The Cochlear Limited (ASX: COH) share price has bounced in morning trade after recording a 28% jump in underlying profit for the first half of FY22.
Keep up to date with the February 2022 reporting season calendar.
Cochlear share price up on strong divisional performance
Currently, the Cochlear share price is up 6.10% to $201.86.
Key financial results for the half ending 31 December include:
- Revenue of $815 million, increasing 10% year-on-year (YoY)
- Underlying net profit of $158 million, jumping 26% YoY
- Statutory net profit of $169 million, down 28% YoY
- Interim dividend of $1.55 per share, a 35% improvement
The two standout divisions were Services and Acoustics, which reported 21% and 40% growth respectively.
Services benefitted from a growing customer base and a shift to upgrading existing implants when surgeries were limited by COVID.
Acoustics profited from strong demand for new products in addition to conducting previously delayed surgeries.
Overall, revenue was supported by a 7% increase in Cochlear implant units, led by strong demand in emerging markets such as China.
This was offset by falling sales in developed markets, which were impacted by increased pandemic-induced hospitalisations.
The US was the most notable shortfall, in addition to Australia. Continental Europe volumes exceed pre-pandemic levels, while the UK is still recovering.
Cost control leads to bumper earnings and dividend
Unlike other health companies such as Resmed Inc (ASX: RMD), inflation doesn’t look to be impacting Cochlear.
Over the half, its gross margin improved 300 basis points to 75%.
Moreover, expenses grew at a relatively slower pace than revenue while spending in areas like travel remain below pre-COVID levels.
Subsequently, underlying profit expanded 26% enabling the Cochlear Board to increase its dividend considerably.
EXPLAINED: The difference between underlying and statutory profit
The statutory profit fall is largely related to one-off gains in the prior period, including $17.2 million in government assistance and a large innovation fund gain.
What’s next for the Cochlear share price?
The Cochlear share price will be supported after management reaffirmed FY22 guidance.
Management expects an underlying net profit between $265 million to $285 million, a 13% to 22% improvement on FY21.
The forecast includes cloud computing expenses, in addition to continuing COVID impacts no worse than the first half.
Current second-half trading remains impacted by the pandemic, with staffing shortages delaying surgeries.
As a result, Cochlear expects implants growth to fall with greater weight allocated to Services and Acoustics.
“Despite the ongoing disruption to surgeries caused by COVID, we continue to be confident of the resilience of our hearing implant business over the longer term”