Search by ticker code:
Generic filters

Search by ticker code:
Generic filters

Search by ticker code:
Generic filters

Cochlear (ASX:COH) share price on watch after FY20 profit takes a hit

The Cochlear Limited (ASX: COH) share price will be on watch today after the company released its full-year financial report.

Cochlear is one of the world’s leading medical businesses. The company designs, manufactures and supplies the Nucleus cochlear implant, the Hybrid electro-acoustic implant and the Baha bone conduction implant, amongst others.

Cochlear’s FY20 report

Cochlear reported that its sales revenue declined by 6% to $1.35 billion, or 11% in constant currency. Like many other companies, Cochlear’s financial year was a tale of two halves – first-half revenue climbed 9%, partially offsetting a 22% fall in the second half of FY20.

Services revenue fell 7% (or 12% on a constant currency basis) to $395.5 million and now represents 29% of the company’s sales mix. Cochlear implants accounted for 61% of sales, achieving revenue of $817.9 million, down 3% or 8% in constant currency. The remaining 10% of sales came from the acoustics line (e.g. bone conduction and acoustic implants), which saw a 20% fall in revenue to $138.9 million.

As announced in a trading update in May, cochlear implant unit sales across developed markets declined by around 80% as most elective surgeries were postponed. Surgeries recommenced across many markets across mid-May and by the end of June, the company said more than 80% of cochlear implant surgical centres in developed markets had recommenced surgeries.

Turning our attention to services, Cochlear said this business was materially impacted by COVID-19 in the fourth quarter of FY20. The services business generates revenue when, for example, a patient comes back for a sound processor upgrade or improvement to their device. The company noted that while some recipients have been able to access sound processor upgrades remotely, clinic closures have delayed access to these upgrades for many people.

Cochlear reported a 42% decline in underlying earnings before interest and tax (EBIT), which came in at $206.9 million. Underlying net profit suffered a similar fate, also falling 42% to $153.8 million.

However, including $11 million of innovation fund gains and $416 million of patent litigation expenses, Cochlear reported a statutory loss of $238.3 million. The patent litigation expense relates to an adverse judgement in the long-running AMF patent infringement case, which Cochlear provided an update on yesterday.

Cochlear ended the period with $930 million cash on its balance sheet, bolstered by its $1.1 billion capital raising announced in March. Factoring in $473 million of debt, the company ended the financial year in a net cash position of $457 million.

Cochlear’s dividend

Back in March, Cochlear suspended its dividend until trading conditions improve. This sentiment was reiterated today, with Cochlear deciding not to pay a final dividend. The company did, however, pay an interim dividend of $1.60 per share earlier in the year.

The board expects to resume paying dividends once a clear and sustained improvement in sales revenue has been established and cash flow generation is sufficient to support its resumption.

What happens next?

Looking forward, Cochlear said unit volumes were at 50% of last year for the June/July trading period in emerging markets. While surgeries in China are growing quickly, surgeries in other markets like India and Latin America have remained low as COVID-19 cases continue to grow.

Cochlear also said its services business continues to be impacted by lower clinic capacity, with June/July revenue at around 70% of last year’s levels. However, the company expects the launch of the Kanso 2 Sound Processor, the growing recipient base and the adoption of remote care tools to underpin demand for upgrades over the longer term.

Due to the uncertain timing of a global recovery from the pandemic, Cochlear held off from providing earnings guidance. It will provide a trading update at its annual general meeting in October.

One question for investors now is whether or not Cochlear’s customers can rely on government and health insurance funding for its expensive devices post COVID-19. I’m not a buyer of Cochlear shares today, I’d rather invest in the growing health technology share profiled in the free investment report below.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Disclosure: At the time of publishing, Cathryn does not have a financial or commercial interest in any of the companies mentioned.
Skip to content