in market rates may impact earnings.
Strategies used to mitigate the risk
We continue to work with reimbursement and
government agencies throughout the world to
emphasise the health and economic benefits
of cochlear and acoustic implants.
Credit risk is not significantly concentrated
and varies by location and customer type.
Credit and receivables management
(including identifying high risk customers
and potential restrictions on future trading)
is executed at a regional level, subject to
country limits set by the Chief Financial
Officer and overseen by the Audit & Risk
Committee. Monthly credit balances and
ageing are monitored by the Board.
Financial instruments are used to manage
foreign exchange risk in accordance with the
Board approved policy.
Interruption to
product supply
Our reliance on suppliers for key materials
and services carries inherent risk of delay and
disruption. This risk is distinct from that where
alternative materials/sources and regulatory
requirements make substitution costly, time-
consuming or commercially unviable. While
products are manufactured across six sites globally,
supply may be disrupted by a site becoming
inoperative. New manufacturing facilities require
regulatory approval for products to be saleable.
Such approval could take many months or years.
We work closely with our suppliers to mitigate
potential interruption or delay to supplies.
In addition, purchase quantities of inventory
are managed to avoid short term impacts.
Where appropriate, lifetime buys, strategic
raw materials purchases, alternate sources
and other supply chain interventions are
undertaken to mitigate production impacts.
We also review the business continuity plans
for manufacturing and maintains business
interruption insurance.
Privacy and
Information
security
We handle and store personal information,
including health information, for our customers and
employees. With expanding information privacy and
security regulations, we recognise its security as a
key element of our relationship with our customers.
We regularly assess our privacy governance
and information security controls to ensure
that when customer information is held it is
secure. Whilst we maintain cyber insurance
as part of our overall risk mitigation strategy,
our pro-active approach aims to ensure that
controls of these risks are prevalent.
Talent management We operate in a competitive environment in
relation to attracting and retaining scientific,
technology and engineering talent. The absence of
this talent may cause key positions to be unfilled,
impacting our ability to innovate and grow.
Talent management programs are in
place, both within Australia and in our key
international markets. These programs
develop the longer-term capabilities required
for us to achieve our strategic goals.
37
Cochlear Limited Annual Report 2021 Operational review
Business segment performance
$m
2021 2020
Cochlear implants (units)
36,456
31,662
Change %
(reported)
Ç 15%
Change %
(CC)*
Sales mix
Sales revenue
Cochlear implants
Services (sound processor upgrades and other)
Acoustics
Total sales revenue
898.6
438.5
156.2
817. 9
395.5
138.9
1,493.3
1,352.3
Ç 10%
Ç 11%
Ç 12%
Ç 10%
Ç 19%
Ç 19%
Ç 22%
Ç 19%
61%
29%
10%
100%
During FY21, we have been focused on ensuring we emerge from the pandemic in a stronger competitive
position, with our strategic priorities continuing to guide our investments. Over the past 12 months, we have
maintained our people and market presence, ensuring the health and safety of our employees while providing
ongoing support to our recipients, clinics and professional customers.
Our focus on long-term growth has continued with increasing levels of investment across R&D projects and
market growth activities. Despite the challenging trading conditions, new products have been successfully
launched across all product categories, with market share gains realised in many markets.
Cochlear implants
Cochlear implant units increased 15% to 36,456 units and sales revenue
increased 19% in CC to $898.6 million, driven by a combination of market
share gains, market growth and rescheduled surgeries from COVID
shutdowns. Compared to FY19, the last financial year unaffected by COVID,
units increased by 7% with sales revenue up 9% in CC.
While hospitals and clinics have adapted to operating during the pandemic,
we experienced variability in surgery rates across countries as infection waves
continued.
For developed markets, the pace of recovery varied across countries with
strong growth in the US, Japan and Korea and improving momentum in
Western Europe. Overall developed market unit volumes grew around 20%, an
increase of around 10% on FY19.
While there had been some concern that candidates would hesitate in
progressing to surgery during the pandemic, we have been pleased to see
surgeries progress across all age groups, with the mix of seniors’ surgeries
back to pre-COVID levels across most countries. The majority of clinics have
re-opened, and the new candidate pipeline has rebuilt quickly supported by
our direct-to-consumer activities.
The US, Japan and Korea delivered strong growth in sales revenue on last year, as well as on FY19. Growth was
driven by the combination of market share, market growth and rescheduled surgeries from the March/April
2020 shutdowns. Strong momentum follows successful new product launches and the introduction of a range
of connected care services, providing greater convenience and confidence to both professional customers and
recipients.
The US in particular is benefitting from the successful integration of a comprehensive suite of products and
services for customers over the last few years, from the leading implant portfolio to clinical support tools like
Cochlear Link and Remote Check, supported by the sales team. The investment has strengthened our capability,
broadened our reach and is reducing workloads for clinics.
38
* Constant currency (CC) removes the impact of exchange rate movements and foreign exchange (FX) contract gains/(losses) to facilitate comparability. See Notes on page 45 for further detail.Cochlear Limited Annual Report 2021
Our market position in Western Europe remains strong but surgery rates
have recovered more slowly than the US. Cochlear implant units grew
on FY20 but remained below FY19 levels, with periods of disruption
caused by COVID waves affecting both surgery rates and the candidate
assessments across many Western European countries.
For the emerging markets, unit volumes overall increased around 10%
on FY20 and were just above FY19 levels. Emerging markets experienced
an improving rate of surgeries albeit at a slower pace than the developed
markets. Surgeries in China are growing quickly due to strong private pay
demand. In other markets, parts of Eastern Europe and the Middle East
are recovering well, with volumes still materially lower in several markets
including India and Brazil.
Services (sound processor upgrades and other)
Services revenue increased 19% in CC to $438.5 million, up 5% in CC on
FY19, with improving momentum across the year. First and third quarter
revenue was impacted by lower clinical capacity for sound processor
upgrades, with new patients prioritised as COVID concerns limited clinic
capacity.
The Cochlear™ Nucleus® Kanso® 2 Sound Processor was launched in
October across the US and Europe, driving demand for upgrades,
representing around 30% of the sound processor mix in the US by June.
We invest to provide our recipients with a world-class customer
experience with increased connectivity and engagement. Cochlear
Family, the recipient membership program, provides us with the
opportunity to connect directly with recipients to provide service and
support. Over the last 12 months we have provided special edition
newsletters and webinar virtual events about COVID safety, with special
considerations for those living with a hearing device.
Membership continues to grow rapidly, increasing by 19% over the last 12
months, to now exceed 217,000 members with a 60% join rate for new
Cochlear™ Nucleus® implant recipients. An acceleration in recruitment
in recent years has been driven by a combination of direct outreach
programs and improvements in customer onboarding.
Acoustics
Acoustics revenue increased by 22% in CC to $156.2 million. Acoustics
revenue is largely generated from the US and the UK with the US recovering
quickly from COVID while the UK return to surgeries has been slower.
As a result, sales revenue continues to be below FY19 levels, down 8% in
CC, with improving momentum in the second half as new products were
launched.
Surgery volumes in the US have recovered quickly with strong demand for
the Cochlear™ Osia® 2 System. The Cochlear™ Baha® 6 Max Sound Processor
was launched in the fourth quarter and is driving strong demand for sound
processor upgrades.
Acoustic implant surgeries recommenced in the UK during the first quarter
with a slower rate of recovery as a result of COVID, with disruption again
during the third quarter as a result of rising COVID-related hospitalisations.
The Osia 2 System achieved CE Mark accreditation during the second half,
with the rollout commencing in a few Western European countries by June.
39
Cochlear Limited Annual Report 2021 Financial review
Profit and loss
$m
Sales revenue
Cost of sales
% gross margin
Selling, marketing and general expenses
Research and development expenses
% of sales revenue
Administration expenses
Operating expenses
Other income / (expenses)
FX contract gains / (losses)
EBIT (underlying)*
% EBIT margin*
Net finance expense
Income tax expense*
% effective tax rate
Underlying net profit*
% underlying net profit margin*
One-off and non-recurring items (after-tax):
Patent litigation-related tax & other
Innovation fund gains
Statutory net profit
Change %
(reported)
Change %
(CC)**
19%
25%
(1) pt
1%
6%
(2) pts
21%
5%
57%
10%
19%
(2) pts
(6%)
5%
(1) pt
20%
0%
60%
(6%)
93%
54%
51%
2021
2020
1,493.3
1,352.3
410.2
73%
444.1
195.0
13%
112.2
751.3
(5.9)
4.3
330.2
22%
8.4
85.1
26%
236.7
16%
59.0
30.8
326.5
344.4
75%
470.0
185.1
14%
93.8
748.9
(20.4)
(31.7)
206.9
15%
8.9
44.2
22%
153.8
11%
(416.3)
24.2
(238.3)
Sales revenue increased 10% (19% in CC) to $1,493.3 million and underlying net profit increased 54% to $236.7
million. The underlying net profit margin of 16% was well above last year and a little below the longer-term target
of 18%. Statutory net profit of $326.5 million includes $59.0 million in patent litigation-related tax and other
benefits and $30.8 million in innovation fund gains after-tax.
Key points of note:
• Cost of sales increased 19% (25% in CC) to $410.2 million with the gross margin declining by two percentage
points to 73% with around half of the decline currency related, the result of the strengthening of the Australian
dollar;
• Selling, marketing and general expenses declined 6% (up 1% in CC) to $444.1 million with continued
investment made in market growth activities, standard of care and market access initiatives. The re-
establishment of the short-term incentive provision was largely offset by COVID-related savings including
travel and conference expenses;
• Investment in R&D increased 5% (6% in CC) to $195.0 million with continued investment made in key R&D
projects and development of the pipeline;
• Administration expenses increased 20% (21% in CC) to $112.2 million and includes the re-establishment of
the short-term incentive provision, significant increases in insurance costs and increased depreciation and IT
expenses;
40
* Excluding one-off and non-recurring items ** Constant currency (CC) removes the impact of exchange rate movements and FX contract gains/(losses) to facilitate comparability. See Notes on page 45 for further detail.Cochlear Limited Annual Report 2021
• Net finance expenses declined 6% to $8.4 million and includes $6.6 million in expenses relating to leasing
accounting standard AASB16. Net finance expense (excluding the lease-related expense) declined 36% to
$1.8 million with the business benefitting from lower debt, lower interest rates on debt and interest income on
cash deposits from the March 2020 capital raising; and
• The effective tax rate for underlying net profit was 26%.
One-off and non-recurring items
$m
Pre-tax
Tax impact
Post-tax
Patent litigation-related tax & other benefits:
ATO ruling on tax deductibility of litigation expenses
Withholding tax associated with ATO ruling
FX gains associated with balance sheet items
Patent litigation-related tax & other benefits (total)
Innovation fund gains
Total
$89.8 million in one-off gains after-tax includes:
-
(29.6)
23.2
(6.4)
50.3
43.9
63.5
8.9
(7.0)
65.4
(19.5)
45.9
63.5
(20.7)
16.2
59.0
30.8
89.8
• $59.0 million in patent litigation-related tax & other benefits after-tax which includes a $63.5 million tax
benefit following the receipt of a private ruling from the Australian Tax Office (ATO) in December 2020 which
clarified the deductibility of elements of the patent litigation expense treated as non-deductible at 30 June
2020; $20.7 million in withholding tax payable as a consequence of the ATO ruling; and $16.2 million in FX
gains on balance sheet items related to the patent litigation since 30 June 2020; and
• Innovation fund gains after-tax includes a $23.5 million gain from the revaluation of Nyxoah following its
listing in September, and a $12.9 million gain from the revaluation of the EpiMinder shareholding following a
financing round and $1.2 million in equity accounted losses relating to Nyxoah.
41
Cochlear Limited Annual Report 2021
Financial review
Cash flow
$m
EBIT (underlying)
Depreciation and amortisation
Changes in working capital and other
Cash impact of patent litigation expense
Net interest paid
Income taxes paid
Operating cash flow
Capital expenditure
Other net investments
Free cash flow
Proceeds from issue of shares
Dividends paid
Other
Change in net cash – increase / (decrease)
Free cash flow increased $482.8 million to $180.3 million.
Key points of note:
2021
330.2
79.5
(11.2)
(104.4)
(8.4)
(14.4)
271.3
(72.6)
(18.4)
180.3
2.4
(75.6)
0.5
107.6
2020
206.9
77.5
66.9
(420.1)
(8.9)
(80.1)
(157.8)
(130.5)
(14.2)
(302.5)
1,081.9
(193.7)
(25.7)
560.0
Change
123.3
2.0
(78.1)
315.7
0.5
65.7
429.1
57.9
(4.2)
482.8
(1,079.5)
118.1
26.2
(452.4)
• Improved trading conditions following COVID shutdowns resulted in a $123.3 million improvement in
underlying EBIT;
• The $104.4 million cash outflow is the US$75 million in prejudgment interest and attorneys’ fees resulting from
the AMF judgment;
• Income taxes paid of $14.4 million includes the benefit of a $55.0 million tax refund resulting from an
overpayment of tax instalments paid in FY20; and
• Capital expenditure (capex) decreased by $57.9 million to $72.6 million, reflecting stay-in-business capex. The
decline in capex also reflects the completion of major projects in FY20 including the development of the new
China manufacturing facility and fit out of the new Denver office.
42
Cochlear Limited Annual Report 2021 Capital employed
$m
Trade receivables
Inventories
Less: Trade payables
Working capital
Working capital / sales revenue
Property, plant and equipment
Intangible assets
Investments & other financial assets
Other net liabilities
Capital employed
2021
262.1
216.1
(202.9)
275.3
18%
239.5
402.8
226.8
(7.3)
1,137.1
2020
211.4
223.8
(155.3)
279.9
21%
230.5
410.3
99.9
(76.1)
944.5
Change
50.7
(7.7)
(47.6)
(4.6)
9.0
(7.5)
126.9
68.8
192.6
Capital employed increased by $192.6 million to $1,137.1 million since June 2020 reflecting an increase in
investments and reduction in other net liabilities.
Key points of note:
• The $126.9 million increase in investments reflects the $18.4 million increase in investment in the innovation
fund as well as the $101.8 million increase in the fair value of EpiMinder and Nyxoah; and
• Other net liabilities decreased $68.8 million reflecting movements across a number of other assets and
liabilities. The $107.0 million reduction in provisions reflects the payment of US$75 million in prejudgment
interest and attorneys’ fees provided for in FY20 and paid in the first half. Net tax liabilities increased by $42.7
million reflecting deferred tax liabilities of gains made in innovation fund investments.
43
Cochlear Limited Annual Report 2021
Financial review
Net cash
$m
Cash, cash equivalents and term deposits
Less: Loans and borrowings
Current
Non-current
Total loans and borrowings
Net cash
Net cash increased by $107.6 million to $564.6 million.
Dividends
$m
Interim ordinary dividend (per share)
Final ordinary dividend (per share)
Total ordinary dividends (per share)
% payout ratio (based on underlying net profit)
% franking
2021
609.6
-
(45.0)
(45.0)
564.6
2021
$1.15
$1.40
$2.55
71%
0%
Change
(320.4)
393.1
34.9
428.0
107.6
Change %
(28%)
59%
2020
930.0
(393.1)
(79.9)
(473.0)
457.0
2020
$1.60
-
$1.60
60%
100%
A final dividend of $1.40 per share has been determined, taking full year dividends to $2.55, an increase of 59%
and representing a payout of 71% of underlying net profit.
The interim and full year dividends are unfranked. The franking balance was depleted due to losses incurred by
the business in FY20.
The ex-dividend date is 23 September 2021. The record date for calculating dividend entitlements is 24
September 2021 with the final dividend expected to be paid on 18 October 2021.
44
Cochlear Limited Annual Report 2021
Notes
Forward-looking statements
Cochlear advises that this document contains forward-looking statements which may be subject to significant
uncertainties outside of Cochlear’s control. No representation is made as to the accuracy or reliability of
forward-looking statements or the assumptions on which they are based. Actual future events may vary from
these forward-looking statements and it is cautioned that undue reliance is not placed on any forward-looking
statements.
Non-International Financial Reporting Standards (IFRS) financial measures
Cochlear uses non-IFRS financial measures to assist readers in better understanding Cochlear’s financial
performance. Cochlear uses three non-IFRS measures in this document: Sales revenue, Underlying net profit
and Constant currency. The Directors believe the presentation of these non-IFRS financial measures are useful
for the users of this document as it reflects the underlying financial performance of the business. Each of these
measures is described below in further detail including reasons why Cochlear believes these measures are of
benefit to the reader.
These non-IFRS financial measures have not been subject to review or audit. However, Cochlear’s external
auditor has separately undertaken a set of procedures to agree the non-IFRS financial measures disclosed to the
books and records of the Group.
Sales revenue
Sales revenue is the primary revenue reporting measure used by Cochlear for the purpose of assessing revenue
performance of the Consolidated Entity. It represents total revenue excluding foreign exchange contract gains/
losses on hedged sales.
Underlying net profit
Underlying net profit allows for comparability of the underlying financial performance by removing one-off
and non-recurring items. The determination of items that are considered one-off or non-recurring is made
after consideration of their nature and materiality and is applied consistently from period to period. Underlying
net profit is used as the basis on which the dividend payout policy is applied. The Financial Review section
includes a reconciliation of Underlying net profit (non-IFRS) to Statutory net profit (IFRS) which details each item
excluded from Underlying net profit.
Constant currency
Constant currency removes the impact of foreign exchange rate movements to facilitate comparability of
operational performance for Cochlear. This is done by converting the prior comparable period net profit of
entities in the Group that use currencies other than Australian dollars at the rates that were applicable to the
current period (translation currency effect) and by adjusting for current year foreign currency gains and losses
(foreign currency effect). The sum of the translation currency effect and foreign currency effect is the amount by
which EBIT and net profit is adjusted to calculate the result at constant currency.
Reconciliation of constant currency net profit to reported net profit
$m
Underlying net profit
FX contract movement
Spot exchange rate effect to sales revenue and expenses*
Balance sheet revaluation*
Underlying net profit (CC)
One-off net gains / (losses)
Statutory net profit / (loss) (CC)
2021
236.7
236.7
89.8
326.5
2020
Change %
153.8
36.0
(23.8)
(9.0)
157.0
(392.1)
(235.1)
54%
51%
45
* FY21 actual v FY20 at FY21 rates.Cochlear Limited Annual Report 2021
Governance
Cochlear’s Board and executive team are committed to high standards of
corporate governance and transparency, with a focus on preserving and enhancing
our reputation and long-term sustainability.
The Board is responsible for overall corporate governance including adopting appropriate policies and
procedures designed to ensure that Cochlear is properly managed to create, protect and enhance shareholder
value. The Board and its committees regularly review governance arrangements and practices to maintain
compliance with regulatory requirements and industry practice, and to ensure that they continue to support
business objectives. Directors, senior executives and employees are expected to act ethically, lawfully and
responsibly at all times.
Since the outbreak of COVID, we have been guided by our Mission in establishing the following principles to
manage the business:
• ensure the health and safety of our employees;
• provide ongoing support to our recipients, clinics and professional customers; and
• maintain the financial health of the Company.
The Board considers that Cochlear’s corporate governance practices have been consistent with the
recommendations contained in the 4th edition of the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations released on 27 February 2019 (ASX Principles and
Recommendations) throughout the reporting period from 1 July 2020 to 30 June 2021.
Further details are set out in the Corporate Governance Statement, which outlines key aspects of our corporate
governance framework and practices, which is available at the ‘Investors’ or ‘Investor Centre’ section of our
website www.cochlear.com.
Structure and composition of the Board
The Board is committed to ensuring its composition continues to include directors who bring an appropriate mix
of skills, experience, knowledge, expertise and diversity, including gender diversity, required to discharge the
Board’s duties.
The tenure profile, represented by the length of service of each director on the Board, is appropriately balanced
such that Board succession and renewal planning is managed over the medium to longer term. The directors
possess an appropriate mix of skills, experience, knowledge, expertise and diversity to enable the Board to
discharge its responsibilities, including overseeing the delivery of the Company’s strategic priorities.
Roles and responsibilities of the Board and management
The role of the Board is to set Cochlear’s strategic direction for the creation, maintenance and enhancement
of long-term sustainable value, to guide and monitor the management of the Company and its implementation
of the strategy and to oversee good governance practice. The Board aims to protect and enhance the interests
of Cochlear’s shareholders, while taking into account the interests of other stakeholders, including employees,
customers, suppliers and the wider community.
In performing its role, the Board is committed to a high standard of corporate governance practice and to
fostering a culture of compliance which values ethical, lawful and responsible behaviour, personal and corporate
integrity, accountability, transparency and respect for others. The Board has a charter which clearly sets out
its role and responsibilities and describes those matters expressly reserved for the Board’s determination. The
Board Charter is available on our website.
The CEO & President has responsibility for the implementation of Cochlear’s strategic objectives, operating
within the risk appetite set by the Board and for the day-to-day management of Cochlear. The CEO & President
is supported in this function by the executive team.
46
Cochlear Limited Annual Report 2021 Board’s key responsibilities
Strategy
Financial
oversight
Set strategic direction, provide input into management’s development of corporate
strategy and oversee management’s implementation of strategy.
Approve and monitor the progress of major capital expenditure, capital management,
operational budgets, acquisitions and divestments and dividend policy.
Financial and
other reporting
Approve Cochlear’s interim and annual financial statements and oversee the integrity of
Cochlear’s accounting and corporate reporting systems.
Corporate
governance
Review, ratify and monitor the effectiveness of Cochlear’s systems of governance, risk
management and internal compliance and control, legal compliance, codes of conduct
and other corporate governance policies and practices.
Risk management
framework
Satisfy itself that Cochlear has in place an appropriate risk management framework. Set
the risk appetite within which the Board expects the CEO & President and the Executive
team to operate.
Board
performance and
composition
Leadership
selection
Succession and
remuneration
planning
Sustainability
Undertake regular external and independent evaluation of Board performance. Review
annually the composition of the Board.
Evaluate the performance, and selection, of the CEO & President.
Plan for Board, CEO & President and Executive succession and remuneration and set
non-executive director remuneration.
Consider the social, ethical and environmental impact of Cochlear’s activities and
operations. Set standards and monitor compliance with Cochlear’s sustainability
responsibilities and practices.
Material
transactions
Approve any unbudgeted expenditure and capital transactions, outside the authority
delegated to management.
Board and Board committee membership as at 30 June 2021
Chair
Member
Board
Audit and Risk
Committee
Medical
Science
Committee
People
& Culture
Committee
Technology
and Innovation
Committee
Nomination
Committee
Director
Rick Holliday-Smith
Dig Howitt
Yasmin Allen
Andrew Denver
Glen Boreham, AM
Alison Deans
Prof Bruce Robinson, AC
Abbas Hussain
Sir Michael Daniell, KNZM
Christine McLoughlin, AM
47
Cochlear Limited Annual Report 2021
Governance
Board of directors
Board composition
As at 30 June 2021
Board gender diversity
Board gender diversity
30%
70%
Male
Female
Board tenure
Board tenure
33%
33%
11%
22%
0-3 years
6-9 years
3-6 years
9+ years
Rick Holliday-Smith
Chairman
Appointed to the Board
1 March 2005 and retiring on
20 August 2021
Chairman of the Nomination
Committee. Member of the Audit &
Risk and People & Culture Committees.
Background
Global executive and leadership
experience in capital markets and
derivatives, and a background in
venture capital activities. Former
President of NationsBank-CRT, Chicago
and Managing Director of Hong Kong
Bank Limited, London.
Other boards
Non-executive Chairman, QBiotics and
member of the Macquarie University
Faculty of Business and Economics
Advisory Board.
Former directorships
Chairman, ASX Limited, Snowy Hydro
Limited and SFE Corporation Limited.
Director, Servcorp Limited, St George
Bank Limited, Exco Resources NL, DCA
Group Limited and MIA Group Limited.
Qualifications
BA (Hons), FAICD, CA
Dig Howitt
CEO & President and Managing
Director
Appointed to the Board
14 November 2017 and as
CEO & President 3 January 2018
Member of the Medical Science and
Technology & Innovation Committees.
Background
Joined Cochlear in 2000 and has
a wealth of experience across the
Company in roles including Chief
Operating Officer, SVP, Manufacturing
and Logistics and President, Asia
Pacific. Prior to joining Cochlear,
worked for Boral and Boston Consulting
Group. Dig is a member of the
Champions of Change STEM group.
Appointed as President of Cochlear
on 31 July 2017 and became CEO &
President on 3 January 2018.
Other boards
Director, QPBT Pty Ltd.
Qualifications
BE (Hons), MBA
48
Board tenure chart excludes Managing Director.Cochlear Limited Annual Report 2021 Yasmin Allen
Non-executive Director
Andrew Denver
Non-executive Director
Glen Boreham, AM
Non-executive Director
Appointed to the Board
1 February 2007
Member of the Audit & Risk, Medical
Science, Technology & Innovation and
Nomination Committees.
Background
Extensive experience in the life sciences
industry. Former Managing Director of
Memtec Limited and President Asia for
Pall Corporation.
Other boards
Chairman, SpeeDx and Director, Vaxxas
and QBiotics.
Former directorships
Executive Chairman, Universal
Biosensors.
Qualifications
BSc (Hons), MBA, FAICD
Appointed to the Board
1 January 2015
Chair of the People & Culture
Committee. Member of the Audit &
Risk, Nomination and Technology &
Innovation Committees.
Background
Led organisations in information
technology, new media and the
creative industries through periods of
rapid change and innovation. Former
Managing Director of IBM Australia and
New Zealand.
Other boards
Director, Southern Cross Media Group
and Link Group. Strategic Advisor, IXUP.
Former directorships
Data#3. Chairman of Screen Australia,
Advance (Global Australian Network),
Business School and Industry Advisory
Board for the University of Technology,
Sydney and Advisory Board IXUP.
Qualifications
BEc, FAICD
Appointed to the Board
2 August 2010
Chair of the Audit & Risk Committee.
