Fisher & Paykel Healthcare Corporation Limited · NZX:FPH
Fisher & Paykel Healthcare — H1 FY2020 Earnings Presentation
41 slides from Fisher & Paykel Healthcare's earnings presentation, Nov 26, 2019
Slide 1: Half Year Results Presentation FY2020
Half Year Results Presentation FY2020 1 For six months ended 30 September 2019
Slide 2: Half year business highlights
Half year business highlights + EXPANDED + AWARDED Release of the F&P 950™ heated Black Pin at the DINZ Best Design humidification system in Europe and Awards for our design culture and the launched F&P Vitera™ mask in the US economic impact of our products + PROGRESSED + DIVERTED an exciting produc
Slide 3: Key half year financial results
Key half year financial results H1 FY20 (6 months to 30 September 2019) % of Revenue NZ$M PCP^ CC* Operating revenue 100% 570.9 +12% +9% Hospital operating revenue 62% 353.6 +19% +17% Homecare operating revenue 38% 214.7 +2% -1% Gross margin / Gross profit 67% 382.9 +26bps +15bps SG&A 29% 162.9 +2
Slide 4: Hospital product group
Hospital product group HARDWARE H1 FY20 HOSPITAL REVENUE COMPOSITION 12% CONSUMABLES Invasive Non-invasive OptiflowTM nasal Surgical ventilation ventilation high flow 88% Hardware Consumables H1 FY19 Hospital revenue composition Hardware: 12% Consumables: 88% 4
Slide 5: Hospital product group
Hospital product group H1 FY20 • New applications 62% OF OPERATING REVENUE consumables* made up 63% of H1 FY20 Hospital HOSPITAL OPERATING REVENUE consumables revenue, 60% in H1 FY19 (H1 FY20 $353.6M) • Strong customer demand NZ$ 19% for our Optiflow and AIRVO systems, driven by clinical trial resul
Slide 6: Homecare product group
Homecare product group HARDWARE H1 FY20 HOMECARE REVENUE COMPOSITION 16% CONSUMABLES CPAP Therapy/OSA Home Respiratory Support 84% Hardware Consumables H1 FY19 Homecare revenue composition Hardware: 16% Consumables: 84% 6
Slide 7: Homecare product group
Homecare product group H1 FY20 • Home Respiratory Support 38% OF OPERATING REVENUE business continues to grow well • OSA mask revenue impacted by phasing of product cycle relative HOMECARE OPERATING REVENUE to competitors (H1 FY20 $214.7M) • F&P Vitera OSA mask launched in the US in 2% NZ$ October 2
Slide 8: New lease accounting standard impact (IFRS 16)
New lease accounting standard impact (IFRS 16) Opening adjustment to Balance Sheet at 1 April 2019 (NZ$M) Prior to adoption Impact Adjusted after adoption Property, plant & equipment 601.4 29.1 630.5 Deferred tax assets 38.9 1.4 40.3 Lease liabilities - 33.9 33.9 Retained earnings 549.2 (3.4) 545.8
Slide 9: Gross Margin
Gross Margin GROSS MARGIN 70% 60% • Gross margin for the half year: 50% − increased by 26 bps to 67.1% − increased by 15 bps in constant currency 40% • Primarily driven by favourable product mix 30% • Offset by costs of the new Mexico manufacturing facility 20% 10% 0% 2015 2016 2017 2018 2019 H1 FY2
Slide 10: Operating Margin
Operating Margin OPERATING (EBIT) MARGIN Operating expenses 30% • NZ$216.9M, +6% (+3% CC) 25% Research & Development expenses • NZ$54M, +18% (+18% CC) 20% • Reflecting underlying growth and timing of R&D 15% projects • Long term plan to grow in line with constant 10% currency revenue growth Selling,
Slide 11: Interest and Tax
Interest and Tax H1 FY19 H1 FY20 Change Financing Expense NZ$M NZ$M NZ$M Interest Income 1.7 1.3 (0.4) Lease Interest Expense - (0.9) (0.9) Interest Expense (1.4) (1.0) 0.4 FX loss on interest bearing liabilities (3.4) (5.7) (2.3) Net financing income/(expense) (3.1) (6.3) (3.2) H1 FY19 H1 FY20 Chan
Slide 12: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet H1 FY19 H1 FY20 NZ$M NZ$M Operating cash flow 93.4 113.5 Capital expenditure (including purchases of intangible assets) 61.1 86.6 Lease liability payments - 4.3 Free cash flow 32.3 22.6 FY2019 H1 FY20 NZ$M NZ$M Net cash/(debt) (including short-term investments) 54.4 (5.2)
Slide 13: Gearing and Dividend
