*Disc: Trading this in RL*

F&P is traded on the NZX and at time of writing up 4%

Some quotes from the CEO/Managing Director, Lewis Gradon

• The year to date has begun strongly across all products and regions
• Good response to new product introductions
• Pleasing to see the progress we are making with our gross margin improvement initiatives

$FPH resported their 1H results yesterday.

Their Highlights

• 12% increase in net profit after tax to $107.3 million, 22% increase in constant currency.
• 16% increase in operating revenue to $803.7 million, 16% increase in constant currency.
• 11% increase in Hospital operating revenue to $487.5 million, 11% increase in constant currency.
• 19% increase in constant currency for new applications consumables (products used in noninvasive ventilation, Optiflow nasal high flow and surgical applications) accounting for 70% of Hospital consumables revenue.
• 26% increase in Homecare operating revenue to $314.4 million, 25% increase in constant currency.
• 28% increase in constant currency for OSA masks and accessories revenue.
• Investment in R&D was 12% of revenue, or $96.9 million.
• 3% increase in interim dividend to 18.0 cps (H1 FY23: 17.5 cps).

My Analysis

The 16% growth in operating revenue (CC) is well above their long-term aspirational goal of 12% revenue growth p.a., and with the second half typically stronger for the larger hospitals segment due to buying patterns, they remain on track to achieve FY$1.7bn sales, per guidance.

Homecare grew pleasingly strongly with cc revenues up 25% over pcp (26% reported basis), within which there was particularly strong growth for OSA masks and accessories (+28% in CC). There has been positive feedback from new face masks and other new products.

In the Q&A there was the expected question on whether $FPH is seeeing any impact of GLP-1s in Homecare. The answer, a simple "no" and the explanation was because the OSA market is under-penetrated and $FPH have low market share.

In Hospital care, new products are growing strongly at 19% in cc, including the new air humidificaton products. Overall Hospital care growth of 11%. Expectations for 2H have been managed, due to the cycling of strong results in the PCP due to the China surge and RSV in the US, creating a challening baseline for the 2H pcp comparison.

On Gross Margin, there was progress of +65bps (+192bps cc) to 60.5% and CEO Lewis and CFO Joy both reiterated their confidence that %GM will progressively drive back to >65% over the next 3-4 years.

Opex growth at 16% was significantly higher than the 12% guidance given for the full year, which contributed to the NPAT advance of 12% behind revenue growth, albeit achieving 22% in cc.

$FPH are going through a process of significantly expanding their manufacturing facilities, having recently made a large Auckland land purchase, commissioned facilites in Mexico and working to bring a new facility online in China in the next 6 months. Guidance for FY capex was reduced from $450m to $350m, to reflect phasing of building.

Total debt of $243m, a change from $FPH historically holding no net debt, has been required as a result of the major expansion in manufacturing facilities to support the next phase of growth. However, at less than 1x forecast NPAT of $250-260m it remains conservative, refflected in the financing expense of $12m for the half.

My Key Takeways

Overall, strong revenue growth, the start of recovering %GM, offset somewhat by increasing Opex, adds up to a good result for FPH.

Forecast FY24 NPAT of NZ$255m on NZ$1,700m revenue, brings $FPH to a %NM of 15% - potentially the low point as margin recovery progresses from here.

On valuation, with a FY24 forward P/E of 54, $FPH is fully-valued on a fundamentals basis, and is trading slightly above its 5-year average p/e of 48-50. The strong revenue growth is parhaps shaking off some of the recent GLP-1-induced market funk, bringing the SP back to where it was earlier in the year post FY23 results, when the market had digested the weaker %NM position of the business.

The strong Homecare revenue growth result is another good read-across to $RMD.

I remain a long term holder of $FPH, albeit my holding of this stock is small in comparison to $RMD.

Disc: Held in RL but not on SM.

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.

$FPH published their FY23 results today. While at the headline level, earnings have dropped off a cliff over the last 3 years, there is a lot needed to unpack the results, as follows. 

