Cochlear declares end to the pandemic and hangover surgeries as sales soar 17pc

The hearing implant titan forecasts profit growth of 16 to 23 per cent in the year ahead as surgeries return to normal following three pandemic-plagued years.

Cochlear chief Dig Howitt says there’s a significant unmet need for cochlear and acoustic implants.

Cochlear chief executive Dig Howitt says a pandemic-fuelled backlog of elective surgeries has largely been cleared – a move that sparked a 4 per cent jump in the company annual profit to $300.5m.

The pandemic has receded into the review mirror at the hearing implant titan, which is forecasting a further 16-23 per cent gain in net profit in the year ahead.

But Mr Howitt said the gains won’t be from a repeat of delayed surgeries.

“We were surprise by the extent of the catch up surgeries in the last year. It’s hard to see what’s still out there but our best indication is that has cleared and we’re certainly in our growth outlook for ‘24 not anticipating a repeat of those catch up surgeries.”

Instead, Mr Howitt said the gains would be delivered by a combination of revenue growth and improved net margin. Demand for cochlear implants has returned, particularly after the company launched its latest sound processor, late last year.

It has also struck a partnership with Google and Australian hearing researches to use artificial intelligence – in a similar way director Peter Jackson restored The Beatle’s Let It Be film – to help people regain hearing.

Mr Howitt said the stigma on hearing loss was slowly dissipating, as more people think of hearing aids in the same way they view glasses. Specsavers has even begun selling over the counter hearing aids. While Mr Howitt and his team have been working closely with audiologists to include cochlear implants in their suite of solutions, he said the over the counter products – like Specsavers’s offering – helped increase awareness that hearing loss is treatable.

“The successful launch of the Cochlear Nucleus 8 Sound Processor late in the second quarter generated strong demand for cochlear implant systems and sound processor upgrades during the second half,” he said

“An improving trend in adult referral rates is providing us with early indications that awareness and access initiatives are having some success.”

Overall revenue leapt 17 per cent to $1.94bn. This compares with analyst estimates of $1.2bn. The sent Cochlear shares leaping 5.7 per cent to $246.47 against a 0.4 per cent gain across the broader sharemarket.

Sales in developed markets grew 15 per cent after Nucleus 8 was launched in Western Europe from October and the US in November. Emerging markets also recorded strong growth, with sales jumping 20 per cent, with India and Latin America driving most of the gains.

Services revenue vaulted 18 per cent to a record $239.9m.

The company hiked its final dividend, which it will pay on October 11, to $1.75 a share from $1.45 a share a year earlier.

“The balance sheet remains strong with net cash of $556m, with operating cash flows sufficient to fund investing activities and capital expenditure whilst delivering dividends to shareholders,” Mr Howitt said.

Cochlear has bought back $30m of its shares under a $75m buyback program, which began in March and aims to reduce its cash balance to $200m.

“A progressive buyback program aligns with the interests of our shareholders by reducing shares on issue, providing gradual accretion in earnings per share and dividends per share over the long term,” Mr Howitt said.

“As we look to the future, we 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,” Mr Howitt said.

“Cochlear implant trading conditions continue to be strong across most markets. At this stage, we expect solid market growth rates to drive high single digit growth in our cochlear implant units for FY24. “

RBC Capital Markets analyst Craig Wong-Pan said Cochlear delivered a “strong operational result” with revenue and gross profit exceeding consensus estimated by 5-7 per cent.

“The Cochlear implant and services segments were driving the beats, with the acoustics segment coming in line. The gross profit beat was offset by higher expenditure across all expense categories, which led to underlying EBIT coming in 6-2 per cent below RBC and consensus,” Mr Wong-Pan wrote in a note to investors.

“We expect the market will view the result positively given the strong operational performance and higher than expected FY24 guidance.”