Investors fret over Healthcare prospects

Fisher & Paykel Healthcare reported another strong profit rise yesterday but its shares slid on investor concern that the strong gains may not continue.

Robust sales of sleep disorder products drove a $9 million increase in the healthcare equipment manufacturer's net profit to $70 million for the year to March.

Based on present exchange rates, chief executive Mike Daniell expected trading revenue for the medical equipment-maker to hit $375 million in the 2007 year, compared with $289.5 million for the year just past, as the company continued to grab market share.

But new profit growth was due to ease this year as the company used up its attractive currency hedges, disappointing some investors, with F&P Healthcare shares closing down 23c at $4.22 yesterday, down from a high of $4.63 last week.

"Investors were really looking for further bottom line growth in 2007, but the company pretty much put a damper on that, saying it wouldn't be achieved," said Hamilton Hindin Greene broker Grant Williamson.

This year, revenue growth came as F&P Healthcare stepped up its product range and grew sales in international markets where it sells 98 per cent of its products.

F&P Healthcare earns about 65 per cent of its trading revenue in US dollars and, in that currency, sales were up 23 per cent and operating profit up 18 per cent for the year.

Anticipation of a flu epidemic was linked to revenue growth of US$2 million ($3.14 million) during the year as customers stockpiled products such as breathing devices.

Daniell said that trend would see the company increase stock levels through the year to carry at least three to four weeks of stock. F&P Healthcare has three core product groups: respiratory humidification systems, devices for treating obstructive sleep apnoea and neonatal products.

Respiratory humidification turnover rose 14 per cent to US$90 million and neonatal and warming product revenue rose 24 per cent to US$15.9 million.

Sales of sleep apnoea devices stood out, with sales rising 34 per cent to US$88.2 million.

F&P Healthcare is tapping a global market for the devices that Daniell said might reach $1.5 billion this year after studies linked the condition to illnesses such as heart disease.

Sleep apnoea is a condition where people briefly stop breathing during sleep.

With the global market for sleep apnoea devices growing at more than 20 per cent a year, Daniell saw clear opportunities to continue to grow share in that area as well as the intensive care ventilation market.

"We expect our growth in the OSA part of our business to be above market rates but to be running at say triple market rates is probably not realistic as the base of the business gets bigger and bigger," Daniell said.

Last week, the company said it was branching out of intensive care with a new range of devices that had the potential to double the market for its respiratory products.

These could be used across a variety of medical applications such as non-invasive ventilation, oxygen therapy, humidity therapy and resuscitation.

Chief financial officer Tony Barclay said: "Overall, we're looking at doubling the number of patients we can serve and more than doubling the value per patient."

Daniell summed up the company's prospects by saying: "Put simply, we believe we have more opportunities to serve more patients with more devices in more places."