Member of the People & Culture,
Nomination and Technology &
Innovation Committees.
Background
Extensive career in investment banking
with senior roles in strategic analysis
and corporate advice. Former Vice
President of Deutsche Bank AG,
Director of ANZ Investment Bank and
Associate Director of HSBC London.
Other boards
Chair of Australian Federal Government
Steering Group for Digital Skills
Organisation. Director, Santos Limited,
ASX Limited and National Portrait
Gallery. Member of the George
Institute for Global Health Board.
Chairman, Advance (Global Australian
Network), Acting President, Australian
Government Takeovers Panel and
Chairman, Faethm.org.
Former directorships
Insurance Australia Group Limited.
National director of the Australian
Institute of Company Directors.
Member of The Salvation Army
Advisory Board. Chair of Macquarie
Specialised Asset Management.
Qualifications
BCom, FAICD
49
Cochlear Limited Annual Report 2021 Governance
Board of directors
Alison Deans
Non-executive Director
Prof Bruce Robinson, AC
Non-executive Director
Abbas Hussain
Non-executive Director
Appointed to the Board 1
January 2015 and appointed as
Chair effective 21 August 2021
Chair Technology & Innovation
Committee until 19 August 2021.
Member of the Audit & Risk,
Nomination and People & Culture
Committees.
Background
Extensive experience leading
technology-enabled businesses across
e-commerce, media and financial
services. Former Chief Executive
Officer of netus, Hoyts Cinemas, ecorp
and eBay Australia and New Zealand.
Other boards
Director, Ramsay Health Care Limited
and Deputy Group Pty Ltd. Senior
Advisor to McKinsey & Company.
Member of Investment Committee,
CSIRO Innovation fund (MainSequence
Ventures) and member of AICD
Corporate Governance Committee.
Director of SCEGGS Darlinghurst
Limited and The Observership Program.
Former directorships
Westpac Banking Corporation,
Insurance Australia Group Limited and
Social Ventures Australia.
Qualifications
BA, MBA, GAICD
Appointed to the Board 13
December 2016
Chair of Medical Science Committee.
Member of the Nomination, People &
Culture and Technology & Innovation
Committees.
Background
Over 20 years’ leadership experience as
an academic physician/scientist across
research, healthcare and medicine, and
tertiary education. Former Dean, The
University of Sydney’s Sydney Medical
School, Head of Medicine at Sydney’s
Royal North Shore Hospital and Head of
the Cancer Genetics Laboratory at the
Kolling Institute for Medical Research.
Other boards
Chairman, National Health and
Medical Research Council. Director,
MaynePharma, QBiotocs and
Ecofibre. Director, Woolcock Institute
of Medical Research and Senior
Advisor to McKinsey & Company and
MinterEllison.
Former directorships
Chairman, Medical Benefits Schedule
Review Taskforce. Director, Lorica
Health Pty Limited, Firefly and Digital
Health Agency CRC.
Qualifications
MD, MSc, FRACP, FAAHMS, FAICD
Appointed to the Board 1
December 2018 and retired on
20 July 2021
Member of the Nomination, Medical
Science and Technology & Innovation
Committees.
Background
Over 30 years’ global experience in the
pharmaceutical industry with significant
experience in building relationships
with professionals within the healthcare
industry. Former Global President,
Pharmaceuticals at GlaxoSmithKline.
Other boards
Director, Teva Pharmaceuticals and
TARGTEX. Senior Advisor, CellResearch
Corp and C-Bridge Group, Hikma PLC
and Advisor to Indegene Inc.
Former directorships
CSL Limited and Immunocore Limited
Qualifications
BSc (Hons)
50
Cochlear Limited Annual Report 2021 Sir Michael Daniell, KNZM
Non-executive Director
Christine McLoughlin, AM
Non-executive Director
Donal O’Dwyer
Non-executive Director
Appointed to the Board
1 January 2020
Chair of Technology & Innovation
Committee effective 20 August 2021.
Member of the Nomination, Medical
Science and Technology & Innovation
Committees.
Background
Over 40 years’ experience in the
medical device industry with extensive
executive leadership experience.
Former Managing Director and CEO of
Fisher & Paykel Healthcare Corporation
Limited responsible for the global
business and operations including the
design, manufacture and marketing of
innovative products and systems for
use in respiratory care, acute care and
treatment of obstructive sleep apnea.
In June 2021, Sir Michael was made a
Knight Companion of the New Zealand
Order of Merit for his services to
business, healthcare and governance.
Other boards
Director, Fisher & Paykel Healthcare
Corporation Ltd, Council member,
The University of Auckland, Director,
Tait International Limited, Chair, New
Zealand Medical Technology Centre of
Research Excellence, Director, Medical
Research Commercialisation Fund.
Qualifications
BE (Hons), Electrical, CMInstD (NZ)
Appointed to the Board
1 November 2020
Member of the Audit & Risk, People &
Culture and Nomination Committees.
Background
Ms McLoughlin has served on
the boards of a number of ASX50
companies and is a highly respected
company director with domestic
and international experience. She
has had wide ranging experience
covering health, insurance, resources,
infrastructure and financial services.
In June 2021, Ms McLoughlin was
awarded a Member of the Order
of Australia in the Queen’s Birthday
Honours for her services to business,
the not-for-profit sector and women.
Other boards
Chairman of the Suncorp Group
Limited, Chancellor of the University
of Wollongong. Chairman, Destination
NSW. Australian Private Sector
Representative, G20 EMPOWER
Council.
Former directorships
NIB Holding, the McGrath Foundation
and Venues NSW.
Qualifications
BA, LLB (Hons), FAICD
Appointed to the Board
1 August 2005 and retired on
20 October 2020
Member of the Audit & Risk, Medical
Science, Nomination and Technology &
Innovation Committees.
Background
Executive experience in global general
management of healthcare products
and medical devices. Former worldwide
President of Cordis Cardiology (a
Johnson & Johnson company) and
President of Baxter’s Cardiovascular
Group, Europe.
Other boards
Director, Mesoblast Limited, Fisher &
Paykel Healthcare and NIB Holdings
Ltd. Chairman of Endoluminal Sciences
and Director Cordis Asset Management
Pty Ltd.
Former directorships
Chairman, CardieX (formerly Atcor
Medical).
Qualifications
BE Civil, MBA
51
Cochlear Limited Annual Report 2021 Governance
Executive team
Executive team & senior
leader composition
As at 30 June 2021
Executive team
gender diversity
9%
91%
Senior leaders
gender diversity
38%
62%
Dig Howitt
CEO & President
Stu Sayers
Chief Financial Officer
Dig joined Cochlear in 2000 and has
a wealth of experience across the
Company in roles including Chief
Operating Officer, President, Asia
Pacific and SVP, Manufacturing and
Logistics.
Prior to joining Cochlear, Dig worked
at Boston Consulting Group and held a
General Management role at Boral.
Dig is a member of the Champions of
Change Coalition, STEM group. He
was appointed President of Cochlear
on 31 July 2017 and became CEO &
President on 3 January 2018.
Stu was appointed as Chief Financial
Officer in February 2021. Stu joined
Cochlear in July 2016 as inaugural
President, Services.
Stu has a strong financial background
and a wealth of experience in
establishing and building customer
focused technology and online
businesses. Stu ran Amazon’s
subsidiary Audible in Asia Pacific,
as well as E*TRADE and Yahoo!7
in Australia and New Zealand. He
previously held senior roles with ANZ
and McKinsey. Stu has a Bachelor of
Economics (Honours in Accounting)
from the University of Sydney and an
MBA from Wharton.
Qualifications
BEc (Hons), MBA
52
Male
Female
Executive team tenure
Qualifications
BE (Hons), MBA
36%
18%
27%
18%
0-5 years
11-15 years
6-10 years
15+ years
Cochlear Limited Annual Report 2021 Jan Janssen
Chief Technology Officer
Tony Manna
President, Americas Region
Richard Brook
President, EMEA
Tony is responsible for the
development and execution of the
strategic direction for our North
America operations.
Tony joined Cochlear in 2005
and has over 30 years’ medical
device experience, including senior
commercial management roles at
BEI Medical and Gyrus Medical. Prior
roles in Cochlear include VP, Sales
USA, General Manager, Cochlear
Bone Anchored Solutions, USA and
President, Cochlear Bone Anchored
Solutions, Sweden.
Qualifications
BS EET
Richard is responsible for the
development and execution of the
strategic direction for all our operations
in Europe, the Middle East and Africa
(EMEA).
Before joining Cochlear in 2003,
Richard held senior roles in Guidant
Corporation and Alaris Medical
Systems. He has over 30 years’
experience in the medical device
industry.
Qualifications
BSc Management, MBA
Jan joined Cochlear in 2000 and
was appointed Senior Vice President
Research & Development in 2005.
Jan leads a team of over 450 highly
qualified engineers and scientists
who implement the R&D strategy
with responsibility for identifying and
developing cutting‐edge technology
and bringing these innovations through
to commercialisation.
In 2017 Jan was appointed Chief
Technology Officer and took on the
additional accountability for Business
Development. Since 2019 he has also
been accountable for Quality and
Regulatory Affairs.
Jan holds 10 granted patents in
the field of implantable hearing
technology.
Qualifications
MScEE
53
Cochlear Limited Annual Report 2021
Governance
Executive team
Anthony Bishop
President, Asia Pacific
& Latin American Regions
Dean Phizacklea
Senior Vice President,
Global Strategic Marketing
David Hackshall
Chief Information Officer
Anthony was appointed President,
Asia Pacific in July 2016 and took on
responsibility for Latin America in June
2021. Anthony is responsible for the
development and execution of the
strategic direction for all our operations
in Australia, Asia, the South Pacific and
Latin America.
Prior to Cochlear, Anthony spent 21
years at Johnson & Johnson Medical
in various roles including marketing,
sales and general management
around the world including Managing
Director, Johnson & Johnson Medical,
Australia/New Zealand.
Qualifications
BBus (Hons), MManagement, GAICD
Dean joined Cochlear in June 2016.
Dean has responsibility for product
marketing and commercialisation,
consumer marketing, innovation,
market access, market insights and
corporate communications.
Dean has more than 20 years’
experience in medical devices and
pharmaceuticals, covering a range
of senior commercial roles in the
US, Japan, Europe and Australia.
Prior to joining Cochlear, Dean
led Global Strategic Marketing for
Abbott Diabetes Care. Other roles
include General Manager for Abbott’s
pharmaceutical and diabetes care
businesses in Australia/New Zealand
and commercial roles in Asia with
AstraZeneca.
Qualifications
BSc Microbiology, MBA
David joined Cochlear in July 2015
as Cochlear’s first Chief Information
Officer and has global responsibility
for the Company’s information
technology strategy and management.
David’s focus is to ensure Cochlear
has the platforms in place to deliver
and drive growth. This capability is
critical in connecting Cochlear with
both professionals and recipients and
evolving Cochlear into both a business-
to-business as well as business-to-
customer organisation.
Prior to Cochlear, David was Chief
Information Officer at Wesfarmers
Insurance Ltd and brings over 15 years
of executive experience across the
communications, logistics and finance
sectors.
Qualifications
DipFN, MIT, MBA
54
Cochlear Limited Annual Report 2021
Greg Bodkin
Senior Vice President, Supply
Chain & Operational Excellence
Jennifer Hornery
Senior Vice President,
People & Culture
Brian Kaplan
Senior Vice President, Clinical
Strategy and Innovation
Greg has functional responsibility for
new product industrialisation, sourcing
& procurement, global manufacturing,
and logistics. These functions enable
the technologies developed in design
and development to be supplied as
commercial products in Cochlear’s
global markets. In addition, he leads
the management of Cochlear’s Global
Property, facilities and corporate
procurement functions.
Greg joined Cochlear in 2007 as
Head of Supply with 20 years’
prior experience in supply chain
management and operations
consulting positions, including
appointments at Taylor Ceramic
Engineering, Warman International
Ltd, Weir Minerals PLC and National
Australia Bank.
Qualifications
BE (Hons), MComm (UNSW)
Jennifer joined Cochlear in 2008
working in senior HR business
partnering roles until her appointment
as SVP People & Culture in 2017. Her
focus is to ensure the right strategic
capabilities, organisation and culture
are in place to support Cochlear’s
performance and growth aspirations.
Prior to Cochlear, Jennifer worked
in commercial, finance, strategy and
HR leadership roles across a number
of industries in Australia and the US,
including senior positions at Campbell
Arnott’s and Booz & Company.
Qualifications
BComm, MBA, GAICD
Brian joined Cochlear in 2016 and
manages clinical strategy and
innovation for Cochlear. He is
responsible for the clinical data to
support present and future products
and services. Brian dedicates two-
thirds of his time to his role at Cochlear,
while continuing to direct a cochlear
implant surgical practice at the Greater
Baltimore Medical Center.
Brian’s past research interests have
included hearing loss, balance
disorders, and hair cell regeneration.
His current practice focuses on
adult and paediatric otology, with an
emphasis on hearing restoration. Brian
is board-certified in otolaryngology
and is a Fellow of the American
College of Surgeons.
Qualifications
BNeuroSci, BA, MD, FACS
55
Cochlear Limited Annual Report 2021
Remuneration report
Letter from the Chair of the People & Culture
Committee (P&CC)
Dear Shareholders
On behalf of the Cochlear Board, I am pleased to present the FY21 Remuneration report where we outline our remuneration
strategy, summarise the performance outcomes for FY21 and detail the associated remuneration outcomes for key
management personnel.
In response to the global pandemic, several measures were taken by the Board at the end of FY20 to adjust the short‐term
incentive (STI) plan measures for FY21 to reflect higher levels of financial uncertainty. This change included refocusing the STI
performance measures to have a greater weighting on the achievement of strategic measures – to ensure that in a year where
there was still a significant level of volatility with setting clear financial targets, executives were able to focus on:
strengthening our competitive position;
investing for long‐term growth; and
managing costs to ensure reasonable recovery and stability into the future.
The change was for FY21 only, with the FY22 STI plan reverting to its original measures and weightings which have a greater
focus on financial targets. Our earnings guidance for FY22 factors in some near‐term COVID impact. We recognise however
that a more material disruption from COVID remains a risk factor that does not form part of guidance. Should COVID impact
performance more materially, the Board may need to again exercise appropriate discretion around executive performance
measures and outcomes for FY22.
FY21 performance and reward outcomes
The Board is satisfied that the reward outcomes under the STI and long‐term incentive (LTI) plans for FY21 reflect the
Company’s performance as it continues to recover from the impacts of the global pandemic.
Overall sales revenue grew by 10%, exceeding revenue targets for the financial year as well as reported revenue for FY19 and
FY20. We also achieved significant progress across a number of key strategic priorities: increasing our market share and
strengthening our market position across the globe; growing the hearing implant market; and building an even stronger
organisation as we grow. Relative total shareholder return against the ASX 100 was at the 54th percentile and basic earnings
per share (EPS) represented a (5.6%) compound annual growth rate over the last three years. Solid performance has resulted
in the awarding of incentives to the CEO & President and executives under the FY21 STI and the FY19‐21 LTI plans. Further
detail on this year’s remuneration outcomes is provided in this report.
Our executive remuneration framework
In FY21, we restructured the executive team to create a smaller, more experienced team to ensure that we can continue to
grow and retain our market leadership in hearing solutions. The Board is committed to ensuring our executive remuneration
framework and the associated reward outcomes align with our business objectives, performance and shareholder
expectations. Given our sustained business growth in recent years, the Board has conducted a deeper review of executive
remuneration with the outcome of this review highlighting gaps in our LTI structure and in fixed pay for select executives. The
Board believes that the proposed changes to be implemented from FY22 will align executives more effectively with the long‐
term growth objectives of the organisation and will ensure executive remuneration continues to be balanced, fair and
equitable, and deeply aligned with the interests of our shareholders.
Glen Boreham, AM
Chair, People & Culture Committee
Cochlear Limited Annual Report 2021
56
Contents
This report covers:
1. Key management personnel;
2. Executive KMP remuneration received in FY21 (unaudited);
3. Our remuneration strategy and framework;
4. Executive KMP remuneration and link to performance;
5. Executive KMP statutory remuneration disclosure;
6. Executive service agreements;
7. Remuneration governance;
8. Executive KMP equity disclosures; and
9. Non‐executive director fees.
The information provided in this Remuneration report (except for section 2 and section 8.3) has been audited as required by
section 308(3C) of the Corporations Act 2001.
1. Key management personnel
This report covers key management personnel (KMP) who have authority for planning, directing and controlling the activities
of Cochlear and comprise non‐executive directors (NEDs) and executive KMP as outlined in the table below.
Name
Position
Non‐Executive Directors
Rick Holliday‐Smith
Chairman
Yasmin Allen
Non‐Executive Director
Glen Boreham, AM
Non‐ Executive Director
Sir Michael Daniell, KNZM Non‐ Executive Director
Alison Deans
Andrew Denver
Abbas Hussain
Non‐Executive Director
Non‐Executive Director
Non‐Executive Director
Christine McLoughlin, AM Non‐Executive Director
Prof. Bruce Robinson, AC
Non‐Executive Director
Former Non‐Executive Directors
Term
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year appointed 1 November 2020
Full year
Non‐Executive Director
Part year retired 20 October 2020
Donal O’Dwyer
Executive KMP
Dig Howitt
CEO & President (CEO&P)
Anthony Bishop
President, Asia Pacific Region
Richard Brook
President, EMEA & Latin American Region
Jan Janssen
Tony Manna
Stu Sayers
Former Executive KMP
Chief Technology Officer
President, Americas Region
Chief Financial Officer
Full year
Full year
Full year
Full year
Full year
Part year appointed 1 January 2021
Brent Cubis
Chief Financial Officer
Part year until 30 September 2020
On 13 July 2020, B Cubis’ resignation was announced and he concluded his KMP responsibilities related to the role of the Chief
Financial Officer (CFO) on 30 September 2020. During the period between 1 October 2020 and 31 December 2020, the CEO&P
performed the KMP responsibilities typically held by the CFO.
Cochlear Limited Annual Report 2021
57
There were no changes to KMP after the reporting date and before the date the Directors’ report was authorised for issue. The
information provided in this Remuneration report has been audited as required by section 308(3C) of the Corporations Act
2001.
2. Executive KMP remuneration received in FY21
(unaudited)
The table below presents the remuneration paid to, received by or vested to each executive KMP during the year. Fixed
remuneration and cash STI relate to amounts earned during the year and vested deferred STI and vested LTI represent equity
vesting from prior years.
The figures presented below are different to the statutory disclosures in section 5 which are prepared in accordance with the
accounting standards and therefore include the accounting value for all unvested deferred STI and LTI awards expensed in the
year. The table below has been provided voluntarily to ensure shareholders are able to clearly understand the remuneration
outcomes and actual ‘take‐home pay’ of executive KMP for FY21.
Amounts $
Executive KMP
D Howitt
A Bishop
R Brook
J Janssen
T Manna
S Sayers5
Former Executive KMP
B Cubis6
Year
Fixed
remuneration1
Cash STI2
Vested
deferred STI3
Vested LTI4
End of
service
Total
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY21
FY20
1,851,043
1,744,153
580,655
561,171
947,798
1,045,039
885,655
851,002
836,301
923,513
406,325
164,827
633,651
1,730,148
–
395,175
–
519,413
–
635,708
–
619,509
–
220,630
–
–
355,828
206,683
92,532
129,803
139,850
205,594
140,270
188,824
135,644
216,701
–
115,034
52,923
1,447,993
864,687
110,355
272,124
318,182
682,358
354,151
706,925
264,735
686,174
–
228,929
–
–
–
–
–
–
–
–
–
–
–
–
5,385,012
2,815,523
1,178,717
963,097
1,925,243
1,932,991
2,015,784
1,746,751
1,856,189
1,826,388
626,955
327,132
–
835,922
686,574
1.
Fixed remuneration earned in the year (base salary, superannuation and non‐monetary benefits which may include insurances and car
allowances). During the temporary pay reduction from mid‐April 2020 until 12 July 2020, D Howitt took a 30% pay reduction in base
salary and other executives took a 20% pay reduction in base salary. R Brook’s fixed remuneration for FY21 and FY20 excludes employer
contributions for social security, accident and sickness and reflects actual ‘take‐home pay’. These amounts are included with the non‐
monetary benefits in the statutory table in section 5.
2. Cash STI earned and relating to performance during the financial year. For example, FY21 is reported as STI payments which are accrued
at year end, and received in August 2021, after the reporting year end.
3. Vested deferred STI is the value of the deferred STI from prior years that vested in August of the reported financial year (calculated as
the number of rights that vested multiplied by the share price on the vesting date). For example, FY21 is reported as the FY18 deferred
STI grant which vested in August 2020.
4. Vested LTI is the value of performance rights and options that vested in August of the reported financial year (rights are calculated as
the number of rights that vested multiplied by the share price on the vesting date and options are calculated as the number of options
multiplied by the share price on the date of vesting/exercise less the exercise price). For example, FY21 is reported as the FY18 LTI grant
which vested in August 2020 (46.4% of awards vested due to performance).
5. Remuneration for S Sayers only relates to the period that he was a KMP from 1 January 2021.
6. B Cubis concluded to be a KMP as at 30 September 2020 and remained with Cochlear until 1 January 2021. The amounts in the table
above reflect remuneration he received as a KMP until 30 September 2020. He continued to receive fixed remuneration of $183,310
from 1 October 2020 to 1 January 2021 and received an end of service payment of $327,132 that relates to statutory entitlements and
contractual benefits agreed. Refer to section 6.1 for further detail.
Cochlear Limited Annual Report 2021
58
3. Our remuneration strategy and framework
Cochlear’s executive remuneration strategy is designed to attract, motivate and retain a highly qualified and experienced group
of executives employed across diverse geographies. The following diagram links each of the executive team remuneration
components to Cochlear’s mission and strategy.
Cochlear’s mission and strategy
To help people hear and be heard
We deliver this through our corporate strategy and organisational capability …
Retain
market
leadership
Grow the
hearing
implant
market
Deliver
consistent
revenue and
earnings
growth
Build a
stronger
organisation
… which are reflected in performance measures across Cochlear’s incentive plans …
Net profit after tax (NPAT)
Sales revenue
Achievement of business priorities
and growth initiatives
Relative total shareholder return (TSR)
Compound annual growth rate in basic
earnings per share (EPS)
… with actual outcomes directly driving executive remuneration.
Fixed remuneration
Short‐term incentive
Long‐term incentive
Total
remuneration
3.1 Remuneration mix
The remuneration mix for executive KMP is weighted towards at‐risk performance based remuneration to ensure a strong
focus on short, medium and long‐term performance. A portion of executive remuneration is paid in equity (44% for the CEO&P
and 33% for other executive KMP) to align our executives with shareholder interests.
1
33%
34%
11%
22%
22%
11%
22%
45%
CEO&P
Other Executive KMP
Cochlear Limited Annual Report 2021
59
3.2 Fixed remuneration
Fixed remuneration comprises base salary, superannuation and non‐monetary benefits which may include insurances and car
allowances. It is set at a level to attract and retain executive talent with the appropriate capabilities to deliver Cochlear’s
objectives.
Fixed remuneration is generally positioned at the median of the relevant market and is reviewed annually to ensure alignment
with local market benchmarks, and it is reflective of the executive’s expertise and performance in the role. Market benchmarks
are typically set with reference to market capitalisation and include organisations within Cochlear’s industry sector and/or
similar in global operations and complexity as determined by the P&CC each year.
3.3 Short‐term incentive
Purpose
To align and reward executives for the achievement of Cochlear group and regional (for regional executives) performance
targets set by the Board at the beginning of the performance period.
Performance
measures
Description
STI is dependent on meeting financial and strategic performance measures:
Performance
measure and
weighting
Performance
Gateway
Sales revenue
(40%)
Group Performance Gateway (minimum NPAT threshold) to drive global alignment.
Sales revenue growth is critical to short and longer‐term shareholder returns.
Financial targets are set by the Board, having regard to prior year performance, global market
conditions, competitive environment, future prospects and Board approved budgets. The targets
incorporate a significant amount of stretch to ensure executives are engaged and incentivised to
appropriately deliver results. The specific targets are not disclosed to the market due to their
commercial sensitivity.
For FY21, the Board approved a shift in the weighting for the sales revenue performance measure
from 60% to 40% to reflect the uncertainty that Cochlear faced at the start of the FY21
performance year.
Strategic measures recognise that in addition to short‐term financial results, a number of strategic
initiatives are required to enable sustained growth over time.
For FY21, the Board approved a shift in the weighting for the strategic performance measure from
40% to 60% to ensure executives continued to focus on delivering critical strategic programs that
will enable Cochlear to recover and grow beyond FY21.
Each executive’s contribution against performance objectives is assessed at an individual level at
the end of the performance period. This assessment determines the level at which awards are
made.
Strategic
measures (60%)
Individual
contribution
Validation of performance against the measures set for:
the CEO&P involves a review by the Board based on financial inputs from the CFO, and approved by the P&CC and
Board each year; and
other executive KMP involves a review by the CEO&P based on inputs from the CFO and approved by the P&CC.
Any anomalies or discretionary elements are validated and approved by the Board.
Refer to section 4 for further detail on measures for FY21.
Opportunity CEO&P: target opportunity is 100% of base salary, and maximum is up to 180% of base salary.
Delivery
Cessation of
employment
Other executive KMP: target opportunity is 75% of base salary, and maximum is up to 135% of base salary.
Two‐thirds of the award is paid in cash annually, with one‐third deferred into service rights for a period of two years (subject
to a service condition) to reinforce alignment to longer‐term shareholder interests and for retention purposes. No dividends
are attached to service rights.
The number of rights to be allocated is calculated using the ‘gross contract value’, which refers to a Black‐Scholes‐Merton
pricing model without discounting for service or performance hurdles. The model uses Cochlear’s share price following the
announcement of full year results in August each year.
Prior to STI payment date: if an executive ceases employment with Cochlear prior to any cash being paid, or service rights
being granted, the executive will forfeit any awards to be paid for the performance period, unless the Board determines
otherwise.
