Dr Boreham’s Crucible: Cochlear

Australia | Mar 03 2023

ASX code: ((COH))

Shares on issue: 65,781,532

Market cap: $14.8bn

Chief executive officer: Diggory ‘Dig’ Howitt

Board: Alison Deans (chair), Mr Howitt, Yasmin Allen, Glen Boreham, Andrew Denver, Prof Bruce Robinson, Michael Daniell, Christine McLoughlin, Michael del Prado, Karen Penrose

Financials (first half to December 2022): revenue $885.2m (up 8%), earnings before interest and tax $185.7m (down -22%), net profit $141.6m (down -16%), dividend per share $1.55 (steady), net cash $505.4m (down -14%)

Identifiable major shareholders: Blackrock Inc 6.4%, State Street Corp (5.7%), ABP (Algemeen Burgerlijk PSF) 5.5%.

By Tim Boreham

Cochlear’s ostensibly downbeat half-year numbers show that when it comes to corporate results, the raw figures usually need a decent explanation.

At face value, the hearing implant leader’s results show that a healthy growth in implant and volumes is not being reflected in earnings - either the reported number or the underlying figures that management prefers.

One explanation is that the company is building inventories as hospitals re-open and surgeries recover to more normal levels. Another is that the previous comparative half simply was better than expected, so the bar was raised in the first place.

In any event, Cochlear chief Diggory Howitt didn’t give the impression of a man under pressure as he fronted analysts, post results (ironically, the questions were hard to hear because of a technical glitch).

Another sign of Cochlear’s corporate health is that it is launching a share buyback to soak up some of its $500m of excess cash. In contrast, at the onset of the pandemic the company raised $1.32bn in an upsized institutional issue and share purchase plan at a heavily discounted $140.00 a share.

“We can see that uncertainty receding,” Mr Howitt declares.

We’ll defer to the investor reaction as the final arbiter: a six percent share boost in immediate response to the results.