Record $169.2m profit for F&P Healthcare

Fisher & Paykel Healthcare has posted a record $169.2million profit for its full year, and signalled its target of attaining $1billion in revenue for the 2018 financial year.

However, US patent litigation costs took a toll at $20.7million this year, with the possibility of similar or even higher costs arising next year, following complaints by US competitor ResMed.

Revenue for the year to March grew 10% to $894.4million, earnings before interest and tax rose 13.8% to $240.1million and after tax profit was up 17.9% to $169.2million.

Fisher & Paykel Healthcare shares were up 3c to $10.20 following the announcement, but ended the day 7c down at $10.10. The 19.5c dividend for the year was 17% up on a year ago.

Chief executive Lewis Gradon said the ``strong result'' was from the increasing product adoption by healthcare providers in both hospital and homecare environments.

``Both major product groups, Hospital and Homecare, delivered record operating revenue results,'' he said.

Hospital product group revenue grew 15% to $500.4million while homecare product group revenue grew 4% to $381.5million.

Forsyth Barr broker Lyn Howe said the profit was in line with expectations and at the top end of the company's earlier guidance.

``This reflects [profit] growth of 18% on the prior year, underpinned by a particularly strong result from its respiratory and acute care and hospital division, up 19%, and another lift in gross margins,'' Mrs Howe said.

North America is Fisher & Paykel's largest market and revenue there grew 13% to $435 million, but there were initial concerns about how the Trump Administration may penalise future imports, especially given Fisher & Paykel's use of a Mexican manufacturing base.

Mr Gradon said there had been increased manufacturing from the Mexican plant and construction had started on a new facility in Mexico, which was expected to be completed early next year, supporting growth and global sales over the next five years.

Craigs Investment Partner broker Peter McIntyre said the initial alarm appeared to have dissipated and would have been raised by management yesterday had there remained any concerns.

Mr McIntyre said it was a ``strong result'' and the fifth year Fisher & Paykel Healthcare had delivered double digit profit growth.

He said the $20.7million litigation costs - more than $5million higher than expected - had ``substantially impacted'' on the company's earnings.

``The higher than expected litigation costs are the key reason for lower than expected full-year net profit after tax,'' he said.

Craigs' forecast full-year profit next year was $195million, at least $5million above top end company guidance and the ligation costs could rise from $20.7million to about $35million, Mr McIntyre said.

While ResMed withdrew its patent complaints last week, it also signalled there would be a refiling of claims in the near future.

Mrs Howe said the $20.7million litigation costs suggested underlying business growth was even stronger than reported.

Fisher & Paykel put out 2018 guidance for after-tax profit, in a range of $180million to $190million yesterday.

Mrs Howe said that range was below Forsyth Barr's predication of $199million, because next year's litigation costs were expected to be at a ``similar run-rate'' to this year's $20.7million cost.

On the $20.7million litigation expenses, Mr Gradon said it was a ``significant cost'' and the litigation was not entered into lightly.

``We have been providing unique solutions for patients for more than 45 years and we take pride in our proprietary technology ... and we are confident in our position,'' Mr Gradon said.

He said the company was ``well placed'' to meet growing global product demand with research and development expenses up 17% to $86million, or 9.6% of operating revenue.

``We're committed to continuous product improvement, and this investment has seen the introduction of a number of innovative products over the financial year, with a substantial pipeline of new products to come,'' Mr Gradon said.


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