Pinned straw:
Fisher & Paykel Healthcare gave guidance for 1H FY24 (6 months ending 30 September 2023). Note: figures are in NZD.
- Revenue Guidance = $790m
- NPAT Guidance = $95m-$105m
Full year revenue guidance was maintained at $1.7b
I think the market is a little disappointed with another fall in the net profit margins in this business. Assuming around $100m of NPAT, margins would be around 12.66%. Down from previous halves and also well down from historical average of around 20%. See my updated chart below:
The company is undergoing a period of investment so hopefully once this phase is over we will see the margin recover again.
Some milestones that were listed as being completed in the last 12 months:
- Acquired land for a 2nd NZ campus.
- Opened a 3rd building at their facility in Mexico.
- Began fitting out new manufacturing site in China.
- Increased the size of its sales force.
- Brought forward some R&D.
- Launched a new sleep apnoea device.
Disc: Held IRL and on Strawman.
@BoredSaint I attended the AGM today and have a little colour to add both from the release and the presentation.
- They are sticking to FY guidance of Revenue of c. $1.7bn, so the result is weighted to the second half, which is not unusual historically (ignoring the COVID distortion).
- GM% is trending back as the supply chains ease although "inflationary raw material and manufacturing costs do remain a factor" . They have line of sight of 200bps %GM improvement this year, and expect to get back to historical 65% GM over the next 3-4 years.
- In support of 2. they have around 5000 continuous improvement opportunities being driven by the organisation. (I believe tthis is an organisation that has successfully embedded Lean Sigma operational improvement in the organisation as a company-wide continuous improvement culture ... funnily enough I'm lecturing this stuff tomrrow evening!) In his presentation Lewis said it is hard to forecast the timing of financial benefits from such an effort (you kinda know tthem when they are delivered).
- and 2. imply to me that we could see a significant improvement in %OM in 2H and an overall improvement for the FY.
Lewis also remarked that the company is shifting from its pandemic focus of supply almost at all costs, to it historic focus on operational efficiency.
I'm less clear what happens when the new facilites in Mexico and NZ come onstream. Mexico will presumably be favourable for %GM with lower labour cost as well as having proximity to markets in the Americas and, indeed, to Europe. But of course, in the early years of a major expansion GM% can go backwards for a while. That is perhaps a question to ask at a future meeting.
The other items that was interesting is that in 1H so far they are seeing strong home OSA demand with relatively weaker hospital demand. This isn't new news, and is part of the reason why I decreased weight in $FPH and increased weight in $RMD. Without opening the $RMD can or worms again, the fact that $FPH are seeing strong home OSA demand reads across positively for $RMD.
Disc: I hold $RMD and $FPH in RL but not on SM.