Fisher & Paykel Healthcare Reports Record Full Year Result
News Release
STOCK EXCHANGE LISTINGS: NEW ZEALAND (FPH), AUSTRALIA (FPH)
FISHER & PAYKEL HEALTHCARE REPORTS RECORD FULL YEAR RESULT
Auckland, New Zealand, 28 May 2018 - Fisher & Paykel Healthcare Corporation Limited today
reported record net profit after tax of NZ$190.2 million for the year ended 31 March 2018, an
increase of 12% over the previous year. Operating revenue was a record NZ$980.8 million, 10%
above the prior year, with 87% of revenue from recurring items, such as consumables and
accessories.
Managing Director and CEO Lewis Gradon said, “Our consistent long-term strategy has again
delivered strong revenue and earnings growth over the past financial year and, over this same time
period, our products and systems were used in the treatment of an estimated 13 million patients
around the world.”
The company’s directors have approved an increased fully imputed final dividend of 12.50 cents
per share, taking the total dividends for the year to 21.25 cents per share, an increase of 9% on the
previous year.
Hospital product group revenue grew 14% to NZ$572.1 million, or 13% growth in constant
currency, and Homecare product group revenue grew 4% to NZ$398.1 million, which is 4% growth
in constant currency.
“We are pleased with the consistent growth we are seeing in our Hospital product group,” said Mr
Gradon. “In particular, our Optiflow nasal high flow therapy is driving significant growth, benefiting
from a growing number of influential clinical studies pointing to its effectiveness in reducing the
need for more invasive therapies and reducing the length of hospital stay for patients. This was
reflected in robust second half constant currency revenue growth of 25% from new applications
consumables.
Growth in our Homecare product group was not as strong as the previous few years but we are
pleased with the response to our most recently released mask, the F&P Brevida nasal pillows
mask. Our OSA masks incorporate market-leading technology and we look forward to expanding
our innovative OSA mask range this year. In respiratory support in the home, new research has
been published that demonstrates the positive impact of our myAirvo nasal high flow therapy for
patients with chronic obstructive pulmonary disease (COPD). We expect this research will
encourage further uptake of our Optiflow and Airv o products in both the hospital and home care
settings.”
Gross margin, at 66.3%, increased by 31 basis points due to a favourable product mix and
increased volume from the Mexican manufacturing facility. The company has made good progress
with construction of the fourth building on its Auckland site and the second manufacturing facility in
Mexico.
The company’s substantial investment in R&D continued, with expenses growing by 10% to
NZ$94.7 million, representing 10% of operating revenue. “During the year we launched Optiflow
Junior 2 in the US, Canada, Europe and India,” said Mr Gradon. “Our F&P 950 respiratory
humidification system for adults is continuing to be rolled out around the world, and the neonatal
version was recently launched in New Zealand and Australia. Looking out further, we have a strong
new product pipeline including more new humidification systems, flow generators, masks and
consumables.”
The final dividend of 12.50 cents per share, carrying full New Zealand imputation credit, will be
paid on 6 July 2018. The dividend reinvestment plan (DRP), under which eligible shareholders can
elect to reinvest all or part of their cash dividends in additional shares, will again be made available
in respect of the 2018 final dividend. The DRP will be offered without a discount in respect of the
2018 final dividend payment.
Outlook for FY2019
We are well positioned to meet the growing demand for our products from an increasing
investment in healthcare across the globe. We expect capital expenditure for the 2019 financial
year to be approximately NZ$160 to NZ$170 million as we increase capacity for both existing and
new products and progress with our building programmes in New Zealand and Mexico. At current
exchange rates we expect full year operating revenue for the 2019 financial year to be
approximately NZ$1.05 billion and net profit after tax to be approximately NZ$210 million,”
concluded Mr Gradon.
Full Year Result highlights:
• 12% growth in net profit after tax to a record NZ$190.2 million.
• 11% increase in final dividend to 12.50 cps.
• 10% growth in operating revenue to a record NZ$980.8 million, 9% growth in constant
currency.
• 14% growth in Hospital operating revenue, 13% growth in constant currency.
• Revenue growth of 22% in constant currency for consumables used in non-invasive
ventilation, Optiflow nasal high flow therapy and surgical applications, accounting for 57% of
Hospital consumables revenue.
• 4% growth in Homecare operating revenue, 4% growth in constant currency.
• Gross margin improvement of 31 basis points for the full year, 34 basis points in constant
currency.
• Investment in R&D increased by 10% to NZ$94.7 million, representing 10% of operating
revenue.
• 87% of the company’s revenue was generated from recurring items, such as consumables
and accessories.
About Fisher & Paykel Healthcare
Fisher & Paykel Healthcare is a leading designer, manufacturer and marketer of products and
systems for use in respiratory care, acute care, surgery and the treatment of obstructive sleep
apnea. The company’s products are sold in over 120 countries worldwide. For more information
about the company, visit our website www.fphcare.com.
Ends
Contact:
Investors:
Marcus Driller
General Manager Corporate
marcus.driller@fphcare.co.nz
+64 (0) 27 578 9663
Media:
Rachel Reynolds
Senior Communications Manager
rachel.reynolds@fphcare.co.nz
+64 (0) 21 713 911
Accompanying Documents
Please find attached to this news release the following additional documents:
• Results in Brief
• Annual Report 2018, including financial commentary and constant currency analysis
• Annual Review 2018
• 2018 Financial Year Investor Presentation
• Corporate Governance Statement
• Appendix 1
• Appendix 7
• Section 209C notice
The 2018 Annual Report and Annual Review will be available online
at https://annualreport.fphcare.com/
and the Corporate Governance statement will be available
at www.fphcare.com/corporategovernance.
