The Cochlear Ltd (ASX: COH) share price dropped 7% in response to the company’s FY24 result.
Cochlear is a business that provides devices and software to help people hear.
Cochlear FY24 result
Here are some of the highlights from the 12 months to 30 June 2024:
- Revenue increased 15% to $2.26 billion
- Underlying net profit after tax (NPAT) rose 27% to $386.6 million
- Statutory net profit increased 19% to $300.6 million
- Final dividend hiked by 20% to $2.10 per share
- Total dividend per share increased by 24% to $4.10 per share
As part of the result, Cochlear reported one-off items totalling $30 million, primarily relating to restructuring costs for the acquired Oticon Medical cochlear implant business.
Cochlear said it saw revenue growth across all business units.
Cochlear implant units increased 9% to 48,040 with strong growth across developed markets, driven by the adults and seniors segment. Services revenue rose by 15% thanks to strong upgrade demand for the Cochlear Nucleus 8 sound processor. Acoustics revenue increased 7% to $256.3 million.
A share buyback started in March 2023, with the aim to reduce the cash balance to around $200 million over a number of years. In FY24, $43 million worth of Cochlear shares were bought back.
Outlook for the Cochlear share price
The business warned the gross profit margin is expected to fall around half a percentage point due to “lower overhead recoveries” at the new facility in Chengdu.
Cochlear said it continues to target revenue growth of around 10% with a net profit margin, pre-cloud investment, of around 18%.
It’s expecting to help 50,000 people with a cochlear or acoustic implant, and it’s aiming for underlying net profit of between $410 million to $430 million, which would represent year on year growth of between 6% to 11%.
The company said implant trading conditions continue to be strong across most markets, with an “improving trend in adult referral rates in many developed countries.” Coclear is seeing signs of “growing waiting lists” for evaluation and/or surgery in some key countries.
It also said services growth is expected to slow after 18 months of strong demand for upgrades. Acoustic growth rates are expected to be “strong”.
Cochlear has impressed over the long-term, but investors have taken a step back as the market reassesses the shorter-term profit growth potential.
However, if I were a long-term shareholder, I’d be very happy with how things are progressing over the years. The growth of profit and dividends are exactly what I’d want to see.
I wouldn’t call it great value today – it has already grown significantly and the market is aware of the long-term growth story and loyal customer base. There are other ASX growth shares I’d buy first.
