Cochlear Limited
Annual Report 2023
Contents
Our
company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
We help people hear and be heard.
We empower people to connect
with others and live a full life.
We help 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.
Our mission
Cochlear Limited Annual Report 2023 Contents
Our
company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
Contents
Our company
About Cochlear
Cochlear at a glance
Product and services portfolio
Financial history
Review of FY23
FY23 highlights
Year in review
Strategy and value creation
Our strategy
Growth opportunity
Key market segments
Strategic priorities
Creating value for stakeholders
- A healthier and more productive society
- A lifetime of hearing solutions
- Thriving people
- Environmental responsibility
- Sustained value
Financial performance
Operational review
Financial review
Governance and risk
Governance
Risk
Board of directors
Executive team
Financial statements
Remuneration report
Financial report
Additional information
Sustainability data
References
Notes
Shareholder information
Corporate directory
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About this report
Over the past several years sustainability has become increasingly
integrated into our business strategy. For the financial year ended
30 June 2023 (FY23), we have combined our reporting on financial
and sustainability performance into a single integrated publication,
providing all key stakeholders with a holistic view of our business,
strategy, value drivers, performance and governance.
The report has been prepared with reference to the GRI (Global
Reporting Initiative) and in accordance with the IFRS (International
Financial Reporting Standards) Foundation’s Integrated Reporting
Framework. We use these guidelines to help us to clearly articulate
how we aim to deliver long-term sustainable value for all our key
stakeholders.
Cochlear Limited (Cochlear) publishes a suite of reports annually
including the Annual Report, Corporate Governance Statement and Tax
Contribution Report, which are available at the Investors section of the
website www.cochlear.com.
Acknowledgment of Country
Cochlear acknowledges the Aboriginal and Torres Strait Islander
peoples and their custodianship of the various lands across Australia
on which we work, live and learn. We pay our respects to ancestors
and Elders past, present and emerging. Cochlear’s global headquarters
are located on the unceded lands of the Wallumattagal Peoples of the
Darug Nation.
Front cover
Bernie, Cochlear™
Nucleus® System recipient
Find out more about Bernie
on page 11.
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Cochlear Limited Annual Report 2023 Contents
Our
company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
Our
company
2
Cochlear Limited Annual Report 2023 Contents
Our
company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
About Cochlear
Cochlear has been the global leader in implantable hearing solutions for over 40 years,
providing a range of implants and sound processor upgrades that deliver a lifetime of hearing outcomes.
Our story
Our company
Graeme Clark, an Australian ear surgeon, saw first-hand the
isolation and frustration that comes from living in a world
of silence as his father struggled with hearing difficulties.
On holiday in 1977, fiddling with a shell and a blade of grass,
Graeme realised there was a safe way to insert electrodes into
the inner ear. It was Graeme’s determination to help others
that realised our first implantable solution, reconnecting Rod
Saunders to hearing and bringing music into his 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.
Today, Cochlear is the leader in implantable hearing solutions,
connecting hundreds of thousands of people globally to a
life full of hearing. The pioneering spirit that started Cochlear
all those years ago continues to drive us forward and our
commitment is stronger than ever. We’re transforming the
way people understand and treat hearing loss, and we’re
committed to reaching more people to provide support for a
lifetime of hearing.
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 30 listed Australian company with
a market capitalisation of over $15 billion.
Our goal is to deliver value by helping more people to hear,
which contributes to building a healthier and more productive
society. Our strategy is focused on improving awareness
of and access to implantable hearing solutions for people
indicated for our products.
We are pioneers and global leaders in the development,
manufacture and commercialisation of implantable hearing
solutions, collaborating in over 100 research programs
worldwide to further research into hearing loss.
We invest around 12% of sales revenue each year in research
and development (R&D), with over $2.7 billion invested since
listing, and we have a portfolio of more than 1,700 patent and
patent applications worldwide.
Over the past 40 years we have provided more than 750,000
implant devices to people who benefit from one – or two – of
our implantable solutions. And we deliver a lifetime of hearing
solutions for recipients, with sound processor upgrades and
services to support prior generation products.
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 global workforce of around 4,800
employees and a wide geographical reach, selling in over 180
countries, with employees based in over 50 countries.
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Cochlear Limited Annual Report 2023 Contents
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company
Review of
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Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
Cochlear at a glance
Business segments
Global presence
Cochlear Implants*
58%
Services*
30%
Acoustics*
12%
Cochlear implant systems
>$1.9b ~4.8k
50+
180+
in sales revenue* across
employees across
countries
countries
Sound processor upgrades,
accessories and other
Market leader
Bone conduction systems and
sound processor upgrades
$240m+
in annual R&D investment
AAA
MSCI ESG rating
Healthcare equipment
& supplies**
implants sold helping
750k+
~650k
99.87%
Cochlear implant reliability^
people to hear#
6
manufacturing
locations
* Based on sales revenue (FY23) ^Nucleus® Profile™ Plus Series implant cumulative survival percentage within four years ^^Cochlear estimate for cochlear and acoustic implants
#Includes cochlear and acoustic implants. ** Measures a company’s resilience to financially material environmental, societal and governance (ESG) risk
female
53%
gender balanced
workforce
>60%
global market
share^^
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Cochlear Limited Annual Report 2023 Contents
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company
Review of
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Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
Product and services portfolio
Cochlear’s market-leading portfolio aims to improve hearing outcomes for recipients and provide a lifetime of hearing
solutions.
Cochlear implant portfolio
Acoustic solutions portfolio
Recipient support tools
Cochlear™
Nucleus® System
Cochlear
Osia® System
Cochlear Nucleus, Baha and Osia Smart Apps
Cochlear CoPilot App
Cochlear
Baha® System
Cochlear Connected Care solutions
Cochlear Nucleus
SmartNav System
Cochlear Custom Sound® Pro
Fitting Software
Cochlear™ Link
Cochlear
Remote Assist
Cochlear Remote Check
solution for cochlear implants
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Cochlear Limited Annual Report 2023
Contents
Our
company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
Financial history
Cochlear has a long track record of investing to grow, delivering growing sales revenue, profits* and dividends.
Consistent investment in R&D
and market growth activities
Research and development
$ million
Long-term growth
in sales revenue
Cochlear implants
units
12%
$245m
13%
↑ 16%
in FY23
Growing profits
and dividends
Underlying net profit*
$ million
$305m
14%
15%
16%
↑ 14%
in FY23
in CC**
44,156
↑ 16%
in FY23
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
% of sales revenue
Operating expenses (excl R&D)
$ million
Sales revenue
$ million
$810m
$1,956m
% of sales revenue
Dividends
per share
↑ 23%
in FY23
↑ 16%
in FY23
in CC**
$3.30
↑ 10%
in FY23
* Excluding one-off and non-recurring items. ** Constant currency
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00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
36%34%41%000102030405060708091011121314151617181920212223% of sales revenueCochlear Limited Annual Report 2023
Contents
Our
company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
Review
of FY23
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Cochlear Limited Annual Report 2023 Contents
Our
company
Review of
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Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
FY23 highlights
In FY23, we helped over 44,000 people hear with one – or two – of our cochlear or acoustic implants, providing an estimated
net societal benefit of more than $7 billion over the lifetime of the recipients from improved health outcomes, educational cost
savings and productivity gains.1
A healthier and more
productive society
A lifetime of
hearing solutions
Thriving
people
Environmental
responsibility
Sustained
value
• Helped over 44,000 more
people to hear with an
implant, up 15%
• Progress made in
strengthening the referral
pathway for adults
• New evidence showing
hearing intervention may slow
cognitive decline
• Expanding indications and
reimbursement in a number of
countries
• Invested over $240m in R&D,
13% of sales revenue, with a
strong pipeline of products and
services in development
• Continued focus on shaping
our culture through training
and leadership development
programs
• Launched the Cochlear™
• Employee engagement
maintained at 80%
• Continued to exceed gender
targets with 43% women in
senior manager roles and
40% women on the Board of
directors
Nucleus® 8 Sound Processor
which is smaller, smarter and
better connected than its
predecessor
• Delivered latest generation
sound processors to over
48,000 prior generation
cochlear implant recipients,
up 19%
• Bimodal control in the
Nucleus® Smart App
• Reached 96% renewable
• Delivered record sales
energy at our manufacturing
facilities, using 100%
renewable energy in five of
our six facilities
• Reduced our Scope 1 and 2
emissions by 68%, from our
FY19 baseline
• Reduced the number of flights
taken per full time employee
by 47%, from our FY19
baseline, and our flight related
emissions by 91%
• Initiated an inventory of our
Scope 3 emissions
revenue, up 19% (16% in CC*)
• Underlying net profit** up 10%
(14% in CC), the top end of the
guidance range
• Underlying net profit margin of
17% (pre cloud investment)
• Full year dividends up 10%
• Obtained ISO 27001
Information Security
certification of our Connected
Care products
• Commenced on-market share
buyback
* Constant currency. ** Excluding one-off and non-recurring items.
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Cochlear Limited Annual Report 2023 Contents
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company
Review of
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Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
Year in review
Over the past year, we have made great progress in our mission to help more people to hear. Our strong financial and
operational results reflect our unwavering dedication to our customers and our disciplined approach to execution.
Our goal is to deliver value by helping more people to hear,
which contributes to building a healthier and more productive
society. To achieve our goal requires consistent investment
over long timeframes. Our R&D investment horizons span over
10 years, and our ambition to improve the uptake of cochlear
and acoustic implants requires long-term planning and
investment.
In FY23 we continued to lift our investment in research and
development, with a strong pipeline of products and services
in development. After many years in the making, we launched
the Cochlear™ Nucleus® 8 Sound Processor. Designed to help
recipients hear conversations more clearly and easily, it has
enjoyed a strong positive reception in the market and was
awarded the 2023 Red Dot Award for Design.
An important long-term goal is to support the development
of a consistent process by which all healthcare professionals
diagnose, refer and treat adults eligible for cochlear implants.
This goal is supported by the growing recognition that hearing
is an essential part of healthy ageing and treating age-related
hearing loss is cost-effective.
We have continued our work in shaping our culture through
training and leadership development programs, with our
employee engagement remaining high at 80%. And we
made good progress towards our net-zero emissions targets,
reducing Scope 1 and 2 emissions by 68% from our FY19
baseline.
The evidence linking hearing loss to cognitive decline is
building. A multi-year study in the US has been investigating
whether hearing loss treatment could delay cognitive decline
and dementia in older adults. In July, the study reported that
after wearing hearing aids for three years, cognitive decline
slowed by 48% for a group of older adults with mild to
moderate hearing loss who were at a higher risk of cognitive
decline.2
The findings are a major advancement in understanding
the broader impact of hearing loss and the need for adults,
policy makers and health professionals to prioritise treatment
of hearing loss. It not only helps people to hear but has the
potential to reduce cognitive decline for adults at high risk.
This year we combined our reporting on financial and
sustainability performance into a single integrated publication,
providing all key stakeholders with a holistic view of our
business, strategy, value drivers, performance and governance.
Sustainability is embedded in our business strategy. We have
long been focused on creating a positive social impact at
both the individual and societal level, supported by a strong
governance framework. Over the past few years, we have
better integrated initiatives to minimise our environmental
impact into our strategic priorities.
Sales revenue exceeded expectations, increasing 19% (16%
in constant currency*) to a record $1,956 million, driven by
growth across all business units.
Alison Deans
Chair
Dig Howitt
CEO & President
Underlying net profit** increased 10% (14% in CC) to $305
million, the top of the guidance range of $290-305 million.
The balance sheet remains strong with net cash of $556
million, with operating cash flows sufficient to fund investing
activities and capital expenditure whilst delivering dividends
to shareholders. A final dividend of $1.75 per share has been
determined, an increase of 21% on last year, with full year
dividends declared of $3.30 per share, an increase of 10%.
Over the following pages we provide greater details on the
highlights for FY23, as well as the outlook for FY24.
* Constant currency (CC) removes the impact of foreign exchange rate movements to facilitate comparability of operational performance. ** Excluding one-off and non-recurring items.
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Cochlear Limited Annual Report 2023 Contents
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Review of
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Governance
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and risk
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A healthier and more productive society
We are focused on building a healthier and more productive society, delivering societal benefit through improved health
outcomes, educational cost savings and productivity gains. We do this by transforming the way people understand and treat
hearing loss through awareness and access activities.
Helping more people to hear
Our mission is to help more people to hear and in FY23 we
helped over 44,000 people hear with one – or two – of our
cochlear or acoustic implants. In doing so, we provide an
estimated net societal benefit of more than $7 billion over the
lifetime of this year’s new recipients from improved health
outcomes, educational cost savings and productivity gains.1
loss. Through clearer screening, diagnosis, referral, treatment
and aftercare, thousands more people will be able to access
the right treatment at the right time and reconnect to life.
During FY23 we collaborated with university partners, industry
and advocacy groups globally to adapt the Living Guidelines
into country-based clinical guidelines, with plans for their roll
out over the coming years. We have also focused on increasing
professional education to strengthen the referral channel.
Strengthening the referral pathway for
adults
An important long-term goal for us is to support the
development of a consistent process by which all healthcare
professionals diagnose, refer and treat adults eligible for
hearing implants. This goal is supported by the growing
recognition that hearing is an essential part of healthy ageing
and treating age-related hearing loss is cost-effective.
Over the past few years, we have invested in awareness
and access activities alongside industry professionals and
advocacy groups. Achievements include the development of
a global consensus on a minimum standard of care for treating
adult hearing loss, the World Health Organization advocating
for improved hearing screening, and the establishment of the
Living Guidelines initiative. The Living Guidelines set clear,
practical, evidence based recommendations to improve the
standard of care and quality of life for adults living with hearing
New evidence showing hearing
intervention slows cognitive decline
In July 2023, new research found that after wearing hearing
aids for three years, cognitive decline slowed by 48% for a
group of older adults with mild to moderate hearing loss who
were at a higher risk of cognitive decline.2 The results add to
the growing evidence that support addressing modifiable risk
factors for cognitive decline and dementia could be effective
in reducing the future global burden of dementia.
The findings are a major advancement in understanding
the broader impact of hearing loss and the need for adults,
policy makers and health professionals to prioritise treatment
of hearing loss. It not only helps people to hear but has the
potential to reduce cognitive decline for adults at high risk.
Expanding indications and reimbursement
Over the past 12 months we have been successful in expanding
indications and funding across a number of countries.
In the US, the Centers for Medicare & Medicaid Services
expanded coverage of cochlear implants for Medicare
beneficiaries to a level of hearing loss more closely aligned
with the FDA indications and most private payers. Candidates
with a moderate-to-profound hearing loss who demonstrate
limited benefit from amplification will now be funded by
Medicare.3
The introduction of newborn hearing screening is a key
priority in emerging markets where penetration rates are
very low. It is important for identification of children needing
cochlear implants, enabling early intervention and providing
better lifetime outcomes. This year Thailand and Malaysia
committed to adopting universal newborn hearing screening
and Karnataka in India adopted mandatory newborn hearing
screening.
The Osia® 2 System achieved funding in Australia and New
Zealand, and we achieved additional funding for cochlear
implants in Canada, Argentina, Mexico and the Netherlands.
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Cochlear Limited Annual Report 2023 Contents
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Review of
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Strategy and value
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Governance
performance
and risk
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A lifetime of hearing solutions
We innovate to build a market-leading portfolio of high-quality products and services that improve hearing outcomes and
support a lifetime of hearing outcomes for recipients. 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.
Growing investment in research and
development
Our market-leading technology underpins our global market
share of over 60%4, and in FY23 we invested over $240 million
in R&D, representing 13% of sales revenue. Our product
pipeline is full, with good progress made across our key
projects over the past year.
Helping recipients hear better
The new Nucleus® 8 Sound Processor has driven strong
growth in the Services segment. By delivering our latest sound
processor upgrade technology to our recipient base, we
helped over 48,000 of our prior generation cochlear implant
recipients to hear better, improving their hearing and quality of
life.
Launch of the Cochlear™ Nucleus® 8
Sound Processor
Bimodal control in the Nucleus®
Smart App
The Cochlear™ Nucleus® 8 Sound Processor achieved
regulatory approval across major markets during the first half
and has driven strong growth in sales revenue since launch.
It is 15% smaller and 13% lighter than its predecessor.5 It’s
smarter, designed to help recipients hear conversations more
clearly and easily, particularly in noisy situations, and it is better
connected, building on the direct streaming capabilities and
connectivity features available in our latest sound processors.6
The Nucleus® 8 Sound Processor was awarded the 2023
Red Dot Award for Design in the Medical Devices and
Technology category, recognising its outstanding design,
including aesthetics, functionality and innovation providing an
‘exceptional user experience’.7
We launched bimodal control in the Nucleus® Smart App
to help patients quickly and easily manage their compatible
ReSound hearing aid and Cochlear sound processor in one app
to get the most out of their bimodal hearing. Recipients can
access commonly used features such as volume adjustment
and program selection to help achieve their best possible
hearing experience.
Our products and services provide
a lifetime of hearing outcomes for
recipients.
Bernie, who appears on this year’s cover, is a bilateral
cochlear implant recipient. He has worked in media for
over 30 years and says he would not have been able to
work in the media at all without his cochlear implants.
Updating his sound processors has been an important
part of Bernie’s ability to work as a journalist, as well as
his enjoyment of life. Bernie started with the Freedom®
Sound Processor, and has upgraded to Nucleus 5,
Nucleus 6 and now the Nucleus 8 Sound Processors,
noting a significant improvement with each generation.
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company
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Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
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 around 4,800 people across the globe. Their
knowledge, expertise, passion and focus on delivering excellence is key to achieving future success.
Fostering a diverse and inclusive
workplace
A diverse, equitable and inclusive organisation improves
employee engagement, our performance and productivity
as well as our customer engagement. Achieving gender
equality is one important element of our diversity and inclusion
strategy. Across the business, 53% of our people are female
and we have achieved 43% female representation amongst our
senior leaders. At Board level, 40% of directors are female.
We are committed to maintaining at least 40% female
representation at senior manager and Board level.
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.
We are pleased to report that overall employee engagement
continues to remain strong at 80%, with 92% of employees
reporting that they feel proud to tell people they work at
Cochlear, 93% understand their contribution to our strategy
and 94% understand how they contribute to the satisfaction of
our customers.
Strengthening enterprise leadership
Integral to our culture work has been strengthening our
enterprise leadership with a focus on inclusive leadership,
building critical skills and capabilities at both an individual and
organisational level. We broadened our Culture Conversations
training through all levels of the organisation, with 75% of all
people leaders globally having completed this training. We also
continued to take steps to invest in our talent and made strong
progress towards building the strategic capabilities which
provide us with a sustainable competitive advantage over the
longer-term.
Attracting, developing and retaining
diverse and highly skilled leaders is
key to creating value.
Gül joined Cochlear 10
years ago as General
Manager Turkiye,
Azerbajan and Georgia,
and has established herself
as a valued member of the
global senior leadership
team, committed to
developing an inclusive
culture and championing
diversity.
Gül led the Turkiye Cochlear team through the
devastating earthquakes which struck eastern Turkiye
and northern Syria in February. With her team, Gül
focused on supporting the more than 1,200 recipients
and their families living across the region either
through the provision of sound processors, parts and
accessories and practical assistance at a time of great
need. Gül was recognised for her contributions by the
WeQual Asia-Pacific 2023 awards, which celebrates
female leaders.
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Review of
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Financial
Governance
performance
and risk
Financial
statements
Additional
information
Environmental responsibility
We are implementing initiatives to promote the sustainable use of natural resources, reduce our environmental footprint and
help tackle climate change.
Pathway to net-zero carbon emissions
Enhancing resource efficiency
We made significant progress in FY23, reducing Scope 1 and
2 emissions by 68% from our FY19 baseline by increasing
renewable energy use at our manufacturing sites. We reached
96% renewable energy at our manufacturing facilities, using
100% renewable energy in five of our six facilities.
We are making steady progress in reducing business flight-
related emissions. Our target is to reduce our flight-related
emissions by 50% by FY25 from our FY19 baseline. In FY23 we
reduced these emissions by 91%. We achieved this by reducing
business flights per full time equivalent employee by 47% from
our FY19 baseline and purchasing offsets for approximately
80% of our remaining business flights. In May we initiated a
complete Scope 3 emissions inventory and expect to complete
the process during FY24.
We are identifying ways to improve resource efficiency,
reduce waste and drive greater circularity into our operations.
In the US we worked with the regulator to achieve changes
in our labelling, allowing us to implement electronic labelling
for the Nucleus® 8 Sound Processor. As a result, we have
saved over 9.4 million paper pages of manual labelling since
November, as well as over 45,000 plastic sleeves. We are now
exploring opportunities to collaborate with other regulators to
see if we can implement these changes in other markets.
Environmentally responsible
business practices help support our
sustainability objectives.
In Malaysia we support the recycling centre of a
charitable organisation that aims to offer employment
opportunities to people who face physical and mental
challenges, while also working towards minimising
waste sent to landfill.
For FY23, our donations amounted to over 1 tonne of
various recyclable materials such as paper, metal and
glass with income from recycling activities used to fund
skills development programs and support services for
the disabled community.
By supporting the recycling centre, we play a crucial
role in helping the charity achieve it’s mission while
promoting environmental sustainability.
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Cochlear Limited Annual Report 2023 Contents
Our
company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
Sustained value
Financial discipline and commitment to high standards of corporate governance and transparency are central to the creation,
maintenance and enhancement of long-term sustainable value.
Underlying net profit* increases 14% in
CC** to $305 million
Final dividend increases 21% to $1.75
per share
We delivered record sales revenue of $1,956 million, an
increase of 19% (16% in CC), driven by strong growth across
all business units. Second half growth was particularly strong
following the launch of the Nucleus® 8 Sound Processor,
increasing 29% (24% in CC).
The gross margin was maintained at 75% and was aligned to
the longer-term target.
Operating expenses excluding cloud investment increased
20% (18% in CC) reflecting growing investment in R&D and
market growth activities. As second half sales momentum
increased, we took the opportunity to further lift our
investment in growth activities.
Cloud computing-related investment increased $17 million to
$39 million, a little above the $36 million guidance.
Underlying net profit increased 10% (14% in CC) to $305
million, the top end of the guidance range. The underlying net
profit margin, excluding the impact of cloud computing-related
expenses, was 17%, a point below our 18% long-term target.
The balance sheet remains strong with net cash of $556
million, with operating cash flows sufficient to fund investing
activities and capital expenditure whilst delivering dividends to
shareholders.
A final dividend of $1.75 per share has been determined, an
increase of 21% on last year, with full year dividends declared
of $3.30 per share, an increase of 10% and representing a
payout of 71% of underlying net profit.
On-market share buyback
A progressive on-market share buyback program commenced
in March with the aim of reducing the cash balance to
around $200 million over a number of years. This program
complements the existing dividend policy which targets a 70%
payout of underlying net profit.
A progressive buyback program aligns with the interests of our
shareholders by reducing shares on issue, providing gradual
accretion in earnings per share and dividends per share over
the long term.
In February the Board approved an initial 12 month buyback
of up to $75 million in shares, with $30 million, or 40% this
amount, bought by 30 June.
Underlying net profit
$ million*
$305m
↑ 14%
in FY23
in CC**
14
15
16
17
18
19
20
21
22
23
Dividends
per share
$3.30
↑ 10%
in FY23
14
15
16
17
18
19
20
21
22
23
350
300
250
200
150
100
50
-
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
-
* Excluding one-off and non-recurring items. ** Constant currency (CC) removes the impact of foreign exchange rate movements to facilitate comparability of operational performance.
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Our new manufacturing facility in Chengdu, China.
Commencement of sound processor
manufacturing in China
In February we achieved certification for the manufacture of
our Nucleus® CP802 Sound Processor at the new Chengdu
facility and have commenced supplying our Chinese
operations. We expect to achieve implant approval within 18
months.
In FY23, we obtained ISO 27001 Information Security
certification of our Connected Care products. This
certification demonstrates that we manage information
security according to global best practices and have invested
in the people, processes and technology to protect our data.
It provides customers with greater confidence that Cochlear
can be a trusted partner for delivering innovative digital health
solutions.
Creating value responsibly
Proposed Oticon Medical acquisition
We are supported by a large and complex supply chain of
over 3,000 suppliers located in countries around the world. In
FY23, we developed a Responsible Supply Chain Action Plan
that aims to drive continuous improvement across the supply
chain with a focus on human rights, labour practices, corporate
governance, safety and well-being and environmental
sustainability.
In June the UK Competition and Markets Authority (CMA)
concluded that Cochlear’s acquisition of Oticon Medical’s
cochlear implants business does not raise competition
concerns and is permitted to proceed, subject to the CMA’s
approval of the related terms and conditions but prohibited
Cochlear’s acquisition of bone conduction implants business.
Cochlear and Demant will pursue a transfer of Oticon
Medical’s cochlear implant business to Cochlear at a zero
headline purchase price, completion of which will ensure that
Cochlear can provide ongoing support for Oticon Medical’s
current base of around 20,000 cochlear implant recipients.
As market leader, we will seek to ensure Oticon Medical’s
cochlear implant recipients can continue to access a lifetime
of hearing solutions and look forward to welcoming them to
the Cochlear family. We will work closely with Demant to
ensure a seamless transition, with continued access to current
Oticon Medical technology for customers in the coming
years. We plan to develop and commercialise next generation
sound processors and services that will enable customers to
transition to and benefit from Cochlear’s technology platform
over time.
We were disappointed to be blocked from acquiring the
acoustics business. We will still be able to offer Cochlear’s
technology to those customers into the future as our Baha
sound processors are already compatible with Oticon
Medical’s Ponto acoustic implants.
Oticon Medical’s cochlear implant business is expected to add
around $10 million to annual revenue. The business is currently
loss making. The priority post-closing of the transaction will
be to determine a plan that returns the business to sustainable
profitability as quickly as possible.
The transaction remains conditional on satisfaction of
customary closing conditions and receipt of other competition
approvals from the Australian Competition and Consumer
Commission and the European Commission and is expected
to close by December 2023. Cochlear will not be assuming
any liability for issues that may arise from the voluntary field
corrective action for Oticon Medical’s Neuro Zti cochlear
implant announced in October 2021.
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FY24 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 FY24, we expect to deliver underlying net profit of $355-
375 million, a 16-23% increase on FY23, which is expected to
be driven by a combination of revenue growth and improved
net profit margin.
Cochlear implant trading conditions continue to be strong
across most markets, with an improving trend in adult referral
rates in many developed countries. At this stage, we expect
solid market growth rates to drive high single digit growth in
our cochlear implant units for FY24. We expect market share
gains from FY23 to stabilise and for there to be fewer COVID-
related backlog surgeries.
The Services segment is expected to perform strongly with
continuing strong demand for upgrades to the Nucleus® 8
Sound Processor.
Acoustics growth rates are expected to be lower than FY23,
with continuing growth from the rollout of the Osia® 2 System
to be moderated by a smaller contribution from upgrades to
the Baha® 6 Max Sound Processor.
We will continue our investment in R&D and market growth
activities to support long-term market growth, with an
anticipated investment of around 12% of sales revenue in R&D.
Cloud computing-related investment is expected to be around
$34 million ($24 million after tax) in FY24.
Guidance is based on a 67 cent AUD/USD (67.5 cent average
in FY23) and 61 cent AUD/EUR (64.4 cent average in FY23).
Capital expenditure is expected to be around $70-90 million.
The Board maintains a dividend policy that targets a 70%
payout of underlying net profit.
Guidance does not factor in any impact from the proposed
acquisition of Oticon Medical, which is targeted to complete
by the end of December 2023. Integration costs, which would
include the development of compatible next generation
sound processors, are yet to be determined and are currently
estimated to be $30-60 million.
Alison Deans
Chair
Dig Howitt
CEO & President
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Strategy
and value
creation
17
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Our strategy
Our goal is to deliver value by helping
more people to hear, which contributes to
building a healthier and more productive
society.
At Cochlear, we are strongly connected to our mission to
help people hear and be heard. It’s the passion that drives the
organisation and focuses the strategy.
With every hearing implant, we begin a lifelong journey with our
recipients. We have a responsibility to be here to support that
lifetime of hearing which means we need to deliver sustainable
financial growth, benefiting all our stakeholders.
How we create value
Our strategy is focused on improving awareness of and access
to implantable hearing solutions for people indicated for our
products.
In helping more people to hear, we create value for our
stakeholders by building a healthier and more productive society,
providing a lifetime of hearing solutions for our recipients, having
thriving employees and being environmentally responsible. Doing
these things well should enable us to achieve sustainable financial
returns over time.
The following pages provide a comprehensive review of our
strategy, from our growth opportunities to our key priorities for
creating value over the coming years.
We help more people to hear,
creating value across five pillars
What we aim to achieve over
the longer term
A healthier and more productive society
Delivering societal benefit through improved
health outcomes, educational cost savings and
productivity gains.
Grow the hearing implant market
Help at least 8% more people to hear each
year with a cochlear or acoustic implant.
A lifetime of hearing solutions
Innovating to build a market-leading portfolio
of products and services that improve hearing
outcomes and provide a lifetime of hearing
solutions for recipients.
Retain market leadership
Develop market-leading technology and
deliver a world-class customer experience
to recipients and professional customers.
Thriving people
An engaged, capable, high-performing and
diverse workforce that delivers on our strategy
and supports the creation of sustained value.
A stronger organisation
Retain employee engagement levels at or
above 80%.
Environmental responsibility
Minimising the impact of our operations on
the environment.
Minimise environmental impact
Net-zero carbon emissions in our operations
by 2030 and across our value chain by 2050.
Sustained value
Maximising spending to grow the market while
maintaining our competitive position. Ensuring we
operate fairly, honestly and legally.
Consistent and sustainable growth
Sustainable and responsible business
practices, targeting growth in sales revenue
of around 10% per annum and an 18% net
profit margin.
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Our strategy
There are many important elements to our strategy which aims to create value over the long term.
Key inputs to creating value
Key market segments
Value creation
Central to how we deliver our strategy and create value are the
key resources we draw on.
• Customers and communities: Our capacity to create value
depends on the strong and trusted relationships we build
with our candidates, recipients, professional customers
and payers.
• Innovation: We are pioneers and global leaders in the
development, manufacture and commercialisation of
implantable hearing solutions, collaborating with a global
network of research partners.
• Our people: Our people’s knowledge and expertise are
central to how we deliver our strategy.
• Financial and environmental: Prudent management
of financial capital and responsible production and
consumption underpin the delivery of sustainable growth
over time.
Our growth opportunity
Our growth opportunity is compelling and has remained
unchanged for many years. Hearing loss is a prevalent and
under-treated condition and implantable hearing solutions
provide life-changing outcomes for recipients. Importantly,
they provide a cost-effective solution for all age groups,
delivering significant returns on the investment made by the
healthcare system.
The factors driving industry growth are detailed on pages 20
to 21.
We grow the market by transforming the way people
understand and treat hearing loss. Our efforts are targeted at
improving awareness, expanding access and building on the
clinical evidence that demonstrates the effectiveness of our
products.
On pages 22 to 23 we detail what we are doing to address our
key market segments.
Strategic priorities
On page 24 we provide a snapshot of the strategic priorities
that determine how we focus our time and resources to create
value. At a high level we aim to:
• Grow the hearing implant market;
• Retain market leadership;
• Build a stronger organisation;
• Ensure we are environmentally responsible; and
• Deliver sustained value.
Stakeholder benefits
On page 25 we outline how our key stakeholders should
benefit over time. Success for us is defined by creating value
across all key stakeholders, which includes our customers, our
people, our shareholders, the environment as well as society
more broadly.
On pages 26 to 61 we describe some of the key activities we
are pursuing over the next five years to create value.
Governance and risk
On pages 68 to 76 we outline our approach to governance and
risk. We believe high standards of corporate governance and
transparency are fundamental to the sustainable, long-term
success of the business. Our strong governance framework
provides a solid structure for effective and responsible
decision-making, and our risk management framework enables
us to identify, assess and appropriately manage risks.
Our sustainability approach
Our sustainability approach is integrated into business strategy
and operations. It reinforces our focus on creating positive
social impact at individual and societal levels, while minimising
our environmental impact. It helps guide our strategic
priorities, manage risk and improve performance.
Our approach is informed by our materiality assessment and
business priorities, as well as the Global Reporting Initiative
framework, the United Nations Sustainable Development
Goals and the United Nations Global Compact Principles.
The Board is responsible for overseeing the approval and
integration of sustainability initiatives into business strategy
and operations and approving sustainability policies and goals.
Further details on our sustainability approach can be found in
the Sustainability data appendix on page 154.
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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.
Hearing loss is prevalent and
under-treated
Cochlear implants are a cost-effective
solution for all age groups
The World Health Organization estimates that there are over
60 million people worldwide who experience severe or higher
hearing loss,1 yet fewer than 5% of the people that could
benefit from an implantable hearing solution have received
one.2
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.