Constant Currency Information
Constant currency information included within this news release is non-conforming financial
information, as defined by the NZ Financial Markets Authority, and has been provided to assist
users of financial information to better understand and track the company’s comparative financial
performance without the impacts of spot foreign currency fluctuations and hedging results and has
been prepared on a consistent basis each year. A constant currency analysis is included on page
35 of the company’s Annual Report 2018 and the company’s constant currency income statement
framework can be found on the company’s website at www.fphcare.com/ccis
.
Full Year Results Conference Call
Fisher & Paykel Healthcare will host a conference call today to review the results and to discuss
the outlook for the 2019 financial year. The conference call is scheduled to begin at 10:00am
NZST, 8:00am AEST (6:00pm USEDT) and will be broadcast simultaneously over the internet.
To listen to the webcast, access the company’s website at www.fphcare.com/investor
. Please
allow extra time prior to the webcast to visit the site and download the streaming media software if
required. An online archive of the event will be available approximately two hours after the webcast
and will remain on the site for two weeks.
To attend the conference call, participants will need to dial in to one of the numbers below at least
5 minutes prior to the scheduled call time and identify yourself to the operator. When prompted,
please quote the conference code of: 7828369.
New Zealand Toll Free 0800 423 970 US/Canada Toll Free 866 548 4713
Australia Toll Free 1800 573 793 Hong Kong Toll Free 800 961 105
United Kingdom Toll Free 0800 358 6377 International +64 9 913 3622
Results in Brief
Year Ended Year Ended
% Change
31 March 2017 31 March 2018
NZ$M NZ$M
(except as otherwise stated) (except as otherwise stated)
FINANCIAL PERFORMANCE
Total operating revenue 894.4 980.8 +10%
Cost of sales (304.0)
(330.4) +9%
Gross profit 590.4
650.4 +10%
Gross margin 66.0% 66.3% +31bps
Other income 5.0
5.0 -
Selling, general and administrative expenses (269.3)
(290.9) +8%
Research and development expenses (86.0)
(94.7) +10%
R&D percentage of operating revenue 9.6%
9.7% +6 bps
Total operating expenses (355.3)
(385.6) +9%
Operating profit before financing costs 240.1 269.8 +12%
Operating margin 26.8% 27.5% +71bps
Net financing (expense) (1.6)
(2.0) -19%
Profit before tax 238.5
267.8 +12%
Tax expense (69.3) (77.6) +12%
Profit after tax 169.2
190.2 +12%
Revenue by Region:
North America 433.0 458.5 +5%
Europe 272.0
297.6 +9%
Asia Pacific 154.8
181.0 +17%
Other 34.6
43.7 +36%
Total 894.4
980.8 +10%
Revenue by Product Group:
Hospital 500.4 572.1 +14%
Homecare 381.5
398.1 +4%
Core products sub-total 881.9
970.2 +10%
Distributed and other 12.5 10.6 -15%
Total 894.4
980.8 +10%
FINANCIAL POSITION
Tangible assets 755.5 884.3
Intangible assets 122.6 140.8
Total assets 878.2 1,025.1
Total liabilities (216.6) (263.7)
Shareholders’ equity 661.6 761.4
Gearing 0.0% -7.3%
Net tangible asset backing (cents per share) 106 121
Results in Brief
(continued)
Year Ended Year Ended
% Change
31 March 2017 31 March 2018
NZ$M NZ$M
(except as otherwise stated) (except as otherwise stated)
CASH FLOWS
Net cash flow from operating activities 193.6 247.8
Net cash flow (used in) investing activities (62.9) (198.5)
Net cash flow (used in) financing activities (87.8)
(79.1)
SHARES OUTSTANDING
Weighted average basic shares outstanding 566,124,701 570,023,436
Weighted average diluted shares outstanding 574,339,178 576,449,648
Basic shares outstanding at year end 567,686,436 571,230,264
DIVIDENDS AND EARNINGS PER SHARE
Dividends per share paid (cents) 18.25 20.00 +10%
Basic earnings per share (cents) 29.9
33.4 +12%
Constant Currency Analysis
CONSTANT CURRENCY INCOME STATEMENTS
Year Ended Year Ended
% Change 31 March 2017 31 March 2018
NZ$M NZ$M
Total operating revenue 880.8 958.0 +9%
Cost of sales (305.6) (329.1) +8%
Gross profit 575.2
628.9 +9%
Gross margin 65.3% 65.6% +34bps
Other income 5.0
5.0 -
Selling, general and administrative expenses (272.4)
(290.3) +7%
Research and development expenses (86.0)
(94.7) +10%
Total operating expenses (358.4)
(385.0) +7%
Operating profit 221.8 248.9 +12%
Operating margin 25.2% 26.0% +80bps
Financing expenses (net) (3.1)
(2.1) -31%
Profit before tax 218.7
246.8 13%
The significant exchange rates used in the constant currency analysis, being the budget exchange rates for the year ended 31 March 2018,
are USD 0.69, EUR 0.66, AUD 0.92, GBP 0.57, CAD 0.94, JPY 80.00 and MXN 13.50.
A constant currency income statement is prepared each month to enable the board and management to monitor and assess the company’s
underlying comparative financial performance without any distortion from changes in foreign exchange rates. The table above provides
estimated NZ dollar income statements for the relevant periods, which have all been restated at the budget foreign exchange rates for the
2018 financial year but after excluding the impact of movements in foreign exchange rates, hedging results and balance sheet translations.
This constant currency analysis is non-conforming financial information, as defined by the NZ Financial Markets Authority, and has been
provided to assist users of financial information to better understand and assess the company’s financial performance without the impacts of
spot foreign currency fluctuations and hedging results and has been prepared on a consistent basis each half year. The company’s constant
currency income statement framework can be found on the company’s website at www.fphcare.com/ccis
.
Annual Report 2018 | Care by design
growth
Delivering
sustainable,
profitable
Annual Report 2018 | Care by design
“ Delivering
sustainable
growth is our
aspiration
and our
commitment.
