Interview Lewis Gradon, CEO Fisher & Paykel Healthcare (FPH)

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F&P Healthcare has always been an "expensive" share — as characterised by a high price:earnings ratio (P/E) that in recent years has been around the 40:1 mark.

Right now it's much higher: at the current share price of $35.70 and earnings per share (from the latest 2020 results) of $0.50, that means investors are paying a mammoth $71.40 for every $1 that F&P earns.

There's a lot of good that F&P's management have done to create its growth momentum. But like everyone, the company is also susceptible to shocks (positive or negative) outside its control.

Fisher & Paykel has benefited from the sudden unexpected demand for its products caused by a global pandemic that most would not have predicted a year ago.

On the flip side, its investors may suffer in future should global economic growth resume and competition for funds pushes up interest rates (unlikely as that might seem right now).

PERFORMANCE

29 June 2020 - Fisher & Paykel Healthcare Corporation Limited announced its results for the full year ended 31 March 2020.

Operating revenue was $1.26 billion, up 18% over last year, or 14% in constant currency.

Overview of key results for the 2020 financial year:

- 37% growth in net profit after tax to a record $287.3 million.

- 18% growth in operating revenue to a record $1.26 billion, 14% growth in constant currency.

- 25% growth in Hospital operating revenue, 21% growth in constant currency.

- 23% constant currency revenue growth for new applications consumables; i.e. products used in non-invasive ventilation, Optiflow nasal high flow therapy, and surgical applications, accounting for 64% of Hospital consumables revenue.

- 9% growth in Homecare operating revenue, 4% growth in constant currency.

- 4% growth in constant currency revenue in OSA masks.

- Investment in R&D was 9% of revenue, or $118.5 million.

- 15% increase in final dividend to 15.5 cps (2019: 13.5 cps).

Excluding the impact from tax changes, being the R&D tax credit and building tax depreciation, net profit after tax grew 23% in constant currency.

The increase in revenue was largely driven by growth in the use of the company's OptiflowTM nasal high flow therapy, demand for products to treat COVID-19 patients, and strong hospital hardware sales throughout the course of the year.

"The 2020 financial year was already on track to deliver strong growth before the coronavirus impacted sales," said Managing Director and CEO Lewis Gradon.

"Beginning in January, the demand for our respiratory humidifiers accelerated in a way that has been unprecedented."

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