Fisher & Paykel Healthcare Corporation Limited

Welcome to the Fisher & Paykel Healthcare Results Conference Call. My name is Eduardo, and I'll be your operator for today's call. At this time, everyone except the guest speakers will be in listen-only mode. Later, we'll conduct a question-and-answer session, and we ask for your assistance in keeping the call to a maximum of one hour. If assistance is required at any time, please press the star followed by zero on your touchtone phone and wait for the coordinator. If you require further assistance, you should redial into the call. Please note this conference is being recorded, and now I'd like to turn the call over to Marcus Driller, VP Corporate. Please go ahead, sir.

Thank you, Eduardo. Well, good morning, everyone, and welcome to the Fisher & Paykel Healthcare First Half 2020 Results Conference Call. On the call today are Lewis Graydon, our Managing Director and Chief Executive Officer, Lyndall York, Chief Financial Officer, Paul Shearer, Senior VP of Sales and Marketing, and Andrew Somerville, our VP of Products and Technology. Lewis will first provide an overview, followed by some specific comments from Lyndall, and then we'll open up the call to questions for the team. We'll be discussing our results for the six months ended 30 September 2019. We've earlier today provided our 2020 interim report, including financial statements and commentary on our results to the NZX and ASX. These documents can be accessed on our website at www.fphcare.com forward slash investor. With that I'd now like to turn the call over to Lewis.

Well thanks Marcus and welcome everyone. Today I'm going to be referring to the investor presentation pack that we released to the NZX and the ASX this morning. But first also this morning our Chairman Tony Carter announced his intention to retire with effect from the close of the annual shareholders meeting next August and the current A current director, Scott St John, has been elected by the board to succeed Tony as part of a planned succession process. As the chairman of our audit and risk committee, Scott has been a strong leader with excellent corporate governance and commercial skills, and he has the unanimous support of his fellow directors. And we'll also have an opportunity to thank Tony at the annual shareholders meeting next year. So now I'll start on page two of the investor presentation pack. We've had a good start to the 2020 financial year with a number of notable business highlights there. We expanded the release of our new products in the new countries. And as always, we have an exciting product pipeline. So turning to page three, these results exceeded our earlier expectations for the start of the financial year. And that's largely driven by robust growth in our hospital product group. Overall operating revenue for the half grew 12% to a record $570.9 million, or 9% growth in constant currency terms. That's 17% constant currency revenue growth in our hospital product group, and a 1% decline in constant currency revenue for our hospital product group. Now Lyndal will talk through gross margin and operating expenses shortly, so then Coming down to reported net profit after tax, that was up 24% on the prior half at $121.2 million, and this represented 23% growth in constant currency turns. Given that positive result, our board of directors has approved a 23% increase in the interim dividend to 12 cents per share, carrying a full imputation credit. In accordance with our usual practice, this week we will pay a profit sharing bonus totaling $2.95 million for the half to our qualifying employees around the world. We certainly appreciate their hard work and their commitment to our success. So now for a closer look at each of the product groups. Let's turn to page four. The hospital product group includes our devices and systems used in invasive ventilation, non-invasive ventilation, nasal high flow therapy, and during surgery. 88% of hospital operating revenue was generated from consumables and accessories during the first half. Turning to page five, revenue from our hospital products for the half was $353.6 million, representing growth of 17% in constant currency. And we saw strong demand across our entire hospital product portfolio, but in particular for our OptiFlow and Evo systems, which continued to benefit from the growing body of clinical research in the use of nasal high flow therapy. This half year also included an extended flu season in the United States, and this likely assisted our growth. Constant currency revenue of 23% in new applications consumables revenue for the first half was driven by our OptiFlow nasal high flow therapy, and we also delivered strong growth in our non-invasive ventilation product portfolio. We had robust growth in hospital hardware for the first half at 18% in constant currency terms. And that's as we lapped the prior period of flat hospital hardware revenue. And this half also included some large one-off tenders. We are pleased with the underlying growth rates of our humidifiers and other hardware. And we do expect hospital hardware growth to return back to more normal levels for the full year. So moving now onto page six. That's our home care group. Our products are used in long-term care facilities and home settings, assisting in the treatment of obstructive sleep apnea, or OSA, and chronic obstructive pulmonary disease, or COPD, as well as other chronic respiratory conditions. Eighty-four percent of home care operating revenue is generated from consumables and accessories during the half. So now onto page seven. Revenue from our home care products for the half was $214.7 million, That represents growth of 2% or a decline of 1% in constant currency terms. We're encouraged by the early response from customers to our new Viterra full face mask in OSA. Revenue from Viterra in Australasia, Canada and Europe has offset declines in sales of legacy OSA masks, resulting in an overall mask revenue slightly above our expectations for the first half. Viterra was launched in the United States in October. And we expect this trend of Viterra offsetting legacy masks to continue for the second half. And we're also planning to launch another new OSA mask later this financial year. I would say flow-generated revenue declined 6% in the first half in constant currency terms. We expect that trend to continue for the full year. Our strategy remains to focus on OSA masks and on the home respiratory support opportunity. Our MyEvo system, which is used to deliver OptiFlow nasal high-flow therapy in the home for patients with chronic respiratory conditions, grew strongly. And we're encouraged by the recent publication of an observational study in a hospital in France by Daugan et al., published in the Advances in Therapeutics in Respiratory Disease Journal. This study concluded that the use of long-term nasal high-flow therapy allows very severe patients to be discharged to the home, and at a reasonable cost. We are aware of at least 10 studies currently underway investigating the benefits of nasal high flow therapy in the home for patients with chronic respiratory conditions. So now I'll turn over to our CFO, Lyndall York, and she'll discuss the rest of our P&L balance sheet cash flows and foreign exchange position. Over to you, Lyndall.