We’re on
the journey.”
Annual Report 2018 | Care by Design
Focus and
discipline now
A disciplined focus on patient care and
innovation means that today, nearly 50 years
on from developing our first humidifier, we help
in the care of an estimated 13 million patients in
120 countries each year.
As a world-class company on a global scale
we value focus and discipline, and have a
clear pathway to sustained growth over the
coming decades.
We recognise our responsibility to be a
sustainable, long-term partner for the many
patients, doctors and nurses who we impact
every day. We also have a business
responsibility to our employees, suppliers,
investors and other stakeholders to be clear
on where the coming years will take us.
Sustainable growth
for tomorrow
By taking a measured approach to
achieving our long-term aspiration, our
strategic plan and technology development
framework is structured to deliver continual
and sustainable growth.
Achieving this will rely on us extending
our presence across the globe; designing
even more effective products and
technologies; and working with healthcare
providers to develop new therapies that
change clinical practice and reduce costs
to healthcare systems.
We build on what we know, but look to the
future too: a future where we believe we can
help over 50 million patients throughout the
hospital and in the home, every year.
From helping
enable a better
childhood
To a better
quality of life
and health
Care by Design.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited4
Contents
FINANCIAL AND BUSINESS HIGHLIGHTS
12
CHAIRMAN’S REPORT
14
CEO’S REPORT
16
OUR STRATEGIES
20
– GLOBAL REACH
20
– CHANGE CLINICAL PRACTICE
22
– BETTER PRODUCTS
24
– SUSTAINABLE, PROFITABLE GROWTH
26
HOSPITAL / HOMECARE OVERVIEW
28
OUR BOARD
30
OUR EXECUTIVE MANAGEMENT TEAM
32
FINANCIAL COMMENTARY
34
FIVE YEAR SUMMARY
38
FINANCIAL STATEMENTS
42
NOTES TO FINANCIAL STATEMENTS
46
AUDITOR’S REPORT
73
CORPORATE GOVERNANCE AND STATUTORY INFORMATION
76
GLOSSARY
95
GRI CONTENT INDEX
96
DIRECTORY
99
Constant currency information contained within this report is non-conforming financial information,
as defined by the NZ Financial Markets Authority, and has been provided to assist users of financial
information to better understand and assess the company’s financial performance without the impacts
of spot foreign currency fluctuations and hedging results and has been prepared on a consistent basis
each financial year. A reconciliation between reported results and constant currency results is available
on page 35 of this report. The company’s constant currency income statement framework can be found
on the company’s website at www.fphcare.com/ccis.
This report is dated 28 May 2018 and is signed on behalf of Fisher & Paykel Healthcare Corporation
Limited by Tony Carter, Chairman and Lewis Gradon, Managing Director and Chief Executive Officer.
LEWIS GRADON, MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
TONY CARTER, CHAIRMAN
About this report
This report is part of a suite of
documents to meet the evolving needs
and requirements of a wide range of
stakeholders.
A digital version of this report is available
at www.fphcare.co.nz/investor-reports.
Further information related to the
2018 financial year can be found here:
https://annualreport.fphcare.com.
Information on our corporate
responsibility and sustainability
performance is available on our website
at www.fphcare.co.nz/sustainability.
Our Corporate Governance Statement,
Codes of Conduct, tax strategy and
corporate policies are available at:
www.fphcare.co.nz/corporategovernance.
We will continue to evolve and
improve our reporting suite over the
coming years and welcome feedback
on this report. Please address any
questions, comments or suggestions
to investor@fphcare.co.nz.
Annual Report 20185Fisher & Paykel Healthcare Corporation Limited
OUR BUSINESS
AT A GLANCE
Fisher & Paykel Healthcare
is a leading designer, manufacturer
and marketer of products and
systems for use in respiratory
care, acute care, surgery and
the treatment of obstructive
sleep apnea.
Our medical devices and
technologies are designed to
help patients get better faster.
We help patients transition to less
acute care settings, help them
recover more quickly and provide
solutions that can assist them to
avoid more acute conditions.
We also provide the ability for
some patients to be treated in the
home rather than the hospital.
Product innovation is essential
to our success. Since the 1970s,
when we successfully introduced
our first heated humidifier to
market, we have focused on
continuous development
and innovation. Our aim is to
lead the way in the development
of medical devices and
technologies, and our products
are considered leaders in their
respective fields.
We are driven by our purpose
of improving care and outcomes
through inspired and world-
leading healthcare solutions.
Assisting clinicians around
the world to deliver the best
possible patient care through
continuous product improvement,
pioneering new therapies and
changing clinical practice is key
to our success.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited6
HOW OUR
BUSINESS WORKS
RESEARCH &
DEVELOPMENT
Our research and
development is based in
New Zealand. The team
spends many hours
in hospitals, and with
patients and clinicians,
in order to provide
better technology that
enhances patient care.
We typically invest
around 9-10% of our
revenue in R&D annually,
and our team continues
to grow year on year.
THERAPIES
58% of our products
and systems are used
in hospitals in invasive
ventilation, non-invasive
ventilation, nasal high
flow therapy and
surgery. The remainder
are used in home
environments to treat
patients suffering from
obstructive sleep apnea
and those in need of
respiratory support.
MANUFACTURING
We manufacture in
New Zealand
(approximately
66%) and Mexico
(approximately 34%).
The co-location of
engineering, quality and
manufacturing teams
facilitates collaboration
and an awareness of the
medical device process
from concept and
design right through to
how our products are
used by patients.
SUPPLY CHAIN
We have distribution
centres located around
the world and a network
of distributors. We use
air, sea, road and rail
freight, with a focus
on sustainable and
cost effective methods
of transportation.
We source materials
from all over the world
and look for socially
responsible partners to
support our growth.
