The Cochlear Limited (ASX: COH) share price is charging higher on Wednesday.
In early trade, the hearing solutions company's shares are up over 6% to $222.87.
Investors have been bidding the Cochlear share price higher following the release of the company's half year results.
Cochlear share price higher on strong result
- Sales revenue up 9% to $893 million
- Statutory net profit down 16% to $142 million
- Underlying net profit down 10% to $142 million
- Interim dividend maintained at $1.55 per share
- On-market share buy-back announced
- Guidance reaffirmed
What happened during the half?
For the six months ended 31 December, Cochlear reported a 9% increase in sales revenue to a record of $893 million. This was driven by strong growth in cochlear and acoustic implant revenue.
Cochlear implant units increased 14% over the prior corresponding thanks partly to strong demand for the Cochlear Nucleus 8 Sound Processor, which was launched during the second quarter. This was supported by the continuing recovery from COVID surgery delays across the emerging markets.
Things weren't quite as positive for Cochlear's earnings, at least on paper. Its statutory net profit was down 16% to $142 million due to one-off gains included in the prior corresponding period.
On an underlying basis, its net profit was down 10%. This reflects an increase in cloud computing‐ related expenses, new product launch costs, and the impact of the weighting in operating expenses to the second half of FY 2022.
Excluding its cloud computing‐related expenses, Cochlear's underlying profit margin would have been 17%, which is just a touch below its long term target of 18%.
Despite this profit decline and thanks to the strength of its balance sheet, the Cochlear board has maintained its interim dividend at $1.55 per share.
Speaking of balance sheet strength, management has announced a progressive on-market share buy-back this morning. This will start with a $75 million buy-back, after which the company intends to progressively buy shares over the coming years until its cash balance is approximately $200 million.
Cochlear finished the period with a cash balance of $505 million, though $170 million will be used for an impending acquisition.
Outlook
Cochlear has reaffirmed its guidance for the remainder of the financial year.
It is expecting underlying net profit in the range of $290 million to $305 million, which will be a 5% to 10% increase on FY 2022's underlying net profit or an increase of 8% to 13% when adjusted for the increase in cloud computing‐related expenses.
Commenting on trading conditions, management said:
Trading conditions have been progressively improving, in line with expectations, with intermittent COVID‐related hospital or region‐specific elective surgery restrictions or staffing shortages continuing. While surgical and clinical capacity to serve implant candidates appears to have stabilised, we continue to be mindful of the pressure on the healthcare system globally to contend with surgical waiting lists, ongoing staffing challenges and growing demand. We will continue our investment in R&D and market growth activities to support long‐term market growth.
