Fisher & Paykel Healthcare share price on watch after COVID-19 drives record profit result

The Fisher & Paykel Healthcare Corp Ltd (ASX:FPH) share price has beaten its guidance after COVID-19 boosted its sales and profit growth…

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The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price could be on the move today after the release of a record full year result.

How did Fisher & Paykel Healthcare perform in FY 2020?

For the 12 months ended 31 March 2020, Fisher & Paykel Healthcare delivered operating revenue of NZ$1.26 billion. This was an 18% increase on the prior corresponding period or a 14% increase in constant currency.

On the bottom line, the medical device company reported a 37% jump in net profit after tax to NZ$287.3 million. This was positively impacted by tax changes including research and development tax credit and building tax depreciation. Excluding these and favourable currency movements, net profit after tax would have been up 23% year on year.

Both its operating revenue and profit after tax came in ahead of its guidance. Management had guided to operating revenue of NZ$1.24 billion and net profit after tax in the range of NZ$275 million to NZ$280 million.

What were the drivers of its growth?

The key drivers of its growth were increasing use of its Optiflow nasal high flow therapy, demand for products to treat COVID-19 patients, and strong hospital hardware sales throughout the course of the year.

Hospital product revenue increased 25% to NZ$801.3 million and Homecare product revenue lifted 9% to US$457 million.

The company’s Managing Director and CEO, Lewis Gradon, commented: “The 2020 financial year was already on track to deliver strong growth before the coronavirus impacted sales. Beginning in January, the demand for our respiratory humidifiers accelerated in a way that has been unprecedented.”

“With new processes, new procedures and new ways of working safely, we managed to double and in some instances triple, output for some of our hospital hardware products over just a few months at the end of the year. I’m incredibly proud of our people and their unyielding commitment to doing the right thing for patients,” he added.

FY 2021 outlook.

Mr Gradon warned that there was a lot of uncertainty for FY 2021 because of the pandemic.

He explained: “We cannot predict the scope, duration or impact of COVID-19 and its effects on our operations and financial results. In the midst of this uncertainty, we will continue doing what we are known for – expanding our range of innovative products with patients at the centre.”

Nevertheless, the company has started FY 2021 very strongly, particularly in respect to its Hospital product sales.

During the first three months of FY 2021, Hospital product sales have continued to accelerate, with hardware growth of over 300%. Hospital consumables are also up over 33% compared to the prior corresponding period.

Things aren’t quite as positive for its Homecare products, which are seeing evidence of both a lower obstructive sleep apnoea (OSA) diagnosis rate and mask resupply levels returning to normal levels. Homecare product revenue is up in the region of 9% over the first three months.

Looking ahead, management expects FY 2021 operating revenue to be approximately NZ$1.48 billion and net profit after tax to be in the range of NZ$325 million to NZ$340 million. This will be an increase of 17.5% and 13.1% to 18.3%, respectively.

This guidance is based on global hospitalisations due to COVID-19 peaking during the first quarter of this financial year, and hospitalisations for respiratory-related illnesses and OSA diagnostic activity steadily returning to normal by the end of the first half.

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