The Cochlear Limited (ASX: COH) share price is trading lower on Tuesday morning following the release of its half year results.
At the time of writing the hearing solutions company's shares are down 2% to $230.12.
How did Cochlear perform in the first half?
During the first half of FY 2020, Cochlear delivered sales revenue growth of 9% (5% in constant currency) to $777.6 million. The drivers this were a 14% increase in Cochlear implant revenue and a 9% lift in Services revenue, offset by a 9% decline in Acoustics revenue.
Cochlear implant units were up 13% over the prior corresponding period to 18,894. Developed markets volumes increased 7% and emerging market volumes were up over 20%.
On the bottom line, Cochlear posted a reported net profit $157.7 million. This was an increase of 23% on the prior corresponding period, but includes $25 million in non-cash after-tax gains from the revaluation of innovation fund investments.
The company's underlying net profit came in at $132.7 million, which was in line with the same period last year. This was due to its operating profit growth being offset by foreign currency contract losses.
Despite its flat underlying profit, the Cochlear board increased its interim dividend by 3% to $1.60 per share.
It also advised that it has updated its dividend policy from a target payout of around 70% of net profit to around 70% of underlying net profit.
Outlook.
Management has reiterated its recently downgraded guidance for full year underlying net profit in the range of $270 million to $290 million. This represents a 2% to 9% increase on FY 2019's profit result.
Cochlear downgraded its guidance earlier this month due to an expected impact from the novel coronavirus in Greater China. Cochlear has been impacted as hospitals across the region have been deferring surgeries, including for cochlear implants, to limit the risk of infection from the coronavirus.
Cochlear's CEO & President, Dig Howitt, acknowledged the short term headwinds in China, but spoke very positively about the future.
Mr Howitt said: "While we are delivering strong results from the cochlear implant business, profit growth will be lower than our original expectations due to the impact of the coronavirus on sales in Greater China."
"As the global leader in implantable hearing solutions, we continue to be excited by the long-term opportunity to grow the hearing implant market. While we face some near-term challenges with the coronavirus and with delays to the approval for the Osia 2 System in Europe, our view to the longer-term opportunity to grow our markets remains unchanged," he added.
The CEO concluded: "We expect to continue to deliver growth in revenue and earnings in the coming years, underpinned by the investments made in product development and market growth initiatives. The balance sheet and free cash flow generation remain strong and we target a dividend payout ratio of around 70% of underlying net profit."
