Fisher & Paykel Healthcare Corporation Limited · NZX:FPH
Fisher & Paykel Healthcare — H1 FY2019 Earnings Presentation
38 slides from Fisher & Paykel Healthcare's earnings presentation, November 2018
Slide 1: Half Year Results Presentation FY2019
Half Year Results Presentation FY2019 | Care by design Fisher& Paykel For six months ended 30 September 2018 HEALTHCARE
Slide 2: 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 3: First Half Financial Highlights
First Half Financial Highlights H1 FY2019 (6 months to 30 September 2018) NZ$M OPCP* &cc* Record operating revenue 511.3 +12% +8% Record Hospital operating revenue 297.3 +13% +11% Record Homecare operating revenue 211.1 +10% +6% Hospital new applications consumables revenue +24% +22% OSA masks reven
Slide 4: Hospital Product Group
Hospital Product Group ¢. S 950 System z AIRVO2 Optiflow * New applications consumables* made up 60% of H1 FY2019 Hospital consumables revenue, 55% in H1 at FY2018 ec * Strong customer demand for our ae Optiflow and AIRVO systems, driven ag by clinical trial results a Gi * F&P 950 to be released in
Slide 5: Homecare Product Group
Homecare Product Group Feil VIO QO CPAP therapy / Obstructive Sleep Apnea (OSA) OF OPERATING REVENUE H1 FY2019 HOMECARE OPERATING REVENUE NZ$ % a . 1 @) {o) Simplus Eson2 Brevida SleepStyle {0} 6% . Home respiratory support CONSTANT CURRENCY MASKS REVENUE " 6% <= ~~ CONSTANT CURRENCY fe) 2% , myAIRV
Slide 6: 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 7: 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
Slide 8: Operating Margin
Operating Margin 25% 20% 15% 10% 5% 0% = = Long Term Operating margin target OPERATING (EBIT) MARGIN Research & Development expenses . NZ$45.7M -3% (-3% cc) compared to 1H FY18 Higher one-off costs in the prior half relating to product introductions and patent renewal fees Underlying rate of R&D inc
Slide 9: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet H1FY2019 (for the 6 months ended 30 September 2018) NZ$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
Slide 10: Gearing and Dividend
Gearing and Dividend * Target gearing ratio* of +5% to -5% debt to debt plus equity - Gearing ratio at 30 September 2018 was GEARING* -2.0% * Increased interim dividend by 11%: 25% 20% - 9.75 cps + 3.792 cps imputation credit sc for NZ residents (gross dividend of NZ 10% 13.542 cps) 5% - Fully imput
Slide 11: 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 12: 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 13: 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
Slide 14: Fisher& Fisher& Paykel
rc ey Fisher& Fisher& Paykel ALT HCARE
Slide 15: Healthcare at a Glance
Fisher & Paykel Healthcare at a Glance Global leader in respiratory humidification devices 15 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
Slide 16: ~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 a 16 Fisher & Paykel HEALTHCARE “NEW APPLICATIONS” Applications outside of invasive ventilation
Slide 17: 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 18: 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 86% of operating revenue (IHFY18: 87%) 18 REVENUE
Slide 19: 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 20: 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 21: 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
Slide 22: Hospital
Hospital “4 & ¢ Lp & Fisher & Paykel HEALTHCARE
Slide 23: 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 24: Optiflow - Displacing Conventional Oxygen Therapy
Optiflow - Displacing Conventional Oxygen Therapy CONVENTIONAL NON-INVASIVE OXYGEN THERAPY VENTILATION Fisher& Fisher& Paykel NM EAC ARE
Slide 25: 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!2 * REDUCED nursing wo
Slide 26: 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 27: 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
Slide 28: Homecare
Slide 29: Obstructive Sleep Apnea
Obstructive Sleep Apnea 29 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 30: 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 31: 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
Slide 32: High Level of Innovation and Investment in R&D
High Level of Innovation and Investment in R&D 32 R&D represents 9% of operating revenue: NZ$45.7M Product pipeline includes: - Humidifier controllers - Masks - Respiratory consumables - Flow generators - Compliance monitoring solutions 186 US patents, 385 US pending, 870 ROW, 912 ROW pending’ Fishe
Slide 33: 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
Slide 34: 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 35: Strong Global Presence
Strong Global Presence . i i REVENUE BY REGION Direct/offices 6 MONTHS TO 30 SEPTEMBER 2018 - Hospitals, home care dealers - Sales/support offices in North America, Europe, Asia, South America, Middle East and Australasia, 15 distribution centres - More than 950 staff in 29 countries - Ongoing inter
Slide 36: 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 37: 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 38: 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
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