The Cochlear Limited (ASX: COH) share price will be in focus today after the hearing device business revealed that its HY21 underlying profit declined, but it’s expecting growth in the second half.
What happened in Cochlear’s result?
Cochlear announced that its sales revenue declined by 4% to $742.8 million, with the first quarter down 8% and the second quarter up 7% (in constant currency terms). This was with cochlear implant units being down 8% to 17,377.
The healthcare business said it experienced improving momentum across the half as surgeries recovered following COVID shutdowns.
There was strong growth in the US, Japan, South Korea and China, with improving momentum in Europe. However, there has been a slower recovery across most emerging markets.
Underlying EBIT (EBIT explained) dropped by 4% to $175.6 million. Underlying net profit after tax (NPAT) fell by 6% to $125.3 million. Cochlear said that this was driven by a solid recovery in sales revenue and lower operating expenses due to material COVID-related savings.
However, the statutory net profit saw a large increase of 50% to $236.2 million. This includes three different elements: $59 million for patent litigation-related tax and other benefits, $17.2 million of COVID-19 government assistance and $34.7 million of innovation fund gains (including the revaluation of investments and equity accounted losses).
The innovation fund has made several small investments in companies with technologies that may help Cochlear over the longer term. The $34.7 million in non-cash gains related to Nyxoah and EpiMinder. Nyxoah listed in September.
Cochlear dividend
Cochlear’s board has decided to re-introduce the dividend as a result of improving trading conditions and cashflow generation.
It will pay out 60% of its underlying net profit, equating to an interim dividend of $1.15 per share – down 28%.
It’s going to return jobkeeper
Cochlear has decided to repay $24.6 million of government assistance as trading conditions improved. It said it was the appropriate thing to do.
FY21 outlook
Cochlear said that it’s expecting to deliver underlying net profit of $225 million to $245 million, which would be a 46% to 59% increase compared to FY20.
It’s expecting further improvements over the rest of the financial year, however the strength of the Australian dollar is expected to have a material impact on second half profit with over 95% revenue derived from overseas while only 50% of expenses are in foreign currencies.
Considering the high level of COVID-19 disruption, this was a solid result and it’s promising that it’s expecting big profit growth for the whole year.
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