as at 15:01:51, Wednesday 22 August, 2012 (NZT)
MEETING: FPH: FPH Annual Shareholders Meeting Speeches
REL: 1501 HRS Fisher & Paykel Healthcare Corporation Limited
MEETING: FPH: FPH Annual Shareholders Meeting Speeches
FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED
TO THE ANNUAL SHAREHOLDERS' MEETING
22 AUGUST 2012
This is my first Annual Meeting as Chairman and I would first like to take
the opportunity to acknowledge Gary Paykel and to reflect on the company's
progress over the past decade.
Gary who served as our Chairman since the separate listing of the company in
2001, retired from that role in March this year, and continues to serve as a
valued member of the Board.
On behalf of the Board, I would like to express our thanks to Gary for the
outstanding contribution that he made to the Company over his 10 years as
Slide 5 10 Years On
Since separation, and during Gary's time as chairman, the company has grown
more than fourfold, with revenue increasing from 89 million to 417 million US
dollars; representing a compound annual growth rate of 17%. In NZ dollars,
Operating revenue has grown from 215 million to 517 million dollars, in the
face of an almost doubling of the value of the NZ dollar over the decade.
The company has declared 911 million dollars of gross dividends, reflecting
our robust levels of profitability, cash flows and high returns on invested
capital. Almost 2,000 new jobs have been created with our worldwide team
growing from 700 people in 15 countries, to more than 2,600 people in 32
countries, reflecting strong growth and increased vertical integration in
manufacturing and sales.
In the past financial year we achieved record operating revenue of 517
million NZ dollars and net profit after tax of 64 million dollars.
In constant currency terms, underlying operating revenue grew 8% and net
profit after tax grew a very encouraging 23%, reflecting increasing demand
for our products and disciplined control of costs.
Both of our major product groups, respiratory and acute care and obstructive
sleep apnea, made encouraging progress during the year with new products and
applications contributing to growth.
Your directors approved a final dividend of seven cents per ordinary share,
carrying full imputation credit, taking total dividends for the year to 12.4
cents per share.
The high level of the New Zealand dollar has again presented a difficult
environment for all New Zealand companies that export most of their product.
For some exporters, high commodity prices have offset this, but the prices of
our products are largely set by the markets in which we operate. However
rather than wait for the dollar to return to more normal levels, we have to
accept that we need to operate successfully at these elevated exchange rates.
The board and executive have been focused on making sure the company can be
successful in this new environment, and have introduced a range of
strategies to partially offset the impact of high exchange rates. However we
must accept that with most of sales denominated in overseas currencies, our
NZ dollar performance will continue to be influenced by the exchange rate
that applies at the time.
I'm pleased to report that trading so far this year has been better than
expected and that we are seeing a promising increase in growth and an
increase in underlying operating margin. Mike Daniell, our CEO, will soon
provide more commentary on our strategies and outlook for the current year.
New and improved products and processes, along with the development of new
applications for our technologies, are critical long term drivers of our
revenue, margin and earnings growth. Our increased investment in R&D is
reflected in the number of significant new products we have introduced this
year, with more to come.
Healthcare providers around the world continue to seek opportunities to
control the overall cost of care through improved patient outcomes, reduced
intensity of care and other efficiencies. Our new products support those
objectives, helping to reduce length of stay and to avoid an escalation of
care or enabling patients to remain at home and out of the hospital.
Slide 7 International Presence
During the year we continued to expand our global sales and support network,
with our own people now located in 32 countries and our products sold in more
than 120 countries. More than 500 staff provide support to our customers
around the world.
Our total capital expenditure was 68 million NZ dollars which included
equipment for increased manufacturing capacity, new product tooling,
replacement equipment and 47million dollars for construction of the third
building on our Auckland site. We have continued to increase manufacturing
capacity at our facility in Tijuana, with an increasing quantity and range of
our products now manufactured there.
I would like to make a few comments about the board. I would like to thank
them sincerely for their support and efforts during the past 12 months. Both
Gary and Nigel have indicated that they plan to retire from the board
following the ASM next year. Both have made outstanding contributions and
will be missed. We are currently searching for a director who has global
experience in medical device manufacturing and hope to make an appointment in
the near future. Next year we will also commence a search for a second
director to ensure a smooth transition when Gary and Nigel retire.
Your Board seeks to achieve high standards of corporate governance and we
continue to keep our corporate governance policies and procedures under
review to ensure that they are consistent with best practice. A
comprehensive summary of the company's governance policies is provided in the
The share price performance over the past year has been disappointing, in
what have been very volatile financial markets. The elevated exchange rate
is undoubtedly a major reason for the share price weakness and as mentioned
earlier we do have strategies in place to mitigate that. We remain confident
that the company is well placed to grow its earnings over the long term.
The experience, capabilities and commitment of our people worldwide ensures
we are able to offer innovative medical devices, which can help to improve
patient care and outcomes and enable us to deliver the long-term growth in
value our shareholders expect.
