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Cochlear lifts profit, dividends

Nicholas Grove  |  09 Aug 2016Text size  Decrease  Increase  |  

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Cochlear Limited (ASX: COH) on Tuesday announced a 30 per cent lift in net profit to $189 million for fiscal 2016, at the top end of guidance of $180 million to $190 million but shy of Morningstar's expectations for a figure of $197.8 million.

Sales revenue rose 23 per cent year over year to $1.158 billion, with growth delivered across all product categories and regions, the hearing implant maker said in a statement to the ASX.

Cochlear implant sales revenue grew 21 per cent and implant units were up 12 per cent, with growth witnessed across developed and emerging markets, it said.

Basic earnings per share rose 29 per cent year on year to $3.31 per share, the company said.

As a result of strong free cash flows, Cochlear declared a final dividend of $1.20 per share, which brought total dividends $2.30 per share, up 21 per cent, fully franked, and representing a payout of 70 per cent of full-year net profit.

The full-year dividend was also short of Morningstar's forecast for a payment of $2.42 a share.

The final dividend will be paid on 29 September 2016 to shareholders on the register as of 8 September 2016.

Cochlear CEO Chris Smith said the business achieved a major milestone during the year, with sales revenue exceeding $1 billion for the first time, while Cochlear also realised a benefit from the fall in the Aussie dollar.

"We have benefitted from the devaluation of the Australian dollar and have taken the opportunity to accelerate our investment in market growth initiatives, including direct-to-consumer marketing and expansion of the sales force, as well as increasing our investment in R&D," Smith said.

"We believe these investments have contributed to market growth this year and will help underpin growth in the coming years."

Morningstar equity analyst Chris Kallos described Cochlear's results as "solid," with accelerated sales momentum underpinned by the adoption of new products released over the past 18 to 24 months.

He also noted that service revenues grew by 30 per cent and accounted for 25 per cent of overall group revenues.

"This is an important development given the new CEO's aim of building service-driven revenues through increased engagement with the end recipient," Kallos said.

Looking at fiscal 2017, Smith expects Cochlear's net profit to be within a range of $210 million to $225 million, an increase of around 10-20 per cent on fiscal 2016.

"Cochlear expects positive momentum to continue, with investments made in product development and market growth initiatives expected to underpin growth for fiscal 2017."

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Nicholas Grove is a Morningstar journalist.

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