Fisher & Paykel Healthcare Corporation Limited · NZX:FPH
Fisher & Paykel Healthcare — H1 FY2019 Earnings Presentation
77 slides from Fisher & Paykel Healthcare's earnings presentation, Nov 26, 2018
Slide 1: Results in Brief
Results in Brief Six Months Ended Six Months Ended 30 September 2017 30 September 2018 NZ$M NZ$M UNAUDITED (except as otherwise stated) (except as otherwise stated) % Change For personal use only FINANCIAL PERFORMANCE Total operating revenue 458.4 511.3 +12% Cost of sales (155.7) (169.7) +9% Gross p
Slide 2: Results in Brief (continued)
Results in Brief (continued) Six Months Ended Six Months Ended 30 September 2017 30 September 2018 NZ$M NZ$M UNAUDITED (except as otherwise stated) (except as otherwise stated) % Change For personal use only CASH FLOWS Net cash flow from operating activities 82.2 93.4 Net cash flow (used in) investi
Slide 3: Interim Report 2019 | Care by design
For personal use only A sketch... Interim Report 2019 | Care by design For six months ended 30 September 2018
Slide 4: ...draws on the knowledge, expertise and care
For personal use only ...draws on the knowledge, expertise and care of the many doctors, clinicians and healthcare providers we work with every day...
Slide 5: ...shaped by creative minds through a design process
For personal use only ...this knowledge is shaped by creative minds through a design process of prototyping, iterating and testing...
Slide 6: ...takes form through precision
...that takes form through For personal use only precision, ensuring the highest product quality standards and performance...
Slide 7: ...global network ensures customers have the devices they need
For personal use only ...which then extends to the care with which our global network ensures our customers have the medical devices they need...
Slide 8: ...helping improve care and outcomes for patients
...helping to improve For personal use only the care and outcomes for many millions of patients around the world every year.
Slide 9: Contents
Contents For personal use only Half Year Highlights 6 Business Updates 7 Product Group Overview 8 Half Year Review 10 Sustainable, Profitable Growth 14 Financial Commentary 18 Financial Statements 22 Directory 32 Constant currency information contained within this report is non-conforming financial
Slide 10: Half year highlights
6 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 Half year highlights For personal use only NET PROFIT AFTER TAX OPERATING PROFIT NZ$97.4 MILLION NZ$139 MILLION 20% 21% OPERATING REVENUE INTERIM DIVIDEND SPEND ON R&D 9% NZ$511.3 MILLION NZ 9.75 CPS FULLY IMPUTED OF OPERATING REVE
Slide 11: Business updates
Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 7 Business updates For personal use only + WELCOMED + INCLUDED REVENUE BY REGION 6 MONTHS TO 30 SEPTEMBER 2018 first major clinical study of the in the Dow Jones Sustainability Asia 4% use of Optiflow nasal high flow Pacific Index an
Slide 12: Hospital product group
8 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 Invasive ventilation Our products for invasive ventilation provide warm, humidified air to intubated patients. For personal use only This maintains the natural balance of heat and moisture in the airways. Non-invasive ventilation N
Slide 13: Homecare product group
Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 9 CPAP therapy For personal use only Our range of continuous positive airway pressure (CPAP) machines and masks support patients with obstructive sleep apnea. Our masks are well known for their comfort, simplicity and ease of use, wh
Slide 14: Care and innovation in everything we do
10 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 Care and innovation For personal use only in everything we do The 2019 financial year has started first half last year. This growth was due Progress well. For the first half of the year, largely to the continued adoption of our We
Slide 15: We have an exciting future ahead of us
For personal use only Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 11 We have an exciting future ahead of us, and will continue to innovate to help improve the care of millions of patients around the world every year. TONY CARTER Chairman We are well placed to deliver sustainab
Slide 16: Chairman and CEO report continued
12 For personal use only Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 The publication of a major long-term study typically at 9-10% of revenue. Our the past decade. His many years’ experience earlier this year continues to make an impact investment this half year was 9%. Our R&
Slide 17: Chairman and CEO report continued
For personal use only Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 13 Last month, we announced the appointment Patent Litigation update Looking ahead of Lyndal York as Chief Financial Officer. There have been developments over the We have an exciting future ahead of us. As Lynd
