Fisher & Paykel Healthcare Corporation Limited

Welcome to the Fisher and Pichol Healthcare's results conference call. My name is Justin and I will be your operator for today's call. At this time everyone except the guest speakers will be in a listen only mode. Later we'll conduct a question and answer session. 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 key fall by zero on your phone and wait for a coordinator. If you require further assistance, you should redial into the call. Please note this conference call is being recorded. I'd now like to turn the call over to Marcus Driller, VP Corporate.

Thank you, Justin. Well, good morning, everyone, and welcome to the conference call for Fisher & Paykel Healthcare's full year results for the 2025 financial year. On the call today are Louis Graydon, Managing Director and Chief Executive Officer, Lyndall York, Chief Financial Officer, Andy Nicol, our Chief Operating Officer, Justin Callaghan, VP of Sales and Marketing, and Andrew Somerville, our VP of Products and Technology. Lewis and Lyndall will first provide an overview of the results and then we'll move on to questions for the team. We will be discussing our results for the 12 months ended 31 March 2025. Earlier today we provided our 2025 annual report including financial statements and commentary on our results to the NZX and ASX. These disclosures can be accessed on our website at fphcare.com forward slash investor. With that I'd now like to turn the call over to Lewis.

Okay thanks Marcus and welcome everyone. I'm going to be referring to the investor presentation pack that was released to the NZX and ASX this morning. So we'll start on page three. with a few of the highlights of the year. We continue to work closely with clinicians to promote the adoption of our therapies globally, and that has supported the treatment of approximately 22 million patients during this financial year. We released new products across the hospital and home care businesses during the year, with the Nova Nasal being added to our OSAID mask portfolio, and this is now available in New Zealand and Australia. Now Evo 3 and 950 were launched into the US and they've been received during the year also. On the infrastructure front, we continued with the expansion of our East Tamaki campus here in Auckland and construction is underway on our fifth building which will complete the site. So now turn to page four. Operating revenue for the full year was $2.02 billion, up 16% on FY24, and that's 14% in constant currency. Board-based growth across the hospital consumables product portfolio, as well as double-digit growth in RSA mask, were key contributors to this result. Net profit after tax was $377.2 million. That's up 43% on FY24, or 30% in constant currency. These growth rates are against the underlying net profit after tax figures for last year which excludes those abnormal items. So turning now to page 6, hospital operating revenue was $1.28 billion for the full year. That's up 18% or 16% in constant currency. New applications consumables revenue was up 20% on FY24, or 18% in constant currency. And if you look at our second half, new applications consumables growth was 13% in constant currency. Our hospital result was pleasing across the portfolio, including in non-invasive ventilation, OptiFlow for both respiratory and anesthesia patients, and in invasive ventilation. So turn now to page eight. Home care operating revenue was $739.9 million, up 13% on FY24, or 11% in constant currency. I would say mask revenue is 14% for the year, or 11% in constant currency. And if you look at our second half, growth was 9% in constant currency terms, after a strong 14% in the first half. And we saw this good growth driven by the new masks that we launched during the year, with a number of competitor introductions during our second half. So I'll pause there and hand over to our CFO, Lyndall York, for more details on financial performance, and I'll speak to our guidance following that. Over to you, Lyndall.

