Cochlear (ASX: COH) Hearing Implant
Cochlear (ASX: COH) has been providing implantable hearing solutions for almost 40 years. The company sold over 550k implants in over 100 countries and has 5 key manufacturing sites globally. The business is an ASX 50 firm and has high R&D spend (>$160m p.a.), which is reflective of their innovation focussed business model.
How does a Cochlear implant work?
There are two main implantable solutions that the firm offers: Cochlear implants that account for 88% of revenue and acoustic implants that make up the other 12%. Unlike other hearing aids, Cochlear implants don’t amplify sound. They channel the sound to bypass the damaged part of the ear and directly stimulate the auditory nerve. This key difference allows the hearing aid to be more effective, thus giving it a key competitive advantage that excites investors.
FY2019 Financial Results
Cochlear is a $12bn company with a strong, healthy balance sheet. They reported sales revenue growth of 7%, bringing the FY19 total to $1.4bn. This was primarily driven by services revenue (up 20%), with a smaller contribution from Cochlear implant revenue (up 2%). Cochlear also delivered an increase in net profit of 13% from the last financial year, bringing the net profit to $276.7 million. The strong result supported the 10% increase in full-year dividends, which will be valuable to retirees looking for income. Robust free cash flow generation allowed Cochlear to continue investing in its R&D, which currently sits at ~12% of revenue.
Cochlear is expecting to see strong growth in implant unit sales for FY20. This comes on the back of new product launches in FY2019, such as the Nucleus Profile Plus Series Cochlear implant. The main cashflow and unit growth benefits are expected to flow through this current financial year, so it will definitely be something investors should keep an eye on. Additionally, Cochlear’s continuous investment in market awareness and access activities is also set to drive growth this financial year. Cochlear has been actively penetrating different market segments by implementing strategies catering to patient awareness in each segment of their business. Cochlear hasn’t reached its maximum potential in each segment, so there will still be significant room for further growth through both market penetration and the creation of more advanced products.
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