Cochlear Limited Annual Report 2021
60
Post STI payment date: if an executive is dismissed for serious misconduct or resigns from their position after service rights
have been granted, but prior to the relevant vesting date, any unvested rights will generally be forfeited, unless the Board
determines otherwise.
3.4 Long‐term incentive
Purpose
Award vehicle
Opportunity
Allocation
method
Performance
period
Performance
measures and
hurdles
To align the remuneration opportunity for the executive team with shareholder value and provide a stimulus for the
retention of executives within the Company.
LTI is delivered as 50% options and 50% performance rights.
CEO&P: maximum opportunity is 100% of base salary.
Other executive KMP: maximum opportunity is 50% of base salary.
The LTI opportunity is calculated using the ‘gross contract value’, which refers to a Black‐Scholes‐Merton pricing model
without discounting for service or performance hurdles.
Gross contract value discounts for dividends not paid, share price volatility and the risk free rate of return. There is no
discount for the likelihood of service or performance conditions. The model uses Cochlear’s five‐day volume‐weighted
average share price following the announcement of full year results in August each year.
Performance is measured over a four‐year performance period.
Post vesting, options expire seven months after the vesting date if they have not been exercised. There is no retesting
of performance hurdles under the LTI plan.
Awards are subject to:
50% weighting on relative TSR against the constituents of the ASX 100 index as at the start of the performance
period; and
50% weighting on compound annual growth rate (CAGR) in basic EPS.
The proportion of awards that vest for performance are:
Relative TSR
Basic EPS
Performance
% of instruments that
vest
Performance (CAGR)
% of instruments that
vest
Less than 50th percentile
At the 50th percentile
50th percentile to 75th
percentile
Above 75th percentile
0%
40%
Less than 7.5%
7.5%
0%
50%
40% to 100% (pro‐rata)
7.5% to 12.5%
50% to 100% (pro‐rata)
100%
Above 12.5%
100%
Dividends
Cessation of
employment
These measures have been selected to incentivise the executive team towards long‐term sustainable growth of the
business and are generally accepted proxies for the creation of shareholder value.
No dividends are attached to options or performance rights.
If an executive ceases employment with Cochlear before the end of the performance period, unvested LTI awards will
generally be forfeited. In exceptional circumstances (including, but not limited to, redundancy and retirement), the
Board may, in its discretion, determine that all or a portion of the award will vest in line with the original performance
criteria and vesting date.
Cochlear Limited Annual Report 2021
61
4. Executive KMP remuneration and link to
performance
4.1 FY21 STI outcomes
The STI plan for FY21 was adjusted by the P&CC at the start of the year to enable the Board to exercise discretion to moderate
any unintended STI outcomes resulting from the global pandemic effects on Cochlear’s performance. The adjustment to
weightings for the FY21 STI performance measures (as outlined in 3.3 Short‐term incentive) factored in the significant level of
volatility and uncertainty with setting clear financial targets, which allowed executives to focus on:
strengthening our competitive position;
investing for long‐term growth; and
managing costs to ensure reasonable recovery and stability into the future.
For FY21, STI was based on meeting a Group Performance Gateway of Underlying NPAT, and performance against financial
measures (40%) and strategic measures (60%). Final allocations to executive KMP were also based on individual performance
as assessed by the Board (for the CEO&P) and CEO&P (for other executives).
The STI plan will revert to its original measures and weightings (with a greater focus on financial targets) from FY22.
When reviewing financial performance, the Board excludes revaluation gains and losses from non‐core investments (the
innovation fund) from the calculation of STI. For FY21, Underlying NPAT was $236.7 million and sales revenue grew 10%.
In addition to financial measures, the Board also considered progress against strategic measures which are critical to the
achievement of Cochlear’s longer‐term goals.
Validation of performance against the measures set for:
the CEO&P involves an independent review and endorsement by the CFO, reviewed and approved by the P&CC and Board;
and
other executive KMP involves a review by the CEO&P based on inputs from the CFO with a final review undertaken by the
P&CC.
Any anomalies or discretionary elements are validated and approved by the Board.
The table below provides a summary, and achievement against each, of the financial measures and strategic measures of the
STI plan. Measures are agreed with the P&CC at the commencement of each financial year and are aligned to the delivery of
initiatives that support Cochlear’s strategic priorities.
Business priority
Commentary on performance
Achievement
s
e
r
u
s
a
e
m
c
i
g
e
t
a
r
t
S
)
%
0
6
(
Retain
market
leadership
Ensure technology Leadership
Accelerate Connected Care roll
out
Grow market share
Increase upgrade penetration
Grow the
hearing
implant
market
Increase access and funding
Expand and enhance direct‐to‐
consumer capability
Build referrals from the Hearing
Aid and ENT channel
Engage with more recipients
Strengthened competitive position across the
globe through the launch of new products
including: Osia, Baha 6, Kanso 2, Custom Sound
Pro, Remote Check and Remote Programming.
Achieved significant progress
the
commercial roll out of Connected Care solutions.
through
Significant progress achieved in driving growth,
despite COVID, with direct‐to‐consumer leads
and surgeries exceeding target and good work on
developing referrals from the hearing aid
channel.
The Standard of Care work has progressed with
the publication of the consensus paper and
detailed country plans developed and being
executed.
Cochlear Limited Annual Report 2021
62
Build a
stronger
organisation
Build an Achievement and One
Team Culture
Develop organisational
talent
and capability
Drive commercial excellence
Implement the digital strategy
Increased focus on two cultural priorities to
improve how we work together across the
organisation and how we deliver better results
by resolving conflicts in responsibilities and
priorities.
Progressed initiatives to support succession and
)
%
0
4
(
Deliver
consistent
revenue
and
earnings
growth
Improve quality, efficiency and
agility
Achieve revenue to pre‐COVID
levels and positive operating
cashflow
Develop
alliances
partnerships
and
executive development.
Successfully delivered a new Customer Data
Architecture for Cochlear across the globe to
ensure ongoing alignment of major business
processes.
Continued to deliver on the digital strategy, with
a majority of sites launched through FY21.
Integrated the Services and Acoustics functions
into other functions across the organisation with
a view to simplify and improve efficiency.
Delivered record revenue for FY21, exceeding
revenue targets for the financial year as well as
reported revenue for FY19 and FY20 in constant
currency.
Continued to manage costs in FY21 to ensure
recover and stability beyond this financial year.
s
e
r
u
s
a
e
m
l
a
i
c
n
a
n
F
i
= Below expectations
= Met expectations
= Exceeded expectations
Key performance targets were exceeded for FY21 resulting in an average actual STI of 144% of target for executive KMP. The
following STI payments were made as outlined in the table below.
STI target as a
% of base salary
STI maximum as a
% of base salary
Actual STI as a
% of target
Actual STI as a
% of maximum
STI forfeited as a
% of maximum
Actual STI ($)
Executive KMP
D Howitt
A Bishop
R Brook
J Janssen
T Manna
S Sayers
Former Executive KMP
B Cubis
100%
75%
75%
75%
75%
75%
75%
180%
135%
135%
135%
135%
135%
135%
144%
144%
137%
144%
160%
137%
0%
80%
80%
76%
80%
89%
76%
0%
20%
20%
24%
20%
11%
24%
2,595,222
592,763
779,120
953,562
929,264
330,945
100%
0
Two‐thirds of the actual STI will be delivered in cash in August 2021, and one‐third will be deferred into service
rights (and subject to service conditions) until August 2023.
Cochlear Limited Annual Report 2021
63
4.2 FY19‐21 LTI vesting outcomes
LTI is based on performance against relative TSR (50%) and basic EPS growth (50%) over a three‐year performance period. The
graphs below illustrate Cochlear’s relative TSR and basic EPS performance over the past five years.
For FY21, Cochlear’s TSR performance was 26.1%, which was
ranked at the 54th percentile of the ASX 100 comparator group.
This resulted in performance around target, and as a result,
50.08% of the TSR portion of the LTI vested.
Cochlear’s basic EPS1 in FY21 was 360 cents, which is a (5.6%)
CAGR over the three‐year performance period. This resulted in
performance below target and as a result, 0% of the EPS portion
of the LTI vested.
R
S
T
r
a
e
y
‐
3
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
Cochlear TSR performance against targets
Cochlear EPS performance against targets
174.0%
157.0%
40%
30%
33.3%
76.3%
30.6%
26.1%
FY17
FY18
FY19
FY20
FY21
Cochlear TSR performance
Median TSR (target)
75th percentile TSR (stretch)
R
G
A
C
S
P
E
20%
10%
18.6%
11.7%
r
a
e
y
‐
3
‐
(10%)
(20%)
FY17
FY18
FY19
FY20
FY21
(5.6%)
(12.9%)
Cochlear EPS performance
Target
Stretch
For the FY19‐21 LTI, 25.04% vests based on performance over the three‐year period
from 1 July 2018 to 30 June 2021.
1. For the purposes of LTI, basic EPS is determined based on underlying NPAT which excludes innovation fund gains and patent litigation‐
related tax and other benefits.
4.3 Financial performance history (FY17 to FY21)
Sales revenue ($million)1
Earnings/(loss) before interest and tax (EBIT) ($million)
EBIT (excluding innovation fund gains and patent litigation
expense) ($million)
Net profit/(loss) after tax (NPAT) ($million)
NPAT (excluding innovation fund gains and patent litigation
expense) ($million)
Basic earnings/(loss) per share (EPS) (cents) – reported
Basic EPS (excluding innovation fund gains and patent
litigation expense) (cents)
EPS growth (3‐year CAGR)
EPS growth (excluding innovation fund gains and patent
litigation expense) (3‐year CAGR)
Total dividend per share ($)
Share price as at 30 June ($)
FY17
FY18
FY19
FY20
FY21
1,239.7
315.6
n/a
1,351.4
348.4
350.6
223.6
n/a
389.7
n/a
33.3%
n/a
245.8
248.0
427.3
431.1
18.6%
n/a
1,446.1
370.1
359.3
276.7
265.9
460.9
460.9
1,352.3
(262.2)
206.9
(238.3)
153.8
(399.6)
257.9
13.2%
11.7%
(200.8%)
(12.9%)
1,493.3
374.1
330.2
326.5
236.7
496.7
360.0
5.1%
(5.6%)
Relative total shareholder return (TSR) (3 years)
TSR percentile ranking2
1. Excludes foreign exchange gain/(loss) on hedged sales.
2. TSR percentile ranking is shown over three financial years to 30 June. For LTI, performance is compared to the TSR of the constituents
2.70
155.45
174.0%
96th
3.00
200.17
157.0%
97th
3.30
206.84
76.3%
81st
1.60
188.93
30.6%
72nd
2.55
251.67
26.1%
54th
of the ASX 100 as at the start of the relevant performance period.
For further explanation of details on Cochlear performance, see the Operating and financial review section on pages 16 to 45
of this Annual Report.
Cochlear Limited Annual Report 2021
64
5. Executive KMP statutory remuneration
disclosure
The table below presents the total remuneration for executive KMP in accordance with the accounting standards.
Amounts $ Year
Short‐term benefits
Post‐
employment
Salary
Cash STI
Non‐
monetary
benefits1
Super‐
annuation
contributions
Other
long‐term
benefits
Long
service
leave
Share‐based payments
End of
service
Total
Deferred
STI2
LTI
performance
rights3
LTI
options3
% of
performance
related
remuneration
Executive KMP
D Howitt
FY21 1,827,811 1,730,148
1,538
21,694
(3,577)
472,519
293,673 518,191
FY20 1,721,612
–
1,538
21,003
41,051
298,081
151,890 463,205
A Bishop
FY21
558,038
395,175
FY20
539,245
–
923
923
21,694
5,605
106,554
57,734
64,375
21,003
6,549
70,316
38,756
36,625
R Brook
FY21
755,888
519,413 146,392
123,202
FY20
767,993
– 235,341
152,924
–
–
146,558
104,762
80,754 105,122
53,498
79,027
J Janssen
FY21
862,423
635,708
1,538
21,694
(18,030)
176,357
90,036 117,930
FY20
828,461
–
1,538
21,003
4,869
115,315
60,412
88,868
T Manna
FY21
764,830
619,509
52,057
FY20
816,517
–
85,755
19,414
21,241
–
–
162,052
102,227
75,093 126,835
36,386 111,795
FY21
S Sayers4
Former Executive KMP
395,020
220,630
458
10,847
9,133
56,846
18,348
24,128
–
–
–
–
–
–
–
–
–
–
–
4,861,997
2,698,380
1,210,098
713,417
1,877,329
1,393,545
1,887,656
1,120,466
1,819,790
1,173,921
735,410
B Cubis5
FY21
158,486
FY20
611,725
–
–
233
923
6,108
746
47,473
21,611
32,030 327,132
593,819
21,003
4,397
84,302
52,062
59,666
–
834,078
Total
FY21 5,322,496 4,120,583 203,139
224,653
(6,123)
1,168,359
637,249 988,611 327,132 12,986,099
FY20 5,285,553
– 326,018
258,177
56,866
775,003
393,004 839,186
–
7,933,807
62.00%
33.84%
51.55%
20.42%
45.38%
17.03%
54.04%
23.61%
54.04%
21.33%
43.51%
17.03%
23.50%
53.25%
25.30%
1. Non‐monetary benefits include insurances for all KMP and car and housing allowances for overseas‐based KMP which are market‐based
payments. During the temporary pay reduction from mid‐April 2020 until 12 July 2020, D Howitt took a 30% pay reduction in base salary
and other executives took a 20% pay reduction in base salary. For R Brook, the amount also includes compulsory social security
contributions of approximately $78,000.
3.
2. Deferred STI is granted in service rights and deferred for a further two years. The cost of the plan is expensed across three years. The
FY21 amount represents the portion of the FY19 and FY21 deferred STI expensed in FY21. The FY20 amount represents the portion of
the FY18 and FY19 deferred STI expensed in FY20. There was no expense for FY20 deferred STI as no awards were made in the year.
LTI granted in performance rights and options are expensed evenly over the period from grant date to vesting date. The value is
calculated at the date of grant using the Black‐Scholes‐Merton pricing model discounted for vesting probabilities of non‐market
performance criteria. The amount expensed each reporting period includes adjustments to the life‐to‐date expense of grants based on
the reassessed estimate of achieving non‐market performance criteria and final vesting amounts for the non‐market performance
criteria of performance rights and options. The value disclosed above is the portion of the value of the performance rights and options
recognised as an expense in the financial year. The ability to exercise the performance rights and options is conditional on Cochlear
achieving certain performance hurdles. Further details of performance rights and options granted during the financial year are set out
in this report.
4. Remuneration for S Sayers only relates to the period that he was a KMP from 1 January 2021.
5. B Cubis concluded to be a KMP as at 30 September 2020 and remained with Cochlear until 1 January 2021. The amounts in the table
above reflect remuneration he received as a KMP until 30 September 2020. He continued to receive fixed remuneration of $183,310
from 1 October 2020 to 1 January 2021 and received an end of service payment of $327,132 that relates to statutory entitlements and
contractual benefits agreed. The share‐based payment values presented includes an expense of $8,198 for LTI performance rights and
$11,992 for LTI options that would normally have been amortised over future years for awards that remain subject to vesting hurdles
and timeframes, and LTI may not be paid out if conditions are not met. Refer to section 6.1 for further detail.
Cochlear Limited Annual Report 2021
65
6. Executive service agreements
Cochlear does not enter into (limited) service contracts for executive KMP. The terms of employment for executive KMP meet
local employment law requirements. Key provisions are similar but do, on occasion, vary to suit different needs.
The following sets out details of the employment agreements relating to executive KMP.
Length of contract
Permanent contract until notice is given by either party.
Notice periods
Post‐employment
restraints
Other arrangements
CEO&P: 12 months’ written notice by either party.
Other executive KMP: between 60 days to six months’ written notice by either party (exact period
specified in each contract).
All executive KMP are subject to post‐employment restraints for up to 12 months.
Richard Brook will receive a maximum of CHF 30,000 for repatriation costs in the case of
termination or resignation.
6.1 End of service for former executives
Brent Cubis announced his resignation from Cochlear on 13 July 2020. He concluded to be a KMP on 30 September 2020 and
remained employed with Cochlear until 1 January 2021. From 1 October 2021 to 1 January 2021, he continued to provide
services as required and continued in his role as director of subsidiaries of Cochlear. Through this period, he received a fixed
remuneration of $183,310. At the end of his service, he received:
payment of $327,132 as part of a contractual agreement;
payment of accrued but unused annual leave; and
payment of any unpaid base salary.
The Board applied its discretion to allow some prior equity grants to remain on‐foot subject to the original terms of those
awards (both time and performance hurdles). The awards are detailed in section 8 and are eligible for vesting in August 2021
and August 2022.
Cochlear Limited Annual Report 2021
66
7. Remuneration governance
7.1 Governance framework for remuneration at Cochlear
The Board is responsible for all areas of Cochlear’s strategy and policy related to its people. Consistent with this responsibility,
the Board has established the P&CC which comprises solely of independent NEDs.
Management
People & Culture Committee
Board
• Makes recommendations to the
P&CC with respect to individual
remuneration arrangements for
executive KMP
• Implements policies and
practices relating to talent
management, remuneration,
organisational culture, diversity
and inclusion, work, health and
safety and leadership
development
• The P&CC is empowered to source any internal
resources and obtain external independent
professional advice it considers necessary to
enable it to review management proposals and
make decisions on behalf of the Board on:
− Remuneration policy, composition, quantum
and performance targets for executive KMP
− Remuneration policy in respect of NEDs
− Organisational culture, diversity and inclusion,
talent management and leadership
development strategies and practices
− Work, health and safety metrics and initiatives
− Design features of employee and executive
short‐term and long‐term incentive plan
awards
• Reviews, applies judgement
and, as appropriate,
approves recommendations
from the P&CC
7.2 Advice from external advisors
To inform decisions, the P&CC sought advice and (at times) recommendations from the CEO&P and other management
throughout the year. During FY21, the P&CC engaged Godfrey Remuneration Group (GRG) and received market practice advice
and information in relation to the remuneration of NEDs, executives and senior leaders. GRG was paid $107,200 (excluding
GST) for these services.
The P&CC is satisfied that the advice received from GRG is free from undue influence of the KMP to whom the remuneration
recommendations relate as GRG confirmed in writing that the remuneration recommendations were made free from undue
influence by management, in accordance with the Corporations Act 2001.
7.3 Share ownership requirements
Executive KMP are required to retain vested equity until they hold and maintain a holding of Cochlear shares equivalent to
their annual salary in the previous year. The Board considers the minimum shareholding guidelines to be best practice to
strengthen the alignment of executives’ interests to those of shareholders. The table in section 8.2 details the current holdings
of executive KMP.
7.4 Clawback Policy and discretion
All participants of the deferred STI and LTI plans are subject to the Clawback Policy, available in the ‘Investor Centre’ section of
the Company’s website. The policy enables the Board to claw back remuneration outcomes in the event of a material non‐
compliance with any financial reporting requirement, misconduct, or following inappropriate behaviour post‐employment in
cases where the Board has exercised its discretion to allow retention of equity following termination of employment. The policy
is designed to further align the interests of participants with the long‐term interests of Cochlear and shareholders, and to
ensure that excessive risk taking is not rewarded.
The Board retains discretion to adjust remuneration outcomes upwards or downwards to ensure incentives are not provided
where it would be inappropriate or would provide unintended outcomes. The exercise of appropriate discretion may be used
where a formulaic outcome does not align with the overall shareholder experience, or reflect overall business performance
and intended outcomes; or leads to retention risk for key talent. The Board balances judgement on remuneration outcomes
with consideration to all stakeholders.
Cochlear Limited Annual Report 2021
67
8. Executive KMP equity disclosures
Executive KMP participate in the deferred STI and LTI plan which offers equity under the Cochlear Executive Incentive Plan
(CEIP). The purpose of the CEIP is to encourage executives to hold Cochlear shares and to align their interests to shareholders’
interests.
Under the LTI plan, vesting of options or performance rights only occurs if Cochlear achieves challenging and market
competitive hurdles related to basic EPS growth and relative TSR. Under the deferred STI plan, grants are based on performance
in the first year, and are then deferred for a further two years.
8.1 Equity granted as remuneration
The table below presents the number of options and performance rights granted to executive KMP as well as the number of
instruments that vested or were forfeited during the year.
Equity granted in FY21 under the CEIP has been approved by shareholders for the CEO&P in accordance with ASX Listing Rule
10.14.
No options or rights vest if the conditions are not satisfied; hence the minimum value is nil. The maximum value of the grants
has been determined as the fair value of awards at grant date that is yet to be expensed.
Plan
Grant date
Options
Performance rights
Number
Maximum
value to be
expensed ($)1
Number Maximum value
to be expensed
($)1
Vesting
date
Vested Forfeited
Executive KMP
D Howitt
A Bishop
R Brook
J Janssen
T Manna
FY18 LTI
FY18 deferred STI
FY19 LTI
FY19 deferred STI
FY20 LTI
FY21 LTI
Total
FY18 LTI
FY18 deferred STI
FY19 LTI
FY19 deferred STI
FY20 LTI
FY20 LTI
FY21 LTI
Total
FY18 LTI
FY18 deferred STI
FY19 LTI
FY19 deferred STI
FY20 LTI
FY20 LTI
FY21 LTI
Total
FY18 LTI
FY18 deferred STI
FY19 LTI
FY19 deferred STI
FY20 LTI
FY20 LTI
FY21 LTI
Total
FY18 LTI
FY18 deferred STI
FY19 LTI
FY19 deferred STI
FY20 LTI
FY20 LTI
FY21 LTI
Total
–
FY18 LTI
FY18 deferred STI
FY19 LTI
FY19 deferred STI
FY20 LTI
FY20 LTI
Total
18‐Oct‐17
24‐Aug‐18
17‐Oct‐18
17‐Sep‐19
23‐Oct‐19
21‐Oct‐20
18‐Oct‐17
24‐Aug‐18
17‐Oct‐18
17‐Sep‐19
23‐Oct‐19
23‐Oct‐19
21‐Oct‐20
18‐Oct‐17
24‐Aug‐18
17‐Oct‐18
17‐Sep‐19
23‐Oct‐19
23‐Oct‐19
21‐Oct‐20
18‐Oct‐17
24‐Aug‐18
17‐Oct‐18
17‐Sep‐19
23‐Oct‐19
23‐Oct‐19
21‐Oct‐20
18‐Oct‐17
24‐Aug‐18
17‐Oct‐18
17‐Sep‐19
23‐Oct‐19
23‐Oct‐19
21‐Oct‐20
–
18‐Oct‐17
24‐Aug‐18
17‐Oct‐18
17‐Sep‐19
23‐Oct‐19
23‐Oct‐19
46,842
–
35,907
–
24,041
21,217
128,007
1,778
–
1,598
–
2,014
2,745
3,230
11,365
6,965
–
4,565
–
2,679
3,652
4,911
22,772
7,060
–
5,223
–
3,237
4,413
5,197
25,130
10,385
–
7,530
–
3,055
4,165
5,045
30,180
–
3,622
–
4,050
–
2,287
3,117
13,076
–
–
–
–
214,818
647,959
862,777
–
–
–
–
10,561
24,528
98,643
133,732
–
–
–
–
14,048
32,632
149,980
196,660
–
–
–
–
16,974
39,432
158,714
215,120
–
–
–
–
16,019
37,216
154,072
207,307
–
–
–
–
–
–
–
–
3,372
1,692
1,685
2,634
4,432
4,782
18,597
697
440
700
582
332
506
728
3,985
1,170
665
857
858
442
673
1,106
5,771
1,186
667
981
1,007
534
813
1,171
6,359
436
645
353
841
504
767
1,137
4,683
–
1,420
547
760
679
377
574
4,357
–
–
–
–
147,370
561,807
709,177
–
–
–
–
7,220
16,825
85,528
109,573
–
–
–
–
9,612
22,378
129,937
161,927
–
–
–
–
11,612
27,033
137,573
176,218
–
–
–
–
10,960
25,504
133,579
170,043
–
46.4%
100.0%
53.6%
0.0%
46.4%
100.0%
53.6%
0.0%
46.4%
100.0%
53.6%
0.0%
46.4%
100.0%
53.6%
0.0%
46.4%
100.0%
53.6%
0.0%
19‐Aug‐20
19‐Aug‐20
23‐Aug‐21
23‐Aug‐21
16‐Aug‐23
21‐Aug‐24
19‐Aug‐20
19‐Aug‐20
23‐Aug‐21
23‐Aug‐21
17‐Aug‐22
16‐Aug‐23
21‐Aug‐24
19‐Aug‐20
19‐Aug‐20
23‐Aug‐21
23‐Aug‐21
17‐Aug‐22
16‐Aug‐23
21‐Aug‐24
19‐Aug‐20
19‐Aug‐20
23‐Aug‐21
23‐Aug‐21
17‐Aug‐22
16‐Aug‐23
21‐Aug‐24
19‐Aug‐20
19‐Aug‐20
23‐Aug‐21
23‐Aug‐21
17‐Aug‐22
16‐Aug‐23
21‐Aug‐24
–
–
–
19‐Aug‐20
19‐Aug‐20
23‐Aug‐21
23‐Aug‐21
17‐Aug‐22
16‐Aug‐23
–
–
–
–
–
–
–
46.4%
100.0%
53.6%
0.0%
0.0%
100.0%
68
S Sayers2
Former Executive KMP
B Cubis
Cochlear Limited Annual Report 2021
1. The options granted in FY21 have an exercise price of $206.06, and an expiry date of 21 March 2025. Fair values (IFRS‐2) of FY21 options
and performance rights under the LTI plan as at the date of grant are as follows: options (basic EPS growth: $42.56; relative TSR: $38.88)
and performance rights (basic EPS growth: $188.83; relative TSR: $124.47). This valuation is for accounting purposes only and forms the
basis of the expense in future years. Further detail on the allocation methodology is provided in section 3.4.
In FY21, S Sayers did not receive any equity grants as a KMP.
