F&P Healthcare boosts first-half profit 27%; affirms full-year forecast

Friday 27th November 2015

Fisher & Paykel Healthcare, the medical device maker, increased first-half profit by 27 percent and affirmed its expectation for full-year earnings.

Profit rose to a record $62 million, or 10.9 cents per share, in the six months ended Sept. 30, from $48.9 million, or 8.6 cents, in the year earlier period, the Auckland-based company said in a statement. Revenue rose 20 percent to $381 million. The results are in line with the company's forecasts for profit of about $60 million and revenue of $380 million.

The company reaffirmed its forecast for full-year profit of about $135 million to $140 million, on revenue of about $800 million.

F&P Healthcare, which competes with Resmed and Respironics, increased its first-half gross profit margin to 63.3 percent from 60.6 percent in the same period a year earlier due to a favourable product mix, increased production through its Mexico plant and manufacturing efficiencies. The company estimates it is tapping a potential market for its products of more than 100 million people a year, which could double to 200 million in 10 to 15 years' time.

"The record result is attributable to a continuation of our consistent growth strategy, which has driven strong revenue growth in both of our major product groups and further gross margin improvements," said chief executive Michael Daniell.

The company assumed direct responsibility for its respiratory care products in the US, its largest market, from mid-July after previous distributor CareFusion was taken over by Becton Dickinson. It almost doubled the size of its US hospital sales and support team and established an expanded distribution centre in Kentucky.

The change meant revenue growth slowed at the company's respiratory and acute care/hospital division as the previous distributor sold down inventory as part of the transition, however it said it was confident that having its own US hospital team will spur future growth.

"With the move to a direct sales model in the US, as we have already done in our other major markets, we expect that the increased sales focus will enable us to maximise opportunities and increase revenue growth in the US," Daniell said.

In the first half, sales of the company's respiratory and acute care/hospital products increased 18 percent to $199.6 million, while sales at its obstructive sleep apnea/homecare unit rose 23 percent to $175.3 million.

Revenue from sales of higher margin recurring items, such as consumables and accessories, accounted for 83 percent of operating revenue.

The company increased its spending on research and development by 14 percent to $35.8 million.

It will pay a dividend of 6.7 cents a share on Dec. 23, up from 5.8 cents in the year earlier period.

The company's shares last traded at $8.02, and have gained 28 percent so far this year, outpacing a 9.3 percent rise in the benchmark S&P/NZX50 Index.

BusinessDesk.co.nz

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