Fisher & Paykel Healthcare Corporation Limited · NZX:FPH
Fisher & Paykel Healthcare — FY2016 Earnings Presentation
45 slides from Fisher & Paykel Healthcare's earnings presentation, 2016
Slide 1: Full Year Results Presentation FY2016
Full Year Results Presentation FY2016 1
Slide 2: FY2016 Business Highlights
FY2016 Business Highlights Innovative new products launched o Released new range of products for use with the AIRVO™ 2 system including the Optiflow™+ nasal Optiflow™+ nasal cannula range high flow cannula o Eson™ 2 nasal mask and HumiGard™ SH870 surgical humidification system launched o FPH assume
Slide 3: Hospital / Respiratory & Acute Care (RAC)
Hospital / Respiratory & Acute Care (RAC) Operating revenue growth H2 FY2016 NZ$ +26% Constant currency +19% New applications consumables revenue growth H2 FY2016 (Noninvasive ventilation (NIV), OptiflowTM, AIRVO, Surgical) NZ$ +45% Constant currency +36% o New applications consumables now make up 5
Slide 4: Homecare / Obstructive Sleep Apnea (OSA)
Homecare / Obstructive Sleep Apnea (OSA) Operating revenue growth H2 FY2016 NZ$ +19% Constant currency +11% Mask revenue growth H2 FY2016 Constant currency +17% o Masks continue to take market share 4
Slide 5: Second Half Financial Highlights
Second Half Financial Highlights H2 FY2016 (6 months to 31 March 2016) PCP^ CC* Operating revenue +22% +15% Gross margin (bps increase) +290bps +213bps Net profit after tax +27% +15% Hospital/RAC operating revenue +26% +19% RAC new applications consumables revenue +45% +36% Homecare/OSA operating
Slide 6: Full Year Financial Highlights
Full Year Financial Highlights FY2016 (12 months to 31 March 2016) NZ$M PCP^ CC* Record operating revenue 815.5 +21% +14% Gross margin (bps increase) +284bps +278bps Record net profit after tax 143.4 +27% +19% Record Hospital/RAC operating revenue 436.3 +22% +15% RAC new applications consumables r
Slide 7: Dividend and Gearing
Dividend and Gearing o Increased final dividend by 25%: • 10.0 cps + 3.8889 cps imputation credit for NZ residents (gross dividend of NZ 13.8889 cps) • Fully imputed • 1.7647 cps non-resident supplementary dividend • Dividend reinvestment plan available for New Zealand and Australian residents, no d
Slide 8: Outlook FY2017
Outlook FY2017 o Expect at exchanges rates of NZD:USD 0.68, NZD:EUR 0.61 • Operating revenue – approximately NZ$900 million • Net profit after tax – approximately NZ$165 – NZ$170 million 8
Slide 9: Overview
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Slide 10: Fisher & Paykel Healthcare at a Glance
Fisher & Paykel Healthcare at a Glance Global leader in respiratory Global presence humidification devices 36 o Medical device manufacturer with 258 Our people are located in 36 leading positions in respiratory care Employees countries and obstructive sleep apnea in Europe 922 Employees in o 45 year
Slide 11: Competitive Advantage – 45 Years' Experience
Competitive Advantage – 45 Years’ Experience o Significant expertise in, and history of, changing clinical practice to therapies that improve clinical outcomes, are more effective and efficient and that ultimately reduce cost to the healthcare system • Heated humidification in invasive ventilation •
Slide 12: ~US$6+ Billion and Growing Market Opportunity
~US$6+ Billion and Growing Market Opportunity HOSPITAL / RESPIRATORY & ACUTE CARE HOMECARE / OBSTRUCTIVE SLEEP APNEA Invasive Noninvasive Hospital Surgical Home CPAP Ventilation Ventilation Respiratory Support Humidification Respiratory Support Therapy “NEW APPLICATIONS” Applications outside of inva
Slide 13: Markets & Products
Markets & Products o Hospital / Respiratory & Acute Revenue by Product Group Care (RAC) 12 months to 31 March 2016 • Heated humidification • Respiratory care • Neonatal care • Surgery o Homecare / Obstructive Sleep Apnea (OSA) • Masks • Flow generators • Data management tools • Respiratory care in t
Slide 14: Impact of Changing Demographics
Impact of Changing Demographics o Population age and weight both US Population over age 65 increasing 100 (millions) • US population 65 years+ to grow 90 ~80% over next 20 years1 • US males 60 - 74 years, 80 average weight increased 70 0.4 kg/year since 19602 60 o 60% of US healthcare cost is after