2.
8.2 Executive KMP equity holdings and minimum shareholding
This section details the movement in equity holdings during the financial year.
Shares held during the year
During the year the FY18 deferred STI plan and FY18 LTI plan vested in August 2020, and executives’ options/rights converted
into shares under these plans.
Executive KMP
D Howitt
A Bishop
R Brook
J Janssen
T Manna
S Sayers
Former Executive KMP
B Cubis
Balance
1 July 2020
Received on exercise of
options/rights1
Purchases and sales
Balance
30 June 2021
42,475
2,499
5,000
6,786
4,128
1,108
343
24,990
1,587
4,438
4,492
5,665
2,327
2,885
(21,734)
(1,587)
(72)
(4,492)
(5,064)
(860)
45,731
2,499
9,366
6,786
4,729
2,575
(2,015)
N/A
1.
For options exercised, the amount paid per option was the exercise price of $154.73.
Rights held during the year
Rights are acquired by executive KMP under the deferred STI and LTI plan. During the year:
Granted: FY21 LTI awards were granted in October 2020; and
Vested: 100% of the FY18 deferred STI award and 46.4% of the FY18 LTI award vested in August 2020.
Executive KMP
D Howitt
A Bishop
R Brook
J Janssen
T Manna
S Sayers
Former Executive KMP
B Cubis
Balance
1 July 2020
13,815
3,257
4,665
5,188
3,546
2,585
4,357
Options held during the year
Deferred STI service rights
Granted
Vested
Forfeited
–
–
–
–
–
–
–
(1,692)
(440)
(665)
(667)
(645)
(449)
(547)
–
–
–
–
–
–
–
LTI performance rights
Vested
Granted
Forfeited
4,782
(1,564)
(1,808)
728
1,106
1,171
1,137
472
(323)
(542)
(550)
(202)
(270)
(374)
(628)
(636)
(234)
(312)
Balance
30 June 2021
13,533
2,848
3,936
4,506
3,602
2,026
–
(658)
(1,336)
N/A
Options over ordinary shares are acquired by executive KMP under the LTI plan. During the year, FY21 LTI awards were granted
in October 2020 and 46.4% of the FY18 LTI award vested in August 2020.
All options held at the end of the year are unvested.
Cochlear Limited Annual Report 2021
69
Balance
1 July 2020
106,790
8,135
17,861
19,933
25,135
8,859
LTI options
Granted
Vested and exercised1
Forfeited
Balance
30 June 2021
21,217
3,230
4,911
5,197
5,045
2,097
(21,734)
(25,108)
(824)
(3,231)
(3,275)
(4,818)
(1,608)
(954)
(3,734)
(3,785)
(5,567)
(1,859)
81,165
9,587
15,807
18,070
19,795
7,489
Executive KMP
D Howitt
A Bishop
R Brook
J Janssen
T Manna
S Sayers
Former Executive KMP
B Cubis
1. The value of exercised options at the date of vesting is $55.57 (closing share price at the vesting date 19 August 2020 of $210.30 less
(1,680)
(5,059)
13,076
N/A
–
the exercise price of $154.73).
Executive minimum shareholding
As at 30 June 2021, the Board is satisfied that the executive KMP are compliant with the Share Ownership Policy. The table
below presents a summary of executive KMP holdings and compliance with minimum shareholding requirements.
Executive KMP
D Howitt
A Bishop
R Brook
J Janssen
T Manna
S Sayers
Ordinary shares held
Policy value of Cochlear shares at year
end ($)1
% of base salary2
45,731
2,499
9,366
6,786
4,729
9,587,961
523,940
1,963,676
1,422,753
991,482
2,575
539,875
531%
95%
258%
167%
128%
65%
1.
In line with the Share Ownership Policy, the value has been calculated as the average daily share price over the previous 12 months
($209.66), as at closing on the ASX up to 30 June 2021, times the number of shares.
2. The % of base salary is calculated as the value of shares divided by the contractual base salary as at 30 June 2021.
8.3 Potential dilution if options vest and ordinary shares issued
(unaudited)
The Board encourages employee ownership of Cochlear shares. To restrict dilution of shareholders’ interests, the total
employee interests in unvested equity cannot exceed 5% of share capital.
At the date of this report, the number of ordinary shares that would be issued if all options were vested (having met the service
and performance conditions) and exercised and assuming ordinary shares were issued, is as follows.
Grant date
17‐Oct‐18
23‐Oct‐19
23‐Oct‐19
21‐Oct‐20
FY19 LTI
FY20 LTI
FY20 LTI
FY21 LTI
Total
Number of options
Forfeited/
lapsed1
4,486
Issued
80,231
At report
date
75,745
Exercise
price per
share ($)
Exercise period
Current net value of
outstanding options as at
30 June 2021 ($)2
202.84 Aug‐21 to Mar‐22
24,231
57,074
55,729
217,265
–
4,448
–
8,934
24,231
217.28 Aug‐22 to Mar‐23
52,626
217.28 Aug‐23 to Mar‐24
55,729
206.06 Aug‐24 to Mar‐25
208,331
3,698,628
833,304
1,809,808
2,541,800
8,883,540
Forfeited/lapsed options from unvested grants relate to plan participants who have departed Cochlear.
1.
2. Closing share price as at 30 June 2021 was $251.67.
Cochlear Limited Annual Report 2021
70
Total unvested equity currently accounts for approximately 0.43% of the total number of issued shares, as set out below.
Number of equivalent shares at 30 June 2021
Instrument
Unvested LTI options
Unvested LTI rights
Unvested deferred STI rights
Service rights under the APAC Employee Equity Plan1
Total
As % of total issued shares
208,331
35,528
30,687
7,581
282,127
0.43%
65,744,078
Number of issued shares
1. Refer to Note 4.3 to the financial statements for further information on the APAC Employee Equity Plan.
8.4 Transactions and loans with KMP
No transactions or loans involving directors or executive KMP, their close family members or entities they control or have
significant influence over, were made during the year.
Cochlear Limited Annual Report 2021
71
9. Non‐executive director fees
NEDs are paid from an aggregate annual fee pool for FY21 of $3,000,000 (approved at the 2017 Annual General Meeting). Total
remuneration paid during the year was $2,553,578 which is within the fee pool limit (represented 85.1% of fee pool). NEDs do
not receive any performance‐related remuneration, options or performance rights. NEDs receive reimbursement for costs
directly related to Cochlear business.
9.1 Fee policy and changes during the year
Board fees must recognise the effort required to fulfil the responsibilities of a director. There were no fee increases for the
Board for FY21.
The table below outlines the policy base and committee fees for FY20 and FY21.
Amounts $1
Cochlear Board
Committees2
Audit & Risk
People & Culture
Technology & Innovation
Medical Science
Nomination
FY20
FY21
Chair
518,547
50,000
40,000
40,000
30,000
No fee
Member
169,923
25,000
20,000
20,000
15,000
No fee
Chair
518,547
50,000
40,000
40,000
30,000
No fee
Member
169,923
25,000
20,000
20,000
15,000
No fee
1.
Superannuation contributions have been made in accordance with Australian superannuation legislation at a rate of 9.5% up to the
Australian Government’s prescribed maximum contributions limit. Fees are presented exclusive of superannuation.
2. Committee fees are not paid to the Chairman of the Board.
9.2 NED statutory remuneration
The table below presents the total remuneration for NEDs.
Amounts $
Year
Short‐term benefits
Post‐employment benefits
Total
Fees
Superannuation1
Non‐Executive Director
R Holliday‐Smith
Y Allen
G Boreham
M Daniell2
A Deans3
A Denver
A Hussain
C McLoughlin4
B Robinson
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY21
FY20
515,755
488,387
258,523
244,848
253,550
240,136
203,819
85,122
253,551
249,022
228,685
218,194
203,819
193,021
137,641
238,631
226,002
21,694
21,003
21,694
21,003
21,694
21,003
20,216
9,210
21,694
10,501
21,694
20,492
20,216
19,280
13,076
21,694
20,921
537,449
509,390
280,217
265,851
275,244
261,139
224,035
94,332
275,245
259,523
250,379
238,686
224,035
212,301
150,717
260,325
246,923
Cochlear Limited Annual Report 2021
72
Amounts $
Year
Short‐term benefits
Post‐employment benefits
Total
Fees
Superannuation1
Former Non‐executive Director
D O’Dwyer5
Total
FY21
FY20
FY21
FY20
68,623
216,578
2,362,597
2,161,310
7,309
20,492
190,981
163,905
75,932
237,070
2,553,578
2,325,215
1. During the temporary fee reduction period from mid‐April 2020 until 12 July 2020, superannuation was maintained on full fees, and
continued to be capped at the maximum superannuation contribution limit.
2. M Daniell was appointed to the Board on 1 January 2020.
3. Effective 1 January 2020 to 30 June 2020, A Deans has opted out of receiving superannuation guarantee payments in accordance with
the Superannuation Guarantee (Administration) Act 1992. An equivalent amount of $10,501 was paid over the period from 1 January
2020 to 30 June 2020 as fees.
4. C McLoughlin was appointed to the Board on 1 November 2020. Effective 1 November 2020, C McLoughlin has opted out of receiving
super guarantee payments in accordance with the Superannuation Guarantee (Administration) Act 1992. An equivalent amount of
$8,411 was paid over the period from 1 November 2020 to 9 April 2021 as fees.
5. D O’Dwyer retired from the Board on 20 October 2020.
9.3 Minimum shareholding requirement for NEDs
NEDs are requested to hold shares equivalent to the fees (including both Board and committee fees) received in the previous
12 months. The share ownership requirement must be satisfied within three years of appointment to the Board.
As at 30 June 2021, all NEDs are compliant with the Share Ownership Policy which allows three years to build their
shareholdings. The table below presents Cochlear Limited shareholdings for each NED.
Balance
1 July 2020
Purchases
Sales
Balance
30 June 2021
10,214
3,714
3,014
1,214
3,214
4,214
226
0
933
–
–
–
–
786
–
1,000
1,000
150
–
–
–
–
–
–
–
–
–
10,214
3,714
3,014
1,214
4,000
4,214
1,226
1,000
1,083
Policy value of
shares as at
30 June 2021 ($)1
2,141,467
778,677
631,915
254,527
838,640
883,507
257,043
209,660
227,062
% of fees
413%
300%
248%
124%
329%
384%
125%
98%
95%
R Holliday‐Smith
Y Allen
G Boreham
M Daniell
A Deans
A Denver
A Hussain
C McLoughlin2
B Robinson3
1.
In line with the Share Ownership Policy, available in the ‘Investor Centre’ section of the Company’s website, the value of Cochlear
Limited ordinary shares is calculated using the average daily share price over the previous 12 months ($209.66), as at closing on the ASX
up to 30 June 2021, times the number of shares.
2. C McLoughlin was appointed to the Board on 1 November 2020 and in accordance with the policy has until 1 November 2023 to build
her shareholding.
3. B Robinson temporarily fell below the minimum shareholding requirement and is actively working towards meeting the policy
requirement by December 2021.
Cochlear Limited Annual Report 2021
73
Directors’ report
The directors present their report, together with the Consolidated Financial report of the Consolidated Entity (Cochlear), being
Cochlear Limited (the Company) and its controlled entities, for the year ended 30 June 2021, and the Auditor’s report thereon.
Directors
The directors of the Company at any time during or since the end of the financial year were R Holliday‐Smith (Chairman),
YA Allen, G Boreham, AM, Sir M Daniell, KNZM, A Deans, A Denver, D Howitt, A Hussain, C McLoughlin, AM, DP O’Dwyer and
Prof B Robinson, AC.
Information on the current directors is presented in the Annual Report. This information includes the qualifications, experience
and special responsibilities of each director. It also gives details of the directors’ other directorships.
Company Secretary
The Company Secretarial function is responsible for ensuring that the Company complies with its statutory duties and maintains
proper documentation, registers and records. It also provides advice to directors and officers about corporate governance and
gives practical effect to any decisions made by the Board.
Mr R Jarman was the Company Secretary during and since the end of the financial year. He has qualifications in law and science
from The University of New South Wales and is an admitted solicitor in New South Wales. Mr Jarman joined Cochlear in 2008
as the inaugural Group General Counsel. He has over 35 years’ experience in corporate and commercial law, litigation and
dispute resolution, legal compliance and corporate governance across medical device, steel, mining and consumer goods
industries.
Directors’ meetings
The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each
of the directors of the Company during the financial year were:
Board of
Directors
Audit & Risk
Committee
People & Culture
Committee
Medical Science
Committee
Nomination
Committee
Technology &
Innovation
Committee
Held Attended Held Attended Held Attended Held Attended
Held Attended
Held Attended
R Holliday‐Smith
YA Allen
G Boreham, AM
Sir M Daniell, KNZM
A Deans
A Denver
D Howitt
A Hussain1
C McLoughlin, AM2
DP O’Dwyer3
10
10
10
10
10
10
10
10
8
4
10
10
10
10
10
10
10
10
7
4
4
4
4
–
4
4
–
–
3
1
4
4
4
–
4
4
–
–
3
1
–
5
5
5
–
5
–
–
–
4
–
5
5
5
5
–
5
–
–
–
4
–
5
–
–
–
2
–
2
2
2
–
1
2
–
–
–
2
–
2
2
2
–
1
2
2
2
2
2
2
2
–
2
1
1
2
1
2
2
2
2
2
–
2
1
1
2
–
2
2
2
2
2
2
2
–
1
2
–
2
2
2
2
2
2
2
–
1
2
Prof B Robinson, AC
10
1.
A Hussain retired from the Board on 20 July 2021.
2. D O’Dwyer retired from the Board on 20 October 2020.
3.
C McLoughlin was appointed to the Board on 1 November 2020.
10
–
Cochlear Limited Annual Report 2021
74
Principal activities
Information on the principal activities, operations and financial position of Cochlear Limited and its business strategies and
prospects is set out in the Operating and financial review on pages 16 to 45 of this Annual Report.
Dividends
Dividends declared and paid by the Company to members since the end of the previous financial year were:
Dollars per share
Total amount
$m
Franked/
unfranked
Date of payment
Dividends recognised in the current financial year by the Company are:
Interim 2021 ordinary
Total amount
1.15
1.15
75.6
75.6
0% Franked
20 April 2021
Since the end of the financial year, the directors declared the following dividend:
Final 2021 ordinary
Total amount
1.40
1.40
92.0
92.0
0% Franked
18 October 2021
The financial effect of the 2021 final dividend will be recognised in the subsequent financial year as it was declared after 30
June 2021.
Environmental regulations
Cochlear’s operations are subject to environmental regulations under the Commonwealth of Australia and State/Territory
legislation. The Board believes that Cochlear has adequate systems in place to manage its environmental obligations and is not
aware of any breach of those environmental requirements as they apply to Cochlear.
Non‐audit services
During the year, KPMG, the Company’s auditor, performed certain other services in addition to its statutory duties. The Board
has considered the non‐audit services provided during the year by the auditor, and in accordance with written advice provided
by resolution of the Audit & Risk Committee, is satisfied that the provision of those non‐audit services during the year by the
auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for
the following reasons:
all non‐audit services were subject to the corporate governance procedures adopted by the Company and have been
reviewed by the Audit & Risk Committee to ensure that they do not impact the integrity and objectivity of the auditor; and
the non‐audit services provided do not undermine the general principles relating to auditor independence as set out in
APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work,
acting in a management or decision‐making capacity for the Company, acting as an advocate for the Company or jointly
sharing risks and rewards.
Cochlear Limited Annual Report 2021
75
Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non‐audit services
during the year are set out below:
Audit services
Audit and review of financial reports
Total audit services
Non‐audit services
Other assurance services
Taxation compliance and advisory services
Other
Total non‐audit services
State of affairs
Consolidated
2021
$
2020
$
2,030,461
2,030,461
2,170,767
2,170,767
–
35,666
1,370,782
1,547,505
52,942
9,185
1,423,724
1,592,356
There were no significant changes to the state of affairs of Cochlear during the financial year other than that referred to in the
financial statements or notes thereto.
Remuneration report
Information on Cochlear’s remuneration framework and the outcomes for the financial year ended 30 June 2021 for the
Cochlear Limited Board, the CEO & President and other key management personnel, and changes for the financial year ending
30 June 2022, is included in the Remuneration report on pages 56 to 73 of this Annual Report.
Indemnification of officers
Under the terms of Article 10 of the Company’s Constitution, and to the extent permitted by law, the Company has indemnified
the directors of the Company named in this Directors’ report, the Company Secretary, Mr R Jarman, and other persons
concerned in or taking part in the management of the Consolidated Entity. The indemnity applies when persons are acting in
their capacity as officers of the Company in respect of:
liability to third parties (other than the Company or related bodies corporate), if the relevant officer has acted in good
faith; and
costs and expenses of successfully defending legal proceedings in which relief under the Corporations Act 2001 is granted
to the relevant officer.
Insurance premiums
During the financial year, the Company paid a premium for a Directors’ and Officers’ Liability Insurance policy. The insurance
provides cover for the directors named in this Directors’ report, the Company Secretary, and officers and former directors and
officers of the Company. The insurance also provides cover for present and former directors and officers of other companies
in the Consolidated Entity. The directors have not included in this report details of the nature of the liabilities covered and the
amount of the premium paid in respect of the Directors’ and Officers’ Liability and Supplementary Legal Expenses Insurance
policies, as such disclosure is prohibited under the terms of the contract.
Cochlear Limited Annual Report 2021
76
Events subsequent to the reporting date
Other than the matter noted below, there has not arisen in the interval between the reporting date and the date of this
Financial report, any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the
Company, to significantly affect the operations of Cochlear, the results of those operations, or the state of affairs of Cochlear
in future financial years:
Dividends
For dividends declared after 30 June 2021, refer above.
Lead auditor’s independence declaration
The lead auditor’s independence declaration is set out on page 78 and forms part of the Directors’ report for the financial year
ended 30 June 2021.
Rounding off
The Company is of a kind referred to in Australian Securities and Investments Commission (ASIC) (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 dated 24 March 2016 and in accordance with that Instrument, amounts in
the Directors’ report and Financial report have been rounded off to the nearest one hundred thousand dollars unless otherwise
stated.
Dated at Sydney this 20th day of August 2021.
Signed in accordance with a resolution of the directors:
Director
Director
Cochlear Limited Annual Report 2021
77
Auditor’s independence declaration
Lead auditor’s independence declaration under section 307C of the Corporations Act 2001
To: the directors of Cochlear Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2021 there
have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Julian McPherson, Partner
Sydney, 20 August 2021
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the
independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
Cochlear Limited Annual Report 2021 78
Income statement
Revenue
Cost of sales
Gross profit
Selling, marketing and general expenses
Research and development expenses
Administration expenses
Other income
Other expenses
Patent litigation expense
Share of losses on equity accounted investments
Results from operating activities
Finance income – interest
Finance expense – interest
Net finance expense
Profit/(loss) before income tax
Income tax (expense)/benefit
Net profit/(loss)
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
Note
2.2
2.3
2.4
2.3
2.3
5.4
3.1
2.5
2.5
2021
$m
1,497.6
(410.2)
1,087.4
(444.1)
(195.0)
(112.2)
86.5
(40.4)
(6.4)
(1.7)
374.1
3.6
(12.0)
(8.4)
365.7
(39.2)
326.5
496.7
496.7
2020
$m
1,320.6
(344.4)
976.2
(470.0)
(185.1)
(93.8)
78.1
(62.7)
(503.7)
(1.2)
(262.2)
1.6
(10.5)
(8.9)
(271.1)
32.8
(238.3)
(399.6)
(399.6)
The notes on pages 84 to 120 are an integral part of these consolidated financial statements.
Cochlear Limited Annual Report 2021 79
Statement of comprehensive
income
Net profit/(loss)
Other comprehensive income/(loss)
Items that will not be reclassified subsequently to the income statement:
Defined benefit plan actuarial (loss)/gain
Financial investments measured at fair value through other comprehensive
income, net of tax
Total items that will not be reclassified subsequently to the income statement
Items that are or may be reclassified subsequently to the income statement:
Foreign currency translation differences
Effective portion of changes in fair value of cash flow hedges, net of tax
Net change in fair value of discontinued cash flow hedges transferred to income
statement, net of tax
Net change in fair value of cash flow hedges transferred to the income statement, net
of tax
Total items that are or may be reclassified subsequently to the income statement
Total other comprehensive income, net of tax
Total comprehensive income/(loss)
The notes on pages 84 to 120 are an integral part of these consolidated financial statements.
2021
$m
326.5
(0.1)
40.7
40.6
(14.1)
11.2
–
(3.0)
(5.9)
34.7
361.2
2020
$m
(238.3)
1.6
(1.8)
(0.2)
3.9
(22.6)
18.3
22.2
21.8
21.6
(216.7)
Cochlear Limited Annual Report 2021
80
Balance sheet
Assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Forward exchange contracts
Inventories
Current tax assets
Prepayments
Total current assets
Forward exchange contracts
Property, plant and equipment
Intangible assets
Investments
Equity‐accounted investments
Other financial assets
Deferred tax assets
Right of use asset
Total non‐current assets
Total assets
Liabilities
Trade and other payables
Forward exchange contracts
Loans and borrowings
Current tax liabilities
Employee benefit liabilities
Provisions
Deferred revenue
Lease liability
Total current liabilities
Trade and other payables
Forward exchange contracts
Loans and borrowings
Employee benefit liabilities
Provisions
Deferred tax liabilities
Deferred revenue
Lease liability
Total non‐current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
Note
6.3
6.4(b)
5.1
3.2
5.2
5.3
5.4
5.4
5.4
3.2
5.7
6.3
3.2
4.2
5.5
5.7
6.3
4.2
5.5
3.2
5.7
2021
$m
609.6
–
296.3
17.6
216.1
69.2
21.2
1,230.0
3.3
239.5
402.8
199.5
–
27.3
146.8
189.0
1,208.2
2,438.2
202.9
4.7
–
12.9
87.9
19.4
42.8
31.9
402.5
0.7
3.2
45.0
12.1
31.0
50.6
4.0
187.4
334.0
736.5
1,701.7
1,276.6
57.9
367.2
1,701.7
2020
$m
565.0
365.0
235.5
1.2
223.8
69.4
17.6
1,477.5
2.1
230.5
410.3
25.9
69.0
5.0
147.1
208.3
1,098.2
2,575.7
159.3
0.3
393.1
7.2
54.4
130.2
47.0
26.0
817.5
13.6
1.7
79.9
12.4
27.2
14.1
2.3
205.5
356.7
1,174.2
1,401.5
1,272.4
12.7
116.4
1,401.5
The notes on pages 84 to 120 are an integral part of these consolidated financial statements.
Cochlear Limited Annual Report 2021
81
Statement of changes in equity
$m
2020
Balance at 1 July 2019
Total comprehensive (loss)/income
Net loss
Other comprehensive income/(loss)
Defined benefit plan actuarial gains
Financial investments measured at fair value through
other comprehensive income, net of tax
Foreign currency translation differences
Effective portion of changes in fair value of cash flow
hedges, net of tax
Net change in fair value of discontinued cash flow hedges
transferred to the income statement, net of tax
Net change in fair value of cash flow hedges transferred
to the income statement, net of tax
Total other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners, recorded directly in equity
Share options exercised
Performance rights vested
Shares issued through institutional placement, net of
related costs
Shares issued through share purchase plan, net of related
costs
Share‐based payment transactions
Deferred tax recognised in equity
Dividends to shareholders
Balance at 30 June 2020
2021
Balance at 1 July 2020
Total comprehensive income/(loss)
Net profit
Other comprehensive income/(loss)
Defined benefit plan actuarial losses
Financial investments measured at fair value through
other comprehensive income, net of tax
Foreign currency translation differences
Effective portion of changes in fair value of cash flow
hedges, net of tax
Net change in fair value of cash flow hedges transferred
to the income statement, net of tax
Total other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners, recorded directly in equity
Share options exercised
Performance rights vested
Share‐based payment transactions
Deferred tax recognised in equity
Dividends to shareholders
Balance at 30 June 2021
Issued
capital
Translation
reserve
Hedging
reserve
Fair
value
reserve
Share‐based
payment
reserve
Retained
earnings
Total
equity
182.3
(47.2)
(17.0)
(1.1)
50.0
546.8
713.8
–
–
–
–
–
–
–
–
–
7.4
–
856.2
219.4
–
7.1
–
1,272.4
–
–
–
3.9
–
–
–
3.9
3.9
–
–
–
–
–
–
–
(43.3)
–
–
–
–
(22.6)
18.3
22.2
17.9
17.9
–
–
–
–
–
–
–
0.9
–
–
(1.8)
–
–
–
–
(1.8)
(1.8)
–
–
–
–
–
–
–
(2.9)
–
–
–
–
–
–
–
–
–
(0.5)
(0.6)
–
–
7.0
2.1
–
58.0
(238.3)
(238.3)
1.6
1.6
–
–
–
–
(1.8)
3.9
(22.6)
18.3
–
1.6
(236.7)
22.2
21.6
(216.7)
–
–
–
6.9
(0.6)
856.2
–
–
–
(193.7)
116.4
219.4
7.0
9.2
(193.7)
1,401.5
1,272.4
(43.3)
0.9
(2.9)
58.0
116.4
1,401.5
–
–
–
–
–
–
–
–
–
4.2
–
–
–
–
1,276.6
–
–
–
(14.1)
–
–
–
–
–
–
40.7
–
–
11.2
–
–
(14.1)
(14.1)
–
–
–
–
–
(57.4)
(3.0)
8.2
8.2
–
40.7
40.7
–
–
–
–
–
9.1
–
–
–
–
–
37.8
–
–
–
–
–
–
–
–
(1.2)
(0.7)
8.1
4.2
–
68.4
326.5
326.5
(0.1)
(0.1)
–
–
–
–
(0.1)
326.4
–
–
–
–
(75.6)
367.2
40.7
(14.1)
11.2
(3.0)
34.7
361.2
3.0
(0.7)
8.1
4.2
(75.6)
1,701.7
The notes on pages 84 to 120 are an integral part of these consolidated financial statements.
