KEY POINTS:
ResMed
ResMed (RMD) is a competitor of Fisher & Paykel Healthcare (FPH) in the area of devices for treating obstructive sleep apnea. It was developed in 1981 by research staff at the University of Sydney and listed its shares on the US Nasdaq system in June 1995 and subsequently on the New York Stock Exchange and the ASX. Like FPH, it is a very expensive share trading on a high p/e ratio to reflect an explosive growth rate. But this week ResMed took a big hit when it issued a voluntary recall of 300,000 S8 airflow generators related to a short circuit in a power supply connector that was causing a small number of devices to fail. The multi-million dollar product recall charge hurt the firm's bottom line and the shares went into freefall. Medical products and the hospitals that buy them have zero tolerance for product failure, so product recall tends to hurt the companies badly.
Restaurant Brands
Restaurant Brands (RBD) has cut its dividend after it reported a loss of $3.6 million in the February year. Net profit was $6.5 million for the 12 months, compared to $12.3 million for the prior year. Group sales were up 1.7 per cent to $293.6 million. But while record sales were achieved for KFC, up 7.1 per cent, and Starbucks, up 3.2 per cent, Pizza Hut remains its problem area with a 10.5 per cent fall in sales in the face of fierce competition and price discounting. The board elected to reduce the final dividend to 3c per share. That brought the total dividend for the year to 5.5c. The company continues to struggle from competition and, while some of its operations are doing better than others, its general outlook looks limited. It is gaining sales in KFC following a huge upgrade of the chain, but the costs are being expressed in the form of a sharp rise in debt. The prospect of a takeover gives the share some appeal for value investors prepared for a volatile ride.
* Views expressed in this article are those of IRG, not the Weekend Herald.
