ADDRESS BY GARY PAYKEL, CNZM
CHAIRMAN
FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED
TO THE ANNUAL MEETING OF SHAREHOLDERS
21 AUGUST 2009
We have continued to make very encouraging progress. In respiratory care we
are successfully broadening the range of applications for our devices and in
OSA we have introduced innovative new technology into our product line. This
was reflected in 28% growth in operating revenue, to a record 458 million New
Zealand dollars for the year ended 31 March 2009.
We also achieved very strong growth in earnings, with a 76% increase in
operating profit to 102 million New Zealand dollars. Profit after tax also
grew 76%, to 62 million dollars.
Our long term growth strategy; expand our range of innovative products,
offer devices to treat a wider range of conditions, and increase our
international sales presence - continues to result in an increasing number
of hospitals, physicians, nurses, therapists and homecare providers choosing
our devices to assist in the treatment of their patients.
We have made very consistent progress with this strategy. Revenue from our
core product groups, in US dollar terms, has grown at a compound annual rate
of more than 18% over the past decade.
Our positive trading performance enabled your directors to approve a final
dividend of seven cents per ordinary share, carrying full imputation credit,
taking total dividends for the year to 12.4 cents per share.
New and improved products and processes, along with the development of new
applications for our technologies, are critical drivers of our annual revenue
and earnings growth. We remain committed to investing in R&D. New products
and applications developed over the past three years made a strong
contribution to our revenue growth and generated encouraging gains in market
share.
Over the year we continued to invest in the expansion of our global sales
network, with our own people located in 26 countries and our products sold in
more than 120 countries. We have an increasing number of our own people
calling directly on customers and clinicians to promote our devices and to
provide in-service training and support.
Our operating revenue is earned in a variety of currencies, with a large
proportion, approximately 61%, generated in US dollars. Exchange rates
between the New Zealand dollar and other currencies were again volatile
during the year, with the New Zealand dollar depreciating substantially
against the US dollar, and more recently, appreciating strongly again. We
operate a robust hedging policy, and we began the new financial year with
approximately 610 million New Zealand dollars of hedging in place, up to five
years forward. These instruments were at average rates of approximately 43
Euro cents and 51 US cents to the New Zealand dollar.
We also continue to invest in our manufacturing capacity, which contributed
to capital expenditure of 22 million dollars last year. This year we expect
to commit to increased capital expenditure of approximately 48 million
dollars to support ongoing growth in demand across our product range.
As reported to you at last year''s annual meeting, some of that capital will
be invested in the establishment of an offshore manufacturing facility in
Mexico which will provide increased capacity, geographic diversity and
reduced freight and manufacturing costs.
Mike Daniell will soon provide a more in-depth commentary on our performance
and will discuss our prospects for the current year and those expansion
plans.
We operate in specialised international markets, and as Chairman, I believe
that shareholder interests are well represented by your Board. We are
fortunate in that we have a board whose experience and knowledge spans
marketing, sales, finance, science, medicine, engineering, legal, quality,
regulatory, and the many other demands of an international business.
Your Board is committed to ensuring that the company adheres to best practice
corporate governance standards. A summary of the company''s governance
policies are set out each year in the annual report.
The experience, capabilities and commitment of our more than 2100 people
worldwide ensures we are able to offer innovative medical devices which can
help to improve patient care and outcomes and enable us to deliver the long
term growth in value expected by our shareholders. Excellence in quality,
research, development, manufacturing, marketing, sales, distribution and
administration are essential to our future growth.
The Board appreciates that our strong performance and our prospects for
growth are due to the combined efforts of our staff and the support we
receive from our customers, distributors, suppliers and clinical partners.
Our thanks to them all.
I would also like to thank you, our shareholders, for your continued loyalty
to the company. The Board and our management team value your support as we
continue to focus on creating value for you.
ADDRESS BY MICHAEL DANIELL
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED
TO THE ANNUAL MEETING OF SHAREHOLDERS
21 AUGUST 2009
A copy of the slide presentation will be available on the company''s website
at www.fphcare.com
Slide 1
Thank you, Gary. Good afternoon, ladies and gentlemen. I''m pleased to have
the opportunity to review our results for the 2009 financial year, and to
update you on progress so far this year.