CUSTOMERS
We work with
thousands of healthcare
professionals including
doctors, clinicians and
nurses, giving them the
products and tools to
deliver the best possible
care. Our largest
markets (in order of
size) are North America,
Europe, and Asia Pacific,
with around half
of our products sold in
North America.
PATIENTS
Each year millions of
patients are treated
with our products in
over 120 countries.
Seeking to understand
our patients’ needs is
what drives our research
and development
programme.
The needs of our customers and their patients drive everything we do. We call this Care by Design.
Annual Report 20187Fisher & Paykel Healthcare Corporation Limited
Canada
Direct Sales
Distributed sales with FPH people
Distribution Centres
Manufacturing Facilities
Mexico
China
Hong Kong
Taiwan
Japan
South Korea
Portugal
Brazil
Saudi Arabia
United
Arab Emirates
Indonesia
Colombia
Spain
Wales
France
USA
India
AustraliaNew Zealand
Scotland
England
Sweden
Poland
Northern Ireland
Netherlands
Germany
Italy
Belgium
Finland
Austria
Ireland
Switzerland
Turkey
Russia
Norway
Denmark
37
Our people are located
in 37 countries
1,314
People in North America
294
People in Europe
2,258
People in New Zealand
308
People in the rest
of the world
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited8
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Our inputsOur outputs
AGEING POPULATION | TECHNOLOGY ADVANCEMENT | HEALTHCARE COSTS INCREASING | OTHER EXTERNAL FACTORS
MARKET CONTEXT
Increased
efficiency
of care
Our
4000+
people
Improved
care &
outcomes for
patients
Over
45 years
of trusted
relationships
Benefits to
our people
Global
supply
networks
Increased
shareholder
value
Excellence
in R&D
Doubling
our constant
currency
revenue every
5-6 years
Trusted
brand
Improving
care & outcomes
through inspired
and world-leading
healthcare solutions
Care by Design.
Annual Report 20189Fisher & Paykel Healthcare Corporation Limited
HOW WE
DELIVER VALUE
For many years, our business strategy has
been consistent, centred on a clear premise
of improving care and outcomes through
inspired and world-leading healthcare
solutions. It is an aspiration that draws
our team of like-minded people together,
and that attracts partners, suppliers and
healthcare providers to work alongside
us towards a shared goal.
We have a culture of Care by Design, which
is a simple way of expressing the care and
intentionality we put into everything we do.
For a global team of over 4,000 people
with different backgrounds, cultures and
expertise, this is a philosophy that unites us.
We believe that by retaining this resolute
focus on delivering the best for the patient,
then the results – such as improved patient
outcomes, career opportunities for our
people and business success, will come.
Our medical devices are built and designed
by people, for people. It is the care with
which we operate that defines us.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited10
DETERMINING OUR MATERIAL MATTERS
In 2018, we conducted a materiality assessment to determine our most
material issues. Materiality in this context applies to the Global Reporting
Initiative definition (see GRI 101: Foundation). This differs from financial
and audit interpretations and NZX/ASX definitions of material information.
Results of the materiality assessment are shown in the matrix on the next
page. The highest ranking issues have been grouped according to our
core business strategies, as indicated below, and will be the focus of this
report. Other issues have also been categorised, and are covered in this
report, on its partnering website at https://annualreport.fphcare.com or
at www.fphcare.co.nz/sustainability.
Our materiality process
We engaged with a wide range of
stakeholders globally, including our
employees, customers, healthcare
professionals, suppliers, investors
(retail and institutional), media,
community organisations and the
environmental sustainability sector.
There was strong alignment of
views between internal and external
stakeholders, and the results shown
in the matrix are weighted equally.
We asked our stakeholders to
rank issues according to what
they believed should be the most
important to our business.
• We consulted our business
threats matrix, the UN
sustainable development
goals, Global Reporting
Initiative (GRI) issues, and the
UN Global Compact to identify
relevant issues.
• We drew on our knowledge
from regular consultation
with customers, healthcare
professionals, suppliers and
investors. We also considered
broader trends, such as the
ageing population, healthcare
demographics and disruptive
technologies.
• Interviews were conducted
internally with a cross-functional
range of our people to refine our
list of issues.
CUSTOMER EXPERIENCE
LEGAL COMPLIANCE
ANTI-BRIBERY AND CORRUPTION
MARKET ACCESS RISK
PRODUCT INNOVATION
PRODUCT QUALITY
CYBER SECURITY AND
DATA PROTECTION
EMPLOYEE ATTRACTION,
DEVELOPMENT AND RETENTION
PATIENT SAFETY
ETHICAL RESEARCH
SUSTAINABLE, FINANCIAL
PERFORMANCE
HEALTH AND SAFETY
INTELLECTUAL PROPERTY
BUSINESS CONTINUITY
CORPORATE GOVERNANCE
Global reach
Better products
Sustainable,
profitable growth
Change
clinical practice
• A global survey was conducted
with our internal and external
stakeholders.
• We consulted and reflected on
the results with members of our
executive management team.
The approach taken to our
materiality assessment and the
content in this report has been
informed by the principles of the
GRI. A GRI reference index based
on the GRI Sustainability Reporting
Standards (2016) can be found on
pages 96-98. We anticipate that
future reports will be in accordance
with the GRI Standard (core).
In 2015, the United Nations
established the Sustainable
Development Goals (SDGs) to
encourage action to improve
people’s lives globally by building
a sustainable future for our people
and our planet. The 17 goals
encompass targets that cover a
broad range of sustainable
development issues, such as
ending poverty and hunger,
improving health and education,
making cities more sustainable
and combating climate change.
We have taken inspiration from
these goals, and have highlighted
below the SDGs to which we can
contribute the most.
