The market certainly liked the latest financial report from Cochlear, the global leader in hearing implants.
The company said yesterday that first-half earnings rose 22%, and said it saw growth of 15-20% core earnings in the full year.
The shares jumped more than 4% in yesterday’s down market to close up $2.30 at $55.
Net profit rose to $69.94 million in the six months to December from $57.1 million a year earlier.
Cochlear lifted interim dividend 14% to 80c per share. Like JB Hi-Fi, a rare event in this reporting season.
The result followed earlier guidance that it expected double-digit growth in core earnings this year, with profit skewed to the second half of the year.
But there was concern from analysts about the favourable impact of the lower Australian dollar.
Cochlear generates more than 90% of its sales in foreign currencies and booked $12.8 million in gains as the US dollar and euro strengthened against the Australian currency. That boosted earnings and offset a five year low in growth in demand for new implants.
But the company was upbeat.
“This is a strong result, confirming our strategy of diversifying our growth drivers within the implantable hearing space,” said CEO DR Chris Roberts.
“We anticipate 15% to 20% growth in core earnings in fiscal 2009.”
“Long term growth initiatives were further advanced, with the controlled market launch of the new Hybrid system in Europe. This product opens up a new market segment of recipients who will benefit from Cochlear’s products,” said Dr Roberts.
One of the long-term projects vital to Cochlear’s competitive advancement is the new manufacturing and headquarter facilities at Macquarie University, which has been granted planning approval by the New South Wales Department of Planning.
Cochlear’s said its capital management plans saw net gearing ratio steady at 32% at 31 December 2008, which is in line with the June 2008 level.
Over 90% of Cochlear’s total debt of $197.3 million is long term. “Cochlear is well positioned in this time of significant global uncertainty, and our fundamental strategies around technological innovation, business model innovation and development of internal capability, such as scale and leverage, have not changed,” said Dr Roberts.
In the first half, Cochlear’s core earnings lifted 20% to $74.4 million, while revenue increased by 19% to $355.2 million. It said its global market share "remained in the 70% range".
Cochlear implant sales rose 2% to 9,178 units, while implant-related sales revenue grew 22% to $301.1 million.
Sales revenue for Bone Anchored Solutions grew 25% to $45.8 million.
In the regions, the Americas delivered a 25% improvement in revenue to $148.5 million in the half; Europe grew revenue also by 25% to $153.1 million, and Asia Pacific revenue lifted 6% to $45.3 million.
Cochlear said there were no donation sales units into China in the half, after 180 units in the prior corresponding period.
Over 90% of Cochlear’s sales and over 50% of expenses are in foreign currency.
Cochlear said its foreign exchange contracts delivered a gain of $8.3 million in the half, compared to $13.8 million in the previous corresponding period.
The company said the fundamentals of the business remain positive (large unmet clinical need, excellent clinical outcomes, established reimbursement, strong competitive position, opportunities for sustainable growth).
It said there was "no change to fundamental strategies around technologic innovation, business model innovation, and scale and leverage of both internal (Cochlear) and external (clinical pathway) activities".
