Cochlear (ASX:COH) share price 6% higher on juicy 35% dividend spike

Cochlear shares are on the move as the company released its financial results for the half-year ended 31 December 2021.

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Key points

  • Cochlear posted its half-year results today 
  • It was a mixed half with weakness in developed markets and strengths in emerging markets 
  • In the last 12 months, the Cochlear share price has slipped more than 9% 

Shares in Cochlear Limited (ASX: COH) are on the move today after the company released its interim report and financial results for the half-year ended 31 December 2021.

At the time of writing, the Cochlear share price is trading 5.77% higher at $201.22 apiece.

Cochlear share price lunges higher on strong earnings growth

Key takeouts from the company’s earnings results today include:

  • Sales revenue increased 10% (12% in CC) to $815 million
  • Cochlear implant units increased 7% to 18,598
  • Statutory net profit of $169 million includes $12 million in innovation fund gains after‐tax
  • Underlying net profit (excluding one-off and non-recurring items) increased 26% to $158 million
  • Interim dividend increased 35% to $1.55 per share, representing a payout of 65% of underlying net
    profit
  • FY22 underlying net profit guidance range maintained at $265‐285 million

What else happened during the half for Cochlear?

The company’s sales mix was unevenly split between emerging and developed markets. For instance, Cochlear says its sales revenue increased 2% to $457.9 million in 1H “with a mix shift to the emerging markets”.

Whereas in these zones unit volumes increased by 30%, in developed markets, unit volumes decreased by 2%.

The biggest decline was seen in the US, Cochlear says. Sales there were “characterised by many operating theatres running below capacity throughout the half”, which ultimately compressed patient turnover.

This was initially due to the impact of Delta variant hospitalisations, whilst hospital staffing shortages were then compounded by the response to the Omicron variant in the second quarter.

Even still, acoustics revenue lunged 40% higher to a record $100.9 million and this carried through to underlying net profit of $158 million, a 26% year on year gain.

Keep in mind that ‘underlying’ net profit allows companies to remove one‐off and non‐recurring items like unrealised gains investments and gain on minority interests.

So when including these items in statutory net profit, Cochlear actually recognised $169 million at the bottom line. This result was underpinned by the “combination of strong sales growth and improved gross margin, with some benefit from lower‐than‐expected operating expenses”.

What’s next for Cochlear

Cochlear notes that for FY22, its underlying net profit guidance range has been maintained at $265‐285 million. This range signifies a 13‐22% increase on underlying net profit for FY21.

The guidance now incorporates “cloud computing expenses and anticipates continuing COVID impacts for the balance of the year”, Cochlear says.

Second half trading to date is tracking in line with the first half, the company says, “with continuing intermittent COVID‐related hospital or region‐specific elective surgery restrictions”.

In addition, guidance now factors in $18‐20 million of cloud investment (pre tax) as a result of the change in accounting treatment from capex to opex. Capex expectations have reduced to factor in this change, declining to around $70 million for FY22. As a result, we expect the net profit margin (inclusive of cloud costs) to remain a little below our longer‐term target of 18% for FY22 and FY23.

Cochlear share price

In the last 12 months, the Cochlear share price has slipped more than 9% and is down another 7% this year to date. Although, during the past month it has regained steam and has spiked 4%.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended 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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