Fisher & Paykel Healthcare Corporation Limited · NZX:FPH
Fisher & Paykel Healthcare — H1 FY2018 Earnings Presentation
37 slides from Fisher & Paykel Healthcare's earnings presentation, November 2017
Slide 1: Fisher & Paykel Healthcare
Fisher & Paykel HEALTHCARE
Slide 2: H1 FY2018 Business Highlights
H1 FY2018 Business Highlights + CONTINUED WITH THE ROLL OUT OF OUR NEW ENTERPRISE RESOURCE PLANNING SYSTEM IN JAPAN, CHINA, TAIWAN AND HONG KONG + INCLUDED IN THE MSCI STANDARD INDICES* AND DOW JONES SUSTAINABILITY INDICES + LAUNCHED OUR NEW PRODUCTS, SLEEPSTYLE AND OPTIFLOW JUNIOR 2 IN AUSTRALASIA
Slide 3: Hospital Product Group
Hospital Product Group (BJ 950"system 850” System AIRVO"2 * New applications consumables* make up 55% of Hospital consumables revenue * Strong customer demand for our - Optiflow and AIRVO systems «fa we * Further positive clinical trial results for Optiflow nasal high flow therapy HumiGard” . Fisher
Slide 4: Homecare Product Group
Homecare Product Group il VIO QO CPAP therapy / Obstructive Sleep Apnea (OSA) 42% OF OPERATING REVENUE HOMECARE OPERATING REVENUE NZ$191.3M 4% a Simplus” Eson"2 Brevida” SleepStyle” @ Home respiratory support CONSTANT CURRENCY S% MASKS REVENUE 8% a CONSTANT CURRENCY fe) 8% AIRVO"2 810"System Optiflo
Slide 5: First Half Financial Highlights
First Half Financial Highlights H1 FY2018 (6 months to 30 September 2017) NZ$M OPCP* &cc* Record operating revenue 458.4 +8% +8% Record Hospital operating revenue 262.5 +11% +12% Record Homecare operating revenue 191.3 +4% +5% Hospital new applications consumables revenue +18% +19% OSA masks revenue
Slide 6: Dividend and Gearing
Dividend and Gearing 6 Increased interim dividend by 6%: - 8.75 cps + 3.4028 cps imputation credit for NZ residents (gross dividend of NZ 12.1528 cps) - Fully imputed - 1.5441 cps non-resident supplementary dividend - Dividend reinvestment plan available for New Zealand and Australian residents. No
Slide 7: Outlook FY2018
Outlook FY2018 Expect at current exchange rates (of NZD:USD 0.685, NZD:EUR 0.59) for the balance of the financial year: * Operating revenue - approaching NZ$1 billion * Net profit after tax - approximately NZ$185 - NZ$190 million Fisher & Paykel HEALTHCARE
Slide 8: Hospital
r ' Hospital I
Slide 9: Healthcare at a Glance
Fisher & Paykel Healthcare at a Glance Global leader in respiratory humidification devices Medical device manufacturer with leading positions in respiratory care and obstructive sleep apnea 45+ years’ experience in changing clinical practice to solutions that provide better clinical outcomes and imp
Slide 10: ~US$6+ Billion and Growing Market Opportunity
~US$6+ Billion and Growing Market Opportunity HOSPITAL HOMECARE Invasive Hospital Noninvasive Surgical _ Home CPAP Ventilation Respiratory Support Ventilation Humidification Respiratory Support Therapy a 10 Fisher& Paykel HEALTHCARE “NEW APPLICATIONS” Applications outside of invasive ventilation
Slide 11: 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
Slide 12: Markets & Products
Markets & Products * Hospital - Heated humidification - Respiratory care - Neonatal care - Surgery * Homecare - Masks - Flow generators - Data management tools - Respiratory care in the home Recurring items, consumables and accessories approximately 87% of operating revenue (H1 FY17: 86%) 12 REVENUE
Slide 13: 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 14: Hospital Cost Breakdown
Hospital Cost Breakdown 6% Medical devices Other - includes labour, utilities, drugs, supplies, 94% food, depreciation. ' . . , so Fisher& Paykel 14 Source: Estimates of Medical Device Spending in the United States, Donahoe, G and King, G, June 2014 HEALTHCARE
Slide 15: Lower Care Intensity = Lower Cost
Lower Care Intensity = Lower Cost $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 Int J Chron Obstruct Pulmon
Slide 16: Hospital
Hospital “4 & ¢ Lp & Fisher & Paykel HEALTHCARE
Slide 17: 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 18: Optiflow - Displacing Conventional Oxygen Therapy
Optiflow - Displacing Conventional Oxygen Therapy CONVENTIONAL NONINVASIVE OXYGEN THERAPY VENTILATION Fisher& Fisher& Paykel VB EA CARE
Slide 19: 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 intubation® * REDUCED intubation? ¢ REDUCED re-intubation® 7 ® ¢ REDUCED length of stay'® * REDUCED bilevel ventilation” * REDUCED respiratory distress" * REDUCED nursing wor