Slide 18: Our aspirations
14 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 Our aspirations For personal use only We have established an enviable track record for delivering sustainable revenue growth. Through increasing our global reach, designing and making better products, changing clinical practice, a
Slide 19: Our aspiration: sustainably doubling constant currency revenue
Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 15 OUR ASPIRATION: Sustainably DOUBLING our constant currency revenue every 5-6 years. For personal use only RESPIRATORY CPAP HOSPITAL HOME SURGICAL HUMIDIFICATION THERAPY/OSA RESPIRATORY RESPIRATORY TECHNOLOGIES SUPPORT SUPPORT C* T
Slide 20: For personal use only
16 For personal use only Fisher & Paykel Healthcare Corporation Limited Interim Report 2019
Slide 21: Financials
For personal use only Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 17 Financials
Slide 22: Financial commentary
18 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 Financial commentary For personal use only CONSTANT CURRENCY INCOME STATEMENTS (UNAUDITED) CONSTANT CURRENCY ANALYSIS A constant currency income statement is prepared each month to enable the Board and Six months Six months Six mo
Slide 23: Reconciliation of constant currency to actual income statements
For personal use only Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 19 RECONCILIATION OF CONSTANT CURRENCY TO ACTUAL INCOME STATEMENTS FOREIGN CURRENCY IMPACTS The company is exposed to movements in foreign exchange rates, with operating revenue Six months ended 30 September gen
Slide 24: Foreign exchange rates and hedging position
20 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 The average daily spot rate and the average conversion exchange rate of the main foreign Foreign exchange hedging position currency exposures for the reported periods are set out in the table. For personal use only During the peri
Slide 25: Funding, short term investments and cash flows
Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 21 FUNDING AND SHORT TERM INVESTMENTS CASH FLOWS The company had total available committed debt funding of NZ$228.8 million as at The full statement of cashflows is provided on page 25. For personal use only 30 September 2018, of whi
Slide 26: Consolidated income statement
22 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 September 2018 For the six months ended 30 September 2018 Unaudited Unaudited Unaudited Unaudited For personal use only 2017
Slide 27: Consolidated statement of changes in equity
Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 23 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 September 2018 Share Treasury Retained Total For personal use only capital shares earnings Reserves equity Notes NZ$M NZ$M NZ$M NZ$M NZ$M Balance at 31 March
Slide 28: Consolidated balance sheet
24 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 CONSOLIDATED BALANCE SHEET As at 30 September 2018 Audited Unaudited Audited Unaudited For personal use only 31 March 30 September 31 March 30 September 2018 2018 2018 2018 Notes NZ$M NZ$M Notes NZ$M NZ$M ASSETS EQUITY Current ass
Slide 29: Consolidated statement of cash flows
Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 25 CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 September 2018 Unaudited Unaudited Unaudited Unaudited For personal use only 2017 2018 2017 2018 NZ$M NZ$M NZ$M NZ$M CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOW R
Slide 30: Notes to the consolidated financial statements
26 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the six months ended 30 September 2018 1. GENERAL INFORMATION 2. SIGNIFICANT TRANSACTIONS AND EVENTS FOR THE CURRENT PERIOD The following significant transactions and events affec
Slide 31: Notes: operating revenue and contingent liabilities
Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. OPERATING REVENUE 5. CONTINGENT LIABILITIES For personal use only Significant Estimate Unaudited Unaudited Contingent liabilities are subject to uncertainty or cannot be reliably m
Slide 32: Notes: contingent liabilities and derivatives
28 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. CONTINGENT LIABILITIES CONTINUED 6. DERIVATIVE FINANCIAL INSTRUMENTS Financial instruments are either carried at amortised cost, less any provision for impairment, or For personal
Slide 33: Notes: derivatives and capital commitments
Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 29 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6. DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED 7. CAPITAL EXPENDITURE COMMITMENTS Undiscounted foreign currency contractual amounts for outstanding hedges were as follows: For personal
Slide 34: Notes: segment information
