Fisher & Paykel Healthcare will pay out an 18 cent interim dividend before Christmas.
On Wednesday, the company reported it had surpassed its expected result for the six months to September 30, reporting net profit after tax (NPAT) of $107 million.
The company had expected net profit for the period of up to $105m.
It increased its interim dividend to 18c per share up from 17.5 cents per share in the same period in the previous financial year. This fully imputed dividend will be paid out on Dec December 18, the company said.
This was a 3 per cent increase on the interim dividend in 2022 and continued the company’s recent track record of increasing dividends to shareholders, the company said.
A dividend reinvestment plan is still available for eligible shareholders with a 3 per cent discount applying.
Operating revenue came in at $803.7m for the six months to September 30 compared to expected operating revenue of $790m.
Fisher & Paykel’s operating revenue rose 16 per cent compared to the same period in the previous financial year.
It reaffirmed that it expected a full-year result of $1.7 billion operating revenue at current exchange rates and net profit after tax of between $250m and $260m.
The board approved a profit-sharing payment of $4m for employees who had worked for the company for the qualifying period.
Craigs Investment Partners’ head of institutional equities research, Stephen Ridgewell, said in a research note the result was in line with expectations and the outlook should see shares trade flat to slightly better today.
He said the predicted full-year result was better than many analysts had been expecting.
“The key to note, however, is that [Fisher & Paykel] has had a hiring freeze in, more or less, since around April, which is leading to lower overhead growth in [the second half of 2024] than is usually the case and stronger operating leverage.”
Fisher & Paykel said its gross margin was 60.5 per cent. This was a 192 basis points increase in constant currency from the same period in the prior financial year and a 72 basis points improvement in constant currency from the second half of the previous financial year.
Managing director Lewis Gradon said Fisher & Paykel remained confident in its ability to return to its long-term target of 65 per cent gross margin within three to four years.
“We have a demonstrable history of margin improvements year-on-year. Continuous improvement plays an important role in this, and we have initiated more than 5000 projects globally over the past year. Many seem small on the surface, but we expect that over time, they will represent meaningful gains,” the company said in its half-year report.
Reduced freight costs accounted for most of the margin improvement, and it also decreased its use of air freight.
“We started negotiating reduced freight rates in the second half of last year. This half, we also had a much lower proportion of our shipments going air freight, reflecting our inventory levels globally and improving supply chain speed and reliability. The return to our usual practice of working on efficiency and margin improvements is starting to show an impact,” chief financial officer Lyndal York said on an analysts call.
Ridgewell said gross margin was a key focus for investors.
“We see room for improvement but doubt it will recover to that level so soon. That said, we see [Fisher & Paykel’s] revenue growth outlook as robust in both divisions, driven by new product launches, which should continue to underwrite solid improvement in revenue and NPAT.”
Cashflows from operations for the period increased to $156.5m from $1.9m in the same period in the previous financial year.
This was due to an increase in net profit before tax, a reduction in net working capital movements and a benefit from prepaid tax during the 2023 financial year, resulting in less tax paid during the period, the company said.
Gradon said historically, sales of hospital consumables were typically higher in the second half, reflecting seasonal patterns of hospitals.
“We are currently expecting that our revenue guidance approximation incorporates the range of pre-Covid historical seasonality in hospital consumables.”
Not sleeping on masks
Gradon said the first-half result indicated a continuation of stable ordering patterns in its hospital business and a robust performance for homecare.
“Headwinds such as freight rates and manufacturing inefficiencies continue to ease, while inflationary raw material and manufacturing costs remain key areas of focus for our teams,” Gradon said.
The company’s hospital business reported revenue of $487.5m, a rise of 11 per cent on the prior comparable period.
This included humidification products used in respiratory, acute and surgical care.
The company said it had reached several important milestones over the past six months, receiving regulatory clearance from the United States Food and Drug Administration in June for its respiratory 950 humidification system.
This followed approval for its Airvo 3 humidifier earlier in 2023.
The Aviro 3 was currently available in the US, and the 950 would be available in the new year, the company said.
In homecare, which includes products used in the treatment of obstructive sleep apnea (OSA) and respiratory support at home, it reported revenue of $314.4m.
This was a 26 per cent increase over the prior comparable period or 25 per cent in constant currency.
Fisher & Paykel said revenue for its obstructive sleep apnea masks and accessories increased 28 per cent in constant currency.
Gradon said the company’s Evora full face mask had been available in the US for more than a year, and it continued to see impressive demand and positive customer feedback.
“We are set to build on this momentum next year as our revolutionary new F&P Solo mask is rolled out beyond New Zealand and Australia.”
The company said its autofit technology on the mask represented a significant step forward in mask innovation, “allowing patients to set themselves up without assistance and easily finetune the fit with a single touch”.
It had received approval from the NZ Overseas Investment Office in April for a land purchase in Karaka, Auckland, for a second NZ campus. It had opened its third building in Tijuana, Mexico, and was nearing completion of a manufacturing facility in Guangzhou, China, “as our team secures the necessary regulatory approvals”.
Total borrowings increased to fund the purchase of the Karaka site, with interest expenses increasing to $8.7m from $1.2m in the same period in the prior financial year.
Fisher & Paykel spent $275.5m on capital expenditure, including $189.5m for the 105 hectares of land in Karaka.