Slide 15: Hospital Cost Breakdown
Hospital Cost Breakdown 6% Medical devices Other – includes labour, utilities, drugs, supplies, 94% food, depreciation. Source: Estimates of Medical Device Spending in the United States, Donahoe, G and King, G, June 2014 15
Slide 16: 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 Source: Anand A Dalal, Laur
Slide 17: Hospital / Respiratory & Acute Care (RAC)
Hospital / Respiratory & Acute Care (RAC) Invasive Noninvasive Hospital Surgical Ventilation Ventilation Respiratory Support Humidification “NEW APPLICATIONS” Applications outside of invasive ventilation 17
Slide 18: Respiratory Humidification
Respiratory Humidification o Normal airway humidification is bypassed or compromised during ventilation or oxygen therapy o Mucociliary transport system operates less effectively o Need to deliver gas at physiologically normal levels • 37°C body core temperature • 44mg/L 100% saturated 18
Slide 19: Optiflow - Displacing Conventional Oxygen Therapy
OptiflowTM - Displacing Conventional Oxygen Therapy CONVENTIONAL NONINVASIVE OXYGEN THERAPY VENTILATION 19
Slide 20: Clinical Outcomes of Optiflow Nasal High Flow Therapy
Clinical Outcomes of Optiflow™ Nasal High Flow Therapy Optiflow is associated with: ADULTS: PAEDIATRICS: o REDUCED intubation5 o REDUCED intubation9 o REDUCED re-intubation6, 7, 8 o REDUCED length of stay10 o REDUCED bilevel ventilation7 o REDUCED respiratory distress11 o REDUCED nursing workload7 o
Slide 21: Optiflow - A Growing Body of Clinical Evidence
Optiflow™ - A Growing Body of Clinical Evidence Nasal High Flow Clinical Papers Published Annually 80 70 60 50 40 30 20 10 0 2000 2003 2006 2009 2012 2015 Adult Neonatal & Paediatric Source: PubMed 21
Slide 22: 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% 2010 2011 2012 2013 2014 2015 2016 o New applications consumables now make up 51% of Hospital/RAC consumables revenue, up from 46% in FY2015 New
Slide 23: Homecare / Obstructive Sleep Apnea (OSA)
Homecare / Obstructive Sleep Apnea (OSA) Home CPAP Respiratory Support Therapy 23
Slide 24: Obstructive Sleep Apnea
Obstructive Sleep Apnea o Temporary closure of airway during sleep o Can greatly impair quality of sleep, leading to fatigue; also associated with hypertension, stroke and heart attack o Estimated US$3+ billion worldwide market, growing approximately 6-8% p.a. o Estimate >50 million people affected
Slide 25: Revolutionary Masks
Revolutionary Masks o Market leading mask technology o Unique, patented designs o Mask Matters Most • Masks are key to compliance F&P ESON 2 F&P SIMPLUS F&P PILAIRO Q 25
Slide 26: Home Respiratory Support for COPD
Home Respiratory Support for COPD o Chronic obstructive pulmonary disease (COPD) is a lung disease which is commonly associated with smoking o Emphysema and chronic bronchitis are both forms of COPD o Chronic respiratory disease, primarily COPD, is the third leading cause of death in the US16 o 6% o
Slide 27: High Level of Innovation and Investment in R&D
High Level of Innovation and Investment in R&D o R&D represents 9% of operating revenue:* NZ$73.3M o Product pipeline includes: • Humidifier controllers • Masks • Respiratory consumables • Flow generators • Compliance monitoring solutions o 138 US patents, 329 US pending, 559 ROW, 582 ROW pending* *
Slide 28: Growing Patent Portfolio
Growing Patent Portfolio Fisher & Paykel Healthcare US Patent Portfolio (2006 – 2016) 350 300 250 200 150 100 50 0 2006 2008 2010 2012 2014 2016 US Patents US Patent Applications o Average remaining life of FPH patent portfolio: 15.8 years* 28 * As at 31 March 2016
Slide 29: Manufacturing & Operations
Manufacturing & Operations o Vertically integrated • COGS improvements: Mexico, lean manufacturing, supply chain o Ample capacity to grow Auckland, New Zealand • Three buildings: 82,000 m² / 885,000 ft² total • 100 acres / 40 hectares land Tijuana, Mexico • 18,000 m2 / 200,000 ft2 • Consumables capa
Slide 30: Strong Global Presence