In 2020, in the global scramble by hospitals to source hiflow devices and, frankly, the entire $FPH hospital range, $FPH ramped up output to drive volume at the expense of margins.  FY21 and FY22 saw demand peak then fall, and margins and volumes got hit due to supply chain constraints. In 1H FY23, hospital volumes plunged, as pressure came out of global hospital systems in most regions, and these were able to run down inventories. FY23 was a game of two halves, with 1H cycling strong pandemic-impacted numbers, with H2 looking more like a return to BAU.

On homecare, the same competitor recall that helped $RMD, boosted demand for $FPH, offset by supply chain constraints and fewer clinic sleep clinics visits and diagnoses for OSA during the pandemic. Headwinds have now turned to tailwinds, and Phillips is yet to return to the market.

So, today, CEO Lewis Gradon focused his presentation on the H2 results, and CFO Lyndal York gave clear guidance on how gross margin (GM) and operating margin (OM) are expected to trend over the coming years, as $FPH refocus on profitability and return to their long term goals of 65% GM and 30% OM.

Because of this I have listed their highlights for both the full year and the half year.

Overview of key results for the second half of the 2023 financial year

• 14% growth in operating revenue to $890.5 million, 12% growth in constant currency.

• Net profit after tax of $154.4 million, a decline of 0.5% or 3% in constant currency.

• 9% growth in Hospital operating revenue to $584.8 million, 7% growth in constant currency.

• 13% constant currency revenue growth for new applications consumables; i.e. products used in noninvasive ventilation, Optiflow nasal high flow therapy and surgical applications, accounting for 72% of Hospital consumables revenue.

• 25% growth in Homecare operating revenue to $303.9 million, 22% growth in constant currency.

• 28% growth in OSA masks revenue, or 24% growth in constant currency.

Overview of key results for the 2023 financial year

• 34% decline in net profit after tax to $250.3 million, 39% decline in constant currency.

• 6% decline in operating revenue to $1.58 billion, 9% decline in constant currency.

• 15% decline in Hospital operating revenue to $1.02 billion, 18% decline in constant currency.

• 6% constant currency revenue decline for new applications consumables.

• 18% growth in Homecare operating revenue to $553.8 million, 13% growth in constant currency.

• Investment in R&D was 11% of revenue, or $174.3 million.

• 2% increase in final dividend to 23.0 cps (2022: 22.5 cps).

• 3% increase in total dividends for the financial year to 40.5 cps (2022: 39.5 cps).

My Key Takeaways

Strategically, Lewis was clear to point out that the pandemic has provided a catalyst for $FPH to scale up its manufacturing base (NZ and Mexico) and sales and marketing team, to support a much-expanded revenue base. Although capex will be high as they establish their second NZ campus, the margin head-room both in %GM and %OM, means that they should now be able to drive above pre-pandemic trend earnings growth, aided by a strong new product pipeline in both hospital and home.

I was somewhat surprised that freight costs were called out as a major contributor to lower margins. Having looked into this, while sea freight has come back to pre-pandemic levels, air freight rates are still elevated and, therefore, I assume a lot of $FPH’s products use this mode.

Given the SP run-up this year, the (superficial) optics of earnings decline and the high p/e multiple, the SP was in my opinion always going to fall today. And because of the turbulence of the last 3 years, it is possible that the analysts are going to have trouble modelling the path forward – so we might see a divergence of valuations, likely weighted to downside. (Personally, that's good new for me.)

Anticipating this risk, I halved my holding recently on the back of $RMD results (which is where I reallocated the capital). I will wait to see how the SP tracks over the coming days and, if the downgrades and traders drag it down, I’ll strongly consider renewing my allocation with fresh $, probably around $21.00 - $21.50, as an entry point (subject to updating my valuation), if Mr Market is so inclined to oblige me.

This is a quality company. I aim continue to hold for the long term, and will happily add at the right price. Taking a step back and looking at the last 3 years, I think management has done a fantastic job in responding to the demands placed on the busines by the pandemic and contributed to saving many lives. The trouble this has caused us analysts to build our forward models is surely a small price to pay!

Next update will be their investor day at the facilities in Mexico in September. I hope like last year this will be live streamed, as my holding doesn't quite justify making the trip.

