The Cochlear Limited (ASX: COH) share price will be on watch today following the release of its half year results.
How did Cochlear perform during the first half?
Cochlear’s performance continued to improve during the first half of FY 2021 after surgeries recovered following COVID-19 related shutdowns. Management notes that the pace of recovery varied across markets, with strong growth recorded in the United States, Japan, Korea, and China. This was supported by improving momentum in Western Europe, which partially offset a slower recovery in emerging markets.
For the six months ended 31 December, Cochlear reported a 4% (or 1% in constant currency) decline in sales to $742.8 million. This was driven by a 7% increase in second quarter constant currency sales, which almost offset an 8% decline in the first quarter.
On the bottom line, the company reported a 6% decline in underlying net profit to $125.3 million. This reflects a recovery in its sales and lower operating expenses due to material COVID-19 related savings. Impressively, this is a 4% constant currency decline over the record half year profit it achieved in the prior corresponding and COVID-free period.
In light of its improved performance and solid cash flow generation, the Cochlear board has declared a $1.15 per share interim dividend. This is down 28% from the prior corresponding period.
Cochlear to return COVID-19 support
Cochlear revealed that it has decided to repay $24.6 million in pre-tax COVID government assistance received during the half.
It notes that it met the eligibility requirements to participate in these programs. However, trading conditions have improved, and while there is still uncertainty ahead, it believes returning the payments is the appropriate thing to do. These funds will be repaid in the second half.
Outlook
Potentially giving the Cochlear share price a lift today is management’s guidance for the remainder of the year.
It has provided full year underlying net profit guidance of $225 million to $245 million. This represents a 46% to 59% increase on FY 2020’s profits.
Management acknowledges that there continues to be uncertainty about the trajectory of COVID, but is increasingly confident of the resilience of its hearing implant business. This guidance is based on the Australian dollar averaging 77 U.S. cents for the second half.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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