Fisher & Paykel Healthcare Reports Half Year Profit up 18%

Fisher & Paykel Healthcare Corporation Limited (NZSX:FPH, ASX:FPH) today reported net profit after tax of NZ$33.3 million for the six months ended 30 September 2012, an increase of 18% compared to the first half last year.

In constant currency terms, the company’s operating profit grew 46%, primarily as a result of revenue growth, improved gross margins and operating efficiencies.

Operating revenue
Operating revenue was a record NZ$266.9 million, which was 6% above the same period last year, or 8% growth in constant currency terms.

The company’s respiratory and acute care (RAC) product group operating revenue increased by 11% and obstructive sleep apnea (OSA) product group revenue increased by 3% in constant currency  terms.

“Strong growth in our RAC product group was driven by ongoing growth in acceptance of our respiratory humidification systems which assist to improve patient care in a wide range of applications, including invasive ventilation, non-invasive ventilation, oxygen therapy and humidity therapy”, commented Fisher & Paykel Healthcare’s CEO, Mr Michael Daniell.  “Growth in revenue from new applications beyond invasive ventilation was particularly encouraging, with consumables revenue from those increasing 20% in constant currency.

“In our OSA product group, revenue for our mask range grew 5% in constant currency terms, reflecting a ramp-up in growth during the half following the introduction of our new Pilairo nasal pillows and Eson nasal masks.  Customer response to both masks has been very positive, with constant currency mask revenue growth of 11% in the second quarter.  Revenue for our ICON flow generator range grew 5% in constant currency over the first half last year, offset by the expected decline in revenue from our legacy SleepStyle range.”

Dividend
The company’s directors have approved an interim dividend for the financial year ending 31 March 2013 of 5.4 NZ cents per ordinary share (2012: 5.4 cents), carrying full imputation.  For New Zealand resident shareholders that equates to a gross dividend of 7.5 cents per ordinary share.  Eligible non-resident shareholders will receive a supplementary dividend of 0.953 NZ cents per ordinary share.  The interim dividend will be paid on 14 December 2012, with a record date of 3 December 2012 and ex-dividend dates of 27 November 2012 for the ASX and 29 November 2012 for the NZSX. 

The company offers a dividend reinvestment plan (DRP), under which eligible shareholders may elect to reinvest all or part of their cash dividends in additional shares.  A 3% discount will be applied when determining the price per share of shares issued under the DRP and will be applied in respect of the 2013 interim dividend and future dividends, until such time as the directors determine otherwise.

Research & Development, Selling, General & Administrative expenses
Research and development (R&D) expenses increased by 7% over the prior comparable period to NZ$21.3 million, representing 8% of operating revenue.

The company continued to expand its product and process research and development activities, and current new product projects include OSA masks, flow generators, humidifier systems and respiratory and acute care consumables. 

Selling, general and administrative (SG&A) expenses increased 6% to NZ$77.0 million, or 7% in constant currency terms, as the company continued to expand its operations and its sales teams in the North America, Europe and Asia-Pacific regions.  In September we acquired selected assets from our distributor in South Korea and established our own sales operation.

Capacity Expansion
During the half year, the company invested NZ$40.9 million in capital expenditure, which included equipment for increased manufacturing capacity, new product tooling, replacement equipment and NZ$27.4 million for construction of the third building on its Auckland site.

The increase in manufacturing of consumable products at the company’s facility in Tijuana, Mexico continued, with an increasing quantity and range of the company’s products now manufactured there.

Foreign Exchange Hedging
To protect the company from exchange rate volatility, the company had in place at 30 September 2012 a mix of foreign exchange contracts and collar options, up to five years forward, with a face value of approximately NZ$450 million.  These instruments hedge the company’s net exposure.  At 30 September 2012, the company had in place for the second half of the 2013 financial year approximately 95% cover for the US dollar and approximately 89% cover for the Euro, at average rates of approximately 0.76 US dollars and 0.49 Euros to the New Zealand dollar.  

Outlook for FY2013
“We expect constant currency revenue growth to increase further in the second half, as new products and applications continue to gain traction.  

For the 2013 financial year, assuming current exchange rates for the remainder of the year, we expect our operating revenue to be in the range of NZ$545 million to NZ$555 million and net profit after tax to be in the range of NZ$69 million to NZ$72 million.  That represents a three to four million dollar improvement on the guidance we provided at our Annual Shareholders’ meeting in August”, concluded Mr Daniell.

Financial Statements and Commentary
Attached to this news release are condensed NZ dollar financial statements and commentary. For convenience the income statement has been translated into US dollars.  The US dollar financial statement is non-conforming financial information, as defined by the NZ Financial Markets Authority.

The company’s financial statements for the six months ended 30 September 2012 and the comparative financial information for the six months ended 30 September 2011 have been prepared under the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). 

A constant currency analysis is also included.  A constant currency income statement is prepared each month to enable the board and management to monitor and assess the company’s underlying financial performance without any distortion from changes in foreign exchange rates.  The constant currency data provided is an estimate of the changes in the main income statement items after excluding the impact of movements in foreign exchange rates, hedging results and balance sheet translations.  The data is based on the NZ dollar income statements for the relevant periods which have all been restated at the budget foreign exchange rates for the 2013 financial year.

The constant currency analysis 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 financial performance without the impacts of spot foreign currency fluctuations and hedging results.

Half Year Results Conference Call
Fisher & Paykel Healthcare will host a conference call today to review these results and to discuss the outlook for the remainder of the 2013 financial year.  The conference call is scheduled to begin at 10:00am NZDT, 8:00am AEDT (4:00pm USEST) and will be broadcast simultaneously over the Internet.

To listen to the webcast, access the company’s website at www.fphcare.com.  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:  76732439.

New Zealand Toll Free  0800 452 569
USA Toll Free  1866 242 1388
Australia Toll Free  1800 354 715
Hong Kong Toll Free  800 968831
United Kingdom Toll Free  0808 234 7860
International  +61 2 8823 6760

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:  76732439.

New Zealand Toll Free  0800 445 136
USA Toll Free  1866 214 5335
Australia Toll Free  1800 766 700
Hong Kong Toll Free  800 901596
United Kingdom Toll Free  0800 731 7846
International  +61 2 8235 5000

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 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: Michael Daniell MD/CEO on +64 9 574 0161 or Tony Barclay CFO on +64 9 574 0119.