A post-Covid reality check? F&P Healthcare’s profit drops 34pc

Fisher & Paykel Healthcare's profit for the 2023 year has fallen sharply. Photo / Supplied

Fisher & Paykel Healthcare said its net profit for the March year came to $250.3 million, down 34 per cent on the previous year, as the respiratory products maker emerged from three years of high demand arising from the Covid-19 pandemic.

Total operating revenue for the year was $1.58 billion, down 6 per cent, or 9 per cent in constant currency terms, from 2022.

By the close, the company’s share price had dropped by $1.67, or 6.51 per cent, to $23.98, despite the result being broadly in line with expectations.

For the second half, operating revenue grew 14 per cent to $890.5m from the second half of 2022, driven by strong growth in hospital new application consumables and obstructive sleep apnoea mask revenue.

Managing director and chief executive Lewis Gradon said the company was coming out of three financial years heavily impacted by Covid-19.

“The second-half result was encouraging as market conditions progressed towards more of a normal state, and both our hospital and homecare product groups

delivered good growth,” he said.

Hospital product group revenue for the full year was $1.02b, a 15 per cent decrease compared to the previous year.

Hospital hardware sales were down 53 per cent in constant currency terms compared with the 2022 financial year, a year more influenced by global Covid-19 surges, the company said.

The company said it expected operating revenue of about $1.7b for the 2024 year, with similar revenue growth rates for both hospital and homecare product groups.

It also expects big margin improvements in the years ahead.

During the last three years, F&P Healthcare said its responsibility was “to get as much product as possible into the hands of our customers”.

“Now, as every team in our business turns back to efficiency gains, we are confident in our ability to return to our long-term target of 65 per cent within three to four years.”

For 2024 the company anticipates a gross margin improvement of about 200 basis points in constant currency terms, Gradon said.

Gross margin for 2023 was 59.4 per cent, a 369-basis-point decrease in constant currency terms, due in part to higher freight costs.

In 2023, hardware sales in countries or regions that did not experience Covid-19 surges tracked “somewhat close” to pre-pandemic patterns.

Hospital new applications consumables revenue for the full year was down 6 per cent from the prior year as hospital customers worked through their excess inventory.

This trend abated throughout the year, and new applications consumables revenue for the second half of 2023 was up 13 per cent over the second half of 2022.

Homecare product group revenue for the full year was a record $553.8m, 18 per cent higher than the previous year.

The company had strong growth in masks and accessories revenue.

The company’s shares fell after the result as it was slightly below some brokers’ expectations.

Forsyth Barr analyst Matt Montgomerie said F&P Healthcare’s gross margins were slightly weaker than expectations, as was its revenue.

Likewise, F&P Healthcare’s margin guidance was softer than some had expected.

“All in all, it was slightly softer, but nothing major,” he said.

“I don’t think that there was anything sinister, per se, in the result.

“It’s just more of a reality check for the new normal, or the new environment in which F&P is operating,” he said.

F&P Healthcare set a final dividend of 23.0 cents per share for the second half of the year, bringing the total to 40.5c per share, an increase of 3 per cent over 2022.

The company announced the acquisition of 105 hectares of land in Karaka, Auckland, for a second New Zealand campus during the year.

A 10 per cent deposit of the $275m purchase price was paid in September 2022, and a payment of $189.5m was made this month.

A further $43m will be paid in January 2026, and the final instalment of $15m will be paid in December 2026.