The Cochlear Ltd (ASX: COH) share price will be on watch this morning.
That's because the hearing solutions company has just released its FY 2024 results and revealed strong top and bottom line growth.
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Cochlear share price on watch following strong growth
- Sales revenue increased 15% (12% in constant currency) to $2,258 million
- Statutory net profit increased 19% (8% in cc) to $357 million
- Underlying net profit increased 27% (15% in cc) to $387 million
- Final dividend increased 20% to $2.10 per share
- $75 million buyback
What happened during the 12 months?
For the 12 months ended 30 June, Cochlear reported a 15% increase in revenue to $2,258 million.
This was driven by growth across all business units. However, the star of the show was the key Cochlear implant business, which reported an 18% increase in revenue to $1,329.6 million. This was driven by a 9% increase in Cochlear implant units to 48,040. This reflects strong growth across the developed markets driven by the adults and seniors segment.
Cochlear's Services revenue increased 15% in FY 2025 to $672.3 million. This was driven by strong upgrade demand for the Cochlear Nucleus 8 Sound Processor. Management also notes that emerging market sound processor upgrade penetration is continuing to improve in a number of markets as funding improves.
Finally, the Acoustics business reported a 7% increase in revenue to $256.3 million. Management notes that its growth was weighted to the second half, which was up 15% in constant currency. This was driven by strong demand for the new 3 Tesla MRI compatible Cochlear Osia Implant which was launched in the US in December.
Cochlear's costs grew slower than revenue at 13% in FY 2024. As a result, its underlying net profit margin expanded to 18% (from 17%), excluding the impact of its cloud computing-related expenses, which is in line with its long term target. This led to its underlying net profit coming in 27% higher year on year at $386.6 million.
In light of its strong profit growth, the Cochlear board elected to increase its final dividend by 20% to $2.10 per share. This brought its total dividends to $4.10 per share, which is up 24% year on year.
In addition, its board has approved a $75 million share buyback.
How does this compare to expectations?
Cochlear's profit result was in line with the bottom end of guidance. Morgans was expecting the following:
FY24 tracking in line. We see little risk to FY24 underlying NPAT targeting A$385-400m (+26-31%) but view near-term underlying NPM reversion back to pre-COVID levels (c18%) as challenging, given little GPM expansion (50bp headwind from China production), along with ongoing investment in market growth activities and R&D expenditures (c12% of sales or higher).
Outlook
Management spoke positively about both FY 2025 and the long term. It said:
[W]e remain confident of 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
It also provided the following guidance for the year ahead:
We continue to target sales revenue growth of around 10%, with a net profit margin (pre-cloud investment) of around 18%. For FY25, we aim to help over 50,000 people to hear with a cochlear or acoustic implant, and expect to deliver underlying net profit of $410-430 million, a 6-11% increase on FY24.
The Cochlear share price is up 37% over the past 12 months.