Over 60m people with severe or
higher hearing loss
Significant return on investment for healthcare
systems investing in cochlear implants
We are the market leader in cochlear implants
but a small player in the severe or higher hearing
loss segment where hearing aids dominate
1153
million
266
million
103
million
31
million
17
million
13
million
14.9% 3.4% 1.3% 0.4% 0.2% 0.2%
Mild
Moderate
Moderately
severe
Severe
Profound
Complete
Globally 1.5 billion people live with hearing loss
* Cochlear estimate
For a pre-lingual deaf child, the return
to society is more than 13 times for
every dollar spent on a cochlear implant
solution based on the cost savings in
education and improved productivity as
an adult.3
The effective use of implants is cost-
effective in adults and seniors with an
estimated return on investment of 10:1.4
60%
global market share*
~4%
global market share
Cochlear implant
market share
Hearing devices treating
the severe or higher hearing
loss segment
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Growth opportunity
Product indications are broadening and funding is expanding
Good hearing is essential to healthy ageing
Product indications and funding are expanding as payers increasingly recognise the improved
outcomes and cost-effectiveness of our implantable solutions.
Hearing loss is particularly prevalent in people over the age of 60, with one in four suffering
moderate or higher hearing loss.5
There is a growing understanding of the importance of properly treating hearing loss in this
age group. It affects communication and is associated with cognitive decline, social isolation,
anxiety and depression.6
Recent changes to reimbursement or indications
Growing understanding of the link between good hearing and healthy ageing
US:
lowered the age of cochlear
implantation from 12 to 9 months and
included single-sided deafness as an
indication for Cochlear’s Nucleus®
implant
US, UK, Germany and Australia:
Cochlear™ Osia® 2 System
reimbursement achieved across a
number of countries
Japan, UK and Belgium:
expansion of reimbursement criteria
for cochlear implants to include severe
hearing loss
US:
the Centers for Medicare & Medicaid
Services expanded coverage for
cochlear implants to cover a broader
spectrum of hearing loss
New Zealand:
cochlear implant funding to reduce the
adult waiting list
Australia:
reimbursement for remote
programming of cochlear and bone
conduction implants
France:
reimbursement approved for Baha®
sound processors
Cognitive decline
Hearing loss associated with
accelerated cognitive decline
and dementia in older adults.7
Depression
Significant association between
hearing impairment and
moderate to severe depression.8
Falls
Higher risk of dizziness
causing falling.8
Social isolation
Hearing loss linked to withdrawal
from social interactions, which
can have a significant impact on
psychological well-being and
physical health.9
Ability to work
Hearing loss can affect
sufferers’ ability to work or
stay in the workforce.10
Loss of independence
Seniors with hearing loss less
likely to be able to self-care.8
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Key market segments
Our efforts are targeted at improving awareness, expanding access and building on the clinical evidence that demonstrates
the effectiveness of our products across four key market segments.
Cochlear implants:
Children in developed markets
Cochlear implantation has been established as the
standard of care for newborns across the developed
markets, with bilateral implants indicated across most
countries as evidence supports the benefit of binaural
hearing.
Addressable market*
~130,000 people
Current penetration
>80% under 3-year-old children
Cochlear implants: 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%
What we are doing
What we are doing
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 rates of cochlear implantation for young children.
The key priority for this segment is to maintain our leadership position while aiming to
improve the rate of implantation, and/or the uptake of bilateral implants, in countries where
current levels 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.1 The segment is however challenging to address 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 a range of programs for driving growth of the adults and seniors segment including:
• 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.
* Cochlear estimates of segment prevalence of severe or higher hearing loss.
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Key market segments
Cochlear implants:
Children in emerging markets
Our emerging markets business has been growing
rapidly as awareness of cochlear implants increases
and wealth grows across many emerging economies.
Acoustic implants: Next generation
bone conduction hearing solutions
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.
Addressable market*
>1.3m people
Current penetration
<10%
Addressable market*
>3m people in developed markets
Current penetration
<1%
What we are doing
What we are doing
Our emerging markets business has been growing rapidly as awareness of cochlear implants
increases and wealth grows across many emerging economies. Most countries however
remain very 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;
We have recently introduced the next generation of bone conduction hearing solutions
into our Acoustics portfolio with the Cochlear™ Osia® 2 System, providing a significant
improvement in performance and aesthetics for bone conduction patients.
Pre-market trials have demonstrated significant improvements in outcomes for patients2
over traditional bone conduction hearing solutions, and we are already experiencing high
demand for the new implant in markets where we have launched.
• 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.
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 just two markets, the US and UK.
* Cochlear estimates of segment prevalence of severe or higher hearing loss.
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Strategic priorities
Our strategic priorities determine how we focus our time and resources to create value. Over the coming years we are
focusing our efforts on delivering value across the following initiatives:
Grow the hearing
implant market
Retain market
leadership
A stronger
organisation
Minimise
environmental impact
Consistent and
sustainable growth
• Strengthen the referral
pathway for adults
• Develop the acoustic implant
segment
• Broaden reimbursement and
improve indications
• Expand access in emerging
markets
• Advance the product and
• Strengthen and nurture the
services pipeline, with annual
R&D investment of ~12% of
revenue
• Deliver our latest sound
processor upgrade technology
to existing recipients
• Strengthen our lead in
customer service and support
• Maintain high standards of
product quality, safety and
reliability
organisational culture
• Attract, develop and retain
talent
• Champion a culture of
diversity and inclusion
• Support the wellness and
safety of our teams
• Advance the implementation
of initiatives to reduce our
Scope 1, 2 and 3 carbon
emissions
• Embed sustainability into
product design, development
and manufacturing
• Deliver a global approach to
managing the environmental
impacts of packaging and
waste
• Optimise growth investment
• Maintain a strong balance
sheet
• Improve efficiency and agility
• Maintain high levels of
corporate governance and an
ethical and sustainable supply
chain
• Vigilance around data security
and privacy
A healthier and more
productive society
A lifetime of
hearing solutions
Thriving
people
Environmental
responsibility
Sustained
value
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Creating value for stakeholders
Value creation describes the impact we have on all our key stakeholders – our customers, our people, our shareholders as well
as society more broadly. Successful execution means achieving the following outcomes for our stakeholders:
Payers and society
more broadly
• Appropriate funding for a
cost-effective intervention
• Standard treatment pathway
for implantable hearing
devices for all age groups
• Improved education and
productivity opportunities
• Understanding of the link
between good hearing and
healthy ageing and the need
to act
Our customers
Our people
All stakeholders
Our shareholders
• High quality and reliability
• Engaged, capable and high-
• Climate change mitigation and
• Consistent financial
• Improving hearing outcomes
and quality of life for new and
existing recipients
• The right care is available at
the right time and is easy to
use
• Reduced cost to serve for
professional customers
• Expanded product indications
performing employees
resilience
performance
• Diverse, equitable and
inclusive workplace
• Conservation of natural
• Disciplined capital
resources
management
• Engaging development and
• Reduced pollution and waste
• Strong corporate governance
career opportunities
• Strong health, wellbeing and
safety culture
• Healthier communities
• Ethical and responsible supply
chain
A healthier and more
productive society
A lifetime of
hearing solutions
Thriving
people
Environmental
responsibility
Sustained
value
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A healthier and more
productive society
Delivering societal benefit through improved health
outcomes, educational cost savings and productivity gains.
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A healthier and more productive society
We are focused on building a healthier and more productive society, delivering societal benefit through improved health
outcomes, educational cost savings and productivity gains. We do this by transforming the way people understand and treat
hearing loss through awareness and access activities.
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. Despite this,
fewer than 5% of the people that could benefit from an implantable hearing solution have
received one.1
Across developed markets, the largest unmet need is in the adults and seniors population.
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 cognitive decline, social isolation, anxiety and
depression.2
The adults and seniors segment is however challenging to address 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.
Our efforts are therefore targeted at improving awareness, expanding access and building on
the clinical evidence that demonstrates the effectiveness of our products, particularly in the
adults and seniors segment.
Over the next few pages we discuss some of the key initiatives we are pursuing which aim to
create value by increasing awareness and access to implantable hearing solutions.
Strategic priorities
Our target
Help at least 8% more people to hear each year with a cochlear or
acoustic implant
Grow the hearing implant market
• Strengthen the referral pathway for adults
• Develop the acoustic implant segment
• Broaden reimbursement and improve indications
• Expand access in emerging markets
How payers and society more broadly benefit
• Appropriate funding for a cost-effective intervention
• Standard treatment pathway for implantable hearing devices for all age groups
• Improved education and productivity opportunities
• Understanding of the link between good hearing and healthy ageing and the need
to act
Relevant UN Sustainable Development Goals
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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.
Key elements to developing a treatment pathway for adults
Creation of evidence
The continuous generation of robust clinical
evidence that demonstrates improved clinical
outcomes and patient quality
of life.
Living Guidelines
An evidenced based set of treatment
guidelines for adults who would
benefit from a cochlear implant.
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 awareness of cochlear implantation among primary
and hearing health care clinicians is inadequate, leading to poor identification of
eligible candidates. Clearer referral and cochlear implantation candidacy pathways
would help increase access to cochlear implants.3
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 towards:
• Building clinical and economic evidence that compels early adult referral
and coverage;
• Developing consistent referral guidelines to enable early identification and
referral; and
• Driving awareness and advocacy through hearing professionals and patient
advocacy groups.
Policy and Advocacy
Engage key stakeholders to raise the awareness
and the importance of hearing health in adults
and, in particular, the role of cochlear implants.
Behaviour change
Move hearing professionals into
willing and active referrers.
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The findings are a major advancement in understanding
the broader impact of hearing loss and the need for adults,
policy makers and health professionals to prioritise treatment
of hearing loss. It not only helps people to hear but has the
potential to reduce cognitive decline for adults at high risk.
An important first of its kind randomised controlled trial
commenced in the UK in 2022. The ‘comparing cochlear
implants with hearing aids in adults with severe hearing loss’
(COACH) study is the first randomised controlled trial to
compare communication and quality of life outcomes with use
of hearing aids versus unilateral cochlear implants in adults
with severe sensorineural hearing loss.
The trial will provide the highest standard of clinical evidence
and is aimed at resolving uncertainty associated with the
treatment of severe or higher sensorineural hearing loss.
The study is being is sponsored by the University of
Nottingham and co-ordinated by Nottingham Clinical Trials
Unit and Cochlear has provided a grant to conduct the study.
The COACH study will assess whether a cochlear implant
or a hearing aid is better at improving speech understanding
for adults with severe sensorineural hearing loss. Half of the
trial participants will be randomly assigned with hearing aids,
with the other half receiving a cochlear implant. The study is
expected to take a few years to complete.
Building clinical evidence
The evidence supports the establishment of an effective
clinical pathway for adults. There is growing recognition that
hearing is an essential part of healthy ageing and treating age-
related hearing loss is cost-effective.
Hearing loss has been found to be associated with accelerated
cognitive decline and dementia. A study that tracked 639
adults for nearly 12 years found that mild hearing loss doubled
dementia risk, moderate loss tripled risk and people with
a severe hearing impairment were five times more likely to
develop dementia.4
To investigate this further, our partners at Johns Hopkins
University and their Cochlear Implant Center have been
conducting a randomised control trial known as the Aging and
Cognitive Health Evaluation in Elders (ACHIEVE) study.5
ACHIEVE is the first randomised trial to determine whether
hearing loss treatment could delay cognitive decline and
dementia in older adults with mild-to-moderate hearing
impairment. The multi-year study is taking place at four centres
in the US, with close to 1000 participants.
In July 2023, the study delivered its first results, finding that for
a group of participants who were at a higher risk of cognitive
decline, using hearing aids for three years slowed cognitive
decline by 48%.6 The results add to the growing evidence
that support addressing modifiable risk factors for cognitive
decline and dementia could be effective in reducing the future
global burden of dementia.
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Building economic evidence
There is growing evidence of the individual and societal
economic value of treating age-related hearing loss, with
cochlear implants considered to be a highly cost-effective
medical intervention.
In 2022, The Lancet published the first-ever global investment
case for integrating ear and hearing care interventions in
countries’ universal health coverage services.7 Based on
the WHO’s proposed interventions, which include cochlear
implants for people with severe or higher hearing loss, the
study concluded that the investment required to execute these
interventions would result in substantial health gains, with an
overall return of nearly US$15 for every US$1 invested.
Developing consistent referral guidelines
The development of a standard treatment pathway for care
by which all healthcare professionals diagnose, refer and treat
adults eligible for cochlear implants has many aspects and
requires a co-ordinated effort between industry, hearing health
professionals, cochlear implant recipients and public policy
makers. There have been some important developments over
the past few years.
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 of the American Medical
Association, JAMA Otolaryngology. This International
Consensus provided the foundation for the development of
formal clinical practice guidelines.8
In 2021, the World Health Organization (WHO) provided
guidance for establishing evidence-based programs for
hearing screening via the World Report on Hearing9, aimed at
improving the identification and treatment of hearing loss in
target age-groups, including adults.
Over the coming years, we are supporting an international
collaboration of hearing experts and cochlear implant
recipients, known as the CI Task Force, and CIICA, the
Cochlear Implant Community of Action, to lead the effort to
develop Living Guidelines.
The Living Guidelines will establish evidence-based, best
practice recommendations for cochlear implantation in
eligible adults. The aim is to optimise care for hearing impaired
adults, improve cochlear implant accessibility and standardise
treatment globally.
The Living Guidelines are now being locally adapted and
adopted into country-based guidelines, with plans for their roll
out over the coming years.
“There is a lack of person-centred and consistent referral
pathways, which results in inconsistent diagnosis and
delays in referral to cochlear implant specialists for
candidates who may benefit.”
Cochlear implant audiologist
Driving awareness and advocacy
An important part of developing a treatment pathway for
adults involves working with hearing health professionals and
patient advocacy groups to amplify the work being done on
the referral guidelines and evidence building to create broad-
based awareness.
We engage with a broad range of advocacy groups globally.
CIICA was formed in 2021 and is the first global cochlear
implant user and family advocacy network that draws upon a
network of over 480 individuals and 98 organisations from 60
countries across the globe.
CIICA aims to increase the number of people globally who
have access to cochlear implants and lifelong support. It
does this by raising the awareness of the health, social and
economic benefits of cochlear implants to candidates, health
care practitioners and society more broadly as well as lobbying
for changes to funding.
We also have research partnerships with academic institutions
including Johns Hopkins University and Macquarie University,
engaging on issues of public health, cost-effectiveness and
broad awareness.
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Health, social and economic benefits of cochlear implants
The economic benefits associated with cochlear implants extend beyond healthcare budgets with significant net economic
gains reported from a broader societal perspective which includes health outcomes, educational costs and productivity gains.7
Expanding product indications
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.10 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 market access teams work with governments and payers
to recognise the benefits of treating hearing loss so we can
continue to increase access to our products.
Based on this study, Cochlear provided an estimated net
societal benefit of more than $7 billion over the lifetime of
the recipients implanted over just the past 12 months from
improved health outcomes, educational cost savings and
productivity gains.
By improving penetration rates in developed markets,
particularly for adults and seniors which currently sits at
around 3%, we can not only improve the quality of life of
thousands of people each year but also further reduce the cost
to society by billions of dollars.
Health, social and economic benefits of treating hearing loss
Children
Education
• Children with cochlear implants have a greater likelihood of acquiring oral language, integrating into
regular schools and being able to experience sounds along with better speech skills12
Employment
• More likely to be in paid employment as adults13
Adults
Employment and productivity
• Reduces odds of unemployment or underemployment14
Societal benefits of cochlear implants
compared to pre-implantation
• Cochlear implantation associated with positive change in employment status15 and increase in income
A recent European study calculated the net societal benefit of
cochlear implants by age group. It estimated that adults and
seniors with progressive profound hearing loss with a cochlear
implant had a positive net benefit of £275,000 and £76,000
respectively.11
• Stay in work for longer16 – reduces premature retirement
Seniors
Health and community connection
• Untreated hearing loss is associated with lower quality of life and higher cost of care due to higher risk of
cognitive decline, depression, social isolation, falls and loss of independence17
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Improving access in emerging countries
We are continuing to identify opportunities in emerging economies to grow the hearing implant market, with a focus on
improving rates of implantation in children.
Our emerging markets business has been growing rapidly as
awareness of cochlear implants increases and wealth grows
across many emerging economies. Most countries however
remain very under-penetrated.
We support the development of localised training and
education tools to raise awareness about hearing loss
treatments among professionals and potential candidates.
We leverage our global collaborations with organisations
including patient advocacy group and researchers,
to help implement policy measures, such as newborn
hearing screening, expand clinical services and improve
reimbursement in these markets.
We are also focused on lowering the age of implantation for
children as evidence supports improved hearing outcomes
from early intervention, which in turn drives improved
educational and employment outcomes. This approach is
aligned with the Joint Committee on Infant Hearing18 which
recommends that all children with hearing loss should receive
intervention by six months of age.
Asia Pacific Case Study
Thai delegation participating in the paediatric workshop at the Australian Hearing Hub (AHH).
Cochlear, in collaboration with our partners at the Australian
Hearing Hub (AHH), is working with Australian Federal
and State Governments to build capacity and capability in
paediatric hearing health systems across the Asia Pacific
region.
The NSW Government has provided support for workshops
aimed at South East Asian countries. In June 2023 the National
Foundation for Australia-China relations announced funding
to support these workshops being held in China and in Sydney
with a focus on newborn hearing screening.
Through workshops facilitated by Australia’s leading hearing
health experts, the AHH is demonstrating the effectiveness of
Australia’s approach to paediatric hearing health – universal
newborn hearing screening, diagnostics, referral pathway and
rehabilitation programs – and creating a forum for knowledge
sharing with clinicians and policy officials from around the
region.
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A lifetime of
hearing solutions
Innovating to build a market-leading portfolio of products
and services that improve hearing outcomes and provide a
lifetime of hearing solutions for recipients.
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A lifetime of hearing solutions
We innovate to build a market-leading portfolio of high-quality products and services that improve hearing outcomes and
provide a lifetime of hearing solutions for recipients. 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.
Cochlear has been the global leader in implantable hearing solutions for over 40 years. Our
investment in R&D aims to strengthen our leadership position through the development of
market-leading technology that improves hearing outcomes and quality of life for our recipients.
We invest around 12% of sales revenue each year in R&D, with over $2.7 billion invested since
listing, and we have a portfolio of more than 1,700 patent and patent applications worldwide.
We have a global innovation network with over 550 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 and an acoustics and software hub in
Sweden.
We helped over 44,000 people hear with one – or two – of our cochlear or acoustic implants
in FY23. We have the largest recipient base in the industry, with more than 750,000 implants
helping around 650,000 people to hear.
With every hearing implant we begin a lifelong journey with our recipients. Our goal is to
see our recipients continue to improve their hearing outcomes as our sound processor
technology improves, while making aftercare simpler and more cost effective for them and the
professionals that support them.
Over the next few pages we discuss our innovation priorities, our history of innovation, our
growing portfolio of connected care solutions as well as our dedication to product quality and
reliability.
Strategic priorities
Our target
Develop market-leading technology and deliver a world-class
customer experience to recipients and professional customers.
Retain market leadership
• Advance the product and services pipeline, with annual R&D
investment of 12% of revenue
• Deliver our latest sound processor upgrade technology to existing recipients
• Strengthen our lead in customer service and support
• Maintain high standards of product quality, safety and reliability
How our customers benefit
• High quality and reliability
• Improving hearing outcomes and quality of life for new and existing recipients
• The right care is available at the right time and is easy to use
• Reduced cost to serve for professional customers
• Expanded product indications
Relevant UN Sustainable Development Goals
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Innovation focus areas
Focus areas for R&D span four key areas – improving hearing outcomes, making life easier for customers, integrating our
ecosystem of products and services with connected care solutions and exploring options to expand the portfolio.
Hearing outcomes
We have made significant improvements in hearing outcomes
for recipients over the past 40 years. Key innovations like dual
microphone technology, pre-processing and user control have
improved the ability for recipients to hear in different sound
environments. These innovations have also led to an expansion
in indications for cochlear implants to now include people with
a severe or higher hearing loss.
There is still more that can be done to improve hearing
outcomes, to reduce listening effort and improve sound quality
for recipients. Together with our research partners, we are
investigating ways to better protect the structures of the inner
ear and improve the electrode-neural interface, exploring
drug/device combinations as well as new surgical strategies.
Lifestyle and ease-of-use
When it comes to lifestyle benefits, recipients want their
sound processor to be smaller, lighter and smarter. Each sound
processor generation has delivered on these expectations
with today’s sound processors integrated with smartphone
technology, making life easier.
Ultimately, recipients would also like to be able to hear
without an external sound processor. The development of
totally implantable cochlear implant technology is a long-term
development goal for Cochlear. It is an exciting part of our
development plan and aims to provide both functional and
aesthetic benefits with 24/7 hearing and invisible hearing.
A commercially available product is not expected for quite a
few years.
We are also innovating to deliver even better solutions for
professional customers to help ensure patient outcomes are
optimised and efficient. In the coming years the fitting process
is expected to become simpler, more automated and AI-
assisted.
Connected care
Connected care is our vision for hearing care – where
Cochlear, the recipient and hearing care professionals work
together to ensure the right care is available at the right time
and is easy to use.
As the industry grows, connected care tools will increasingly
provide additional capacity for our professional customers to
manage growing volumes as well as provide convenience to
professionals and recipients.
By creating a cohesive and interconnected care ecosystem we
can ensure a positive customer experience with on-demand
and secure access to comprehensive patient and product
information to drive evidence-based decision making and
delivery of high quality, accessible and patient-centred care.
Expanding the portfolio
Our innovation focus expands beyond cochlear implants,
spanning acoustic implants as well as exploring potential
opportunities to broaden the use of our technology outside of
hearing loss.
A key priority has been to revolutionise our bone conduction
technology and we achieved this in 2020 with the introduction
of a transcutaneous bone conduction implant. The Cochlear™
Osia® 2 System represents a significant improvement in
performance, aesthetics and quality of life for bone conduction
patients and has great potential to see broader uptake and
geographic expansion of our acoustic implant portfolio.
Looking beyond hearing loss, our innovation fund and research
partnerships are investigating the potential for our technology
to be applied into new treatment areas.
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A history of meaningful innovation
Innovation matters. We are focused on delivering key technology improvements to our recipients. These innovations bring
performance that matters, a true connection to life and a lifelong commitment to all of our recipients. The most advanced and
reliable devices on the market are a result of over 40 years of dedication to innovation.
Cochlear™ hearing implants
Our R&D is focused on improving hearing outcomes
and improving recipient quality of life. For more than
40 years Cochlear™ Nucleus® Implant innovations have
delivered:
• Improved hearing outcomes, resulting in improved
speech perception, particularly in noise. These
improvements have led to a broadening of
treatment indications from profound to moderate-
severe hearing loss and also new indications such
and hybrid and single-sided deafness;
• The world’s thinnest cochlear implants, designed to
be discreet when implanted and providing a natural
appearance;
• The world’s thinnest electrodes and only
perimodiolar electrode designed to sit close to
the hearing nerve, supporting cochlea health and
delivering clearer sounds;
• Convenient and pain-free1 MRI scans at 1.5 and 3.0
Tesla without the need for magnet removal; and
• Industry-leading reliability based on exceptional
product design, extensive testing and world-
class manufacturing that speaks not just to past
performance but builds trust in future innovation.
Cochlear hearing implants
1985
1997
2000
2005
2009/2014
2019
Nucleus 22
World’s first
commercial multi-
channel cochlear
implant with 22
electrodes
Nucleus 24
World’s first cochlear
implant with removable
magnet for MRI safety
Nucleus 24 Contour
Released with
perimodiolar
and straight electrodes
Freedom
World’s most
implanted cochlear
implant
Nucleus Profile
World’s thinnest
implant, offers ease of
use and faster surgery
due to minimal drilling
Nucleus Profile Plus
World’s thinnest
implant, MRI 1.5 and 3 T
compatible with magnet
in place
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Cochlear™ Nucleus®
sound processors
Over the past 40 years we have been improving
the quality of life of our recipients with new sound
processing technology that is compatible with both
latest generation and older implants. Our sound
processor innovation has delivered:
• Improved hearing outcomes with sound
processing technology designed to provide
clearer sound and reduced background noise;
• Connectivity to the world and people, by
integrating with smartphone technology to allow
direct streaming, control and monitoring with
apps; and
• Lifestyle benefits, with each generation being
smaller and lighter, easier to use and with longer
battery life.
Cochlear Nucleus sound processors
50.7 mm
42 mm
40.9 mm
34.5mm
2005
2009
2016
2022
Freedom
Offered input processing
technologies designed to
mimic natural hearing and is
the industry’s first water
resistant sound processor
Nucleus 5
Was 36% smaller than the
Freedom sound processor
and offers an average hearing
improvement of 30% in
noisy environments. Includes
AutoPhone, the industry’s
first automatic phone
detection ability.
Winner of the prestigious Red Dot Design
Award for Nucleus 5 and Nucleus 8.
Kanso
At launch, Kanso was the
smallest and lightest off-
the-ear sound processor
available. Kanso was designed
to help recipients hear
with clarity using SmartSound®
iQ with SCAN*
and dual microphones,
and is compatible with
Cochlear™ True Wireless™
devices. Kanso is dust
and splash resistant.
Nucleus 8
Designed to make
communicating with people
easier, the Nucleus® 8 Sound
Processor delivers our latest
hearing technology. It senses
changes in the environment
and automatically adjusts
listening settings.
Ready for next generation
Bluetooth® LE Audio technology
and able to connect directly
to what’s being broadcast
at public venues such as
airports, conference centres
and theatres supporting
Bluetooth Auracast™.
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Connected care solutions providing
convenience and confidence
Connected care is our vision for hearing care – where Cochlear, the recipient and hearing care professionals work together to
ensure the right care is available at the right time and is easy to use.
Our connected care solutions comprise a range of digital
health solutions that provide new ways to deliver convenient,
evidence-based care for patients at every stage of their
journey, spanning surgical care, self-managed care, in-clinic
care and remote care.
Surgical care
Surgical care solutions enhance patient outcomes through
intraoperative tools and insights that improve the surgical
experience.
The Nucleus® SmartNav System supports surgeons in
optimising electrode placement during cochlear implant
surgery. It provides real-time, actionable intraoperative insights
that increase confidence in device placement to help surgeons
optimise outcomes and postoperative clinical performance.
In-clinic care
In-clinic care solutions streamline patient management and
care, giving clinicians the time and flexibility to optimise every
appointment.
Our comprehensive range of fitting software uses our
extensive fitting and performance data to inform and optimise
programming. Our software is created using best-in-class
design principles and harnesses over 40 years of experience
and input from thousands of clinicians worldwide2 to help drive
consistent outcomes, clinic efficiency and personalised care.
Our fitting software always keeps the patient at the centre
of care, promoting patient engagement and facilitating more
effective tracking of progress between appointments.3
A recent innovation is the secure and seamless cloud transfer
of a patient’s surgical data from the operating room to the
fitting clinic via Nucleus SmartNav. This transfer ensures that
hearing health professionals can always commence a patient’s
first post-surgical appointment with all the information they
need for a successful first fitting.
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Remote care
Self-managed care
Cochlear™ Self-managed care solutions empower patients to
actively manage their hearing experience in partnership with
their clinician through their smartphone.
Self-managed care gives patients the option to proactively
manage their device settings as they move through their
day and encounter different hearing and communication
conditions. Our range of mobile apps provide patients with the
tools to manage their everyday situational hearing – whether
they are adjusting their volume settings or using device
features such as ForwardFocus.
With Self-managed care, patients also have access to
interactive tools to help them practice and improve their
listening and communication skills. These app-based solutions
are designed to give patients the confidence to participate in
the conversations and moments that matter most.
Remote care solutions allow clinicians to monitor patients and
deliver quality care without a trip to the clinic.
We are the first company to offer app-based Remote care
solutions to both acoustic and cochlear implant recipients. This
means that recipients can conveniently access care from their
clinician without a clinic visit – from home, at work, or when
they’re travelling.
With Cochlear™ Remote Check, cochlear implant recipients
can complete a hearing health check through the Nucleus®
Smart App without visiting the clinic. Their clinician can then
review the results at a convenient time to determine if they are
performing as expected or need follow-up.
Cochlear™ Remote Assist enables live video appointments
for both cochlear implant and Baha® Implant recipients. The
clinician can assess how the recipient is progressing and
discuss any issues they are experiencing. The clinician can also
connect remotely to the recipient’s sound processor to make
adjustments or enable features in real-time.
By offering app-based Remote care solutions, we are meeting
a recipient need and making care more convenient. We
assist our professional partners to increase clinic efficiency,
providing greater flexibility and allowing clinicians to see more
patients, including new candidates. And by removing the need
to travel to and from the clinic.
Over the longer-term, remote care solutions have the potential
to expand access to those who live in remote areas or
otherwise don’t have access to a clinic.
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Leading on product quality and reliability
When choosing a cochlear implant, the reassurance of high-quality products that support a lifetime of hearing is key.
Our market-leading products are the result of our world-class manufacturing process and meet stringent, internationally
recognised standards.
As the global leader in implantable hearing, with more than
750,000 devices provided, we take our responsibility to report
on the reliability of our products seriously. This is why we
report with full transparency, in accordance with International
Standard ISO 5841-24, the reporting principles outlined in the
European Consensus Statement on Cochlear Implant Failures
and Explantations5 and ANSI/AAMI CI86 – Cochlear implant
systems: Requirements for safety, functional verification,
labelling and reliability reporting.6
Cochlear’s implants are the most reliable7 in the industry.
Our products are approved by regulators around the world
for the treatment of moderate to profound hearing loss after
undergoing safety and efficacy reviews.
Implant reliability is important for successful patient outcomes,
with longevity an important factor when choosing an implant,
particularly for a child.
Our latest implant, the Nucleus® Profile Plus Series implant, has
a combined cumulative survival percentage (CSP) of 99.87%
within four years. Our Nucleus CI24RE Series implant, the
world’s most widely used cochlear implant, with more than
200,000 registered devices, has a combined CSP of 98.92%
after being on the market for 18 years.
Each year we publish our product reliability data in the
Cochlear™ Nucleus® System Reliability Report, which can be
found on the website.
Our world-class manufacturing processes meet stringent,
internationally recognised standards. Our Quality Management
System (QMS) provides the framework, processes and
procedures for ensuring:
• safety and efficacy of our products;
• compliance with regulatory requirements; and
• product design, manufacture and marketing consistently
meet customer and regulatory requirements.
Our QMS plays an integral part in ensuring our product safety
and reliability. During the design process, products go through
extensive testing both internally and externally to ensure they
are designed to meet all applicable standards for intended use.
Our products are manufactured to ensure they meet our
design specifications. We then continue to monitor the
performance of our products throughout their lifetime via
an extensive post market surveillance process. Information
gathered throughout the product lifecycle is used to improve
current and future products.
Our QMS is also audited annually by regulatory agencies to
ensure compliance with applicable regulations and standards
for the countries where we market our products.
The Chief Technology Officer has executive accountability for
Quality and Regulatory Affairs and, along with the Executive
team, oversees the performance of the QMS to evaluate its
suitability, effectiveness and ensure it continues to improve.
Undertaking pre-clinical and clinical trials
to study the efficacy of new technology
Cochlear undertakes pre-clinical and clinical trials, often in
conjunction with leading universities and research partners, to
study the safety and efficacy of new technology in accordance
with relevant standards including ISO 14155: Clinical
investigation of medical devices for human subjects – Good
clinical practice.
We currently have 35 active sponsored studies in the areas
of technology development and lifecycle product support.
We make outcomes from clinical studies available to
payers, regulators, health technology assessment bodies
and other stakeholders via summary reports on clinical trial
public registry platforms and as published peer-reviewed
manuscripts.
In FY23, there were 18 peer-reviewed publications arising from
Cochlear-sponsored studies.
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Collaborating to advance hearing science and research
As a market leader we strive to help advance hearing health science and research. By working with other leaders in the sector,
we can harness our collective expertise, skills, and imagination to achieve more for our customers and for the community.
Strategic research partnerships and global collaborations
Cochlear has established research collaborations with leading universities and research
organisations around the world including strategic research partnerships with Macquarie
University in Australia and Johns Hopkins University in the US. These collaborations build on the
research expertise of the institutions, as well as their broader networks and ecosystems, to drive
innovation in hearing technology and public health.
Macquarie University and the Australian Hearing Hub
Both Cochlear and Macquarie University are founding members of the Australian Hearing Hub
(AHH) which brings together leading researchers, clinicians, service providers and industry
with the vision of being the world leading community transforming hearing and communication.
Key collaborative AHH research projects include Hearing Impairment in Adults: A Longitudinal
Outcomes Study (HALOS) and the Cochlear Implant Neurotrophin Gene Therapy Clinical Trial.
In March 2023 the AHH announced a new partnership with Google to explore new applications
of artificial intelligence and machine learning hearing solutions as part of Google’s $1 billion
Digital Future Initiative.
Johns Hopkins University and the Cochlear Center for Hearing and Public Health
In 2018 we Cochlear pledged US$10 million over 10 years to establish the Cochlear Center for
Hearing and Public Health at Johns Hopkins Bloomberg School of Public Health. Under the
leadership of Professor Frank Lin, the Center focuses on hearing loss as a global public health
priority, with an emphasis on the public health impacts of hearing loss in senior adults.
Priority research areas include the contribution of hearing loss to the risk of cognitive decline
and dementia in older adults and the epidemiology of hearing loss prevalence and risk factors.
Australian Hearing Hub and Google collaboration partners.
