Cochlear and oOh!media withdraw guidance

16 March 2020, Written by Matt Ogg

Cochlear and oOh!media withdraw guidance

Hearing implants business Cochlear (ASX: COH) and billboard advertising group oOh!media (ASX: OML) have joined the growing list of companies withdrawing guidance due to coronavirus-related uncertainty.

With healthcare providers either fast-tracking elective surgery or putting it on hold to shore up capacity for Covid-19 patients, many countries have put cochlear implant surgeries on hold.

"Since the update we provided on 18 February, we have seen COVID-19 spread rapidly across many countries," says Cochlear CEO and president Dig Howitt.

"We are now seeing a growing number of health authorities either recommend or enforce surgery deferrals.

"Over the weekend, the US Surgeon General has urged hospitals and healthcare systems to consider suspending elective surgical procedures in an effort to reduce the strain on the healthcare system until the rate of infection of COVID-19 is under control."

Howitt expects these actions to impact surgeries in our major markets, particularly the US and Western Europe.

"The business has been on track to deliver its earnings guidance driven by strong growth in cochlear implant system sales across the developed markets. However, we expect to experience a significant decline in sales in the immediate future," says Howitt.

"There is a high level of uncertainty surrounding the impact of COVID-19 in terms of the extent and duration of the reduction in surgeries and the ability for recipients to access sound processor upgrades.

"As a result, we are not in a position to provide an earnings outlook to the market at this time and withdraw our earnings guidance for FY20."

In terms of China, after a delay in surgeries in February a small but growing number of surgeries have been recommended over the past few weeks although they remain well below the pre-virus run rates.

Cochlear's Chinese suppliers have resumed production of components, which are used primarily for sound processors and accessories. The business continues to carry at least three months inventory of most components and is managing distribution carefully to enable continued supply of products to customers.

As for oOh!media, revenue for the year to date has been in line with the prior corresponding period and performance has been consistent with previous guidance.

However, the company notes the "deteriorating macroeconomic conditions and resultant market uncertainty caused by COVID-19" have made forecasting full year revenue in the current environment difficult.

The full-year result is even more uncertain than most for the advertising group given it follows a calendar year for the reporting and still has nine months to go in its FY20.

"In accordance with its continuous disclosure obligations, oOh! therefore advises that it has withdrawn FY20 earnings guidance for the time being," the company says.

"The Company is taking decisive action to proactively manage the business through this period and ensure it remains well positioned for when conditions stabilise, and continues to make every effort to achieve the prior earnings guidance.

"Capital expenditure is being re-prioritised and will be materially below the bottom of the previous guidance range of $60-$70 million. Accordingly, the Company has also withdrawn its FY20 capex guidance."

Other companies that have withdrawn guidance include Qantas (ASX: QAN), Webjet (ASX: WEB), Helloworld (ASX: HLO), Flight Centre (ASX: FLT), Corporate Travel Management (ASX: CTD) and Apollo Tourism & Leisure (ASX: ATL).

In contrast, the country's leading annuities provider Challenger (ASX: CGF) has demonstrated a sense of certainty to the market this morning, reiterating it remains on track FY20 normalised net profit before tax within the guidance range of between $500-550 million.

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Author: Matt Ogg

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