Cochlear Limited Annual Report 2021 82
Statement of cash flows
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Grant and other income received
Government assistance in respect of COVID received
Government assistance in respect of COVID repaid
Interest received
Interest paid
Income taxes paid
Net cash provided by/(used in) operating activities
Cash flows from investing activities
Acquisition of leasehold improvements and plant and equipment
Acquisition of IT system costs
Acquisition of other intangible assets
Acquisition of investments
Proceeds from term deposits
Acquisition of term deposits
Net cash used in investing activities
Cash flows from financing activities
Repayments of borrowings
Proceeds from borrowings
Payments of lease liability
Net proceeds from exercise of share options and performance rights
Net proceeds from shares issued through institutional placement
Net proceeds from share purchase plan
Dividends paid
Net cash (used in)/provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, net of overdrafts at 1 July
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents, net of overdrafts at 30 June
Note
2021
$m
2020
$m
1,436.0
1,403.7
(1,150.2)
(1,501.6)
2.4
2.4
2.3
3.1
2.7(b)
5.2
5.3
5.3
5.4
2.6
8.3
24.6
(24.6)
3.6
(12.0)
(14.4)
271.3
(41.2)
(5.9)
(25.5)
(18.4)
365.0
–
274.0
5.5
23.6
–
1.6
(10.5)
(80.1)
(157.8)
(92.9)
(18.5)
(19.1)
(14.2)
–
(365.0)
(509.7)
(403.1)
(130.0)
1.7
(20.5)
2.4
–
–
(75.6)
(495.1)
50.2
565.0
(5.6)
609.6
420.9
(24.6)
6.3
856.2
219.4
(193.7)
1,154.5
487.0
78.6
(0.6)
565.0
The notes on pages 84 to 120 are an integral part of these consolidated financial statements.
Cochlear Limited Annual Report 2021
83
Notes to the financial
statements
1. Basis of preparation
This section sets out the Company’s accounting policies that relate to the financial statements as a whole. Where an accounting
policy is specific to one note, the policy is described in the note to which it relates.
1.1 Reporting entity
Cochlear Limited (the Company) is a company domiciled in Australia. The consolidated financial statements of the Company as
at and for the year ended 30 June 2021 comprise the Company and its controlled entities (together referred to as Cochlear or
the Consolidated Entity). Cochlear is a for‐profit entity and operates in the implantable hearing device industry.
1.2 Basis of preparation
(a) Statement of compliance
The Financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting
Standards (AASBs) adopted by the Australian Accounting Standards Board and the Corporations Act 2001. The consolidated
financial statements comply with International Financial Reporting Standards (IFRS) and Interpretations adopted by the
International Accounting Standards Board.
The Board approved the consolidated financial statements on 20 August 2021.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for derivative financial
instruments and financial investments measured at fair value. The fair value measurement method of derivative instruments
and financial investments measured at fair value through other comprehensive income is discussed further in Note 6.4(d).
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars (AUD), which is the Company’s functional currency.
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191
dated 24 March 2016 and, in accordance with that Instrument, all financial information presented in AUD has been rounded
to the nearest one hundred thousand dollars unless otherwise stated.
(d) Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of entities at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date
are translated to the functional currency at the foreign exchange rate ruling at that date. Non‐monetary assets and liabilities
denominated in foreign currencies that are stated at historical cost are translated using the exchange rate at the date of the
transaction. Non‐monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated
to the functional currency at the foreign exchange rates ruling at the date the fair value was determined.
Foreign exchange differences arising on translation are recognised in the income statement within other income and other
expenses.
Cochlear Limited Annual Report 2021
84
Financial statements of foreign operations
The assets and liabilities of foreign operations are translated to the Company’s functional currency at foreign exchange rates
ruling at the reporting date. The revenues and expenses of foreign operations are translated to the Company’s functional
currency at rates approximating the foreign exchange rates ruling at the dates of transactions.
Foreign currency differences arising from translation of controlled entities are recognised in the foreign currency translation
reserve (translation reserve) in equity. When a foreign operation is disposed of, in part or in full, the relevant amount of its
translation reserve is transferred to the income statement and reported as part of the gain or loss on disposal.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the
settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in
a foreign operation and are recognised in other comprehensive income, and presented in the translation reserve.
(e) Use of judgements and estimates
The preparation of financial statements in conformity with AASB requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the financial year in which the estimate is revised and in any future years affected.
Management discussed with the Audit & Risk Committee the development, selection and disclosure of Cochlear’s critical
accounting policies and estimates and the application of these policies and estimates.
Information about critical judgements in applying accounting policies that have the most significant effect on the amounts
recognised in the consolidated financial statements is included in the following notes:
Note 4.2 – Employee benefit liabilities
Note 4.3 – Share‐based payments
Note 5.3 – Intangible assets
Note 5.5 – Provisions
Note 5.6 – Contingent liabilities
Note 5.7 – Leases
Note 6.4 – Financial risk management.
(f) Basis of consolidation
Controlled entities
The Consolidated Entity controls an entity when it is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. The financial statements of controlled
entities are included in the consolidated financial statements from the date that control commences until the date that control
ceases.
Transactions eliminated on consolidation
Intra‐group balances and transactions, and any unrealised income and expenses arising from intra‐group transactions, are
eliminated in preparing the consolidated financial statements.
Special purpose entities
Cochlear has established special purpose entities (SPEs) for investment purposes. A SPE is consolidated if Cochlear concludes
that it controls the SPE. SPEs controlled by Cochlear were established under terms that impose strict limitations on decision‐
making powers of the SPE’s management.
Cochlear Limited Annual Report 2021
85
(g) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST. Where the amount of GST incurred is not recoverable
from the taxation authority, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to,
the relevant taxation authority is included as a current asset or liability in the balance sheet.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing
and financing activities which are recoverable from, or payable to, the relevant taxation authority are classified as operating
cash flows.
(h) Comparability
Comparative information is reclassified where appropriate to enhance comparability.
2. Performance for the year
2.1 Operating segments
Cochlear’s three reportable segments, determined on a geographical basis, are the strategic business units of Cochlear.
Segment results, assets and liabilities include items directly attributable to a segment, as well as those that can be allocated
on a reasonable basis. Unallocated items comprise corporate and other net expenses and corporate and manufacturing assets
and liabilities.
Performance is measured based on segment earnings before interest and income tax (EBIT) as included in the internal
management reports that are reviewed by Cochlear’s CEO&P, who is also the chief operating decision maker.
Information about reportable segments
Americas
EMEA1
Asia Pacific
Total
2021
$m
724.8
383.8
301.9
151.8
11.2
0.8
0.9
2020
$m
650.3
335.0
353.7
148.7
10.8
2.0
29.7
2021
$m
517.7
227.6
275.8
91.9
6.5
1.8
2.9
2020
$m
479.6
191.7
247.6
67.6
5.6
1.5
1.9
2021
$m
2020
$m
2021
$m
2020
$m
250.8
222.4
1,493.3
1,352.3
74.2
59.0
138.1
148.2
42.9
37.6
5.4
0.7
0.9
5.6
0.8
1.4
685.6
715.8
286.6
23.1
3.3
4.7
585.7
749.5
253.9
22.0
4.3
33.0
Reportable segment revenue
Reportable segment EBIT
Reportable segment assets
Reportable segment liabilities
Other material items
Depreciation and amortisation
Write‐down in value of inventories
Acquisition of non‐current assets
Europe, Middle East and Africa.
1.
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items
Revenues
Cochlear
implants
2021
2020
$m
898.6
817.9
Services
(sound
processor
upgrades and
other)
$m
438.5
395.5
Total
Cochlear
implants
$m
1,337.1
1,213.4
Acoustics
Reportable
segment
revenue
Foreign
exchange
gain/(loss) on
hedged sales
Consolidated
revenue
$m
156.2
138.9
$m
1,493.3
1,352.3
$m
4.3
(31.7)
$m
1,497.6
1,320.6
Cochlear Limited Annual Report 2021
86
Profit or loss
2021
2020
Assets and liabilities
2021
2020
Reportable
segment EBIT
Corporate
and other
net expenses
Foreign
exchange
gain/(loss) on
hedged sales
Net finance
expense
Consolidated
profit/(loss)
before
income tax
$m
685.6
585.7
$m
(315.8)
(816.2)
$m
4.3
(31.7)
$m
(8.4)
(8.9)
$m
365.7
(271.1)
Reportable
segment
assets
$m
715.8
749.5
Corporate and
manufacturing
assets
$m
1,722.4
1,826.2
Consolidated
total assets
$m
2,438.2
2,575.7
Reportable
segment
liabilities
$m
286.6
253.9
Corporate and
manufacturing
liabilities
$m
449.9
920.3
Consolidated
total
liabilities
$m
736.5
1,174.2
Other material items
Reportable segment total
Corporate and
manufacturing total
Consolidated total
2021
$m
23.1
3.3
4.7
–
–
–
2020
$m
22.0
4.3
33.0
–
–
–
2021
$m
56.4
8.2
75.4
–
6.4
1.7
2020
$m
55.5
15.4
97.0
16.7
503.7
1.2
2021
$m
79.5
11.5
80.1
–
6.4
1.7
2020
$m
77.5
19.7
130.0
16.7
503.7
1.2
Depreciation and
amortisation
Write‐down in value of
inventories
Acquisition of non‐current
assets
Impairment of intangible
assets
Patent litigation expense
Equity accounted losses
2.2 Revenue
Revenue from the sale of cochlear and acoustic implants and associated sound processors and accessories to customers is
based on the contracted sales price. Revenue is recognised at the point in time when control passes to the customer with the
exact timing dependent on the agreed sales terms for each contract. Revenue from product sales is also deferred based on the
historical rates of product returns.
Revenues from the rendering of services, including ongoing customer support and software licensing are provided to customers
over time. Where payments are received in advance, the agreed transaction price is initially deferred and progressively
recognised over the life of the agreement as the service is provided. The value of unfulfilled performance obligations under
these contracts is reflected in the Consolidated Entity’s deferred revenue balance.
Customers include implant recipients, medical practitioners and governments. Contracts are short‐term with the exemption of
software licences which are recognised over multiple years. The accounting policy for foreign exchange gains/losses arising
from hedges of forecast sales transactions is set out in Note 6.4(a).
Sale of goods before hedging
Foreign exchange gain/(loss) on hedged sales
Revenue from sale of goods
Rendering of services
Total revenue
Cochlear Limited Annual Report 2021
2021
$m
1,462.7
4.3
1,467.0
30.6
1,497.6
2020
$m
1,320.3
(31.7)
1,288.6
32.0
1,320.6
87
2.3 Expenses
(a) Cost of sales
Carrying amount of inventories recognised as an expense
Write‐down in value of inventories1
Other
Total cost of sales
(b) Other expenses
Repayment of Government assistance in respect of COVID2
Net foreign exchange loss
Ineffective forward exchange contracts
Impairment expense1
Total other expenses
2021
$m
391.4
11.5
7.3
410.2
24.6
15.8
–
–
40.4
2020
$m
329.7
8.2
6.5
344.4
–
6.8
26.1
29.8
62.7
(c) Patent litigation expense
Withholding tax expense
Foreign exchange (gain)
Patent litigation costs
Total patent litigation expense
1.
–
–
503.7
503.7
Total inventory write‐down of $11.5 million (2020: $19.7 million) comprises $11.5 million (2020: $8.2 million) write‐down of
inventories in cost of sales and nil (2020: $11.5 million) write‐down of inventories in other expenses.
29.6
(23.2)
–
6.4
2. Voluntary repayment of government grants. Refer to Note 2.4 for further details.
Patent litigation expense
The patent litigation expense relates to the long‐running patent dispute with Alfred E. Mann Foundation for Scientific Research
and Advanced Bionics LLC (collectively referred to as AMF and AB).
In the prior year, the US Court of Appeals affirmed the US District Court’s decision against Cochlear Limited and its US subsidiary
Cochlear Americas (the Defendants) resulting in the Defendants paying USD 268 million in relation to patent infringement
damages and a further USD 12 million in post judgment interest. The Defendants also agreed to a settlement with AMF and AB
of pre‐judgment interest and attorneys’ fees totalling USD 75 million.
In the current year, $29.6 million has been recognised for withholding tax payable on the settlement amounts. This follows
receipt of a private ruling from the ATO in December 2020 discussed in Note 3. The foreign exchange gain of $23.2 million
represents the revaluation of balance sheet items related to the patent litigation. This includes the USD 268 million loan facility
for patent litigation at 30 June 2020. As this matter has now been resolved, there are no provisions remaining in relation to
this dispute.
Cochlear Limited Annual Report 2021
88
2.4 Other income
Other income, including government grants, is recognised on a systematic basis over the years necessary to match it with the
related costs for which it is intended to compensate. If the costs have already been incurred, the amount is recognised in the
year the entitlement is confirmed. Foreign exchange gains/losses are recognised in accordance with the accounting policy at
Note 1.2(d).
Grant received or due and receivable
Release of contingent consideration
Government assistance in respect of COVID
Fair value change in investments measured at fair value through profit or loss
Other income
Total other income
2021
$m
2.1
1.6
24.6
52.0
6.2
86.5
2020
$m
1.4
13.2
23.6
35.8
4.1
78.1
Due to the impact of COVID, Cochlear received AUD 24.6 million (2020: AUD 23.6 million) in government assistance through
Australia’s JobKeeper Program and other government programs. Cochlear met the eligibility criteria to participate in these
programs which were designed to support jobs during COVID. As trading conditions have improved, Cochlear has voluntarily
repaid the assistance received in the current financial year from these programs. As the payment is voluntary, the repayment
has been included as an expense in Note 2.3(b).
Changes to the contingent consideration value recognised for the Sycle, LLC business acquisition were considered at 30 June
2021. Based on performance hurdles expected to be met, $1.6 million (2020: $13.2 million) has been released to the Income
Statement and $3.0 million remains as contingent consideration (2020: $6.2 million).
2.5 Earnings per share
Cochlear presents basic and diluted earnings per share (EPS) for its ordinary shares.
Basic earnings per share
The calculation of basic EPS has been based on the following net profit attributable to equity holders of the parent entity and
weighted average number of ordinary shares of the Company:
Net profit/(loss) attributable to equity holders of the parent entity
$326,500,000
($238,285,000)
Weighted average number of ordinary shares (basic):
Issued ordinary shares at 1 July (number)
65,687,402
57,715,821
2021
2020
Effect of options, performance shares and performance rights exercised (number)
45,869
Effect of shares issued under Employee Share Plan (number)
Effect of shares issued under institutional placement (number) 1
Effect of shares issued under share purchase plan (number) 2
Weighted average number of ordinary shares (basic) at 30 June
Basic earnings/(loss) per share (cents)
1.
2.
Institutional placement of 6,285,715 shares 31 March 2020, weighted as per days held for the purpose of the EPS calculation.
Share purchase plan of 1,571,567 shares 30 April 2020, weighted as per days held for the purpose of the EPS calculation.
88,382
5,629
1,562,842
261,928
–
–
–
65,733,271
59,634,602
496.7
(399.6)
Cochlear Limited Annual Report 2021
89
Diluted earnings per share
The calculation of diluted EPS has been based on the following net (loss)/profit attributable to equity holders of the parent
entity and weighted average number of shares outstanding after adjustments for the effects of all dilutive potential ordinary
shares:
Net profit/(loss) attributable to equity holders of the parent entity
$326,500,000
($238,285,000)
Weighted average number of ordinary shares (diluted):
Weighted average number of shares (basic) (number)
65,733,271
59,634,602
Effect of options, performance shares and performance rights unvested (number)
1,071
–
Weighted average number of ordinary shares (diluted) at 30 June
Diluted earnings/(loss) per share (cents)
65,734,342
59,634,602
496.7
(399.6)
2021
2020
2.6 Dividends
A liability for dividends payable is recognised in the financial year in which the dividends are declared.
Dollars per share
Total amount $m
Franked/unfranked
Date of payment
Dividends recognised in the current financial year by the Company are:
2021
Interim 2021 ordinary
Total amount
2020
Interim 2020 ordinary
Final 2019 ordinary
Total amount
1.60
1.75
3.35
1.15
1.15
75.6
75.6
92.5
101.2
193.7
0% Franked
20 April 2021
100% Franked
100% Franked
17 April 2020
14 October 2019
Dollars per share
Total amount $m
Franked/unfranked
Date of payment
Subsequent event
Since the end of the financial year, the directors declared the following dividend:
Final 2021 ordinary
Total amount
1.40
1.40
92.0
92.0
0% Franked
18 October 2021
The financial effect of the 2021 final dividend will be recognised in the subsequent financial year as it was declared after 30
June 2021.
Dividend franking account
Franked dividends paid during the prior year were franked at the tax rate of 30%. There are no further tax consequences as a
result of paying dividends other than a reduction in the franking account.
The dividend franking account at year end is normally adjusted for:
franking credits that will arise from the payment of the current tax liability;
franking debits that will arise from the payment of dividends recognised as a liability at the year end; and
franking credits that the Company may be prevented from distributing in subsequent financial years.
At 30 June 2021, there are no franking credits (2020: no franking credits) available to shareholders of Cochlear Limited for
subsequent financial years. As there are no franking credits available for subsequent years, there is no impact on the dividend
franking account after the balance sheet date.
Cochlear Limited Annual Report 2021
90
2.7 Notes to the statement of cash flows
(a) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank
overdrafts that are repayable on demand and form an integral part of Cochlear’s cash management are included as a
component of cash and cash equivalents for the purpose of the statement of cash flows.
The operating cash account received an average interest rate of 0.58% (2020: 1.09%) per annum.
(b) Reconciliation of net profit/(loss) to net cash provided by/(used in) operating activities
Net profit/(loss)
Add item classified as investing activities:
Loss on disposal of property, plant and equipment
Add/(less) non‐cash items:
Depreciation and amortisation
Impairment of intangible assets
Release of contingent consideration
Change in fair value measurement of investments through profit or loss
Equity settled share‐based payment transactions
Share of losses on equity accounted investments
Net cash provided by/(used in) operating activities before changes in assets and
liabilities
Changes in assets and liabilities:
Change in trade and other receivables
Change in inventories
Change in prepayments
Change in deferred tax assets/liabilities
Change in trade and other payables
Change in current tax assets/liabilities
Change in employee benefit liabilities
Change in provisions
Change in deferred revenue
Effect of movements in foreign exchange
Net cash provided by/(used in) operating activities
2021
$m
326.5
0.2
79.5
–
(1.6)
(52.0)
8.1
1.7
362.4
(60.8)
7.7
(3.6)
36.8
30.7
5.9
33.2
(107.0)
(2.5)
(31.5)
271.3
2020
$m
(238.3)
0.4
77.5
16.7
(13.2)
(35.8)
7.0
1.2
(184.5)
82.5
(28.4)
9.3
(38.4)
(30.3)
(84.8)
(15.8)
85.9
3.7
43.0
(157.8)
Cochlear Limited Annual Report 2021
91
3. Income taxes
The Company and its wholly owned Australian resident entities are part of a tax consolidated group. As a consequence, all
members of the tax consolidated group are taxed as a single entity. The head entity within the tax consolidated group is
Cochlear Limited.
3.1 Income tax expense/(benefit)
Income tax expense/(benefit) includes current and deferred tax. Current and deferred tax is recognised in the income
statement except to the extent that it relates to items recognised directly in other comprehensive income or equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax
payable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.
Income tax expense/(benefit) recognised in the income statement
Current income tax expense/(benefit)
Current year
Adjustment for prior years
Total current income tax expense/(benefit)
Deferred income tax expense/(benefit)
Origination and reversal of temporary differences
Net benefit of tax losses
Current year deferred income tax expense/(benefit)
Adjustment for prior years
Total deferred income tax expense/(benefit)
Total income tax expense/(benefit) recognised in the income statement
2021
$m
84.6
(61.3)
23.3
49.4
(34.4)
15.0
0.9
15.9
39.2
2020
$m
5.9
(6.5)
(0.6)
(9.2)
(26.8)
(36.0)
3.8
(32.2)
(32.8)
Consolidated Entity – Numerical reconciliation between income tax expense/(benefit) and profit/(loss) before
income tax
Profit/(loss) before income tax
Tax at the Australian tax rate of 30% (2020: 30%)
Add/(less) adjustments for:
Patent litigation
Research and development allowances
Net non‐deductible/(non‐assessable) items
Effect of tax rates in foreign jurisdictions
Patent litigation adjustment for prior year1
Other adjustment for prior years
Income tax expense/(benefit) on profit/(loss) before income tax
2021
$m
365.7
109.7
–
(10.1)
3.2
(3.2)
99.6
(63.5)
3.1
39.2
2020
$m
(271.1)
(81.3)
63.7
(9.4)
(3.3)
0.2
(30.1)
–
(2.7)
(32.8)
1.
Cochlear Limited prior year adjustment relating to patent litigation following the receipt of a private ruling from the ATO in December
2020 which clarified the deductibility of elements of the patent litigation expense treated as non‐deductible at 30 June 2020.
Cochlear Limited Annual Report 2021
92
Income tax recognised in Statement of Changes in Equity
Income tax on:
Fair value gains on investments
Cash flow hedges
Share‐based payments
Capital raising
Total income tax recognised in Statement of Changes in Equity
Note
3.2
3.2
3.2
3.2
2021
$m
17.4
3.5
(4.2)
–
16.7
2020
$m
–
7.7
(2.1)
(7.1)
(1.5)
Consolidated Entity – Numerical reconciliation between income tax expense/(benefit) and cash taxes paid
Income tax expense/(benefit) on profit/(loss) before income tax
Timing differences recognised in deferred tax
Current year tax instalments receivable/(payable) next year
Prior year tax instalments (received)/paid this year
Cash taxes paid per statement of cash flows
2021
$m
39.2
(15.0)
43.3
(53.1)
14.4
Cochlear Limited’s Australian tax consolidated group – Numerical reconciliation between income tax
expense/(benefit) and profit/(loss) before income tax
Profit/(loss) before income tax (excluding dividends from wholly owned foreign subsidiaries)
Add: Dividends from wholly owned foreign subsidiaries
Profit/(loss) before income tax
Tax at the Australian tax rate of 30% (2020: 30%)
Add/(less) adjustments for:
Patent litigation
Research and development allowances
Net non‐deductible/(non‐assessable) items
Controlled foreign company income
Exempt foreign sourced dividends from wholly owned subsidiaries
Patent litigation prior year adjustment1
Adjustment for prior years
Income tax expense/(benefit) on profit/(loss) before income tax
2021
$m
257.6
45.8
303.4
91.0
–
(8.5)
4.4
2.8
(13.7)
76.0
(63.5)
5.1
17.6
2020
$m
(32.8)
33.8
53.1
26.0
80.1
2020
$m
(306.4)
116.0
(190.4)
(57.1)
63.7
(8.5)
(1.7)
1.6
(34.8)
(36.8)
–
(0.3)
(37.1)
1.
Cochlear Limited prior year adjustment relating to patent litigation following the receipt of a private ruling from the ATO in December
2020 which clarified the deductibility of elements of the patent litigation expense treated as non‐deductible at 30 June 2020.
Cochlear Limited Annual Report 2021
93
3.2 Current and deferred tax assets and liabilities
Deferred tax is recognised on all temporary differences between the carrying amounts of assets and liabilities for financial
reporting and taxation purposes.
The measurement of deferred tax mirrors the tax consequences that the Consolidated Entity expects to recover or settle from
the carrying amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which it
can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced if it is no longer probable that the
related tax benefit will be realised.
Recognised deferred tax assets and liabilities
Deferred tax assets
Deferred tax liabilities
Deferred tax assets/(liabilities)
Reconciliation of deferred tax assets and liabilities
2021
$m
146.8
(50.6)
96.2
2020
$m
147.1
(14.1)
133.0
Opening
balance
Recognised
in the income
statement
Recognised in
other
comprehensive
income
Recognised
in equity
Closing
balance
(1.2)
(1.4)
46.9
59.7
4.0
(0.4)
26.8
(1.4)
133.0
1.9
(0.2)
(7.9)
(30.9)
0.8
–
34.4
(13.1)
(15.0)
–
–
–
–
–
(3.5)
–
(17.4)
(20.9)
–
–
–
–
–
–
–
(0.9)
(0.9)
0.7
(1.6)
39.0
28.8
4.8
(3.9)
61.2
(32.8)
96.2
Property, plant and equipment
Intangible assets
Inventories
Provisions
Deferred revenue
Forward exchange contracts
Tax losses and offsets carried forward
Other
Deferred tax assets/(liabilities)
Unrecognised deferred tax liabilities
At 30 June 2021, a deferred tax liability of $48.1 million (2020: $22.8 million) relating to investments in subsidiaries has not
been recognised because the Company controls whether the asset will be recovered or the liability will be incurred and it is
satisfied that it will not be incurred in the foreseeable future.
Carried forward tax losses
Total tax losses brought forward
Total losses recognised
Total losses utilised against current taxable income
Total losses carried forward to be utilised in future years
Cochlear Limited Annual Report 2021
2021
$m
26.8
63.9
(29.5)
61.2
2020
$m
–
26.8
–
26.8
94
Current tax assets and liabilities
The current tax assets for the Consolidated Entity of $69.2 million (2020: $69.4 million) represent the amount of income taxes
recoverable in respect of current and prior years and arise from the payment of tax in excess of the amounts due to the relevant
taxation authority. The current tax liabilities for the Consolidated Entity of $12.9 million (2020: $7.2 million) represent the
amount of income taxes payable in respect of current and prior financial years.
4. Employee benefits
4.1 Employee expenses
Wages and salaries
Contributions to superannuation plans
Increase in leave liabilities
Equity settled share‐based payment transactions
Total employee expenses
4.2 Employee benefit liabilities
Wages, salaries and annual leave
2021
$m
410.6
30.5
(0.4)
8.1
448.8
2020
$m
415.6
31.3
6.4
7.0
460.3
Liabilities for employee benefits for wages, salaries and annual leave are recognised in other payables and provisions if Cochlear
has a present obligation to pay an amount as a result of past services provided by the employee. The liability is calculated on
remuneration rates as at the reporting date including related on‐costs, such as workers’ compensation insurance and payroll
tax.