30 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10. SEGMENT INFORMATION The Group’s operating segments consist of New Zealand, North America, Europe and Asia Pacific. The composition of these segments is unchanged from the audited
Slide 35: Independent review report
For personal use only Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 31 INDEPENDENT REVIEW REPORT To the shareholders of Fisher & Paykel Healthcare Corporation Limited REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS We have reviewed the accompanying consolidated financial stateme
Slide 36: Directory
32 Fisher & Paykel Healthcare Corporation Limited Interim Report 2019 Directory For personal use only DIRECTORS REGISTERED OFFICES SHARE REGISTRAR Tony Carter Chairman, Non-Executive, Independent New Zealand: In New Zealand: Lewis Gradon Managing Director and Chief Executive Physical address: 15 Mau
Slide 37: Fisher & Paykel Healthcare is a world leader in medical devices
For personal use only Fisher & Paykel Healthcare is a world leader in medical devices and systems for use in respiratory care, acute care, surgery and in the treatment of obstructive sleep apnea. www.fphcare.com © 2018 Fisher & Paykel Healthcare Corporation Limited
Slide 38: Half Year Results Presentation FY2019
Half Year Results Presentation FY2019 | Care by design Fisher& Paykel For six months ended 30 September 2018 HEALTHCARE
Slide 39: H1 FY2019 Business Highlights
H1 FY2019 Business Highlights + WELCOMED first major clinical study into the use of Optiflow nasal high flow therapy in the home + AWARDED two Gold Pins at the New Zealand Design Awards for our F&P InfoSmart web application and F&P SleepStyle patient application + ANNOUNCED the appointment of Lyndal
Slide 40: First Half Financial Highlights
First Half Financial Highlights H1 FY2019 (6 months to 30 September 2018) NZ$M OPCP* &cc* Record operating revenue 511.3 +12% +8% Record Hospital operating revenue 297.3 +13% +11% Record Homecare operating revenue 211.1 +10% +6% Hospital new applications consumables revenue +24% +22% OSA masks reven
Slide 41: Hospital Product Group
Hospital Product Group ¢. S 950 System z AIRVO2 Optiflow * New applications consumables* made up 60% of H1 FY2019 Hospital consumables revenue, 55% in H1 at FY2018 ec * Strong customer demand for our ae Optiflow and AIRVO systems, driven ag by clinical trial results a Gi * F&P 950 to be released in
Slide 42: Homecare Product Group
Homecare Product Group Feil VIO QO CPAP therapy / Obstructive Sleep Apnea (OSA) OF OPERATING REVENUE H1 FY2019 HOMECARE OPERATING REVENUE NZ$ % a . 1 @) {o) Simplus Eson2 Brevida SleepStyle {0} 6% . Home respiratory support CONSTANT CURRENCY MASKS REVENUE " 6% <= ~~ CONSTANT CURRENCY fe) 2% , myAIRV
Slide 43: First Half Operating Results
First Half Operating Results H1 FY2019 (6 months to 30 September 2018) % of Revenue NZ$M OPCP* Occ* Operating revenue 100% 511.3 +12% +8% Cost of sales 33.2% 169.7 +9% +8% Gross profit 66.8% 341.6 +13% +9% Other income (R&D grant) 2.5 0% 0% SG&A 31.2% 159.4 +11% +8% R&D 8.9% 45.7 -3% -3% Total opera
Slide 44: Gross Margin Improvements
Gross Margin Improvements GROSS MARGIN 70% cox | 7 * Gross margin for the first half: 50% - increased by 77 bps to 66.8% - increased by 22 bps in constant currency “0% ¢ Primarily driven by favourable product mix 30% * Offset by OSA price declines 20% 10% 0% 2014 «2015 = 2016) 2017,-— 2018 -—-1H 201
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Slide 46: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet H1FY2019 (for the 6 months ended 30 September 2018) NZ$M Operating cash flow (+14%) 93.4 Capital expenditure (including purchases of intangible assets) 61.1 Depreciation and amortization 20.9 H1 FY2019 (as at 30 September 2018) NZ$M Net cash 14.8 Total equity 776.7 Total
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Slide 48: Foreign Exchange Effects
Foreign Exchange Effects * 50% of operating revenue in USD (FY18: 51%) and 19% in €. Year to 31 March Hedging position for our main exposures FY19 FY20 FY21 FY22 FY23 FY24 FY25-27 USD % cover of expected exposure 95% 75% 50% 10% - - - USD average rate of cover 0.681 0.668 0.654 0.660 - - - EUR % cov
Slide 49: Profit & Loss by Currency
Profit & Loss by Currency 1H FY2019 (for the 6 months ended 30 September 2018) REVENUE BY CURRENCY COST OF SALES BY CURRENCY OPERATING EXPENSES BY CURRENCY =NZD mUSD BEUR @MXN m Other = NZD USD BEUR @MXN m Other m@NZD @USD EUR @MXN m Other Fisher & Paykel 12 HEALTHCARE
Slide 50: Outlook FY2019
Outlook FY2019 Expect at current exchange rates (of NZD:USD 0.67, NZD:EUR 0.60): * Operating revenue - NZ$1.07 billion * Net profit after tax - in the range of approximately NZ$205 to NZ$210 million Capital expenditure for FY19 expected to be approximately NZ$160 million * New facilities in New Zeal