Thanks, Lewis, and good morning, everyone. On page 9, our growth margin was 62.9% for the year. Excluding the product recall provision last year, that's an increase of 181 basis points or 129 basis points in constant currency. The range of margin improvement efforts across our business including manufacturing efficiency and overhead efficiency continued making a positive impact. If the current global tariffs remain in effect as they currently are, Our gross margin would be impacted by approximately 75 basis points on an annualised basis and approximately 50 basis points impacting in the 2026 financial year. Our ongoing improvement efforts are anticipated to more than offset this to provide an overall gross margin improvement of approximately 50 basis points in constant currency in FY26. At the end of April exchange rates, that would be approximately a 25 basis point improvement in reported currency. Moving on to page 10, total operating expenses grew 10% in both reported and constant currency compared to last year. This is as expected given the impact of the people we added throughout the 2024 financial year. Operating margin was 25.2% for the year. Excluding the product recall provision last year, This is an increase of 379 basis points or 260 basis points in constant currency. This reflects the improvement in gross margin as well as our operating expenses growing below revenue growth. R&D expenses grew 14% to $227 million and were 11% of revenue for the year. We continue to estimate that about 60% of our R&D spend is eligible for the 15% R&D tax credit. SG&A expenses were $534 million this year, an increase of 8% in both reported and constant currency. Moving now to page 11. Operating cash flow this year was $549 million, up 28% from last year. This reflects the growth in our profit. Tax payments were lower than usual last year, as we prepaid tax during the 2023 financial year, requiring less tax to be paid in the 2024 financial year. Capital expenditure, which includes purchases of intangible assets, was $103 million for the year, down from $339 million last year, which included $190 million paid for the Karaka land acquisition. Capital expenditure for the 2026 financial year is expected to be approximately $225 million. Within this is around $120 million on land and buildings including the next payment on our Karaka land purchase and progress on the construction of our fifth building at East Tamaki. Looking at the balance sheet, debtor days were in line with last year at 44 days. Net cash at 31 March was $200.5 million and our gearing ratio was minus 11.6%. Interest bearing debt was $60 million, all of it being current. Turning to page 12, we have declared a fully imputed final dividend of $0.24 per share. This is a 2% increase on the final dividend declared last year and it will be paid on 4 July. The full year dividend totals 42.5 cents per share, up 2% on last year. This represents a 66% payout of our full year profit. Looking now at foreign currency on page 13. Foreign currency movements positively impacted our net profit after tax, or NPAP, by $39 million compared to last year. This primarily reflects the movements in spot rates and hedging results when compared to last year. In the 2025 financial year, hedging gains were $7 million before tax and foreign exchange gains on balance sheet translations were half a million dollars before tax. At the end of April exchange rates, we would have an overall positive impact on profit before tax of approximately $10 million for FY26 when compared to FY25. That would be approximately $2 million after tax. This includes hedging losses of $8 million before tax and losses on balance sheet translations of $3 million before tax in the 2026 financial year. Now back over to you Lewis.

Okay, thanks Lyndall. So turning now to outlook on page 14. At 30 April exchange rates, we expect full year operating revenue to be in the range of approximately $2.15 billion to $2.25 billion. And net profit after tax to be in the range of approximately $390 million to $440 million. One of the big movers in that revenue guidance is hospital consumables. They're sensitive to seasonal respiratory hospitalisations in the Northern Hemisphere, and these usually occur in our second half. And to be clear, we are using the phrase seasonal respiratory hospitalisations to include all the contributors. So that's at least influenza, RSV, COVID. Now, we're also moving away from referencing seasons as low, moderate and high. These terms are often used by other parties for influenza only and they include other metrics like test results. They don't always neatly align with hospitalisations or our financial year and of course now there's a COVID component as well so it's just becoming less relevant. So this year we're referencing our guidance against the year we've just completed and on that basis We would expect that if a similar cumulative respiratory seasonal hospitalisation rate to FY25 occurred in FY26, it would be pushing the result towards the upper end of guidance and conversely a lower rate would push us towards the lower end of guidance. I'd just like to put this flu season commentary into a context. We estimate that for most years, probably less than 5% of our hospital consumables business is due to the seasonality. And it's a directional signal rather than a quantifiable number. However, of course, the larger years versus smaller years or vice versa can impact the apparent progress of our major growth driver, which is the change in clinical practice. The other major mover in guidance is OSA masks. This guidance range accommodates similar conditions throughout this year as we experienced in our second half of FY25. Moving on now to the NPAT portion of guidance. Assuming the current global tariff rates, the policies and applications of them don't change for the remainder of this financial year, we're estimating about a 50 basis point impact gross margin in constant currency terms for the 2026 financial year due to those tariff costs. So annualised, that's about 75 basis points, but it kicks in part through the financial year. And a quick recap of those assumptions for the year is that practically all of our finished goods in Mexico are compliant with the USMCA, and after applying the Nairobi Protocol, that leaves us with a 10% tariff on hospital products out of New Zealand. I think a really important point is that during the year, we're going to continue with a holistic approach to improving gross margin, just like we always have for all the cost increases that come our way, whether it's driven by inflation, materials, exchange rate, freight, or tariffs, or whatever the source of the increase. And that's our long-standing approach of continuous improvements across all of the business processes, improving efficiencies and making better use of our overheads. We've assumed in guidance that if these activities, along with our routine pricing negotiations during the year, can generate a roughly 100 basis point improvement to gross margin, then the year could net out at roughly a 50 basis point improvement to gross margin, all in constant currency terms, of course. So I'll end my comments there, and we can move on to the questions.