Long service leave
The provision for long service leave is the present value of the estimated future cash outflows as a result of services provided
by the employee up to the reporting date.
The provision is calculated using expected future increases in remuneration rates, including related on‐costs, and expected
settlement dates based on turnover history, and is discounted using the corporate bond rates which most closely match the
terms to maturity of the related liabilities.
Defined benefit plans
The Consolidated Entity has defined benefit plans that cover, in aggregate, 84 employees in two countries (2020: 84
employees). Cochlear contributed cash of $1.4 million (2020: $1.5 million) to defined benefit plans in the year ended 30 June
2021 and expects to contribute $1.3 million in the year ending 30 June 2022.
The defined benefit obligations are calculated annually by a qualified actuary using the projected unit credit method.
Remeasurements of the net defined benefit liability (excluding interest) are recognised immediately in other comprehensive
income.
The Company determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by
applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the opening net
defined benefit liability/(asset), adjusted for any changes in the net defined benefit liability/(asset) during the period resulting
from contributions and benefit payments. Net interest expense related to defined benefit plans is recognised in the income
statement.
Cochlear Limited Annual Report 2021
95
Current
Provision for long service leave
Provision for annual leave
Provision for short‐term incentives and sales commissions
Total current employee benefit liabilities
Non‐current
Provision for long service leave
Defined benefit plan
Total non‐current employee benefit liabilities
Total employee benefit liabilities
4.3 Share‐based payments
2021
$m
13.5
36.6
37.8
87.9
6.1
6.0
12.1
100.0
2020
$m
13.4
36.3
4.7
54.4
6.9
5.5
12.4
66.8
From 1 July 2013, the Company grants options and performance rights to certain employees under the Cochlear Executive
Incentive Plan (CEIP).
The fair value of options and performance rights granted is recognised as an employee expense, with a corresponding increase
in equity. The expense is adjusted by the actual number of options, and rights, that are expected to vest except where forfeiture
is due to market‐related conditions.
The fair value is measured using the Black‐Scholes‐Merton pricing model at the date the options, or performance rights are
granted, taking into account market‐based criteria and the terms and conditions attached to the instruments. The options, or
performance rights, are expensed over the vesting period after which the employees become unconditionally entitled to them.
When the Company grants options over its shares to employees of controlled entities, the fair value at grant date is recognised
as an increase in the investment in subsidiaries, with a corresponding increase in equity over the vesting period of the grant in
the Company’s accounts. At 30 June 2021, the unissued ordinary shares of the Company under option and rights and the terms
and conditions of the grants and issues are as follows:
Grant date
Exercise price of
options
Number of
options
Number of
performance rights
Contractual life
–
N/A
9,280
30,687
75,745
24,231
4 years
$217.28
$202.84
$217.28
October 20181
August 20192
October 20191,3
October 20191,3
September 20204
October 20201,3
Total
1. Options and performance rights offered under long‐term incentives.
Performance rights offered under deferred short‐term incentives.
2.
From FY20, LTI Award is subject to a four‐year performance period and as a transition for the FY20 LTI plan, two grants were offered
3.
including three‐year and four‐year performance period. No transitional arrangements were provided to the CEO&P. The CEO&P’s FY20
LTI grant had a four‐year performance period only.
Services rights offered under CEIP.
208,331
$206.06
5 years
5 years
2 years
4 years
2 years
71,211
55,729
12,557
52,626
4,996
9,697
3,994
N/A
–
4.
Grants are split between deferred short‐term incentives (STI) and long‐term incentives (LTI).
Under the CEIP, certain employees receive a portion of their STI achievement in the form of performance rights. The number
of performance rights under the deferred STI grants is calculated at the end of each year and then held for two years until
vesting. As a result of COVID, no deferred STI were offered in FY21.
Cochlear Limited Annual Report 2021
96
Grants under LTI are in two equal tranches assigned to compound annual growth in EPS and ranking of total shareholder return
(TSR) against the ASX 100 index. The conditions for minimum vesting are four years of service and:
50% weighting on compound annual growth in EPS with a minimum CAGR in EPS of 7.5% assigned to 50% of grant; or
50% weighting on relative TSR with the Consolidated Entity’s TSR at the 50th percentile against the ASX 100 over four years
assigned to 40% of grant.
The grant date fair value of options and performance rights was measured based on the Black‐Scholes‐Merton pricing model.
Gross contract value discounts for dividends not paid, share price volatility and the risk free rate of return. There is no discount
for the likelihood of service or performance conditions. The model uses Cochlear’s five‐day volume‐weighted average price
following the announcement of full year results in August each year. The inputs used in the measurement of the fair values at
the grant date are the following:
21 October 2020
(4yr)
TSR based
conditions
EPS
performance
based
conditions
18
September
2020
Rights
service
based
conditions
23 October 2019
(3yr)
23 October 2019
(4yr)
TSR based
conditions
EPS
performance
based
conditions
TSR based
conditions
EPS
performance
based
conditions
17
September
2019
Deferred
STI service
based
conditions
$38.88
$42.56
N/A
$31.46
$34.13
$35.74
$37.56
N/A
$124.47
$188.83
$195.20
$130.48
$206.70
$133.01
$203.72
$209.75
$201.75
$206.06
30.77%
4 ‐ 5
1.66%
$201.75
$201.75
$215.89
$215.89
$215.89
$215.89
$215.89
$206.06
N/A
$217.28
$217.28
$217.28
$217.28
N/A
30.77%
39.13%
4 ‐ 5
1.66%
2
1.66%
24.1%
3 ‐ 4
1.46%
0.71%
24.1%
23.96%
23.96%
24.42%
3 ‐ 4
1.46%
0.71%
4 ‐ 5
1.46%
0.71%
4 ‐ 5
1.46%
0.71%
2
1.46%
0.71%
Fair value of options
at grant date
Fair value of
performance rights at
grant date
Share price at
valuation date
Option exercise price
Expected volatility1
Option life (years)
Expected dividend
Risk free interest rate2
1. Measure captures the characteristics of fluctuations in the share price.
2. Based on government bonds.
0.30%
0.30%
0.30%
The numbers and weighted average exercise prices of options are as follows:
Outstanding at 1 July
Forfeited
Exercised
Granted
Outstanding at 30 June
Exercisable at 30 June
Weighted
average exercise
price
2021
$188.12
$159.34
$154.73
$206.06
$209.03
$202.84
Number of
options
2021
261,426
(60,401)
(48,423)
55,729
208,331
75,745
Weighted
average exercise
price
2020
$163.71
$150.26
$135.84
$217.28
$188.12
$154.73
Number of
options
2020
263,613
(20,846)
(62,646)
81,305
261,426
104,376
48,423 options were exercised in 2021 (2020: 62,646 options were exercised). The weighted average market share price on
the Australian Securities Exchange (ASX) at date of exercise was $207.72 (2020: $215.30). The weighted average remaining
contractual life of options outstanding at the end of the year is two years (2020: two years).
Cochlear Limited Annual Report 2021
97
Employee Share Plan
Cochlear’s Employee Share Plan (Plan) was approved by special resolution at the Annual General Meeting held on 19 October
1999. Under the Plan, the directors can, at their discretion, allocate at nil consideration up to a maximum of $2,000 worth of
shares per eligible employee in any one year. In practice, the directors issue shares worth up to the tax concessional limit,
currently approximately $1,000 per eligible employee each year. The fair value of shares issued during the financial year is the
market price of the Company’s shares on the ASX as at the start of trading on the issue date.
Shares under the Plan vest with the employee immediately but are non‐transferable for a period of up to three years.
In the current year, the Employee Share Plan was suspended due to COVID impacts. Refer to Note 6.2 for further details.
APAC Employee Equity Plan
The APAC Employee Equity Plan, established in 2016, aligns with the Cochlear Employee Share Plan and provides approximately
$1,000 of service rights annually per eligible employee in selected Asian countries. Upon vesting, each service right converts to
one share. For the year ended 30 June 2021, the Company issued 1,068 shares under the plan (2020: 826 shares).
4.4 Key management personnel
The following were key management personnel (KMP) of Cochlear at any time during the financial year and unless otherwise
indicated were KMP for the entire financial year:
Non‐executive directors
R Holliday‐Smith (Chairman), YA Allen, G Boreham, AM, Sir M Daniell, KNZM, A Deans, A Denver, A Hussain1,
C McLoughlin2, AM, DP O’Dwyer3 and Prof B Robinson, AC.
Executive KMP
D Howitt, A Bishop, R Brook, J Janssen, T Manna and S Sayers4
Former Executive KMP
B Cubis5
1. Retired on 20 July 2021.
2. Appointed on 1 November 2020.
3. Retired on 20 October 2020.
4.
5.
Commenced as a KMP on 1 January 2021.
Ceased as a KMP on 30 September 2020.
Key management personnel disclosures
The KMP compensation is included in employee expenses as follows:
Short‐term
employee benefits
$
12,008,815
Post‐employment
benefits
$
415,634
Other long‐term
benefits
$
(6,123)
Share‐based
payments
$
2,794,219
7,772,881
422,082
56,866
2,007,193
End of service
payment
$
327,132
–
Total
$
15,539,677
10,259,022
2021
2020
Information regarding individual KMP remuneration and some equity instruments disclosures as permitted by section 300A of
the Corporations Act 2001 is provided in the Remuneration Report of this Annual Report on pages 56 to 73.
The KMP have not received any loans from Cochlear and there have been no other related party transactions with any of
Cochlear’s KMP.
Cochlear Limited Annual Report 2021
98
5. Operating assets and liabilities
5.1 Inventories
Inventories are measured at the lower of cost and net realisable value.
Cost is based on the first‐in‐first‐out principle including expenditure incurred in acquiring the inventories and bringing them to
their existing condition and location. In the case of manufactured inventories and work in progress, cost includes an appropriate
share of production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and
selling, marketing and distribution expenses.
Raw
materials
$m
87.4
82.6
Work in
progress
$m
32.9
32.5
Finished
goods
$m
95.8
108.7
Total
inventories
$m
216.1
223.8
2021
2020
5.2 Property, plant and equipment
Owned assets
The value of property, plant and equipment is measured as the cost of the asset, minus accumulated depreciation and
impairment losses (see Note 5.3). The cost of the asset is the consideration provided plus incidental costs directly attributable
to the acquisition.
The value of internally‐constructed assets includes the cost of material and direct labour and any other costs directly
attributable to bringing the asset to a working condition for its intended use.
Subsequent costs in relation to replacing a part of property, plant and equipment are capitalised in the carrying amount of the
item if it is probable that future economic benefits will flow to Cochlear and its cost can be measured reliably. All other costs
are recognised in the income statement as incurred.
Depreciation
Depreciation is calculated to expense the cost of items of property, plant and equipment less their estimated residual values
on a straight‐line basis over their estimated useful lives. The estimated useful lives in the current and comparative years are as
follows: leasehold improvements between one to 15 years, plant and equipment between three to 14 years and buildings
between 10 to 30 years.
Depreciation is recognised in the income statement from the date of acquisition or, in respect of internally‐constructed assets,
from the time an asset is completed and held ready for use.
Depreciation rates and methods, useful lives and residual values are reviewed at each balance sheet date. When changes are
made, adjustments are reflected prospectively in current and future financial years only.
Cochlear Limited Annual Report 2021
99
Leasehold
improvements
Plant and equipment
Land and
buildings
Total
At cost
Accumulated
depreciation
Net book value
2021
$m
66.1
(32.1)
34.0
2020
$m
67.6
2021
$m
308.3
2020
$m
295.7
(28.7)
38.9
(174.8)
(171.2)
133.5
124.5
Reconciliations of the carrying amounts are:
Opening balance
Additions
Disposals
Depreciation
Effect of movements in
foreign exchange
Net book value
38.9
2.5
–
(5.4)
(2.0)
34.0
13.8
30.0
–
(4.4)
(0.5)
38.9
124.5
33.9
(0.2)
(23.2)
(1.5)
133.5
5.3 Intangible assets
Goodwill
2021
$m
73.1
(1.1)
72.0
67.1
4.8
–
123.1
25.2
(0.4)
(22.0)
(0.8)
(1.4)
124.5
0.9
72.0
2020
$m
67.7
(0.6)
67.1
29.6
37.7
–
(0.2)
–
67.1
2021
$m
447.5
2020
$m
431.0
(208.0)
(200.5)
239.5
230.5
230.5
41.2
(0.2)
(29.4)
(2.6)
239.5
166.5
92.9
(0.4)
(26.6)
(1.9)
230.5
All business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between
the cost of the acquisition and the fair value of the net identifiable assets acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is tested annually for impairment.
IT system costs
IT system costs are recognised as an intangible asset where Cochlear controls future economic benefits as a result of the costs
incurred, and are stated at cost less accumulated amortisation. Costs include expenditure directly related to the development
and implementation (hardware and software costs) of IT systems including direct labour.
Other intangible assets
Other intangible assets, comprising acquired technology, patents and licences, customer relationships, capitalised
development expenditure and intellectual property, are acquired individually or through business combinations and are stated
at cost less accumulated amortisation and impairment losses (see below).
Amortisation
Amortisation is calculated to expense the cost of intangible assets less their estimated residual values on a straight‐line basis
over their estimated useful lives. The estimated useful lives for the current and comparative years are as follows: IT system
costs between two to seven years, acquired technology, patents and licences between four to 15 years, customer relationships
up to 31 years and capitalised development expenditure between four to 10 years.
Amortisation is recognised in the income statement from the date the assets are available for use unless their lives are
indefinite.
Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment annually.
Cochlear Limited Annual Report 2021
100
Intangible assets with
indefinite useful life
Intangible assets with finite useful life
Goodwill
IT system
costs
$m
$m
267.3
132.8
–
267.3
270.9
–
–
(3.6)
267.3
270.9
–
270.9
268.8
–
–
–
2.1
270.9
(79.5)
53.3
58.1
5.9
(10.7)
–
53.3
127.4
(69.3)
58.1
50.4
18.5
(10.8)
–
–
58.1
Acquired
technology,
patents and
licences
$m
140.3
(81.8)
58.5
53.6
13.0
(8.1)
–
58.5
127.4
(73.8)
53.6
72.5
4.4
(6.6)
(16.7)
–
53.6
Other
intangible
assets
$m
53.8
(30.1)
23.7
27.7
1.6
(3.8)
(1.8)
23.7
55.4
(27.7)
27.7
32.7
–
(5.1)
–
0.1
27.7
2021
At cost
Accumulated amortisation and
impairment losses
Net book value
Reconciliations of the carrying amounts are:
Opening balance
Additions
Amortisation
Effect of movements in foreign
exchange
Net book value
2020
At cost
Accumulated amortisation
Net book value
Reconciliations of the carrying amounts are:
Opening balance
Additions
Amortisation
Impairment
Effect of movements in foreign
exchange
Net book value
Impairment
Intangible
assets
Total
$m
594.2
(191.4)
402.8
410.3
20.5
(22.6)
(5.4)
402.8
581.1
(170.8)
410.3
424.4
22.9
(22.5)
(16.7)
2.2
410.3
Cochlear annually tests goodwill and other intangible assets with indefinite useful life for impairment. Other non‐financial
assets, other than inventories (see Note 5.1) and deferred tax assets (see Note 3.2), are tested if there is any indication of
impairment or if there is any indication that an impairment loss recognised in a prior period may no longer exist or may have
decreased.
Assets are impaired if their carrying value exceeds their recoverable amount. The asset’s recoverable amount is estimated
based on its value in use.
An asset that does not generate independent cash flows and its individual value in use cannot be estimated is tested for
impairment as part of a cash‐generating unit (CGU).
An impairment loss is recognised in the income statement when the carrying amount of an asset or CGU exceeds its recoverable
amount. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment
loss in respect of goodwill is not reversed.
Cochlear Limited Annual Report 2021
101
Impairment tests for CGUs
Cochlear allocates goodwill and other intangible assets to CGUs based on the expected benefits that each CGU will receive
from use of those assets.
The aggregate carrying amounts of goodwill allocated to each CGU are:
2021
2020
Americas
EMEA
Asia Pacific
$m
183.4
185.2
$m
73.9
75.5
$m
10.0
10.2
Total
$m
267.3
270.9
The recoverable amount of each CGU is based on value‐in‐use calculations. Those calculations use five‐year cash flow
projections based on actual operating results and an EBIT growth rate, considered modest compared to historical growth rates
in the CGUs.
Cash flows for year six onwards are extrapolated using a terminal growth rate of 3.0% (2020: 3.0%) per annum which is
consistent with long‐term growth rates. The pre‐tax discount rate for each CGU is as follows: Americas 6.8% (2020: 9.6%),
EMEA 6.9% (2020: 9.8%) and Asia Pacific 7.4% (2020: 10.3%).
The key assumptions and the approach to determining their value in the current year are:
Assumption
Discount rate
EBIT growth rate
Approach
Based on weighted average cost of capital reflecting current market assessments of the
time value of money and risks specific to the CGU.
Based on a five‐year cash flow projection taking into account historical growth rates and
product lifecycle.
Terminal value growth rate
Based on long‐term growth rates.
The recoverable amount of each CGU including unallocated corporate assets is in excess of the carrying amount and therefore
no impairment expense was recognised. The above represents the best estimate of the directors. Sensitivity analysis has been
undertaken to stress test cash flow forecasts, discount rates and terminal value growth rate assumptions. Based on the range
and depth of sensitivities applied no reasonable change in assumptions would result in an impairment.
5.4 Investments, equity‐accounted investments and other financial assets
Cochlear has a number of strategic investments that may, over the longer term, enhance or leverage our intellectual property.
These include investments in Nyxoah S.A., Saluda Medical and EpiMinder. As Cochlear holds these investments for strategic
purposes it elects to fair value investments through other comprehensive income when possible in accordance with accounting
standards.
Cochlear’s investments are valued individually using quoted prices or unobservable market inputs. Unobservable inputs are
those not readily available in an active market. These inputs are generally derived from other observable inputs that match the
risk profile of the financial instruments and validated against current market assumptions and historical transactions where
available. Refer to Note 6.4(d) for further details on the valuation of financial assets.
Equity investments at fair value through other comprehensive income are ordinary shares. Investments measured at fair value
through profit or loss are interests in entities that do not meet the definition of equity, such as instruments convertible into
ordinary shares.
Cochlear Limited Annual Report 2021
102
Balance at 1 July 2020
Additions
Share of equity‐accounted losses
Fair value gain in investments measured at fair
value through profit or loss
Transferred from equity‐accounted investments
Fair value gain through other comprehensive
income (before tax)
Balance at 30 June 2021
Investments Equity‐Accounted
Investments
$m
69.0
8.1
(1.7)
$m
25.9
6.4
–
Other Financial
Assets
$m
5.0
3.9
–
–
109.0
58.2
199.5
33.6
(109.0)
–
–
18.4
–
–
27.3
At 30 June 2021, $50.0 million of investments is measured at fair valued through profit or loss with the remaining $176.8 million
measured at fair valued through other comprehensive income.
Investment in Nyxoah S.A.
In February 2020, Cochlear executed an agreement to invest an additional EUR 8.0 million in Nyxoah S.A. The additional
investment resulted in Cochlear’s ownership interest exceeding 20% and the investee has been reclassified as an associate
from February 2020.
Associates are accounted for using the equity method with Cochlear recognising its share of the associate’s profit or loss and
other comprehensive income. Transactions with associates are eliminated to the extent of Cochlear’s interest in the associate
until such time as they are realised by the investee on consumption or sale. Investments in associates are assessed for
impairment when indicators of impairment are present and, if required, written down to the recoverable amount.
If Cochlear’s share of losses exceeds its interest in the associate, the carrying amount is reduced to nil and recognition of further
losses is discontinued except to the extent that Cochlear has incurred legal or constructive obligations or made payments on
behalf of the associate.
In September 2020, Nyxoah S.A., completed an Initial Public Offering (‘IPO’). Cochlear invested a further EUR 5.0 million
($8.1 million) in the IPO, however, the IPO resulted in Cochlear ownership interest falling to 17.9% and Cochlear’s right to
appoint a director to the Nyxoah board terminated at completion of the IPO. This change in ownership interest resulted in the
investee being reclassified from an investment that is equity accounted to an investment that is fair valued through other
comprehensive income.
As required by accounting standards, on ceasing equity‐accounting of Nyxoah S.A. a $33.6 million gain was recognised in profit
or loss, being the difference between the fair value and the equity‐accounted carrying value at completion of the IPO. At 30
June 2021, the fair value of this investment is $158.8 million based on the listed share price, resulting in a gain of $49.8 million
through other comprehensive income.
5.5 Provisions
A provision is recognised in the balance sheet when:
Cochlear has a present obligation (legal or constructive) as a result of a past event;
a reliable estimate can be made of the amount of the obligation; and
it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre‐tax rate that reflects current market
assessments of the time value of money and the risk specific to the liability.
Cochlear Limited Annual Report 2021
103
2021
Opening balance
Provision made
Provision used
Effect of movements in foreign exchange
Total provisions
Represented by:
Current
Non‐current
Total provisions
Warranties
Warranties
Legal and
insurance
Product
recall
Make good
lease costs
$m
31.6
16.3
(11.4)
(2.2)
34.3
13.2
21.1
34.3
$m
115.2
31.5
(136.8)
(4.9)
5.0
4.9
0.1
5.0
$m
9.0
–
(1.0)
–
8.0
1.3
6.7
8.0
$m
1.6
1.5
–
–
3.1
–
3.1
3.1
Total
$m
157.4
49.3
(149.2)
(7.1)
50.4
19.4
31.0
50.4
A provision for warranty claims is recognised in relation to sales made prior to the reporting date, based on historical claim
rates and respective product populations. Warranty periods on hardware products extend for three to 10 years.
Legal and insurance
Cochlear is involved in litigation in the ordinary course of business, including claims made by Cochlear and against Cochlear for
patent infringement. Where Cochlear is able to make a reliable estimate of the estimated future costs related to these
proceedings, including legal fees, a provision is recognised.
The legal and insurance provision also included amounts provided in relation to the long‐running patent dispute with Alfred E.
Mann Foundation for Scientific Research and Advanced Bionics LLC (collectively referred to as AMF and AB). As at 30 June 2021,
the provision has been fully utilised. Refer to Note 2.3 for further details.
Cochlear self‐insures certain risks associated with operating in its line of business. Claims are recognised when an incident
occurs that may give rise to a claim. They are measured at the cost that Cochlear expects to incur in defending or settling the
claims, discounted using a rate that reflects current market assessments of the time value of money and the risks specific to
the liability.
Product recall
On 11 September 2011, the Company initiated a worldwide voluntary recall of its unimplanted Nucleus CI500 cochlear implant
range. Management has made judgements, estimates and assumptions related to probable costs arising from the recall which
affect the reported amounts of assets, liabilities, income and expenses. Actual outcomes may differ from these estimates as
further information is identified.
No additional provisions have been made or released to the income statement for the year ended 30 June 2021.
Make good lease costs
Cochlear has several operating leases over its offices that require the premises to be returned to the lessor in their original
condition. The operating lease payments do not include an element for the repairs and overhauls.
5.6 Contingent liabilities
The details of contingent liabilities are set out below. The directors are of the opinion that provisions are either adequate or
are not required in respect of these matters, as it is either not probable that a future sacrifice of economic benefits will be
required, or the amount is not capable of reliable measurement.
Product liability claims
Cochlear is currently, and/or is likely from time to time to be, involved in claims and lawsuits incidental to the ordinary course
of business, including claims for damages relating to its products and services.
In addition, Cochlear has received legal claims and lawsuits in various countries including the United States by recipients who
have had Cochlear implant CI500 series devices stop functioning for the reason that led to the September 2011 voluntary recall
of unimplanted CI500 series devices.
Cochlear Limited Annual Report 2021
104
Cochlear carries product liability insurance and has made claims under the policies. The insurers have agreed to indemnify
Cochlear in accordance with the terms and conditions of the policies including deductibles and exclusions. In the opinion of
the directors, the details of the product liability insurance policies are commercially sensitive and any disclosure of these details
may be prejudicial to the interests of Cochlear.
Regulatory actions
Cochlear operates in multiple overseas jurisdictions and, from time to time, is subject to tax, customs and regulatory reviews,
audits and investigations. Known reviews, audits and investigations are not expected to result in a significant adverse outcome
for Cochlear. Outcomes are uncertain because investigations are ongoing.
Patent infringement claims
Cochlear operates in an industry that has substantial intellectual property and patents protecting that intellectual property.
From time to time, Cochlear is involved in confidential discussions with patent owners including competitors regarding
threatened litigation for alleged infringement of patent rights. Current discussions are not expected to result in a significant
adverse outcome for Cochlear.
5.7 Leases
Cochlear leases a number of assets including land and buildings, office equipment and motor vehicles. Cochlear’s lease
agreements often include a standard lease term with an extension option at the end. Lease agreements may include annual
rent increases based on either a fixed percentage or benchmarked against an inflation index. Land and building leases may also
include periodic market rent reviews which resets the rent to the market rent at the time of the review.
At inception of a contract, Cochlear assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Where the contract contains a lease, a lease liability is recognised at lease commencement date. The liability is initially
measured at the present value of future lease payments, discounted using Cochlear’s incremental borrowing rate.
The lease liability is subsequently remeasured when there is a modification in future lease payments arising from a change in
an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or changes
in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is
reasonably certain not to be exercised. The right of use asset is initially measured at cost and subsequently adjusted for certain
remeasurements of the lease liability.
Over the life of the lease, the lease liability will be increased by interest costs and will be reduced as lease payments are made.
The right of use asset is amortised on a straight‐line basis over its useful life.