Gearing and Dividend • Target gearing ratio* of +5% to -5% debt to debt plus equity GEARING* − Gearing ratio as at 30 September 2019 was 0.6% 15% • Increased interim dividend by 23%: 10% − 12.00 cps + 4.667 cps imputation 5% credit for NZ residents (gross dividend of NZ 16.667 cps) 0% − Fully impute
Slide 14: Foreign exchange effects
Foreign exchange effects • 50% of operating revenue in USD (FY19: 50%) and 19% in € (FY19: 19%). Year to 31 March Hedging position for our main exposures FY20 FY21 FY22 FY23 FY24 FY25-27 USD % cover of expected exposure 95% 80% 50% 30% 15% - USD average rate of cover 0.667 0.657 0.654 0.642 0.636 -
Slide 15: Revenue and expenses by currency
Revenue and expenses by currency H1 FY20 (for the 6 months ended 30 September 2019) REVENUE BY CURRENCY COST OF SALES BY CURRENCY OPERATING EXPENSES BY CURRENCY 1% 5% 17% 12% 30% <1% 3% 43% 43% 13% 50% <1% 19% 37% 27% NZD USD EUR MXN Other NZD USD EUR MXN Other NZD USD EUR MXN Other 15
Slide 16: Outlook FY2020
Outlook FY2020 Expect at current exchange rates (of NZD:USD 0.64, NZD:EUR 0.58): • Operating revenue – approximately NZ$1.19 billion • Net profit after tax – approximately NZ$255 million to NZ$265 million Capital expenditure expected to be approximately NZ$170 million • New facility in New Zealand •
Slide 17: Overview
rol Overview | Fisher &Paykel HEALTHCARE
Slide 18: Fisher & Paykel Healthcare at a glance
Fisher & Paykel Healthcare at a glance Global leader in respiratory Global presence humidification devices Our people are located in 38 countries • Medical device manufacturer with leading 317 positions in respiratory care and obstructive of our people in Europe sleep apnea 1,555 of our people in No
Slide 19: ~US$10+ billion and growing market opportunity
~US$10+ billion and growing market opportunity HOSPITAL HOMECARE Invasive Non-invasive Hospital Surgical Home Obstructive Sleep Ventilation Ventilation Respiratory Support Humidification Respiratory Support Apnea “NEW APPLICATIONS” Applications outside of invasive ventilation 19
Slide 20: Our aspiration
Our aspiration OUR ASPIRATION: Sustainably DOUBLING our constant currency revenue every 5-6 years. 20
Slide 21: Markets and products
Markets and products • Hospital REVENUE BY PRODUCT GROUP 6 MONTHS TO 30 SEPTEMBER 2019 − Heated humidification <1% − Respiratory care − Neonatal care − Surgery • Homecare 38% 62% − Masks − Flow generators − Data management tools − Respiratory care in the home Recurring items, consumables and Hospita
Slide 22: Impact of changing demographics
Impact of changing demographics • Population age and weight both US POPULATION OVER AGE 65 (MILLIONS) increasing 100 − US population 65 years+ to grow 90 ~80% over next 20 years1 80 − US males 60 - 74 years, average weight increased 70 0.4 kg/year since 19602 60 • 60% of US healthcare cost is after
Slide 23: Hospital cost breakdown
Hospital cost breakdown 6% Medical devices Other – includes labour, utilities, drugs, supplies, 94% food, depreciation. 23 Source: Estimates of Medical Device Spending in the United States, Donahoe, G and King, G, June 2014
Slide 24: Lower care intensity = lower cost
Lower care intensity = lower cost MEAN ANNUAL COPD-RELATED MEDICAL, PHARMACY AND TOTAL COSTS BY CARE INTENSITY COHORT $50,000 $40,000 Mean cost (2008 US$) $30,000 $20,000 $10,000 $0 Outpatient cohort Urgent outpatient cohort ED cohort Standard admission cohort ICU cohort 24 Source: Anand A Dalal, La
Slide 25: Hospital
Fisher &Paykel HEALTHCARE
Slide 26: Respiratory humidification
Respiratory humidification • Normal airway humidification is bypassed or compromised during ventilation or oxygen therapy • Mucociliary transport system operates less effectively • Need to deliver gas at physiologically normal levels − 37°C body core temperature − 44mg/L 100% saturated 26
Slide 27: Optiflow - displacing conventional oxygen therapy
Optiflow - displacing conventional oxygen therapy CONVENTIONAL NON-INVASIVE OXYGEN THERAPY VENTILATION 27
Slide 28: Clinical outcomes of Optiflow nasal high flow therapy
