Fisher & Paykel Healthcare Reports Record Half Year Net Profit, Up 34%

Fisher & Paykel Healthcare Corporation Limited today reported record net profit after tax of NZ$44.5 million for the six months ended 30 September 2013, an increase of 34% compared to the first half last year.

Operating revenue for the half year was a record NZ$303.9 million, 14% above the prior comparable period as a result of strong revenue growth in the company’s two major product groups.  Respiratory and acute care (RAC) product group operating revenue grew 15% to NZ$164.1 million and Obstructive Sleep Apnea (OSA) product group operating revenue grew 15% to NZ$131.2 million.

An interim dividend of 5.4 NZ cents per ordinary share, carrying full New Zealand imputation credit, will be paid on 19 December 2013.

“We are pleased with the record results achieved for the half year, with both of our major product groups delivering strong growth”, commented Fisher & Paykel Healthcare’s CEO, Mr Michael Daniell.

“This is a reflection of our strategy to increase the range of applications for our technologies and to extend the range of products we provide for use in the care of each patient.  An increasing number of clinicians and homecare providers are now choosing our devices to help improve patient outcomes and efficiency of care.

“Robust growth in our RAC product group was driven by particularly strong demand for our respiratory systems which help to improve care and outcomes in non-invasive ventilation, oxygen therapy, humidity therapy and surgery. Growth in consumables revenue from those applications increased 29% in constant currency.

“The roll-out of our Eson nasal, Pilairo nasal pillows and Simplus full face masks was a key contributor to OSA mask constant currency revenue growth of 19%, compared to the first half last year. This month, we have introduced the Simplus and new Pilairo Q masks into the United States, with positive early acceptance by homecare providers and users.

“ICON+, our new flow generator range, was introduced into our major markets during the half and contributed to an encouraging 12% constant currency growth in total flow generator revenue in the second quarter”.

Outlook for FY2014

“Our strategic direction remains consistent as we focus on developing innovative products, increasing the number of patients who can benefit from our products, extending our range of products and growing our international presence.

“We expect our underlying revenue growth to be robust for the remainder of the year, driven by growing demand for a broad range of new products and new applications for our products.

“We continue to expect net profit after tax to be in the range of NZ$90 million to NZ$95 million for the 2014 financial year, based on an exchange rate of 0.83 for the NZD:USD for the remainder of the year, despite exchange rates moving unfavourably since our last earnings guidance update in August.  We expect operating revenue to be in the range of NZ$610 million to NZ$625 million”, concluded Mr Daniell.

Dividend

The company’s directors have approved an interim dividend for the financial year ending 31 March 2014 of 5.4 NZ cents per ordinary share (2013: 5.4 cents), carrying full New Zealand imputation credit. For New Zealand resident shareholders that results in 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 19 December 2013, with a record date of 6 December 2013, and ex-dividend dates of 2 December 2013 for the ASX and 4 December 2013 for the NZSX.

Dividend Reinvestment Plan

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 2014 interim dividend and future dividends, until such time as the directors determine otherwise.

Research and Development expenses

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

R&D expenses increased by 21% over the prior comparable period to NZ$25.8 million, representing 8.5% of operating revenue.  R&D expenses included depreciation and operating costs of NZ$0.9 million relating to the new building on the Auckland site, which will primarily accommodate future growth in R&D activities.

Selling, General and Administrative expenses

Selling, general and administrative (SG&A) expenses increased 12% to NZ$86.0 million, or 13% in constant currency, as the company continued to expand its international operations and sales teams.

Capacity Expansion

During the first half, the company invested NZ$18.4 million of capital expenditure, which included equipment for increased manufacturing capacity and new product tooling. In the first half last year, capital expenditure of NZ$40.9 million included NZ$27.4 million for construction of the third building on its Auckland site, which was completed in November 2012.

The ramp-up of manufacturing of consumable products at the company’s facility in Tijuana, Mexico progressed as expected with an increasing quantity and range of the company’s products now manufactured there.

Increased volume from the Mexico facility, coupled with lean manufacturing improvements at the company’s Auckland facility and a positive product mix, contributed to a constant currency 357 bps increase in gross margin compared to the first half last year.

Foreign Exchange Hedging

To protect against exchange rate volatility, the company had in place at 30 September 2013 a mix of foreign exchange contracts and collar options, up to four years forward, with a face value of approximately NZ$430 million.  These instruments hedge the company’s net exposure.  At the commencement of the second half, the company had in place for the year ended 31 March 2014 approximately 94% cover for the US dollar and approximately 91% cover for the Euro at average rates of approximately 0.77 US dollars and 0.47 Euros to the New Zealand dollar.

The company closed out foreign exchange contracts in the 2010 and 2012 financial years, which will contribute NZ$21.3 million in the 2014 financial year to operating profit but not to cash flow, as the cash was received in the 2010 and 2012 financial years.  Those instruments were progressively replaced with new instruments that form part of the company’s current foreign exchange hedging.

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 2013 and the comparative financial information for the six months ended 30 September 2012 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 excludes 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 2014 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 the results and to discuss the outlook for the 2014 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/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: 94752676

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: 94752676.

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 8199 0299

 

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.