Record Half Year Result for Fisher & Paykel Healthcare, Earnings Guidance Upgraded

Fisher & Paykel Healthcare Corporation Limited today announced its results for the half year ended 30 September 2016. Net profit after tax was up 26% for the half at a record NZ$78.2 million. Operating revenue was NZ$425.2 million, 12% above the prior comparable period, or 16% growth in constant currency.

Chief Executive Officer Lewis Gradon said, “We are very pleased with the record results achieved in the first half of the year, as we continued to execute on the delivery of innovative technologies that improve care and outcomes in hospital and homecare settings. Based on our positive first half performance we are today upgrading our full year earnings guidance and we now expect, at current exchange rates, for full year net profit after tax to be towards the middle of a NZ$165 to NZ$170 million range.”   

In the Hospital product group, operating revenue for the half grew 19% to NZ$236.6 million, an impressive 23% growth in constant currency.

Operating revenue in the Homecare product group lifted 5% for the half to NZ$183.2 million or 8% growth in constant currency. Masks used in the treatment of obstructive sleep apnea (OSA) performed strongly, with revenue up 14% in constant currency as the company’s mask range continued to take market share.

Revenue generated from consumables and accessories continued to increase, accounting for 86% of operating revenue.

“This half we have seen exceptional results from our new applications in the Hospital product group, with revenue growth of 35% from these products in constant currency terms,” said Mr Gradon.

“Several new clinical studies were published this year, which have continued to demonstrate the effectiveness of our Optiflow nasal high flow therapy. This has encouraged uptake from clinicians around the world as the advantages of this therapy in terms of patient outcomes and economic benefits become increasingly evident. We have also made pleasing progress with our hospital distribution model in the United States, building a strong platform to provide for future growth through the new direct sales structure.

“In our Homecare product group we continue to track well, delivering a solid performance in mask sales this half,” continued Mr Gradon. “We also recently received FDA regulatory clearance for our Eson 2 mask, and we are now selling this mask in the United States.”

Gross margin increased by 157 basis points to 64.9%, or a 307 basis points increase in constant currency, compared to the first half last year, primarily due to favourable product mix, increased production in Mexico and supply chain efficiencies.

The company continued to invest in its growth programme, having signed an agreement for the purchase of a 15 hectare greenfields site in Mexico, which will enable further expansion of its manufacturing capabilities.

Investment in research and development remained strong, increasing 16% to NZ$41.6 million, representing 9.8% of operating revenue for the period.  

“Earlier this year we released some exciting new products, including the F&P 950 heated humidification system, which is used in hospitals for invasive, non-invasive and Optiflow nasal high flow therapies,” said Mr Gradon. “We are pleased with the early customer response in Australasia.  

“We also released the innovative F&P Nivairo mask, a hospital mask used for non-invasive ventilation therapy featuring unique TubeFit nasogastric zones. In Homecare, we launched the F&P Brevida, a nasal pillows mask for OSA patients, which has received a very positive response in Australasia, Europe and Canada, the markets in which it has been released so far.”     

The company’s directors have approved an increased interim dividend of 8.25 NZ cents per ordinary share, an increase of 23% on the interim dividend last year. The interim dividend, carrying full New Zealand imputation credit, will be paid on 21 December 2016. The dividend reinvestment plan, 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 2017 interim dividend. The directors have determined that the DRP will be offered without a discount in respect of the 2017 interim dividend payment.

Outlook for FY2017

“We have shown continued strength this half, buoyed by supportive clinical research, a skilled global team and innovative products. We will continue to build on our existing expertise and educate healthcare providers on the benefits that our products provide. Our longstanding objective is to double our constant currency operating revenue every five or six years. Our performance this financial year to date is consistent with that objective and the opportunities we see to assist more and more caregivers and their patients continue to give us confidence for the future.

“Given the positive first half result we now expect full year net profit after tax to be towards the middle of a NZ$165 to NZ$170 million range and we expect full year operating revenue to be approximately NZ$880 million,” concluded Mr Gradon.

This guidance is provided at exchange rates of NZD:USD = 0.70 and NZD:EUR = 0.66.

Result highlights for the first half

·      26% growth in net profit after tax to a record NZ$78.2 million.

·      23% increase in interim dividend to 8.25 cps (2016: 6.7 cps).

·      12% growth in operating revenue to a record NZ$425.2 million, 16% growth in constant currency.

·      19% growth in Hospital operating revenue, 23% growth in constant currency.

·      35% revenue growth for consumables used in non-invasive ventilation, Optiflow and surgical applications, accounting for 52% of Hospital consumables revenue.

·      5% growth in Homecare operating revenue, 8% growth in constant currency.

·      Continued strong performance from Homecare masks, with 14% revenue growth in constant currency.

·      Investment in R&D increased by 16% to NZ$41.6 million, representing 9.8% 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.