In early 2023 we renewed our strategic research partnership with Macquarie University for a
further five years strengthening the platform for co-funded multi-year and multi-disciplinary
research projects with a focus on advancing clinical practice, education and public policy.
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Growing connectivity and engagement with
our customers
We invest to provide our customers with a world-class customer experience with increased connectivity and engagement for
recipients and products and services to improve convenience and confidence for our professional customers.
Cochlear Family
Cochlear Family is our recipient awareness and education
membership program, providing information about the hearing
journey and support in living with hearing implant technology
for recipients and their families and carers.
It aims to help upskill recipients and their carers to live a
more confident life with hearing technology via proactive
communications and hosted events.
Cochlear Family is the world’s largest community of hearing
implant recipients and is available in 70 countries. Over 54%
of all new customers become Family members and in FY23
membership increased to 296,000 people, up 14%.
Cochlear Volunteer Community
The Cochlear Volunteer Community is a network of highly
engaged, committed recipients and carers who are motivated
to help others learn about and successfully live with
implantable hearing devices.
There are currently over 1,400 official Cochlear Volunteers
throughout 24 countries, who have been matched over 2,400
times in FY23 with people considering whether Cochlear
technology is right for them or their loved one.
Volunteers provide candidates and recipients with relevant
information about the benefits of hearing implants and sound
processors and opportunities to maximise the benefits of
devices in daily life.
We work closely with our volunteers to provide them with the
knowledge and skills they need to be successful in supporting
others along their hearing journey.
Professional learning programs
In FY23 our European-based professional education learning
program provided in-person, virtual and hybrid trainings for
ENT surgeons, audiologists and oral rehabilitation therapists
across Europe. We held 166 events, reaching over 3,800
professionals.
Our Cochlear Clinical Skills Institutes (CCSI) in Sydney
and Chengdu conducted surgical and clinical training for
professionals in the hearing implant industry. The training
attracted nearly 100 surgeons from the Asia Pacific region.
We also delivered a diverse range of face-to-face and
online training events, benefiting over 11,000 professionals
throughout FY23.
Professional training.
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Thriving people
An engaged, capable, high-performing and diverse workforce
that delivers on our strategy and supports the creation of
sustained value.
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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 around 4,800 people across the globe. Their
knowledge, expertise, passion and focus on delivering excellence is key to achieving future success.
Cochlear has a rich history, helping people to hear for over 40 years, underpinned by a strong
culture of innovation and a focus on our customers.
Strategic priorities
We have a responsibility to build a reputable and sustainable organisation, now and into the
future. We achieve this by nurturing those important elements of our culture that have brought
us success, while continuing to evolve, intentionally shaping the culture that will enable us to
grow and deliver for our customers as our workforce expands.
Diversity, equity and inclusion continue to be key priorities as they are fundamental to our
success as an innovation leader. Over the past few years, we have also focused on building a
stronger achievement culture, improving the way we collaborate to achieve company-wide
goals.
Focused training and development enable us to establish clearer priorities and work more
effectively together, removing boundaries and improving focus on what matters most, our
customers.
We have continued to develop our systems, processes and organisation design in a deliberate
fashion to reinforce this target culture. We have invested in leadership development, notably in
Inclusive Leadership and Unconscious Bias and Culture Conversations, with an increased focus
on building critical skills and capabilities both at an individual and organisational level.
Over the next few pages we discuss some of the key initiatives we are pursuing which aim to
create value by investing in our people and culture.
Our targets
Retain employee engagement levels at or above 80%
A stronger organisation
• Strengthen and nurture the organisational culture
• Attract, develop and retain talent
• Champion a culture of diversity and inclusion
• Support the wellness and safety of our teams
How our people benefit
• Engaged, capable and high-performing employees
• Diverse, equitable and inclusive workplace
• Engaging development and career opportunities
• Strong health, wellbeing and safety culture
Relevant UN Sustainable Development Goals
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Ways of working together
Our HEAR behaviours bring to life our mission and reflect what we value as an organisation.
Our HEAR behaviours are our ways of working, providing
a framework to operate. Together with the Global Code
of Conduct, the HEAR Behaviours provide a set of guiding
principles that shape our culture and define how employees
should behave and make decisions.
When setting our individual and department goals each year,
employees and managers ensure that the goals incorporate the
expected outcome as well as the behaviours we demonstrate
to achieve the outcome.
Each year we review the micro behaviours associated
with each pillar and adapt where either the strategy or the
behaviour needs evolving. This year, Aspire to Win micro
behaviours have been adapted to reflect a greater focus on
prioritisation, taking risks, experimenting and taking initiative
– key areas we want to further develop as we enter the next
phase of growth.
H
E
A
R
Hear the customer
Put the customer at the centre
of all that we do
• I see what we are doing through the customers’ eyes
• I factor in what the customer needs in my decision making
• I bring the voice of the customer into our conversations
Embrace change
and innovate
Think differently to change
and grow
• I simplify complex information to make it easy to understand
• I look for the simplest solution without adding complexity in
the future
• I change my mind when persuaded by a better idea
Aspire to win
Inspire each other to achieve
• I push the team to take actions toward our stretch goals
• I prioritise my actions to get things done
• I raise difficult and important issues
• I take calculated risks to achieve our goals
• I take action without being told what to do
Remove boundaries
Unite and act as one
• I challenge others’ opinions in a constructive way
• I speak supportively of decisions made by others outside my
immediate team
• I seek and use input from other parts of the business to
make decisions
• I put the interests of the organisation ahead of my own or my team
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Championing a culture of diversity and inclusion
A diverse, equitable and inclusive organisation improves employee engagement, our performance and productivity as well as
customer engagement.
Our workforce
We are proud of our diverse and capable global workforce.
Our people are based in more than 50 countries around the
world with 53% females.
Targeting to maintain at least 40% female
representation at senior management and Board level
53%
43%
All
employees
Senior
managers*
47%
40%
Senior
placements
Board
More information about our workforce is in the Sustainability
data appendix on page 154 and the 2023 Corporate
Governance Statement, available on the Investors section of
the website.
Our diversity and inclusion strategy
Our diversity and inclusion (D&I) strategy is aimed at creating
an environment where our people feel safe, valued, included
and empowered to do their best work.
The strategy is built around target setting and policies,
hiring and development, training and communication and
engagement.
Targets and policies
Since implementing our Diversity and inclusion policy in 2021,
our focus has been on gender diversity. We introduced gender
targets for our Board and senior leaders, reaching these targets
by FY22. In FY23, 43% of senior managers were female.
Flexible work is an important part of our employee value
proposition and is a key driver of attracting and retaining
talent. Our Global Flex@Cochlear policy sets expectations
around flexibility with 87% of our employees saying their
manager provides them with the flexibility to manage their
work and personal responsibilities.
Our commitment to diversity, equity and inclusion is enshrined
in our Global Code of Conduct which states that our people
have a responsibility to make our workplace fair and inclusive
and we do not tolerate any form of discrimination and
harassment.
Hiring and development
In FY23 we continued to invest in our Hiring Manager Learning
Program ‘Hiring to win’, which is focused on the removal of
unconscious bias from our selection processes.
We have seen some pleasing results from our work in this area
with females comprising 47% of all senior placements made
during the year.
We achieved our Board target of 30% female representation in
FY21, with females now comprising 40% of our Board.
To ensure we maintain and embed these achievements, we are
continuing to improve the gender diversity of our succession
pipelines to all senior leadership roles.
We continuously monitor outcomes and metrics to ensure
fairness and equity in our talent management activities, such
as recruitment practices and performance and remuneration
review outcomes, while identifying opportunities for further
improvement.
Female
* For the purposes of this Statement, senior managers are defined as all managers in Bands 1, 2 and 3; the three most senior levels with Band 1 being the Executive team.
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Career Trackers internship program.
2023 Sydney WorldPride event at our headquarters in Australia.
An important element of our talent strategy is to build our
relationships with school and university programs so that
we continue to grow a diverse pipeline of entry-level talent.
Females comprised 62% of our 2022/2023 Summer Student
Intern Program and 50% of our 2023 Graduate Program intake.
In Australia, we sponsor students as part of the Cadetship to
Career initiative jointly developed by The Smith Family and the
Business Council of Australia. This initiative provides students
from disadvantaged backgrounds with paid work experience
to help them transition from study to employment and explore
future career options.
In August we became a CareerTrackers partner with the aim
of offering more, high quality internship opportunities to
Australian First Nations students. This initiative aligns with
our Reconciliation Action Plan (RAP) commitment to explore
opportunities to promote STEM (Science, Technology,
Engineering and Mathematics) development and career
pathways for First Nations peoples.
Training
We continue to upskill our people to support our D&I principles
and goals. By the end of FY23 80% of all leaders globally have
completed our Inclusive Leadership program. In addition, we
launched an Embrace Equity online learning pathway for all
employees to build greater awareness of equity and why it is
important. Other key learning programs aimed at building an
inclusive workplace include Respectful Workplace training,
Mental Health for Managers and Smarter Meetings.
In June we launched an online First Nations Knowledge
Building and Engagement course as part of our efforts to
increase cultural safety and understanding under our RAP. The
course is available to our Australian based people and aims to
provide our people with a foundational understanding of First
Nations history, culture and people.
Communication and engagement
Our culture work and goals are closely integrated with our
D&I strategy. The work of our 100 Culture Champions has
continued to focus on building a more inclusive workplace
and environment where we ensure people are heard and
differences are valued.
The Culture Champions introduced an organisation wide
experiment entitled ‘Challenger in the Room’ designed
to encourage behaviours of raising difficult issues and
encouraging diverse perspectives. This experiment required
people to apply the skills learnt through the Culture
Conversations series.
Over the past year, we took steps to acknowledge and
celebrate a broader range of significant events or dates to
better reflect the diversity of our people and the communities
they live in, including celebrating World Pride Day with an
event featuring personal stories from leaders from across the
globe and their experience as an LQBTQIA+ employee.
In Australia we celebrated National Reconciliation Week, a
time for all Australians to reflect on First Nations’ peoples,
learn about our shared histories, cultures and achievements
and explore how we can contribute to reconciliation. We ran
online events providing a platform to encourage more people
to join us in this important journey.
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Attracting, developing and retaining talent
We strive to attract and retain passionate and highly skilled professionals.
We have continued to build on our efforts to engage and retain
our talent, focussing on career progression and development,
pay and recognition and ensuring all our employees feel
a sense of belonging, regardless of their background and
experiences.
As a result, we have seen a significant number of employees
taking on a new career development opportunity with 30% of
open roles filled by employees.
In FY23, overall employee engagement remained strong
at 80%, with 91% of our employees completing our global
engagement survey.
We are particularly pleased to see contribution to the
satisfaction of our customers (94%), employee understanding
of their contribution to strategy (93%) and pride in the
organisation (92%) remain our strongest areas, a result that
can be attributed to the power of our mission and our strong
commitment to our customers.
We have also continued to see a strong uptake in our all-
employee share purchase plan, with 47% of eligible employees
participating in the second year of the plan offering.
Our retention levels remain strong with our global annualised
voluntary turnover for FY23 of 8%, almost three points below
the previous year.
We have made a significant global investment in efforts to
prepare for our new People and Culture operating model with
the new IT platform launching in September 2023. The new
operating model is designed to support our organisation as it
grows and will enable greater empowerment of our leaders
and greater opportunities for our people to share their talents
and skills and build their career.
80%
Overall
engagement
28.5 hrs
per employee of formal
learning globally in FY23.
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Supporting the wellness and safety of our teams
We are committed to providing safe, healthy and secure workplaces for our employees and all others in our workplaces.
Our care and commitment to safe and healthy working
environments allows our people to thrive and deliver their best
work.
In FY23 our Total Recordable Injury Frequency Rate was 3.3,
having increased slightly from FY22. Our main risks relate to
the development of musculoskeletal disorders, which comprise
21% of all injuries sustained in our operations.
We continue to focus on the prevention of musculoskeletal
disorders through early intervention, evidenced based exercise
programs and increased frequency of rotation through our
operations to further lower exposure times to operations of a
repetitive nature.
We are taking a holistic approach to the wellness of our people
through maintaining both a physically safe and mentally
healthy work environment.
Our confidential Employee Assistance Program is available to
all employees and their immediate family members ensuring
comprehensive assistance is available to address their mental
health needs.
To help our managers recognise and fully support their teams’
mental health we have implemented mandatory ‘Mental
Health for Managers’ training and are upskilling the workforce
through the provision of Mental Health First Aid training.
We have also commenced a comprehensive review of our
existing psychosocial risk assessment, with a particular focus
on sexual harassment. In FY24 we will continue our work in
this critical area to ensure that we take a holistic and robust
approach towards the prevention of sexual harassment in the
workplace.
81%
Feel safe
at work
76%
Satisfied with
health and
wellbeing
85%
Feel leadership
is committed to
employee health
and wellbeing
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Environmental responsibility
To be a sustainable business, we aim to minimise the impact
of our operations on the environment.
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Environmental responsibility
We are implementing initiatives to promote the sustainable use of natural resources, reduce our environmental footprint and
help tackle climate change.
We are implementing initiatives and actions to meet our science-based carbon emissions
reduction targets. Our short-term focus is on expanding renewable energy use at our sites and
reducing our Scope 1 and 2 emissions. Additionally, we are reducing our business flight related
carbon emissions and mapping our other Scope 3 emissions in line with our net-zero strategy.
Strategic priorities
Our target
Sustainability is integrated into our operations, processes and procedures. We consider the
environmental impact of our product development, manufacturing, packaging, and logistics. We
are committed to utilising natural resources in a responsible and efficient manner.
Addressing climate-related risks is part of our risk management strategy. To enhance our
approach, we are progressively implementing climate-related scenario analysis in line with the
Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.
This section outlines the initiatives and processes we have established to drive our progress
towards our targets.
Net-zero carbon emissions in our operations by 2030 and across
our value chain by 2050
Minimise environmental impact
• Advance the implementation of initiatives to reduce our Scope 1, 2 and 3 carbon
emissions
• Embed sustainability into product design, development and manufacturing
• Deliver a global approach to managing the environmental impacts of packaging
How all stakeholders benefit
• Climate resilience
• Efficient use of natural resources
Relevant UN Sustainable Development Goals
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Our pathway to net-zero emissions
We are committed to taking an active role in the global effort to tackle climate change and are using climate science to better
understand our impacts and define our strategy.
In FY22 we set short, medium and long-term Greenhouse
Gases (GHG) emission reduction targets. Our targets are in line
with the Science Based Target Initiative (SBTi) methodology,
consistent with the reductions required to limit warming to 1.5
degrees above pre-industrial levels.
Our emission reduction targets
2025
• 25% reduction in our absolute Scope 1 and
Scope 2 emissions
• 50% reduction in business flight emissions
2030
• Net-zero emissions in our operations
(Scope 1 and 2)
2050
• Net-zero emissions across our value chain
(Scope 1, 2 and 3)
Electric van at our Macquarie site in Australia.
Our climate-related strategy
Scope 1 and 2 emissions
Implementing efficiency initiatives is a key element of our
strategy, and we are on target to meet our Scope 1 and 2
emission reduction targets.
We have continued to expand the use of renewable energy
at our key sites and reached an overall rate of 70% renewable
electricity globally.
Our manufacturing facilities account for 70% of the total
energy consumption. We have made significant progress
in reducing Scope 1 and 2 emissions by 68% from our
FY19 baseline by increasing renewable energy use in our
manufacturing sites.
In FY23, we reached 96% renewable energy at our
manufacturing facilities, using 100% renewable energy in five
of our six facilities. Due to restrictions in the availability of
renewable energy at the remaining site, we were not able to
obtain 100% renewable energy during FY23. We expect to be
able to move to 100% renewable energy in FY24.
We are also implementing other initiatives to further reduce
our fossil fuel use and energy consumption. For example, we
have replaced the petrol van used to transport production
components, consumables and finished goods between our
Sydney facilities with an electric van, and we have renovated
the air conditioning system at our Macquarie University site,
representing annual savings of around 360 MWh, almost 8% of
the annual consumption.
Our historical emissions and energy use data are available in
the Sustainability data appendix on page 158.
Scope 3 emissions
We are making steady progress toward accomplishing our
business flight-related targets. In FY21, we set a target to
reduce our business flights per full-time equivalent employee
by 20% and our flight-related emissions by 50% by 2025 (from
a FY19 baseline).
In FY23 we reduced our flight related emissions by 91%.
We achieved this by reducing business flights per full time
equivalent employee by 47% from our FY19 baseline and
purchasing offsets for approximately 80% of our remaining
business flights.
For other Scope 3 emissions, we have initiated a complete
inventory in line with the GHG Protocol. The initial result
indicates that 10 out of the 15 GHG Protocol categories apply
to our business. We intend to disclose the results of this
process in our next Annual Report and will also develop a
reduction plan in line with the SBTi.
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US environment champions
The US team has established a voluntary environmental working group aimed at
advancing our global environment objectives by implementing local initiatives focused
on employee commuting, energy efficiency, waste management and promoting
sustainable lifestyles. This initiative is endorsed by the US management team and
supported by the Global Sustainability Team.
The working group comprises 29 members from different parts of the business including
sales, clinical, finance, product management, communication, warehouse, clinics, field
staff and people and culture.
Initiatives delivered in FY23 include an education program about waste and recycling
and ‘Bike to Work’ day, raising awareness about sustainable transportation.
Managing our climate-related sustainability risks
Our enterprise risk management approach includes assessment of our physical climate-related
risks (riverine and urban flood, extreme heat, cyclones and wildfires). It also includes the
assessment of potential climate-related risks to critical production-related suppliers and critical
business infrastructure providers.
We have considered the risks and opportunities of transitioning to a low carbon economy.
Although we are not a carbon-intensive industry, we assess our supply chain to identify relevant
climate impacts so that ambitions to decarbonise are aligned.
Metrics and targets
As we further align our approach with the TCFD and the International Sustainability Standards
Board Sustainability Disclosure Standards, we intend to extend our climate-related scenario
analysis in FY24 to provide a more detailed assessment of risks and opportunities associated
with climate change and the transition to a low carbon economy.
The main metrics used to assess and manage climate-related risks and opportunities are:
• Scope 1, 2 and 3 GHG emissions. Please refer to the Sustainability data appendix on page
154 for more details;
• Location of relevant facilities; and
• Our targets to reach net-zero emissions, in line with the SBTi.
Governance
The Audit and Risk Committee assists the Board to discharge its responsibilities in monitoring
sustainability performance and overseeing the implementation of sustainability initiatives and
commitments and reviewing the assessment, management and response to these risks and
opportunities. Please refer to the Governance and risk section on page 68 for more details.
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Enhancing environmental management and compliance
We continue to integrate environmental considerations into our business, focused on minimising our impact, complying with
regulation and improving efficiency.
Sustainable design and packaging
Life Cycle Assessment
We incorporate a sustainability mindset into our product
development, packaging and logistic processes.
Multidisciplinary teams are working on increasing the
environmental efficiency of our products, aligned with the
medical device regulations focused on protecting the safety of
patients.
As part of our product design process, we comply with
the International Electrotechnical Commission Standard
- IEC60601-1-9:2020: Requirements for environmentally
conscious design, focused on minimising the environmental
impact of each stage of a product’s life cycle.
In light of growing environmental regulation related to
packaging, we are exploring initiatives to minimise the
environmental impact of our packaging while still meeting
medical device safety standards. For example, we use
recyclable PaperFoam and biodegradable packaging across all
our products.
By replacing plastic bubble-wrap with a paper filler in shipping
boxes, we have reduced the use of plastic shipped from
Australian sites to our regional distribution centres by 80%.
We also transport batteries required for our products. With the
implementation of shipping optimisation actions in FY23, we
have reduced the distance travelled by air for these batteries
by 69%.
We have initiated a systematic Life Cycle Assessment (LCA) of
the Cochlear™ Nucleus® 8 Sound Processor using the SimaPro
modelling software, a leading science-based methodology.
The LCA measures environmental impacts during all stages
of the product’s life. This will help us define a baseline for
sustainable product innovation and enable us to make better
decisions throughout the life cycle of our products in areas
such as:
• Waste management;
• Environmental impact of packaging;
• Material preferences for products and packaging; and
• Carbon footprint.
Environmental management
Our Environmental Policy sets out our commitment to
managing and reducing our impact on the global environment.
Working closely with our partners and suppliers, we monitor
our environmental performance across our operations and
across the value chain.
Resource efficiency
We are identifying ways to improve resource efficiency,
reduce waste and drive greater circularity into our operations.
We continuously identify ways to reduce waste going to
landfill by effective sorting of recyclable materials and waste
avoidance. In FY23 we reused 250 square meters of our carpet
and refurbished tables and white boards in the renovation of
our Lane Cove office.
Our current production processes use limited quantities of
water, with the majority consumed through staff kitchens and
bathrooms. We encourage responsible water consumption and
continuously identify appropriate water-saving initiatives.
Environmental compliance
We comply with the European Union (EU) Restriction of
Hazardous Substances (RoHS) Directive 2002/95/ EC, which
governs the use of heavy metals and halogenated compounds
in electrical and electronic equipment.
We also comply with the EU’s regulation on the Registration,
Evaluation, Authorisation and Restriction of Chemicals
(REACH) for the safe manufacture and use of chemical
substances throughout their lifecycle. In addition, we comply
with the Directive 2012/19/EU aiming to prevent and reduce
waste from electrical and electronic equipment.
In addressing packaging and packaging waste, we comply
with the European Parliament and Council Directive 94/62/
EC aimed at preventing the production of packaging waste,
reusing packaging, recycling and other forms of recovering
packaging waste and, hence, at reducing the final disposal of
such waste.
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Sustained value
Maximising spending to grow the market while maintaining
our competitive position. Ensuring we operate fairly, honestly
and legally.
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Sustained value
Financial discipline and commitment to high standards of corporate governance and transparency are central to the creation,
maintenance and enhancement of long-term sustainable value.
Cochlear has a long history of delivering growing sales revenue, profits and dividends. This
track record can be attributed to our unwavering dedication to our core competency, the
development of implantable hearing solutions, and has been supported by a multi-decade
philosophy of investing to grow, disciplined management of capital and high standards of
corporate governance.
As a business we plan and invest over long timeframes. Our R&D investment horizons span over
10 years, and our ambition to improve the uptake of cochlear and acoustic implants requires
long-term planning and consistent investment over many years.
Over the coming years we expect to continue to invest consistently to improve the adoption of
our products. We see a significant opportunity to grow by strengthening the clinical pathway for
adults and seniors through improving awareness and access for those who would benefit from
a cochlear implant. Improving these pathways takes time, requires us to trial novel approaches
and adapt quickly as we learn. We need to constantly challenge ourselves on how best to
prioritise and optimise this growth investment and measure progress.
We have set high level targets to guide our investment, aiming to balance financial objectives
and expectations with the organisation’s capacity to grow at a manageable pace. Over the
coming years we aim to grow sales revenue at around 10% per annum, while targeting an
investment of 12% of sales revenue in R&D and an underlying net profit margin of 18%. While
the outcomes for any individual year may vary as a result of prevailing trading conditions, these
guiderails provide us with the ability to grow our investment in market growth activities.
We are also cognisant that to be successful over the long term, we must create value
responsibly. We recognise that high standards of corporate governance and transparency are
important for the creation, maintenance and enhancement of long-term sustainable value.
Over the coming pages we discuss some of the key elements of our financial and governance
objectives aimed at creating sustained value.
Strategic priorities
Our target
Sustainable and responsible business practices, targeting growth
in sales revenue of around 10% per annum and an 18% net profit
margin
Consistent and sustainable growth
• Optimise growth investment
• Maintain a strong balance sheet
• Improve efficiency and agility
• Maintain high levels of corporate governance and an ethical and sustainable supply
chain
• Vigilance around data security and privacy
How shareholders benefit
• Consistent financial performance
• Disciplined capital management
• Strong corporate governance
• Ethical and sustainable supply chain
Relevant UN Sustainable Development Goals
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Delivering sustainable financial returns
Our long-term approach to investing, combined with disciplined capital management, has delivered consistent growth in sales
revenue, profits and dividends over many decades.
Investing to grow
Growing R&D capability
Operational improvement
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
$2.7 billion has been invested in R&D since listing and we
target an annual R&D investment of 12% of sales revenue
Delivering stable net profit margins
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 an 18% net
profit margin over the long-term, reinvesting any efficiency
gains, currency or tax benefits into market growth activities.
We take a long-term approach to investing and have
consistently invested in growing the market for implantable
solutions since listing in 1995.
Consistent investment in sales and marketing
Our investment in sales and marketing is building awareness of
and access to implantable solutions and driving market growth.
Over the past few years, we have accelerated our investment
in growth activities including direct-to-consumer marketing,
standard of care initiatives and market access.
Operating expenses (excl R&D)
$million
36%
34%
41%
810
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
% of sales revenue
Disciplined capital investment and optimising cost of
production strengthens our competitive position.
Disciplined use of capital
Since listing, operating cash flows have been primarily used to
fund dividends, capital expenditure and acquisitions.
The dividend policy has been to target a payout 70% of
underlying 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); and
• Entific – bone conduction implant business (FY05).
The innovation fund has invested around $170 million in
companies with novel technologies that may, over the longer
term, enhance or leverage our core technology. The innovation
fund includes investments in Nyxoah, Precisis, Epiminder, Seer
Medical and Sensorion.
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Strong financial position
Quality operating cash flows
Being agile and efficient
Strong free cash flow generation provides funding for market
growth activities and R&D as well as the ability to reward
shareholders with a growing dividend stream.
High return on capital employed (ROCE)
ROCE measures the cash return for each dollar invested in the
business. We generate a high ROCE reflecting our competitive
position in the market and the high barriers to entry to the
cochlear implant industry which have proven to be robust over
many decades.
The high ROCE is also a function of the relatively low level of
tangible assets employed by the business. Our competitive
advantage is driven by our strong product and patent portfolio,
a result of investment in R&D over many years, as well as
customer knowledge and strong relationships. As R&D
investment is expensed through the income statement, no
value for this important asset is captured on the balance sheet.
ROCE
22%
25%
1,194
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Capital employed ($m)
ROCE % (after tax EBIT* / Capital employed)
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 underlying net profit and
the operating cash flows generated by the business.
Operating cash flow v net profit
$million
We are investing in strengthening our business processes and
IT platforms to improve efficiency and agility. Successfully
executing this transformation program will enable us to scale
more effectively and provide even better solutions for our
customers.
Our recipient base is fast approaching one million. As we look
to the future, we recognise the need for more scalable ways
to provide customer service and customer solutions. And with
an increasing suite of digital products and services, we must
ensure our processes, data and platforms are consistently
deployed across the globe.
305
At the same time, we seek to ensure we continue to meet the
challenge of increasingly stringent regulatory and security
standards that require strong process governance and
transparency.
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Underlying net profit* ($m)
Operating cash flows (adj for dep)** ($m)
Conservative gearing levels
We have a strong balance sheet, with over $550 million in net
cash. We are a growth company that had, 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.
A progressive on-market share buyback commenced in
February 2023 with the aim of reducing the cash balance to
around $200 million over a number of years.
Improving strategy execution and meeting customer needs for
digital solutions require greater organisational integration and
more consistent business processes. To achieve this, we will
invest $100-150 million in cloud-based technology solutions
over four to five years.
We have been preparing for this transformation over the past
few years, simplifying our organisational structure, clarifying
decision rights and working to standardise processes across
the business. We have established strong governance
structures for processes and platforms and will build
sustainable continuous improvement processes to capture
efficiencies in the years to come.
We have commenced this program, and expect to
progressively introduce scalable, flexible platforms and build
the capability to support these platforms.
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Creating value responsibly
We recognise that high standards of corporate governance and transparency are important for the creation, maintenance and
enhancement of long-term sustainable value.
The Board is committed to high standards of corporate
governance practice and fostering a culture of compliance
which values ethical, lawful and responsible behaviour,
personal and corporate integrity, accountability, transparency
and respect for others.
The Board and its committees regularly review the governance
arrangements and practices to maintain compliance with
regulatory requirements and industry practice and to ensure
they continue to support business objectives.
Our 2022 Modern Slavery Statement provides an overview
of this framework as it relates to these risks as well as further
detail on our global approach to modern slavery and is
available on the website.
In FY23, we established a cross-functional working group
to manage opportunities for improvement in our processes,
address emerging trends and monitor our progress. This
working group was involved in a review of our Supplier Code
of Conduct, which is available on our website.
Key aspects of our corporate governance framework and
practices are set out in our 2023 Corporate Governance
Statement, which is available on the website.
In FY23, we updated our Global Code of Conduct, maintaining
the high standard of conduct, business ethics and integrity
required of all our people around the world in driving our
business forward. We conduct mandatory training on the
Global Code of Conduct for all staff globally on an annual
basis.
In the following section we discuss a few important areas
where we have been increasing our governance metrics. These
areas include procurement, cybersecurity and data privacy.
Responsible supply chain
We have a framework of policies, procedures and processes
in place to manage risks relating to human rights, labour
practices, corporate governance, safety and wellbeing and
environmental sustainability in our supply chain.
During FY23, we continued to implement our supplier due
diligence assessments to support sustainable and ethical
procurement. No suppliers have required mitigation action
plans.
We are taking action to engage a more diverse range of
suppliers with the aim of generating social value beyond
the value of goods or services being procured. In FY23, our
spending with First Nations suppliers generated over $3.1
million in social value (as calculated by Supply Nation1, provider
of verified Australian Indigenous businesses).
As a signatory to the voluntary Business Council of Australia
Supplier Code, we aim to pay eligible Australian small
businesses within 30 days of receiving correct invoices and/or
products.
As at 31 December 2022, we procured 15% of our supplies
from Australian small businesses with 86% of invoices (by
value) paid within 30 days. We continue to drive process
improvements to ensure we pay small businesses promptly.
Cyber security
We handle and store personal information, including health
information, for our customers and employees. With expanding
information privacy and security regulations, we recognise
data security as a key element of our relationship with our
stakeholders.
We design and implement our information technology systems
and applications with security controls in line with industry
standards. In FY23, we obtained ISO 27001 Information
Security certification of our Connected Care products,
enhancing our capability to identify emerging threats and
manage cyber-risks.
All employees must comply with our policies, standards and
procedures to protect our information technology systems and
data.
We maintain a defence-in-depth approach to security with
multiple layers of controls and countermeasures in place to
protect our information technology systems and data.
We have strong resilience controls which are tested regularly
and we conduct incident response drills to ensure our teams
remain vigilant and ready to respond. Independent third-
party specialists conduct regular security assessments of our
Information Technology systems.
We conduct regular information security awareness training
for all employees to ensure our people are aware of the
importance of information security.
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The Chief Information Officer is charged with overseeing the
organisation’s information and cyber security programs and
reports is a member of the Executive team.
We conduct mandatory privacy training for all staff as part
of the onboarding process and supplement this training with
specific training for targeted audiences.
The Audit and Risk Committee is responsible for revising our
Risk Management Framework and risk management practices,
including risks associated with the technology and research
and development aspects of the business.
Data privacy
Our commitment to privacy is reflected in our Global Code
of Conduct and our Privacy Values. As part of our vision and
ambition for data, we have made commitments to process and
protect the personal information of all our stakeholders in a
compliant and ethical way.
Our Global Privacy Program reinforces this commitment and
ensures that privacy is embedded into our business operations
and that we adopt a privacy-by-design approach in designing
our products and services and keep the personal information
entrusted to us secure.
Privacy and data protection matters are led by the Chief
Privacy Officer and is supported by employees globally.
As a multinational company, we operate in many jurisdictions,
subject to different laws and regulations. To ensure we
meet our privacy commitments and evolving stakeholder
expectations we have a Global Privacy Program based
on internationally recognised privacy and data protection
principles that promotes transparency in data use practices.
We strive to be transparent with individuals in relation to how
we process their personal information and to provide them
with meaningful control over how their personal information is
collected and used, including responding to their requests and
complaints.
Our Global Privacy Notice explains how we handle personal
information across our global operations.
We ensure proper third-party management and vendor
compliance with data protection standards. Our vendors who
process personal information are subject to a vendor privacy
risk assessment as part of our privacy compliance and vendor
management.
We aim to prevent and address privacy issues wherever
they occur within the business and across our vendors. If we
receive reports of data incidents, we investigate allegations
and take action if there is evidence of wrongdoing.
Over the past year, we have not identified any substantial
complaints concerning breaches of customer privacy or losses
of customer data.
Tax transparency
We have a strong commitment to transparency and
compliance from a regulatory and financial perspective and
value the principles of being transparent with respect to tax
strategy and compliance in Australia and globally.
A key driver of our global tax strategy is our longstanding
commitment to Australian-based R&D and manufacturing as
well as growing the business with broad economic benefits for
Australia.
Our tax strategy reflects the generation of intellectual property
that occurs primarily in Australia. The assets, risks and
functions of implementing that strategy mean that the majority
of our corporate income tax is paid in Australia.
Our 2023 Tax Contribution Report details taxes paid globally,
tax strategy and tax governance, and is available on the
website.
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Public policy engagement
Animal welfare
We participate in the formulation of public policy that could
affect our business operations, patient access to appropriate
care, public health and other areas of material interest.