The Board appreciates that our progress is a result of the combined efforts
of our staff and the support we receive from our customers, distributors,
suppliers and clinical partners. On behalf of the board, I would like to
thank them all for their commitment and contribution in a challenging global
I would like to thank you, our shareholders, for your continued loyalty to
the company. The Board and our management team value your support as we
continue to focus on creating value for you.
ADDRESS BY MICHAEL DANIELL
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED
TO THE ANNUAL SHAREHOLDERS' MEETING
22 AUGUST 2012
A copy of the slide presentation will be available on the company's website
Slide 9 Introduction
Thank you Tony. Good afternoon ladies and gentlemen. I'm pleased to have the
opportunity to review our results for the 2012 financial year, and to update
you on our growth strategies and progress so far this year.
Before doing so, I'd like to mention that we have a number of our staff here
today who will be available later to discuss the products we have on display.
They are wearing name badges, so you should be able to identify them easily.
Slide 10 Consistent Growth Strategy
Our consistent long term growth strategy; expand our range of innovative
products, offer devices to treat a wider range of medical conditions, and
increase our international presence - continued to result in an increasing
number of healthcare providers choosing our devices to assist in the care of
their patients, both in the hospital and home settings.
Slide 11 Financial Summary
52% of our operating revenue was generated in US dollars and 23% in Euros,
with 99% of our sales made outside New Zealand.
You will have seen, in the annual report, that we have provided a detailed
analysis of our financial performance in constant currency terms, which
removes the effects of foreign exchange hedging and the very volatile
exchange rates around the world.
As Tony has mentioned, our operating revenue grew 8% in constant currency
terms, or 2% to 517 million NZ dollars. We achieved an operating margin of
18% and net profit after tax of 64 million NZ dollars, which represented
growth of 23% in constant currency terms, a solid result given the
challenging global environment.
Slide 12 Products Groups
The Respiratory and acute care product group contributed 53% of total revenue
and the OSA group 44%.
A high proportion of our revenue, 75%, was generated from recurring items,
such as consumables and accessories.
Slide 13 Global sales
The geographic split of our sales remained diverse, with revenue growing in
each major geographic region. North America continues to be our biggest
market, with a large proportion of our OSA sales made there.
Selling, general and administrative expenses were 143 million NZ dollars,
which represented an increase of 6% in constant currency terms, reflecting an
increase in the average level of sales generated by each our sales, marketing
and operations staff.
Slide 14 Respiratory and Acute Care
Our heated humidifier and respiratory care systems play an important role in
improving patient care in a variety of applications.
Warming and moistening of the gases delivered in respiratory care helps to
reproduce the normal functioning of the nose and upper airways and reduces
airway moisture loss and the occurrence of adverse side effects.
Slide 15 New Applications Growing
In the hospital setting, as well as heated humidification systems for use in
intensive care ventilation, we are significantly expanding the potential
market for our technologies by also providing devices that can be used in
non-invasive ventilation, oxygen therapy, humidity therapy and surgery.
Over the past year we achieved very encouraging results, with revenue from
those new applications growing 24% in constant currency terms and
contributing one third of our respiratory and acute care consumables revenue.
We have had a very busy year with new product introductions, which have
included our second generation Evaqua breathing circuits and the Evatherm
breathing circuit designed specifically for developing markets.
Slide 16 Optiflow Junior
We have also recently begun to introduce two important new product ranges,
Optiflow Junior and Airvo 2.
Optiflow Junior provides a vastly improved system for providing oxygen
therapy to new born babies and children; by combining a very easy to fit
anatomically contoured nasal cannula with optimal humidity delivery.
Slide 17 Airvo 2
Airvo 2, delivers Optiflow humidity therapy with precise monitoring of oxygen
concentration and is available in two versions, for use in the hospital and
Our Optiflow system is recognised as a superior means of providing
comfortable, effective oxygen therapy, which can both improve outcomes and
significantly reduce the cost of care. We included a case study in the
Annual report which described the significant savings reported by a hospital
in South Carolina which has adopted Optiflow.
Customer reaction to both new products has been very positive and we expect
that both will contribute to increasing growth in our RAC product group.
Slide 18 Obstructive Sleep Apnea
Tens of millions of people worldwide who have untreated obstructive sleep
apnea, stop breathing for short periods many times each night while they are
Continuous positive airway pressure, or CPAP, therapy is the most common
treatment for OSA. CPAP therapy prevents the collapse and blockage of the
patient's airway during periods of deep sleep and is delivered using an
airflow generator, humidifier, tubing and mask.
Slide 19 ICON Flow Generators
Our ICON range drove 18% flow generator revenue growth for the year. The
product range integrates our leading technologies into stylish, compact and
intelligent devices to deliver a better night's sleep for OSA patients.
It's also been a busy period for our OSA product group, with the rollout of
our Info Technologies for efficient compliance data recording and reporting,
the inclusion of our unique SensAwake responsive pressure relief into ICON
Premo and our super quiet Zest Q and lady Zest nasal masks.
Slide 20 Pilairo nasal pillows mask
We are particularly excited about the revolutionary new mask ranges we are
currently introducing around the world.