Thanks, Lewis. Justin, if I could ask you to please open up the lines for questions. And can I please ask everybody to limit your questions to two? This is to ensure that everybody has an opportunity to participate. You can rejoin the queue for any additional questions.

Thank you. We will now begin the question and answer session. If you wish to register a question, please press star followed by one on your phone. And if you wish to cancel your registration, you may remove yourself from the queue by pressing the pound or hash key.

Thanks, Justin. The first question comes from Devin Thalinathan at Goldman Sachs. Please go ahead, Devin.

Thanks, Marcus. Good morning, Lewis and team. Can I just start with the revenue guidance for FY26? I hear your comments about the variability there in the hospital and the home care segments, but maybe if I can just focus on the hospital side. Clearly, you've got a few new products that are in the mix of launching or to come. Can we get an understanding within that guidance just which products are materially contributing. And some of the products, from what we can see, would be the Opti-Close Switch, Evo 3 NIV, and also potentially the S&P 950 for anesthesiology. Could you give us a sense of whether that's contributing into your guidance, please?

Yeah, thanks for the question. Look, they kind of all contribute, and they all contribute all ways. If you look at maybe, say, a 950 system, we've been rolling that out globally. Well, COVID got in the way there, but typically that might be, say, a five-year rollout, so that's not unusual for us. Same for everything you talk about. We roll them out over a period of years, and then across the whole product portfolio, you've got kind of the whole range and the whole mix shift if you look at... maybe an OptiFlow cannula, you know, Duets, the current run there, that's version five. We still sell version three and version four. So, bit of a long-winded answer, but I think it's an important point, that shift, those new products, they contribute. Typically for us, that's a one to two percent impact during the year. That would be quite normal, and it's kind of always there, and it's kind of across everything.

Yeah, okay. Just to clarify that, because the sort of timing of when you launch this would be quite useful to understand your momentum in the hospital side of the business. So as an example, is the OptiFlow switch launched yet in the US? Is it to launch in that 26 number?

Okay, so when you go to switch and trace, That's a little bit different in that we're coming off a pretty low install base. We're leading with switch and trace. So they actually do make up the majority of our anesthesia per se, anesthesia sales right now. You could think of that as a mix shift within say OptiFlow in general or mix shift within UX. And then the other component to that is we've led with trace. We just We got going with a dedicated anesthesia force in the US, and we kind of started that, I'm looking at Justin, two years ago, three years ago is when we first started. We led with Trace, and we're still working through the Trace leads there, mate. We haven't quite got to switch in the US yet.

Okay, and just my next question then. Just in terms of this comment, I think, that you made in the annual report, short-term challenges that you're seeing. Could I get you to comment on how that would impact or feature in your hospital revenue guidance again? Just trying to think about CapEx constraints perhaps in certain markets. Just how have you thought about that, please?

Capex constraints don't tend to have an impact on our business. I think it's fairly normal in the healthcare industry most years that there's pressure on healthcare costs. We might have been referring to tariffs with that comment as well. That could be a challenge going forward. Any other short-term challenges? I think that's it. Thanks for your questions, Devon.

Really appreciate it. Next questions come from Leanne Harrison at B of A. Please go ahead, Leanne.

Hi. Good morning, Lewis, Lyndal, and all. I might start with hospital hardware. Obviously, very good growth this year. driven by the AIRVO3. Can you comment on the rate of rollout and penetration particularly in the United States for the AIRVO3? Should we expect a little bit more growth to come as well in fiscal 26 and is that included in your assumptions?

I think yes to all those comments. I can't actually go back to the opening comment. It's a continuous process. In the case of Evo III, we think of that as facilitating the change in clinical practice. It makes it easier for customers to use the therapy in more parts of a hospital. It makes it easier with less training required. And then in terms of uptake for those new products, Evo III in the US right now would be maybe half our volume by now compared to Evo III. So yeah, we expect this to continue, but again, it's a dynamic that's always happening in the business in some product portfolio in some region.

Okay. If I could move on to gross margin, so obviously very good gross margin expansion this year. Can perhaps you Lewis or maybe even Lyndall comment on which factors contributed most towards the gross margin expansion and how should we think about that for fiscal 26?