Slide 20: Optiflow NHF - A Growing Body of Clinical Evidence
Optiflow NHF - A Growing Body of Clinical Evidence NASAL HIGH FLOW CLINICAL PAPERS PUBLISHED ANNUALLY 2000 2002 2004 2006 2008 2010 2012 2014 2016 —Adult Neonatal & Paediatric Fisher & Paykel 20 Source: PubMed HEALTHCARE
Slide 21: 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 * New applications consumables now make up 55% of Hospital consumables revenue, up from 51% in FY2016 and 52
Slide 22: Homecare
r Homecare Fisher & Paykel HEALTHCARE 22
Slide 23: Obstructive Sleep Apnea
Obstructive Sleep Apnea 23 Temporary closure of airway during sleep Can greatly impair quality of sleep, leading to fatigue; also associated with hypertension, stroke and heart attack Estimated US$3+ billion worldwide market. Estimate >50 million people affected in developed countries Most common tr
Slide 24: Revolutionary Masks
Revolutionary Masks 24 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 25: 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'é * 6% of US adu
Slide 26: High Level of Innovation and Investment in R&D
High Level of Innovation and Investment in R&D * R&D represents 10% of operating revenue: NZ$47M ¢ Product pipeline includes: - Humidifier controllers - Masks - Respiratory consumables - Flow generators - Compliance monitoring solutions * 168 US patents, 357 US pending, 771 ROW, 809 ROW pending’ 201
Slide 27: Growing Patent Portfolio
Growing Patent Portfolio FISHER & PAYKEL HEALTHCARE US PATENT PORTFOLIO (2007 - 2017) A400 350 300 250 200 150. 100 Wn ie) 2007 2009 2011 2013 2015 2017 mUS Patents mm US Patent Applications Average remaining life of FPH patent portfolio: 12 years* 9 9 P P y Fisher & Paykel 27“ Asat 31 Ma HEALTHCARE
Slide 28: Manufacturing & Operations
Manufacturing & Operations ¢ Vertically integrated - COGS improvements: Mexico, lean manufacturing, supply chain « Ample capacity to grow Auckland, New Zealand ¢ Three buildings: 82,000 m2 / 885,000 ft? total * 100 acres / 40 hectares land ¢ Fourth building underway Tijuana, Mexico * 18,000 m2 / 200
Slide 29: Strong Global Presence
Strong Global Presence . i i REVENUE BY REGION Direct/offices 6 MONTHS TO 30 SEPTEMBER 2017 - Hospitals, home care dealers - Sales/support offices in North America, Europe, Asia, South America, Middle East and Australasia, 15 distribution centres - More than 800 staff in 29 countries - Ongoing inter
Slide 30: Long Term Margin Targets
Long Term Margin Targets GROSS MARGIN OPERATING MARGIN 70% 30% ) eee ee eH K- 60% 25% 50% 20% 40% 15% 30% 10% 20% 10% 5% 0% 0% 2013 2014 2015 =. 2016 2017 2013 2014 2015 2016 2017 — = = Gross margin target = = = Operating margin target « We expect to see gross margin expansion in FY18 in the range o
Slide 31: 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 2017 30 SEPTEMBER 2017 NZ Institutions @ Other Institutions m Brokers & Retail m Other mNew Zealand wm Australia m North America mUK mEurope (ex UK) Asia
Slide 32: Consistent Growth Strategy
Consistent Growth Strategy 32 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 33: Fisher & Paykel Healthcare
33 Fisher & HEALTHCARE
Slide 34: Half Year Operating Results
Half Year Operating Results H1 FY2018 (6 months to 30 September 2017) % of Revenue NZ$M OPCP* Occ* Operating revenue 100% 458.4 +8% +8% Cost of sales 34.0% 155.7 +4% +7% Gross profit 66.0% 302.7 +10% +9% Other income (R&D grant) 2.5 0% 0% SG&A 31.3% 143.3 +14% +14% R&D 10.2% 46.9 +13% +13% Total ope
Slide 35: Cash Flow & Balance Sheet
Cash Flow & Balance Sheet H1 FY2018 (for the 6 months ended 30 September 2017) NZ$M Operating cash flow (+8%) 82.2 Capital expenditure 51.6 Depreciation and amortisation 23.5 H1 FY2018 (as at 30 September 2017) NZ$M Debt (net) 26.4 Total equity 687.2 Total assets 933.8 % Pre-tax return on average eq
Slide 36: Foreign Exchange Effects
Foreign Exchange Effects * 51% of operating revenue in USD (1H FY17: 52%) and 20% in €. * Merch Year to 31 March Hedging position for our main exposures 2018 2019 2020 2021 2022 2023 USD % cover of expected exposure 90% 70% 55% 20% 0% 0% USD average rate of cover 0.678 0.673 0.658 0.627 NA NA EUR %
Slide 37: 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) 2018 Interim Report and accompanying market releases. Nothing in this presentation should be cons
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