The Cochlear Limited (ASX: COH) share price has sunk 7% lower this morning to $184.65 after the release of the hearing solutions company's full-year results.
For the 12 months ended June 30 Cochlear posted a net profit after tax of $245.8 million on sales revenue of $1,351 million, which was an increase of 10% and 9%, respectively, on the prior corresponding period.
Diluted earnings per share came in at 426.7 cents, compared to 389.1 cents in FY 2017. This allowed management to declare a final dividend of $1.60 per share, bringing its full-year pay-out up to $3.00 per share from $2.70 per share.
The solid top line growth was driven by an 8% increase in implant unit sales to 35,260. Units would have been up 11% year-on-year if you exclude tenders from the Chinese Central Government. The FY 2018 result includes around 1,100 Chinese Central Government tender units compared to around 1,900 in FY 2017.
The Cochlear implants segment generated revenue of $831 million for the period, up 8% on FY 2017. Whereas its Services segment grew revenue by a solid 16% year-on-year to $355.2 million and its Acoustics segment saw revenue rise just 1% in FY 2018 to $165.2 million.
Once again it was the Americas region that contributed the most to its revenue. Approximately 48% of its sales were generated there, with 35% generated in the Europe, Middle East, and Africa (EMEA) region, and the remaining 17% generated the Asia Pacific region.
The U.S. market was a key highlight during the 12 months. Sales in the U.S. grew approximately 15% in FY 2018 thanks to market growth and market share gains. Management has pointed to new product introductions and the success of awareness building initiatives for this strong performance.
Expenses grew in line with sales during the period and totalled $1,023.3 million. This was due to the sizeable increase in selling, marketing and general expenses and administration expenses offsetting improvements in its gross margin. This ultimately led to Cochlear generating $258.1 million in operating cash flow during the 12 months, down slightly on FY 2017.
Outlook.
Management expects the company's growth to continue in FY 2019. It has provided FY 2019 net profit guidance of $265 million to $275 million, up between 8% and 12% on FY 2018.
This is based largely on developed market growth continuing and the Australian dollar averaging 75 U.S. cents and 63 Euro cents for the 12 months.
Should you invest?
Although its net profit after tax fell a touch short of the Bloomberg consensus estimate of $246.9 million, I still thought this was a solid result from Cochlear that demonstrated why it is one of the highest quality companies on the Australian share market along with CSL Limited (ASX: CSL) and ResMed Inc (ASX: RMD).
In light of this, I think that today's decline could be a buying opportunity for investors that are prepared to hold onto its shares for the long-term.
