Covid demand drives F&P Healthcare H1 profit up 86 per cent

Fisher and Paykel Healthcare has reported a sharp lift in its first half net profit. Photo / NZ Herald

Fisher and Paykel Healthcare said its first-half net profit shot up by 86 per cent to $225.5 million, driven by demand for its respiratory products arising from the Covid-19 pandemic.

The company said that based on stronger hospital hardware sales to date its net profit for the full year was forecast to be $400m to $415m, up from its August forecast of $365m-$385m.

F&P Healthcare said the result was driven by increased demand for the company's hospital hardware, in particular its "Optiflow" and "Airvo" systems.

"This reflected a shift in clinical practice toward using nasal high flow therapy as a front-line treatment for Covid-19 patients in hospital," it said.

In the hospital product group, which includes products used in acute and chronic respiratory care and surgery, operating revenue grew 93 per cent over the first half of the previous financial year to $681m.

Hospital products made up three-quarters of the company's operating revenue.

"Sales in hardware and consumables continued to track surges in Covid-19 globally, as the virus moved across Europe, North America, South America and South Asia," chief executive Lewis Gradon said.

In the homecare product group, which includes products used in the treatment of obstructive sleep apnea (OSA) and nasal high flow therapy in the home, operating revenue grew 5 per cent to $226.2m.

Gradon said since the pandemic started, many sleep clinics have been closed, resulting in a reduction in new patient diagnoses.

He said the company's "F&P Evora" and "F&P Vitera" masks for OSA had yet to reach their full potential.

A reduction in gross margin for the six-month period to 61.7 per cent was due to the increased use of air freight and the elevated costs associated with it.

Excluding these additional freight costs, gross margin was in line with the first half of the previous financial year in constant currency terms.

F&P Healthcare declared an interim dividend of 16 cents per ordinary share, up 33 per cent on the interim dividend last year.

Gradon said the company could not predict the course of Covid-19, the effectiveness or adoption of preventative measures, the progress of a vaccine and its outcomes, the impact on future hospitalisation rates, or the investments countries may make in treatment measures.

He said the full-year forecast was based on the following assumptions:

• Hospital hardware sales return to normal levels from January 2021.

• The use of its hospital hardware returns down to approximately normal rates for the second half of the financial year.

• OSA diagnosis rates are reduced for the second half of the financial year, due to limited access to customers.

• Freight costs remain elevated, resulting in a reduction in gross margin of about 200 basis points.

F&P Healthcare - New Zealand's biggest NZX-listed company by market capitalisation - designs, makes and markets products respiratory systems.

The company's shares last traded at $35.18, up $1.13 or 3.3 per cent from yesterday's closing level. The stock has rallied by just over 63 per cent over the past 12 months.