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rc ey Fisher& Fisher& Paykel ALT HCARE
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Slide 53: ~US$6+ Billion and Growing Market Opportunity
~US$6+ Billion and Growing Market Opportunity HOSPITAL HOMECARE Invasive Hospital Non-invasive Surgical _ Home CPAP Ventilation Respiratory Support Ventilation Humidification Respiratory Support Therapy & ot 16 Fisher & Paykel HEALTHCARE “NEW APPLICATIONS” Applications outside of invasive ventilatio
Slide 54: Our Aspiration
Our Aspiration @ ® A) @ OUR ASPIRATION: RESPIRATORY | a HOSPITAL HOME SURGICAL Sustainably HUMIDIFICATION | THERAPY/OSA RESPIRATORY RESPIRATORY TECHNOLOGIES SUPPORT SUPPORT DOUBLING our constant currency revenue every 5-6 years. ns) oon] SHORT-TERM MEDIUM-TERM LONGER-TERM . Fisher & Paykel “CONSTANT
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Slide 56: Impact of Changing Demographics
Impact of Changing Demographics * Population age and weight both us roe MILLIONS) 65 increasing 100 - US population 65 years+ to grow 30 ~80% over next 20 years! - US males 60 - 74 years, average weight increased 70 0.4 kg/year since 19602 «co 60% of US healthcare cost is after age 65 years? ° Devel
Slide 57: Hospital Cost Breakdown
Hospital Cost Breakdown 6% Medical devices Other - includes labour, utilities, drugs, supplies, 94% food, depreciation. ' . . , so Fisher& Paykel 20 — Source: Estimates of Medical Device Spending in the United States, Donahoe, G and King, G, June 2014 HEALTHCARE
Slide 58: Lower Care Intensity = Lower Cost
Lower Care Intensity = Lower Cost 21 $50,000 $40,000 $30,000 $20,000 $10,000 Mean cost (2008 US$) $0 MEAN ANNUAL COPD-RELATED MEDICAL, PHARMACY AND TOTAL COSTS BY CARE INTENSITY COHORT Outpatient cohort Urgent outpatient cohort ED cohort Standard admission cohort ICU cohort Source: Anand A Dalal, La
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Slide 60: 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 Fisher & Pay
Slide 61: Optiflow - Displacing Conventional Oxygen Therapy
Optiflow - Displacing Conventional Oxygen Therapy CONVENTIONAL NON-INVASIVE OXYGEN THERAPY VENTILATION Fisher& Fisher& Paykel NM EAC ARE
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Slide 63: Optiflow NHF - A Growing Body of Clinical Evidence
Optiflow NHF - A Growing Body of Clinical Evidence NASAL HIGH FLOW CLINICAL PAPERS PUBLISHED ANNUALLY Fisher & Paykel HEALTHCARE
Slide 64: 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 * New applications consumables now make up 59% of Hospital consumables revenue, up from 50% in FY2016 a
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Slide 67: Revolutionary Masks
Revolutionary Masks 30 Market leading mask technology Unique, patented designs Mask Matters Most - Masks are key to compliance F&P ESON 2” F&P SIMPLUS”™ F&P BREVIDA™ Fisher &Paykel HEALTHCARE
Slide 68: 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 US!” * 6% of US adu
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Slide 70: Growing Patent Portfolio
Growing Patent Portfolio FISHER & PAYKEL HEALTHCARE US PATENT PORTFOLIO (2008 - 2018) 450 400 350 300 250 200 150 100 HOM ) 2008 2010 2012 2014 2016 2018 mUS Patents mm US Patent Applications Average remaining life of FPH patent portfolio (all countries): 12 years* 33 * As at 31 March 2018 FisheréPa
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Slide 73: 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 2018 30 SEPTEMBER 2018 NZ Institutions @ Other Institutions m Brokers & Retail m Other mNew Zealand m Australia @ North America mUK mEurope (ex UK) Asia
Slide 74: Consistent Growth Strategy
Consistent Growth Strategy 37 Our outputs Increased ‘efficiency of care Improved Over 45 years care & oft ‘outcomes for patients Care by Design Impro through inspi world-leading healthcare Increased shareholder value Benefits to ‘our people Doubling ‘our constant Trusted brand currency revenue every
Slide 75: 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) 2019 Interim Report and accompanying market releases. Nothing in this presentation should be cons
Slide 76: NZX Appendix Information
NZX Appendix 1 Information Results for announcement to the market HALF YEAR REPORTING For personal use only Reporting Period 6 months to 30 September 2018 Previous Reporting Period 6 months to 30 September 2017 EARNINGS Amount (NZ$M) Percentage change Operating revenue from ordinary activities $511.
Slide 77: Appendix – NZSX Listing Rules
APPENDIX 7 – NZSX Listing Rules EMAIL: announce@nzx.com Notice of event affecting securities Number of pages including this one (Please provide any other relevant NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10. details on additional pages) 1 For change to allotment, NZSX
Fisher & Paykel Healthcare — H1 FY2019 Earnings Presentation on 6ix