Yeah, that'll be Lyndall.

Hi Leanne. Yeah look, basically everything that we do around the business and the margin improvement made a positive impact this year. We're sort of back to BAU, what we've always been doing is thousands of continuous improvement projects done throughout the organisation, getting more efficient with our overheads and growing into the overhead structure there. I guess the colour I'd give you there is about half of that 130 basis point improvement in constant currency came from overhead efficiency and freight and that's where sort of they'll come back a little bit in FY26 which is why we're sort of going to roughly about 100 basis point constant currency improvement. Freight gave us a little bit of a tailwind in 25, we expect that to be pretty flat in and then overhead efficiency will reduce in terms of quantum as we've grown into the overhead structure.

Okay, and are you planning on taking any price increases in 26 that'll support gross margins?

Yeah, and again, just like we always do, I mean, you know, across the business on average, it averages out a percent or so, you know, year after year after year.

Okay. Thank you very much. I'll leave it there.

Thanks, Leanne. Next question has come from Daniel Hurran at MST Marquis. Please go ahead, Dan.

Good morning, everyone. Thanks very much. Just actually following from Leanne's. I mean, I remember when you kind of looked through your factory, there appeared to be a bit of frustration trying to get the factory back to sort of historic levels of efficiency. I know we no longer talk about COVID too much, but can you just talk about where's the factory today versus sort of the pre-COVID sort of baseline? And I understand there's always continuous improvement, just wondering if you're back to sort of where you wanted to be.

We're not back where we want to be. We think we still have, for existing products, a little bit of spare capacity. So we think we've got a bit of room to go there and Financially, that translates into we should have a bit of a lower capex rate for plant and equipment going forward over the next few years. We're still expecting that.

Thank you. And just on workforce, I understand you've been through a couple of phases of expansion there and you've previously given some sort of total OPEX guidance. Are you through the bulk of that expansion? Is the workforce where you need it to be now?

In terms of manufacturing, yeah, that's where we needed to be. And in terms of OPEX, SG&A, and R&D, we feel that we can take some leverage. You've seen that in FY25, and we think we've got a few more years to go of taking some leverage in the operating expense space.

Okay. Thanks. It's helpful. Thank you.

Thanks. Next questions come from Matt Montgomery at Forsyth Bar. Hi, Matt. We can't hear anything.

Have we got you there, Matt? And Matt has actually left the question-answer queue.

Okay. Thank you. Next questions come from Craig Wong Pan at RBC. Please go ahead, Craig.

Great, thank you. Just noticed in your OSA mask revenue constant currency growth, that did slow a little bit from the first half to the second half. Could you just explain from your perspective what you think has driven that?

Yeah, so in our first half, we had the solo range hit the United States. So we think of it as a new product introduction boost. So you've got that as the primary driver of that first half 14% constant currency. Then in our second half, we've got multiple introductions of new masks from multiple competitors. So that kind of takes the boost off the new product introduction cycle.

OK. And so is that the second half growth, kind of your expectations for where you think, you know, kind of looking forward, where you think that might go in FY26?

Yeah, that probably is our best guess for FY26 because you've got two things going on there. You know, we're lapping that 14%. So, you know, that's always challenging. But then offsetting that, we've got the Nova Nasal currently out in New Zealand and Australia. We'll be getting that to the US over this financial year as well. So maybe offsetting that, maybe lend around a similar 9%-ish would be our thinking.

Okay, that makes sense. And then just the last question on the gross margins. Given the current tariff environment, can you provide an update on that? the timeframe for when you might be able to get back to that sort of 65% target gross margin range?

Yeah look on an annualised basis if everything stays as it is in place today we think there's about a 75 basis point impact annually from tariffs so we think that probably adds another year to getting back to our target.

Okay thank you.

Thanks, Craig. Next questions come from Adrian Orbon at Jarden. Please go ahead, Adrian.

Good morning, team. Just one of the earlier questions, you made the point around the Salesforce cost base, I suppose, taking leverage now and for the next couple of years. Can you kind of just provide a bit more colour as to what's sort of making that decision? Do you feel like the efforts you've put in I guess post-COVID and protocolising hospitals and stuff are starting to get more traction or is there something else going on there that we should consider?

