Cochlear Limited (ASX: COH), the world's leading implantable hearing device manufacturer, today announced its results to the market.
In the six-month period ended 31 December 2015, Cochlear achieved revenue growth of 27%, to $558 million, with a net profit of $94 million up 32% over the prior corresponding period.
The results were buoyed by currency movements, however, even in constant currency, the company achieved sales growth of 16%. Product releases and investments in growth initiatives helped drive market growth.
"The positive momentum we saw in FY15 has continued into HY16 with both our Implant Business and Services business delivering strong growth," Cochlear CEO, Chris Smith, said. "The business is benefitting from the rollout of new products launched in FY15 and the continued growth investment in strategic growth initiatives that commenced two years ago."
Each of the company's key geographies fired on all cylinders during the half, with the Asia Pacific segment more than doubling operating profit year over year.
"We are particularly pleased with the Implant business, which delivered sales growth across both developed and emerging markets, with some countries like the United States (US) experiencing accelerated market growth," Mr Smith said.
The Implant's business achieved sales growth of 62%, while Services which includes sound processor upgrades and accessories, achieved growth of 25%. Bone conduction & acoustic implants revenue jumped 13%.
Pleasingly, the company's board announced an interim dividend of 110 cents per share, up 22% over last year's payout, with 100% franking. The company will continue ahead with a targeted payout ratio of 70% of profits.
For the remainder of FY16, Cochlear upgraded its financial outlook to a net profit of between $180 million and $190 million, thanks in large part to currency tailwinds. Based on this guidance, net profit would be between 23% and 30% higher than last year, the company said.
"The hearing loss market offers an incredible business opportunity with over 360 million people worldwide experiencing disabling hearing loss, with nearly one in three people over the age of 65 affected by hearing loss," Mr Smith added. "With global market penetration for implantable hearing solutions less than 5%, there remains a significant, unmet and addressable clinical need that will continue to underpin the long-term sustainable growth of our business."
Foolish takeaway
Cochlear shares trade at a premium valuation to the market. However, that premium is arguably justified by the continued growth the business serves up. While some dyed-in-the-wool value investors may be turned off by the valuation, I think that if you're investing for five years or more, Cochlear is a buy.