Clinical outcomes of Optiflow nasal high flow therapy Optiflow NHF therapy is associated with: ADULTS: PAEDIATRICS: • REDUCED intubation5 • REDUCED intubation10 • REDUCED re-intubation6, 7, 8 • REDUCED length of stay11 • REDUCED bilevel ventilation7 • REDUCED respiratory distress12 • REDUCED nursing
Slide 29: Optiflow NHF - a growing body of clinical evidence
Optiflow NHF - a growing body of clinical evidence NASAL HIGH FLOW CLINICAL PAPERS PUBLISHED ANNUALLY 225 • The publication of 200 247 clinical papers 175 on NHF continues 150 to signify a high level of clinical 125 interest in the 100 therapy. 75 50 25 0 Adult Neonatal & Paediatric 29 Source: PubMe
Slide 30: Consistently strong growth in hospital new applications
Consistently strong growth in hospital new applications CONSTANT CURRENCY REVENUE GROWTH RATE IN NEW APPLICATIONS CONSUMABLES* 35% 30% 25% 20% 15% 10% 5% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 • New applications consumables currently make up 63% of Hospital consumables revenue, up from 59%
Slide 31: Homecare
- Homecare Fisher &Paykel HEALTHCARE 31
Slide 32: Obstructive Sleep Apnea
Obstructive Sleep Apnea • Temporary closure of airway during sleep • Can greatly impair quality of sleep, leading to fatigue; also associated with hypertension, stroke and heart attack • Estimate >100 million people affected in developed countries • Most common treatment is CPAP (Continuous Positive
Slide 33: Mask matters most
Mask matters most • Masks are key to compliance • Unique, patented designs • Vitera launched in NZ, Australia, Europe and Canada in May and in the US in October 33 F&P ESON 2™ F&P VITERA™ F&P BREVIDA™
Slide 34: Home respiratory support
Home respiratory support • Chronic obstructive pulmonary disease (COPD) is a lung disease which is commonly associated with smoking • Emphysema and chronic bronchitis are both forms of COPD • Chronic respiratory disease, primarily COPD, is the third leading cause of death in the world17 • 6% of US a
Slide 35: High level of innovation and investment in R&D
High level of innovation and investment in R&D • R&D represents 9% of operating revenue:* NZ$54.0M • Product pipeline includes: − Humidifier controllers − Masks − Respiratory consumables − Flow generators − Compliance monitoring solutions • 242 US patents, 451 US pending, 1,056 Rest of world patents
Slide 36: Growing patent portfolio
Growing patent portfolio FISHER & PAYKEL HEALTHCARE US PATENT PORTFOLIO (2008 – 2019) 450 400 350 300 250 200 150 100 50 0 2008 2010 2012 2014 2016 2018 US Patents US Patent Applications Average remaining life of FPH patent portfolio (all countries): 12 years* 36 * As at 31 March 2019
Slide 37: Manufacturing and operations
Manufacturing and operations • Vertically integrated • Will grow manufacturing capacity to accommodate future volume growth • Modest growth in NZ • Most growth outside NZ Auckland, New Zealand • Three buildings: 82,000 m2 / 885,000 ft2 total • 100 acres / 40 hectares land • Fourth building due to be
Slide 38: Strong global presence
Strong global presence REVENUE BY REGION • Direct/offices 6 MONTHS TO 30 SEPTEMBER 2019 − Hospitals, home care dealers 5% − Sales/support offices in North America, Europe, Asia, South America, Middle East and 22% Australasia, 18 distribution centres − ~1,000 employees in 38 countries 45% − Ongoing i
Slide 39: Ownership structure and listings
Ownership structure and listings • Listed on NZX and ASX (NZX.FPH, ASX.FPH) SHAREHOLDING STRUCTURE AS AT GEOGRAPHICAL OWNERSHIP AS AT 30 SEPTEMBER 2019 30 SEPTEMBER 2019 1% 2% 4% 15% 4% 23% 6% 36% 24% 60% 25% New Zealand Australia North America UK NZ Institutions Other Institutions Europe (ex UK) As
Slide 40: Consistent growth strategy
Consistent growth strategy 40
Slide 41: Important Notice and References
Important Notice and References Disclaimer The information in this presentation is for general purposes only and should be read in conjunction with Fisher & Paykel Healthcare Corporation Limited’s (FPH) Interim Report 2020 and accompanying market releases. Nothing in this presentation should be cons
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