The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price is on watch this morning after reporting a high level of profit growth in its FY21 result.
Fisher & Paykel is a designer and manufacturer of products and systems for use in acute and chronic respiratory care, surgery and the treatment of obstructive sleep apnea.
Fisher & Paykel FY21 result
It reported a 56% increase of operating revenue to NZ$1.97 billion, which represented 61% growth in constant currency.
There was a divergence in performance between its operating divisions.
Hospital operating revenue went up 87% to NZ$1.5 billion. There was 49% constant currency growth for new applications consumables, meaning products used in non-invasive ventilation, Optiflow nasal high flow therapy and surgical applications, accounting for two thirds of hospital consumables revenue.
Homecare operating revenue only went up 2%.
Management said that the sales of its hospital hardware and consumables have continued to track COVID-19 hospitalisation surges in countries around the world.
The company spent 7% of its revenue on research and development to create the latest products and unlock new or continuing earnings streams. That’s a healthy amount.
Whilst revenue has been soaring, some costs also increased. The gross profit margin decreased by 295 basis points (2.95%) to 63% because of increased freight costs and a high airfreight utilisation. However, the business benefited from operating leverage from high demand.
Profit before tax increased 104% to NZ$718.2 million and profit after tax went up 94% to NZ$524.2 million.
Profit sharing
To recognise the contribution of its people to the result, the board has approved a bonus of $29 million for FY21 to be paid to everyone who has worked for a qualifying period of time.
Dividend
The board decided to declare a final dividend of 22 cents per share, an increase of 42%. That brought the full year dividend to 38 cents per share, an increase of 38%.
Outlook for Fisher & Paykel and the share price
Fisher & Paykel decided not to give guidance because of the wide range of scenarios relating to returning to normal, COVID-19 hospitalisations and vaccinations.
The company did say that a global vaccine rollout during FY22 is likely to reduce global hospitalisations requiring respiratory support compared to FY21. However, elevated freight costs are likely to remain. Its manufacturing sites will likely retain its COVID-19 safety practices too.
But, in the financial year so far, hospital revenue continues to remain variable with higher volumes of hospital hardware and consumables to locations with hospitalisation surges.
Fisher & Paykel is a quality business, but it’s unlikely that the next 12 to 18 months will see as much demand for its products as the last 12 months. Perhaps in a year or so, if the profit and share price declines, there might be an opportunity to buy at a lower price.
