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.
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.