Annual Report 201811Fisher & Paykel Healthcare Corporation Limited
MATERIALITY MATRIX
Patient safety
Product
innovation
Product quality
Health & safety
Healthcare demographics
Resource efficiency
Carbon & energy
Community
Corporate governance
Ethical research
Disruptive technologies
Improving public health
Business continuity
Market access risk
Labour practices
Healthcare waste management
Ethical supply chain
Diversity & inclusion
Local employment
Intellectual Property
Employee attraction, development
and retention
Anti-bribery & corruption
Cyber security & data protection
Customer
experience
Legal compliance
Sustainable financial
performance
BUSINESS IMPACT
(based on stakeholder concern)
STAKEHOLDER CONCERN (external stakeholders only)
5.0
5.05.56.06.57.07. 58.08.59.09.510.0
5.5
6.0
6.5
7.0
7. 5
8.0
8.5
9.0
9.5
10.0
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited12
Financial &
business highlights
NET PROFIT AFTER TAX
NZ$190.2 MILLION
12%
OPERATING PROFIT
NZ$269.8 MILLION
12%
OPERATING REVENUE
NZ$980.8 MILLION
10%
GROSS MARGIN
31 BASIS POINTS INCREASE
66.3%
TOTAL DIVIDEND FOR YEAR
NZ 21.25CPS FULLY IMPUTED
9%
HOSPITAL REVENUE GROWTH
NZ$572.1 MILLION
14%
SPEND ON R&D NZ$M
10% OF OPERATING REVENUE
$94.7m
NEW APPLICATIONS CONSUMABLES
REVENUE GROWTH
22%
(CONSTANT
CURRENCY)
Annual Report 201813Fisher & Paykel Healthcare Corporation Limited
OPERATING REVENUE
NZ$ MILLIONS
NET PROFIT AFTER TAX
NZ$ MILLIONS
REVENUE BY PRODUCT GROUP
12 MONTHS TO 31 MARCH 2018
GLOBAL PRODUCT SALES
2018
120+
COUNTRIES
Hospital
Homecare
Distributed & Other
North America
Europe
Asia Pacific
Other
58%
1%
41%
47
%
30%
18%
5%
1415161718
623.4
672.3
815.5
894.4
980.8
1415161718
97.1
113.2
143.4
169.2
190.2
+
WELCOMED
significant new clinical research
using our Optiflow
TM
Junior and
myAirvo
TM
products
+
ENCOURAGED
by the publication of 259 new
clinical studies in nasal high flow
therapy in 2017
+
INTRODUCED
F&P SleepStyle
TM
CPAP device,
F&P Nivairo
TM
non-invasive
ventilation mask and Optiflow
Junior 2 into global markets
+
INCLUDED
in the MSCI World investor index
+
CONTINUED
with the global roll out of our
enterprise planning system
(ERP) in Japan, Canada and
Korea
+
PROGRESSED
with our building programmes
in New Zealand and Mexico
+
AWARDED
prestigious product design
awards, such as the Red Dot
award for the F&P Brevida
TM
mask for OSA
+
IMPACTED
the lives of 13 million patients
around the world
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited14
The 2018 financial year was
another positive year for our
company. We delivered a record
financial result of $190.2 million
net profit after tax, up 12% on the
previous year. Revenue growth for
the financial year was up 10% to
$980.8 million.
Our global team continues to
grow to meet the increasing
demands of the healthcare sector.
We remain dedicated to
producing high quality, innovative
medical devices that assist
healthcare providers to deliver
outstanding patient care, help
people recover sooner, and where
possible, be treated in the home
rather than the hospital.
As healthcare systems strive to
balance the need to provide
excellent patient care with the
growing costs of caring for ageing
and growing populations, we will
continue to support them with
our technology innovations.
Update on building
programmes
We are making good progress
with construction of the fourth
building on our Auckland site.
Earthworks are now complete
and foundations have started.
The new building will have a total
gross floor area of 35,700m
2
and
consist of a mix of R&D, pilot
manufacturing and warehousing
areas. We are on track to have
the building operational by 2020.
In Tijuana, Mexico, work continues
on our second manufacturing
facility. We expect the building to
be completed before the end of
2018. We currently have more
than 1,000 employees in Tijuana,
and have been manufacturing in
a leased facility there since 2010.
The new building will be
additional to the existing facility.
Your Board
During the year we were pleased
to appoint Pip Greenwood as a
non-executive director to replace
long-serving director Lindsay
Gillanders on his retirement from
the Board.
Arthur Morris has indicated that
he will not seek re-election to
the Board at this year’s annual
shareholders’ meeting and will
therefore be retiring from the
Board at the meeting. Arthur has
served as a non-executive director
for 10 years and we have greatly
benefited from his clinical
background.
We will shortly commence a
process to find a replacement
director with the necessary skills
and experience to complement
the other Board members and will
provide an update in due course.
Report from
the Chairman
of the Board,
Tony Carter
Annual Report 201815Fisher & Paykel Healthcare Corporation Limited
We continue to be a supporter of
the New Zealand Future Directors’
programme and our third
participant, Rachael Newsome,
completed her term with us in
March 2018. We have commenced
the process to find our fourth
participant and believe that this
is a valuable programme that
not only provides benefit to the
company, but also grows the
pool of director talent.
Chief Financial Officer
change
We announced recently that
our Chief Financial Officer,
Tony Barclay, has decided to
retire. Tony has been a key
member of the executive team for
many years and the Board would
like to acknowledge his significant
contribution to the company’s
financial position, stability,
success and growth during that
time. We wish Tony all the best
for his future.
We have commenced a formal
process to appoint Tony’s
successor and expect to be able
to update the market later this
year. Tony has also agreed to
remain in a consulting role for a
12 month period following his
retirement to assist with the
transition.
Culture
Fisher & Paykel Healthcare is
one of New Zealand’s foremost
technology companies. Starting
from small, humble beginnings,
we have evolved into a truly
global medical device leader,
impacting the lives of many
millions of people every year.
Despite our global nature,
we have retained a unique,
collaborative and modest culture
that is replicated in each of our
international offices.