Disc: Held RL (1.6%); not held on SM.

First up, big thanks to @BoredSaint and @Chagsy for your valuations and posts on $FPH, which prompted me to take a look at my own valuations. See @Chagsy’s post for the many good reasons to hold the stock. (As a side note, I’d just finished reading the Economist article you quoted over breakfast on Saturday, when I read your post!) 

Market mis-pricing

For such a consistently performing long-term growth stock, the market has had a lot of difficulty pricing $FPH during the pandemic and its aftermath. Just consider the broker reports.

In late 2019, Goldman Sachs had a 12m price target of A$17.30 (consensus at the time was just under A$17). 

Now, $FPH was a huge COVID beneficiary. With ventilators in short supply globally, the hi-flo masks were snapped up and clinical evidence was widely reported of the benefits from their use. This expanded the global fleet and hospital presence massively, and they benefit on an ongoing basis from all the consumables.

By early 2021, Goldman Sachs valuation was $38.80, ahead of a consensus view of over $35.00 and a SP peak of $34.27.

Once the global COVID peak passed, supply chain problems and inflation rose and the outlook for interest rates turned hawkish, the SP collapsed to $16.05.  This was driven by falling sales due to hospital destocking, high inventory and supply costs due to supply constraints, freight costs, component shortages etc. In addition, cash flow hit due to high tax payments (from the COVID super-profits), investment in new facilities including in Auckland and Mexico.

$FPH is widely considered to be able to sustain moderate growth over the long term. Their strategic framework assumes 12% real revenue growth in perpetuity, at a 65% gross margin and 30% net margin. With margins hit hard post-COVID, and sales in "decline", the market punished this growth stock, in my view over-reacting to the numbers immediately in front of it. In addition, as a growth stock the valuation got hit hard as interest rates rise, given that so much of the SP lies in long-dated cashflows. (If continuing free cash flow growth rate is high, then the valuation is super-sensitive to the WACC.) 

By September 2022, Goldman Sachs had progressively downgraded the SP target to $17.90, a 53% fall from their peak target 18 months earlier. (The pattern for the rest of the market was similar, albeit not as extreme as GS, which tends to be a FPH bull.)

I have been unable to get a hold of GS research note from November 2022. However, on the back of the Half Year results, the TP was raised back to $27.00. (Yes, I was suffering whiplash by this time.) The re-setting in SP expecations was no doubt due to the analysts call the bottom and realising that it was not that bad.

Where to from here

Last week, FPH provided a revenue update which was ahead of consensus of between $1550 and $1600m. Although no margin guidance was given, the outlook is assumed to be as given in November last year.

Following the announcement, there have been a series of upgrades. E.g., This morning UBS upped their price target by 10% to NZ$26.67 (which I make about A$24.80, i.e., about where the SP is.)

Healthcare stocks have generally started the year strong. In a year where there is still an outlook for a recession in many market globally, the healthcare sector will be a sought after destination for equity funds, and certaintly in favour while the market remains risk-off.

Looking at $FPH, specifically fundamentally, little has really changed. In a model I have of the business valuing it at $17.50 (at current interest rates) at the end of 2019, had COVID19 not happened, this would today be worth $24.00.

But some things have changed. COVID-19 significantly expanded their global reach and the base from which consumables sales and upgrade revenues will flow. The transient effects on sales, margins, cash flows etc. have played havoc with the financial accounts, as is reflected in both the share price and analysts’ gyrations.

In, addition, as @Chagsy points out, we have a generally sicker global population, with 'flus resurgent, and China's strong COVID demand a driver for the next several months.

While I considered selling on the recent SP stregnth, I am comfortable holding $FPH at $24-25/sh. (My valuation models says it could be worth anything between $19 and $28, depending on how long they can sustain the growth model: of 12% sales growth, 65%GM and 30%OM, which could be conservative.)

