Fisher & Paykel Healthcare delivers record full year result

Fisher & Paykel Healthcare delivers record full year result, net profit up 26%

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Fisher & Paykel Healthcare Corporation Limited today announced record financial results for the financial year ended 31 March 2014.

The medical device manufacturer, which provides respiratory care systems and products for the treatment of obstructive sleep apnea, today reported record net profit after tax of NZ$97.1 million for the full year, an increase of 26% over the prior year. Operating revenue was also a record, at NZ$623.4 million, 12% above the prior year or 13% growth in constant currency.

Chief Executive Officer Michael Daniell said, “Our record results are very pleasing and they reflect that hospital clinicians and homecare providers are increasingly using our innovative products to help to improve care and outcomes. Our medical devices are designed to increase the effectiveness and efficiency of care and we estimate that our products were used in the treatment of more than 9 million patients during the year”.

Both of the company’s major product groups, respiratory and acute care (RAC) and obstructive sleep apnea (OSA), delivered record operating revenue results. RAC product group revenue grew 12% to NZ$336.9 million, or 14% growth in constant currency, and OSA product group revenue grew 15% to NZ$270.0 million, or 15% growth in constant currency. The company estimates that revenue growth was about double the market growth for both major product groups.

“Growth in our RAC product group was strong and we are particularly encouraged by the continuing robust revenue growth, 29% in constant currency, in new applications for our products outside our traditional invasive ventilation market.

“More and more customers around the world are choosing to use our Optiflow oxygen therapy system and respiratory humidification systems for patients who are receiving noninvasive ventilation, as they see the real benefits for their patients and healthcare systems.

“The roll-out over the year of new masks for the treatment of OSA has been a key contributor to the excellent growth in our OSA product group, with mask operating revenue growth increasing to 26% in the second half in constant currency.

“Our Eson, Pilairo Q and Simplus masks are designed for comfort, seal and ease of use and we have enjoyed a very positive response from our customers”, said Mr Daniell.

The company’s directors have approved a final dividend of 7.0 NZ cents per share for the financial year ended 31 March 2014, carrying full imputation credit. 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 2014 final dividend. A 3% discount will be applied when determining the price per share in respect of the 2014 final dividend.

A feature of the result was the ongoing substantial improvement in gross margin, 393 basis points in constant currency over the prior year, due to favourable product mix, new products, Lean manufacturing improvements, increased volume from the Mexico facility and supply chain efficiencies.

The company continued to grow its investment in research and development (R&D) with R&D expenses increasing by 18% to NZ$54.1 million, representing 8.7% of operating revenue. “We have a number of exciting new products under development including masks, flow generators, humidifier systems and respiratory and acute care consumables”, said Mr Daniell.
Outlook for FY2015
“The number of patients who can benefit from our products is growing significantly, as a result of an aging demographic and increasing investment in healthcare in developing countries. We have a clear strategy to meet those needs by continually improving our products, serving more patient groups, extending our range of products and growing our international presence.

“The company continues to have favourable foreign exchange hedging in place although substantially less than in the 2014 financial year.

“At current exchange rates we anticipate an operating profit headwind of approximately NZ$32 million in the 2015 financial year from both reduced hedging and less favourable spot rates. Despite the challenge of this large roll-off in hedging, we have momentum in both of our product groups and we believe that we can offset that headwind in the 2015 financial year.

“For the 2015 financial year, based on a NZD:USD exchange rate of 0.86 for the remainder of the year, we expect our operating revenue to be approximately NZ$640 million and net profit after tax to be similar to FY2014.

“However, we again expect to deliver robust constant currency net profit growth of approximately 40% for the 2015 financial year”, concluded Mr Daniell.
Result highlights:
• 26% growth in net profit after tax to a record NZ$97.1 million, 46% growth in constant currency.
• 12% growth in operating revenue to a record NZ$623.4 million, 13% growth in constant currency.
• Double digit operating revenue growth in both of the company’s major product groups – Respiratory and acute care (RAC) 14%, Obstructive Sleep Apnea (OSA) 15% in constant currency.
• New RAC applications consumables revenue outside of invasive ventilation grew particularly strongly at 29% in constant currency.
• Strong performance from new OSA masks, Eson, Pilairo Q and Simplus, drove mask operating revenue growth of 23% in constant currency.
• Gross margin improvement of 327 basis points for the full year, 393 bps in constant currency.
• Fully imputed final dividend of 7.0 cps.
• Investment in R&D increased by 18% to NZ$54.1 million, representing 8.7% 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 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.

Full 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 year ended 31 March 2014 and the comparative financial information for the year ended 31 March 2013 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 comparative 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 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 comparative financial performance without the impacts of spot foreign currency fluctuations and hedging results and has been prepared on a consistent basis each year.

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