Last year, the company adopted
a new tagline called ‘care by
design’. The speed and
enthusiasm with which this has
been adopted right across the
business, irrespective of
background, nationality or role,
demonstrates how the principle
of care, coupled with excellence
in design, has resonated with the
global team.
Every day our people recognise
how important our products are
to the people who rely on them
for their care and wellbeing.
Protection of
intellectual property
Fisher & Paykel Healthcare has
invested consistently in research
and development throughout our
49 year history, and our R&D team
now sits at over 500 scientists,
engineers and researchers.
Investing to protect the
intellectual property we have
built up over time is crucial, and
occasionally that means we may
become engaged in intellectual
property legal proceedings.
As you may be aware, we are
currently involved in litigation with
ResMed, one of our competitors
in the obstructive sleep apnea
(OSA) market. We believe that it
is in the best interests of the
company to vigorously defend
our IP rights.
An update on the status of the
litigation is provided on page 65
of this annual report.
Dividend
The Board has approved an
increased final dividend for the
year of 12.5 cps. This takes the
total dividend for the financial
year to 21.25 cps, an increase of
9% on the previous year.
This equates to a dividend
pay-out ratio of approximately
65% of net profit after tax for
the year.
The dividend reinvestment plan
(DRP) will again be offered,
without discount, under which
eligible shareholders may elect
to reinvest all or part of their cash
dividends in additional shares.
Outlook
We are pleased to deliver this
strong result for the year, and,
at current exchange rates, look
forward to achieving a significant
milestone of more than
NZ$1 billion in operating revenue
in our 50th year of operation.
The care and dedication of
our employees, right around
the world, is evident in the good
outcomes we have achieved
this year.
TONY CARTER, CHAIRMAN
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited16
Our consistent long-term
strategy has again delivered
strong growth. Operating revenue
grew 10% to $980.8 million and
net profit after tax grew 12% to
$190.2 million.
Operating revenue in our Hospital
product group grew 14% to a
record $572.1 million. This was
driven largely by growth in new
applications of 23%, which
includes our Optiflow nasal high
flow therapy, non-invasive
ventilation and surgery products.
It was particularly pleasing to
report growth of 27% in new
applications in the second half
as more hospitals and clinicians
choose to use our Optiflow
nasal high flow therapy to treat
a broader range of patients with
respiratory complications.
Revenue growth of 4% in our
Homecare product group was
not as strong as the previous few
years, but we are pleased with
the response to our most recently
released mask, the F&P Brevida
nasal pillows mask.
Our OSA masks incorporate
market-leading technology and
we look forward to expanding
our innovative OSA mask range
later this year.
Our products used in home
respiratory support are
growing well, although we are
still at the very early stages
of the product lifecycle. We are
beginning to see clinical evidence
supporting the use of Optiflow
therapy in the home emerging
with encouraging results.
About this report
This year we conducted a
materiality assessment in which
we asked a selection of our
global internal and external
stakeholders their views on
various environmental, social and
governance issues as they relate
to Fisher & Paykel Healthcare.
The resulting matrix is provided
Report from the
Managing Director &
Chief Executive Officer,
Lewis Gradon
Annual Report 201817Fisher & Paykel Healthcare Corporation Limited
“ ...more clinicians are choosing to
use our Optiflow nasal high flow
therapy to treat a broader range
of patients with respiratory
complications.”
on page 11, and the top
ranking issues have been used to
determine the focus of this report.
The materiality assessment
was a valuable process, and
has contributed to our decision
to combine our sustainability
disclosures with this annual
report, rather than produce it
separately, as we have done
for the past three years.
This approach reflects the
holistic view we have of
sustainability as a medical
device manufacturer, providing
technologies that advance patient
care and outcomes. Sustainability
is integral to the way we do
business, and the value that we
provide through the nature of
the work we do every day.
It is our hope that by integrating
this information, our stakeholders
will be able to consider a fuller
picture of how we create value for
our customers, our communities
and our people.
In the interests of being able
to easily locate information,
we have paired this report with
an accompanying website:
https://annualreport.fphcare.com.
Executive changes
As referred to in Tony Carter’s
report, our long-standing Chief
Financial Officer, Tony Barclay,
recently announced his
retirement. Tony has been a key
member of our leadership team
for 22 years. He has been
instrumental in the growth of the
business, its financial performance
and position. Over the years, he
has worked closely with
shareholders and the investment
community, and is very highly
regarded.
Tony retires at the end of May, but
will remain in a consulting role to
the business for a further 12
months. Andrea Blackie, who
joined the business in January
2017, will take up the role of
Acting Chief Financial Officer
from 1 June 2018.
We have commenced a formal
process to appoint Tony’s
successor and expect to make
an announcement in the coming
months. On behalf of the team,
I would like to acknowledge
Tony’s outstanding contribution
to the company. He will be
greatly missed.
Changing clinical practice
One of the key drivers of our
business is changing clinical
practice. In order to achieve this,
we work closely with customers
and clinicians to develop products
and therapies that can help
deliver improved patient care.
On the Hospital side of our
business, a paper was recently
published of a large multi-centre
randomised controlled trial on the
use of nasal high flow therapy for
infants with bronchiolitis.
The study used our Optiflow
Junior system, and found
significant benefits of the therapy
for pediatric patients requiring
respiratory support. This study
is an exciting addition to the
influential and growing body of
evidence showing the efficacy of
nasal high flow therapy in both
adult and paediatric populations.
In Homecare, two recent studies
have also demonstrated the
clinical efficacy of Optiflow nasal
high flow therapy, this time in the
home, using our myAirvo device.
Benefits included reduced
hospital admissions, improved
quality of life and reduced
hypercapnia for patients with
chronic obstructive pulmonary
disease (COPD). It is expected
that these studies will influence
how patients with COPD are
treated in the home in the future.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited18
It is exciting to see the research
continuing to build, and the
potential benefits this will bring
to our patients. All of these
studies are covered in further
detail on pages 22-23.
