FLLYR: FPH: FPH REPORTS 15% GROWTH IN PROFIT TO NZ$71.6M

26 May 2010 9:39 am

FPH 26/05/2010 FLLYR

REL: 0939 HRS Fisher & Paykel Healthcare Corporation Limited

FLLYR: FPH: FPH REPORTS 15% GROWTH IN PROFIT TO NZ$71.6M

FISHER & PAYKEL HEALTHCARE REPORTS 15% GROWTH IN PROFIT TO NZ$71.6M Auckland, New Zealand, 26 May 2010 - Fisher & Paykel Healthcare Corporation Limited (NZSX:FPH, ASX:FPH) today reported a net profit of NZ$71.6 million for the year ended 31 March 2010, an increase of 15% compared to the prior year. Strong growth in its obstructive sleep apnea (OSA) and respiratory and acute care product groups, as well as favourable foreign exchange hedging results, contributed to the result.

Operating revenue Operating revenue for the year ended 31 March 2010 increased 14% over the prior year to a record US$341.5 million, or 10% to NZ$503.3 million.

OSA product group operating revenue increased by 22% to US$160.8 million or 17% to NZ$237.0 million, reflecting strong demand for the company's premium flow generators and masks. Respiratory and acute care product group operating revenue increased by 11% to US$164.7 million or 7% to NZ$242.4 million.

"Operating revenue growth for our OSA product group was a robust 34% in US dollar terms in the second half and 17% in constant currency terms for the year, as we gained market share with our new premium products. Late in the year, we began introduction of our new ICON flow generator range, which has been enthusiastically received by customers in New Zealand and Australia.

Accelerating growth in demand for our respiratory and acute care devices was encouraging, with second half revenue growth of 35% in US dollar terms, or 17% in constant currency, compared to the same period last year", commented Fisher & Paykel Healthcare's CEO, Mr Michael Daniell.

The company continued to generate strong operating revenue growth from clinical applications beyond its traditional invasive ventilation and OSA markets. These include patients requiring non-invasive ventilation, oxygen therapy, humidity therapy and laparoscopic surgery. Those applications contributed 27% of the company's respiratory and acute care consumables revenue for the year.

In October 2009, the company ceased sales of its infant warmer product line in North America and transferred distribution of the Medela product line in Australia to Medela.

Dividend The company's directors have approved a final dividend for the financial year ended 31 March 2010 of 7.0 NZ cents per ordinary share (2009: 7.0 cents), carrying full imputation credit. Eligible non-resident shareholders will receive a supplementary dividend of 1.2353 NZ cents per share. The final dividend will be paid on 9 July 2010, with a record date of 25 June, and an ex-dividend date of 21 June for the ASX and 28 June 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 Fisher & Paykel Healthcare 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 2010 final dividend and future dividends, until such time as the directors determine otherwise.

The directors have reviewed the company's capital structure and intend to progressively increase shareholders funds, to ensure that the company has capacity to continue to implement its foreign currency hedging policy as it grows.

A target debt to debt plus equity ratio of 5% to 15% (excluding unrealised financial instrument gains or losses) has been established. The company expects that, subject to earnings performance, the dividend will be maintained in real terms until such time as the target capital structure is achieved. Longer term, the directors expect that a dividend payout ratio of greater than 60% will be appropriate to maintain target gearing.

Research & Development, SG&A Research and development expenses increased by 25% over the prior year to NZ$35.3 million, representing 7.0% of operating revenue. The company continued to expand its product and process research and development activities and current new product projects include flow generators, masks and additional respiratory care consumables. For the 2010 financial year the company has included in other income an additional R&D tax credit of NZ$1.0 million, relating to R&D expenditure in the 2009 financial year.

Selling, general and administrative (SG&A) expenses grew 16% to NZ$137.5 million, or 23% in constant currency terms. During the year, the company established new distribution and clinical sales support centres in Japan, Canada and Taiwan and continued to expand its operations and its sales teams in North America, Europe, Asia/Pacific and South America.

Capacity Expansion During the year, the company invested NZ$48 million of capital expenditure. Approximately NZ$27 million was invested in New Zealand. This included equipment for increased manufacturing capacity, new product tooling, replacement equipment and the initial site works for a new 31,000m2 building, which will provide increased office, research and development, laboratory, manufacturing and warehouse space. The company has invested approximately NZ$20 million establishing a manufacturing facility in Tijuana, Mexico that will primarily accommodate increased manufacturing capacity for the company's more established, high volume consumable devices.

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$550 million. For the remainder of the 2011 financial year, the company has in place approximately 67% cover for the US dollar and approximately 70% cover for the Euro at average rates of approximately 0.60 US dollars and 0.45 Euros to the New Zealand dollar.

During the year the company monetised (closed out) US$66 million of forward exchange contracts with maturity dates in the 2012, 2013 and 2014 financial years with a cash benefit of NZ$32 million being realised and applied to reduce bank debt.

Outlook "Over the year we will be introducing our new ICON flow generator range into Europe, North America and the remainder of our international markets. We will also be expanding our R&D activities, our sales and distribution teams and our New Zealand and Mexico manufacturing capacity." concluded Mr Daniell.

For the 2011 financial year the company expects to continue to achieve strong revenue growth and estimates that, at an average NZD:USD spot exchange rate for the year of 0.67, it will achieve operating revenue of approximately NZ$560 million and profit after tax of approximately NZ$70 million to NZ$75 million. End CA:00195353 For:FPH Type:FLLYR Time:2010-05-26:09:39:59

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