Fisher & Paykel Healthcare Corporation Limited (NZSX:FPH, ASX:FPH) today announced that new products and new clinical applications contributed to accelerating revenue growth late in the year for its respiratory and acute care (RAC) and obstructive sleep apnea (OSA) product groups. Operating revenue was a record NZ$506.1 million for the year ended 31 March 2011, despite unfavourable exchange rate conditions.
Net profit after tax was NZ$63.9 million (prior to one-off non-cash deferred tax charges of NZ$11.5 million), compared to NZ$71.6 million for the prior year. The reduction in the full year result primarily reflects unfavourable exchange rate movements, expenses related to the establishment and expansion of manufacturing in Mexico and a non-recurring NZ$3.2 million distribution termination payment received in the prior year. The non-cash deferred tax charges relate to the NZ government’s removal of depreciation on buildings and the reduction in the NZ company tax rate. Reported net profit after tax was NZ$52.5 million.
RAC product group operating revenue increased by 13% and OSA product group revenue increased by 8%, in US dollar terms, over the prior year. The company derived approximately 54% of its operating revenue in US dollars.
“As expected, growth accelerated late in the financial year as our new ICON flow generator range gained traction and demand for our respiratory consumables increased. In the fourth quarter RAC operating revenue grew 24% and OSA operating revenue grew 17% in US dollar terms, compared to the same period last year”, commented Fisher & Paykel Healthcare’s CEO, Mr Michael Daniell.
“In January, we completed the roll-out of our new ICON flow generator product range into the OSA market in North America. Customer reaction to ICON has been very positive, with fourth quarter flow generator operating revenue growing 50% in US dollars compared to the same period last year”.
The company’s directors have approved a final dividend for the financial year ended 31 March 2011 of 7.0 NZ cents per ordinary share (2010: 7.0 cents), carrying full imputation credit based on a tax rate of 28%. Eligible non-resident shareholders will receive a supplementary dividend of 1.235 NZ cents per share. The final dividend will be paid on 8 July 2011, with a record date of 24 June 2011, and ex-dividend dates of 20 June 2011 for the ASX and 22 June 2011 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 2011 final dividend and future dividends, until such time as the directors determine otherwise.
Research and development (R&D) expenses increased by 11% over the prior year to NZ$39.3 million, representing 7.8% 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 grew 3% to NZ$141.9 million, or 7% in constant currency terms. During the year, the company expanded operations at its new distribution and clinical sales support centres in Japan, Taiwan, Hong Kong and Turkey. Revenue grew particularly strongly in Japan, as a result of an increasing proportion of sales made directly to healthcare providers and sub- distributors. The company also continued to expand its operations and its sales teams in North America, Europe, Asia/Pacific and South America.
During the year, the company invested NZ$43.3 million of capital expenditure. Approximately NZ$37.7 million was invested in New Zealand. This included equipment for increased manufacturing capacity, new product tooling, replacement equipment and NZ$15.5 million for construction of the third building on its Auckland site.
On completion in late 2012, the new NZ$95 million building will provide increased R&D, laboratory, office, manufacturing and warehouse space and will provide the capacity to more than double the company’s New Zealand based R&D, clinical research and marketing activities.
The ramp up of manufacturing of consumable products at the company’s facility in Tijuana, Mexico progressed as expected, with NZ$5.6 million of capital invested over the year to expand capacity and the range of products manufactured in Mexico.
Foreign Exchange Hedging
To protect the company from exchange rate volatility, the company has in place a mix of foreign exchange contracts and collar options, up to five years forward, with a face value of approximately NZ$520 million. These instruments hedge the company’s net exposure. For the 2012 financial year, the company had in place approximately 57% cover for the US dollar and approximately 77% cover for the Euro at average rates of approximately 0.69 US dollars and 0.46 Euros to the New Zealand dollar.
The company closed out foreign exchange contracts in the 2010 financial year, which will contribute NZ$17.0 million to operating profit but not cash flow in the 2012 financial year, as the cash was received in the 2010 financial year. These instruments were progressively replaced with new instruments that form part of the company’s current foreign exchange hedging.
During the April-May 2011 period the company closed-out US$15 million of forward exchange contracts with maturity dates in the 2013 and 2014 financial years with a cash benefit of NZ$10.5 million, which will be applied to reduce bank debt.
Outlook for FY2012
“Our underlying revenue growth accelerated in the March quarter and we are anticipating a continuation of strong operating revenue growth this year, supported by new products and growth in new applications.
Both our new direct sales operation in Japan and our manufacturing facility in Mexico are expected to make positive contributions to earnings this year. We are planning for our rate of revenue growth to exceed expense growth and are expecting better than 20% constant currency net profit after tax growth, as we begin to see benefits from those new operations along with other efficiencies.
Exchange rates have continued to be very volatile, with the NZD:USD rate ranging between 0.80 and 0.70 over the past year. For the 2012 financial year, over that range of average NZD:USD spot rates, we expect our operating revenue to be in the range of NZ$530 million to NZ$580 million and net profit after tax to be in the range of NZ$62 million to NZ$76 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 company’s financial statements for the year ended 31 March 2011 and the comparative financial information for the year ended 31 March 2010 have been prepared under the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).
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 2012 financial year. The conference call is scheduled to begin at 10:00am NZDT, 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. 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: 60143923.
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: 60143923.
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.