We engage with governments directly and through
participation in industry groups and other forums. We also
collaborate with a range of other stakeholders including
consumer/patient organisations, professional associations and
industry peers on public policy issues at global, national and
local levels.
In FY23, we contributed a total of $9,000 to political
organisations in Australia, solely as a payment for attendance
at events and briefings. These payments complied with our
Global Code of Conduct.
In compliance with the Code, we did not make any cash
donations to political parties or make direct campaign funding
donations to either individuals or political parties.
We paid more than $3.5 million to industry associations,
advocacy groups, professional associations and other related
groups across 25 countries including Australia, Colombia,
France, Germany, India, Japan, South Korea, Switzerland,
Turkey, the UK and the US.
As a medical device industry, we are required to demonstrate
and document both safety and efficacy of our products
in accordance with relevant regulations, guidelines and
international standards.
Where an assessment of biological safety is required and
animal studies are mandated by the regulations or guidelines,
we subcontract studies to experienced and accredited
contract research organisations.
Our Animal Ethics Policy outlines the core ethical principles
in the respectful and humane use of animal subjects when
required to be used in product development and research
projects.
We apply the 3R principle – replacement, reduction,
refinement – limiting animal testing as much as possible.
Please refer to our Animal Ethics Policy for more details, which
is available on the website.
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Financial
performance
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Business segment performance
$m
FY23
FY22
Change %
(reported)
Change %
(CC*)
Sales Mix
Cochlear implants (units)
44,156
38,182
↑ 16%
Sales revenue
Cochlear implants
Services (sound processor
upgrades and other)
Acoustics
Total sales revenue
1,131.4
584.4
239.9
1,955.7
935.2
503.9
202.0
1,641.1
↑ 21%
↑ 16%
↑ 19%
↑ 19%
↑ 17%
↑ 14%
↑ 15%
↑ 16%
58%
30%
12%
100%
The clinical capacity constraints we experienced in FY22 from hospital staffing shortages
stabilised during the first half, with indications that much of the remaining COVID-related
surgical backlog cleared during FY23. We are seeing an improving trend in adult referral rates in
key markets, providing us with early indications that initiatives to improve awareness and access
for adult cochlear implant candidates are having some success.
Emerging market units grew close to 20% with strong growth across all regions, with most
countries now trading well above pre-COVID levels. Growth was particularly strong in markets
most impacted by COVID, including India and Latin America. Government tender activity
increased following subdued activity during COVID shutdowns and private pay continued to
perform strongly. China also delivered strong growth.
Sales revenue increased 19% (16% in constant currency*) to a record $1,956 million, with strong
growth across all business units.
Cochlear implants
Cochlear implant units increased 16% to 44,156 units, with strong growth across both developed
and emerging markets. Sales revenue increased 21% (17% in CC) to $1,131.4 million.
Developed market units grew around 15% (18% in the second half) with strong growth across
all markets driven by a combination of market growth, improved clinical capacity, market share
gains and COVID catch-up surgeries. The Cochlear™ Nucleus® 8 Sound Processor has been
well received, commencing its rollout in Western Europe from October and the US during
November.
Services (sound processor upgrades and other)
Services revenue increased 16% (14% in CC) to $584.4 million. First half revenues slowed in
anticipation of the Nucleus® 8 Sound Processor, which was launched late in the half. Second
half revenues grew 32% (27% in CC) with strong uptake of the new sound processor across
the developed markets. Emerging markets also performed well with growing rates of sound
processor upgrade penetration across most markets.
Acoustics
Acoustics revenue increased 19% (15% in CC) to a record $239.9 million, with strong demand
across all regions as the business benefits from a strong product offering and a continued
recovery in surgery volumes following COVID delays. The Cochlear™ Osia® 2 System continues
to gain momentum with new accounts opened in existing markets and a growing presence in
new markets, with more than 12,000 systems sold since launch. The Cochlear™ Baha® 6 Max
Sound Processor continued to generate demand for sound processor upgrades across all
regions.
* Constant currency (CC) removes the impact of exchange rate movements and foreign exchange (FX) contract gains/(losses) to facilitate comparability. See Notes on page 67 for further detail.
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Profit and loss
$m
FY23
FY22
Change %
(reported)
Change %
(CC)
Sales revenue increased 19% (16% in CC) to $1,955.7 million and underlying net profit increased
10% (14% in CC) to $305.2 million. Statutory net profit increased 4% to $300.6 million.
Sales revenue
Cost of sales
% Gross margin
Selling, marketing and general
expenses
Research and development
expenses
% of sales revenue
Administration expenses
(excluding cloud investment)
Administration expenses (cloud
investment)
1,955.7
488.0
75%
606.5
1,641.1
411.0
75%
498.7
244.9
210.7
13%
165.4
38.5
13%
137.4
21.6
Operating expenses
1,055.3
868.4
19%
19%
22%
16%
20%
78%
22%
Other income
FX contract gains / (losses)
EBIT (underlying)*
% EBIT margin*
Net finance expense / (income)
Income tax expense*
% Effective tax rate
Underlying net profit*
% Underlying net profit margin*
% Underlying net profit margin
(pre cloud investment)*
3.3
(19.6)
396.1
20%
(7.1)
98.0
24%
305.2
16%
17%
One-off and non-recurring items (after-tax):
Innovation fund gains / (losses)
Statutory net profit
(4.6)
300.6
13.8
7.2
382.7
23%
6.2
99.5
26%
277.0
17%
18%
12.1
289.1
* Excluding one-off and non-recurring items. See Notes on page 67 for further detail.
16%
15%
19%
17%
Key points of note:
• Cost of sales increased 19% (15% in CC) to $488.0 million, in line with the increase in sales
revenue. The gross margin was maintained at 75% and was in line with the long-term target
gross margin;
• Selling, marketing and general expenses increased 22% (19% in CC) to $606.5 million
reflecting continued investment in market growth activities, standard of care and market
access initiatives;
• Investment in R&D increased 16% (17% in CC) to $244.9 million with continued investment
made in key R&D projects and development of the product and services pipeline;
• Administration expenses (excluding cloud investment) increased 20% to $165.4 million
primarily driven by increases in short-term incentives, additional headcount, costs
associated with the Oticon Medical transaction as well as restructuring expenses; and
20%
• Cloud investment of $38.5 million forms part of the $100-150 million investment in cloud-
based technology solutions which will be incurred over four to five years.
4%
7%
10%
14%
4%
7%
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Cash flow
$m
EBIT (underlying)
Depreciation and amortisation
Increase in working capital and other
Net interest received / (paid)
Income taxes paid
Operating cash flow
Capital expenditure
Other net investments
Free cash flow
Outlay from exercise of share options and
performance rights
Payments for share buyback
Dividends paid
Payment of lease liability and other
Change in net cash – increase / (decrease)
FY23
396.1
80.9
(42.4)
7.1
(79.3)
362.4
(95.9)
(29.8)
236.7
(10.7)
(29.6)
(197.4)
(30.2)
(31.2)
FY22
382.7
73.0
(46.9)
(6.2)
(26.1)
376.5
(77.2)
(61.7)
237.6
(1.1)
-
(194.0)
(20.4)
22.1
Change
13.4
7.9
4.5
13.3
(53.2)
(14.1)
(18.7)
31.9
(0.9)
(9.6)
(29.6)
(3.4)
(9.8)
(53.3)
Operating cash flow decreased $14.1 million to $362.4 million, with free cash flow declining
$0.9 million to $236.7m.
Key points of note:
• The $42.4 million increase in working capital and other reflects investment in working
capital as the business grows;
• Income taxes paid of $79.3 million is lower than the income tax expense in the income
statement as a result of the timing of tax instalments and the receipt of a tax refund relating
to prior year losses. Income taxes paid increased $53.2 million on FY22 primarily reflecting
timing of tax payments and the larger tax refund received last year;
• Capital expenditure (capex) increased by $18.7 million to $95.9 million and includes the
commencement of an upgrade to the Lane Cove facility and stay-in-business capex;
• Other net investments of $29.8 million comprises additional investment in the innovation
fund for Precisis, Epiminder and Nyxoah; and
• Payments for share buyback reflects the $29.6 million outlay for the repurchase of ordinary
shares as part of the on-market share buyback.
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Capital employed
$m
Trade receivables
Inventories
Less: Trade payables
Working capital
Working capital / sales revenue
Property, plant and equipment
Intangible assets
Investments and other financial assets
Other net liabilities
Capital employed
Funding sources:
Equity
Less: Net cash
Capital employed
Dividends
Interim ordinary dividend (per share)
Final ordinary dividend (per share)
Total ordinary dividends (per share)
% Payout ratio
(based on underlying net profit)
% Franking (final dividend)
Jun23
388.4
311.5
(270.4)
429.5
22%
276.7
444.1
188.1
(145.1)
1,193.3
1,748.8
(555.5)
1,193.3
FY23
$1.55
$1.75
$3.30
71%
Jun22
308.4
270.2
(232.4)
346.2
21%
260.2
392.5
187.9
(87.8)
1,099.0
1,685.7
(586.7)
1,099.0
FY22
$1.55
$1.45
$3.00
71%
70%
40%
Change
Capital employed increased $94.3 million to $1,193.3 million since June 2022.
Key points of note:
• Working capital increased $83.3 million, lifting from 21% to 22% of sales revenue. The
increase in trade receivables reflects the strong growth in sales revenue in the second
half. Inventory levels remain higher than pre-COVID levels reflecting the building of safety
stocks over the past few years in anticipation of potential ongoing global supply chain
shortages;
• Intangible assets increased $51.6 million to $444.1 million, reflecting IT system costs and
acquired and licenced technology;
• Other net liabilities increased $57.3 million to $145.1 million, primarily the result of the
increase in employee incentives; and
• Net cash decreased $31.2 million to $555.5 million.
80.0
41.3
(38.0)
83.3
16.5
51.6
0.2
(57.3)
94.3
63.1
31.2
94.3
Change %
0%
21%
10%
A final dividend of $1.75 per share has been determined, taking full year dividends to $3.30,
an increase of 10% and representing a payout of 71% of underlying net profit. The interim
dividend was 35% franked and the final dividend is 70% franked. The franking balance had
been depleted by losses incurred in FY20. The ex-dividend date is 18 September 2023. The
record date for calculating dividend entitlements is 19 September 2023 with the final dividend
expected to be paid on 11 October 2023.
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Notes
Forward-looking statements
Constant currency
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 compare 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 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 (CC)
* FY23 actual v FY22 at FY23 rates.
FY23
305.2
305.2
(4.6)
300.6
FY22
277.0
(26.8)
27.8
(10.2)
267.8
12.1
279.9
Change %
10%
14%
7%
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and risk
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Our approach to governance
High standards of corporate governance and transparency are fundamental to the sustainable, long-term success of the
business. Cochlear’s strong governance framework provides a solid structure for effective and responsible decision-making.
Corporate governance plays an integral role in supporting our business and helping us deliver
on our strategy. It provides the frameworks and practices through which our strategy and
business objectives are set, performance is monitored, and risks are managed. It includes a clear
framework for decision making and accountability across the business.
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.
Our corporate governance framework
The Board is responsible for setting the strategic direction for the business aimed at creating,
maintaining and enhancing long-term sustainable value. They guide and monitor management
to implement the strategy and oversee good governance practice.
The Board aims to protect and enhance the interests of shareholders, while taking into account
the interests of other stakeholders, including employees, customers, suppliers and the wider
community.
For FY23, the Board considers that Cochlear’s governance practices have been consistent
with the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations (fourth edition) and addressed additional aspects of governance which the
Board considers important. The Corporate Governance Statement outlines key aspects of our
corporate governance framework and practices and is available at: https://www.cochlear.com/
au/en/corporate/investors/corporate-information/corporate-governance.
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 the
website.
The CEO & President has responsibility for the implementation of 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.
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Governance framework
Cochlear Board of directors
t
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s
s
A
Oversee the leadership of the Company with the aim of maximising its long-term sustainable value while delivering on
Cochlear’s mission to help people hear and be heard.
Audit and Risk
Committee
Medical Science
Committee
Nomination
Committee
People and
Culture
Committee
Product and
Services
Innovation
Committee
Oversee corporate
reporting, the
audit process, risk
management and
internal controls.
Oversee medical
aspects of Cochlear’s
implantable devices
program.
Oversee Board
and Committee
composition, renewal
and succession
planning.
Oversee values
and behaviours,
organisational culture
and remuneration
framework.
Oversee strategy and
implementation of
product and related
services innovation.
CEO & President
Responsible for the implementation of Cochlear’s strategic objectives and the
day-to-day management of Cochlear.
Executive team
Responsible for supporting CEO & President with the implementation of the
strategic objectives and operational, financial and risk management.
Our people
Aim to achieve individual and team goals (objectives) while conducting themselves
in line with the mission, HEAR behaviours, Global Code of Conduct, Company
policies and procedures.
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Supporting value creation
Board meetings are an important part of setting the expectations of management and
providing the Board with oversight of the strategy, the organisation, risk management,
governance and operations. These meetings include the presentation to the Board of key
reports on business performance, significant developments as well as deep dives into key
strategic initiatives.
In FY23 a multi-day Board strategy session was held and one meeting held offshore to provide
detailed local and regional reviews and engagement with offshore employees, customers and
research partners.
The Board recognises that our five focus areas of value creation, supported by disciplined
governance and risk management, contribute to performance and drive the creation of long-
term value for our business.
During the year, examples of some of the specific matters to support value creation that the
Board deliberated on are set out below. While these do not represent the full scope of Board
activities, they highlight some of the areas of focus by the Board.
Thriving people
• Employee engagement and the strategies to improve engagement and strengthen
corporate culture
• Review of the remuneration framework to assess its effectiveness and relevance to the
market
• Risks and opportunities relating to health, safety and wellbeing, culture, talent and
capability
• Oversight of plans to develop people capabilities across the business
Environmental responsibility
• Sustainability initiatives, including the pathway to net-zero carbon emissions in our
operations by 2030
• Development of the sustainability governance framework
A healthier and more productive society
Sustained value
• A review of key strategic initiatives to create long term value with a focus on developing a
treatment pathway for adults, enhancing market access and improving access across the
emerging markets
• Deep dives into key regional and functional priorities
• Considering and approving financial reports, audit reports, market guidance, funding
requirements and liquidity, and the implementation of the internal audit program
• Assessment of the capital structure and launch of an on-market share buy-back
• A periodic review of the Board Charter, Committee Terms of Reference and key
• Oversight of the proposed acquisition of Oticon Medical
governance policies
A lifetime of hearing solutions
• Cyber and data security including the adequacy of controls and disaster recovery testing
• Oversight of the product and services pipeline and long-term R&D investment priorities
to mitigate these risks
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Board skills matrix
The Board skills matrix sets out the mix of skills that the Board currently has in its membership and is reviewed annually to ensure the prescribed skills address our strategy and operating
environment. It is also used to guide the identification of potential director candidates as part of the ongoing Board renewal process and to identify professional development initiatives
for existing directors. A summary of the key skills of current directors is set out below. The full Board skills matrix including the criteria for each skill is set out in our Corporate Governance
Statement, available on the website.
Skills
No. of Directors
(10)
Medical device industry
Capability to oversee product commercialisation by applying a deep understanding of the medical device industry.
Healthcare industry
Competency in the healthcare industry including international health systems and medical science. Ability to influence
public policy development in healthcare.
Research and development
Ability to develop product innovation to drive long-term business growth through strategic investment in research and
development activities.
Technology and digital expertise
Ability to leverage new technologies, innovation processes and digital services to drive growth, realise scale benefits and
enhance the customer experience.
Strategy
Ability to develop and implement successful strategies.
Global perspective
Ability to manage and oversee an organisation’s business and strategic objectives from an international perspective.
Financial acumen
Ability to understand and analyse financial statements to assess financial performance and probe the adequacies of
internal financial and risk controls. Understanding capital management and capital markets.
Public policy and regulatory affairs
Ability to manage the implications of public and regulatory policy on product development and commercialisation. Ability
to influence public policy development.
Risk management
Sustainability
Governance
People and culture
Ability to identify and manage key risks to an organisation to ensure the delivery of long-term value to shareholders.
Ability to oversee the integration of environmental, social and governance into business strategy and operations to support
long term value creation for all stakeholders.
Commitment to the highest standards of governance. Ability to assess the effectiveness of process and procedures, and to
manage legal, compliance and reputational risks.
Understanding of remuneration practices and frameworks. Ability to attract talent, oversee talent management and
retention initiatives and develop succession plans. Ability to set and oversee corporate culture (‘tone from the top’).
7
9
7
10
10
10
9
7
10
6
10
10
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Managing our strategic risks
Cochlear has a sound and robust risk management framework to identify, assess and appropriately manage risks.
Our approach to risk
Risk governance framework
The Board sets the appetite for risk and provides oversight
of the practices used by management to govern risk, and
addresses specific issues escalated by the Audit and Risk
Committee or management.
The Board recognises that a sound culture is fundamental
to an effective risk management framework. We promote a
culture which values the principles of honesty, transparency,
integrity, fairness, constructive challenge and accountability,
and these values are reflected in the Global Code of
Conduct.
Senior management are responsible for reinforcing and
modelling the key behaviours required to maintain a sound
risk culture, including encouraging constructive reporting,
challenging and transparency. These elements are necessary
to support effective risk management and awareness and to
support appropriate behaviours and judgements about risk
taking.
Our risk framework enables us to understand and adapt to the strategic challenges from our operating environment. The
diagram below outlines our risk governance framework and the key responsibilities of the Board, the Executive team, Internal
Audit and the business units, incorporating the three lines model for how risk is managed.
We use it to manage material risk types including financial, non-financial and strategic risks. The specific risks we manage
within each of these types are either existing risks, or forward-looking emerging risks that could require action now to
minimise their impacts in the future.
k
s
i
R
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p
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a
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l
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c
n
e
f
e
d
f
o
s
e
n
L
i
• Provides oversight of risk exposures
• Sets and communicates
• Sets risk appetite
and risk taking
expectations for risk management
Board of directors
• Implements business strategy and
resolves significant enterprise risk
issues
Executive team
• Provides recommendations to the
Board on risk policy, frameworks,
risk appetite and risk practices
• Implements enterprise risk
management in the business units
Business
(1st line)
Oversight functions
(2nd line)
Owns and manages risk
Oversees and sets frameworks and standards
Group risk
Legal &
compliance
People & culture
Assurance
(3rd line)
Provides independent and
objective assurance and
advice of frameworks and
controls effectiveness
Business unit
line management
Health &
safety
Quality &
regulatory
Finance
Internal audit
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Environmental and social risks
Our enterprise risk management approach includes
assessment of our environmental and social risks. Due to the
nature of our business and value chain, we do not have any
material exposure to environmental or social risks at this time.
We have identified material sustainability topics as outlined in
the Sustainability data appendix on page 154.
Internal audit
The Internal Audit function is managed by and within
the Group Risk and Assurance team and is accountable
to the Board. Internal Audit provides assurance services
to management and the Board in relation to the internal
controls, risk management framework and governance of
Cochlear. It does so through:
• performing audits in accordance with an Internal Audit
Plan. The Plan is formulated using a risk-based approach
and approved annually by the Audit and Risk Committee;
• having direct access to the Board through the Audit and
Risk Committee, with the right to communicate to it in the
absence of management; and
• regular reporting to the Executive team and the Audit and
Risk Committee on the results of its audits.
The Audit and Risk Committee reviews and approves the
Internal Audit Plan every six months. It also reviews the
hiring and performance of the Vice President Group Risk and
Assurance and the internal audit function. This process was
followed during the reporting period.
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Our business risks
Our principal business risks are outlined below. These are risks that may have a material adverse effect on 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. Cochlear’s Risk Management
Policy and details of its risk management framework can be found in the Corporate Governance Statement, both available on the website.
Risk
Pandemics
Product innovation and
competition
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.
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.
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 our 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.
Medical device regulations
Product quality
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.
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.
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.
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.
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 are a key focus for us.
We target an annual investment of 12% of sales revenue on R&D aimed at
retaining our market leadership position and growing the hearing implant
market.
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.
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.
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.
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Risk
Market access
Credit and currency
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.
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.
Interruption to product supply Our reliance on suppliers for key materials and services carries inherent
Privacy and information
security
Talent management
Geo-political risk
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 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 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.
Our business is subject to risks associated with doing business
internationally. Unexpected geo-political events in foreign countries in
which we operate could adversely affect our supply chain or manufacturing
through increased cost or a reduced choice of supply, impacting our ability
to execute our strategic plans.
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 and 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.
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
maintain business interruption insurance.
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 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.
Whilst the international politics which influence the level of risk are, and
will remain, outside our control, we closely monitor our key suppliers, and
assess opportunities to diversify supply and reduce key dependencies.
Engagement with governments, experts and regulators, enables us to
ensure compliance with the latest regulations, economic sanctions and
trade rulings.
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Board of directors
Board composition
As at 30 June 2023
60%
Board gender
diversity
Female
Male
45%
Board tenure*
40 %
22%
33%
0-5 years
6-10 years
10+ years
* Board tenure chart excludes Managing Director
Alison Deans
Chair
Appointed to the Board 1 January 2015 and as Chair 21
August 2021: Chair of the Nomination Committee.
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, Calix
Limited and Deputy Group Pty Ltd. Member of Investment
Committee, CSIRO Innovation fund (Main Sequence Ventures)
and member of AICD Corporate Governance Committee.
Director of The Observership Program.
Former directorships: SCEGGS Darlinghurst Limited,
Westpac Banking Corporation, Insurance Australia Group
Limited and Social Ventures Australia.
Qualifications: BA, MBA, GAICD
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 Product and Services Innovation Committees.
Background: 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, worked for 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 as President of Cochlear on 31 July
2017 and became CEO & President on 3 January 2018.
Qualifications: BE (Hons), MBA
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Yasmin Allen, AM
Non-executive Director
Appointed to the Board 2 August 2010: Member of the Audit
and Risk, People and Culture, Nomination and Product and
Services Innovation Committees.
Glen Boreham, AM
Non-executive Director
Appointed to the Board 1 January 2015: Chair of the People
and Culture Committee. Member of the Audit and Risk,
Nomination and Product and Services Innovation Committees.
Sir Michael Daniell, KNZM
Non-executive Director
Appointed to the Board 1 January 2020: Chair of the Product
and Services Innovation Committee. Member of the Audit and
Risk, Nomination and Medical Science 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.
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: Chairman of Data#3, 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
In June 2023, Ms Allen was awarded a Member of the Order
of Australia in the King’s Birthday Honours for her service to
finance and business, and to the not-for-profit sector.
Other boards: Chair of Australian Federal Government Future
Skills Organisation and Tic:Toc Home Loans. Director, Santos
Limited, ASX Limited, QBE Insurance Group Limited and The
George Institute for Global Health. Acting President Australian
Government Takeovers Panel.
Former directorships: Insurance Australia Group Limited and
National Portrait Gallery. National director of the Australian Institute
of Company Directors. Member of The Salvation Army Advisory
Board. Chair of Macquarie Specialised Asset Management,
Faethm.org and Advance (Global Australian Network).
Qualifications: BCom, FAICD
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 the treatment of obstructive sleep apnea.
Other boards: Director, Fisher & Paykel Healthcare Corporation
Ltd. Director, Tait International Limited. Advisory Board
Chair, Te Titoki Mataora (NZ). Director, Medical Research
Commercialisation Fund.
Qualifications: BE (Hons), Electrical, CMInstD (NZ)
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Michael del Prado
Non-executive Director
Appointed to the Board 1 January 2022: Member of the
Medical Science, Nomination and Product and Services
Innovation Committees.
Andrew Denver
Non-executive Director
Appointed to the Board 1 February 2007: Member of
the Audit and Risk, Medical Science, Product and Services
Innovation and Nomination Committees.
Christine McLoughlin, AM
Non-executive Director
Appointed to the Board 1 November 2020: Member of the
Audit and Risk, Nomination, People and Culture and Product
and Services Innovation Committees.
Background: Over 34 years’ global experience in the medical
device and pharmaceutical industries with senior executive
leadership roles in Johnson & Johnson medical device
businesses in the US, Asia-Pac and EMEA. Former Company
Group Chairman of Ethicon, the world’s largest and most
comprehensive surgical company.
Other boards: Ambu A/S
Former directorships: Co-lead Director, Verb Surgical.
Advisory Board, Singapore Management University Lee Kong
Chian School of Business.
Qualifications: BSc Industrial Engineering, MBA, MA
Background: Extensive experience in the life sciences
industry. Former Managing Director of Memtec Limited and
President Asia for Pall Corporation.
Other boards: Chairman of QBiotics. Director, Vaxxas.
Former directorships: Executive Chairman, Universal
Biosensors. Chairman, SpeeDx
Qualifications: BSc (Hons), MBA, FAICD
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.
Other boards: Chairman of the Suncorp Group Limited.
Chancellor of the University of Wollongong. Co-founder and
Chairman of the Minerva Network.
Former directorships: Chairman, Destination NSW.
Chairman, Venues NSW. Director, nib Holding Limited and the
McGrath Foundation.
Qualifications: BA, LLB (Hons), FAICD
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Karen Penrose
Non-executive Director
Appointed to the Board 1 July 2022: Chair of the Audit
and Risk Committee. Member of the People and Culture,
Nomination and Product and Services Innovation Committees.
Prof Bruce Robinson, AC
Non-executive Director
Appointed to the Board 13 December 2016: Chair of Medical
Science Committee. Member of the Nomination, People and
Culture and Product and Services Innovation Committees.
Background: Extensive executive career in senior leadership
and Chief Financial Officer roles in financial services. An
experienced company director, having served on the boards of
a number of ASX100 companies and experienced across health
care, financial services, property and infrastructure industries.
Other boards: Director, Ramsay Health Care Limited, Estia
Health Ltd, Bank of Queensland Limited. Director, Ramsay
Sante (associated with Karen’s directorship of Ramsay Health
Care Limited), Rugby Australia and Marshall Investments.
Former directorships: Director, Vicinity Centres.
Qualifications: BCom, CPA, FAICD
Background: Over 20 years’ leadership experience as an
academic physician/scientist across research, healthcare and
medicine, and tertiary education. Co-Head of the Cancer
Genetics Laboratory at the Kolling Institute for Medical
Research and Chair of Research, North Sydney Local Health
District. Former Dean, The University of Sydney’s Sydney
Medical School and Head of Medicine at Sydney’s Royal North
Shore Hospital.
Other boards: Director, MaynePharma, QBiotics and Ecofibre.
Director (former Chairman), Hoc Mai Foundation. Senior
Advisor to McKinsey & Company and Advisor to MinterEllison.
Former directorships: Chairman, National Health and
Medical Research Council. Chairman, Medical Benefits
Schedule Review Taskforce. Director, Lorica Health Pty
Limited, Firefly, and Digital Health Agency CRC and Woolcock
Institute of Medical Research.
Qualifications: MD, MSc, FRACP, FAAHMS, FAICD
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Executive team
Executive team composition
As at 30 June 2023
27%
73%
Executive team
gender diversity
Female
Male
9%
36%
Executive team
tenure
55%
0-5 years
6-10 years
10+ years
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.
Stu was appointed as Chief Financial Officer in February
2021. Stu joined Cochlear in July 2016 as inaugural President,
Services.
Prior to joining Cochlear, Dig worked for 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 as President of Cochlear on 31 July
2017 and became CEO & President on 3 January 2018.
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.
Qualifications: BE (Hons), MBA
Qualifications: BEc (Hons), MBA
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Jan Janssen
Chief Technology Officer
Lisa Aubert
President, North America
Richard Brook
President, EMEA
Jan joined Cochlear in 2000 and was appointed Senior Vice
President Research & Development in 2005.
Lisa is responsible for the development and execution of the
strategic direction for our North America operations.
Jan leads a team of over 550 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 12 granted patents in the field of implantable hearing
technology.
Qualifications: MScEE
Lisa was appointed as President, Americas Region in April
2022. Lisa joined Cochlear in 1994 and has deep experience
across the Company in roles in Europe and the United States,
including General Manager of UK/Ireland/South Africa,
Regional Director of Europe North and most recently Vice
President of Sales for Cochlear North America and Chair of
Cochlear’s Global Sales Council.
Qualifications: BA Communication Disorders, MA in
Audiology, MBA
Richard is responsible for the development and execution of
the strategic direction for all our operations in Europe and
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
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Anthony Bishop
President, Asia Pacific & Latin America
Dean Phizacklea
Senior Vice President, Global Strategic Marketing
Karen O’Driscoll
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
Karen has global responsibility for Cochlear’s information
technology strategy and management. She leads a team of
more than 350 information technology professionals and is
responsible for strengthening business processes and systems
to improve efficiency and agility, enabling the business to be
more scalable and provide even better solutions for customers.
Karen joined Cochlear in February 2023. Prior to Cochlear,
Karen was Group Executive for Digital Services for Ventia Ltd
and brings over 20 years of experience across pharmaceuticals
and infrastructure industries.
Qualifications: BSc (Hons), GAICD
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Greg Bodkin
Senior Vice President, Global Supply Chain
Jennifer Hornery
Senior Vice President, Global People & Culture
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
Jennifer joined Cochlear in 2008 working in senior HR
business partnering roles until her appointment as SVP, Global
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 Kaplan
Senior Vice President, Global Clinical Strategy
and Innovation
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
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Financial
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Remuneration report
Key management personnel (KMP)
Executive KMP remuneration received in FY23 (unaudited)
Our remuneration strategy and framework
Executive KMP remuneration and link to performance
Executive KMP statutory remuneration disclosure
Executive service agreements
Remuneration governance
Executive KMP equity disclosures
Non-executive Director fees
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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 (Cth).
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Letter from the Chair of the People and Culture Committee
Dear Shareholders
On behalf of the Board, I am pleased to present the FY23 Remuneration report where we outline
our remuneration strategy, summarise the performance outcomes for FY23 and detail the
associated remuneration outcomes for key management personnel.
Our remuneration strategy has been developed to ensure remuneration is fair and competitive in
the context of being a globally integrated business, and in FY23 the Board has continued to focus
on a governance framework that rewards responsible behaviours, aligns remuneration with
regulatory requirements and has regard for the expectations of our customers, shareholders, and
the community.
We continue to focus efforts on building a stronger organisation to enable us to grow and deliver
for our customers over the long term. During the year we made good progress towards shaping
our desired culture with a stronger focus on achievement and on enterprise leadership, whilst also
preserving those elements of our culture that have brought us success.
We also continued to take steps to invest in our talent and made strong progress towards building
the strategic capabilities which provide us with a sustainable competitive advantage.
We continue to see high levels of engagement, maintained at 80%, and strong progress has been
maintained against our gender diversity targets.
FY23 performance and reward outcomes
The Board is satisfied that the reward outcomes for FY23 reflect the Company’s performance.
In FY23 we delivered record revenue and underlying net profit1, strengthened our competitive
position, expanded acoustics sales, and continued to execute growth programs to drive long term
value creation.
Our corporate strategy is clear and is being executed effectively across the globe and our culture
and transformation programs continue with strong global support. We have overachieved on our
strategic priorities of growing the hearing implant market and creating consistent and sustainable
growth. We have also continued to make good progress to maintain our market leadership and
build a stronger organisation through our continued investment in culture, capability, and talent.
We have further integrated sustainability metrics into our strategic priorities to ensure they are
prioritised. This includes minimising our environmental impact.
1 Excluding one off and non-recurring items
Performance has exceeded expectations this year and has resulted in the awarding of short-term
incentives (STI) above target to the CEO & President and the Executive team under the FY23 STI
plan, with an STI payment of 142.4% of target (79.1% of maximum) for the CEO & President.
For long-term incentives (LTIs), relative total shareholder return (TSR) against the ASX 100 was
above median (at the 55th percentile) and basic earnings per share (EPS) represented a 0.4%
compound annual growth rate over the last four years, reflecting the impact of COVID and the
2020 capital raise. This resulted in 26.1% vesting under the FY20-23 LTI plan.
Further details on this year’s remuneration outcomes are provided in this report.
Our executive remuneration framework
The Board is committed to ensuring our executive remuneration framework and the associated
reward outcomes align with our business objectives, performance, and shareholder expectations.
There were no major changes to our executive reward framework for FY23. However, strong
competition for talent in many of the markets in which we operate has continued during FY23 and
we expect this to continue for the foreseeable future.
We undertake regular reviews of our executive reward framework to ensure it is fit for purpose,
with a particular focus on applicability across the regions. For FY24 we have increased the STI
quantum for the KMP from a target of 75% to 90% of base salary, excluding the CEO & President,
to ensure they are aligned to market. Additionally, we have increased the portion of STI that is
deferred into equity for a period of two years to further drive alignment between executives and
shareholders and support retention. Also, for the FY24 LTI grant we will use face value as the basis
for the allocation of performance rights.
We have seen significant growth in the business over the last few years and we will continue to
review our executive reward offering to ensure it attracts, motivates, and retains a highly qualified
and experienced group of executives employed across diverse geographies.
Glen Boreham, AM
Chair, People and Culture Committee
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1. Key management personnel
This report covers key management personnel (KMP) who have authority for planning, directing, and controlling the activities of Cochlear and comprises Non-executive Directors (NEDs) and executive KMP as
outlined in the table below. The three Regional Presidents (Lisa Aubert, Anthony Bishop, and Richard Brook) are no longer included as KMP from 1 July 2022 due to structural changes and the global
integration of most support functions over time resulting in these roles no longer meeting the criteria of planning, directing, or controlling the activities of Cochlear as a whole.