No, it's really driven by when we look at our long-term revenue growth, we look at long-term OPEX growth. If you aggregate that over the last six or seven years, OPEX growth has been a wee bit ahead of revenue growth and we think we can bring that back. A wee bit, and then the other comment, probably the exception to that actually is in the sales force. That's not a place we'd be planning on taking leverage, and it looks pretty much in line with revenue growth over the last five, six years.

Okay, so the leverage is more on the management and administration kind of growth?

Yes, it's in the S, the G, and the R&D. Sorry, the G, the A, and the R&D. G, A, and R&D. OK.

Thank you. Just within new app consumables, would you be able to give us a sense of the contributions by each of the three products? I think anaesthesia last year was kind of a touch under 10%. Are you able to give us an update on that?

Yeah, anaesthesia, closer to 10%. And then, you know, roughly speaking, you know, OptiFlow, roughly speaking, I'd say OptiFlow around about two-thirds of the new apps. Non-invasive would be about a quarter. And then anesthesia.

Okay. So anesthesia has sort of grown more in line with the overall new apps. Like it may be a touch higher.

Oh, no, touch fire. I mean, that's still in the 40s.

OK. And then just a, sorry, one more question. In hospital hardware, can you, like over the last couple of years, can you sort of give us a guide, mainly for our modelling purposes, like how much of the sort of volumes are sort of replacement volumes versus sort of new volumes?

Yeah, that's a tough one. We tend, and there's a wee bit of a difference, but we tend to think of it as mostly new volume. We tend to think of it as the growth driver rather than replacement. And I think it goes to the idea that at these kind of growth rates, whatever you're replacing from 10 years ago is a relatively small component. And typically, again, you know, it's... driven by change in clinical practice. It's driven by, I need more. Maybe it's driven by, I had 50, I want 10 more. As opposed to, definitely not, I want the latest model cycle. That's not how it works.

Okay, so we should think of it as mostly net growth off the strong increase that you experienced from COVID.

Yeah, look, if I had to put a number on it for a model, I'd be going 5% or 10% or something like that.

In terms of replacement?

I can't even go there. It kind of doesn't work like that. I've got 50. They're all 850s. I want 10 more. I'm going to go to all 950s. So I don't know what you want to call that. Is that replacement or growth? Both.

All right, thank you.

Thanks, Adrian. Next question's come from Sasha Crean at Evans and Partners.

Good morning. First question's just on seasonal hospitalisations. I think you said that it's 5% in most years. Just wondering if you can clarify what you think it was this year. I mean, it's basically reasonable to assume that the difference between the top end and the bottom end of the range is largely the seasonal components.

Okay, that was really hard to hear, Sasha, so I'm going to kind of read between the lines. The 5% comes from looking at... I can repeat the question if that helps. Yeah, that would be helpful, Sasha. Crank the volume up and get closer to the speaker.

Yeah. Okay, so the question was just in terms of seasonal hospitalisations, I think you said it was 5% in most years. Just wondering if you can provide some guidance on what you think it was this year. Is the difference between the top end and the bottom end of the revenue range really just the seasonal hospitalizations? Is that the way to think about it?

I'll answer the second question, the last question first. Yes, that's what we're thinking, top end, bottom end. The top end we're thinking is similar, seasonal, to FY25. bottom end, we're thinking, is a heck of a lot less. So that's that part. And we put a lot of attention on this, and we talk about it a lot. So I just wanted to make the point that when we look at our history and we look at the seasonal impact second half versus first half, over the long term, looking at that seasonality, we conclude it's less than 5% of the consumables business most years. That's the proportion of our business that it typically makes up. The trouble is it can swing from nothing to 10 and back the other way and obscure the change in clinical practice growth.

Okay. No, that's clear. Thank you.

I kind of just wanted to make a point. We're putting a lot of... Sorry. Go ahead.

You go on.

I just kind of want to make the point, I'm putting a lot of time and effort on it because it does throw the numbers around a bit, but we're talking about what's fundamentally probably about 5% of the hospital consumable business.

Okay, thank you. The second question is just on hospital hardware. You provided a little bit of guidance before on the mix of where new actual consumables are being used. I'm just wondering, in terms of Do you have visibility on whether they're going to ICUs or EDs or anaesthesiology departments? And can you provide a little bit of guidance on where you think they're going so we can think about the future growth of the consumables?