Cochlear has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include
renewal options. The assessment of whether Cochlear is reasonably certain to exercise such options impacts the lease term,
which significantly affects the amount of lease liabilities and right of use assets recognised.
Cochlear has elected not to recognise a right of use asset and a corresponding lease liability for leases with a term of less than
12 months or for leases of low‐value assets. Cochlear recognises the lease payments associated with these leases as an expense
on a straight‐line basis over the lease term.
The right of use asset depreciation is recognised in cost of sales, selling, marketing and general expenses, research and
development expenses and administration expenses in the income statement depending on the function of associated
activities; while interest expense incurred on the lease liability is recognised in finance expense – interest in the income
statement. For the purpose of presentation of the statement of cash flows, the lease payments are separated into principal
payments (financing activities) and interest payments (operating activities).
Cochlear Limited Annual Report 2021
105
The following table shows movements in the right of use assets during the year:
Balance at 1 July 2020
Additions
Remeasurement
Depreciation expense
Effect of movements in foreign exchange
Balance at 30 June 2021
Land and
buildings
Other
assets
$m
202.0
2.5
0.9
(23.4)
(4.2)
177.8
$m
6.3
8.4
–
(4.1)
0.6
11.2
Total
$m
208.3
10.9
0.9
(27.5)
(3.6)
189.0
6. Capital and financial structure
6.1 Capital management
Cochlear’s capital management objectives are to safeguard its ability to continue as a going concern, provide returns to
shareholders, provide benefits to other stakeholders and maintain an optimal capital structure to reduce the cost of capital.
The Board aims to maintain and develop a capital base appropriate to Cochlear’s objectives and monitors a number of
qualitative metrics as follows:
gearing ratio – defined as total borrowings as a proportion of total equity;
dividend payout ratio – defined as dividends as a proportion of net profit after tax excluding one‐off and non‐recurring
items (‘underlying net profit’) for a given period;
growth in EPS – defined as the compound annual growth percentage in EPS over a three‐year period; and
TSR – defined as the percentage growth in share price over a three‐year period plus the cumulative three‐year dividend
return calculated against the opening share price in the same three‐year period.
Senior management tracks, manages and reports against these capital management metrics periodically as part of broader
corporate governance responsibilities. The Board undertakes periodic reviews to assess whether the metrics continue to be
appropriate and whether the capital management structure is appropriate to meet Cochlear’s medium and long‐term strategic
requirements.
In order to maintain or adjust the capital structure, Cochlear may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt. Neither the Company nor any of its subsidiaries is subject
to externally imposed capital requirements.
In the financial year ended 30 June 2020, Cochlear increased its liquidity by undertaking a capital raising of AUD 1,075.6 million
(net of related costs) and additionally increased Cochlear’s overall available debt by obtaining additional working capital
facilities from existing lenders and an additional facility for the patent litigation. During the financial year ended 30 June 2021,
those additional working capital facilities were terminated, the additional facility for the patent litigation was fully repaid and
existing net debt levels were reduced.
Cochlear’s priority for the use of cash from the capital raising was to reduce existing debt levels, which was achieved during
the financial year ended 30 June 2021, and to maintain a strengthened balance sheet to support the business during any
continuing impacts of COVID while continuing to invest in core strategic business priorities, research and development and the
resumption of dividends to shareholders.
Cochlear Limited Annual Report 2021
106
6.2 Capital and reserves
Share capital
The Company does not have authorised capital or par value in respect of its issued shares.
On issue 1 July – fully paid
Issued for nil consideration under Employee Share Plan
Issued from exercise of APAC Equity Plan
Issued from the exercise of options
Issued from the exercise of performance rights
Issued from capital raising – institutional placement
Issued from capital raising – share purchase plan
On issue 30 June – fully paid
Total number of issued shares
2021
2020
65,687,402
57,715,821
–
1,068
26,689
28,919
–
–
65,744,078
7,955
826
54,419
51,099
6,285,715
1,571,567
65,687,402
During the 2021 financial year, Cochlear purchased 24,990 shares (2020: 10,394 shares) on‐market to satisfy exercise of options
and performance rights and did not issue shares to employees under the Employee Share Plan (2020: 7,955 shares). Refer to
Note 4.3 for further details.
Ordinary shares are classified as equity and incremental costs directly attributable to the issue of ordinary shares and share
options are recognised as a deduction from equity, net of any income tax benefit.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at shareholders’ meetings.
In the prior year, Cochlear completed a capital raising of AUD 1,075.6 million, net of related costs, in response to the combined
effects of COVID and the patent litigation. The capital raising was to ensure Cochlear remained strongly capitalised during the
market uncertainties of COVID, to enhance Cochlear’s balance sheet and to strengthen liquidity in order to position Cochlear
for the future. From the capital raise, 6,285,715 shares were issued from the institutional placement on 31 March 2020 and
1,571,567 shares were issued from the share purchase plan on 30 April 2020.
Translation reserve
The translation reserve records the foreign currency differences arising from the translation of the financial statements of
foreign operations as well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary,
where their functional currency is different to the presentation currency of the reporting entity. See Note 1.2(d) for further
details.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to underlying transactions that have not yet occurred.
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of investments revalued through other
comprehensive income until the assets are derecognised or impaired.
Share‐based payment reserve
The share‐based payment reserve comprises the cost of shares, options, performance shares and performance rights granted
to eligible executives under the CEIP, as detailed in Note 4.3 less any payments made to meet Cochlear’s obligations through
the acquisition of shares on‐market, together with any deferred tax asset/liability on such payments.
Cochlear Limited Annual Report 2021
107
6.3 Total borrowings, net cash and finance costs
Loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequently, loans and
borrowings are stated at amortised cost, with any difference between amortised cost and redemption value being recognised
in the income statement over the period of the borrowings on an effective interest rate basis.
Debt establishment costs are capitalised and recognised as a reduction in loans and borrowings. They are recorded initially at
cost and are amortised over the period of the loan. Included within borrowings is an amount of $0.7 million (2020: $0.9 million)
in relation to unamortised loan establishment fees.
As a result of the capital raising, Cochlear continues to be in a net cash position for the year ended 30 June 2021.
Cash at bank
Cash and cash equivalents
Term deposits1
Total Cash
Less: Total borrowings
Current
Non‐current
Total borrowings
Net Cash
2021
$m
609.6
–
609.6
–
(45.0)
(45.0)
564.6
2020
$m
565.0
365.0
930.0
(393.1)
(79.9)
(473.0)
457.0
1.
Term deposits are bank deposits with a fixed term maturity of longer than three months from inception. Bank deposits with a fixed term
of less than three months are classified as cash and cash equivalents. All term deposits have matured and therefore no term deposits
were held as at 30 June 2021 (2020: AUD 365.0 million).
Gearing ratio
Total borrowings
Total equity
Gearing ratio1
1. Gearing ratio = Total borrowings/Total equity.
2021
$m
45.0
1,701.7
2.6%
2020
$m
473.0
1,401.5
33.7%
Cochlear Limited Annual Report 2021
108
Financing arrangements
2021
Utilised at reporting date1
Not utilised at reporting date
Total facilities
2020
Utilised at reporting date1
Not utilised at reporting date
Total facilities
Multi‐option bank facilities
Unsecured
bank loan
Bank
guarantees2
Other credit facilities
Unsecured
bank loan
Bank
guarantees2
Unsecured
bank
overdrafts
$m
45.7
300.0
345.7
470.5
527.2
997.7
$m
5.5
9.5
15.0
8.0
7.0
15.0
$m
–
2.7
2.7
–
2.9
2.9
$m
–
5.4
5.4
3.4
2.7
6.1
$m
6.2
3.4
9.6
5.4
4.2
9.6
Excludes the amount of $0.7 million (2020: $0.9 million) in relation to unamortised loan establishment fees.
1.
2. Bank guarantees include standby letters of credit.
Multi‐option bank facilities – Unsecured bank loan
During the year ended 30 June 2021, Cochlear restructured its bank loan facilities as follows:
Facility type
<1 year term
$m
1 ‐ 2 year term
$m
2 ‐ 3 year term
$m
3 ‐ 4 year term
$m
5 ‐ 6 year term
$m
Total facilities
$m
Committed debt
including guarantees
–
145.7
115.0
–
100.0
360.7
All facilities are unsecured and have interlocking guarantees provided by certain controlled entities. Interest on the facilities is
variable and charged at prevailing market rates.
Other credit facilities
Unsecured bank overdrafts
Certain unsecured bank overdrafts are payable on demand and are subject to annual review. Interest on unsecured bank
overdrafts is variable and is charged at prevailing market rates.
Unsecured bank loan
Cochlear has a Japanese yen (JPY) 450.0 million loan facility and a Swedish kroner (SEK) 300.0 million loan facility. The facilities
are unsecured bank loans. Interest on unsecured bank loans is variable and is charged at prevailing market rates.
Bank guarantees/Standby letters of credit
As at 30 June 2021, Cochlear had additional contingent liability facilities denominated in USD, Euros (EUR), Sterling (GBP),
Indian rupees and New Zealand dollars totalling AUD 9.6 million (2020: AUD 9.6 million).
Finance costs
Interest income is recognised as it accrues in the income statement. Borrowing costs are recognised as they accrue in the
income statement as a finance expense.
Cochlear Limited Annual Report 2021
109
6.4 Financial risk management
The activities of Cochlear are exposed to a variety of risks, including market risk (comprising currency and interest rate risk),
credit risk and liquidity risk. Cochlear’s overall risk management program considers the unpredictability of financial markets
and seeks to appropriately manage the potential adverse effects on financial performance.
The Board has overall responsibility for the establishment and oversight of the Risk Management Framework. Under instruction
of the Board, management has established a Risk Management Committee which is responsible for identifying, assessing and
appropriately managing risk throughout Cochlear. Key risks are reported to the Audit & Risk Committee on a regular basis.
The Audit & Risk Committee oversees how management monitors compliance with Cochlear’s Risk Management Framework,
policies and procedures and is assisted by Group Risk and Assurance which undertakes reviews of key management controls
and procedures.
(a) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect
Cochlear’s net profit or the value of its holdings of financial instruments.
The objective of market risk management is to manage and control market risk exposures by buying and selling forward
exchange contracts and incurring financial liabilities, within acceptable parameters, while optimising the return, all in
accordance with the treasury risk policy.
Currency risk
Cochlear is exposed to currencies other than the respective functional currencies of the controlled entities, primarily AUD,
Swiss francs (CHF), CNY, EUR, GBP, JPY, SEK and USD.
Over 90% of Cochlear’s revenues and over 50% of costs are denominated in currencies other than AUD. Currency risk is hedged
in accordance with the treasury risk policy. Risk resulting from the translation of assets and liabilities of foreign operations into
Cochlear’s reporting currency is not hedged.
Cochlear’s exposure to foreign currency risk in relation to non‐derivative financial instruments at 30 June 2021 was as follows,
based upon notional amounts:
Amounts local currency/millions
CHF
CNY
EUR
GBP
JPY
SEK
USD
2021
Trade receivables
Unsecured bank loan
Trade payables
Balance sheet exposure
2020
Trade receivables
Unsecured bank loan
Trade payables
0.3
–
(1.4)
(1.1)
6.4
–
(47.4)
(41.0)
0.6
–
6.0
(165.4)
45.1
–
(17.3)
27.8
36.5
–
(0.1)
(26.3)
(10.6)
Balance sheet exposure
0.5
(185.7)
25.9
2.2
–
(4.5)
(2.3)
922.2
5.5
–
(300.0)
97.0
–
(54.2)
(46.6)
(23.4)
868.0
(341.1)
73.6
(0.9)
771.8
1.7
66.4
–
(250.0)
(300.0)
(268.0)
(3.0)
(3.9)
(74.4)
(39.9)
(23.8)
447.4
(338.2)
(225.4)
Cochlear Limited Annual Report 2021
110
Derivative assets and liabilities
In order to reduce the impact of short‐term fluctuations on Cochlear’s earnings, Cochlear enters into forward exchange
contracts to hedge anticipated sales and purchases in CHF, EUR, GBP, JPY, SEK and USD. The amounts of forward cover taken
are in accordance with approved policy and internal forecasts.
In the year ended 30 June 2021, Cochlear designated the majority of forward exchange contracts as cash flow hedges. These
are hedges of forecast future transactions to manage the currency risk arising from exchange rate fluctuations. The hedged
items were highly probable foreign currency transactions.
At the start of a hedge relationship, Cochlear designates and documents the relationship between the hedging instrument and
hedged item. This includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk
being hedged and how Cochlear will assess the effectiveness of the hedging relationship. Cochlear regularly assesses whether
the hedging instruments are expected to be highly effective in offsetting the changes in the cash flows of the respective hedged
items.
Forward exchange contracts are recognised initially at fair value. Subsequently, forward exchange contracts are measured at
fair value. Changes in the fair value are recognised directly in equity to the extent that the hedge is effective. The ineffective
part of any hedging instrument is recognised immediately in the income statement.
If the forward exchange contract no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there
until the forecast transaction occurs or until cash flows arising from the transaction are received.
For cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in the income statement
in the same period the hedged forecast transaction affects the income statement and on the same line item as that hedged
forecast transaction.
In the year ended 30 June 2021, all cash flow hedges were effective at the reporting date.
The following table sets out the gross value to be received or paid under remaining forward exchange contracts and the
weighted average contracted exchange rates of outstanding contracts:
Weighted
average rate
< 1 year
$m
1 ‐ 2 years
$m
2 ‐ 5 years
$m
2021
Buy CHF
Sell EUR
Sell GBP
Sell JPY
Buy SEK
Sell USD
Total
2020
Buy CHF
Sell EUR
Sell GBP
Sell JPY
Buy SEK
Sell USD
Total
0.678
0.617
0.544
76.901
6.414
0.741
0.659
0.595
0.522
72.979
6.492
0.691
(18.6)
146.3
21.3
18.2
(32.7)
264.5
399.0
(12.0)
–
–
19.8
(27.7)
–
(19.9)
–
95.9
9.0
9.2
‐
171.4
285.5
–
63.1
9.6
11.1
–
122.8
206.6
–
–
–
–
–
–
–
–
–
–
–
–
26.3
26.3
Cochlear Limited Annual Report 2021
111
Currency risk – Sensitivity analysis
An analysis based on a 10% strengthening of foreign currencies would have increased Cochlear’s profit for the year ended 30
June 2021 after tax by approximately AUD 0.9 million (2020: increased loss by AUD 1.7 million) and increased Cochlear’s equity
by AUD 49.9 million (2020: increase by AUD 13.6 million). A 10% weakening of the foreign currencies would have a neutral
impact on Cochlear’s profit after tax (2020: decreased loss by AUD 2.4 million) and decreased equity by AUD 40.4 million
(2020: decrease by AUD 13.0 million).
This analysis assumes that all other variables remain constant and ignores any impact from the translation of foreign
operations.
The following significant exchange rates applied to Cochlear during the year:
AUD 1 =
CHF
CNY
EUR
GBP
JPY
SEK
USD
Interest rate risk
Average rate
Reporting date spot rate
2021
0.679
4.940
0.625
0.553
79.464
6.421
0.745
2020
0.656
4.725
0.606
0.533
72.549
6.457
0.672
2021
0.692
4.856
0.631
0.542
83.025
6.561
0.752
2020
0.654
4.869
0.611
0.558
73.985
6.413
0.688
Cochlear is exposed to interest rate risks in Australia, Japan and Sweden. See Note 6.4(c) for effective interest rates, repayment
and repricing analysis of outstanding debt.
At the reporting date, the interest rate profile of Cochlear’s interest‐bearing financial instruments is financial assets of
$609.6 million (2020: $930.0 million) and financial liabilities of $45.0 million (2020: $473.0 million).
Interest rate risk – Sensitivity analysis
For the year ended 30 June 2021, it is estimated that a general increase of one percent in interest rates would have reduced
Cochlear’s profit after income tax and equity by approximately $0.3 million (2020: increased loss by $3.3 million). A one percent
general decrease in interest rates would have had the equal but opposite effect on Cochlear’s loss and equity.
(b) Credit risk
Credit risk is the risk of financial loss to Cochlear if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. Cochlear is exposed to credit risk from its operating activities (primarily from trade and other
receivables) and from financing activities, including deposits with financial institutions and foreign exchange contracts. The
carrying amounts of these financial assets at year‐end represent Cochlear’s maximum exposure to credit risk.
Credit risk management – Trade and other receivables
Customer credit risk is managed at a regional level, subject to Board approved policies and procedures. The ageing profile of
total receivables balances, individually significant debtors by geographic region, high risk customers and collection activities
are reported to management and the Board on a monthly basis. Where high risk customers are identified, regional
management is responsible for placing restrictions on future trading, including suspending future shipments and administering
dispatches on a prepayment basis.
Cochlear’s exposure to credit risk is influenced mainly by the political and geographical location and characteristics of individual
customers. Cochlear does not have a significant concentration of credit risk with a single customer.
Cochlear Limited Annual Report 2021
112
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
2021
2020
Americas
EMEA
Asia Pacific
$m
88.4
74.7
$m
125.9
92.1
$m
47.8
44.6
Total
$m
262.1
211.4
Depending on the region, Cochlear’s credit terms are generally 30 days; however, there are certain jurisdictions where it is
customary practice for customers to make payment beyond 270 days. Although Cochlear discloses the balance as overdue, it
is not indicative of a higher than normal credit risk as payments are typically received by Cochlear within the extended
timeframes.
Cochlear has established an allowance for impairment that represents its estimate of the expected credit losses in respect of
trade receivables. The expected credit losses are assessed by reference to historical collection trends and timing of recoveries
of each customer type within a region.
In response to COVID, Cochlear undertook reviews of its outstanding trade debtors. The reviews considered the
macroeconomic conditions and outlook in the country that the customer is located as well as any specific collection risk
identified by either Cochlear or the customer. As a result of these reviews, the trade debtors provision has been adjusted to
reflect the increased level of risk caused by COVID in the current and prior year. While these model inputs including forward‐
looking information were revised, the expected credit loss model remains consistent with the prior year.
Trade and other receivables are stated at amortised cost less impairment losses. The ageing of Cochlear’s trade receivables at
the reporting date was:
Trade receivables
Not past due
Past due 1 ‐ 60 days
Past due 61 ‐ 180 days
Past due 181 ‐ 360 days
Past due 361 days and over
Allowance for impairment losses
Trade receivables net of allowance for impairment losses
Other receivables – current
Trade and other receivables
2021
$m
220.7
29.9
14.0
6.3
9.0
279.9
(17.8)
262.1
34.2
296.3
2020
$m
163.5
31.6
19.8
11.6
8.8
235.3
(23.9)
211.4
24.1
235.5
Credit risk management – Cash deposits, term deposits and forward exchange contracts
The majority of Cochlear’s cash deposits, term deposits and all forward exchange contracts are only executed with leading
financial institutions whose credit rating is at least ‘A’ on the Standard & Poor’s rating index.
(c) Liquidity risk
Liquidity risk is the risk that Cochlear will not be able to meet its financial obligations as they fall due. Cochlear manages liquidity
risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. The capital raising
increased Cochlear’s liquidity such that Cochlear continues to be in a net cash position for the year ended 30 June 2021 (refer
to Note 6.1). This has ensured that Cochlear has a strengthened balance sheet and is well positioned to meet all liabilities when
due.
Cochlear Limited Annual Report 2021
113
Non‐derivative liabilities
Contractual maturities of non‐derivative financial liabilities, including estimated interest payments and excluding the impact
of netting agreements, are as follows:
Effective
interest rate
Carrying
amount
Contractual
cash flows
2021
SEK floating rate loan
Trade and other payables
Lease liability
Total
2020
USD floating rate loan
CNY floating rate loan
JPY floating rate loan
SEK floating rate loan
Trade and other payables
Lease liability
Total
Per annum
$m
0.66%
–
–
1.17%
2.60%
0.55%
0.91%
–
–
45.7
203.6
219.3
468.6
389.8
34.0
3.3
45.9
172.9
231.5
877.4
$m
46.2
203.6
260.3
510.1
394.3
37.6
3.4
47.8
172.9
282.6
938.6
< 1
year
$m
0.3
202.9
31.9
235.1
394.3
0.9
3.4
0.2
159.3
26.0
584.1
1 ‐ 2
years
2 ‐ 5
years
More than
5 years
$m
$m
$m
45.9
0.7
29.1
75.7
–
0.9
–
0.4
12.4
28.2
41.9
–
–
72.6
72.6
–
35.8
–
47.2
1.2
77.7
161.9
–
–
126.7
126.7
–
–
–
–
–
150.7
150.7
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly
different amounts.
Derivative assets and liabilities
The following table indicates the periods in which the cash flows associated with Cochlear’s derivatives are expected to occur:
2021
Assets
Liabilities
Total
2020
Assets
Liabilities
Total
Carrying
amount
$m
Contractual
cash flows
$m
20.9
(7.9)
13.0
3.3
(2.0)
1.3
20.9
(7.9)
13.0
3.3
(2.0)
1.3
< 1 year
$m
17.6
(4.7)
12.9
1.2
(0.3)
0.9
1 ‐ 2
years
$m
3.3
(3.2)
0.1
2.0
(1.6)
0.4
2 ‐ 5
years
$m
–
–
–
0.1
(0.1)
–
The expected impact on the income statement is not considered to be significantly different to the cash flow impact noted
above.
(d) Fair value
The carrying amounts and estimated fair values of Cochlear’s financial assets and liabilities are materially the same.
The fair value of forward exchange contracts is based upon the listed market price, if available. If a listed market price is not
available, the fair value is estimated by discounting the difference between the contractual forward price and the current
forward price for the residual maturity of the contract using benchmark bill futures and swap rates. These fair values are
provided by independent third parties.
Cochlear Limited Annual Report 2021
114
Valuation of financial assets and liabilities
For financial assets and liabilities measured and carried at fair value, Cochlear uses the following levels to categorise the
valuation methods used:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
All of Cochlear’s forward exchange contracts were valued using observable market inputs (Level 2) and there were no transfers
between levels during the year.
7. Other notes
7.1 Auditors’ remuneration
Audit services
Auditors of the Company – KPMG:
– audit and review of financial reports
Total audit services
Non‐audit services
Auditors of the Company – KPMG:
– other assurance services
– taxation compliance and advisory services
– other
Total non‐audit services
7.2 Commitments
Capital expenditure commitments
2021
$
2020
$
2,030,461
2,030,461
2,170,767
2,170,767
–
35,666
1,370,782
1,547,505
52,942
9,185
1,423,724
1,592,356
As at 30 June 2021, Cochlear entered into contracts to purchase property, plant and equipment for $20.4 million (2020:
$24.0 million).
7.3 Controlled entities
Subsidiaries conduct business transactions with various controlled entities. Such transactions include purchases and sales of
certain products, dividends, interest and loans.
Company
Cochlear Limited
Controlled entities
Cochlear AG
Cochlear Americas
Cochlear Austria GmbH
Cochlear Benelux NV
Cochlear Bone Anchored Solutions AB
Cochlear Boulder LLC
Cochlear Canada Inc
Cochlear Clinical Services LLC
Interest held
2020
2021
%
%
Country of
incorporation/
formation
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Australia
Switzerland
USA
Austria
Belgium
Sweden
USA
Canada
USA
Cochlear Limited Annual Report 2021
115
Cochlear Colombia SAS
Cochlear Deutschland GmbH & Co KG
Cochlear Employee Share Trust
Cochlear Europe Finance GmbH
Cochlear Europe Limited
Cochlear Finance Pty Limited
Cochlear France SAS
Cochlear German Holdings Pty Limited
Cochlear Incentive Plan Pty Ltd
Cochlear Investments Pty Ltd
Cochlear Investments (No. 2) Pty Ltd
Cochlear Italia SRL
Cochlear Korea Limited
Cochlear Labs Pty Limited
Cochlear Latinoamerica S.A.
Cochlear Malaysia Sdn. Bhd.
Cochlear Manufacturing Corporation
Cochlear Medical Device (Beijing) Co., Ltd
Cochlear Medical Device (Chengdu) Co Ltd
Cochlear Medical Device Company India Private Limited
Cochlear Mexico SA de CV
Cochlear Middle East FZ‐LLC
Cochlear Nordic AB
Cochlear Norway AS
Cochlear NZ Limited
Cochlear Research and Development Limited
Cochlear Shared Services S.A.
Cochlear Sweden Holdings AB
Cochlear Taiwan Limited
Cochlear (Thailand) Limited
Cochlear Tibbi Cihazlar ve Saglik Hizmetleri Limited Sirketi
Cochlear Verwaltungs GmbH
Cochlear (HK) Limited
Cochlear (UK) Limited
Medical Insurance Pte Limited
Nihon Cochlear Co Limited
Sichuan Keli ShuangChuang Technology Co Ltd
Sycle, LLC
Sycle.Net Technologies (Canada) Ltd
(i) Dormant.
(i)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
Colombia
Germany
Australia
Germany
UK
Australia
France
Australia
Australia
Australia
Australia
Italy
Korea
Australia
Panama
Malaysia
USA
China
China
India
Mexico
UAE
Sweden
Norway
New Zealand
UK
Panama
Sweden
Taiwan
Thailand
Turkey
Germany
Hong Kong
UK
Singapore
Japan
China
USA
Canada
Cochlear Limited Annual Report 2021
116
7.4 Parent entity disclosure
At, and throughout the financial year ended, 30 June 2021, the parent company of Cochlear was Cochlear Limited.
Result of the parent entity
Net profit/(loss)
Other comprehensive income
Total comprehensive income/(loss)
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising:
Share capital
Hedging reserve
Share‐based payment reserve
Profit reserve
Accumulated losses
Total equity
2021
$m
248.5
8.3
256.8
1,192.6
1,903.2
282.8
474.7
2020
$m
(191.4)
17.9
(173.5)
1,441.8
2,154.8
689.0
922.0
1,276.6
1,272.4
9.1
68.4
172.9
(98.5)
1,428.5
0.9
58.0
–
(98.5)
1,232.8
Dividends will be paid from the profit reserve of Cochlear Limited, as the parent of the Consolidated Entity.