For those who are concerned about the fwd p/e of 60+, based on the current consensus, I note that the consensus is still showing forecast 2023 revenue of only $1525m, and an Operating Margin of 20%. While margins are indeed below their (FPH’s) current model of 30%, I am forecasting that they get back to 23% this year, 27% in FY24 and 30% by FY25. So, my forward p/e’s over 2023 to 2025 are: 57, 45, and 37. (Note: inflation is not a major issue for them as they have quite good pricing power in the hospital segment.)

From a traders’s perspective (not me!) it also looks like we are returning once more to an upgrade cycle. However, the result in May will determine just how strong this is.

For now: FPH is a HOLD for me, even though I recognise there could be some profit taking in the coming weeks, and should margins disappoint we'd see a sell-off after May results. However, management are historically conservative and if there was a profit problem, I'd have expected to see a more explicit indication of this in last week's release.

Disc: Held in RL. Not on SM.

I have to agree with all the recent posters here. Just when it was approaching something like a palatable valuation a few months ago, it reversed course and is now unequivocally expensive. Too bad.

Thanks for your update and revised valuation @BoredSaint

It is difficult to fault the conclusion of your valuation - FPH is once again looking very highly valued.

Just a couple of comments about the potential sustainability of its earnings:

• The pandemic has done some funny things to healthcare. Health care systems are all in dire straits. This is not something I and other healthcare workers are imagining. It is a global problem.(see below)
• The burden of disease has jumped significantly, and it is not clear if this will return to a baseline that existed prior to the pandemic. The sharp rebound in respiratory infectious diseases is likely to do so but much of the undiagnosed and untreated pathologies will be around for a lot longer.
• FPH product set is definitely more skewed to managing respiratory infections and COVID. Hi-Flo is a significant part of that process and is a standout in FPH increased sales. However, it is also becoming a standard of care for respiratory support for most respiratory problems, as robust data becomes available and providers and systems become more familiar with the devices. This is likely to be persistent. As mentioned in a previous post, there is a great consumables market for these devices.
• Healthcare spending is likely to trend up over the any time period you want to choose!
• Their CPAP devices are also performing well, and this market (despite what Somnomed might suggest!) is only set to grow
• Does this justify the lofty valuation? Probably not. The valuation also likely reflects a general market move to safety/quality/health and avoidance of any company that might deliver a nasty surprise. It is highly likely one can buy it cheaper in a year or tow's time when market sentiment shifts to more "risk-on".

Held IRL, but will likely sell in next few weeks

Excess deaths are soaring as health-care systems wobble

What lessons can be learned from a miserable winter across the rich world?

Jan 19th 2023

Five centuries later, those who prefer to be ill in hospital would struggle to make it past the lobby. People often lament the shortcomings of their own country’s health system. They tend to ignore the extent to which pressure is visible across the rich world. Britain’s National Health Service (nhs) is in a winter crisis like none before, with people who have heart attacks waiting 90 minutes for an ambulance. In Canada things are so bad that a children’s hospital called in the Red Cross. Even in Switzerland, whose health care is often admired, the system is under enormous stress. 

Worse care is contributing to huge numbers of excess deaths. Mortality in Europe is about 10% higher than expected in a normal year. In mid-December French and German deaths were a quarter higher. The chaos is also damaging in ways that cannot be measured. It is distressing to think that one day you will need to call 911, 112 or 999—and that no one will come to help.

Spending on health care is at an all-time high in the rich world. The trouble is that “all-time high” does not necessarily mean “enough”. Ageing populations increase demand. Health-care systems compete for staff with other parts of the economy, so doctors’ and nurses’ wages must keep pace with prevailing rates of pay. Costs rise even if health-care productivity stagnates. The unforgiving logic of this “cost disease” means that in ageing societies health-care spending must usually grow as a share of the economy just to maintain a given level of provision. Countries, such as Britain and Italy, that in the years before the covid-19 pandemic cut health-care spending as a share of gdp, or held it constant, were already on a path to worse services. 

Yet squeezed budgets do not fully explain the disarray. Even in places with ample funding, health care is struggling with the unprecedented effects of the pandemic. On the demand side, covid has left behind sicker populations. After years of avoiding flu, many people are now getting it. The world is also discovering some of the costs of lockdowns. In 2020-21 many hospitals and family doctors cancelled appointments for non-covid conditions. People who postponed treatment for other maladies are presenting with later-stage illnesses that need more expensive treatment; they also have poorer chances of recovery. 