Yeah, no, we don't have that visibility and our customers typically don't have that visibility either. I mean, hospitals may well organise where there's a pool and they're using it across the hospital. We don't have that visibility. Very strong anecdotals and some hospitals when we can visit and some hospitals here and there we can get the insight into gives us the confidence that we've got usage outside ICU.

Okay, thank you.

Thanks, Sasha. Next question has come from Stephen Ridgewell at Craig's Investment Partners.

Yeah, good morning. And first of all, congratulations to the team, Lewis. Another great result. My first question is on anaesthesia. Lewis, you mentioned earlier almost 10% of new apps and FY25 were from anaesthesia. and it was growing at 40%. I mean, at a high level, you know, what are the expectations for anesthesia consumables growth in the FY26 guidance, please? Are you still kind of expecting growth in that 40% range? And, you know, is that being supported by a similar growth in the sales force for that product or are you still taking a little bit of leverage there?

I'll turn to Justin for the sales force comment. But... But yeah, off that still really low base, we are expecting to see 30% to 40% in FY26.

Yep, thanks Lewis. And yes, Steve, I think from the sales force perspective, we tended to invest with the growth. So as that business grows, we're still investing in the team, so we should expect to see that as we move forward in line with those growth rates.

That's very clear. Thank you. And then my second question is on hospital devices. F&P has been in a very strong innovation cycle the last few years with a number of new device launches. Can you talk a little bit to the revenue and revenue growth you're expecting in the FY26 year and perhaps some flavour on the extent to which you expect the contribution from the Evo III NOV in the 950. Any comments you can provide on the commercialisation timeline of the Evo III NOV would be useful. Is there an expectation for material revenue from the Evo III NOV in the FY26 year? Thank you.

No, we don't have an expectation. currently in a controlled market release. I kind of just want to point one thing out. We're calling it Airbow 3 NIV. We're not thinking of it as an NIV machine. We're thinking of it as a way to efficiently move patients around the hospital to different acuities within the hospital and facilitate the use of nasal high flow throughout the hospital. That's how we're thinking of it. So it's not a straightforward NIV machine.

And then just going back to the earlier part of the question about revenue expected from hospital devices in FY26, and it sounds like that will mainly be coming from EBO3 and the 950.

Oh, sorry, mate. So the way we... Well, as you've seen, that can be lumpy year to year. We'd probably just reference FY25 plus or minus 10%. Wouldn't surprise us or give us any indication of anything.

Okay. No, that's fair enough. And then a quick one for Lyndall. Does the guidance for 26 assume a benefit from accelerated depreciation on New Zealand CapEx that was announced in the budget last week, or is that still to come?

No, that's just a cash flow benefit, so it won't flow through to P&L.

Okay, thank you. That's all from me.

Thanks, Stephen. Next question's come from Andrew Payne at CLSA. Please go ahead, Andrew.

Good morning, Arthur. Thanks for taking my question. Just wanted to know if there's any concerns around budget pressures from purchases just resulting from the trade policies. I'm just thinking if there's any communication or any conversations you're having given the current environment around purchasing, especially in the hospital segment.

Oh, I didn't catch all of that. Sorry, Andrew. So you're talking about concerns around hospital budgets?

Yeah, I guess concerns around budget pressures from purchases just under the current trade environment. Is that helping some of the costs of that?

Right. Got you. I think in this hospital business, there's always cost pressure. Every year, there's some kind of cost pressure on the hospital business. And at the end of the day, for all of our therapies and all of our product range, we're going to point to an improvement in outcomes, and we're going to point to an economic benefit. So that's how we navigate it. I'd have to say I can't remember a time when one of these cost pressures didn't exist. Or two, we felt like it had any material impact on us.

Yeah, okay. That's great. And then just, sorry if it's been after my line's been a bit overshot, but what stage do you think you're at in terms of the US tariff discussions? Are you able to give a timeline there or an indication of where you are at that process?

Well for the current situation we think we're pretty well done. Mexican manufacturing is covered by the USMCA and anything else has been suspended indefinitely. Then in New Zealand you've got the 10% on the hospital products. There's no indication at present that that's changing.

I'm just not thinking about any exclusions that you could fall under.