Dividend income from subsidiaries is recognised by the parent entity when the dividends are declared by the subsidiary.
Parent entity contingencies
The details of all contingent liabilities in respect of Cochlear Limited are disclosed in Note 5.6.
Parent entity capital commitments for acquisition of plant and equipment
As at 30 June 2021, the parent entity entered into contracts to purchase plant and equipment for $16.0 million (2020:
$10.1 million).
7.5 Deed of Cross Guarantee
Cochlear Limited (the holding entity) together with wholly owned subsidiaries set out below (together referred to as the ‘Closed
Group’) have entered a Deed of Cross Guarantee on 17 April 2019 in accordance with ASIC Corporations (Wholly‐owned
Companies) Instrument 2016/785 and are relieved from the Corporations Act 2001 requirement to prepare and lodge an
audited financial report and directors’ report. The effect of the deed is that Cochlear Limited has guaranteed to pay any
outstanding liabilities upon the winding up of any wholly owned subsidiary that is party to the Deed. Wholly owned subsidiaries
that are party to the Deed have also been given a similar guarantee in the event that Cochlear Limited or another party to the
Deed is wound up.
The subsidiaries party to the deed are:
Cochlear Finance Pty Limited;
Cochlear German Holdings Pty Limited;
Cochlear Investments Pty Ltd;
Cochlear Investments (No. 2) Pty Ltd; and
Cochlear Labs Pty Limited.
Cochlear Limited Annual Report 2021
117
Set out below is the income statement, statement of comprehensive income, a summary of movements in (accumulated
losses)/retained earnings and balance sheet of the entities party to the Deed of Cross Guarantee for the year ended 30 June
2021 and 30 June 2020:
Income statement
Revenue
Cost of sales
Gross profit
Selling, marketing and general expenses
Research and development expenses
Administration expenses
Other income
Other expenses
Patent litigation expense
Share of losses on equity accounted investments
Results from operating activities
Finance income – interest
Finance expense – interest
Net finance expense
Profit/(Loss) before income tax
Income tax benefit/(expense)
Net profit/(loss)
Statement of comprehensive income
Financial investments measured at fair value through other comprehensive
income, net of tax
Foreign currency translation differences
Effective portion of changes in fair value of cash flow hedges, net of tax
Net change in fair value of discontinued cash flow hedges transferred to the
income statement, net of tax
Net change in fair value of cash flow hedges transferred to the income statement,
net of tax
Total comprehensive income/(loss)
Retained earnings at beginning of year
Net profit/(loss)
Dividends recognised
Retained earnings/(Accumulated losses) at end of year
2021
$m
959.7
(351.1)
608.6
(65.3)
(129.8)
(106.6)
105.5
(95.0)
(6.4)
(1.7)
309.3
4.3
(10.1)
(5.8)
303.5
(17.6)
285.9
40.7
(0.1)
11.2
–
(3.0)
334.7
(82.0)
285.9
(75.6)
128.3
2020
$m
851.1
(307.2)
543.9
(63.3)
(141.8)
(88.3)
178.8
(107.7)
(503.7)
(1.2)
(183.3)
3.0
(10.0)
(7.0)
(190.3)
37.1
(153.2)
(1.8)
(2.2)
(22.6)
18.3
22.3
(139.2)
264.9
(153.2)
(193.7)
(82.0)
Cochlear Limited Annual Report 2021
118
Balance sheet
Assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Forward exchange contracts
Inventories
Current tax assets
Prepayments
Total current assets
Forward exchange contracts
Loans and borrowings – internal
Investments in subsidiaries
Investments
Equity accounted investments
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Right of use asset
Total non‐current assets
Total assets
Liabilities
Trade and other payables
Forward exchange contracts
Loans and borrowings – external
Loans and borrowings – internal
Current tax liabilities
Employee benefit liabilities
Provisions
Deferred revenue
Lease liability
Total current liabilities
Trade and other payables
Forward exchange contracts
Loans and borrowings – external
Loans and borrowings – internal
Employee benefit liabilities
Provisions
Deferred tax liabilities
Deferred revenue
Lease liability
Total non‐current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
(Accumulated losses)/retained earnings
Total equity
2021
$m
514.2
–
441.9
17.6
141.0
65.1
13.4
1,193.2
3.3
121.3
432.2
199.5
–
27.3
111.7
108.5
84.3
113.5
1,201.6
2,394.8
201.7
4.6
–
86.8
2.8
45.1
14.4
5.2
14.8
375.4
–
3.2
45.0
265.1
4.0
21.2
50.2
–
118.7
507.4
882.8
1,512.0
1,276.6
107.1
128.3
1,512.0
2020
$m
432.9
365.0
443.2
1.0
137.6
53.5
9.4
1,442.6
2.1
79.8
415.2
25.9
69.0
5.0
109.4
107.4
90.1
117.6
1,021.5
2,464.1
115.0
0.3
389.8
74.5
1.7
32.6
139.6
2.6
13.4
769.5
51.3
1.7
45.9
208.4
4.7
5.5
12.9
2.0
123.8
456.2
1,225.7
1,238.4
1,272.4
48.0
(82.0)
1,238.4
Cochlear Limited Annual Report 2021
119
7.6 Changes in accounting policies
There have been no changes to accounting policies materially impacting Cochlear in the current financial year.
7.7 New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for financial years beginning on or
after 1 July 2020, and have not been applied in preparing these consolidated financial statements. Of the new standards, only
the below are expected to have an effect on the consolidated financial statements of Cochlear.
IFRIC Agenda Decision on Configuration or customisation costs in a cloud computing arrangement
In April 2021, the International Financial Reporting Standards Interpretations Committee (IFRIC) issued a final agenda
decision, Configuration or customisation costs in a cloud computing arrangement. The decision discusses whether
configuration or customisation expenditure relating to cloud computing arrangements is able to be recognised as an
intangible asset and if not, over what time period the expenditure is expensed.
Cochlear’s accounting policy has historically been to capitalise all configuration and customisation costs related to cloud
computing arrangements as intangible assets. These are recorded within IT system costs disclosed in Note 5.3 of these
financial statements.
The adoption of this agenda decision could result in a reclassification of a portion of these intangible assets to either a
prepaid asset in the Balance Sheet and/or recognition as an expense in the Income Statement, impacting both the current
and prior periods presented.
Cochlear has not yet applied this IFRIC agenda decision. The impact of the change is not reasonably estimable as Cochlear
has yet to complete its assessment of the impact of the IFRIC agenda decision. Cochlear expects to adopt this IFRIC agenda
decision in its interim financial statements ending on 31 December 2021.
7.8 Events subsequent to the reporting date
Other than the matter noted below, there has not arisen in the interval between the reporting date and the date of this
Financial report, any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the
Company, to significantly affect the operations of Cochlear, the results of those operations, or the state of affairs of Cochlear
in future financial years:
Dividends
For dividends declared after 30 June 2021, see Note 2.6.
Cochlear Limited Annual Report 2021
120
Directors’ declaration
1.
In the opinion of the directors of Cochlear Limited (the Company):
a)
the consolidated financial statements and notes and the Remuneration report are in accordance with the Corporations
Act 2001, including:
i)
giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2021 and of its performance
for the financial year ended on that date; and
ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable; and
c) at the date of this declaration, there are reasonable grounds to believe that the Company and each of the Closed
Group entities identified in Note 7.5 will be able to meet any liabilities to which they are or may become subject to,
because of the Deed of Cross Guarantee between the Company and those group entities pursuant to ASIC
Corporations (Wholly‐owned Companies) Instrument 2016/785.
2. The directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief
Executive Officer & President and Chief Financial Officer for the financial year ended 30 June 2021.
3. The directors draw attention to Note 1.2(a) to the consolidated financial statements, which includes a statement of
compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Dated at Sydney this 20th day of August 2021.
Director
Director
Cochlear Limited Annual Report 2021
121
Independent auditor’s report to the shareholders of Cochlear Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of Cochlear Limited
(the Company).
The Financial Report comprises:
Balance sheet as at 30 June 2021;
In our opinion, the accompanying Financial Report of the
Company is in accordance with the Corporations Act
2001, including:
Income statement, Statement of comprehensive income,
Statement of changes in equity, and Statement of cash flows
for the year then ended;
giving a true and fair view of the Consolidated Entity’s
financial position as at 30 June 2021 and of its
financial performance for the year ended on that
date; and
complying with Australian Accounting Standards and
the Corporations Regulations 2001.
Notes including a summary of significant accounting policies;
and
Directors’ Declaration.
The Consolidated Entity consists of the Company and the entities
it controlled at the year‐end or from time to time during the
financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report.
We are independent of the Consolidated Entity in accordance with the Corporations Act 2001 and the ethical requirements of
the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our
other ethical responsibilities in accordance with the Code.
Key Audit Matters
The key audit matters we identified are:
Recoverability of trade receivables; and
Warranty provision.
Recoverability of trade receivables $262.1 million
Refer to Note 6.4(b) Financial risk management, credit risk
The key audit matter
Recoverability of trade receivables was considered a key
audit matter due to:
The varying characteristics of customers which include
universities,
government‐supported
governments,
clinics and major hospital chains;
The different geographical locations of customers and
the political and economic environments they are
Key Audit Matters are those matters that, in our professional
judgement, were of most significance in our audit of the
Financial Report of the current period.
These matters were addressed in the context of our audit of
the Financial Report as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
How the matter was addressed in our audit
Our procedures included:
With the assistance of our IT specialists, testing key
controls within the credit control process including:
‐ management review and approval of new customer
credit limits within the Consolidated Entity’s credit
limit policies;
‐
the system configuration of credit limits; and
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the
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122 Cochlear Limited Annual Report 2021
Independent auditor’s report to the shareholders of Cochlear Limited
subject to, which may affect the timely recovery of
certain receivables;
‐ management’s evaluation of trade receivables
ageing and trade receivables past due;
Trade receivables past due at the reporting date which
have certain risk characteristics and therefore have a
greater inherent risk of not being recovered;
The potential for COVID‐19 to increase the risk of
receivables being delayed for a prolonged period or not
paid;
The inherent subjectivity involved in the Consolidated
Entity making forward‐looking judgements in relation to
the recovery of credit risk exposures; and
The Consolidated Entity’s adoption of AASB 9 Financial
Instruments requiring the use of an expected credit loss
model.
These conditions gave rise to additional audit effort,
including:
Greater involvement by our senior team members to
gather evidence across the various customer profiles
and their trade receivables; and
To challenge the forward‐looking judgements made by
the Consolidated Entity.
We involved IT specialists to supplement our senior team
members in assessing this key audit matter.
Warranty provision $34.3 million
Refer to Note 5.5 Provisions
The key audit matter
The warranty provision was considered a key audit matter
due to:
The estimation uncertainty
in the key
assumptions applied by the Consolidated Entity to
determine the warranty provision;
inherent
The Consolidated Entity’s evolving product portfolio,
through the introduction of new generations, where
Assessing the Consolidated Entity’s expected credit loss
the
model
requirements of the accounting standards;
geographies
significant
against
in
Challenging the Consolidated Entity’s view of credit risk
and recoverability in certain locations by selecting a
sample of significant overdue customer balances with
indicators of credit deterioration. We:
‐
‐
‐
‐
‐
noted the historical patterns for long outstanding
trade receivables in those locations for those
customer types, to form an understanding of the
normal pattern of recovery and compared this to
the age of the customer balances sampled;
assessed cash received subsequent to year‐end
from the Consolidated Entity’s bank statements for
its effect in reducing amounts outstanding at year‐
end;
evaluated other evidence
correspondence;
including customer
questioned the Consolidated Entity’s assessment of
the impact of COVID‐19 on the risk of default; and
questioned the Consolidated Entity’s knowledge of
future conditions which may
impact expected
customer receipts based on consistency with the
results of the procedures performed above; and
Assessing the Consolidated Entity’s disclosures of the
quantitative and qualitative considerations in relation
to trade receivables credit risk, by comparing these
disclosures to our understanding of the matter and the
requirements of the accounting standards.
How the matter was addressed in our audit
Our procedures included:
Obtaining an understanding of the evolving product
portfolio, each product’s warrantable period and
history of claim rates, and the different attributes
which impact the key assumptions used in the
Consolidated Entity’s warranty provision;
Testing the sensitivity of the warranty provision by
varying key assumptions, within a reasonably possible
range, to focus our further procedures;
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the
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123
Cochlear Limited Annual Report 2021
Independent auditor’s report to the shareholders of Cochlear Limited
each product’s design and quality attributes can impact
the key assumptions;
The increased use of the Global Repair Centre intended
to reduce forecast repair cost;
The inherent unpredictability of future failures resulting
in claims under warranty; and
The calculation is largely manually developed and
therefore is at greater risk of error.
The key assumptions used in the Consolidated Entity’s
determination of the warranty provision are:
The forecast claim rates of the multiple products in the
portfolio;
The ratio of repairing to replacing failed products;
The forecast repair cost; and
The forecast replacement cost which is based on
standard forecasts of manufacturing costs.
Challenging these key assumptions required greater
involvement by our senior team members.
Challenging the Consolidated Entity’s ability to reliably
estimate the key assumptions by comparing previous
estimates to actual outcomes;
Assessing the integrity of the model for the warranty
provision. This included checking the accuracy of the
formulas within the model;
Comparing the forecast claim rates of a sample of
products to the historical warranty claims for that
product or the historical warranty claims of previous
generations of similar products;
Comparing the forecast proportion of claims that can
be repaired and associated repair costs to historical
performance of the Global Repair Centre;
Comparing the forecast replacement cost to:
‐
‐
the standard manufacturing cost used in board
approved budgets; and
actual manufacturing costs to identify variances
and their impact on the warranty provision;
Enquiring of management responsible for product
design and quality attributes and the Global Repair
Centre to challenge the forward‐looking assumptions
used in the model; and
Assessing the disclosures of the quantitative and
qualitative considerations in relation to the warranty
provision, by comparing these disclosures to our
understanding of the matter and the requirements of
the accounting standards.
Other Information
Other Information is financial and non‐financial information in Cochlear Limited’s annual reporting which is provided in addition
to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion
or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance
opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider
whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the
work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing
to report.
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the
independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
124 Cochlear Limited Annual Report 2021
Independent auditor’s report to the shareholders of Cochlear Limited
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001; and
implementing necessary internal controls to enable the preparation of a Financial Report that gives a true and fair view
and is free from material misstatement, whether due to fraud or error; and
assessing the Consolidated Entity’s ability to continue as a going concern and whether the use of the going concern basis
of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless they either intend to liquidate the Consolidated Entity or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether
due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian
Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
Auditor’s Report.
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report of Cochlear Limited for the year ended 30 June 2021, complies with Section 300A of
the Corporations Act 2001.
Directors’ responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in pages 56 to 73 of the Directors’ report for the year ended 30 June 2021.
Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
KPMG
Julian McPherson, Partner
Sydney, 20 August 2021
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the
independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
125
Cochlear Limited Annual Report 2021
References
Letter to shareholders
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(https://www.who.int/activities/highlighting‐priorities‐for‐ear‐and‐hearing‐care).
2. Buchman CA, Gifford RH, Haynes DS et al. Unilateral Cochlear Implants for Severe, Profound, or Moderate Sloping to
Profound Bilateral Sensorineural Hearing Loss: A Systematic Review and Consensus Statements. JAMA Otolaryngol Head
Neck Surg. 2020 Oct 1;146(10):942‐953. doi: 10.1001/jamaoto.2020.0998.
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Health Serv Res. 2021 Apr 8;21(1):319.
4. Neve OM, Boerman JA, van den Hout WB, Briaire JJ, van Benthem PPG, Frijns JHM. Cost‐benefit Analysis of Cochlear
Implants: A Societal Perspective. Ear Hear. 2021 Mar 4.
5. Lupo JE, Biever A, Kelsall DC. Comprehensive hearing aid assessment in adults with bilateral severe‐profound
sensorineural hearing loss who present for Cochlear implant evaluation. Am J Otolaryngol. 2020;41(2):102300.
doi:10.1016/j.amjoto.2019.102300.
6. Drouin JR & Theodore RM. (2020). Leveraging interdisciplinary perspectives to optimize auditory training for cochlear
implant users. Lang Linguist Compass. 2020 Sep; 14(9): e12394. Available from: https://doi.org/10.1111/lnc3.12394.
7. Boothroyd A. Adult aural rehabilitation: what is it and does it work? Trends Amplif. 2007 Jun;11(2):63–71.
8. Ferguson M, Maidment D, Henshaw H et al. Evidence‐based interventions for adult aural rehabilitation: that was then,
this is now. Semin Hear. 2019 Feb;40(1):68–84.
Our growth opportunity
9. Market penetration estimate based on Cochlear sourced data.
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11. CPI Inflation Calculator (http://www.in2013dollars.com).
12. Estimated from Mohr et al., 2000.
13. World Alzheimer Report 2015 (https://www.alz.co.uk/research/WorldAlzheimerReport2015.pdf).
14. Lin et al., 2011.
15. The Ear Foundation (2018). Spend2Save Report (2nd Edition).
16. Mohr et al., 2000.
17. WHO 2021 World Report on Hearing (https://www.who.int/activities/highlighting‐priorities‐for‐ear‐and‐hearing‐care).
18. Fact 5. Deafness and hearing loss. World Health Organization [Internet]. [cited July 2018]. Available from:
http://www.who.int/features/factfiles/deafness/en/.
19. Haile L.M et al., 2021; Hearing loss prevalence and years lived with disability, 1990–2019: findings from the Global
Burden of Disease Study 2019; Lancet, March 2021.
20. Livingston G, Sommerlad A, Orgeta V, Costafreda S, Huntley J, Mukadam N, et al. The Lancet Commissions: Dementia
prevention, intervention, and care. The Lancet [serial on the Internet]. (2017, Dec 16), [cited July 2, 2018]; 3902673‐
2734.
21. Hsu W, Hsu C, Wen M, Lin H, Tsai H, Hsu Y, et al. Increased risk of depression in patients with acquired sensory hearing
loss: A 12‐year follow‐up study. Medicine [serial on the Internet]. (2016, Nov), [cited July 3, 2018]; 95(44): e5312.
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22. Stam M, Kostense P, Lemke U, Merkus P, Smit J, Kramer S, et al. Comorbidity in adults with hearing difficulties: which
chronic medical conditions are related to hearing impairment? International Journal Of Audiology [serial on the
Internet]. (2014, June), [cited July 3, 2018]; 53(6): 392‐401.
23. Barnett S. A hearing problem. American Family Physician [serial on the Internet]. (2002, Sep 1), [cited July 3, 2018]; 66(5):
911.
24. Mick P, Kawachi I, Lin F. The Association between Hearing Loss and Social Isolation in Older Adults. Otolaryngology And
Head And Neck Surgery [serial on the Internet]. (2014), [cited July 3, 2018]; (3): 378.
25. Tomaka J, Thompson S, Palacios R. The Relation of Social Isolation, Loneliness, and Social Support to Disease Outcomes
Among the Elderly. Journal Of Aging And Health [serial on the Internet]. (2006), [cited July 3, 2018]; (3): 359.
26. Kramer S, Kapteyn T, Houtgast T. Occupational performance: comparing normally‐hearing and hearing‐impaired
employees using the Amsterdam Checklist for Hearing and Work. International Journal Of Audiology [serial on the
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27. Nachtegaal J, Festen J, Kramer S. Hearing ability in working life and its relationship with sick leave and self‐reported work
productivity. Ear And Hearing [serial on the Internet]. (2012, Jan), [cited July 3, 2018]; 33(1): 94‐103.
28. Nachtegaal J, Kuik D, Anema J, Goverts S, Festen J, Kramer S. Hearing status, need for recovery after work, and
psychosocial work characteristics: Results from an internet‐based national survey on hearing. International Journal Of
Audiology [serial on the Internet]. (2009, Oct), [cited July 3, 2018]; 48(10): 684‐691.
29. ClinicalTrials.gov [Internet]. Bethesda (MD): National Library of Medicine (US); 2017 March 22. Identifier NCT03086135.
Clinical Performance of a New Implant System for Bone Conduction Hearing; 2019 January 31 [cited 2019 June 20]; [4
screens]. Available from: https://clinicaltrials.gov/ct2/show/NCT03086135.
Cochlear Limited Annual Report 2021
127
Shareholder information
Additional information required by Australian Securities Exchange Listing Rules and not disclosed elsewhere in this report – the
information presented is as at 30 June 2021.
Substantial shareholders
Investor
BlackRock Inc
ABP (Algemen Burgerlijk PSF)
Baillie Gifford & Co
State Street Corporation
Total
Distribution of shareholders
Number of shares held
Number of ordinary shares
4,160,651
3,621,994
3,471,533
3,345,897
14,600,075
%
6.3
5.5
5.3
5.1
22.2
Number of ordinary shareholders
% shares
1 ‐ 1,000
1,001 ‐ 5,000
5,001 ‐ 10,000
10,001 ‐ 100,000
100,001 and over
Total
Non‐marketable parcels – 174 shareholders held less than a marketable parcel of ordinary shares.
41,634
2,669
128
71
15
44,517
Twenty largest shareholders
Shareholder
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited‐GSCO ECA
BNP Paribas Nominees Pty Ltd Six Sis Ltd
HSBC Custody Nominees (Australia) Limited
Australian Foundation Investment Company Limited
Netwealth Investments Limited
Citicorp Nominees Pty Limited
Mr Christopher Graham Roberts
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Custodial Services Limited
HSBC Custody Nominees (Australia) Limited ‐ A/C 2
AMP Life Limited
BNP Paribas Nominees Pty Ltd ACF Clearstream
National Nominees Limited
BNP Paribas Nominees Pty Ltd
Total
The 20 largest shareholders held 77.93% of the ordinary shares of the Company.
On market buy‐back
There is no current on market buy‐back.
Number of ordinary shares
30,209,511
9,708,153
3,911,642
1,606,824
1,570,432
1,166,640
645,315
486,754
373,306
324,174
258,114
222,299
172,387
120,873
117,587
94,699
80,692
65,891
57,163
55,055
51,247,511
10.9
7.8
1.3
2.7
77.3
100.0
%
45.95
14.77
5.95
2.44
2.39
1.77
0.98
0.74
0.57
0.49
0.39
0.34
0.26
0.18
0.18
0.14
0.12
0.10
0.09
0.08
77.93
Cochlear Limited Annual Report 2021
128
Contact information
Cochlear headquarters
1 University Avenue
Macquarie University NSW 2109
Australia
Telephone: +612 9428 6555
Fax: +612 9428 6353
Website: www.cochlear.com
Shareholder enquiries
Access to shareholding information is available to investors through Computershare.
Computershare Investor Services Pty Limited
GPO Box 2975
Melbourne VIC 3001
Australia
Telephone: 1300 850 505
Email: web.queries@computershare.com.au
Website: www.computershare.com.au
Calendar of events
20 August 2021
FY21 results announced
19 October 2021
Annual general meeting
22 February 2022
HY22 results announced*
19 August 2022
FY22 results announced*
* Indicative dates only.
Annual general meeting
The annual general meeting (AGM) of Cochlear Limited will be held on 19 October 2021 at 10.00am. Further details will be
provided in the Notice of Meeting, which will be provided to shareholders in mid‐September 2021. The Notice of Meeting will
also be available on the ASX Company Announcements Platform and Cochlear’s website at www.cochlear.com.
Cochlear Limited Annual Report 2021
129
Hear now. And always
As the global leader in implantable hearing solutions, Cochlear is dedicated to helping people with
moderate to profound hearing loss experience a life full of hearing. We have provided more than
650,000 implantable devices, helping people of all ages to hear and connect with life’s opportunities.
We aim to give people the best lifelong hearing experience and access to innovative future
technologies. We have the industry’s best clinical, research and support networks.
That’s why more people choose Cochlear than any other hearing implant company.
Cochlear Ltd (ABN 96 002 618 073) 1 University Avenue, Macquarie University, NSW 2109, Australia T: +61 2 9428 6555 F: +61 2 9428 6352
www.cochlear.com
Please seek advice from your health professional about treatments for hearing loss. Outcomes may vary, and your health professional will advise you about the
factors which could affect your outcome. Always read the instructions for use. Not all products are available in all countries. Please contact your local Cochlear
representative for product information.
Views expressed are those of the individual. Consult your health professional to determine if you are a candidate for Cochlear technology.
The Cochlear Nucleus Smart App is available on App Store and Google Play. The Cochlear Nucleus 7 Sound Processor is compatible with Apple and Android devices,
for compatibility information visit www.cochlear.com/compatibility.
ACE, Advance Off-Stylet, AOS, AutoNRT, Autosensitivity, Beam, Bring Back the Beat, Button, Carina, Cochlear,
Codacs, Contour,
MP3000, myCochlear, mySmartSound, NRT, Nucleus, Osia, Outcome Focused Fitting, Off-Stylet, Profile, Slimline, SmartSound, Softip, SPrint, True Wireless, the
elliptical logo, and Whisper are either trademarks or registered trademarks of Cochlear Limited. Ardium, Baha, Baha SoftWear, BCDrive, DermaLock, EveryWear,
Human Design, Piezo Power, SoundArc, Vistafix, and WindShield are either trademarks or registered trademarks of Cochlear Bone Anchored Solutions AB.
, Contour Advance, Custom Sound, ESPrit, Freedom, Hear now. And always, Hugfit, Hybrid, Invisible Hearing, Kanso, MET, MicroDrive,
,
,
코클리어
コクレア
, Cochlear SoftWear,
コントゥア
科利耳
Android, Google Play and the Google Play logo are trademarks of Google LLC.
Apple, the Apple logo, FaceTime, Made for iPad logo, Made for iPhone logo, Made for iPod logo, iPhone, iPad Pro, iPad Air, iPad mini, iPad and iPod touch are
trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc., registered in the U.S. and other countries.
ReSound is a trademark of GN Hearing A/S.
© Cochlear Limited 2021. D1896723 V1 2021-08