Fisher & Paykel Healthcare Delivers Record Full Year Result, Net Profit up 27%

Fisher & Paykel Healthcare Corporation Limited today reported record net profit after tax of NZ$143.4 million for the year ended 31 March 2016, an increase of 27% over the prior year. Operating revenue was also a record, at NZ$815.5 million, 21% above the prior year or 14% growth in constant currency.
 
The company is the global leader in respiratory and acute care (RAC) humidification systems and a leading provider of products for the treatment of obstructive sleep apnea (OSA).  
 
Chief Executive Officer Lewis Gradon said, “We indicated in November 2015 that we expected net profit after tax for the full year to be between approximately NZ$135 million and NZ$140 million, and we are very pleased to have exceeded that. This result is due to strong uptake of our products across both the hospital and homecare settings and a continuation of gross margin expansion. In particular, our Optiflow™ nasal high flow therapy products and innovative range of OSA masks have driven significant growth.”
 
The company’s directors have approved an increased fully imputed final dividend of 10.0 cents per ordinary share, an increase of 25% on the previous year.
 
Both of the company’s major product groups, Hospital/RAC and Homecare/OSA delivered record operating revenue results. RAC product group revenue grew 22% to NZ$436.3 million, or 15% growth in constant currency, and OSA product group revenue grew 21% to NZ$365.8 million, or 12% growth in constant currency.
 
“Growth in revenue from our Hospital/RAC product group accelerated over the second half as we benefited from the successful transition of US hospital distribution to our own team. Growth in new applications for our products outside our traditional invasive ventilation market was particularly robust, with 37% revenue growth, or 30% in constant currency, for the year” said Mr Gradon. “This comes on the back of a growing body of clinical evidence demonstrating the effectiveness of our Optiflow nasal high flow therapy in reducing the need for more invasive therapies and the length of hospital stay for patients.
 
“We are also very encouraged by the robust 21% revenue growth in our OSA product group. Our Simplus™ and Eson™ range of masks, used in the treatment of OSA, have performed strongly and have been a key contributor to growth. Overall, OSA mask revenue was up 31%, or 21% in constant currency, compared to the previous year. Our myAIRVO™ humidifier with integrated flow generator also performed strongly, with increasing demand from home healthcare providers.”
 
Gross margin increased by 284 basis points during the financial year due to a favourable product mix and increased volume from the company’s Mexico manufacturing facility.  
 
The proportion of the company’s revenue generated from recurring items, such as consumables and accessories, continued to increase and accounted for 83% of operating revenue.
 
Investment in research and development (R&D) continued to be significant. R&D expenses grew by 13% to NZ$73.3 million, representing 9% of operating revenue. “Our consistent investment in R&D is fuelling one of our most exciting periods of new product development, with humidifier controllers, masks, respiratory consumables, flow generators and compliance monitoring solutions all expected to be released during this current year,” said Mr Gradon.
 
The company’s change to a direct distribution model for its hospital respiratory care products in the United States took effect in July 2015. An expanded distribution centre and hospital sales and support team was established in the US to support this change.
 
“We have expended considerable effort into ensuring that we have the resources in place to serve our hospital customers in the US and to promote the benefits of our innovative respiratory care products. We anticipate that this sales focus on our own products will support an increase in revenue growth over time, particularly in non-invasive therapies such as Optiflow™. We have already begun to see the early benefits of this approach,” said Mr Gradon.
 
The increased final dividend of 10.0 cents per share, carrying full New Zealand imputation credit, will be paid on 8 July 2016. The dividend reinvestment plan (DRP), under which eligible shareholders can elect to reinvest all or part of their cash dividends in additional shares, will again be made available in respect of the 2016 final dividend. The DRP will be offered without a discount in respect of the 2016 final dividend payment.
 
Outlook for FY2017
“Continuous product improvement, serving more patient groups, broadening the range of assistance we can provide for each patient and expanding our international presence is a strategy that is well proven and has guided us to record operating revenue every year over more than a decade. We believe that this consistent strategy will continue to deliver robust revenue growth in the current year.
 