Name
Non-executive Directors
Alison Deans
Yasmin Allen, AM
Glen Boreham, AM
Sir Michael Daniell, KNZM
Michael del Prado
Andrew Denver
Christine McLoughlin, AM
Bruce Robinson, AC
Karen Penrose1
Executive KMP
Dig Howitt
Jan Janssen
Stu Sayers
Position
Chair
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
CEO & President (CEO&P)
Chief Technology Officer (CTO)
Chief Financial Officer (CFO)
1 Karen Penrose was appointed as Non-executive Director (NED) of Cochlear on 1 July 2022.
There are no other changes to KMP after the reporting date and before the date the Directors’ report was authorised for issue.
Term as KMP
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
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2. Executive KMP remuneration received in FY23 (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 FY23.
Amounts $
Executive KMP
D Howitt
J Janssen
S Sayers
Year
FY23
FY22
FY23
FY22
FY23
FY22
Fixed remuneration1
Cash STI2
Vested deferred STI3
Vested LTI4
2,034,343
1,952,875
1,006,581
972,990
893,594
871,068
1,866,877
1,362,427
750,611
465,143
699,799
443,685
–
636,243
–
243,241
–
–
–
412,062
–
85,202
–
–
Total
3,901,220
4,363,607
1,757,192
1,766,576
1,593,393
1,314,753
1 Fixed remuneration earned in the year (base salary, superannuation, and non-monetary benefits)
2 Cash STI earned and relating to performance during the financial year. For example, FY23 is reported as STI payments which are accrued at year end, and received in August 2023, 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,
FY23 is reported as the FY20 deferred STI grant, however in response to the impact of Covid-19 on business performance, no grants were made in FY20.
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 exercise less the exercise price). FY23 is reported as the first tranche of the FY20 LTI grant subject to a three-year performance period to 30 June
2022, with a vesting date in August 2022 (0% of awards vested as performance hurdles were not met).
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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.
Our mission
We help people hear and be heard.
We empower people to connect with others and live a full life. We help 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.
Our goal is to deliver value by helping more people to hear, which contributes to building a healthier and more productive society. Our strategy is focused on improving awareness of and access to
implantable hearing solutions for people indicated for our products, creating value across five pillars.
A healthier and
more productive
society
A lifetime of
hearing solutions
Thriving
people
Environmental
responsibility
Sustained
value
Our strategy
Our strategic priorities determine how we focus our time and resources to create value.
Grow the hearing implant
market
Retain market leadership
A stronger organisation
Minimise environmental
impact
Consistent and sustainable
growth
The performance measures across our incentive plans reflect achievement of both financial and strategic objectives.
Financial measures
Underlying net profit
Sales revenue
Compound annual growth rate in basic earnings per share
With actual outcomes directly driving executive remuneration.
Strategic measures
Achievement of strategic priorities and growth initiatives
Market measures
Relative total shareholder return (TSR)
Fixed
remuneration
90
Short-term
incentive
Long-term
incentive
=
Total
remuneration
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3.1 Remuneration mix
The total remuneration for executive KMP is made up of both fixed and variable remuneration. Variable remuneration is provided through the short-term incentive (STI) and long-term incentive (LTI) plans.
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 delivered in equity (deferred STI and LTI), to align our executives with shareholder interests.
The following diagrams set out the maximum and target remuneration mix for executive KMP in FY23.
CEO&P
Other executive KMPs
3.2 Fixed remuneration
Fixed remuneration comprises base salary, superannuation, and non-monetary benefits. 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 People and Culture Committee (P&CC) each year.
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3.3 Short-term incentive
Purpose
Performance
measures
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.
STI is dependent on meeting financial and strategic performance measures:
Performance measure and
weighting
Performance Gateway
Description
•
Group Performance Gateway (minimum underlying net profit threshold) to drive global alignment.
Sales revenue (60%)
•
•
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.
Strategic measures (40%)
•
Strategic measures recognise that in addition to short-term financial results, several strategic initiatives are required to enable sustained growth over
time.
Individual contribution
•
Each executive’s contribution against performance objectives is assessed at an individual level at the end of the performance period. This assessment
determines the value of the short-term incentive award.
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 FY23.
Opportunity
Delivery
Cessation of
employment
CEO&P: target opportunity is 100% of base salary, and maximum (based on exceeding the performance measures and at the discretion of the board) is up to 180% of base salary.
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 determined by dividing the value of one-third of the STI outcome by the value of performance rights determined as a ‘gross contract value’
using the share price following the announcement of full-year results in August each year. Gross contract value uses a Black-Scholes-Merton pricing model and discounts for dividends
not paid, share price volatility and the risk free rate of return. There is no discount for the likelihood of service conditions.
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.
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.
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3.4 Long-term incentive
Purpose
To align the remuneration opportunity for the executive team with shareholder value and provide a stimulus for the retention of executives within the Company.
Award vehicle
LTI is delivered as 50% options and 50% performance rights.
Opportunity
CEO&P: maximum opportunity is 125% of base salary.
Other executive KMP: maximum opportunity is 90% of base salary.
Allocation method The number of rights is calculated by dividing the value of the opportunity by the value of the options and performance rights determined as ‘gross contract values’ using the five-day
Performance
period
Exercise period
(for options)
Performance
measures and
hurdles
volume-weighted average share price following the announcement of full-year results in August each year. Gross contract value uses a Black-Scholes-Merton pricing model and
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.
Performance is measured over a four-year performance period. In FY20 the LTI Plan transitioned from a 3- year to a 4-year performance period and executive KMP, excluding the
CEO&P, received 2 grants of LTI. The Grant 2 of the FY20 LTI is subject to a four-year performance period vesting in August 2023.
There is no retesting of performance hurdles under the LTI plan.
Post vesting, options expire 25 months after the vesting date if they have not been exercised.
The Board also has discretion to extend the exercise period for vested options by a further 12 months (up to 37 months) if an option holder is in possession of inside information in a
trading window and is unable to exercise their vested options before expiry.
Awards are subject to:
•
•
The proportion of awards that vest for performance is:
Relative TSR
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.
Basic EPS
Performance
Less than 50th percentile
At the 50th percentile
50th percentile to 75th percentile
Above 75th percentile
% of instruments that vest
Performance (CAGR)
% of instruments that vest
0%
40%
40% to 100% (pro-rata)
100%
Less than 7.5%
7.5%
7.5% to 12.5%
Above 12.5%
0%
50%
50% to 100% (pro-rata)
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. From FY24 onwards, dividends will be attached to 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.
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4. Executive KMP remuneration and link to performance
4.1 FY23 STI outcomes
STI is based on meeting a Group Performance Gateway of underlying net profit, and performance against financial measures (60%) and strategic measures (40%). Final allocations to executive KMP are also
based on individual performance as assessed by the Board (for the CEO&P) and CEO&P and P&CC (for other executives).
When reviewing financial performance, the Board excludes revaluation gains and losses from non-core investments (the innovation fund) and the impact of one off and non-recurring items from the
calculation of STI. For FY23, underlying net profit was above the Group Performance Gateway and sales revenue grew 19% (16% in constant currency). 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.
Key performance targets were met for FY23 resulting in an average actual STI of 153.7% of target and 85.4% of maximum for executive KMP. The following STI payments were made as outlined in the table
below. Two-thirds of the actual STI will be delivered in cash in August 2023, and one-third will be deferred into service rights and subject to service conditions until August 2025.
Executive KMP
D Howitt
J Janssen
S Sayers
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 ($)
100%
75%
75%
180%
135%
135%
142.4%
156.0%
162.7%
79.1%
86.6%
90.4%
20.9%
13.4%
9.6%
2,800,316
1,125,916
1,049,699
The table below (unaudited) 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.
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create
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Long
Term
Target
Strategic
priorities
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A healthier and more
productive society
A lifetime of
hearing solutions
Thriving
people
Environmental
responsibility
Sustained
value
Help at least 8% more people to hear
each year with a cochlear or acoustic
implant.
Develop market-leading technology
and deliver a world-class customer
experience to recipients and
professional customers.
Retain employee engagement levels
at or above 80%.
Net-zero carbon emissions in our
operations by 2030 and across our
value chain by 2050.
Strategic measures (40%)
Grow the hearing implant market
• Strengthen the referral pathway
Retain market leadership
• Advance the product and services
A stronger organisation
• Strengthen and nurture the
for adults
• Develop the acoustic implant
segment
• Broaden reimbursement and
improve indications
pipeline, with annual R&D
investment of ~12% of revenue
• Deliver our latest sound processor
upgrade technology to existing
recipients
organisational culture
• Attract, develop and retain talent
• Champion a culture of diversity
and inclusion
• Support the wellness and safety of
• Expand access in emerging markets
• Deliver high levels of service for all
our teams
Minimise environmental impact
• Advance the implementation of
initiatives to reduce our Scope 1, 2
and 3 carbon emissions
• Embed sustainability into product
design, development and
manufacturing
• Deliver a global approach to
managing the environmental
impacts of packaging and waste
FY23
highlights
• Helped over 44,000 more people
to hear with an implant, up 15%
• Progress made in strengthening
the referral pathway for adults
• New evidence showing hearing
intervention may slow cognitive
decline
• Expanding indications and
reimbursement in a number of
countries
customers
• Maintain high standards of product
quality, safety and reliability
• Strong pipeline of products and
services in development from
investing over $240m in R&D
• Launched the Cochlear™ Nucleus®
8 Sound Processor which is smaller,
smarter, and better connected than
its predecessor
• Delivered latest generation sound
processors to over 48,000 cochlear
implant recipients, up 19%
• Bimodal control in the Nucleus®
Smart Appt
• Continued focus on shaping our
culture through training and
leadership development programs
delivered through all levels of the
organisation. 75% of all people
leaders have completed these
programs
• Reached 96% renewable energy at
our manufacturing facilities, using
100% renewable energy in five of
our six facilities
• Reduced our Scope 1 and 2
emissions by 68% from our FY19
baseline
• Employee engagement maintained
• Reduced the number of flights
at 80%
• Continued to exceed gender
targets with 43% women in senior
manager roles and 40% women on
the Board of directors
taken per full time employee by
47%, from our FY19 baseline, and
our flight related emissions by 91%
Sustainable and responsible business
practices, targeting growth in sales
revenue of around 10% per annum
and an 18% net profit margin.
Financial measures (60%)
Consistent and sustainable growth
• Optimise growth investment
• Maintain a strong balance sheet
• Improve efficiency and agility
• Maintain high levels of corporate
governance and an ethical and
sustainable supply chain
• Vigilance around data security and
privacy
• Delivered record sales revenue, up
19% (16% in CC*)
• Underlying net profit** up 10%
(14% in CC), the top end of the
guidance range
• Underlying net profit margin of
17% (pre cloud)
• Full year dividends up 10%
• Obtained ISO 27001 Information
Security certification of our
Connected Care products
• Commenced on-market share
buyback
FY23
Scorecard
95
Exceeded Expectations
Met Expectations
Met Expectations
Met Expectations
Exceeded Expectations
* Constant currency. ** Excluding one-off and non-recurring items.
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4.2 FY20-23 LTI vesting outcomes
In FY20 the LTI Plan transitioned from a 3- year to a 4-year performance period and KMP, excluding the CEO&P, received 2 grants of LTI. Grant 1 was for 50% of their annual LTI opportunity, with a 3-year
performance period. Grant 2 was for 75% of their annual LTI opportunity with a 4-year performance period. Presented below is the performance outcome for Grant 2 of the FY20 LTI subject to a 4-year
performance period to 30 June 2023. Grant 1 of the FY20 LTI was presented in last year’s report. In FY20 the CEO received 100% of his annual LTI opportunity with a 4-year performance period (Grant 2) and
did not receive a transitional arrangement (Grant 1).
The graphs below illustrate Cochlear’s relative TSR and basic EPS performance against targets over the past five years. The capital raising in March 2020 and the impact of COVID on hospitals and healthcare
systems around the world has significantly impacted the achievement of LTI performance hurdles.
Cochlear’s TSR for the performance period 1 July 2019 to 30 June 2023 was 22.3%, which was
ranked at the 55th percentile of the ASX 100 comparator group. This resulted in performance
above target, and as a result, 52.2% of the TSR portion of the LTI vested.
Cochlear’s basic EPS1 for the performance period 1 July 2019 to 30 June 2023 was 464.1 cents, which
is a 0.4% CAGR over the four-year performance period. This resulted in performance below target2
and as a result, 0% of the EPS portion of the LTI vested.
1For the purpose of the FY20-23 LTI, EPS is determined based on underlying net profit which excludes non-cash after tax gain/loss from the revaluation of innovation fund investments and the impact of one off and non-recurring
items.
2EPS targets were revised in FY20 to ensure targets remained aligned to the Company’s growth targets and current market conditions. Refer to Cochlear’s 2019 Annual Report for further detail.
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4.3 Financial performance history (FY19 to FY23)
Sales revenue ($million)2
Earnings/(loss) before interest and tax (EBIT) ($million)
Underlying EBIT ($million)
Reported EPS
Net profit/(loss) after tax (NPAT) ($million)
Basic earnings/(loss) per share (EPS) (cents) – reported
EPS growth4
Underlying EPS
Underlying NPAT ($million)3
EPS (cents)3
EPS growth4
Share price and dividends
Total dividend per share ($)
Shares bought back and cancelled ($million)
Share price as at 30 June ($)
FY19
1,446.1
370.1
359.3
276.7
460.9
13.2%
263.8
457.2
11.7%
3.30
–
206.84
FY20
1,352.3
(262.2)
206.9
(238.3)
(399.6)
(200.8%)
149.1
250.0
(12.9%)
1.60
–
188.93
FY211
1,493.3
370.2
326.3
323.8
492.6
4.9%
234.0
356.0
(5.6%)
2.55
–
251.67
FY22
1,641.1
400.0
382.7
289.1
439.6
(2.9%)
277.0
421.1
(2.7%)
3.00
–
198.70
FY23
1,955.7
389.5
396.1
300.6
457.0
(1.2%)
305.2
464.1
0.4%
3.30
26.4
229.07
76.3%
Relative total shareholder return (TSR)
TSR percentile ranking5
81st
1 Except for EPS growth (3-year CAGR), FY21 has been restated for the accounting policy change in relation to cloud computing.
2 Excludes foreign exchange gain/(loss) on hedged sales.
3 Underlying NPAT and EPS for FY19 to FY21 has been restated for the accounting policy change in relation to cloud computing as they relate to LTI awards vesting in current and future years.
4 EPS growth for FY19 to FY22 is as reported in prior Remuneration Reports, as it relates to LTI awards that have already vested in prior years. EPS growth for FY19 to FY22 is based on 3-year CAGR and EPS growth for FY23 is based on
26.1%
54th
22.3%
55th
30.6%
72nd
3.6%
42nd
4-year CAGR. EPS growth has been calculated based on the reported basic earnings per share adjusted for restatements for the accounting policy change in relation to cloud computing.
5 TSR percentile ranking for FY19 to FY22 is shown over three financial years to 30 June. TSR percentile ranking for FY23 is shown over four financial years to 30 June 2023. For LTI, performance is compared to the TSR of the
constituents of the ASX 100 as at the start of the relevant performance period.
For further explanation of details on Cochlear performance, see the Operational review and Financial review section on pages 62 to 67 of this Annual Report.
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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
Other long-
term benefits
Share-based payments
Salary1
Cash STI
Non-monetary
benefits2
Superannuation
contributions
Long service
leave
Deferred STI3
LTI performance
rights4
LTI
options4
Total % of performance
related
remuneration
Executive KMP
D Howitt
J Janssen
S Sayers
Total
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
2,007,343
1,866,877
1,927,769
1,362,427
979,580
750,611
947,884
465,143
867,277
699,799
846,577
443,685
3,854,200
3,317,287
3,722,230
2,271,255
1,709
1,538
1,709
1,538
1,025
923
4,443
3,999
25,292
47,439
23,568
50,872
25,292
(29,683)
23,568
12,897
25,292
16,456
23,568
8,219
826,481
515,383
308,548
183,460
264,637
148,066
700,726
833,498
6,309,365
595,748
493,294
4,970,599
214,348
252,376
2,502,781
185,570
152,856
1,972,916
170,594
199,533
2,244,613
131,525
109,960
1,712,523
75,876
34,212
1,399,666
1,085,668
1,285,407
11,056,759
70,704
71,988
846,909
912,843
756,110
8,656,038
67.00%
59.69%
60.97%
50.03%
59.46%
48.66%
64.11%
55.30%
1 Salary includes annual base salary paid on a fortnightly basis.
2 Non-monetary benefits include insurances for all KMP.
3 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 FY23 amount represents the portion of the FY21, FY22 and FY23 deferred STI expensed in FY23.
The FY22 amount represents the portion of the FY21 and FY22 deferred STI expensed in FY22.
4 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.
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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
CEO&P: 12 months’ written notice by either party.
Other executive KMP: between 12 weeks to 6 months’ written notice by either party (exact period specified in each contract).
Post-employment restraints
All executive KMP are subject to post-employment restraints for up to 12 months.
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 and 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 STI and LTI
awards
• Reviews, applies judgement and, as
appropriate, approves
recommendations from the P&CC
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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 FY23, the P&CC engaged Guerdon to provide information
used as an input to the annual review of executive KMP remuneration.
No remuneration recommendations (as defined by the Corporations Act 2001 (Cth)) were provided by Guerdon or any other advisor during the year.
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. Until this requirement is met, executive
KMP must retain shares derived from participation in incentive plans, except sales to meet the cost of exercising any options and sales to meet tax on participation in the plan. 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 ‘Investors’ 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.
8. Executive KMP equity disclosures
Executive KMP participate in the deferred STI and LTI plans which offer 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 relative TSR and EPS growth. Under the deferred STI plan,
grants are based on performance in the first year, and are then deferred for a further two years.
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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 FY23 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
Vesting date
Expiry date
(Options)3
Vested
Forfeited
Number Maximum value to
be expensed ($)1
Number
Maximum value
to be expensed ($)1
Executive KMP
D Howitt
J Janssen
S Sayers2
FY20 LTI
FY21 LTI
FY21 deferred STI
FY22 LTI
FY22 deferred STI
FY23 LTI
Total
FY20 LTI
FY20 LTI
FY21 LTI
FY21 deferred STI
FY22 LTI
FY22 deferred STI
FY23 LTI
Total
FY21 deferred STI
FY22 LTI
FY22 deferred STI
FY23 LTI
Total
23-Oct-19
21-Oct-20
30-Sep-21
20-Oct-21
29-Sep-22
16-Sep-22
23-Oct-19
23-Oct-19
21-Oct-20
30-Sep-21
17-Sep-21
29-Sep-22
16-Sep-22
30-Sep-21
17-Sep-21
29-Sep-22
16-Sep-22
24,041
21,217
–
21,808
-
19,087
86,153
3,237
4,413
5,197
–
7,685
–
6,726
27,258
–
7,636
–
6,010
13,646
–
215,986
–
544,704
–
713,253
1,473,943
–
–
52,905
–
191,950
–
251,341
496,196
–
190,726
–
224,585
415,311
4,432
4,782
3,851
5,341
3,257
6,041
–
187,269
–
464,680
227,024
622,295
27,704
1,501,268
534
813
1,171
1,415
1,882
1,112
2,129
9,056
990
1,870
1,060
1,902
5,822
–
–
45,858
–
163,739
77,510
219,313
506,420
–
162,695
73,886
195,929
432,510
16-Aug-23
21-Aug-24
16-Aug-23
20-Aug-25
16-Aug-24
18-Aug-26
22-Aug-22
16-Aug-23
21-Aug-24
16-Aug-23
20-Aug-25
16-Aug-24
18-Aug-26
16-Aug-23
20-Aug-25
16-Aug-24
18-Aug-26
16-Mar-24
21-Mar-25
20-Mar-26
18-Sep-28
16-Mar-24
21-Mar-25
20-Mar-26
18-Sep-28
20-Mar-26
18-Sep-28
0.0%
100.0%
1 The options granted in FY23 have an exercise price of $216.33, and an expiry date of 18 September 2028. Fair values (AASB 2) of FY23 options and performance rights under the LTI plan as at the date of grant are as follows: options
(EPS growth: $64.39; relative TSR: $54.08) and performance rights (EPS growth: $203.44; relative TSR: $130.71). 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.
2 LTI reported for S Sayers relates to his KMP role only and includes a pro-rated LTI to reflect his appointment to the CFO role during FY21. His FY21 deferred STI grant relates to his executive role for the period from 1 July 2020 to 31
December 2020, and his KMP role from 1 January 2021 to 30 June 2021.
3 No expiry date for deferred STI, as they automatically vest on the vesting date.
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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
In FY23, there was no vesting of the deferred STI for executive KMP, as no STI was allocated in FY20, and no vesting of the FY20 LTI, as the performance hurdles were not met.
Balance 1 July 2022
Received on exercise of options/rights
Purchases and sales
Balance 30 June 2023
Executive KMP
D Howitt
J Janssen
S Sayers
Rights held during the year
48,786
8,093
2,842
–
–
–
–
(1,000)
–
48,786
7,093
2,842
Rights are acquired by executive KMP under the deferred STI and LTI plans. During the year:
• Granted: FY23 LTI awards were granted in September/October 2022 and FY22 Deferred STI awards were granted in September 2022; and
• Vested: no deferred STI was allocated in FY20 and 0% of the FY20 LTI award vested in August 2022.
Executive KMP
D Howitt
J Janssen
S Sayers1
Balance
1 July 2022
18,406
5,815
3,875
Deferred STI service rights
LTI performance rights
Granted
Vested
Forfeited
Granted
Vested
Forfeited
3,257
1,112
1,060
–
–
–
–
–
–
6,041
2,129
1,902
–
–
–
–
(534)
(215)
1 For S Sayers vested and forfeited awards also relate to roles prior to appointment as KMP.
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Balance
30 June 2023
27,704
8,522
6,622
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Options held during the year
Options over ordinary shares are acquired by executive KMP under the LTI plan. During the year, FY23 LTI awards were granted in September/October 2022 and 0% of the FY20 LTI award (Grant 1) was
vested. All options held at the end of the year are unvested.
Balance
1 July 2022
67,066
20,532
12,822
Executive KMP
D Howitt
J Janssen
S Sayers1
LTI options
Balance
30 June 2023
Vested and
exercisable at 30
June 2023
Granted
Vested and exercised
Vested and lapsed
Forfeited
19,087
6,726
6,010
–
–
–
–
–
–
–
(3,237)
(1,307)
86,153
24,021
17,525
–
–
–
1 For S Sayers, vested and forfeited options also relate to roles prior to appointment as KMP.
Executive minimum shareholding
As at 30 June 2023, 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, which they have confirmed through the executive KMP disclosures for FY23.
Ordinary shares held
Policy value of Cochlear shares at year end ($)1
% of base salary2
Executive KMP
D Howitt
J Janssen
S Sayers3
48,786
7,093
2,842
10,682,183
1,553,083
622,284
1 In line with the Share Ownership Policy, the value has been calculated as the average daily share price over the previous 12 months ($218.96), as at closing on the ASX up to 30 June 2023, times the number of shares.
2 The % of base salary is calculated as the value of shares divided by the contractual base salary as at 30 June 2023.
3 S Sayers is on track to meet the minimum shareholding requirement of 100% of base salary, as equity vests in future years.
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543%
161%
72%
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8.3 Potential dilution if options vest and ordinary shares issued (unaudited)
The Board encourages employee ownership of Cochlear shares. To restrict dilution of shareholders’ interests, the total employee interests in unvested equity cannot exceed 5% of share capital.
At the date of this report, the number of ordinary shares that would be issued if all options were vested (having met the service and performance conditions) and exercised and assuming ordinary shares
were issued, is as follows.
Number of options
Forfeited/ lapsed1
At report date
Exercise price per
share ($)
Exercise period
Current net value of outstanding
options as at 30 June 2023 ($)2
FY20 LTI
FY21 LTI
FY22 LTI
FY23 LTI
Grant date
23-Oct-19
21-Oct-20
17-Sep-21 (Executive KMP)
20-Oct-21 (CEO&P)
16-Sep-22 (Executive KMP)
19-Oct-22 (CEO&P)
Issued
57,074
55,729
80,240
67,487
(5,272)
51,802
217.28
Aug-23 to Mar-24
(998)
54,731
206.06
Aug-24 to Mar-25
(11,105)
69,135
232.52
Aug-25 to Mar-26
–
67,487
216.33
Aug-26 to Sep-28
(17,375)
Total
1 Forfeited/lapsed options from unvested grants relate to plan participants who have departed Cochlear.
2 Represents the number of options as at report date multiplied by the value of an option as at 30 June 2023 (exercise price less the closing share price as at 30 June 2023 of $229.07).
260,530
243,155
Number of equivalent shares at 30 June 2023
Total unvested equity currently accounts for approximately 0.60% of the total number of issued shares, as set out below.
Instrument
Unvested LTI options
Unvested LTI rights
Unvested deferred STI rights
Service rights
Total
As % of total issued shares
Number of issued shares
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.
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610,746
1,259,360
–
859,784
2,729,890
243,155
60,164
72,400
20,099
395,818
0.60%
65,671,649
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9. Non-executive Director fees
NEDs are paid from an aggregate annual fee pool of $3,500,000 for FY23 (approved at the 2022 Annual General Meeting). Total remuneration paid during the year was $2,825,555, which is within the fee
pool limit (represented 80.7% of the fee pool).
NEDs do not receive any performance-related remuneration, options or performance rights.
9.1 Fee policy and changes during the year
Board fees must recognise the effort required to fulfil the responsibilities of a director. Reflecting the increasing governance requirements and the work of the Board, the Board considered it appropriate to
increase annual Chair and base Member fees by 3%, effective 1 July 2022. Committee fees remain unchanged. This decision was made with reference to external remuneration benchmarking of companies of
a similar market capitalisation to that of Cochlear.
The table below outlines the policy base and committee fees for FY22 and FY23.
Amounts $1
Cochlear Board
Committees2
Audit and Risk
People and Culture
Technology and Innovation
Medical Science
FY22
FY23
Chair
534,103
50,000
40,000
40,000
30,000
Member
176,720
25,000
20,000
20,000
15,000
Chair
550,126
50,000
40,000
40,000
30,000
Member
182,022
25,000
20,000
20,000
15,000
Nomination
No fee
1 Superannuation contributions have been made in accordance with Australian superannuation legislation at a rate of 10.5% up to the Australian Government’s prescribed maximum contributions limit. Fees are presented exclusive
No fee
No fee
No fee
of superannuation.
2 Committee fees are not paid to the Chairman of the Board.
NEDs are entitled to reimbursement for costs directly related to Cochlear business including reasonable travel, accommodation and other expenses incurred attending meetings of the Board, committees, or
shareholders, or while engaged on company business.
It is recognised that as an Australian headquartered business, for some overseas-based Non-executive Directors substantial additional travel may be required to attend meetings or other Board-related
matters in Australia. Currently a travel allowance of $10,000 per return trip is in place for internationally based Non-executive Directors who travel to and from Australia to attend Board and/or committee
meetings or other Board-related matters (when air travel exceeds 10 hours). The allowance is paid on a per return trip basis and is in addition to the reimbursement of travel costs. In FY23, one NED based in
the United States received a travel allowance of $50,000 to reflect five trips to Australia to attend Board meetings.
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Additional
information
9.2 NED statutory remuneration
The table below presents the total remuneration for NEDs.
Amounts $
Non-executive Directors
A Deans (Chair)
Y Allen, AM
G Boreham, AM
M Daniell, KNZM
M del Prado1
A Denver
C McLoughlin, AM2
B Robinson, AC
K Penrose
Year
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
Short-term benefits
Post-employment benefits
Total
Fees
Travel allowance
Superannuation
(Restated1)
552,242
495,341
263,837
266,720
268,049
261,720
263,030
246,547
240,737
114,654
242,953
236,720
272,591
235,797
252,991
246,720
244,510
–
–
–
–
–
–
–
–
–
50,000
10,000
–
–
–
–
–
–
–
–
25,292
23,568
25,292
23,568
25,292
23,568
25,292
22,946
–
–
24,375
22,710
–
22,979
24,860
23,171
24,212
–
577,534
518,909
289,129
290,288
293,341
285,288
288,322
269,493
290,737
124,654
267,328
259,430
272,591
258,776
277,851
269,891
268,722
–
Total
2,825,555
2,276,729
1 M del Prado is a tax resident of the US and a non-resident of Australia for income tax purposes and is exempt from Australian superannuation guarantee obligations. An equivalent amount of $22,875 was paid over the period from
2,578,065
2,093,796
197,490
172,933
50,000
10,000
FY23
FY22
1 July 2022 to 30 June 2023 as fees in lieu of superannuation guarantee payments which would have been received. For FY22, an equivalent amount of $10,423 paid in lieu of superannuation guarantee has been restated and
included in fees.
2 Effective 1 July 2022, C McLoughlin has opted out of receiving superannuation guarantee payments in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth). An equivalent amount of $24,619 was paid
over the period from 1 July 2022 to 30 June 2023 as fees.
106
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9.3 Minimum shareholding requirement for NEDs
NEDs are required to hold shares equivalent to the fees (including both Board and committee fees) received in the previous 12 months. The share ownership requirement must be satisfied within three years
of appointment to the Board.
As at 30 June 2023, all NEDs are compliant with the Share Ownership Policy, which allows three years to build their shareholdings. The table below presents Cochlear Limited shareholdings for each NED,
which they have confirmed through the NED disclosures for FY23.
Balance 1 July 2022
Purchases
Sales
Balance
30 June 2023
Policy value of shares as at
30 June 2023 ($)1
% of fees2 Date of appointment as
a NED
Non-executive Directors
A Deans
Y Allen, AM
G Boreham, AM
M Daniell, KNZM
M del Prado3
A Denver
C McLoughlin, AM
B Robinson, AC
K Penrose4
4,000
3,714
3,014
1,214
–
4,214
1,650
1,083
177
500
–
–
200
582
–
250
102
778
–
–
–
–
–
–
–
–
–
4,500
3,714
3,014
1,414
582
4,214
1,900
1,185
955
985,320
813,217
659,945
309,609
127,435
922,697
416,024
259,468
209,107
179%
329%
247%
118%
59%
381%
168%
103%
77%
1 January 2022
1 July 2022
1 In line with the Share Ownership Policy, available in the ‘Investors 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 ($218.96), as at closing on the ASX up to 30 June 2023, times the number of shares.
2 The shareholding requirement has been calculated using annualised contractual policy fees based on Board and Committee membership as at 30 June 2023 (excluding superannuation).
3 M del Prado was appointed to the Board on 1 January 2022 and in accordance with the policy has until 1 January 2025 to build his shareholding.
4 K Penrose was appointed to the Board on 1 July 2022 and in accordance with the policy has until 1 July 2025 to build her shareholding.
107
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Financial report
Director’s report
Auditor’s independence declaration
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report
109
112
113
113
114
115
117
118
149
150
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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 2023, 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 A Deans
(Chair), Y Allen, AM, G Boreham, AM, Sir M Daniell, KNZM, M del Prado, A Denver, D Howitt, C
McLoughlin, AM, K Penrose and Prof B Robinson, AC.
Information on the current directors is presented in this 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 and
Risk
Committee
People and
Culture
Committee1
Medical
Science
Committee
Nomination
Committee
Product and
Services Innovation
Committee2
d
e
d
n
e
t
t
A
l
d
e
H
12 12
12 12
A Deans
Y Allen, AM
G Boreham, AM
12 12
Sir M Daniell, KNZM 12 12
M del Prado
A Denver
D Howitt
12 12
12 12
12 12
C McLoughlin, AM
12 12
K Penrose
12 12
Prof B Robinson, AC 12 11
d
e
d
n
e
t
t
A
–
4
4
4
–
4
–
4
4
–
d
e
d
n
e
t
t
A
–
4
5
–
–
–
–
5
2
5
d
e
d
n
e
t
t
A
–
–
–
3
3
3
3
–
–
3
l
d
e
H
2
2
2
2
2
2
–
2
2
2
d
e
d
n
e
t
t
A
2
2
2
2
2
2
–
2
2
2
l
d
e
H
–
–
–
3
3
3
3
–
–
3
l
d
e
H
–
5
5
–
–
–
–
5
2
5
l
d
e
H
–
4
4
4
–
4
–
4
4
–
l
d
e
H
–
3
3
3
3
3
3
3
3
3
d
e
d
n
e
t
t
A
–
2
3
3
3
3
3
3
3
3
1. Karen Penrose was appointed as a Member of People and Culture Committee from 17 February 2023.
2 Formerly known as the Technology and Innovation Committee.
The Chair of the Board attends committee meetings by invitation as a matter of course. Often
directors also attend meetings of committees of which they are not a member. These attendances
are not reflected in the table above.
