Fisher & Paykel Healthcare Corporation Limited · NZX:FPH
Fisher & Paykel Healthcare — FY2020 Earnings Presentation
49 slides from Fisher & Paykel Healthcare's earnings presentation, Jun 30, 2020
Slide 1: Full Year Results Presentation FY2020
Full Year Results Presentation FY2020 1 For twelve months ended 31 March 2020
Slide 2: Important notice
Important notice 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) Annual Report 2020 and accompanying market releases. Nothing in this presentation should be construed as an invi
Slide 3: Full year business highlights
Full year business highlights + IMPACTED + LAUNCHED the lives of approximately 16 million patients the F&P Evora™ compact nasal mask for OSA in around the world, including many with COVID-19 in New Zealand, Australia, Europe and Canada hospital + EXPANDED + COMMEMORATED release of the F&P 950TM heat
Slide 4: Impact of COVID-19
Impact of COVID-19 • Our people - Priority has been ensuring the safety of our people, and therefore protect our ability to manufacture, supply and train end users on essential respiratory support - Since January 2020, have hired 548 additional direct manufacturing staff in NZ and 518 additional dir
Slide 5: Key full year financial results
Key full year financial results FY20 (for 12 months ended 31 March 2020) % of Revenue NZ$M PCP^ CC* Operating revenue 100% 1,263.7 +18% +14% Hospital operating revenue 63% 801.3 +25% +21% Homecare operating revenue 36% 457.3 +9% +4% Gross margin / Gross profit 66% 835.8 -73bps -150bps SG&A 27% 338
Slide 6: Hospital product group
Hospital product group HARDWARE FY20 HOSPITAL REVENUE COMPOSITION 14% CONSUMABLES Invasive Non-invasive OptiflowTM nasal Surgical ventilation ventilation high flow 86% Hardware Consumables FY19 Hospital revenue composition Hardware: 12% Consumables: 88% 6
Slide 7: Hospital product group – H2 FY20 results
Hospital product group – H2 FY20 results HOSPITAL OPERATING REVENUE • New applications consumables* H2 FY20 $447.7M made up 65% of H2 FY20 Hospital consumables revenue, 65% OF OPERATING REVENUE 63% in H1 FY20 • Strong customer demand NZ$ 30% for our Optiflow and AIRVO systems, driven by clinical tri
Slide 8: Homecare product group
Homecare product group HARDWARE FY20 HOMECARE REVENUE COMPOSITION 16% CONSUMABLES CPAP Therapy/OSA Home Respiratory Support 84% Hardware Consumables FY19 Homecare revenue composition Hardware: 16% Consumables: 84% 8
Slide 9: Homecare product group – H2 FY20 results
Homecare product group – H2 FY20 results HOMECARE OPERATING REVENUE • Home Respiratory Support business continues to grow well H2 FY20 $242.6M • Strong H2 FY20 growth in OSA masks 35% • F&P Vitera OSA mask launched in the US in October 2019 OF OPERATING REVENUE • Released F&P Evora February, receivi
Slide 10: New lease accounting standard impact (IFRS 16)
New lease accounting standard impact (IFRS 16) Opening adjustment to Balance Sheet at 1 April 2019 (NZ$M) Prior to adoption Impact Adjusted after adoption Property, plant & equipment 601.4 29.4 630.8 Deferred tax assets 38.9 1.5 40.4 Lease liabilities - 35.2 35.2 Retained earnings 549.2 (3.8) 545.4
Slide 11: Gross margin
Gross margin GROSS MARGIN 70% • Gross margin for the full year: 60% − decreased by 73 bps to 66.1% − decreased by 150 bps in constant currency 50% − decrease primarily driven by an increase in 40% freight cost as a result of COVID-19 and first full year of costs of our second Mexico 30% manufacturin
Slide 12: Operating margin
Operating margin OPERATING (EBIT) MARGIN Operating expenses 30% • NZ$456.5M, +7% (+3% CC) 25% Research & Development expenses • NZ$118.5M, +18% (+18% CC) 20% • Reflecting underlying growth and timing of R&D 15% projects • Long term plan to grow in line with constant 10% currency revenue growth Selli
Slide 13: Interest and Tax
Interest and Tax FY19 FY20 Change Financing expense NZ$M NZ$M NZ$M Interest income 3.3 2.2 (1.1) Lease interest expense - (2.1) (2.1) Interest expense (2.5) (1.8) 0.7 FX loss on interest bearing liabilities (2.2) (7.1) (4.9) Net financing expense (1.4) (8.8) (7.4) FY19 FY20 Change Tax and R&D grant
