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Fisher & Paykel Healthcare Record Full Year Net Profit Up

Fisher & Paykel Healthcare
News Release
23 May 2013

Fisher & Paykel Healthcare Reports Record Full Year Net Profit, Up 20%

Auckland, New Zealand, 23 May 2013 - Fisher & Paykel Healthcare Corporation Limited (NZSX:FPH, ASX:FPH) today reported record net profit after tax of NZ$77.1 million for the year ended 31 March  2013, an increase of 20% compared to the prior year.  Full year operating revenue was a record NZ$556.3 million, 8% above the prior year or 11% growth in constant currency. 

For the second half, net profit after tax grew by 22% to NZ$43.8 million and operating revenue grew 9% to NZ$289.3 million.  In constant currency,  second half operating revenue increased by 14% and net profit after tax increased by 54%, primarily as a result of revenue growth, improved gross margins and operating efficiencies.

Respiratory and acute care product group (RAC) operating revenue grew 18% and Obstructive Sleep Apnea product group (OSA) operating revenue grew 10% in constant currency, compared to the prior year second half.

“Robust growth in our RAC product group was driven by strong demand for our respiratory systems, which help to improve effectiveness and efficiency of 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 very strong, with consumables revenue from those increasing 38%, in constant currency, for the second half.

“Enthusiastic customer acceptance of our easy to fit, comfortable and effective Pilairo nasal pillows and Eson nasal masks drove OSA mask revenue growth of 16% in the second half, in constant currency.  Early indications are that our recently introduced Simplus full-face mask will also be very well accepted.

“Our new ICON+ flow generator range is rolling out to our major markets at present, and combines very simple setup with our comfort enhancing SensAwake and ThermoSmart systems and our efficient cloud-based Info Technologies for compliance data recording and reporting”.

Dividend
The company’s directors have approved a final dividend for the financial year ended 31 March 2013 of 7.0 NZ cents per ordinary share (2012: 7.0 cents), carrying full imputation credit.  For New Zealand resident shareholders that results in a gross dividend of 9.722 cents per ordinary share.  Eligible non-resident shareholders will receive a supplementary dividend of 1.235 NZ cents per ordinary share.  The final dividend will be paid on 5 July 2013, with a record date of 21 June 2013, and ex-dividend dates of 17 June 2013 for the ASX and 19 June 2013 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 final 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 9% over the prior year to NZ$45.7 million, representing 8.2% of operating revenue.  

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

Selling, general and administrative (SG&A) expenses increased 6% to NZ$151.8 million, or 9% in constant currency, as the company continued to expand its operations and its sales teams in the North America, Europe and Asia-Pacific regions.

Capacity Expansion
During the year the company invested NZ$62.0 million of capital expenditure, which included equipment for increased manufacturing capacity, new product tooling, replacement equipment and NZ$33.6 million for completion of the third building on its Auckland site.  The company expects capital expenditure to be approximately NZ$40 million for the 2014 financial year.

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 contributed to the increase in gross margin.

Foreign Exchange Hedging
To protect the company from exchange rate volatility, the company had in place at 31 March 2013 a mix of foreign exchange contracts and collar options, up to five years forward, with a face value of approximately NZ$385 million.  These instruments hedge the company’s net exposure.  At the commencement of the 2014 financial year, the company had in place approximately 60% cover for the US dollar and approximately 77% cover for the Euro at average rates of approximately 0.76 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.

Outlook for FY2014
“We expect our underlying revenue growth to continue to be robust this year, driven by a broad range of new products and applications.

“Constant currency operating margin is expected to increase, as a result of growth in higher margin differentiated products, cost reductions and other efficiencies.

“For the 2014 financial year, based on an exchange rate range of 0.80 to 0.85 for the NZD:USD for the remainder of the year, we expect our operating revenue to be in the range of NZ$610 million to NZ$630 million and net profit after tax to be in the range of NZ$85 million to NZ$90 million”, 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 year ended 31 March 2013 and the comparative financial information for the year ended 31 March 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 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.

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 2014 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: 


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: 69177616.

A copy of the financial statements filed with the NZX and ASX are attached: http://img.scoop.co.nz/media/pdfs/1305/FPH_FY2013_Full_Year_Release.pdf
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.

ENDS

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