Oh, OK. Yeah, sure. So OSA products, you know, are covered by the Nairobi Protocol, so we've applied that to our thinking and to our guidance. But I think for now we've kind of left it there.

Yeah, OK. No problem. Thanks a lot.

Thanks, Andrew. Next question has come from Marcus Curley at UBS.

Good morning, guys. First one, could you talk a little bit about your, I always say, mass sales by category in the second half? Obviously, you're referring to competitor launches. I assume you're talking full face, or have you seen a slowdown in the categories that you've actually got new products in?

I think the only comment I can make to that, Marcus, is the growth that we've seen is in the new masks that we've launched in those categories.

So is it fair enough to assume that full face is an area of focus at the moment, given you sort of probably overdue a new product in that category?

I think that's absolutely fair, Marcus.

Great, I look forward to it. Secondly, just a little bit of maths around your guidance would suggest constant currency revenue growth at the top end at 11% for the year. If you take what you said about home care being similar to the second half, it then suggests that you're looking at hospital growth around about 12% for the year at the top end, which obviously includes a similar level of hospitalisations in the peak. 12% probably a little lower than your long-term target, a 13-style number. For that, is there anything that you'd call out other than your normal conservatism around that level of growth in hospital?

I think the best answer I can give you there, Marcus, is if you look at our second half, we've delivered 12%. growth in hospital consumables. And that's with a flu season or cumulative seasonal respiratory hospitalisations. Can we just call that a flu season for now? That's with a flu season that's a little less than FY24 by all indications. So we think maybe at the top end, if you had the same, you might be a little bit above 12. Or everything else being equal.

Okay, like if I was extending that answer, I'd say your underlying business is growing better than 12 if you flu season adjusted for the second half, yet the guidance looks like it's a little slower in FY26. But it doesn't sound like you're necessarily calling out anything that's a specific headwind for the hospital business as you stand here today.

I'll just point out one other thing. We are lapping 14% for the total business. And then for the hospital business, in our first half FY25, you've got some seasonal stuff in there, which has flowed through from FY24. So you're potentially lapping that as well.

Okay. Okay. And sorry, I think I might have missed this, but Lyndal, did you give OPEX guidance growth for 26?

We didn't, but look, probably similar growth to 25 wouldn't be unreasonable.

Okay, thank you.

Thanks, Marcus. Next question's come from Matt Montgomery at Forsyth Bar.

Hi guys, good morning. Hopefully you can hear me now. Just, Linda, one for you on CapEx, sort of beyond FY26, like cognizant of the balance sheet being in quite good shape. You've got the new New Zealand building coming online, but presumably not much else. I'd just be interested if you could talk to CapEx maybe over a slightly longer-term view, three to five years. I think previously you had a five-year target out there around land and buildings. It would just be interesting to roll that forward a few years now, particularly with Karaka coming maybe at the end of the decade.

Yeah, sure. So look, I guess Building 5 here at East Tamaki will be building for 26, 27 and 28. It will complete. We're estimating the end of calendar 2027. We also still will have one more payment for Karaka land acquisition in FY27. So for those two sites we'd be looking at probably another $130 million spend through 27-28, weighted more to 27 and then that completes East Tamaki campus, it also completes the land acquisition. wouldn't anticipate material building costs at Karaka in that timeframe.

Great, that's useful. And then one just on sort of R&D of sales, it's been sort of over 11% for the last couple of years now. Essentially is what you're saying in terms of leverage that we'll see a trend back to sort of nine, nine and a half over the next few years.

Yeah, maybe back towards 10-ish.

Yeah. Okay. And I might squeeze one more in. Just within the anesthesia business, cognizant of comments around switch-first-trace timelines, are you able to give us a, or roll-outs more so, are you able to give us a sense of, within the anesthesia business today, what percentage is in-traced?

You know, we don't want to go there, sorry.

That's all right, I'll try.

Yeah, no, look, it's okay. It's just not all of our listeners are as benevolent as you might be.

Thanks for your questions, Matt. Appreciate it. Move on to Saul Hedesson from Barron Joey. Please go ahead, Saul.

Yeah, good morning. Can you guys hear me?

Loud and clear. Perfectly.