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Principal activities
Non-audit services
Information on the principal activities, operations and financial position of Cochlear Limited and
its business strategies and prospects is set out in the Operational review and Financial review on
pages 62 to 67 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
Date of payment
Dividends recognised in the current financial year by the Company are:
Interim 2023 ordinary
1.55
102.0
35% Franked
14 April 2023
Final 2022 ordinary
1.45
95.4
40% Franked
17 October 2022
Total amount
3.00
197.4
Since the end of the financial year, the directors declared the following dividend:
Final 2023 ordinary
1.75
114.9
70% Franked
11 October 2023
Total amount
1.75
114.9
The financial effect of the 2023 final dividend will be recognised in the subsequent financial year
as it was declared after 30 June 2023.
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.
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 and 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 and 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.
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:
Consolidated
2023
$
2022
$
Audit and assurance services
Auditors of the Company - KPMG:
– audit and review of consolidated financial reports
1,552,259
1,435,765
– audit and review of subsidiary financial reports
– other assurance services
Total audit and assurance services
Other services
Auditors of the Company - KPMG:
– taxation compliance and advisory services
– other advisory services
Total other services
642,016
18,715
614,887
17,824
2,212,990
2,068,476
1,334,339
98,407
977,589
68,824
1,432,746
1,046,413
110
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State of affairs
Events subsequent to the reporting date
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 2023 for the Cochlear Limited Board, the CEO & President and other key management
personnel, and changes for the financial year ending 30 June 2024, are included in the
Remuneration report on pages 86 to 107 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
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 2023, refer above.
Lead auditor’s independence declaration
The lead auditor’s independence declaration is set out on page 112 and forms part of the Directors’
report for the financial year ended 30 June 2023.
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.
•
costs and expenses of successfully defending legal proceedings in which relief under the
Corporations Act 2001 is granted to the relevant officer.
Dated at Sydney this 15th day of August 2023.
Signed in accordance with a resolution of the directors:
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.
Director
Director
111
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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 2023 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, 15 August 2023
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.
112
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Income statement
FOR THE YEAR ENDED 30 JUNE 2023
Revenue
Cost of sales
Gross profit
Selling, marketing and general expenses
Research and development expenses
Administration expenses
Other income
Other expenses
Share of losses on equity-accounted investments
Results from operating activities
Finance income – interest
Finance expense – interest
Net finance income/(expense)
Profit before income tax
Income tax expense
Net profit
Basic earnings per share (cents)
Diluted earnings per share (cents)
Statement of comprehensive income
Note
2.2
2.3
2023
$m
1,936.1
(488.0)
2022
$m
1,648.3
(411.0)
1,448.1
1,237.3
(606.5)
(244.9)
(203.9)
13.5
(16.6)
(0.2)
389.5
16.5
(9.4)
7.1
396.6
(96.0)
300.6
457.0
456.1
(498.7)
(210.7)
(159.0)
31.1
–
–
400.0
2.4
(8.6)
(6.2)
393.8
(104.7)
289.1
439.6
439.6
2.4
2.3
5.5
3.1
2.5
2.5
Net profit
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 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 loss, net of tax
Total comprehensive income
2023
$m
300.6
2022
$m
289.1
(3.1)
(20.0)
5.1
(83.8)
(23.1)
(78.7)
7.3
(16.3)
(6.2)
(16.9)
13.7
(5.0)
4.7
(28.1)
(18.4)
282.2
(106.8)
182.3
The notes on pages 118 to 148 are an integral part of these consolidated financial statements.
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Balance sheet
AS AT 30 JUNE 2023
Assets
Cash and cash equivalents
Trade and other receivables
Forward exchange contracts
Inventories
Current tax assets
Prepayments
Total current assets
Trade and other receivables
Forward exchange contracts
Property, plant and equipment
Intangible assets
Investments
Other financial assets
Equity-accounted investments
Deferred tax assets
Right of use assets
Total non-current assets
Total assets
114
Note
2.7(a)
6.4(b)
5.1
3.2
5.2
5.3
5.5
5.5
5.5
3.2
5.8
2023
$m
555.5
437.5
3.7
311.5
20.0
33.3
2022
$m
629.3
348.5
8.4
270.2
41.9
28.7
Liabilities
Trade and other payables
Forward exchange contracts
Loans and borrowings
Current tax liabilities
Employee benefit liabilities
Provisions
1,361.5
1,327.0
Deferred revenue
0.9
1.6
276.7
444.1
93.8
90.8
3.5
125.3
170.5
–
2.4
260.2
392.5
119.1
68.8
–
116.1
179.0
1,207.2
2,568.7
1,138.1
2,465.1
Lease liabilities
Total current liabilities
Trade and other payables
Forward exchange contracts
Employee benefit liabilities
Provisions
Deferred tax liabilities
Deferred revenue
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
Note
6.3
3.2
4.2
5.6
6.4(c)
4.2
5.6
3.2
6.4(c)
2023
$m
270.4
20.6
–
17.5
146.4
22.3
61.6
39.2
578.0
–
6.4
9.7
35.1
18.3
9.8
162.6
241.9
819.9
2022
$m
232.4
22.3
42.6
15.2
101.6
22.7
54.7
36.1
527.6
0.3
6.5
6.4
33.2
22.4
7.8
175.2
251.8
779.4
1,748.8
1,685.7
1,250.3
1,276.6
(56.9)
555.4
(46.2)
455.3
1,748.8
1,685.7
The notes on pages 118 to 148 are an integral part of these consolidated financial statements.
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Statement of changes in equity
FOR THE YEAR ENDED 30 JUNE 2023
$m
2023
Balance at 1 July 2022
Total comprehensive income/(loss)
Net profit
Other comprehensive income/(loss)
Defined benefit plan actuarial loss
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
Shares issued
Treasury shares acquired
Shares cancelled
Share-based payment transactions
Deferred tax recognised in equity
Dividends to shareholders
Balance at 30 June 2023
The notes on pages 118 to 148 are an integral part of these consolidated financial statements.
115
Issued
capital
Treasury
share
reserve
Translation
reserve
Hedging
reserve
Fair
value
reserve
Share-based
payment
reserve
Retained
earnings
Total
equity
(63.6)
(12.8)
(46.0)
76.2
455.3
1,685.7
1,276.6
–
–
–
–
–
–
–
–
0.1
–
(26.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
(40.3)
26.4
–
–
–
–
–
–
7.3
–
–
7.3
7.3
–
–
–
–
–
–
–
–
–
–
(16.3)
13.7
(2.6)
(2.6)
–
–
–
–
–
–
–
–
(20.0)
–
–
–
(20.0)
(20.0)
–
–
–
–
–
–
1,250.3
(13.9)
(56.3)
(15.4)
(66.0)
–
–
–
–
–
–
–
–
–
–
–
15.9
2.6
–
94.7
300.6
300.6
(3.1)
–
–
–
–
(3.1)
297.5
–
–
–
–
–
(3.1)
(20.0)
7.3
(16.3)
13.7
(18.4)
282.2
0.1
(40.3)
–
15.9
2.6
(197.4)
(197.4)
555.4
1,748.8
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Statement of changes in equity
FOR THE YEAR ENDED 30 JUNE 2023
$m
2022
Balance at 1 July 2021
Total comprehensive income/(loss)
Net profit
Other comprehensive income/(loss)
Defined benefit plan actuarial gain
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
Performance rights vested
Share-based payment transactions
Deferred tax recognised in equity
Dividends to shareholders
Balance at 30 June 2022
The notes on pages 118 to 148 are an integral part of these consolidated financial statements.
Issued
capital
1,276.6
–
–
–
–
–
–
–
–
–
–
–
–
1,276.6
Treasury
share
reserve
Translation
reserve
Hedging
reserve
Fair
value
reserve
Share-based
payment
reserve
Retained
earnings
Total
equity
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(57.4)
9.1
37.8
68.4
355.1
1,689.6
–
–
–
(6.2)
–
–
(6.2)
(6.2)
–
–
–
–
(63.6)
–
–
–
–
(16.9)
(5.0)
–
–
(83.8)
–
–
–
(21.9)
(83.8)
(21.9)
(83.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
289.1
289.1
5.1
–
–
–
–
5.1
(83.8)
(6.2)
(16.9)
(5.0)
5.1
(106.8)
294.2
182.3
(1.1)
10.8
(1.9)
–
–
–
(1.1)
10.8
(1.9)
–
(194.0)
(194.0)
(12.8)
(46.0)
76.2
455.3
1,685.7
116
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Statement of cash flows
FOR THE YEAR ENDED 30 JUNE 2023
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Grant and other income received
Interest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Acquisition of leasehold improvements, plant and equipment and land and buildings
Acquisition of IT systems
Acquisition of other intangible assets
Acquisition of investments and other financial assets
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Repayments of borrowings
Payments of lease liability principal
Outlay from exercise of share options and performance rights
Payments for share buyback
Dividends paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 30 June
The notes on pages 118 to 148 are an integral part of these consolidated financial statements.
117
Note
2.4
3.1
2.7(b)
5.2
5.3
5.3
5.5
2.6
2023
$m
1,859.6
(1,438.5)
13.5
16.5
(9.4)
(79.3)
362.4
(50.0)
(22.5)
(23.4)
(29.8)
(125.7)
(41.3)
(31.4)
(10.7)
(29.6)
(197.4)
(310.4)
(73.7)
629.3
(0.1)
555.5
2022
$m
1,611.8
(1,215.0)
12.0
2.4
(8.6)
(26.1)
376.5
(44.5)
(6.3)
(26.4)
(61.7)
(138.9)
–
(25.6)
(1.1)
–
(194.0)
(220.7)
16.9
609.6
2.8
629.3
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Notes to the financial statements
(d) Foreign currency
Foreign currency transactions
FOR THE YEAR ENDED 30 JUNE 2023
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 2023 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 and Interpretations adopted by the International
Accounting Standards Board.
The Board approved the consolidated financial statements on 15 August 2023.
(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.
118
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.
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 AASBs 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 and Risk Committee the development, selection and
disclosure of Cochlear’s critical accounting policies and estimates and the application of these
policies and estimates.
118
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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:
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.
Note 4.3 – Share-based payments – measurement of fair value using the Black-Scholes-Merton
pricing model;
Note 5.3 – Intangible assets – key assumptions in impairment testing of intangible assets and
goodwill;
Note 5.6 – Provisions – key assumptions about the likelihood and magnitude of an outflow of
economic benefits in relation to the warranty and product recall provisions;
Note 5.7 – Contingent liabilities – key assumptions about the likelihood and magnitude of an outflow
of economic benefits in relation to patent infringement claims;
Note 5.8 – Leases – lease terms and whether the Group is reasonably certain to exercise extension
options; and
Note 6.4 – Financial risk management – measurement of expected credit loss allowance for trade
receivables; measurement of the fair value of financial assets.
(f) Basis of consolidation
Controlled entities
Cochlear 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
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 or to comply
with new or revised accounting standards.
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 Chief Executive Officer
and President, who is also the chief operating decision maker.
Information about reportable segments
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-
group transactions, are eliminated in preparing the consolidated financial statements.
Revenues
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.
(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.
Cochlear implants
Services (sound processor upgrades and other)
Total cochlear implants
Acoustics
Sales revenue
Foreign exchange (loss)/gain on hedged sales
Revenue
119
2023
$m
1,131.4
584.4
1,715.8
239.9
1,955.7
(19.6)
1,936.1
2022
$m
935.2
503.9
1,439.1
202.0
1,641.1
7.2
1,648.3
119
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Americas
EMEA1 Asia Pacific
Corporate
and other
net expenses
Total
2023
Americas EMEA Asia Pacific
Corporate and
manufacturing
Total
$m
978.3
523.8
$m
639.4
292.5
$m
338.0
104.9
$m
(19.6)2
(531.7)
$m
1,936.1
389.5
Assets and liabilities
Assets
Liabilities
Acquisition of non-current assets
$m
392.9
199.7
2.1
$m
357.9
122.1
6.7
$m
213.7
68.5
1.0
$m
$m
1,604.2 2,568.7
819.9
429.6
129.6
139.4
2022
Americas EMEA Asia Pacific
Corporate and
manufacturing
Total
Assets and liabilities
Assets
Liabilities
Acquisition of non-current assets
$m
350.8
172.7
2.3
$m
281.2
93.3
2.4
$m
228.9
57.0
3.9
$m
$m
1,604.2 2,465.1
779.4
456.4
130.3
138.9
Cochlear Limited is domiciled in Australia and earns less than 5% of its sales revenue from external
customers in Australia. Cochlear Limited has $385.1 million (2022: $333.0 million) of non-current
assets (excluding financial instruments and deferred tax) in Australia, including Australian based
manufacturing facilities.
2023
Profit or loss
Revenue
EBIT
Net finance income
Profit before income tax
Depreciation and amortisation
Write-down in value of inventories
Equity accounted losses
13.0
1.9
–
7.3
1.4
–
5.7
0.3
–
54.9
1.7
0.2
2022
Profit or loss
Revenue
EBIT
Americas
EMEA1 Asia Pacific
Corporate
and other
net expenses
$m
779.7
414.4
$m
578.5
274.4
$m
282.9
92.0
$m
7.22
(380.8)
Net finance expense
Profit before income tax
Depreciation and amortisation
Write-down in value of inventories
Equity accounted losses
1 Europe, Middle East and Africa.
2 Foreign exchange (loss)/gain on hedged sales
11.2
0.7
–
6.8
1.1
–
5.8
0.3
–
49.2
11.1
–
7.1
396.6
80.9
5.3
0.2
Total
$m
1,648.3
400.0
(6.2)
393.8
73.0
13.2
–
120
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2.2 Revenue
2.3 Expenses
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 recognised over time as the services are provided to customers. 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 Cochlear’s deferred revenue balance.
Customers include implant recipients, medical practitioners and governments. Contracts are short-
term with the exception 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 (loss)/gain on hedged sales
Revenue from sale of goods
Rendering of services
Total revenue
2023
$m
1,921.0
(19.6)
1,901.4
34.7
2022
$m
1,608.5
7.2
1,615.7
32.6
1,936.1
1,648.3
(a) Cost of sales
Carrying amount of inventories recognised as an expense
Write-down in value of inventories
Note
Other
Total cost of sales
(b) Other expenses
Net foreign exchange loss
Fair value change in investments through profit or loss
5.5
Total other expenses
2.4 Other income
2023
$m
476.1
5.3
6.6
2022
$m
392.8
13.1
5.1
488.0
411.0
10.2
6.4
16.6
–
–
–
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
Fair value change in investments through profit or loss
Release of contingent consideration
Net foreign exchange gain
Other income
Total other income
Note
5.5
2023
2022
$m
2.2
–
–
–
11.3
13.5
$m
2.7
17.3
1.7
0.1
9.3
31.1
121
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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:
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 Date of payment
Dividends recognised in the current financial year by the Company are:
2023
2022
2023
Net profit attributable to equity holders of the parent entity
$300,559,000 $289,104,000
Weighted average number of ordinary shares (basic):
Issued ordinary shares at 1 July (number)
Effect of options, performance shares and performance rights
exercised (number)
Effect of shares issued under Employee Share Plan (number)
Effect of shares cancelled from share buy-back (number)
Effect of shares purchased and held as treasury stock
65,775,339
65,744,078
4,803
238
(16,378)
(1,559)
26,291
70
–
–
Weighted average number of ordinary shares (basic) at 30 June
65,762,443
65,770,439
Basic earnings per share (cents)
457.0
439.6
Interim 2023 ordinary
Final 2022 ordinary
Total amount
2022
Interim 2022 ordinary
Final 2021 ordinary
Total amount
1.55
1.45
3.00
1.55
1.40
2.95
102.0
35% Franked
14 April 2023
95.4
40% Franked 17 October 2022
197.4
102.0
92.0
194.0
0% Franked
21 April 2022
0% Franked 18 October 2021
Dollars per
share
Total amount
$m
Franked Date of payment
Diluted earnings per share
Subsequent event
The calculation of diluted EPS has been based on the following net 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:
2023
2022
Net profit attributable to equity holders of the parent entity
$300,559,000
$289,104,000
Weighted average number of ordinary shares (diluted):
Weighted average number of shares (basic) (number)
Effect of options, performance shares and performance rights
unvested (number)
Weighted average number of ordinary shares (diluted) at
30 June
Diluted earnings per share (cents)
65,762,443
65,770,439
134,410
207
65,896,853
65,770,646
456.1
439.6
At 30 June 2023, 136,622 options (2022: 180,048) were excluded from the diluted weighted average
number of ordinary shares calculation because their effect would have been antidilutive.
122
Since the end of the financial year, the directors declared the following dividend:
Final 2023 ordinary
Total amount
1.75
1.75
114.9
70% Franked
11 October 2023
114.9
The financial effect of the 2023 final dividend will be recognised in the subsequent financial year as
it was declared after 30 June 2023.
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Dividend franking account
(b) Reconciliation of net profit to net cash provided by operating activities
Total franking account balance at 30%
2023
$m
7.4
2022
$m
–
Net profit
The above amount represents the balance of the franking account as at 30 June, after taking into
account adjustments for:
Add item classified as investing activities:
Loss on disposal of property, plant and equipment
••
••
••
franking credits that will arise from the payment of income tax payable for the current year;
franking credits that will arise from the receipt of dividends recognised as receivables at the
year end; and
franking credits that the Company may be prevented from distributing in subsequent financial
years.
The ability to utilise the franking account credits is dependent upon the ability to declare dividends.
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 2.84% (2022: 0.39%) per annum.
Add/(less) non-cash items:
Depreciation and amortisation
Release of contingent consideration
Fair value change in investments measured at fair value
through profit or loss
Equity settled share-based payment transactions
Share of losses on equity accounted investments
Net cash provided by 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 operating activities
2023
$m
300.6
0.8
80.9
–
6.4
15.9
0.2
2022
$m
289.1
0.6
73.0
(1.7)
(17.3)
10.8
–
404.8
354.5
(89.0)
(41.3)
(4.6)
(14.8)
37.7
24.2
46.1
1.5
8.9
(11.1)
362.4
(52.2)
(54.1)
(7.5)
45.0
29.1
29.6
8.0
5.5
15.7
2.9
376.5
123
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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
Income tax expense 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 recognised in the Income statement
Current income tax expense
Current year
Adjustment for prior years
Total current income tax expense
Deferred income tax expense
Origination and reversal of temporary differences
Net utilisation/(recognition) of tax losses
Current year deferred income tax expense
Adjustment for prior years
Total deferred income tax expense
Total income tax expense recognised in the Income statement
2023
$m
110.8
(2.2)
108.6
(9.5)
(2.3)
(11.8)
(0.8)
(12.6)
96.0
2022
$m
50.4
6.7
57.1
(14.3)
61.2
46.9
0.7
47.6
104.7
Consolidated Entity – Numerical reconciliation between profit before income
tax and income tax expense
Profit before income tax
Tax at the Australian tax rate of 30% (2022: 30%)
(Less)/add adjustments for:
Research and development allowances
Net non-deductible/(non-assessable) items
Effect of tax rates in foreign jurisdictions
Other adjustment for prior years
Income tax expense on profit before income tax
Income tax recognised in Statement of changes in equity
Income tax on:
Fair value (losses)/gains on investments
Cash flow hedges
Share-based payments
Total income tax recognised in Statement of
changes in equity
Note
3.2
3.2
2023
$m
396.6
119.0
2022
$m
393.8
118.1
(21.1)
(16.5)
5.6
(4.5)
99.0
(3.0)
96.0
2023
$m
(3.0)
(1.1)
(2.6)
(6.7)
0.3
(4.6)
97.3
7.4
104.7
2022
$m
(34.1)
(9.4)
1.9
(41.6)
124
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Consolidated Entity – Numerical reconciliation between income tax expense
and cash taxes paid
Income tax expense on profit before income tax
Timing differences recognised in deferred tax
Net (utilisation)/benefit of tax losses recognised in deferred tax
Current year tax instalments (payable)/receivable next year
Prior year tax instalments received this year
Cash taxes paid per statement of cash flows
2023
$m
96.0
9.5
2.3
(4.5)
(24.0)
79.3
2022
$m
104.7
14.3
(61.2)
21.1
(52.8)
26.1
Cochlear Limited’s Australian tax consolidated group – Numerical reconciliation
between profit before income tax and income tax expense
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.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences
when they reverse. 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
at each reporting date and are reduced if it is no longer probable that the related tax benefit will be
realised.
Profit before income tax (excluding dividends from wholly-owned
foreign subsidiaries)
Add: Dividends from wholly-owned foreign subsidiaries
Profit before income tax
Tax at the Australian tax rate of 30% (2022: 30%)
(Less)/add adjustments for:
Research and development allowances
Net non-deductible items
Controlled foreign company income
Exempt foreign sourced dividends from wholly-owned
subsidiaries
Adjustment for prior years
Income tax expense on profit before income tax
125
2023
$m
272.2
23.1
295.3
88.6
2022
$m
336.9
95.5
432.4
129.7
(20.0)
(15.8)
5.9
0.7
(6.9)
68.3
(4.0)
64.3
2.8
2.3
(28.7)
90.3
0.7
91.0
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Movement in deferred tax balances
2023
Property, plant and equipment
Intangible assets
Inventories
Provisions
Deferred revenue
Forward exchange contracts
Tax losses and offsets carried forward
Other
Deferred tax assets/(liabilities) before set-off
Set-off of tax
Net tax assets/(liabilities)
2022
Property, plant and equipment
Intangible assets
Inventories
Provisions
Deferred revenue
Forward exchange contracts
Tax losses and offsets carried forward
Other
Deferred tax assets/(liabilities) before set-off
Set-off of tax
Net tax assets/(liabilities)
126
Opening balance
Recognised in
the Income
statement
1.5
7.2
53.6
33.4
5.4
5.5
–
(12.9)
93.7
1.3
(18.1)
(4.2)
3.2
2.2
–
2.3
25.1
11.8
Opening balance
Recognised in
the Income
statement
0.7
3.6
39.0
28.8
4.8
(3.9)
61.2
(32.8)
101.4
0.8
3.6
14.6
4.6
0.6
–
(61.2)
(9.9)
(46.9)
Recognised in
other
comprehensive
income
–
–
–
–
–
1.1
–
3.0
4.1
Recognised in
other
comprehensive
income
–
–
–
–
–
9.4
–
34.1
43.5
Recognised in
equity
Closing balance
Deferred tax
assets
Deferred tax
liabilities
–
–
–
–
–
–
–
(2.6)
(2.6)
2.8
(10.9)
49.4
36.6
7.6
6.6
2.3
12.6
107.0
5.7
2.2
49.4
36.6
7.6
6.6
2.3
27.2
137.6
(12.3)
125.3
(2.9)
(13.1)
–
–
–
–
–
(14.6)
(30.6)
12.3
(18.3)
Recognised in
equity
Closing balance
Deferred tax
assets
Deferred tax
liabilities
–
–
–
–
–
–
–
(4.3)
(4.3)
1.5
7.2
53.6
33.4
5.4
5.5
–
(12.9)
93.7
4.9
10.3
53.6
33.6
5.4
5.6
–
17.2
130.6
(14.5)
116.1
(3.4)
(3.1)
–
(0.2)
–
(0.1)
–
(30.1)
(36.9)
14.5
(22.4)
126
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Unrecognised deferred tax liabilities
At 30 June 2023, a deferred tax liability of $2.5 million (2022: $49.4 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.
Future tax developments
The Organisation for Economic Co-operation and Development’s (OECD)/G20 Inclusive Framework
on Base Erosion and Profit Shifting (BEPS) addresses the tax challenges arising from the digitalisation
of the global economy. The BEPS Pillar Two model rules seek to apply a 15% global minimum tax to
individual jurisdictions across the globe and is expected to apply to the Group from 1 July 2024. As
at 30 June 2023 the Group has operations in the United Kingdom which has substantively enacted
the Pillar Two legislation and it is anticipated that Australia will be substantively enacting this
legislation before 1 July 2024 (with the relevant provisions rules being effective for income years on
or after 1 January 2024).
Cochlear has operations globally which may give rise to an exposure to top-up taxes and is in the
process of evaluating the cash tax implications of the Pillar Two global minimum tax rules. Cochlear
has applied the mandatory temporary exception under AASB 2023-2 Amendments to Australian
Accounting Standards – International Tax Reform – Pillar Two Model Rules issued by the Australian
Accounting Standards Board in June 2023. The amendments provide a temporary mandatory
exception from deferred tax accounting for the Pillar Two global minimum top-up tax. The
mandatory exception applies retrospectively. The retrospective application has had no impact on
Cochlear’s financial statements as no new legislation implementing the top-up tax was enacted or
substantively enacted at the end of the comparative period in any jurisdiction in which the Cochlear
operates and no related deferred taxes were recognised at that date.
Current tax assets and liabilities
The current tax assets for the Consolidated Entity of $20.0 million (2022: $41.9 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 $17.5 million (2022: $15.2 million) represent the amount of
income taxes payable in respect of current and prior financial years.
4. Employee benefits
4.1 Employee expenses
Salaries and wages
Contributions to superannuation plans
Increase in leave liabilities
Equity settled share-based payment transactions
Total employee expenses
1 Restated
4.2 Employee benefit liabilities
Wages, salaries and annual leave
2023
$m
624.2
42.6
5.2
15.9
687.9
20221
$m
534.2
37.4
5.0
10.8
587.4
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
Cochlear has defined benefit plans that cover, in aggregate, 81 employees in two countries (2022:
84 employees). Cochlear contributed cash of $1.9 million (2022: $1.5 million) to defined benefit
plans in the year ended 30 June 2023 and expects to contribute $1.9 million in the year ending 30
June 2024.
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.
127
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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.
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
2023
$m
15.7
43.9
86.8
146.4
6.8
2.9
9.7
2022
$m
14.7
40.1
46.8
101.6
6.3
0.1
6.4
156.1
108.0
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 2023,
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
October 20191
October 20201
September 20212
October 20211
October 20213
October 20221
September 20222
October 20223
Exercise
price of
options
$217.28
$206.06
N/A
Number of
options
51,802
54,731
–
$232.52
69,135
N/A
–
$216.33
67,487
N/A
N/A
–
–
Total
1 Options and performance rights offered under long-term incentives.
2 Performance rights offered under deferred short-term incentives.
3 Services rights offered under the CEIP.
243,155
Number of
performance
rights
9,546
12,332
38,513
16,929
3,281
21,357
33,887
6,598
142,443
Contractual
life
5 years
5 years
2 years
5 years
2 years
7 years
2 years
2 years
4.3 Share-based payments
Since 1 July 2013, the Company has granted 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.
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.
Grants under LTI are in two equal tranches assigned to compound annual growth rate (CAGR) in EPS
and ranking of total shareholder return (TSR) against the Australian Securities Exchange (ASX) 100
index. The conditions for minimum vesting are four years of service and:
••
••
50% weighting on CAGR in EPS with a minimum CAGR in EPS of 7.5% assigned to 50% of grant;
or
50% weighting on relative TSR over four years against the ASX 100 with a minimum TSR at the
50th percentile assigned to 40% of grant
128
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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:
19 October 2022
(4 years)
29 September 2022
20 October 2021
(4 years)
30 September 2021
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/right life (years)
TSR-based
conditions
$54.08
$130.71
$214.85
$216.33
29.81%
4 - 7
Expected dividend yield
Risk free interest rate2
3.28%
1 Measure captures the characteristics of fluctuations in the share price.
2 Based on government bonds.
1.37%
EPS
performance-
based
conditions
$64.39
$203.44
$214.85
$216.33
29.81%
4 - 7
1.37%
3.28%
Deferred STI
service-based
conditions
Rights
service-based
conditions
TSR-based
conditions
N/A
$209.11
$214.85
N/A
26.68%
2
1.37%
3.28%
N/A
$209.11
$214.85
N/A
26.68%
2
1.37%
3.28%
$45.46
$125.69
$226.85
$232.52
30.87%
4 - 5
0.51%
0.30%
EPS
performance-
based
Deferred STI
service-based
conditions
Rights
service-based
conditions
conditions
$54.45
$222.32
$226.85
$232.52
30.87%
4 - 5
0.51%
0.30%
N/A
$224.60
$226.85
N/A
38.06%
2
0.51%
0.30%
N/A
$224.60
$226.85
N/A
38.06%
2
0.51%
0.30%
129
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The number, and weighted average exercise prices of, options are as follows:
4.4 Key management personnel
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Number of
options
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:
Outstanding at 1 July
Forfeited
Exercised
Granted
Outstanding at 30 June
Exercisable at 30 June
2023
219.76
219.61
–
216.33
218.82
$217.28
2023
204,279
(28,611)
–
67,487
243,155
51,802
2022
$209.03
$205.88
$202.84
$232.52
$219.76
$217.28
2022
208,331
(70,634)
(13,658)
80,240
204,279
24,231
No options were exercised in 2023 (2022: 13,658 options were exercised). The weighted average
market share price on the ASX at date of exercise was Nil (2022: $237.25). The weighted average
remaining contractual life of options outstanding at the end of the year is three years (2022: three
years).
ShareWave Employee Share Plan
Since 2021, Cochlear launched ShareWave, replacing the previous employee share purchase plans.
Under the plan, eligible employees can become a Cochlear Limited shareholder by purchasing
shares at the current market value through after-tax salary deductions, with Cochlear Limited
providing a matching benefit at no extra cost to the employees at the end of the contribution period,
subject to service conditions and the employee retaining the purchased shares up to the vesting
date of the matching benefit. A maximum value of $1,000 or $1,500 applies to ShareWave,
depending on the eligibility of the participating employee.
APAC Employee Equity Plan
The APAC Employee Equity Plan, established in 2016, provided approximately $1,000 of service
rights annually per eligible employee in selected Asian countries. Service rights were subject to a
three-year service condition. Upon vesting, each service right converted to one share. For the year
ended 30 June 2023, the Company issued 1,195 shares under the plan (2022: 1,075 shares). The
plan ceased in effect following the launch of ShareWave with the current year being the last plan to
vest.
Non-Executive directors
A Deans (Chair), YA Allen, AM, G Boreham, AM, Sir M Daniell, KNZM, M del Prado, A Denver, C
McLoughlin, AM, K Penrose and Prof B Robinson, AC.
Executive KMP
D Howitt, J Janssen and S Sayers.
Former Executive KMP
L Aubert, A Bishop, R Brook
The three Regional Presidents (Lisa Aubert, Anthony Bishop, and Richard Brook) are no longer
included as KMP from 1 July 2022 due to structural changes and the global integration of most
support functions over time resulting in these roles no longer meeting the criteria of planning,
directing, or controlling the activities of Cochlear as a whole.
Key management personnel disclosures
The KMP compensation is included in employee expenses as follows:
Short-term
employee
$
9,715,096
12,387,271
Post-
employment
$
273,366
432,680
Other long-
term benefits
$
34,212
82,478
Share-based
payments
$
3,755,925
4,009,601
End of
service
$
–
298,694
Total
$
13,778,599
17,210,724
2023
20221
1 Includes former executive KMPs who were not KMPs during FY23.
Information regarding individual KMP remuneration and some equity instruments disclosures as
permitted by section 300A of the Corporations Act (Cth) 2001 is provided in the Remuneration
report of this Annual Report on pages 86 to 107.
The KMP have not received any loans from Cochlear and there have been no other related party
transactions with any of Cochlear’s KMP.
130
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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.
2023
2022
Raw
materials
Work in
progress
Finished
goods
Total
inventories
$m
126.4
99.9
$m
37.5
25.2
$m
147.6
145.1
$m
311.5
270.2
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.
131
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.
Leasehold
improvements
2022
$m
2023
$m
Plant and
equipment
2023
$m
2022
$m
Land and
buildings
Total
2023
$m
2022
$m
2023
$m
2022
$m
At cost
77.6
70.9
388.6
347.4
73.9
75.5
540.1
493.8
Accumulated
depreciation
Net book value
(44.7)
(38.3)
(215.1)
(192.7)
(3.6)
(2.6)
(263.4)
(233.6)
32.9
32.6
173.5
154.7
70.3
72.9
276.7
260.2
Reconciliations of the carrying amounts are:
Opening balance
32.6
34.0
154.7
133.5
72.9
72.0
260.2
239.5
Additions
Disposals
5.8
–
3.4
–
45.2
(0.7)
41.1
0.3
(0.6)
–
–
–
51.3
(0.7)
44.5
(0.6)
Depreciation
(6.4)
(6.2)
(24.7)
(22.5)
(1.1)
(1.1)
(32.2)
(29.8)
Effect of
movements in
foreign exchange
Net book value
0.9
1.4
(1.0)
3.2
(1.8)
2.0
(1.9)
6.6
32.9
32.6
173.5
154.7
70.3
72.9
276.7
260.2
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5.3 Intangible assets
Goodwill
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 systems
IT systems 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
intangible assets, comprising acquired technology, patents and
licences, customer
Other
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 systems 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.
