Cochlear made the forecast after today announcing a 10 per cent increase in net profit to $29.47 million for the six months to December 31, 2004.

"In the second half of F05 continued growth in unit sales and revenue is anticipated," chief executive Chris Roberts. "A strategic decision has been taken to increase the marketing and R&D spend associated with our new cochlear implant system.

"These costs plus the extra costs associated with the set up of the Italian direct operations will result in second-half profits lower than first-half profits, however we are increasing our F05 profit after tax guidance to $53-55 million (up from $50-51 million)."

Dr Roberts added that this would translate into a 2004/05 profit about 45 per cent above the previous year.

Revenue for the first half was $163.6 million, 18 per cent higher than the previous first half. The period also achieved record unit sales of 5014 units, up 12 per cent.

Cochlear maintained its dividend at 35 cents per share, fully franked.

Dr Roberts said it was a pleasing result.

"First, revenue, unit sales and profit are all record first half results," he said.

"Second, the result is ahead of our expectations and demonstrates that the hard decisions made last year are beginning to yield positive results.

"Sales revenue was stronger and costs were in line with targets.

"A competitor having a recall certainly helped, however the result was a strong result even if there had been no recall."

In September in the US, Boston Scientific Corp announced that its subsidiary, Advanced Bionics Corp in California, was voluntarily recalling all Clarion and HiResolution cochlear devices that had not been implanted in patients.

Boston Scientific Corp said possible moisture in the device's internal circuitry could cause it to stop working.

Dr Roberts said the benefit to Cochlear from the recall was approximately $2.5 million of sales or around 1.5 per cent of total revenue.

"The organisation as a whole is in good shape for the second half and beyond," he said.

"The rollout of new products in the second half will further consolidate our leading market position."

From AAP