F&P Healthcare posts 18pc gain in full-year profit on record sales

Inside the Fisher & Paykel Healthcare factory in East Tamaki, Auckland. Photo / Dean Purcell

Fisher & Paykel Healthcare is not expecting any "meaningful changes" to its US operations from plans to repeal 'Obamacare' in a market which has helped it deliver a record profit in its latest financial year.

The medical device maker posted an 18 per cent jump in full-year profit to $169 million for the year ended March 31, on the back of record operating revenue of $894.4m, up 10 per cent.

Chief executive Lewis Gradon said the company was happy with the results and had few reservations going into next year.

Gradon told the Herald that US President Donald Trump's plan to repeal and replace the Affordable Care Act, also known as Obamacare, would not result in "meaningful changes" to operations in the United States.

F&P Healthcare counts North America as its biggest market and in the latest year revenue grew 13 per cent to $435m, making it the company's best-performing market.

The company expects to grow its Tijuana manufacturing operations over the next 12 months. Gradon said it had acquired 15ha of land in the region and had begun the process of building a new manufacturing site on that land, which it hoped to have up and running next year.

Gradon said the company had benefited from changing clinical treatments and practices, along with ageing demographics across the globe.

"Healthcare costs across the world, in almost every country, are growing faster than the rate of GDP growth," Gradon said.

"There's a huge sensitivity to the cost of healthcare and it's going to get worse before it gets better," he said.

"Everything we do, we try to ensure we can save costs for the healthcare system and improve care at the same time," he said.

"We are well placed to meet the growing global demand for our products," Gradon said. "We have a consistent, well-proven strategy for delivering sustainable, profitable growth."

The medical device maker's profit was within the $165m to $170m range the company affirmed with its first-half results in November, and the performance for the 2018 year was expected to be better again, with operating revenue seen rising to about $1b at current exchange rates, with forecast profit of between $180m and $190m.

F&P Healthcare declared a final dividend of 11.25c a share, making 19.5c for the year, up from 16.7c a year earlier.

Sales in Europe rose 7 per cent to $272m while Asia Pacific sales advanced 9 per cent to $155m.

Sales in its hospital division rose 15 per cent to $500m, while homecare product sales increased a more modest 4 per cent to $381m. Helping drive profit growth was a 205 basis point increase in gross margin to 66 per cent, which the company said reflected a favourable product mix but also increased output from its manufacturing plant in Tijuana.

F&P Healthcare competes with Resmed and Respironics and is currently engaged in a patent dispute with Resmed which generated $20.7m in legal costs in the 2017 year, it said.

"We recognise that this is a significant cost and did not enter into litigation lightly," Gradon said. "We have been providing unique solutions for patients for more than 45 years and we take pride in our proprietary technology. We also respect the valid intellectual property rights of others and we are confident in our position."

The company filed patent infringement proceedings against Resmed, which countered with its own suit claiming that F&P Healthcare's OSA (obstructive sleep apnea) products infringed its patents.

Research and development costs rose 17 per cent to $86m in the latest year.

F&P Healthcare shares last traded at $10.17 and have gained 1.9 per cent in the past 12 months, lagging behind a 7.1 per cent gain for the S&P/NZX 50 Index.

- Additional reporting BusinessDesk