Better products
Innovation in our research
and development programme
has always been very important
to us. This year, we invested
$94.7 million into R&D, which
is 10% of our revenue.
It has been a busy year with
global product launches. During
the year we launched Optiflow
Junior 2 in the US, Canada,
Europe and India after its New
Zealand and Australian release
last year. Our F&P 950
TM
respiratory humidification system
for adults has been released in
New Zealand, Australia, the UK
and Hong Kong, and the neonatal
version is currently available in
New Zealand and Australia, with
the roll out to other countries
expected over the coming year.
The Nivairo non-invasive hospital
mask was introduced into the US
in the second half of the financial
year. The new SleepStyle
continuous positive airway
pressure (CPAP) device for
OSA patients is available in
New Zealand, Australia, Canada,
the UK and Japan, among others.
All of these products have
been extremely well received
by customers and clinicians and
we are pleased with the rate of
adoption and are confident in
their ability to generate long-term
growth.
Currently, we are involved in
ongoing legal proceedings with
one of our OSA competitors,
ResMed, for alleged patent
infringement. This financial year,
pre-tax net litigation related
expenses of $15.6 million were
incurred. Based on current legal
proceedings, we expect to incur
litigation related expenses at a
similar run rate during the 2019
financial year.
Global reach
Globally, we continue to expand
and strengthen our sales teams.
Every year, we invest in
developing and training our sales
representatives so they are well
equipped to explain the clinical
advantages of our products and
encourage a change in clinical
practice. Building trusting
“ All of these products have
been extremely well received
by customers and clinicians
and we are pleased with the
rate of adoption and are
confident in their ability to
generate long-term growth.”
Annual Report 201819Fisher & Paykel Healthcare Corporation Limited
relationships between our people
and our customers is a critical
part of our sales approach, right
around the world. We now have
almost 1,000 people in our sales,
marketing and distribution teams
in 37 countries.
Our ERP system continues to
be rolled out globally, and is
now in place in New Zealand,
Mexico, and the majority of our
offices in the Asia Pacific region.
The new system has already
proven beneficial, with global
sales offices seeing improvements
in stock management, demand
planning and traceability across
the supply chain.
Sustainable,
profitable growth
With growing clinical evidence,
continued investment in R&D
and an expanding global sales
team, we are well positioned to
take advantage of the ample
opportunities before us for
continued, long-term growth.
Our emphasis is on ensuring
that we continue to grow in a
profitable way that is sustainable
for the long-term.
Gross margin and
foreign currency
Our gross margin increased by
31 basis points to 66.3% in the
2018 financial year, largely due to
product mix and our Mexican
manufacturing facility. This is
above our stated target of 65%.
We expect to see gross margin
stability in the 2019 financial
year as most of the recent
improvement factors have been
substantially captured.
In terms of foreign currency,
we experienced a tailwind to
profit of approximately $1 million
compared to the previous
financial year. We took
opportunities during the year
to add to our hedging cover in
many currencies, including the
US dollar, Euro and Mexican peso.
The most significant hedging
added related to the Euro where
conditions allowed us to add
cover for the long-term as far
forward as five years.
Our gearing has continued to
improve and at the end of the
year we had a net cash position
of $49.9 million. This positions us
well for the 2019 financial year
where funds are required for the
construction of the fourth building
on our East Tamaki campus.
Outlook
At current exchange rates we
expect full year operating revenue
for the 2019 financial year to be
approximately NZ$1.05 billion and
net profit after tax to be
approximately NZ$210 million.
In the 2018 financial year, we
estimate that our medical devices
and systems were used in the
treatment of more than 13 million
patients. This number grows
every year, and is testament to the
hard work and dedication of our
skilled teams around the world.
The care with which all of our
4,174 people approach their work
is evidenced in the result we have
announced today.
Our outlook is exciting and we
are looking forward to another
year of positive revenue and
earnings growth. We are well
positioned to meet the growing
demand for our products from
an increasing investment in
healthcare across the globe.
LEWIS GRADON, MANAGING DIRECTOR
AND CHIEF EXECUTIVE OFFICER
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited20
SUPPORTING
CLINICAL CHANGE
Louise Little, Fisher & Paykel
Healthcare Territory Manager for
the North East of England, has
found first-hand the significant
impacts of changing clinical
practice with the Airvo
TM
respiratory device.
Louise works closely with the
Freeman Hospital, which is a large
teaching hospital in Newcastle,
England, that regularly uses
Optiflow nasal high flow therapy
in its critical care unit. After
seeing the positive impacts of the
therapy in this part of the hospital,
the critical care outreach team
chose to run a year-long audit
monitoring the Airvo’s
performance in the general wards.
Utilising two Airvo devices, the
study covered 53 patients over a
one year period. The results were
outstanding, showing a significant
improvement in patient outcomes
by reducing escalation to higher
acuity care environments, such as
the intensive care unit (ICU) or
the high dependency unit (HDU).
This means that patients were
able to stay with clinicians they
knew, more time was available for
patient assessment, and
treatment plans could be more
tailored for each individual. There
were also economic benefits; by
freeing up 103 critical care bed
Global reach
Increase our presence
around the world
CUSTOMER
EXPERIENCE
MATERIAL ISSUE
days over the course of the audit,
the hospital was able to save a
potential £82,000 in ICU costs.
The team’s results were presented
at CARE, an annual airway and
respiratory conference for UK
clinicians. “It was a great
opportunity for the team to share
the results of what they had
achieved,” says Louise. “There
were people queuing out the door
to hear them present. To improve
patient outcomes as well as
reduce costs to the hospital so
significantly was very compelling.”