Covid hits the supply side, too. Many hospitals continue to isolate covid-positive patients and maintain strict cleaning regimes. This eats up time and resources. In addition, staff are burned out. The result seems to have been a decline in productivity. Excluding primary care, the nhs has 13% more doctors and 10% more nurses than in 2019, yet it is treating fewer patients from its waiting list.

Fisher & Paykel Healthcare gave a business update today.

FY23 (year end March 31) revenue guidance was given at $1.55-1.6b NZD (converting back to AUD is around $1.44-$1.48b).

Although guidance was not given at the 1HFY23 results this is higher than I expected and was fueled by an increase in covid-19 cases in China and an early start to the Flu season in North America which has increased hardware and consumable sales.

Assuming net margins of around 15%. NPAT for FY23 would be around $222m (top end of guidance).

The market has reacted well to this announcement although personally I feel that this situation is similar to 2020 and 2021 when there was a pull forward of sales as a result of covid. On a longer term basis, this increase in the short term may well just be a sugar hit to the revenue and not be sustainable.

If my assumptions are correct then the current share price represents a PE of over 60x. A bit rich for me to buy more shares but will happily hold on for now.

Will update my valuation shortly.

Full Announcement here

Disc: Held IRL and on Strawman.

FPH released first half FY23 guidance. See here

They are comparing numbers to pre-pandemic. So if we look pre-pandemic the company was CAGRing earnings approx. 14% per annum. If we were to hypothetically assume covid never happened and continue that rate of growth through to now, their first half would be $844m. If we compare that to what they just guided to $670m, its under 7% CAGR. Then based off this you would think that the shares should trade on a lower multiple to account for the lower growth. So the pre-pandemic first half they are comparing to company was trading over 40x earnings, now its on about 29x earnings. The market is pricing in this lower growth to continue. What shareholders need to work out is if the lower growth is due to a pull forward of demand and eventually, once this cycles through, we return to historical growth levels? Or is the company now a mid-high single digit grower? Your individual opinion on that question will determine whether current pricing is cheap or not. 

My personal opinion is this is not really super cheap now for the risks, but not expensive either. Which means, I will be doing nothing in my real life account, but selling in my Strawman account (because of the limited capital nature of strawman). I can see a world where it returns to 14% growth, but can also see its plausible it might just stay a high single digit grower. 

Reasoning being I believe there is somewhat pulled forward and growth will return once stock levels of consumables get used. Their OSA business is still growing nicely and should keep becoming a larger portion of revenue and there is large tailwinds in the future for that general industry - this is be a growth driver. They are also in the midst of a CAPEX cycle where they are building out manufacturing plants. Once these come online the margins should be better than they were historically adding a boost to earnings.

Following on from the EOY results, FPH held an investor day.

I managed to watch a couple of segments live on the day, the new airvo3 demo and the Q&A session. It was very well done with prepared demo tapes for the participants that were online and little clips of the warehouse etc as filler when the onsite participants were moving between rooms/sessions etc. I was surprised how much I got out of it for a company I think I know “fairly well”. It was valuable in enforcing the key points on the new product as well as picking up on enthusiasm, issues etc.  

I’d been waiting for the investor day to be available online to catch up on the segments I missed. The results webinar was there so assumed the investor day would be posted. 

When it hadn’t appeared on the website now a week later, I contacted investor relations yesterday to ask about it. This is the response I received today. 

At this stage we have not released a recording of the event online. We have released the presentation content to the NZX and ASX. As the event was open to all and the experience was meant to be seen live, we are still considering if we will release the recording. If we do I will be sure to let you know.

Thank you,

Hayden

Hayden Brown | Investor Relations Manager

Email: hayden.brown@fphcare.co.nz

I have responded expressing my disappointment. It was about a 5-hour event during a work week which rules out participation by many retail investors.