Strong Global Presence o Direct/offices Revenue by Region • Hospitals, home care dealers 12 months to 31 March 2016 • Sales/support offices in North America, Europe, Asia, South America, Middle East and Australasia, 15 distribution centres • More than 700 staff in 29 countries • Ongoing internationa
Slide 31: Our Global Coverage
Our Global Coverage mi SCSC*~*~*S @ Direct Sales @ Distributed sales with FPH staff © Distribution Centres © Manufacturing Facilities Germany sweden perenne cried olstum Eroarah Aaa Satin [ Textera land | fi SS eq — a a Dae __ ee? ce e a -— = eS By | 4 | . —_lil = Pega arse — = Taiwan ene) ta , sora
Slide 32: Doubling our Constant Currency Revenue every 5-6 Years
Doubling our Constant Currency Revenue every 5-6 Years Constant Currency Operating Revenue NZ$000 800 800 700 700 600 600 500 500 CAGR*: 13% 400 400 CAGR*: 12% 300 300 200 200 CAGR*: 15% 100 100 0 0 Mar-06 Mar-16 Mar-06 Mar-16 Total Group Revenue Hospital / RAC Homecare / OSA 32 * Compound Annual Gr
Slide 33: Long Term Margin Targets
Long Term Margin Targets Gross Margin Operating Margin 70% 30% 60% 25% 50% 20% 40% 15% 30% 10% 20% 10% 5% 0% 0% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Long term gross margin target Long term operating margin target Note: the long term margin targets are based on an assumption of a continu
Slide 34: Ownership Structure and Listings
Ownership Structure and Listings o Listed on NZX and ASX (NZX.FPH, ASX.FPH) Shareholding Structure as at Geographical Ownership as at 31 March 2016 31 March 2016 2% 3%2% 4% 18% 31% 15% 47% 29% 49% NZ Institutions Other Institutions New Zealand Australia North America Brokers & Retail Other UK Europe
Slide 35: Consistent Growth Strategy
Consistent Growth Strategy o Improving care and outcomes o Four key pillars: o Reducing cost to the Continuous product healthcare system improvement Increase Broadening the range of • Effectiveness of care devices for each patient • Efficiency of care Serve more patient Reduce groups • Intensity of
Slide 36: Product
Product. 36
Slide 37: Hospital Hardware
Hospital Hardware o 850 respiratory humidifier system • Invasive ventilation, nasal high flow therapy and non-invasive ventilation o 810 respiratory humidifier system • Entry level system • Ventilation and nasal high flow therapy • Optional heated breathing circuit o AIRVO 2 flow generator/humidifie
Slide 38: Hospital Single Use Consumables
Hospital Single Use Consumables o Single-use chambers • Patented auto filling MR290 o Single-use breathing circuits • Patented spiral heater wire • Proprietary Evaqua 2 expiratory tube • Minimal condensation • Delivery of optimal humidity o Breathing circuit components • Filters, catheter mount, wea
Slide 39: Optiflow Nasal High Flow Therapy – Delivery Options
Optiflow™ Nasal High Flow Therapy – Delivery Options 39
Slide 40: Homecare Hardware and Consumables
Homecare Hardware and Consumables 40
Slide 41: Figures
Full Year Results Presentation FY2016 Figures. Figures. 41
Slide 42: Full Year Operating Results
Full Year Operating Results FY2016 (12 months to 31 March 2016) % of Revenue NZ$M PCP^ CC* Operating revenue 100% 815.5 +21% +14% Cost of sales 36.0% 293.8 +12% +6% Gross profit 64.0% 521.6 +27% +19% Other income (R&D grant) 5.0 0% 0% SG&A 29.7% 242.3 +34% +23% R&D 9.0% 73.3 +13% +13% Total operat
Slide 43: Cash Flow & Balance Sheet
Cash Flow & Balance Sheet FY2016 (for the 12 months ended 31 March 2016) NZ$M Operating cash flow (-2%) 144.6 Capital expenditure 65.7 Depreciation and amortisation 35.2 FY2016 (as at 31 March 2016) NZ$M Debt (net) 44.4 Total equity 541.7 Total assets 766.8 % Pre-tax return on average equity 39.7% P
Slide 44: Foreign Exchange Effects
Foreign Exchange Effects o 52% of operating revenue in USD (1H FY16: 51%) and 21% in €. Year to 31 March Hedging position for our main exposures 2017 2018 2019 2020 2021 USD % cover of expected exposure 85% 42% 24% 22% 18% USD average rate of cover 0.689 0.659 0.643 0.626 0.614 EUR % cover of expect
Slide 45: 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) 2016 Annual Report and accompanying market releases. Nothing in this presentation should be const
Fisher & Paykel Healthcare — FY2016 Earnings Presentation on 6ix