Impeccable bill of health for Fisher & Paykel

Company News

by Glenn Dyer

Shares in Fisher and Paykel Healthcare (ASX:FPH) leapt 14% yesterday after the company produced a forecast for a second half improvement on what was a solid first six-month performance.

Reflecting the more confident outlook, directors boosted the interim dividend to 17.5 cents NZ from 17 cents NZ a year ago.

The confidence about the outlook saw the shares end the day up 9.8% at $A21.09 after hitting a high of $21.90.

But in a sign of caution, the company has restarted its dividend reinvestment plan to help with cash retention. Eligible shareholders will be able to invest all or part of their cash dividends in additional shares with an applicable discount of 3%.

The company reported a 23% decline in operating revenue to $NZ690.6 million for the half year (down 27% in constant currency) but FPH said this was “above the $NZ670 million guided by the company in its August trading update.”

Net profit after tax for the first half was $NZ95.9 million, a 57% fall from the prior comparable period, or a 65% decline in constant currency.

Gross margin for the latest half was 59.8%, down from 63.1% in the prior period and below the company’s long- term target of 65%.

“Although global freight rates are seeing prices soften, legs in and out of New Zealand lag this trend, which continues to weigh on margin,” the company told the market.

“The company has also been impacted by manufacturing inefficiencies, as it carefully balances demand fluctuations while managing manufacturing throughput and higher rates of sickness-related absenteeism in the manufacturing workforce, FPH directors said in the release.

But CEO Lewis Gradon said in the release the company was looking to a better second half.

“…we expect second half revenue for the 2023 financial year will be higher than in the first half,” he said.

“Assuming current, slightly lower freight costs and reduced manufacturing inefficiencies, constant currency gross margin for the second half would improve from the first half by approximately 200 basis points,” said Mr Gradon.

“The company is now targeting constant currency operating expense growth of approximately 8% for the full year.”

But in terms of current uncertainties (such as the extent and depth of the northern hemisphere flu season, Covid case numbers and their severity, other respiratory complaints and hospital staffing levels),the CEO said “we are not providing full-year quantitative revenue or earnings guidance at this time.”

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