“At current exchange rates we expect full year operating revenue to be approximately NZ$900 million and net profit after tax to be approximately NZ$165 million to NZ$170 million,” concluded Mr Gradon.
 
Full Year Result highlights:

  • 27% growth in net profit after tax to a record NZ$143.4 million.
  • 25% increase in final dividend to 10.0 cps (2015: 8.0 cps).
  • 21% growth in operating revenue to a record NZ$815.5 million, 14% growth in constant currency.
  • 22% growth in RAC operating revenue, 15% growth in constant currency.
  • Revenue growth of 30% in constant currency for RAC consumables used in noninvasive ventilation, Optiflow nasal high flow therapy and surgical applications, accounting for 51% of RAC consumables revenue.
  • 21% growth in OSA operating revenue, 12% growth in constant currency.
  • Strong performance from OSA masks, 21% revenue growth in constant currency.
  • Gross margin improvement of 284 basis points for the full year, 278 basis points in constant currency.
  • Investment in R&D increased by 13% to NZ$73.3 million, representing 9% of operating revenue.


About Fisher & Paykel Healthcare
Fisher & Paykel Healthcare is a leading designer, manufacturer and marketer of products and systems for use in respiratory care, acute care, surgery and the treatment of obstructive sleep apnea.  The company’s products are sold in over 120 countries worldwide.  For more information about the company, visit our website www.fphcare.com.
 
Contact: Marcus Driller, Investor Relations & Corporate Affairs Manager on +64 9 574 0110.
 
Accompanying Documents 
Please find attached to this news release the following additional documents:

  • Results in Brief
  • Annual Report 2016, including financial commentary and constant currency analysis
  • Annual Review 2016
  • Corporate Governance Statement and ASX Appendix 4G
  • Appendix 1 and Appendix 4E reports
  • Appendix 7
  • Section 209 notice

 
The 2016 Annual Report and Annual Review will be available online at www.fphcare.com/2016annualreport and the Corporate Governance statement will be available at www.fphcare.com/corporategovernance.
 
Constant Currency Information
Constant currency information included within this news release is non-conforming financial information, as defined by the NZ Financial Markets Authority, and has been provided to assist users of financial information to better understand and track the company’s comparative financial performance without the impacts of spot foreign currency fluctuations and hedging results and has been prepared on a consistent basis each year. A constant currency analysis is included on page 24 of the company’s Annual Report 2016 and the company’s constant currency income statement framework can be found on the company’s website at www.fphcare.com/ccis.
 
Full Year Results Conference Call
Fisher & Paykel Healthcare will host a conference call today to review the results and to discuss the outlook for the 2017 financial year. The conference call is scheduled to begin at 10:00am NZST, 8:00am AEST (6:00pm USEDT) and will be broadcast simultaneously over the internet.
 
To listen to the webcast, access the company’s website at www.fphcare.com/investor. Please allow extra time prior to the webcast to visit the site and download the streaming media software if required. An online archive of the event will be available approximately two hours after the webcast and will remain on the site for two weeks.
 
To attend the conference call, participants will need to dial in to one of the numbers below at least 5 minutes prior to the scheduled call time and identify yourself to the operator.  When prompted, please quote the conference code of: 1421463.
 
New Zealand Toll Free: 0800 446 046
USA Toll Free: 1800 742 9301
Australia Toll Free: 1800 725 000
Hong Kong Toll Free: 800 906 648
United Kingdom Toll Free: 0808 234 1369
International: +61 2 8373 3610
 
An audio replay of the conference call will be available approximately 2 hours after the call and will be accessible for two weeks by dialing one of the numbers below.  When prompted please enter the conference code of: 1421463.
 
New Zealand Toll Free: 0800 453 213
USA Toll Free: 1855 452 5696
Australia Toll Free: 1800 153 898 
Hong Kong Toll Free: 800 963 117
United Kingdom Toll Free: 0808 234 0072
International: +61 2 9003 4211