Last month we introduced Pilairo, our new nasal pillows mask, into the United
States, following its very successful launch in Australasia and Canada.
Pilairo's innovative design integrates a self-inflating seal and minimalist
headgear into our lightest mask ever. No manual adjustments are necessary,
to either the headgear or mask, with one size fitting most patients.
Slide 21 Eson nasal mask
And just last week, we announced the release of Eson, our new nasal mask.
Eson is also exceptionally small, with minimal adjustment required for a
superb fit. We've further developed our popular Flexifit concept, into
Eson's elegant, self adjusting RollFit seal.
Both masks have been well received by our customers and we have enjoyed a
very positive initial response where these new masks have been launched.
Of course, in addition, we have in development more new products, including
more new masks, which are scheduled for introduction later this year.
Slide 22 Earnings Growth Drivers
We are very conscious of the effect of the high NZ dollar on shareholder
Last year I outlined our strategy for addressing what may be a long term
strong NZ dollar and weak US dollar and Euro. I'm pleased to report that
those strategies are improving our margins, and for the first half, we expect
our constant currency gross margin to increase about two percentage points
compared to the first half last year.
The strategies which are delivering increased margins are listed, I'll
comment briefly on each.
o New Products
Last year, and again this year, we have introduced a broad range of premium
new products, all of which assist healthcare providers to provide more
effective and efficient care and which generate increased revenue growth and
o Capacity Increases in Mexico
Most of our growth in capacity for consumable items is at our Mexico
facility. As well as the benefit of geographic diversity, we are achieving
substantial manufacturing cost savings. This year we expect Mexico to
contribute about 7 or 8 million NZ dollars to operating profit compared to
manufacturing the same items in New Zealand.
o Lean Manufacturing, Increased Automation, Supply Chain Optimisation
Lean manufacturing projects and increased automation and other efficiencies
continue to deliver cost savings and we expect ongoing improvements. We are
also continuing to implement supply chain efficiencies, including shipping an
increasing proportion of our product by sea and road rather than air.
o Reduced Expense Growth
We have previously made significant investments in expanding our operations,
including Mexico manufacturing, new direct sales operations and increased R&D
activity. We are benefiting from those investments, and will continue to
manage expense growth to be below revenue growth in constant currency.
o Currency Diversification
Over a number of years we have been reducing our exposure to the US dollar by
moving to direct sales and invoicing in local currencies in a number of
The latest is Korea, where we are acquiring assets from our current
distributor and will transfer distribution of our products to our own sales
operation, which will begin trading next month. We have also been moving
more of our costs to local currencies.
o Foreign Exchange Hedging
The ongoing volatility in exchange rates has demonstrated the value of our
disciplined foreign exchange hedging policy. We have substantial hedging in
place for the current year and also for the 2014 and 2015 financial years.
As Tony indicated earlier, trading has been better than expected so far this
year, and we now anticipate constant currency operating revenue growth of
approximately 7% for the first half.
Demand for our respiratory and acute care products has been strong, with the
proportion of our revenue from products used in new applications continuing
In May, we indicated that we expected modest first half growth for RAC, as we
lapped last year's US hospital distributor's 7 million US dollar inventory
build. We are now expecting RAC constant currency revenue growth of about
10% for the first half, implying underlying revenue growth of about 18%.
For our obstructive sleep apnea product group we are expecting first half
constant currency revenue growth to improve over last year's second half, to
about 4%, with growth increasing in the second quarter as our new masks gain
As I mentioned earlier, Pilairo and Eson have been very well received in
initial markets, and are beginning to drive an increase in mask growth.
Slide 24 FY2012 Outlook
The year has started very well, at current exchange rates we expect operating
revenue for the first half to be approximately 265 million NZ dollars and net
profit after tax to be approximately 31 million NZ dollars. That would
represent about 10% net profit growth or about 25% in constant currency terms
driven by a combination of revenue growth and improving gross margins.
The full year earnings guidance we provided in May, based on an exchange
range of 75 cents to 80 cents for the NZ dollar to the US dollar, was 62 to
70 million NZ dollars. At those rates we would have expected that net profit
after tax would be 67 to 72 million dollars.
There has been a firming of the NZ dollar, so we have updated our assumed
exchange rate range to 78 to 82 cents.
Based on this range for the remainder of the financial year and the
improvement in our trading, we now expect full year operating revenue to be
in the range of 540 million NZ dollars to 550 million NZ dollars and net
profit after tax to be in the range of 65 million NZ dollars to 69 million NZ
As Tony mentioned, stock exchange rules require that I offer myself for
re-election as Managing Director this year. It's been my privilege to be
part of this business for more than 32 years, and to lead the team for more
than 20 years, first as General Manager and for the past decade as Chief
Executive. I would appreciate your support for my re-election as a Board
member and Managing Director.
On behalf of the worldwide team, I would like to express our thanks for the
continued support of our Board and our shareholders, and also our customers,
suppliers and clinical partners. We are working to reward that support.
End CA:00226297 For:FPH Type:MEETING Time:2012-08-22 15:01:51