Cochlear Ltd (ASX: COH) is a global leader in implantable hearing solutions. Cochlear has provided more than 550,000 implantable devices to all ages. Cochlear has a market capitalisation of $13.56 billion.
What are the results from Cochlear HY20 results?
- Sales revenue for HY20 is A$18,894, up 5% at constant currency (CC) compared with the corresponding period.
- Cochlear implants units for HY20 is 18,894, up 13% compared with the corresponding period.
- Net profit (reported) for HY20 is A$157.7 million, up 22% at CC compared with the corresponding period.
- Net profit (underlying) for HY20 is A$132.7 million, in line with the corresponding period.
- Basic earnings per share is A$2.73, up 22% compared with the corresponding period.
- Interim dividend per share for HY20 is A$1.60 (fully franked), up 3% compared with the corresponding period.
What are the drivers of this result?
A key driver of this result was the growth in implant revenue.
CEO and President Dig Howitt said:
The Nucleus ProfileTM Plus Series cochlear implant has been well-received by the market since its launch late in FY19 with developed market units growing by 7%. The US rebounded strongly, growing units by over 10%, with improvements in market share since the launch. Western Europe also experienced an improvement in momentum with availability of the new implant expanding across the half. Units increased by 5% with growth weighted to the second quarter.
Another key point is that sales of units in emerging markets increased by over 20%, with growth delivered across many regions including the Middle East and China.
What is the outlook for Cochlear?
Cochlear’s management notes that FY20 guidance is as follows:
- Net profit for FY20 is A$270 – A$290 million, a 2-9% increase on underlying net profit for FY19. This follows the downgraded earnings that Cochlear announced on the 11 February 2020 from A$290 – A$300 million (9 – 13% increase on underlying net profit).
A few main points on Cochlear outlook are as follows:
- Cochlear expects strong growth in cochlear implant units in developed markets driven by the recent launch of the Nucleus Profile Plus Series cochlear implant.
- Cochlear expects to release the new osseointegrated steady-state implant (OSIA) product later in FY20 to extend the Acoustics product portfolio.
- Capital expenditure to increase to around $180 million, including the continued development of the China manufacturing facility, fitout of the new, larger Denver office as well as investment in IT platforms to strengthen connected health, digital and cyber security capabilities.
Finally, CEO and President Dig Howitt said on Cochlear outlook:
We expect to continue to deliver growth in revenue and earnings in the coming years, underpinned by the investments made in product development and market growth initiatives. The balance sheet and free cash flow generation remain strong and we target a dividend pay-out ratio of around 70% of underlying net profit.
What is the market reaction?
The market reaction to Cochlear is negative. Cochlear is down 3.5% and is currently trading at A$225.75. Currently, Cochlear is very expensive with a forward P/E ratio in the high-forties and an annual dividend yield of 1.5%.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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