Cochlear Limited earnings results

CommSec CommSec

 

19 February 2019

Results ($m)

Half Year 2019

Half Year 2018

Change

Sales Revenue

711.9

639.6

+11%

Bloomberg Consensus

713.5

 

 

Cochlear Implant Units

16,740

15,972

+5%

Earnings (EBIT)

177.0

160.4

+10%

Reported Net Profit

128.6

110.8

+16%

Net Profit margin (%)

18

17

+100bps

Interim Dividend ($)

1.55

1.40

+11%

Cochlear Ltd (COH) lifts sales for the half but implant growth expected to slow 

 

Results

  • Hearing implant maker Cochlear Ltd (COH) has reported a 16% increase in first half net profit to $128.6 million with sales revenue lifting 11% to $711.9 million for the period ending 31 December 2018. Looking at a constant currency (CC) change, which removes the impact of foreign exchange fluctuations, sales revenue was 6% higher, while net profit growth remained at 16%.

Drivers

  • Of Cochlear’s three main products and services, Cochlear implants is the largest and contributes most to total sales, making up 58% of total sales revenue. Over the half, implant revenue grew 5% (0% growth CC) and came in at $413.9 million, with the number of units sold also increasing 5% to 16,740. COH did experience a weaker growth rate in the US and loss of market share following the launch of a competitor product, but growth remained strong in Japan and emerging markets. 
  • Services is the next biggest contributor to total revenue, approximately 29%, with revenue of $207 million. That figure is up 28% (21% CC) on the first half of FY18 as more existing users get upgrades, particularly for the Nucleus 7 sound processor. The Acoustics segment saw sales revenue of $90.8 million, 7% growth in reported terms but only 1% higher in CC terms. 
  • The Americas (US, Canada & Latin America) remains the largest region with nearly 50% of total sales followed by EMEA (Europe, Middle East & Africa) with 35% share and lastly Asia Pacific with 16%. Sales grew in each region but was slowest in the Americas.

Dividend

  • COH will pay an interim dividend of $1.55 per share fully franked, up 11% on the previous year. The ex-dividend date will be 25 March 2019 and it will be paid to eligible shareholders on 16 April 2019.

Outlook

  • Guidance for FY19 has been maintained with net profit expected to be in the range of $265-$275 million, up 8-12% on FY18. COH anticipates that the implant growth rate in its developed markets will slow over the remainder of the financial year on increased competition, while the services business is expected to maintain strong revenue growth.

Share price

  • COH shares slumped on the release of the interim result amid its outlook of slowing growth for its major markets of the US & Europe. Cochlear’s share price has so far underperformed the ASX 200 index for calendar year 2019.

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