Before doing so, I''d like to mention that we have a number of our staff here
today who will be available later to discuss our products with you. They are
wearing name badges. Of course many of you will know Lewis Gradon, our
Senior VP of Products and Technology and Paul Shearer, our Senior VP of Sales
and Marketing.
As Gary mentioned, we have pursued a very consistent long term growth
strategy, and our revenue growth for the year again demonstrated the success
of that strategy.
As this graph of US dollar operating revenue over the past six years
illustrates, our strategy has delivered ongoing strong revenue growth.
Slide 2
Over the year, 61% of our operating revenue was generated in US dollars, with
99% of our sales resulting from exports from New Zealand.
Our operating revenue grew 28%, or 100 million dollars, to 458 million NZ
dollars and, as a result, operating profit and net profit after tax both
increased by 76%.
We achieved an operating margin in excess of 22%, while investing 6.2% of
operating revenue in research and development.
Slide 3
With a combination of strong underlying growth and favourable exchange rate
movements, we achieved strong increases in operating revenue across our major
product groups, with respiratory and acute care revenue up 34% and
contributing 53% of our total revenue. Obstructive sleep apnea product group
revenue grew 23%, and contributed 44% of the total.
The proportion of our revenue which was generated from recurring items, such
as consumables and accessories, continued to increase and accounted for 74%
of core operating revenue.
Slide 4
The geographic split of sales remained diverse, with good revenue growth in
each major geographic region. North America continues to be our biggest
market, with a large proportion of our OSA sales made there.
Slide 5
We are very well represented in our international markets, as Gary mentioned.
This year we have established new distribution and clinical sales support
centres in Japan and Canada, with plans for direct sales operations in two
more countries later in the year.
We are also continuing to expand our sales and distribution teams in other
countries, to ensure that we can serve our growing range of customers, and so
that we are able to take full advantage of our opportunities for growth.
Slide 6
Looking now at our major product groups and their performance.
Our heated humidifier and respiratory care systems play an important role in
improving patient care in the treatment of a variety of medical conditions
which interfere with normal respiration.
Warming and moistening of the gases delivered through mechanical ventilation
or oxygen therapy helps to reproduce the normal functioning of the nose and
upper airways and reduces airway moisture loss and the occurrence of adverse
side effects.
Our devices include humidifier controllers, chambers, breathing circuits
which convey medical gases to and from the patient, filters, connectors and
interfaces.
Slide 7
Respiratory and acute care product group operating revenue grew exceptionally
strongly, assisted by significant hospital Group Purchasing Organisation
business in the United States. The increasing number of our humidification
systems in use around the world also generated continuing growth in adult and
neonatal consumables.
The average value of humidifier and respiratory care components we provide
for each patient continued to increase. Demand for our neonatal oxygen
therapy systems and resuscitators also continued to grow strongly.
For several years we have been pursuing opportunities to increase the number
of patients our devices can assist, by expanding from our traditional
intensive care ventilation market into non-invasive ventilation, oxygen
therapy, humidity therapy and surgery. We have made very encouraging
progress, with those new applications generating 24% of operating revenue in
this product group last year.
We recently began international introduction of our new humidity therapy
system which combines technology from our OSA and intensive care
humidification products. Two models will be available, Airvo for hospital
use and myAirvo for homecare use.
We also continue to pioneer a system which humidifies the cold, dry carbon
dioxide gas which is used in surgical procedures, and can reduce the
complications associated with drying and cooling of delicate internal
tissues. We now believe that humidified CO2 can be beneficial in both
laparoscopic and open surgery.
Slide 8
Most people with OSA do not realize that they have a condition which causes
excessive daytime fatigue, is associated with cardiovascular disease and
strokes, and is directly linked to hypertension. In fact, tens of millions
of people worldwide who have untreated OSA stop breathing for short periods
many times each night while they are asleep.
Continuous positive airway pressure, or CPAP, therapy is the most common
treatment for OSA. CPAP therapy prevents the collapse and blockage of the
patient''s airway during periods of deep sleep and is delivered using an air
flow generator, humidifier, tubing and mask.
Slide 9
We estimate that the worldwide market for OSA treatment devices is now worth
more than two billion US dollars annually. The increasing availability of
home diagnosis, better treatment devices and improving awareness of the
condition are contributing to ongoing market growth.