Excellent. So, yeah, first question, Lewis, and apologies if you may have mentioned this, but regarding the outlook for revenue into FY26, trying to get a sense of your expectations for new app sales growth within that. The reason I ask is because for the last few halves, there's obviously been a very disparate rate of growth in terms of your first half rate of growth for that sales line versus second half. So I just wanted to get a sense in TFI26 for the full year, are you still expecting a circa high teens percentage growth rate for new app sales?

Yeah, look, it seems pretty... It's quite dependent on what the seasonal respiratory hospitalisations do. And bearing in mind there's a bit of variation in there in that... It's all very well going with the seasonal numbers, but the level of respiratory intensity can vary. You saw a classic of that with Omicron versus Delta in COVID. Omicron had about half the respiratory intensity. That can impact the relative ratios. But I would expect that if you were looking at low teens for hospital and you had kind of a more normal distribution, you'd be looking at mid-teens for new apps and you'd be looking at high single digits for invasive would be kind of a more common, more normal distribution of the growth rates.

Thank you for that. And then... Just another comment or question on OSA and again just looking at the rate of mask growth, particularly in the second half. I'm assuming the bulk of your growth in masks is from your installed base of mask users rather than new products. Have you seen any indications of OSA users ceasing usage of their devices due to introduction of GLP-1 products and weight loss? Is there any anecdotal evidence that you can see or that you've noted that might be reducing your census of the installed base of mask users.

Nothing I've seen or heard, and Justin's shaking his head as well. We haven't seen anything that would pin on GLP-1 at all.

Thank you. That's all I had.

Thanks, Saul. Next question has come from Vanessa Thompson at Jefferies.

Good morning. Thank you for taking my questions, Lewis and team. I just asked about the effects and the hedging cover and wondered if you've made any or intend to make any further changes to the hedge duration, given the current situation.

Thank you. Hi Vanessa, I'm sort of caught I think most of your question. We've got quite a robust hedging procedure around here and we're not looking to change that at all. What we do is build out further cover when rates are favourable and then less so when they're not. So when we've seen the dips we have actually taken some more out, which I think you can sort of see reflected in the coverage that we've got there in the accounts.

And so that will happen dynamically throughout the year, I suppose?

It happens every day, yeah. We're always looking at it, yeah.

Okay, thank you. And then my second question, we're seeing a lot of commentary about ambulatory surgical centre growth And I wondered how this affects your sales strategies, approach to clinical care education and so on, given it's perhaps selling into a different business. Thank you.

Yeah, hi, Vanessa. This is Justin. I think probably from an ambulatory surgical centre, that's probably more around the anaesthesia space than many of our other traditional products. And that's part of our growing market. And where those surgical centers are important to us, we're calling on them. So it just fits into our call cycle, really.

So with more procedural work is getting done through the ASC, how does that affect what happens in the traditional hospitals for your product?

Well, I don't think we've changed. It's just the location of care, really. Our products are in both places, so it's just the location of care.

We're selling and calling on the anaesthesiologist, and typically they do travel from hospital to hospital and centre to centre. It's the anaesthesiologist or the anaesthetist, depending where you grew up, that's our target.

Okay, thank you.

Thanks, Vanessa. Looks like we have time for one more question, and we've got Adrian Albon from Jarden. Please go ahead, Adrian.

Thanks again, Tame. Just a question for you, Lewis. Just around the tariff situation on the New Zealand hospital products, are you anticipating a pricing response to cover some of that, or are you kind of more looking at your sort of GM improvement as sort of cover for that over time?

Very much the latter I mean I think it's kind of a really important point we're approaching this as a cost in and we're mitigating it the way we mitigate all cost ins we're not doing a heck of a lot different or special just for tariffs we get some mitigation in our costs against tariffs just by what we normally do and normal growth and then we're thinking of the pricing cycle is exactly the same We're doing what we normally do.

Okay. All right. That's clear. Thank you.

Okay. Thanks.

Thanks, Adrian. That concludes the time we have for questions. I'll now turn over to Lewis for some final comments.

Okay. Thanks, Marcus. And thank you, everybody, for your questions. We really do appreciate your interest and your support in Fisher & Paykel Healthcare. To wrap up, I really would like to acknowledge the more than 7,000 people working day in, day out at Fisher & Paykel Healthcare globally. Thank you once again for your commitment to patient care, to outcomes, and to our business. My thanks also go to our customers, suppliers, clinical partners, and shareholders for your ongoing support. Thank you, everyone, and please enjoy the rest of your day.