Heat goes on F&P to shed division

WELLINGTON - Pressure is building on Fisher & Paykel to split off its lucrative healthcare division to boost its "undervalued" share price.

Institutional investors say the share price of the company, better known for its whiteware, is low compared with similar overseas healthcare stocks.

Spinning off its healthcare business - either in a float or by splitting the company into two listed stocks - is one way to raise healthcare's profit with investors, and the share price.

"Pressure is probably building on them to do something," said AMP head of New Zealand equities Stephen Walker yesterday.

Another institution said: "Management has a firm understanding that institutional shareholders expect them to do something to improve the recognition of healthcare."

It said other options for F&P included releasing more financial information or a full takeover of the Auckland company by a big overseas company.

Analysts will be watching F&P's March-year profit announcement on June 8 for any comments.

F&P last week dismissed talk of a split, saying it "was not on the public agenda." However, spokesman Richard Blundell said that, in commerce, "nothing is ruled out."

F&P has restructured to concentrate on three core businesses: whiteware, healthcare and finance.

"When that has settled down, and only then, can a whole host of options be looked at," Mr Blundell said.

Investor concern about the share price was not new, he said. "We began taking that on board two years ago when we starting the restructuring process."

But Mr Blundell acknowledged that F&P's healthcare business was one of the market's "best-kept secrets, despite our best efforts."

A five-year run of 15 per cent a year sales growth has seen the division grow to account for 60 per cent of Fisher & Paykel's profit.

It has proved a lucrative investment, earning $40.7 million in the March 1999 year on the $88.8 million F&P pumped into it.

By contrast, the whiteware division in which F&P made its name earned $23.1 million on assets of $483.9 million.

The outlook is for continued fast growth, with healthcare sales expected to double in the next five years.

All this has not gone unnoticed by investors. In April, broker Merrill Lynch advised clients to buy the stock mainly for its healthcare arm, which sells goods such as medical humidifiers.

Yet this has not stopped F&P's share price falling 13 per cent this year, compared with a 10 per cent drop in the NZSE-40 Capital Index.

Mr Walker said healthcare's success had increased pressure for a split from overseas investors who did not necessarily want to invest in whiteware.

- NZPA