The Cochlear Limited (ASX: COH) share price will be on watch on Tuesday following the release of its full year results for FY 2020.
How did Cochlear perform in FY 2020?
For the 12 months ended 30 June 2020, the hearing solutions company reported sales revenue of $1,352.3 million, which represents a 6% decline on a reported basis or 11% in constant currency. This revenue comprises Cochlear implants revenue of $817.9 million (down 3%), Services revenue of $395.5 million (down 7%), and Acoustics revenue of $138.9 million (down 20%).
Management advised that this decline was caused by difficult trading conditions in the second half because of COVID‐19‐related surgery deferrals. Cochlear implant unit sales fell 7% over the 12 months, having been up 13% during the first half.
On the bottom line Cochlear reported an underlying net profit after tax of US$153.8 million, which was down 42% year on year. This follows a collapse in its profits during the second half because of the aforementioned surgery deferrals. Second half profit fell 84% on the prior corresponding period.
On a reported basis, Cochlear recorded a net loss of $238.3 million. This includes $416.3 million in patent litigation expenses and $24.2 million in innovation fund gains after‐tax.
In light of the above, the company has unsurprisingly decided against declaring a final dividend in FY 2020.
Trading update.
Management advised that while elective surgeries have resumed, there is still a risk that second waves could result in new restrictions, complicating recovery plans and timing.
It also recognises that the surgeries currently occurring, particularly for adults and seniors, include a catch up of delayed surgeries from March to May. And while the majority of clinics have re‐opened, many are still running below capacity as they recommence operations carefully and follow social distancing disciplines.
As a result, the company expects there to be some impact on the number of patient assessments for cochlear and acoustic implants until clinic throughput normalises.
Nevertheless, the company's direct‐to‐consumer activities have been aimed at providing additional support to candidates, and potential candidates. It hopes these activities may assist in more quickly rebuilding the candidate pipeline once things normalise.
Outlook.
Due to the uncertain timing of a global recovery from the pandemic, management acknowledges that it cannot reliably estimate its FY 2021 revenues. As a result, it will not be providing guidance at this stage.
However, it intends to provide a trading update with its annual general meeting in late Octover.
Until then, the company "will be focused on market growth activities and strengthening our competitive position, while continuing to limit non‐essential spending until we have greater confidence in the outlook. There are a number of cost base considerations for FY21, which may be adapted if trading conditions materially change."
Looking further ahead, management is confident on the future prospects of the company.
It commented: "As we look to the future, we remain confident about the opportunity to grow our markets. There remains a significant, unmet and addressable clinical need for cochlear and acoustic implants that is expected to continue to underpin the long‐term sustainable growth of the business."
The company also notes that the arrival of telehealth solutions during the pandemic could be a big positive for its business.
"The pandemic has also driven the rapid adoption of telehealth and telemedicine which may lead to faster than expected structural changes in healthcare delivery. We experienced this first hand with the FDA fast‐tracking the approval of our Remote Check solution in the US."
"We have been investing in connected care solutions for many years and believe they provide the opportunity to open up access to our products and optimise outcomes for recipients by transforming the care model while delivering efficiencies to clinics," it added.