 If you are a FPH holder please consider sending an email requesting the day is made available, I think it is worth watching.

 held

FPH released full year results today. Revenue was in line with the guidance the company provided to market early April. Net margins held up better than I had expected at just over 22%. Net margins will be important to watch going forward considering FPH are cycling some huge covid sales and freight, labor and input costs rise around the globe.

Things I noted:-

• They mentioned supplying 10-years worth of hardware to hospitals in the last 2. Does this mean that we should expect subdued hardware sales for the foreseeable future? (27% of hospital sales is hardware – 73% consumables)
• Flagged freight costs as the main reason for declining gross margins.
• Management are unsure of the extent existing clients have brought forward sales and stockpiling products.
• A higher installed hardware base should translate to increased consumable sales moving forward.
• Post covid elective surgery backlog should be good for FPH especially their new Optiflow accessory products which is used with anesthesia.
• OSA sales slightly improved even though OSA diagnosis over the last year was severely restricted. This segment should show significant improvement this year.
• Increased dividend putting the current price on a dividend yield of approx. 2%
• Tijuana manufacturing plant near completion which should increase margins. Management have previously flagged net margins of 30% by FY25 however this is not mentioned in this report from what I can see. Will be interesting to see if that is the case with the freight, input and labor cost increases going forward.
• FPH are entering a capex & heavy R&D investment cycle over the next 5 years. Management calling for $700m spend in land and buildings to beef up manufacturing and distribution capabilities.
• The biggest growth region for FPH hospital products is Asia Pacific which continued to hit record numbers and has nearly overtaken Europe as the second largest region behind North America. See below growth YoY

@vanderlay @Boredsaint

No argument from me, on valuation, I think about 20 bucks is about right.

I hold in my super as a solid, boring, low risk compounder. When looking at FPH I find it helpful to dial the time period on the SP graph all the way out: this is a company that has returned massive value to shareholders.

I use several of their products and am mighty impressed. Their innovation, and the quality of their products over the years ,have created something very difficult to replicate: trust.

They also have pretty good margins (as mentioned) due to the high quantity of consumables required - each patient using a breathing "device" needs a fresh sterile, disposable set of tubing.

And that is worth a significant premium.

Will continue to do nothing

Continues to be one of the most underrated companies on the market. A quick glance at a 10 year price chart shows what a wonderful performer it’s been for many years. Haven’t seen a large cap stock beat expectations as much as these guys too. Outstanding company

Disc: Held in RL

FPH released half year results this morning.

Overall sales and revenue are flat. I think most people were expecting their elevated covid sales to cycle through and be much lower to more "normalised" levels. However, biggest thing I think to take away from the result, is that Covid 19 has increased their install base in hospitals around the world, especially in developing nations. This has resulted in their hospital consumable sales up 24%. With the much higher install bas the consumable revenue should now have a much larger baseline of "normalised sales".

I also expect their Homecare division to see some growth in the second half. The recall in Phillips CPAP products may help them steal some market share. In my opinion the company should focus on this segment now while the opportunity is there.

Freight costs remain elevated. This should normalise even slightly in future which should help keep elevate margins. 

There are so many moving parts here its hard to fully predict where FPH sales and profits will end up post covid, so im still wary of jumping in now. Id like to see a full year cycle through and have a clearer outlook. I do own some shares IRL but have sold on strawman due to the limited nature of capital in the strawman portfolios.

• 2% decline in net profit after tax to $221.8 million.
• 1% decline in operating revenue to $900.0 million, or 2% growth in constant currency.
• 2% decline in Hospital operating revenue to $670.2 million, or 1% growth in constant currency.
• 24% constant currency revenue growth for new applications consumables; i.e. products used in
• noninvasive ventilation, Optiflow nasal high flow therapy and surgical applications, accounting for
• 72% of Hospital consumables revenue.
• 0.3% growth in Homecare operating revenue, or 3% growth in constant currency.
• Investment in R&D was 8% of revenue, or $75.7 million.
• 6% increase in interim dividend to 17 cps (H1 FY21: 16 cps).

FPH released a trading update this morning to accompany their annual report. The update is for the first 4 x trading months ending 31st of July 2021. 