132
Intangible
assets with
indefinite
useful life
Intangible assets with
finite useful life
Intangible
assets
Goodwill
IT systems
Acquired
technology,
patents and
licences
Other
intangible
assets
Total
$m
$m
$m
$m
$m
256.1
–
256.1
136.3
(89.7)
206.8
(86.8)
48.1
(26.7)
647.3
(203.2)
46.6
120.0
21.4
444.1
2023
At cost
Accumulated amortisation
and impairment losses
Net book value
Reconciliations of the carrying amounts are:
Opening balance
257.1
Additions
Amortisation
Effect of movements in
foreign exchange
Net book value
2022
At cost
Accumulated amortisation
and impairment losses
Net book value
–
–
(1.0)
256.1
33.0
22.5
(9.0)
0.1
79.2
46.4
(5.4)
(0.2)
23.2
1.4
(4.0)
0.8
392.5
70.3
(18.4)
(0.3)
46.6
120.0
21.4
444.1
257.1
113.5
163.5
50.5
584.6
–
(80.5)
(84.3)
(27.3)
(192.1)
257.1
33.0
79.2
23.2
392.5
267.3
Reconciliations of the carrying amounts are:
Opening balance
Additions
Amortisation
Effect of movements in
foreign exchange
Net book value
(10.2)
257.1
–
–
37.1
5.2
(8.5)
(0.8)
33.0
58.5
24.1
(3.0)
(0.4)
79.2
22.6
3.4
(3.8)
1.0
23.2
385.5
32.7
(15.3)
(10.4)
392.5
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Impairment
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 the higher of its value in use and its fair value less costs of disposal.
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.
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 group of CGUs are:
2023
2022
Americas
EMEA
Asia Pacific
$m
176.9
178.1
$m
69.8
69.5
$m
9.4
9.5
Total
$m
256.1
257.1
The recoverable amount of each CGU is based on value-in-use calculations. 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.
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.
Revenue is based on near-term forecasts and Cochlear’s expectation of medium and long-term
growth rates. Cost of sales, R&D investment and net margin are based on long-term expectations.
Year 1 cash flows are based on Cochlear’s budget for the year ending 30 June 2024, which is aligned
with Cochlear’s outlook statement.
133
Cash flows for year six onwards are extrapolated using a terminal growth rate of 3.0% (2022: 3.0%)
per annum which is consistent with long-term growth rates. The pre-tax discount rate for each CGU
is as follows: Americas 9.4% (2022: 7.0%), EMEA 9.3% (2022: 7.1%) and Asia Pacific 9.7% (2022:
7.5%).
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.
Based on long-term growth rates.
Terminal value growth
rate
The recoverable amount of each CGU including allocated 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.
5.4 Proposed acquisition of Oticon Medical
In April 2022, Cochlear agreed to acquire Oticon Medical, the hearing implants business of Demant
A/S, a Danish Company. The proposed transaction which was subject to regulatory approval
included the acquisition of both Demant’s cochlear implant and bone conduction implants
businesses.
In June 2023, the UK Competition and Markets Authority (CMA) published its final report in relation
to the proposed acquisition which prohibited the acquisition of the bone conduction implants
business due to competition concerns. The CMA did not raise competition concerns in relation to
the cochlear implant business which is permitted to proceed, subject to the CMA’s approval of the
terms of all agreements related to the transfer of the cochlear implant business to Cochlear.
Cochlear and Demant are pursuing a transfer of Oticon Medical’s cochlear implant business at a
zero headline purchase price ("CI Carve Out Transaction”). The CI Carve Out Transaction remains
conditional on satisfaction of customary closing conditions and receipt of approvals from the CMA,
Australian Competition and Consumer Commission and the European Commission.
If the CI Carve Out Transaction does not complete because the necessary competition approvals
have not been obtained, Cochlear has agreed to make a payment of $27.5 million 12 months after
Cochlear and Demant have ceased pursuing the CI Carve Out Transaction, provided that Demant
does not attempt to dispose of, or dispose of the cochlear implant business (or any part) to any third
party during this 12-month period. This amount is treated as a contingent liability for accounting
purposes.
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5.5 Investments, equity-accounted investments and other financial assets
Cochlear has a number of strategic investments that may, over the longer term, enhance or leverage
Cochlear’s intellectual property. These include investments in Nyxoah S.A., Saluda Medical,
EpiMinder, Seer Medical and Precisis. As these investments are held for strategic purposes, Cochlear
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.
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.
Balance at 1 July 2022
Additions
Fair value loss in investments measured at fair
value through profit or loss
Fair value through other comprehensive income
(before tax)
Share of losses on equity-accounted investments
Balance at 30 June 2023
Investments
Other
financial
assets
Equity-
accounted
investments
$m
119.1
4.1
(6.4)
(23.0)
–
93.8
$m
68.8
22.0
–
–
–
90.8
$m
–
3.7
–
–
(0.2)
3.5
At 30 June 2023, $103.8 million (2022: $88.2 million) of Investments and Other financial assets are
measured at fair value through profit or loss. The remaining $80.8 million (2022: $99.7 million) is
measured at fair value through other comprehensive income including Nyxoah $59.2 million (2022:
$68.2 million) and Seer Medical $19.6 million (2022: $28.7 million).
Valuation of Level 3 investments and other financial assets
Cochlear’s strategic investments in Saluda Medical, EpiMinder, Seer Medical and Precisis are
classified as Level 3 financial instruments. Level 3 in the fair value hierarchy uses unobservable
inputs when measuring fair value (refer to section 6.4 for further details).
134
At 30 June 2023, Saluda Medical and EpiMinder were valued using a Market comparison technique.
For these investments, the fair values are based on the latest market price per latest fundraising
values and using the price per share from the latest financing round which are considered
unobservable inputs. The estimated fair value would increase (decrease) if the prices per the latest
financing round were higher (lower).
Seer Medical and Precisis were valued using a discounted cash flow. The valuation model considers
the present value of the net cash flows expected to be generated by the investees and uses growth
rate and discount rate assumptions which are considered unobservable inputs. The estimated fair
value would increase (decrease) if growth rates were higher (lower) and discount rates were lower
(higher).
The following table summarises the movement in Level 3 investments during the period:
Balance at 1 July 2022
Additions
Fair value loss in investments measured at fair value through
profit or loss
Fair value through other comprehensive income (before tax)
Balance at 30 June 2023
Investments
$m
50.6
–
(6.4)
(9.9)
34.3
Other
financial
assets
$m
68.8
22.0
–
–
90.8
At 30 June 2023, $103.8 million (2022: $88.2 million) of Level 3 Investments and Other financial
assets are measured at fair value through profit or loss and $21.3 million (2022: $31.2 million)
measured at fair value through other comprehensive income.
A 10% increase/(decrease) in the fair value of level 3 valuations would have a $10.4 million
gain/(loss) on P&L and $2.1 million gain/(loss) on OCI.
Equity-Accounted Investments
During the period, Cochlear invested $17.9 million in Precisis AG in ordinary shares ($3.7 million)
and convertible notes ($14.2 million). The additional investment resulted in Cochlear’s ownership
interest, on an as converted and undiluted basis, exceeding 20% with the interest held in shares
(4.3%) being classified as an associate from December 2022. Cochlear has recognised a loss of $0.2
million which represents Cochlear’s proportionate share of Precisis AG’s net loss since being
classified as an associate.
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5.6 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.
2023
Warranties
Legal and
insurance
Product
recall
Make good
lease costs
Opening balance
Provision made
Provision used
Effect of movements in
foreign exchange
Total provisions
Represented by:
Current
Non-current
Total provisions
Warranties
$m
37.5
25.9
(23.0)
0.3
40.7
16.1
24.6
40.7
$m
7.0
–
(1.2)
–
5.8
5.5
0.3
5.8
$m
7.4
–
(0.1)
–
7.3
0.7
6.6
7.3
$m
4.0
0.2
(0.8)
0.2
3.6
–
3.6
3.6
Total
$m
55.9
26.1
(25.1)
0.5
57.4
22.3
35.1
57.4
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 from 2 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 has a present obligation
and can reliably estimate future costs related to these proceedings, including legal fees, a provision
is recognised.
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.
135
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 2023.
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 lease payments do not include an element for the repairs
and overhauls.
5.7 Contingent liabilities
Contingent liabilities are disclosed where a provision is not recognised due to the uncertainty
regarding the outcome of future events and/or inability to reliably measure such liabilities. The
details of contingent liabilities are set out below and in Note 5.4 Proposed acquisition of Oticon
Medical. 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.
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. The outcome of these discussions are not expected to result in a significant adverse
outcome for Cochlear.
Claims made by the University of Pittsburgh in September 2021 and previously disclosed as a
contingent liability have been discontinued.
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.
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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.
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. The lease liability includes the lease of Cochlear Global
Headquarters in Sydney, Australia until 2035.
Regulatory actions
Cochlear operates in multiple overseas jurisdictions and is currently, and/or is likely from time to
time to be, subject to payment claims and tax, customs and regulatory reviews, audits and
investigations by governments, authorities and regulators. Individual significant confidential
investigation(s) by an authority are not disclosed, as disclosure may prejudice Cochlear.
5.8 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 reset 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, which comprises the initial
amount of the lease liability adjusted for any lease payments made at or before the commencement
date less any lease incentives received.
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 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 year
ended 30 June 2023, lease interest was $6.7 million (2022: $6.6 million). 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). Total cash outflows
related to leases was $38.5 million for the year ended 30 June 2023 (2022: $32.2 million).
The following table shows movements in the right of use assets during the year:
Balance at 1 July 2022
Additions
Remeasurement
Depreciation expense
Effect of movements in foreign exchange
Balance at 30 June 2023
Land and
buildings
$m
169.6
12.5
2.1
(25.9)
1.8
160.1
Other
assets
$m
9.4
5.3
–
(4.4)
0.1
10.4
Total
$m
179.0
17.8
2.1
(30.3)
1.9
170.5
136
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6. Capital and financial structure
6.1 Capital management
6.2 Capital and reserves
Share capital
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 CAGR 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. There were no significant changes in Cochlear’s approach to capital management
during the year.
The Company does not have authorised capital or par value in respect of its issued shares.
On issue 1 July – fully paid
Issued under Employee Share Plan
Issued from exercise of APAC Equity Plan
Issued from the exercise of performance rights
Shares cancelled from share buy-back
On issue 30 June – fully paid
Total number of issued shares
2023
2022
65,775,339
65,744,078
450
1,195
4,665
(110,000)
65,671,649
236
1,075
29,950
–
65,775,339
For the FY20-22 LTI plan, 0% vested based on the performance over 3 years period (FY20-FY22), as
result of it, nil shares were purchased under the plan in 2023 financial year (2022: 16,766 shares),
and 450 shares were issued to employees under the Employee Share Plan (2022: 236 shares).
The on-market share buy-back commenced on 8 March 2023. For the financial year ended 30 June
2023, 110,000 shares were cancelled out of the 124,000 shares bought back on market.
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.
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.
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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.
Treasury shares reserve
The reserve comprises the cost of the Cochlear Limited’s shares held by the Group.
When shares recognised as equity are repurchased, the amount of the consideration paid, including
directly attributable costs, are recognised as a deduction from equity. Repurchased shares are
classified as treasury shares and are presented in the treasury share reserve.
When treasury shares are cancelled, the consideration paid is transferred to share capital. When
treasury shares are issued to employees to satisfy vesting of employee share plans the consideration
paid is transferred to the share-based payment reserve.
At 30 June 2023, the Group held 58,658 of Cochlear Limited’s shares (2022: nil)
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. As at 30 June 2023, Cochlear has no borrowings.
Debt establishment costs are capitalised and an amount of $1.5 million (2022: $1.0 million) in
relation to unamortised loan establishment fees has been recognised in prepayments. They are
recorded initially at cost and are amortised over the period of the loan.
Cash
Cash and cash equivalents
Total cash
Less: Total borrowings
Current
Total borrowings
Net cash
Gearing ratio
Total borrowings
Total equity
Gearing ratio1
1 Gearing ratio = Total borrowings/Total equity.
Financing arrangements
2023
$m
555.5
555.5
–
–
555.5
2023
$m
–
1,748.8
0.0%
2022
$m
629.3
629.3
(42.6)
(42.6)
586.7
2022
$m
42.6
1,685.7
2.5%
Multi-option bank facilities
Other credit facilities
Unsecured
bank loan
Bank
guarantees2
$m
$m
Unsecured
bank
overdrafts
$m
Unsecured
bank loan
Bank
guarantees2
$m
$m
2023
Utilised at reporting date1
Not utilised at reporting date
Total facilities
2022
Utilised at reporting date1
Not utilised at reporting date
–
350.0
350.0
42.6
300.0
15.0
5.0
20.0
6.0
9.0
–
3.0
3.0
–
2.9
–
–
–
–
4.8
9.1
3.7
12.8
6.4
2.9
Total facilities
1 Excludes the amount of $1.5 million (2022: $1.0 million) in relation to unamortised loan establishment fees.
2 Bank guarantees include standby letters of credit.
342.6
15.0
2.9
4.8
9.3
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Multi-option bank facilities – Unsecured bank loan
6.4 Financial risk management
During the year ended 30 June 2023, 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
4-5
year
term
$m
5-6
year
term
$m
Total
facilities
$m
6-7
year
term
$m
Committed debt
including guarantees
–
–
–
100.0
150.0
100.0
20.0
370.0
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.
Bank guarantees/Standby letters of credit
The activities of Cochlear are exposed to a variety of risks, including market risk (comprising
currency, interest rate and equity price 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
Standard. 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 and Risk Committee on a regular basis.
The Audit and Risk Committee oversees how management monitors compliance with Cochlear’s
Risk Management Standard, 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 Management
Policy.
As at 30 June 2023, Cochlear had additional facilities denominated in USD, Euros (EUR), Sterling
(GBP), Indian rupees and New Zealand dollars totaling AUD 12.8 million (2022: AUD 9.3 million).
Currency risk
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 is exposed to currencies other than the respective functional currencies of the controlled
entities, primarily AUD, Swiss francs (CHF), Chinese yuan (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 Management Policy. Risk
resulting from the translation of assets and liabilities of foreign operations into Cochlear’s reporting
currency is not hedged.
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Cochlear’s exposure to foreign currency risk in relation to non-derivative financial instruments at 30
June 2023 was as follows, based upon notional amounts:
Amounts in foreign
currency/millions
2023
Trade receivables
Trade payables
CHF
CNY
EUR
GBP
JPY
SEK
USD
1.0
41.1
70.6
4.0 1,098.7
0.6
110.4
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.
(1.2)
(44.4)
(28.3)
(7.7)
(60.4)
(64.9)
(25.7)
In the year ended 30 June 2023, all cash flow hedges were effective at the reporting date.
Balance sheet exposure
(0.2)
(3.3)
42.3
(3.7) 1,038.3
(64.3)
84.7
2022
Trade receivables
0.5
18.3
49.4
3.1 1,126.4
5.9
101.7
Unsecured bank loan
–
–
–
–
–
(300.0)
–
Trade payables
(1.3)
(57.4)
(23.1)
(5.8)
(79.1)
(108.2)
(25.1)
Balance sheet exposure
(0.8)
(39.1)
26.3
(2.7) 1,047.3
(402.3)
76.6
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 2023, 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.
140
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:
Amounts
In AUD
2023
Buy CHF
Sell EUR
Sell GBP
Sell JPY
Buy SEK
Sell USD
Total
2022
Buy CHF
Sell EUR
Sell GBP
Sell JPY
Buy SEK
Sell USD
Total
Weighted average
rate
<1 year
$m
1-2 years
$m
0.611
0.625
0.554
85.643
7.095
0.690
0.664
0.627
0.548
82.331
6.629
0.732
(31.5)
112.7
29.5
17.9
(36.6)
313.3
405.3
(21.8)
131.9
20.1
18.4
(40.0)
258.6
367.2
–
82.4
18.5
9.3
–
154.8
265.0
–
61.1
9.1
8.5
–
159.6
238.3
140
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Currency risk – Sensitivity analysis
(b) Credit risk
An analysis based on a 10% strengthening of foreign currencies would have increased Cochlear’s
profit for the year ended 30 June 2023 after tax by approximately AUD 10.8 million (2022: increased
profit by AUD 9.5 million) and decreased Cochlear’s equity by AUD 65.7 million (2022: decrease by
AUD 58.8 million). A 10% weakening of the foreign currencies would have decreased Cochlear’s
profit for the year ended 30 June 2023 after tax by approximately AUD 9.8 million (2022: decreased
profit by AUD 9.9 million) and increased equity by AUD 26.4 million (2022: increase by AUD 25.2
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
2023
0.632
4.698
0.644
0.558
92.632
7.110
0.675
2022
0.674
4.685
0.643
0.546
85.242
6.696
0.724
2023
0.595
4.798
0.609
0.524
95.900
7.181
0.662
2022
0.657
4.607
0.658
0.567
94.010
7.037
0.688
Interest rate risk is managed through the management of net debt, interest expense and cost of
finance. Cochlear is exposed to movements in the Australian interest rates in relation to corporate
debt, leases and cash.
At the reporting date, the interest rate profile of Cochlear’s interest-bearing financial instruments
is financial assets of $555.5 million (2022: $629.3 million) and financial liabilities of $0.0 million
(2022: $42.6 million).
Interest rate risk – Sensitivity analysis
At 30 June 2023, Cochlear was in a net financial asset position. A one percent increase in interest
rates would have increased Cochlear’s profit after income tax and equity by approximately $3.0
million (2022: increased profit by $3.9 million). A one percent decrease in interest rates would have
decreased Cochlear’s profit after income tax and equity by approximately $2.1 million (2022:
reduced profit by $0.8 million).
141
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. In determining concentrations of credit risk, management
assesses the characteristics of customers which include governments, government-supported
universities, clinics, major hospital chains and distributors. Concentrations of credit risk are
determined by assessing different geographical locations of customers and the political and
economic environments they are subject to, which may affect the timely recovery of certain
receivables. The timing of government tenders and distributor sales directly impacts the
concentration risk and management may obtain a letter of credit to minimize the risk. At 30 June
2023 the carrying amount of the receivable from Cochlear's most significant customer was $23.9
million ($25.4 million).
The maximum exposure to credit risk for trade receivables at the reporting date by geographic
region was:
2023
2022
Americas
EMEA
Asia Pacific
$m
129.8
109.5
$m
178.7
129.4
$m
79.9
69.5
Total
$m
388.4
308.4
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.
141
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The group uses an allowance matrix to measure Lifetime Expected Credit Losses of trade receivables
from individual customers. Loss rates are calculated using a 'roll rate' method based on the
probability of a receivable progressing through successive stages of ageing to write-off. Roll rates
are calculated separately for exposures in different segments based on the following credit risk
characteristics - geographic region, political and economic environments, and whether receivables
are covered by a letter of credit. The movement in the allowance for impairment loss during the
current year comprises of $1.4 million in allowance utilised and a further $0.4 million net
remeasurement.
The ageing of Cochlear’s trade receivables and allowance for impairment loss, are as follows:
Trade receivables
Allowance for
impairment losses
2023
$m
309.8
44.8
28.8
9.8
10.4
403.6
49.1
452.7
2022
$m
246.8
36.8
15.8
19.9
6.1
325.4
40.1
365.5
2023
$m
(3.7)
(1.5)
(2.6)
(2.5)
(4.9)
(15.2)
–
(15.2)
2022
$m
(2.6)
(0.7)
(1.5)
(6.1)
(6.1)
(17.0)
–
(17.0)
Trade receivables
net of allowance for
impairment losses
2022
$m
2023
$m
306.1
43.3
26.2
7.3
5.5
388.4
49.1
437.5
244.2
36.1
14.3
13.8
–
308.4
40.1
348.5
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
Other receivables – current
Trade and other receivables
Credit risk management – Cash deposits, term deposits and forward exchange
contracts
The majority of Cochlear’s cash 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.
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
Per
annum
Carrying
amount
Contractual
cash flows
<1
year
1-2
years
2-5
years
>5
years
$m
$m
$m
$m
$m
$m
2023
SEK floating rate loan1
3.23 %
Trade and other payables
Lease liability
–
–
Total
2022
SEK floating rate loan
1.66%
Trade and other payables
Lease liability
Total
–
–
–
270.4
201.8
472.2
42.6
232.7
211.3
486.6
–
–
270.4 270.4
–
–
–
–
–
–
233.9
35.9 31.9
68.7
97.4
504.3 306.3
31.9
68.7
97.4
43.1
43.1
–
232.7 232.4
0.3
–
–
–
–
247.6
35.4
31.8
69.7 110.7
523.4 310.9
32.1
69.7
110.7
1. The SEK loan was fully repaid in May 2023 and therefore there was an effective interest rate on the drawn
balance for 11 months.
It is not expected that the cash flows included in the maturity analysis could occur significantly
earlier or at significantly different amounts.
142
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Derivative assets and liabilities
Valuation of financial assets and liabilities
The following table indicates the periods in which the cash flows associated with Cochlear’s
derivatives are expected to occur:
2023
Assets
Liabilities
Total
2022
Assets
Liabilities
Total
Carrying
amount
$m
Contractual
cash flows
$m
<1 year
1-2 years
$m
$m
5.3
(27.0)
(21.7)
10.8
(28.8)
(18.0)
5.4
(28.3)
(22.9)
10.8
(29.8)
(19.0)
3.7
(21.2)
(17.5)
8.4
(22.8)
(14.4)
1.7
(7.1)
(5.4)
2.4
(7.0)
(4.6)
The expected impact on the Income statement is not considered to be significantly different to the
cash flow impact 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.
143
For financial assets and liabilities measured and carried at fair value, Cochlear uses the following
levels to categorise the valuation methods used:
••
••
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 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
••
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 and assurance services
Auditors of the Company - KPMG:
2023
$
2022
$
– audit and review of consolidated financial reports
1,552,259
1,435,765
– audit and review of subsidiary financial reports
– other assurance services
Total audit and assurance services
Other services
Auditors of the Company - KPMG:
– taxation compliance and advisory services
– other advisory services
Total other services
7.2 Commitments
Capital expenditure commitments
642,016
18,715
614,887
17,824
2,212,990
2,068,476
1,334,339
98,407
977,589
68,824
1,432,746
1,046,413
As at 30 June 2023, Cochlear entered into contracts to purchase property, plant and equipment for
$21.1 million (2022: $22.1 million).
143
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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.
Interest held
2023
2022
%
%
Country of
incorporation/
formation
Company
Cochlear Limited
Controlled entities
Cochlear AG
Cochlear Americas
Cochlear Arabia Regional Headquarter LLC (i)
Cochlear Austria GmbH
Cochlear Benelux NV
Cochlear Bone Anchored Solutions AB
Cochlear Boulder LLC (ii)
Cochlear Brasil Ltda
Cochlear Canada Inc
Cochlear Clinical Services LLC
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.
144
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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Australia
Switzerland
USA
Saudi Arabia
Austria
Belgium
Sweden
USA
Brazil
Canada
USA
Colombia
Germany
Australia
Germany
UK
Australia
France
Australia
Australia
Australia
Australia
Italy
Korea
Australia
Panama
Malaysia
Interest held
2023
2022
%
Cochlear Manufacturing Corporation
Cochlear Medical Device (Beijing) Co., Ltd
Cochlear Medical Device (Chengdu) Co Ltd
Cochlear Medical Device
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 Russia LLC
Cochlear Shared Services S.A.
Cochlear Sweden Holdings AB
Cochlear Taiwan Limited
Cochlear Tibbi Cihazlar ve Saglik Hizmetleri
Limited Sirketi
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Cochlear Verwaltungs GmbH
Cochlear (HK) Limited
Cochlear (Thailand) Limited
Cochlear (UK) Limited (ii)
Medical Insurance Pte Limited
Nihon Cochlear Co Limited
Sichuan Keli ShuangChuang Technology Co Ltd
Sycle, LLC
Sycle.Net Technologies (Canada)
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
51
100
100
(i) Incorporated on 30 June 2022.
(ii) Dormant.
Country of
incorporation/
formation
USA
China
China
India
Mexico
UAE
Sweden
Norway
New Zealand
UK
Russia
Panama
Sweden
Taiwan
Turkey
Germany
Hong Kong
Thailand
UK
Singapore
Japan
China
USA
Canada
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7.4 Parent entity disclosure
Parent entity capital commitments for acquisition of plant and equipment
At, and throughout the financial year ended, 30 June 2023, the parent company of Cochlear was
Cochlear Limited.
As at 30 June 2023, the parent entity entered into contracts to purchase plant and equipment for
$19.6 million (2022: $16.8 million).
Result of the parent entity
Net profit
Other comprehensive (loss)/income
Total comprehensive income
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
Treasury share reserve
Hedging reserve
Share-based payment reserve
Profit reserve
Accumulated losses
Total equity
2023
$m
238.8
(2.3)
236.5
1,275.5
2,045.3
358.4
480.4
1,250.3
(3.2)
(15.3)
94.7
349.0
(110.6)
1,564.9
2022
$m
329.1
(22.2)
306.9
1,367.2
2,034.1
356.5
496.7
1,276.6
–
(12.8)
76.2
308.0
(110.6)
1,537.4
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 5.4
Proposed acquisition of Oticon Medical and Note 5.7 Contingent liabilities.
145
7.5 Deed of Cross Guarantee
Cochlear Limited (the holding entity) together with the wholly-owned subsidiaries set out below
(together referred to as the Closed Group) entered into a Deed of Cross Guarantee (the Deed) on
17 April 2019. As a result, pursuant to ASIC Corporations (Wholly-owned Companies) Instrument
2016/785, the wholly-owned subsidiaries set out below are relieved from the Corporations Act 2001
requirement to prepare and lodge an audited financial report and directors’ report. Under the Deed,
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.
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Set out below is the Income statement, Statement of comprehensive income, a summary of
movements in retained earnings/(accumulated losses) and Balance sheet of the entities party to the
Deed for the year ended 30 June 2023 and 30 June 2022:
Statement of comprehensive income
Income statement
Revenue
Cost of sales
Gross profit
Selling, marketing and general expenses
Research and development expenses
Administration expenses
Other income
Other expenses
Share of losses on equity accounted investments
Results from operating activities
Finance income – interest
Finance expense – interest
Net finance expense
Profit before income tax
Income tax expense
Net profit
2023
$m
1,247.8
(447.5)
800.3
(86.3)
(149.8)
(200.2)
39.0
(117.9)
(0.2)
284.9
20.3
(9.8)
10.5
295.4
(64.4)
231.0
2022
$m
1,169.3
(405.8)
763.5
(69.1)
(133.6)
(156.6)
118.8
(86.4)
–
436.6
3.1
(7.0)
(3.9)
432.7
(91.0)
341.7
Net profit
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 comprehensive income
Retained earnings at beginning of year
Net profit
Dividends recognised
Defined benefit plan actuarial loss
Retained earnings at end of year
2023
$m
231.0
(19.1)
(0.1)
(16.3)
13.7
209.2
263.9
231.0
(197.4)
(0.3)
297.2
2022
$m
341.7
(83.8)
(0.1)
(16.9)
(5.0)
235.9
116.2
341.7
(194.0)
–
263.9
146
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Balance Sheet
Assets
Cash and cash equivalents
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
Other financial assets
Equity-accounted investments
Loans and borrowings – internal
Investments in subsidiaries
Deferred tax assets
Right of use assets
Total non-current assets
Total assets
147
2023
$m
455.9
595.8
3.6
191.2
9.5
23.3
2022
$m
542.7
614.5
8.0
150.3
34.0
18.4
1,279.3
1,367.9
1.6
129.9
153.6
93.6
90.8
3.5
83.6
502.6
49.0
94.9
1,203.1
2,482.4
2.4
118.8
102.6
119.0
68.8
–
122.3
436.0
44.8
104.9
1,119.6
2,487.5
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 liabilities
Total current liabilities
Forward exchange contracts
Loans and borrowings – internal
Employee benefit liabilities
Provisions
Deferred tax liabilities
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
2023
$m
209.0
20.6
–
190.5
1.5
73.7
18.3
21.5
15.2
550.3
6.4
243.4
3.7
12.6
17.1
99.5
382.7
933.0
1,549.4
1,250.3
1.9
297.2
1,549.4
2022
$m
177.8
22.3
42.6
150.1
4.3
54.6
19.1
24.9
15.5
511.2
6.5
264.6
3.8
20.7
21.5
109.8
426.9
938.1
1,549.4
1,276.6
8.9
263.9
1,549.4
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7.6 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 2022 and have not been applied in preparing these
consolidated financial statements. These new standards are not expected to have an effect on the
consolidated financial statements of Cochlear.
7.7 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 2023, see Note 2.6.
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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)
ii)
giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2023 and of its performance for the financial year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
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
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.
b)
c)
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 2023.
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 15th day of August 2023.
Director
Director
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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).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
• giving a true and fair view of the
Consolidated Entity’s financial position
as of 30 June 2023 and of its financial
performance for the year ended on that
date; and
•
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report comprises:
• Balance Sheet as of 30 June 2023
•
Income Statement, Statement of
comprehensive income, Statement of
changes in equity, and Statement of
cash flows for the year then ended
• Notes including a summary of
significant accounting policies
• 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 these requirements.
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.
Key Audit Matters
The Key Audit Matters
we identified are:
• Recoverability of
trade receivables
• Warranty provision.
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.
Recoverability of trade receivables $388.4 million
Refer to Note 6.4(b) Financial risk management, credit risk
The key audit matter
How the matter was addressed in our audit
Recoverability of trade
receivables was considered a
key audit matter due to:
• The varying characteristics
of customers which include
governments, government-
supported universities,
clinics, major hospital chains
and distributors;
• The different geographical
locations of customers and
the political and economic
environments they are
subject to, which may affect
the timely recovery of
certain receivables;
• Trade receivables past due
at the reporting date which
have certain risk
characteristics relevant to
the assessment of
recoverability;
Our procedures included:
• 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 for enforcing
credit limits;
• management’s review of trade receivables
ageing and trade receivables past due for
identification of receivables with greater
credit risk to be included in the expected
credit loss model;
• Assessing the Consolidated Entity’s expected
credit loss model in significant geographies
against the requirements of the accounting
standards;
• Challenging the Consolidated Entity’s view of
credit risk and recoverability in certain locations
and for certain customers by selecting a sample
of significant overdue customer balances with
indicators of credit deterioration. We:
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• The inherent subjectivity
•
involved in the Consolidated
Entity making forward-
looking judgements in
relation to the recovery of
credit risk exposures; and
• The use of an expected
credit loss model required
by AASB 9 Financial
Instruments.
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.
compared management’s assumptions to
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;
• evaluated other evidence including
customer correspondence; and
• questioned the Consolidated Entity’s
knowledge of future conditions which may
impact expected customer receipts and
checked consistency of the results to the
procedures performed above.
• Challenging the Consolidated Entity’s expected
credit loss modelling for customers without a
specific risk by comparing assumptions to
historical patterns of credit losses and
evaluating those assumptions against changes
in general economic conditions in significant
locations.
• 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.
Warranty provision $40.7 million
Refer to Note 5.6 Provisions
The key audit matter
How the matter was addressed in our audit
The warranty provision was
considered a key audit matter due
to:
• The high estimation uncertainty
inherent in the key assumptions
applied by the Consolidated
Entity to determine the warranty
provision;
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;
• The Consolidated Entity’s
evolving product portfolio,
through the introduction of new
generations, where each
product’s design and quality
attributes can impact the key
assumptions;
• 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.
Given the dependence on manually
developed calculations, we involved
our data analytics specialists to
supplement our senior team
members in addressing this key
audit matter.
•
Testing the sensitivity of the warranty
provision by varying key assumptions,
within a reasonably possible range, to
focus our further procedures;
• 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 using data analytic techniques;
• Comparing the forecast claim rates of a
sample of products to actual warranty
claims for that product or actual warranty
claims of previous generations of similar
products;
• Comparing the forecast proportion of
claims that can be repaired and associated
repair costs to historical repair
performance;
• Comparing the forecast replacement cost
to actual manufacturing costs and
challenging forward-looking assumptions
used in the model;
• Enquiring of management responsible for
product design and quality attributes and
the product repair function regarding
product reliability and repairability,
especially in relation to recently launched
products, to challenge the forward-looking
assumptions used in the model;
• 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.
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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.
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;
•
•
implementing necessary internal control 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 and Company’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.
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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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
2023, 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 86 to 107 of the Directors’
report for the year ended 30 June 2023.
Our responsibility is to express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
Auditor’s responsibilities for the audit of the Financial Report
KPMG
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.
Julian McPherson,
Partner
Sydney, 15 August 2023
152
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Additional
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Sustainability data
Sustainability approach
Progress against our targets
Climate-related metrics
Our people
GRI content index
155
157
158
159
160
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Sustainability approach
Sustainability is embedded in our business strategy, recognising the importance of social, environmental and governance
outcomes for our long-term success.
Our approach
Sustainability governance
Sustainability governance framework
Our sustainability approach is integrated with business
strategy. It reinforces our focus on creating positive social
impact at individual and societal levels, while minimising our
environmental impact. It helps guide our strategic priorities,
manage risk and improve performance.
Our approach is informed by our materiality assessment and
business priorities as well as the Global Reporting Initiative
(GRI) framework, the United Nations Sustainable Development
Goals (SDGs) and the United Nations Global Compact (UNGC)
Principles.
We have been signatory of the UNGC since 2022 and support
the Ten Principles in the areas of human rights, labour,
environment and anti-corruption.
The Board is responsible for overseeing the approval and
integration of sustainability initiatives into business strategy
and operations and approving sustainability policies and goals.
The Audit and Risk Committee assists the Board to discharge
its responsibilities in monitoring sustainability performance and
overseeing the implementation of sustainability initiatives and
commitments and reviewing the assessment, management and
response to these risks and opportunities.
The Executive team has responsibility for the implementation
of sustainability strategy, integrating sustainability into
business strategy and operations and reporting progress to the
Audit and Risk Committee.
