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Fisher & Paykel Healthcare (ASX:FPH) share price drops 6% on FY23 result

The Fisher & Paykel Healthcare Corporation (ASX: FPH) share price has fallen 6% after revealing a big profit decline in FY23.

Fisher & Paykel is a designer, manufacturer and seller of products and systems for use in acute and chronic respiratory care, surgery and the treatment of obstructive sleep apnea.

FY23 result

Here are some of the financial highlights for the company’s financial year to 31 March 2023:

  • Operating revenue fell by 6% to $1.58 billion
  • Hospital operating revenue dropped by 15% to $1.02 billion
  • Homecare operating revenue improved by 18% to $553.8 million
  • Net profit after tax (NPAT) dropped by 34% to $250.3 million
  • Final dividend up by 2% to $0.23 per share
  • 3% increase in total dividends to 40.5 cents per share

The ASX healthcare share said that it was difficult to beat the prior financial year considering it was boosted by COVID demand.

But, it did say that the second half result was encouraging as market conditions progressed towards more of a normal state and both its hospital and homecare product divisions delivered “good growth” That’s good news for supporting the Fisher & Paykel share price. Second-half operating revenue rose by 14% to $890.5 million, while net profit after tax dropped 0.5%.

The full year saw hospital new applications consumables revenue drop by 6% as hospital customers “worked through their excess inventory”.

Its Evora full mask for OSA launched in the USA in May 2022 and “contributed significantly to the strong OSA masks revenue.” Management said it was one of the most positive new mask launches the company has ever experienced based on customer feedback and initial sales performance.

Outlook for the Fisher & Paykel share price

The company said that its guidance assumes “significant respiratory disease events”, which is good to hear.

Full year operating revenue is expected to be approximately $1.7 billion, with similar growth rates for both the hospital and homecare product groups. That compares to $1.58 billion for FY23, so it’s expecting growth of 7.6%.

Operating expense growth is expected to grow 12%, reflecting the company’s investment in research and development, and sales people, during FY23.

Management commentary

The Fisher & Paykel Managing Director and CEO Lewis Gradon said:

Prior to the pandemic, we had a track record of incremental improvements in gross margin. During the last three years, our responsibility was to get as much product as possible into the hands of our customers. Now, as every team in our business turns back to efficiency gains, we are confident in our ability to return to our long-term target of 65% within three to four years. For the 2024 financial year, we anticipate a gross margin improvement of approximately 200 basis points in constant currency, or an improvement of approximately 100 basis points at current exchange rates.

Final thoughts on the Fisher & Paykel share price

I think the business has a promising future – it’s expecting to grow profit margins and revenue. But, I’d want to see that revenue grows faster than expenses in the longer-term. It’s not at the top of my watchlist, but a growing business could do well into the future.

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