Hospital:-

• 62% decline in total hardware sales
• 14% decline in total consumable sales
• Outside Europe and North America hardware sales grew 42% and consumables grew 31%.

My comments - The decline in sales into European and North American hospitals is predictable as their vaccination rates have been growing and the period comparable to the height of Covid last year. I expect these to continue to normalise. The increased growth outside of these areas in more developing countries is something that makes sense but i did not expect. Generally most of FPH revenue comes from more developed nations. While these sales aree obviously a covid bump due to the underdeveloped nations not being as vaccinated, I believe this gives FPH an opportunity to expand their footprint outside NA & Europe which should lead to increased normalised sales post covid. 

Homecare:-

• Sales up 4%

My comments - The growth in the segment should start to increase as economies open up and more people can go back to visiting their GP and diagnosis of respiratory illness & sleep apnea continues. This is a big tailwind for FPH and Resmed. Phillips recalls should also help boost this segment. In FY21 FPH had 24% of revenue from homecare products. I expect this % to increase YOY in the future. 

Outlook & my comments:-

• Obviously company gave no specific guidance, which is understandable, flagging the unpredictability of covid outbreaks and how long it will last and rates of vaccination.
• Hospital sales (while slightly declining) should remain elevated for some time, until the world vaccination effort is completed. 
• Hospitals continue to stockpile. Once covid hospitalisations reduce, this could see some weakness in sales, until this is flushed through. 
• Increased hardware installations and increased product awareness (especially in develping countries as mentioned above) should benefit FPH in the longterm with consumable sales.
• Freight costs remain elevated. This should normalise even slightly in future which will help margins when covid sales normalise to help soften the revenue impact. 

Summary - There are so many moving parts here its hard to fully predict where FPH sales and profits will end up post covid. As you can see in my Strawman portfolio i sold down my holding significantly post FY21 result. I can see FPH trading sideways or within a range for even a few years and feel my money is better put to work elsewhere for now. However i kept a small holding because this is a super high quality company. And if there is a significant sell off when revenues normalise, thats when im hopefully i can add more.

Highlights:-

• 82% growth in NPAT to $524.2m(NZD)
• 56% growth in operating revenue to $1.97b(NZD) - 61% in constant currency
• 87% growth in Hospital operating revenue to $1.5b(NZD)
• 49% constant currency revenue growth for new applications consumables
• 2% growth in Homecare operating revenue
• Investment in R&D was 7% of revenue, or $136.7m(NZD)
• 42% increase in final divided to 22.0 cps (NZD)

In FPH half year result they guided for EPS between 69c - 72c NZD. They beat this by 25% and achieved 91.1c NZD.

It would be crazy to assume that this will continue. FPH themselves are very cautious in their forward looking statements and have given no guidance. It is very hard to know where normalised earnings will land in FY22 and FY23. I think Covid will stay around a little longer than everyone thinks and outbreaks will continue to occur across the globe for some time, with FPH hospital division continuing to benefit. Whether that is at the same magnitude as we see here in these results remains to be seen. Nevertheless, FPH should see a pick up in their homecare division sales once doctor visits and sleep apnea and respiratory condition diagnosis returns.

One small concern is with freight and input cost increases reducing margins. If we see inflation continue this will be an ongoing concern and may impact growth if FPH are unable to pass these increased costs to customers. 

These are my intial thoughts while glancing over the results announcement. Much more work needed. Working out a valuation for this one will be tricky!

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02378606-2A1300137?access_token=83ff96335c2d45a094df02a206a39ff4

Fisher & Paykel Healthcare has increased full year guidance based on a weaker currency.

FY20, which ends 31 March, is expected to see revenue of NZ$1.24b while NPAT should be between NZ$275-280m. That's a 30% lift from last year and a 5% lift from prior guidance.

As a manufacturer of hospital respiratory care products (~60% of revenues), and the massive ramp up in demand for such things things due to coronavirus, the coming year is likely to be a very strong one too.

Guidance gives an FY20 EPS of 48.2c, which puts shares on a PE of ~54 (at current price of $25.98)

Announcement here