We have continued to grow strongly, with our broad range of CPAP masks and
flow generators generating 23% growth in operating revenue last year.
In the United States, the Federal medical insurer, CMS, has introduced a
reimbursement rule that requires the patient''s compliance with their CPAP
therapy to be recorded. During the year we introduced our SleepStyle Auto
Flow generators with SensAwake and our SleepStyle 240 range, both product
ranges incorporate our SmartStick compliance and efficacy recording
technology. These new devices allow us to address the significant and
growing premium segment of the market.
We also introduced two new masks, Zest and Forma. The Zest nasal mask
combines our new Easy-Clip silicone seal with our previously proven Glider
and FlexiFit technology.
The Forma full face mask includes a new FlexiFoam cushion, which is soft and
light and features active contouring that conforms naturally to the patient''s
face.
Slide 10
Over the year, we increased our R&D spending by 18% to 28 million dollars.
This increase reflects the increased numbers of engineers, scientists,
physiologists and other staff employed in product and process research and
development activities across product groups.
I''ve already mentioned the new premium flow generators and masks, and Airvo
which were introduced last financial year. So far this year we have
introduced new respiratory care interfaces for nasal high flow oxygen therapy
and non-invasive ventilation, as well as Petite and Plus sizes in the Zest
nasal mask range.
We have in development an extensive new product pipeline, with a number of
new products scheduled for introduction over the next twelve to eighteen
months. Over the next few months we will begin introduction of myAirvo into
the homecare market. Later this financial year, we plan to begin
introduction of our new flow generator platform for OSA treatment.
The new range combines both exceptional style and technology, to fit
unobtrusively into the home setting. It has a very small footprint and can
incorporate all of our innovative technologies including, SmartStick,
ThermoSmart, SensAwake and Auto-adjusting.
Slide 11
We expect that, with so many great new products, demand will continue to grow
at rates which will more than double the size of the business over the next
five years.
As Gary mentioned earlier, we are currently making a significant investment
in manufacturing capacity.
In the current financial year we expect to commit approximately 30 million
dollars of capital expenditure in New Zealand, which will include new product
tooling, equipment for increased capacity and some replacement equipment.
This year we also expect to invest approximately 20 million dollars of
capital expenditure for a manufacturing facility in Mexico. The facility is
located in Tijuana, and will primarily accommodate increased manufacturing
capacity for our more mature, high volume consumable devices.
Mexico is close to our major North American markets and will provide shorter
delivery times, reduced freight and manufacturing costs, as well as increased
geographic diversity.
Manufacturing equipment is being built for installation in the 18,500 square
metre (or 200,000 square feet) building we have leased. Some existing
equipment will be moved to Tijuana which will allow for growth and for the
introduction of new products at our Auckland facilities.
We expect that the Mexico facility will begin operations late this financial
year and will initially add approximately 100 employees to our current total
of 2100 worldwide.
The facility is expected to contribute more than 20 million dollars to annual
operating profit within five years, and cumulatively, more than 60 million
dollars over the next five years.
Slide 12
In November we will be reporting our results for the first six months of the
2010 financial year.
Trading for the first half, so far, has been better than expected than when
we provided guidance in May, offset to degree by the appreciating New Zealand
dollar. Demand has been strong, and we have seen accelerating growth, as a
result of the introduction of new products, in the OSA product group.
We expect to achieve first half operating revenue of approximately 245
million NZ dollars, representing growth of approximately 15% in NZ dollars or
9% in constant currency terms. Very pleasing, given the exceptional 20%
constant currency growth recorded for the first half last year.
Taking into account that growth, along with the hedging we''ve previously
disclosed, we expect to achieve first half operating profit of approximately
54 million NZ dollars, and profit after tax of approximately 37 million
dollars, up 30% on the first half last year.
For the full year, at current exchange rates, we still expect to achieve
profit after tax of 75 to 80 million NZ dollars, approximately 25% above last
year. That''s due to stronger than expected underlying growth offsetting
higher exchange rates than assumed in our original guidance.
Slide 13
In conclusion, I''d like to express our appreciation of the continued support
of our Board and our shareholders, and also our customers, suppliers and
clinical partners. Our teams around the world are working to reward that
support.
Thank you.
End CA:00183811 For:FPH Type:ADDRESS Time:2009-08-21:15:06:00