Slide 14: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet FY19 NZ$M FY20 NZ$M Operating cash flow 253.3 321.4 Capital expenditure (including purchases of intangible assets) 133.3 170.7 Lease liability payments - 9.7 Free cash flow 120.0 141.0 FY19 NZ$M FY20 NZ$M Net cash /(debt) (including short-term investments) 54.4 42.2 Total
Slide 15: Capital management and Dividend
Capital management and Dividend • Expanded previous dividend policy into GEARING* a broader capital management policy. 15% Priority to appropriately invest in the business to support long term 10% sustainable growth. 5% • Target gearing ratio* of +5% to -5% 0% debt to debt plus equity -5% • Increase
Slide 16: Foreign exchange effects
Foreign exchange effects • 49% of operating revenue in USD (FY19: 50%) and 19% in € (FY19: 19%). Year to 31 March Hedging position for our main exposures FY21 FY22 FY23 FY24 FY25 FY26-28 USD % cover of expected exposure 85% 60% 45% 35% 35% - USD average rate of cover 0.652 0.652 0.637 0.630 0.624 -
Slide 17: Revenue and expenses by currency
Revenue and expenses by currency FY20 (for 12 months ended 31 March 2020) REVENUE BY CURRENCY COST OF SALES BY CURRENCY OPERATING EXPENSES BY CURRENCY 1% 5% 11% 19% 30% 3% <1% 43% 45% 49% 11% <1% 36% 19% 27% NZD USD EUR MXN Other NZD USD EUR MXN Other NZD USD EUR MXN Other 17
Slide 18: Outlook FY2021
Outlook FY2021 • Strategic direction remains consistent • For the first three months of FY21: − Hospital hardware growth >300% and Hospital consumables growth >33% on PCP − Homecare growth closer to FY20 full year rate of growth in Homecare Guidance assumptions (note these are not a forecast or a pr
Slide 19: Key Financials
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Slide 20: Key full year financial results
Key full year financial results FY20 (for the 12 months ended 31 March 2020) NZ$M PCP^ CC* Operating revenue 1263.7 +18% +14% Hospital operating revenue 801.3 +25% +21% Homecare operating revenue 457.3 +9% +4% Hospital new applications consumables revenue +27% +23% OSA masks revenue +8% +4% Gross
Slide 21: Key second half financial results
Key second half financial results H2 FY20 (for the 6 months ended 31 March 2020) NZ$M PCP^ CC* Operating revenue 692.8 +24% +18% Hospital operating revenue 447.7 +30% +24% Homecare operating revenue 242.6 +15% +9% Hospital new applications consumables revenue +29% +23% OSA masks revenue +15% +9% G
Slide 22: Overview
Overview Overview Overview 22
Slide 23: 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 39 countries • Medical device manufacturer with leading 333 positions in respiratory care and obstructive of our people in Europe sleep apnea 1,645 of our people in No
Slide 24: ~NZ$20+ billion and growing market opportunity
~NZ$20+ billion and growing market opportunity Total addressable market estimates HOSPITAL HOMECARE ~90+ million patients (including ~50+ million in Hospital Respiratory Support)* ~100+ million patients Invasive Non-invasive Hospital Surgical Home Obstructive Sleep Ventilation Ventilation Respirator
Slide 25: Our aspiration
Our aspiration OUR ASPIRATION: Sustainably DOUBLING our constant currency revenue every 5-6 years. 25
Slide 26: Markets and products
Markets and products • Hospital REVENUE BY PRODUCT GROUP 12 MONTHS TO 31 MARCH 2020 − Heated humidification <1% − Respiratory care − Neonatal care − Surgery • Homecare 36% 63% − Masks − Flow generators − Data management tools − Respiratory care in the home Recurring items, consumables and Hospital a
Slide 27: 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 years2 80 − US males 60 - 74 years, average weight increased 70 0.4 kg/year since 19603 60 • 60% of US healthcare cost is after
Slide 28: Hospital cost breakdown
Hospital cost breakdown 6% Medical devices Other – includes labour, utilities, drugs, supplies, 94% food, depreciation. 28 Source: Estimates of Medical Device Spending in the United States, Donahoe, G and King, G, June 2014
Slide 29: 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 29 Source: Anand A Dalal, La
Slide 30: Hospital Overview
Hospital Overview Overview 30
Slide 31: 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 31
Slide 32: Optiflow - displacing conventional oxygen therapy
