Cochlear Soars On Second Half Rebound

By Glenn Dyer | More Articles by Glenn Dyer

Shares in bionic ear maker, Cochlear (COH) more than doubled the 6% rise in the past year, thanks to a second half performance that confirmed the company is back on track after a rough first half of the 2013-14 financial year.

As expected, Cochlear suffered a a big drop in annual earnings for the year to June 30 – they fell 29%, despite improved sales during the second half as new products were released.

But that fall was nearly half the 53% slump in earnings reported in the six months to December 2013.

Cochlear made a net profit of $93.7 million for the 12 months to June 30, which was down from $132.6 million a year ago.

Sales revenue was up 15% to $821 million for the year, after being down 5% at the halfway mark.

The market loved the news – the shares bolted more than 11% higher to a 12 month peak of $69.44, before easing to end the day up 10.4% at $69.

That rise lifted the rise in Cochlear shares for the past 12 months to more than 16%, compared to 6% up to the close of trading Monday.

Earnings before interest and tax, and excluding a provision for a legal dispute, fell 16% to $149.6 million, from $178.9 million in the prior period. They were down 54% at December 31.

Analysts had expected the Sydney-based medical device manufacturer to report revenue of $806.6 million, and flat earnings before interest and tax of $144.2 million, according to Bloomberg.

The consensus was for net profit of $105.1 million, which followed guidance provided in February that Cochlear would miss its previous guidance of $133 million by $32 million to $42 million.

Cochlear had a net profit of $132.6 million in the 2013 financial year.

The board declared an unchanged final dividend of $1.27 per share, payable on September 25.

That took the full year payout to $2.54 a share, up 2c (thanks to the higher interim of $1.27 a share).

Cochlear chief executive Chris Roberts said the 2014 financial year delivered on the company’s commitment to introduce a range of new products to drive growth. Product launches in the first half of the year had sparked a return to sales growth, he said in a statement.

“While it is still early in the product release cycle, record sales in the second half gives us confidence as we go into 2014-15,” he said.

Major product launches in the past year included the Baha 4 sound processor and implant, the Hybrid Hearing implant and the Nucleus 6 sound processor, although not all features for this device have been approved for use in Cochlear’s biggest market the US.

The company also relaunched its N5 implant in Europe, under a new name of Profile, following a product recall in September 2011.

Unit sales in the second half rose 10% on the previous corresponding period to 14,285.

The best performing region in the second half, on a constant currency basis, was Europe, Middle East and Africa, which reported a 17% on the same six months last year. Sales in the Americas rose 16% and Asia Pacific saw a 13% rise, excluding the effects of currency movements.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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