The global sustainability team reports to the Chief Financial
Officer and is responsible for defining our sustainability
framework, supporting all parts of the business to deliver on
the framework, leading or coordinating key sustainability-
related activities and developing external reporting.
Group risk and assurance is responsible for maintaining the
enterprise risk framework which includes sustainability and
climate-related risks. All employees and contractors are
responsible for compliance with policy and procedure controls
to manage risk.
Board
Oversight of sustainability and initiatives
Audit and Risk Committee
Monitor and review sustainability
performance and initiatives
Executive team
Implementation of sustainability strategy
Global sustainability team
Driving sustainability activities
across the business
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Sustainability approach
Materiality
Our material topics focus on the positive social impact our solutions deliver to
society and reflect our business strategic priorities.
We regularly assess the most significant sustainability topics for our business
and our stakeholders, and our materiality process is aligned to the GRI
Standards.
Our materiality assessment, conducted in 2022, was informed by a market
scan of key sustainability trends, benchmarking against industry peers and
stakeholder engagement. This year we focused on better understanding the
perspective of implant recipients by undertaking surveys in several key markets.
Our contribution to the United Nations Sustainable
Development Goals
The United Nations Sustainable Development Goals (SDGs) are a set of 17
universal goals adopted by all United Nations Member States in 2015. The
goals are a global call to action on sustainable development that aim to end
poverty, protect the planet and ensure all people enjoy healthy lives, peace
and prosperity by 2030. They are applicable to all countries at all stages of
development and are predicated on all sectors of society being involved in their
achievement.
The World Health Organization’s first World Report on Hearing highlights
the relevance of action on hearing care to achieving SDGs. We support the
objectives of the SDGs and recognise their relevance to our business.
We believe that our greatest contributions relate to SDGs 3: good health
and wellbeing, 4: quality education, 5: gender equality, 8: decent work
and economic growth, 9: industry, innovation, infrastructure, 10: reduced
inequalities and 13: climate action. This year we continued to address our
priority SDGs which are also reflected in our material topics.
Material topics
Information about how we are
addressing the topic
Product quality, safety and reliability A lifetime of hearing solutions
Access and affordability
A healthier and more productive society
Health outcomes and socioeconomic
enablement
A healthier and more productive society
Data privacy and cyber security
Sustained value
Awareness and education
A healthier and more productive society
A lifetime of hearing solutions
Customer-centric approach
A lifetime of hearing solutions
Research and innovation
A lifetime of hearing solutions
Energy, emissions and climate
resilience
Environmental responsibility
Employee value proposition
Thriving people
Ethical and sustainable supply chain
Sustained value
Diversity, equity and inclusion
Thriving people
SDGs
3, 9
3, 4, 8, 10
3, 4, 8, 10
8, 9
3, 9
3, 9
3, 9, 13
13
4, 5, 9
8, 9, 10
5, 8
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Progress against our targets
The following table outlines our progress towards the targets defined in our 2022 Sustainability Report, reinforcing our strong positive social impact and the commitment to minimising our
environmental footprint. During FY23 we have achieved several targets and reviewed remaining targets to ensure they remain relevant and appropriate. While several targets will remain
unchanged, others have been revised to reflect the further integration of sustainability into the business strategy.
Targets
A healthier and more productive society
Help over 40,000 people hear with one of our cochlear or acoustic implants.
A lifetime of hearing solutions
FY23 progress
Helped over 44,000 people hear.
We are investing in initiatives to develop a standard clinical pathway for adults.
Target an annual R&D investment of approximately 12% of sales revenue.
Invested over $240m in R&D, 13% of sales revenue.
Thriving people
Maintain or exceed employee engagement score of 80%.
Achieve 40% of female representation in senior management
role (2 levels below the CEO & President) by FY24.
Maintain fair remuneration for equivalent work including
annual review to ensure gender pay equity.
Environmental responsibility
Net-zero emissions in our operations (Scope 1 and 2) by 2030.
Sustained value
Review the Global Code of Conduct and deliver training to all employees in FY23.
Review Supplier Code of Conduct in FY23
Implement Reflect Reconciliation Action Plan (RAP)
and begin developing next RAP in FY23.
Status
Ongoing
On going
Achieved
Ongoing
Achieved
Achieved
On track
Achieved
Achieved
Employee engagement scored maintained at 80%, with
survey inputs incorporated in our culture work.
Women in senior management roles increased to 43%, up 2 points from last year.
Achieved
We continuously monitor remuneration and reward practices to
ensure fairness and equity in our talent management activities
and identify opportunities for further improvement.
Transitioned 5 of our 6 manufacturing sites to renewable energy and identifying
opportunities to move to 100% renewable energy at the remaining site.
Expanded renewable energy use at our non-manufacturing locations.
Published the reviewed Global Code of Conduct and
delivered training to all employees in FY23.
Published the reviewed Supplier Code of Conduct.
Implemented the Reflect RAP and initiated the development of the Innovate RAP.
Achieved
157
25% reduction in our absolute Scope 1 and Scope 2 emissions by 2025.
Reduced Scope 1 and 2 emissions by 68% in relation to the FY19 baseline.
50% reduction in business flight emissions by 2025.
Reduced business flight emissions by 91% in relation to the FY19 baseline.
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Climate-related metrics
Scope 1
• Gasoline and natural gas for our fleet and operations.
Scope 2
• Purchased electricity for our manufacturing and other
facilities.
Scope 3
• We are reporting on business flights only.
• We are currently undertaking a complete Scope 3
inventory and will report on the relevant emission
categories during FY24.
GHG emissions1
Total Scope 12
Total Scope 23
Total Scope 1 & 2
Unit
tCO2e
tCO2e
tCO2e
Emission intensity per unit
KgCO2e/unit
Emission intensity per mAUD KgCO2e/
% Change
from FY19
(Baseline)
124%
-76%
-68%
-79%
-78%
FY23
916
2,401
3,316
14
2
FY22
251
8,693
8,945
41
5
FY21
474
11,793
12,267
68
8
FY20
559
9,115
9,674
66
8
FY19
409
9,825
10,234
66
8
Total Scope 3
(business flights)4
Total Scope 1 to 3
revenue
tCO2e
-91%
1,641
1,046
186
4,774
18,630
tCO2e
-83%
4,957
9,991
12,454
14,448
28,864
Energy
Unit
Direct purchased electricity MWh
Direct purchased natural gas
+ petrol
Total direct purchased
energy
MWh
MWh
Energy intensity per unit
MWh/unit
Energy intensity per mAUD
MWh/revenue
% Change
from FY19
(Baseline)
29%
-62%
8%
-7%
6%
FY23
23,158
5,433
FY22
22,943
2,066
FY21
22,857
1,904
FY20
15,638
1,201
FY19
17,806
5,371
28,591
25,009
24,761
16,839
23,177
0.12
15
0.11
14
0.13
15
0.11
13
0.11
13
1. GHG emissions measured using the Greenhouse Gas (GHG) Protocol as a guiding framework.
2. Scope 1 emissions calculated based on the volume of fuel consumed and emission factors considered most relevant to each region where consumption occurred.
3. Scope 2 emissions calculated based on the electricity consumption and emission factors considered most relevant to each region where consumption occurred. Estimates have been made for certain facilities where actual data was not
available, representing less than 1% of the total Scope 2 emissions.
4. Scope 3 emissions related to business flights only. Travel data obtained from travel management companies. Emissions provided by travel management companies or calculated based on the relevant emission factors applied to the distance
travelled. Total includes 1,641 tCO2e carbon offsets.
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Our people
Our workforce
Engagement
FY23
FY22
Engagement
Female
Male
Female
Male
Employee turnover
%
Number
%
Number
%
Number
%
Number
Engagement score
43%
49%
55%
53%
168
457
1,882
2,507
57%
51%
45%
47%
227
475
1,564
2,266
41%
157
59%
225
48%
55%
52%
406
1,763
2,326
52%
45%
48%
444
1,451
2,120
Total hours of employee formal training
Safety and wellbeing
FY23
8.2%
80%
28.5
Employees
by category
Senior
manager
Management
Operational
Total
Employees
by type and
gender
Permanent
Temporary
Full-time
Part-time
Total
FY23
FY22
Female
Male
Female
Male
%
Number
%
Number
%
Number
%
Number
53%
57%
51%
78%
53%
2,508
83
2,392
199
2,591
47%
43%
49%
22%
47%
2,267
63
2,275
55
2,330
52%
63%
51%
83%
53%
2,327
94
2,229
192
2,421
48%
37%
49%
17%
47%
2,120
56
2,137
39
2,176
Gender diversity in leadership
Women on the Board
Women in senior management
FY23
40%
43%
FY22
33%
41%
FY22
11.1%
80%
24.3
FY19
156
1.9
1
Severity rate
Injury Frequency
TRIFR1
LTIFR2
FY23
263
3.3
2.3
FY22
281
2.5
1.6
FY21
295
2.7
1.5
FY20
192
3.2
1.7
1 Total Recordable Injury Frequency Rate (TRIFR) measures how frequently recordable injuries are occurring.
2 Total Lost Time Injury Frequency Rate (LTIFR) refers to the number of lost time injuries occurring in a workplace per 1
million hours worked.
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GRI Content Index
Cochlear Limited has reported the information cited in this GRI content index for the period from 01 July 2022 to 30 June 2023 with reference to the GRI Standards.
GRI used: GRI 1: Foundation 2021. No sector guidelines apply.
GRI Disclosures
GRI 2: General Disclosures 2021
2-1 Organizational details
Location
About Cochlear - page 3
2-2 Entities included in the organization’s sustainability reporting
About this report - page 1
2-3 Reporting period, frequency and contact point
About this report - page 1
2-4 Restatements of information
Climate-related metrics – page 158 - Total Scope 1 to 3 emissions in FY21 presented in
the 2022 Sustainability Report was adjusted to reflect the correct amount.
Safety and wellbeing - page 159 - Severity rate, TRIFR and LTIFR in FY22 presented in
the 2022 Sustainability Report was adjusted to reflect the correct rates.
2-5 External assurance
Report on the audit of Financial Report - page 150
The sustainability data was internally reviewed and not submitted to external
assurance. The content of this report is approved by the executive team.
2-6 Activities, value chain and other business relationships
Responsible supply chain - page 59
2-7 Employees
2-8 Workers who are not employees
2-9 Governance structure and composition
Our workforce - page 159
Our workforce - page 159
Governance - pages 69 - 72
2-10 Nomination and selection of the highest governance body
2023 Corporate Governance Statement
2-11 Chair of the highest governance body
2-12 Role of the highest governance body in overseeing the
management of impacts
Board of directors - pages 77 - 80
Sustainability governance - page 155
2-13 Delegation of responsibility for managing impacts
Sustainability governance - page 155
Board skills matrix - page 72
2-14 Role of the highest governance body in sustainability reporting
Sustainability governance - page 155
2-15 Conflicts of interest
2-16 Communication of critical concerns
Cochlear Global Code of Conduct
Cochlear Global Code of Conduct
2-17 Collective knowledge of the highest governance body
2023 Corporate Governance Statement
2-18 Evaluation of the performance of the highest governance body
2023 Corporate Governance Statement
2-19 Remuneration policies
Remuneration report - page 86
SDGs
UNGC
16
16
16
16
16
16
16
16
16
16
16
16
16
16
16
8
1, 7
1, 7, 10
1, 7
10
10
1, 7, 10
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Location
SDGs
UNGC
GRI Disclosures
GRI 2: General Disclosures 2021
2-20 Process to determine remuneration
2-21 Annual total compensation ratio
Remuneration report - page 86
Information currently not disclosed.
2-22 Statement on sustainable development strategy
Year in review – pages 9 – 16
2-23 Policy commitments
2-24 Embedding policy commitments
Our pathway to net-zero emissions - page 52
Cochlear Global Code of Conduct
2022 Cochlear Modern Slavery Statement
Cochlear Global Code of Conduct
2-25 Processes to remediate negative impacts
Managing our climate-related sustainability risks - page 53
2-26 Mechanisms for seeking advice and raising concerns
Cochlear Global Code of Conduct
2-27 Compliance with laws and regulations
Creating value responsibly - pages 59 - 61
Environmental management - page 54
Sustainability approach - page 155
Cochlear Global Code of Conduct
2-28 Membership associations
Sustainability approach - page 155
All SDGs
2-29 Approach to stakeholder engagement
Materiality - page 156
2-30 Collective bargaining agreements
Cochlear Global Code of Conduct
GRI 3: Material Topics 2021
3-1 Process to determine material topics
3-2 List of material topics
3-3 Management of material topics
GRI 201: Economic Performance 2016
Materiality - page 156
Materiality - page 156
Sustainability approach - page 155
Materiality - page 156
201-1 Direct economic value generated and distributed
Cochlear at a glance - page 4
201-2 Financial implications and other risks and opportunities due to
climate change
Financial statements - pages 108 - 152
Cochlear at a glance - page 4
Financial statements - pages 108 – 152
201-3 Defined benefit plan obligations and other retirement plans
Defined benefit plans - page 127
201-4 Financial assistance received from government
Other income - page 121
16
8
17
17
1, 2, 7, 8, 10
3, 8, 10
13
16
16
8
16
16
16
16
16
16
16
1, 7
1, 7, 8, 10
7, 8, 9
10
1, 2, 8
3
1, 2, 7, 8
7, 8, 9
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company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
GRI Disclosures
GRI 205: Anti-corruption 2016
Location
205-2 Communication and training about anti-corruption policies and
procedures
Creating value sustainably - page 59
SDGs
UNGC
3, 16
10
GRI 207: Tax 2019
207-1 Approach to tax
GRI 302: Energy 2016
Tax transparency - page 60
1, 10, 17
302-1 Energy consumption within the organization
Climate-related metrics - page 158
302-2 Energy consumption outside of the organization
Climate-related metrics - page 158
302-3 Energy intensity
302-4 Reduction of energy consumption
303-5 Water consumption
GRI 305: Emissions 2016
305-1 Direct (Scope 1) GHG emissions
305-2 Energy indirect (Scope 2) GHG emissions
305-3 Other indirect (Scope 3) GHG emissions
305-4 GHG emissions intensity
305-5 Reduction of GHG emissions
GRI 306: Waste 2020
Climate-related metrics - page 158
Climate-related metrics - page 158
Resource efficiency - page 54
Climate-related metrics - page 158
Climate-related metrics - page 158
Climate-related metrics - page 158
Climate-related metrics - page 158
Climate-related metrics - page 158
306-2 Management of significant waste-related impacts
Resource efficiency - page 54
GRI 308: Supplier Environmental Assessment 2016
308-1 New suppliers that were screened using environmental criteria
Responsible supply chain - page 59
308-2 Negative environmental impacts in the supply chain and actions
taken
Responsible supply chain - page 59
GRI 401: Employment 2016
401-1 New employee hires and employee turnover
Engagement - page 159
GRI 403: Occupational Health and Safety 2018
403-1 Occupational health and safety management system
Supporting the wellness and safety of our teams - page 49
403-3 Occupational health services
Supporting the wellness and safety of our teams - page 49
403-4 Worker participation, consultation, and communication on
occupational health and safety
Supporting the wellness and safety of our teams - page 49
403-5 Worker training on occupational health and safety
Supporting the wellness and safety of our teams - page 49
13
13
13
13
12
13
13
13
13
13
12
8, 9, 10, 13
8, 9, 10, 13
3, 8
3, 8
3, 8
3, 8
3, 8
7, 8, 9
8, 9
7, 8, 9
8, 9
8, 9
8, 9
8, 9
8, 9
8, 9
8, 9
8, 9
8
8
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Financial
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performance
and risk
Financial
statements
Additional
information
Location
SDGs
UNGC
GRI Disclosures
GRI 403: Occupational Health and Safety 2018
403-6 Promotion of worker health
403-7 Prevention and mitigation of occupational health and safety
impacts directly linked by business relationships
403-8 Workers covered by an occupational health and safety
management system
403-9 Work-related injuries
403-10 Work-related ill health
GRI 404: Training and Education 2016
Supporting the wellness and safety of our teams - page 49
Supporting the wellness and safety of our teams - page 49
Supporting the wellness and safety of our teams - page 49
Safety and wellbeing - page 159
Safety and wellbeing - page 159
404-1 Average hours of training per year per employee
Engagement - page 159
404-2 Programs for upgrading employee skills and transition
assistance programs
GRI 405: Diversity and Equal Opportunity 2016
Attracting, developing and retaining talent - page 48
405-1 Diversity of governance bodies and employees
Championing a culture of diversity and inclusion - page 46
GRI 408: Child Labor 2016
408-1 Operations and suppliers at significant risk for incidents of child
labor
Responsible Supply Chain - 59
Cochlear Global Code of Conduct
GRI 409: Forced or Compulsory Labor 2016
409-1 Operations and suppliers at significant risk for incidents of
forced or compulsory labor
Responsible Supply Chain - 59
Cochlear Global Code of Conduct
GRI 411: Rights of Indigenous Peoples 2016
411-1 Incidents of violations involving rights of indigenous peoples
Reconciliation Action Plan
GRI 413: Local Communities 2016
413-1 Operations with local community engagement, impact
assessments, and development programs
Cochlear Foundation
GRI 414: Supplier Social Assessment 2016
414-1 New suppliers that were screened using social criteria
Responsible Supply Chain - 59
414-2 Negative social impacts in the supply chain and actions taken
Responsible Supply Chain - 59
3, 8
3, 8
3, 8
3, 8
3, 8
8
8
5
8
8
1, 8, 10
3, 4, 8, 10
6
5
4
1
8, 9, 10, 13
8, 9, 10, 13
1, 3, 4, 5
1, 3, 4, 5
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company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
GRI Disclosures
GRI 415: Public Policy 2016
415-1 Political contributions
GRI 416: Customer Health and Safety 2016
416-1 Assessment of the health and safety impacts of product and
service categories
GRI 417: Marketing and Labeling 2016
Location
SDGs
UNGC
Public policy engagement - page 61
3, 16
10
Leading on product quality and reliability - page 40
417-1 Requirements for product and service information and labeling
Leading on product quality and reliability - page 40
In addition, our Quality Management System is intended to be compliant with the
following quality management standards, regulations and directives:
• EN ISO 13485:2016
• ISO 13485:2016
• CFR Title 21 Part 820 (US)
• Medical Device Regulation (EU) 2017/745 : 2017
• Active Implantable Medical Device Directive 90/385/EEC
• Therapeutic Good Act 1989
• Therapeutic Goods (Medical Device) Regulations 2002 (Australia)
• Canadian Medical Device Regulation (SOR/98-282)
• MHLW Ministerial Ordinance no. 169 (Japan)
• Medical Device Act (South Korea)
• Good Manufacturing Practices RDC National Health Surveillance Agency
(ANVISA)
• 665/2022 (Brazil)
• NMPA (2014) China No. 64 Order of Good Manufacturing Practice for Medical
Devices.
GRI 418: Customer Privacy 2016
418-1 Substantiated complaints concerning breaches of customer
privacy and losses of customer data
Cyber security - page 59
Data privacy - page 60
3, 9, 12
3, 9, 12
16
164
Cochlear Limited Annual Report 2023
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Our
company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
References
FY23 highlights – page 8
1. Cochlear estimates based on the published economic model
findings of Neve et al 2021. Dollar amount relates to all recipients
implanted with a cochlear implant in FY23 across the developed
markets.
Year in review – pages 9-16
1. Cochlear estimates based on the published economic model
findings of Neve et al 2021. Dollar amount relates to all recipients
implanted with a cochlear implant in FY23 across the developed
markets.
2. Lin FR et al. Hearing intervention versus health education control
to reduce cognitive decline in older adults with hearing loss in the
USA (ACHIEVE): a multicentre, randomised controlled trial. The
Lancet. [ePub ahead of print] DOI: https://doi.org/10.1016/S0140-
6736(23)01406-X. Available at https://www.thelancet.com/
journals/lancet/article/PIIS0140-6736(23)01406-X/fulltext
3. https://www.cms.gov/medicare-coverage-database/view/
ncacal-decision-memo.aspx?proposed=N&ncaid=306
4. Cochlear estimate for cochlear and acoustic implants
5. Cochlear Limited. D1190805 Processor Size Comparison. 2022,
May. # Comparison made using the Compact Battery Module
for Nucleus 8 Sound Processor and the Compact Rechargeable
Battery for Nucleus 7 Sound Processor
6. a. Cochlear Limited. D1864200 SCAN 2 Design Description.
2022, Apr. b. Mauger SJ, Warren C, Knight M, Goorevich M, Nel
E. Clinical evaluation of the Nucleus 6 cochlear implant system:
performance improvements with SmartSound iQ. International
Journal Of Audiology. 2014, Aug; 53(8): 564-576. [Sponsored
by Cochlear] c. Mauger S, Jones M, Nel E, Del Dot J. Clinical
outcomes with the Kanso ™ off-the-ear cochlear implant sound
processor. International Journal Of Audiology. 2017, Jan 9;
1-10. [Sponsored by Cochlear] d. Wolfe J, Neumann S, Marsh
M, Schafer E, Lianos L, Gilden J, O’Neill L, Arkis P, Menapace
C, Nel E, Jones M. Benefits of Adaptive Signal Processing in
a Commercially Available Cochlear Implant Sound Processor.
Otol Neurotol. 2015 Aug;36(7):1181-90. [Sponsored by Cochlear]
e. Cochlear Limited. D1631375 Nucleus 8 Sound Processor
Product Definition. F. Wolfe J, et al. Evaluation of a wireless
audio streaming accessory to improve mobile telephone
performance of cochlear implant users. International Journal of
Audiology. 2016;55(2):75-82. G. Wolfe J, et al. Improving hearing
performance for cochlear implant recipients with use of a digital,
wireless, remote-microphone, audio-streaming accessory. J
Am Acad Audiol. 2015 Jun;26(6):532-9. H. Warren C, Nel E, and
Boyd P. Controlled comparative clinical trial of hearing benefit
outcomes for users of the Cochlear™ Nucleus ® Sound Processor
with mobile connectivity. Cochlear Implants International (2019
Feb); 20(3)19. i. Cochlear Limited. D1964109 Clinical Investigation
Report CLTD5804 – Feb 2022. ¥ When the technology becomes
available for the Cochlear Nucleus 8 Sound Processor, a firmware
update to your sound processor will allow you to connect
to Bluetooth LE Audio compatible devices. † ForwardFocus
is a clinician-enabled feature that can be user-controlled or
automated.
7. https://www.red-dot.org/project/cochlear-nucleus-8-sound-
processor-63928
Growth opportunity – pages 20-21
1. World report on hearing. Geneva: World Health Organization;
2021. Licence: CC BY-NC-SA 3.0 IGO. (https://www.who.int/
activities/highlighting-priorities-for-ear-and-hearing-care).
2. Market penetration estimate based on Cochlear sourced data.
3. a. Mohr et al., 2000.
b. CPI Inflation Calculator (http://www.in2013dollars.com).
c. Estimated from Mohr et al., 2000.
4. The Ear Foundation (2018). Spend2Save Report (2nd Edition).
5. WHO 2021 World Report on Hearing (https://www.who.int/
activities/highlighting-priorities-for-ear-and-hearing-care).
6. Lin FR et al. Hearing intervention versus health education control
to reduce cognitive decline in older adults with hearing loss in the
USA (ACHIEVE): a multicentre, randomised controlled trial. The
Lancet. [ePub ahead of print] DOI: https://doi.org/10.1016/S0140-
6736(23)01406-X. Available at https://www.thelancet.com/
journals/lancet/article/PIIS0140-6736(23)01406-X/fulltext
7. Fact 5. Deafness and hearing loss. World Health Organization
[Internet]. [cited July 2018]. Available from: http://www.who.int/
features/factfiles/deafness/en/.
8. 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.
9. a. 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.
b. 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.
c. Barnett S. A hearing problem. American Family Physician [serial
on the Internet]. (2002, Sep 1), [cited July 3, 2018]; 66(5): 911.
10. a. 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.
b. 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.
11. a. 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 Internet]. (2006,
Sep), [cited July 3, 2018]; 45(9): 503-512.
b. Nachtegaal J, Festen J, Kramer S. Hearing ability in working
life and its relationship with sick leave and self-reported work
165
Cochlear Limited Annual Report 2023 Contents
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company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
productivity. Ear And Hearing [serial on the Internet]. (2012, Jan),
[cited July 3, 2018]; 33(1): 94-103.
c. 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.
Key market segments – pages 22-23
1. WHO 2021 World Report on Hearing (https://www.who.int/
activities/highlighting-priorities-for-ear-and-hearing-care).
2. 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.
A healthier and more productive society –
pages 26-32
1. Market penetration estimate based on Cochlear sourced data.
2. Fact 5. Deafness and hearing loss. World Health Organization
[Internet]. [cited July 2018]. Available from: http://www.who.int/
features/factfiles/deafness/en/.
3. 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. doi:10.1001/jamaoto.2020
4. Hearing Loss and Incident Dementia, Arch Neurol. 2011;68(2):214-
220. doi:10.1001/archneurol.2010.362, https://www.ncbi.nlm.nih.
gov/pmc/articles/PMC3277836/
5. http://www.achievestudy.org/
6. Lin FR et al. Hearing intervention versus health education control
to reduce cognitive decline in older adults with hearing loss in the
USA (ACHIEVE): a multicentre, randomised controlled trial. The
Lancet. [ePub ahead of print] DOI: https://doi.org/10.1016/S0140-
6736(23)01406-X. Available at https://www.thelancet.com/
journals/lancet/article/PIIS0140-6736(23)01406-X/fulltext
7. Tordrup et al 2022. Global return on investment and cost-
18. https://www.infanthearing.org/nhstc/docs/Year%202019%20
effectiveness of WHO’s HEAR interventions for hearing loss:
a modelling study. The Lancet. https://www.thelancet.com/
journals/langlo/article/PIIS2214-109X(21)00447-2/fulltext
8. 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. doi:10.1001/jamaoto.2020
9. World report on hearing. Geneva: World Health Organization;
2021. Licence: CC BY-NC-SA 3.0 IGO. (https://www.who.int/
activities/highlighting-priorities-for-ear-and-hearing-care).
10. The Ear Foundation (2018). Spend2Save Report (2nd Edition).
11. Neve et al 2021
12. WHO 2021 World Report on Hearing (https://www.who.int/
activities/highlighting-priorities-for-ear-and-hearing-care), page
98.
13. Cost-benefit analysis of First Voice’s early intervention program:
Deloitte Access Economics 2017 p2.
14. WHO 2021 World Report on Hearing (https://www.who.int/
activities/highlighting-priorities-for-ear-and-hearing-care), page
49.
15. Monteiro et al 2012.
16. Monteiro et al 2012.
JCIH%20Position%20Statement.pdf
A lifetime of hearing solutions – pages 33-42
1. a. Related to the implant when used in accordance with product
labelling.
b. Profile Plus. As of 30 December 2022, no complaints in relation
to the device when undergoing MRI have been received.
2. Cochlear Limited. D1619303 Software History Timeline. Data on
file.
3. Dillon H, James A, Ginis J. Client Oriented Scale of Improvement
(COSI) and its relationship to several other measures of benefit
and satisfaction provided by hearing aids. J Am Acad Audiol.
1997, Feb (1)8:2743. 2.
4. International Standard ISO 5841-2. Implants for Surgery —
Cardiac Pacemakers — Part 2: Reporting of Clinical Performance
of Populations of Pulse Generators or Leads. Geneva
(Switzerland): International Organization for Standardization.
5. European Consensus Statement on Cochlear Implant Failures and
Explantations. Otol Neurotol. 2005 Nov;26(6):1097-9.
6. ANSI/AAMI CI86. Cochlear implant systems: Requirements for
safety, functional verification, (2017). Arlington, VA: American
National Standards Institute.
17. a. Livingston G, Sommerlad A, Orgeta V, Costafreda S, Huntley
7. Based on implant generations released within a comparable
period with 5+ years of CSP data.
Sustained value – pages 55-61
1. https://supplynation.org.au/wp-content/uploads/2018/08/
Sleeping-Giant-Report.pdf
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.
b. 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.
c. 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.
d. Barnett S. A hearing problem. American Family Physician [serial
on the Internet]. (2002, Sep 1), [cited July 3, 2018]; 66(5): 911.
166
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company
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FY23
Strategy and value
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Financial
Governance
performance
and risk
Financial
statements
Additional
information
Notes
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Our
company
Review of
FY23
Strategy and value
creation
Financial
Governance
performance
and risk
Financial
statements
Additional
information
Shareholder information
The shareholder information presented is applicable as at 28 July 2023.
Twenty largest shareholders
Substantial shareholders
Investor
BlackRock Inc
State Street Corporation
ABP (Algemen Burgerlijk PSF)
Pinnacle Investment Management Group Limited
Total
Number of ordinary shares
4,477,869
3,863,824
3,541,229
3,299,003
15,181,925
%
6.82
5.88
5.39
5.02
23.12
Distribution of shareholders
Number of shares held
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
40,227
2,472
102
64
19
42,884
10.06
7.22
1.06
2.12
79.54
100.00
All shares above are fully paid ordinary shares, each carrying one voting right.
Non-marketable parcels: 245 shareholders held less than a marketable parcel of ordinary
shares, based on the closing market price on 28 July 2023 of $239.07.
Unquoted equity securities
As at 28 July 2023, there were 243,155 options and 152,650 rights over unissued ordinary
shares.
On market buy-back
On 15 February 2023, Cochlear announced its intention to buy-back up to $75 million of its fully
paid ordinary shares. A total of $29.6 million was spent up to 30 June 2023.
Securities purchased on-market
44,658 ordinary shares were purchased on-market under or for the purposes of an employee
incentive scheme, with the average price paid per security being $239.81.
Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
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
HSBC Custody Nominees (Australia) Limited-
GSCO ECA
Australian Foundation Investment Company Limited
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd Hub24 Custodial
Serv Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
14 Mr Christopher Graham Roberts
Custodial Services Limited
HSBC Custody Nominees (Australia) Limited - A/C 2
BNP Paribas Nominees Pty Ltd ACF Clearstream
HSBC Custody Nominees (Australia) Limited
Cochlear Incentive Plan Pty Ltd
BNP Paribas Nominees Pty Ltd
15
16
17
18
19
20
Total
Number of
ordinary shares
29,384,578
% of issued
capital
44.75
9,404,348
6,098,155
2,009,236
1,644,075
792,246
451,702
396,188
324,174
305,565
256,551
253,816
176,502
172,387
152,756
133,789
115,215
109,229
101,003
61,520
14.32
9.29
3.06
2.50
1.21
0.69
0.60
0.49
0.47
0.39
0.39
0.27
0.26
0.23
0.20
0.18
0.17
0.15
0.09
52,343,035
79.71
The 20 largest shareholders held 79.71% of the ordinary shares of the Company.
168
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company
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Strategy and value
creation
Financial
Governance
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and risk
Financial
statements
Additional
information
Directory
Cochlear headquarters
1 University Avenue
Macquarie University NSW 2109
Australia
Telephone: +612 9428 6555
Fax: +612 9428 6353
Website: www.cochlear.com
Shareholder enquiries
Calendar of events*
Annual general meeting
19 September 2023
Record date for final dividend
11 October 2023
17 October 2023
Payment date for final dividend
Annual general meeting
16 February 2024
HY24 results announced
22 March 2024
15 April 2024
Record date for interim
dividend
Payment date for interim
dividend
The annual general meeting of Cochlear Limited will be
held on 17 October 2023 at 10.00am. Further details will be
provided in the Notice of Meeting, which will be provided to
shareholders in mid-September 2023. The Notice of Meeting
will also be available on the ASX Company Announcements
Platform and the website, www.cochlear.com.
Access to shareholding information is available to investors
through Cochlear’s share registry Computershare.
15 August 2024
FY24 results announced
* Indicative dates only and subject to change.
Company secretary
Ray Jarman
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
Auditor
KPMG
Level 38, Tower Three, International Towers Sydney
300 Barangaroo Avenue
Sydney, NSW, 2000
Telephone: +612 9335 7000
Website: www.kpmg.com.au
169
Cochlear Limited Annual Report 2023
Hear now. And always
Cochlear is dedicated to helping people with moderate to profound hearing loss experience a world full of hearing.
As the global leader in implantable hearing solutions, we have provided more than 700,000 devices and helped
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 next generation technologies.
We collaborate with leading clinical, research and support networks to advance hearing science and improve care.
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 6353
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 follow the directions for use. Not all
products are available in all countries. Please contact your local Cochlear representative for product information.
ACE, Advance Off-Stylet, AOS, Ardium, AutoNRT, Autosensitivity, Baha, Baha SoftWear, BCDrive, Beam, Bring Back the Beat, Button, Carina, Cochlear,
Sound, DermaLock, Freedom, Hear now. And always, Hugfit, Human Design, Hybrid, Invisible Hearing, Kanso, LowPro, MET, MP3000, myCochlear, mySmartSound, NRT, Nucleus, Osia, Outcome Focused Fitting, Off-Stylet, Piezo Power, Profile,
Slimline, SmartSound, Softip, SoundArc, True Wireless, the elliptical logo, Vistafix, Whisper, WindShield and Xidium are either trademarks or registered trademarks of the Cochlear group of companies.
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© Cochlear Limited 2023. D2121224 V1 2023-08