Investors shrug off F&P Health downgrade

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The market has shrugged off a downgrade in Fisher & Paykel Healthcare's full-year net profit forecast, comforted by a record half-year profit result and assurances that the exchange rate is the real culprit.

The company announced a 31 per cent lift in profit yesterday to $37 million for the six months to September 30, boosted by strong revenue growth in its obstructive sleep apnoea (OSA) product group, robust demand for its respiratory products and favourable foreign exchange hedging results.

Analysts said the result was in line with, or slightly better than, expectations but all eyes had been on the company's guidance for the full year to March 2010. It fell from a previous range of between $75m and $80m to between $65m and $70m.

Despite the downgrade, the shares rose 14c, reflecting the market's understanding that the earlier guidance had been given on the back of a weaker currency and the underlying business was tracking as expected, said Craig Investment Partners head of private wealth research Mark Lister.

"It was a good result and the guidance was completely expected given the way the dollar has moved up. That's the reason the stock rallied and the market is comfortable."

Hamilton Hilton Greene director Grant Williamson said the sales result was "extremely positive" but the strength of the New Zealand dollar against the US currency would start to bite soon.

Fisher & Paykel Healthcare managing director Michael Daniell said the company estimated that at an average exchange rate of 74c, it would achieve operating revenue of about $500m for the year.

Operating revenue for the six months increased 18 per cent to a record $251.4m. Recurring revenue from sales of consumables and accessories was about 75 per cent of total operating revenue. OSA group operating revenue lifted by 31 per cent to nearly $119m.

Respiratory and acute care product group operating revenue increased by 8 per cent to $117.4m. The company spent 23 per cent more on research and development than the comparable period at $16.3m, 6.5 per cent of operating revenue.

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