The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price headed marginally higher following the announcement of a bumper profit result this morning.
Reporting in New Zealand dollars, during the six-month period ended 30 September 2015, the $4.5 billion company announced a 20% increase in revenue, to $381 million, and a profit of $62 million, up 27% on the prior corresponding period.
Fuelling profit growth was a 2.76% widening of the group's gross profit margin, which came in at an enviable 63.3%, thanks to a favourable product mix, and increased production and efficiency gains at its operations in Mexico.
"The record result is attributable to a continuation of our consistent growth strategy, which has driven strong revenue growth in both of our major product groups and further gross margin improvements," CEO Michael Daniell said.
During the half, Fisher & Paykel moved to a direct-to-consumer sales model for their respiratory and acute care/hospital product group. "With the move to a direct sales model in the US, as we have already done in our other major markets, we expect that the increased sales focus will enable us to maximise opportunities and increase revenue growth in the US," Mr Daniell added.
The Auckland-based company said 83% of sales were derived from recurring items such as consumables and accessories. Sales of masks used for the treatment of Obstructive Sleep Apnoea (OSA) rose 25% in constant currency.
Investment in research & development rose 14.3% to $35.8 million, or 9.4% of operating revenue. "We have a significant pipeline of new products that we expect to release in the coming year including new humidifier controllers, flow generators, masks and consumables," Fisher & Paykel's Senior Vice President of Products and Technology and CEO Designate, Lewis Gradon, said.
Pleasingly, the company announced an interim dividend of 6.7 cents per share, up 16% from last year.
Looking towards 2017, Mr Daniell said, "Our strategic direction remains consistent as we continue to develop new, innovative products, expand our market opportunities and grow our international presence."
While currency exchange rates have been slightly less favourable than when the group previously set profit guidance, Mr Daniell said, "we continue to expect full year operating revenue to be approximately 800 million NZ dollars and net profit after tax to be approximately 135 to 140 million NZ dollars."
Are Fisher & Paykel shares a buy?
Fisher & Paykel competes with both RedMed Inc. (CHESS) (ASX: RMD) and Philips Respironics in the huge market for the treatment of sleep apnoea. The company believes there are 100 million patients who could benefit from its products worldwide, but with changing demographics it forecasts that number to double in the next 10 to 15 years.
Unfortunately, after rising some 23% in 2015, the Fisher & Paykel share price now appears roughly in line with fair value. However, if you're investing for the ultra-long-term (10 years or more), I think it's certainly worthy of a spot on your watchlist.
