F&P Healthcare: Interim result 2015
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Fisher & Paykel Healthcare has reported a 4% increase in revenue to NZ$317m for the six months to 30 September compared to the prior comparable period, due to the continued popularity of its new range of masks.
Net profit was up 10% to NZ$48.9m thanks to cost-cutting initiatives that expanded the gross margin by 2.2 percentage points to 60.6%. The board declared an interim dividend of NZ 5.8 cents (ex date 3 Dec 14), an increase of 7%. Non-NZ shareholders will also receive an additional 1.0235 NZ cents per share in lieu of New Zealand tax credits.
The company's Respiratory and Acute Care (RAC) division – which sells breathing devices for use in hospitals – increased sales by 13% to $174m excluding the effects of currency fluctuations. The result was driven by growing use of F&P Healthcare's products outside of intensive care, such as oxygen and humidity therapy. Revenue from consumables grew 26% in the first half due to higher turnover of products in non-intensive care applications.
The Obstructive Sleep Apnea (OSA) division grew sales 20% to NZ$138m in constant currency terms, thanks to increasing demand for the company's new range of masks, including the Eson, Pilairo Q and full-face Simplus.
| Six months to 30 Sep | 2014 | 2013 | /(–) (%) |
|---|---|---|---|
| Revenue (NZ$m) | 317 | 304 | 4 |
| EBIT (NZ$m) | 73 | 67 | 10 |
| Net Profit (NZ$m) | 49 | 44 | 10 |
| EPS (NZ cents) | 8.6 | 7.9 | 9 |
| DPS (NZ cents) | 5.8 | 5.4 | 7 |
| Div Yield (%) | 2.2 | 2.0 | n/a |
| Franking (%) | 0 | 0 | n/a |
F&P Healthcare continued to pay down debt to improve its balance sheet. The net debt to equity ratio is currently around 19%, slightly above the long-term target range of 5–15%.
Cash flow from operations increased strongly from NZ$33m to NZ$59m due to a slow down in capital expenditure with the construction of the new Mexican manufacturing plant nearing completion. The Mexican facility's lower costs and wages were also a contributor to the improved operating margin.
Management expects 'constant currency revenue growth in the mid-teens' for the six months to 31 March and full-year net profit of NZ$105m–110m. The share price has increased 31% since F&P Healthcare: Result 2014 from 27 May 14 (Sell – $4.00) and the company now sports a forward price-earnings ratio of 30.
That's expensive even for a high-quality company, but especially so relative to industry heavyweight ResMed, which has a forward price-earnings ratio of 20 and currently sits on our Buy list. We're increasing F&P Healthcare's price guide to reflect the company's continued growth, but today's share price offers little margin of safety. SELL.
Note: Our model Growth and Income portfolios hold shares in ResMed.
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