The Cochlear Limited (ASX: COH) share price is under the spotlight as the hearing device business announced its FY22 result.
Cochlear’s FY22 result
Here are some of the main highlights from the report:
- Sales increased by 10% to $1.64 billion
- Total number of Cochlear implants rose 5% to 38,182
- Underlying net profit rose 18% to $277 million, or up 10% in constant currency terms
- Statutory net profit up 11% to $289.1 million
- Final dividend of $1.45 per share, up 4%
- Total dividend of $3 per share, up 18%
What happened during the year?
Cochlear said that there was strong demand for acoustic implants and sound processor upgrades. All regions and product segments were “tracking above” pre-COVID levels.
However, while the cochlear implant revenue growth rate improved across the year, it continued to experience “variability” in performance across countries with COVID and hospital staffing shortages impacting operating theatre capacity.
Cochlear said that its ‘developed market’ saw units grow by low single digits, after a decline in the first half. Units overall were around 10% above pre-COVID levels. The US volume was around 20% higher than pre-COVID.
The ’emerging markets’ experienced a “strong” recovery after COVID shutdowns with many countries trading above pre-COVID levels, including China and the Middle East. India and Brazil saw a recovery, but were still below pre-COVID levels.
Cochlear said that service revenue grew by 15% in constant terms to $503.9 million, with the growing recipient base underpinning growing demand. Sound processor upgrade revenue experienced “strong growth” particularly in the first half, after the restriction of access to clinics.
Acoustics revenue increased 28% in constant currency terms to $202 million, representing strong demand for new products and a recovery from COVID-related surgery delays.
FY23 guidance
Cochlear revealed that the FY23 underlying net profit guidance range is between $290 million to $305 million. That would be an increase of 5% to 10% increase on FY22’s underlying net profit – it’s an increase of 8% to 13% when adjusted for the increase in cloud computing related expenses.
The company is expecting “strong” sales growth and an underlying net profit margin of around 18% before cloud computing expenses.
Management are expecting trading conditions to progressively improve across the year, with “intermittent” COVID-related hospital or region-specific elective surgery restrictions expected to continue.
The company’s guidance does not include a more significant disruption from COVID or hospital capacity restrictions.
Summary thoughts on the Cochlear share price
Cochlear outlined its growth opportunity to investors, noting that hearing loss is prevalent and under-treated, it said that its implants are a cost-effective solution for all age groups and that it can deliver “superior outcomes” to hearing aids.
It says it wants to deliver consistent revenue and earnings growth over time.
I think Cochlear is a high-quality business, but with a relatively high price/earnings ratio (p/e ratio), I don’t think it’s one for the top of my watchlist. I’d be happy if I’d owned shares for many years. Other ASX growth shares are on my mind.
