Fisher & Paykel Healthcare Corporation Limited (NZSX:FPH, ASX:FPH) today announced strong growth in its respiratory and acute care product group and a positive response to its new ICON flow generator range, which is used for the treatment of obstructive sleep apnea (OSA). Operating revenue was NZ$245.0 million for the six months ended 30 September 2010.
Net profit after tax was NZ$28.6 million (prior to one-off non-cash deferred tax charges of NZ$11.7 million) compared to NZ$37.0 million for the first half last year. The reduction in the half year result primarily reflects unfavourable exchange rate movements. Reported net profit after tax was NZ$16.9 million. 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.
Over the six months, the company derived approximately 56% of its operating revenue in US dollars. In US dollar terms, respiratory and acute care product group operating revenue increased by 18% and obstructive sleep apnea (OSA) product group revenue increased by 7% over the prior comparable period. Total operating revenue grew 9% to US$173.8 million for the six months.
“Growth in demand for our respiratory and acute care consumables was very encouraging, at 23% in US dollar terms, or 15% in constant currency compared to the same period last year. That growth was supported by 32% growth, in constant currency terms, from consumables used in the care of patients beyond our traditional invasive ventilation market”, commented Fisher & Paykel Healthcare’s CEO, Mr Michael Daniell.
“As planned, late in the half we began the roll-out of our new ICON flow generator product line into the OSA market in North America and Europe. Customer reaction has been very positive and we expect sales to build strongly during the second half”.
The company’s directors have approved an interim dividend for the financial year ending 31 March
2011 of 5.4 NZ cents per ordinary share (2010: 5.4 cents), carrying full imputation credit. Eligible non-resident shareholders will receive a supplementary dividend of 0.953 NZ cents per share. The interim dividend will be paid on 17 December 2010, with a record date of 3 December 2010, and ex- dividend dates of 29 November 2010 for the ASX and 1 December 2010 for the NZSX.
The company offers a dividend reinvestment plan (DRP), under which 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 interim dividend and future dividends, until such time as the directors determine otherwise.
Research & Development, SG&A
Research and development expenses increased by 14% over the prior comparable period to NZ$18.6 million, representing 7.6% of operating revenue. The company continued to expand its product and process research and development activities and current new product projects include flow generators, humidifier systems, masks and respiratory and acute care consumables.
Selling, general and administrative (SG&A) expenses grew 6% to NZ$75.2 million, or 11% in constant currency terms. During the half year, the company expanded operations at its new distribution and clinical sales support centres in Japan, Taiwan, Hong Kong and Turkey. The company also continued to expand its operations and its sales teams in North America, Europe, Asia/Pacific and South America.
During the half year the company invested NZ$23.9 million of capital expenditure. Approximately
NZ$19.9 million was invested in New Zealand. This included equipment for increased manufacturing capacity, new product tooling, replacement equipment and ongoing site works for the third building on its Auckland site.
As previously announced, construction of the new building will begin this month, with the total cost of the building project expected to be approximately NZ$95 million dollars. On completion in late 2012, the new building will provide increased research and development, laboratory, office, manufacturing and warehouse space and will provide the capacity to more than double the company’s New Zealand based research, development and clinical marketing activities. Manufacturing at the company’s facility in Tijuana, Mexico has progressed as expected, with a further NZ$3.3 million of capital invested over the six months to expand 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. For the remainder of the 2011 financial year, the company has in place approximately 70% cover for the US dollar and approximately 72% cover for the Euro at average rates of approximately 0.60 US dollars and 0.45 Euros to the New Zealand dollar.
“During the second half we expect underlying revenue growth to increase substantially in our OSA product group as ICON sales ramp-up and we expect continuing strong underlying growth for consumables in the respiratory and acute care product group. We anticipate that some customers will remain cautious regarding capital equipment purchases in the current economic environment”, concluded Mr Daniell.
The company estimates that, at an average NZD:USD spot exchange rate of 0.77 for the remainder of year, it will achieve operating revenue of approximately NZ$510 million and net profit after tax of approximately NZ$60 million to NZ$63 million (NZ$48 million to NZ$51 million after one-off non- cash deferred tax adjustments) for the financial year ending 31 March 2011.
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 six months ended 30 September 2010 and the comparative financial information for the six months ended 30 September 2009 have been prepared under the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).
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 remainder of the 2011 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. 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: 23116543.
New Zealand Toll Free 0800 446 041
USA Toll Free 1866 242 1388
Australia Toll Free 1800 701 269
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: 23116543.
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 www.fphcare.com
Contact: Michael Daniell MD/CEO on +64 9 574 0161 or Tony Barclay CFO on +64 9 574 0119.