Optiflow - displacing conventional oxygen therapy CONVENTIONAL NON-INVASIVE OXYGEN THERAPY VENTILATION ~4million Estimated patients were treated with our Optiflow nasal high flow therapy over the past year 32
Slide 33: Patient groups who may benefit from Optiflow
Patient groups who may benefit from Optiflow ADULTS: • Acute respiratory • Emphysema failure • Palliative Care • Asthma • Pneumonia • Atelectasis • Pulmonary embolism • Bronchiectasis • Respiratory • Bronchitis compromise • Burns • Viral pneumonia • COPD • Carbon monoxide • Chest trauma poisoning PA
Slide 34: 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 intubation6 • REDUCED intubation11 • REDUCED re-intubation7, 8, 9 • REDUCED length of stay12 • REDUCED bilevel ventilation8 • REDUCED respiratory distress13 • REDUCED nursing
Slide 35: Optiflow NHF - a growing body of clinical evidence
Optiflow NHF - a growing body of clinical evidence NASAL HIGH FLOW CLINICAL PAPERS PUBLISHED ANNUALLY • The publication of 437 clinical papers 300 on NHF continues to 250 signify a high level of clinical interest in the 200 therapy • Of the 65 controlled 150 studies* on the use of NHF for 100 respir
Slide 36: Nasal High Flow in AHCRF patients
Nasal High Flow in AHCRF patients** IMPROVES IMPROVES REDUCED IMPROVES IMPROVES Comparator Max flow Hypercapnia Respiratory PH PtCO2 / Comfort rate Rate PaCO2 Kim, ES 21 Medical COT >50 2018 ICU Yuste, M 22 - >50 ICU 2019 Pilcher, J 23 Medical COT >35 * 2017 ward Lee, MK 24 Respiratory NIV 60 * 2018
Slide 37: 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 2020 • New applications consumables currently make up 64% of Hospital consumables revenue, up from
Slide 38: Homecare
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Slide 39: 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 40: Mask matters most
Mask matters most • Masks are key to compliance • Unique, patented designs • Vitera launched in US in October. Evora launched in NZ, Australia, Europe and Canada in February and received US regulatory clearance in June 40 F&P EVORA™ F&P VITERA™ F&P BREVIDA™
Slide 41: 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 world18 • 6% of US a
Slide 42: 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$118.5M • Product pipeline includes: − Humidifier controllers − Masks − Respiratory consumables − Flow generators − Compliance monitoring solutions • 302 US patents, 430 US pending, 1,236 Rest of world patent
Slide 43: Growing patent portfolio
Growing patent portfolio FISHER & PAYKEL HEALTHCARE US PATENT PORTFOLIO (2008 – 2020) 450 400 350 300 250 200 150 100 50 0 2008 2010 2012 2014 2016 2018 2020 US Patents US Patent Applications Average remaining life of FPH patent portfolio (all countries): 11.5 years* 43 * As at 31 March 2020
Slide 44: 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 • Four buildings: 110,000 m2 / 1,180,000 ft2 • 100 acres / 40 hectares land • Fourth building was completed
Slide 45: Environmental Social Governance
Environmental Social Governance Summary of key environmental metrics Sustainability disclosures Topic Description Target and indices of measure We participate annually in a suite of well- respected sustainability disclosure programmes and have been included this Scope 1 & 2 Tonnes 4.2% annual reduct
Slide 46: Strong global presence
Strong global presence REVENUE BY REGION • Direct/offices 12 MONTHS TO 31 MARCH 2020 − Hospitals, home care dealers 4% − Sales/support offices in North America, Europe, Asia, South America, Middle East and 22% Australasia, 18 distribution centres − ~1,000 employees in 39 countries 45% − Ongoing inte
Slide 47: 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 31 MARCH 2020 31 MARCH 2020 1% 2% 3% 15% 5% 23% 7% 36% 25% 60% 23% New Zealand Australia North America UK NZ Institutions Other Institutions Europe (ex UK) Asia Broke
Slide 48: Consistent growth strategy
Consistent growth strategy 48
Slide 49: References
References References 1. Clinical guidelines for use of NHF on COVID-19 patients, including those issued by the HHS, WHO, SCCM, ACEP, NIH and the CDC. 2. Grayson K. Vincent, Victoria A. Velkoff. The Next Four Decades. The Older Population in the United States: 2010 to 2050. US Census Bureau, 2010. 3
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