Cochlear (COH) SNAPSHOT
Profile: Cochlear Limited (COH) is a top 50 ASX listed company which develops hearing implants and aids, including cochlear implants, bone conduction implants and acoustic implants. Its key products include the Cochlear Nucleus System and the Cochlear Baha System. Headquartered in Sydney, COH distributes its products in over 100 countries.
History: In 1978, professor Graeme Clark invented the world’s first successful multichannel cochlear implant. Cochlear commenced commercial operations in 1981 as part of the Nucleus group. COH listed on the ASX in 1995. It completed the acquisition of Entific Medical systems and its Baha product in 2006.
Earnings composition: In FY19, Cochlear Implants generated $845m (58%) of sales revenue. Services generated $427m (30%) and Acoustics reported $174m (12%) of sales. Taking a regional view of FY19 revenue, America’s produced $689m (48%), EMEA generated $519m (36%) and Asia Pacific reported $238m (16%).
Most recent result – 1H20: EBIT increased 2% to $184m, from $181m in the prior corresponding period (pcp), and was also up 2% on a constant currency (cc) basis. Underlying NPAT was $133m, in line with the pcp as operating profit growth was offset by foreign currency contract losses. Sales revenue increased 9% (5% cc) to $778m. This was driven by a strong performance in Cochlear Implants, where revenue increased 14% (9% cc) to $470m as unit sales increased 13% to 18,894. Unit sales in developed markets increased 7%, while emerging market volumes increased 20%. Services revenue increased 9% to $226m (up 5% on cc). Acoustics revenue declined 9% (13% cc) on the pcp to $82m, due to a combination of competitor product launches and slower sales from customers anticipating the launch of the next generation device, the Cochlear Osia 2 System. A dividend of $1.60 was declared, up from $1.55 in the pcp.
Company outlook: COH expects an FY20 NPAT of $270-$290m, up 2-9% on FY19 (the guidance was downgraded from $290-$300m due to COVID-19 impacts in Greater China). The company expects strong 2H20 cochlear implant unit growth in developed markets. Services revenue is expected to grow at a lower rate than previous years. Acoustics revenue is expected to decline in FY20.
Important dates: Ex-dividend date is 24 March 2020. Payment date is 17 April 2020. FY20 results are scheduled for 18 August 2020.
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