The critical care team at Freeman
went on to acquire another six
devices and ran a second audit to
further monitor the effectiveness
of the therapy. This audit involved
200 patients between 17-88 years
of age with treatment times
ranging from one hour to 73 days
over a one year period. Patients
included those on the wards who
were at risk of escalation to a
higher acuity care environment.
SAVING A POTENTIAL
IN ICU COSTS
£82,000
Annual Report 201821Fisher & Paykel Healthcare Corporation Limited
“The therapy was used as an
intervention,” says Louise. “It was
hoped that by using nasal high
flow therapy with the Airvo on the
ward, patients normally at risk of
needing to go into the ICU
wouldn’t need to.”
Again, the results of the audit
were excellent. It was found that
56% of patients were able to stay
on the ward, and did not require
escalation of care to an HDU or
ICU environment. This prevented
479 critical care unit days, which
equated to a potential cost saving
of £380,000 over the year. It also
meant those ICU beds were
available for other patients.
For Louise, the support and
training she was able to offer was
rewarded. “I see my role as
essentially being a support
person. The project was led by
the critical care team at Freeman
so it was about me giving them
the support they needed to see
the impact of the therapy for
themselves. It was important to
me to always be available, to drop
in to see how they were getting
on, and generally be responsive to
their needs,” says Louise.
The team now has eight Airvo
machines and continues to share
its results with other hospitals
across the United Kingdom.
“Over the past five years, we believe that the nasal
high flow therapy system has improved patient
outcomes at the Freeman and has measurably
improved the efficiency and quality of our critical
care outreach programme.”
KIRSTY CROWTHER
Freeman Hospital Critical Care Outreach team.
FROM FREEMAN HOSPITAL CRITICAL CARE OUTREACH TEAM (LEFT TO RIGHT):
Lindsay Armitage – Sister, Natalie Lawson – Sister, Carol Woods – Sister,
Louise Little – Territory Manager, F&P Healthcare.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited22
Changing
clinical practice
Utilise our expertise to develop new therapies
and reduce costs to healthcare systems
CLINICAL COLLABORATION
BRINGS BENEFITS
Clinical studies are an important
element in building confidence in
the efficacy of our products,
particularly in new care settings.
We support clinical research that
validates improvements in patient
outcomes that our products can
deliver, and we work closely with
clinicians and healthcare
organisations to support their
studies and identify ways in which
our products can help them
provide better healthcare solutions.
The collaboration evident in
the following two case studies
shows the impact of industry
and hospitals working together
to improve patient care and
outcomes.
New hope for COPD patients
Recent studies have shown that
nasal high flow therapy in the
home, using Fisher & Paykel
Healthcare’s myAirvo respiratory
device, has considerable benefits,
such as reduced hospital
admissions, improved quality of
life and reduced hypercapnia for
patients with COPD.
The first study, a randomised
controlled trial undertaken in
Denmark*, investigated the
long-term effects of nasal high
flow therapy for COPD patients
already being treated with
long-term oxygen therapy.
1
The trial showed statistically
significant results, with the
primary outcome being a
significant reduction in patients’
exacerbation rate, or worsening of
their condition (from 4.95 to 3.12
per patient per year, p <0.001) for
those being treated with nasal
high flow therapy.
The study also showed for
those patients using the
myAirvo that all cause
hospitalisation rates decreased
from a rate of 1.39 to 0.79 per
patient, over the course of the
year, for those who followed the
protocol. Other positive results
included the treatment group
(myAirvo) being better than the
control group (standard care) in
several quality of life assessments,
less breathlessness, better
mobility and lower carbon dioxide
retention levels for these chronic
patients.
Further positive results have
recently been published in the
Annals of the American Thoracic
Society. Led by Dr Kazuma Nagata
of Kobe City Medical Centre
General Hospital, this study
2
was a
multi-centre trial in Japan with
cross-over design, studying stable
PATIENT SAFETY
MATERIAL ISSUE
* Fisher & Paykel Healthcare provided product support.
Annual Report 201823Fisher & Paykel Healthcare Corporation Limited
COPD patients with hypercapnia.
This research also demonstrated a
clinically significant improvement
in quality of life for patients (the
mean total score improved by 7.8
points, p<0.01), and a decrease in
hypercapnia levels for patients
with stable hypercapnic COPD.
This pilot trial had such positive
outcomes that a larger trial has
already commenced.
Together, these new studies add
to the growing body of evidence
showing the efficacy of Optiflow
nasal high flow therapy in the
home for COPD patients using the
myAirvo device. We expect that
these studies will strongly
influence how patients with COPD
are treated in the home, thereby
driving clinical change and
assisting with adoption of our
myAirvo system.
Helping infants breathe
New research has been published
in the prestigious New England
Journal of Medicine that shows
significant benefits of Optiflow
nasal high flow therapy for
pediatric patients requiring
respiratory support.
3
The Pediatric Acute Respiratory
Intervention Study (PARIS)
was conducted by the research
team at Lady Cilento Children’s
Hospital in Brisbane, Australia,
led by Ms Donna Franklin and
Dr Andreas Schibler. The study
is the largest nasal high flow
(NHF) randomised controlled trial
to date, aiming to investigate if
the early use of NHF in less
intensive settings can prevent the
need for treatment escalation.
1 Storgaard L, Hockey H, Laursen B, Weinreich
U. Long-term effects of oxygen-enriched
high-flow nasal cannula treatment in COPD
patients with chronic hypoxemic respiratory
failure. Int J Chron Obstruct Pulmon Dis.
2018;13:1195-1205. Fisher & Paykel Healthcare
contributed to equipment and some
administration costs.
2 Nagata K, Kikuchi T, Horie T, Shiraki A,
Kitajima T, Kadowaki T et al. Domiciliary
High-Flow Nasal Cannula Oxygen Therapy for
Patients with Stable Hypercapnic Chronic
Obstructive Pulmonary Disease. A Multicenter
Randomized Crossover Trial. Ann Am Thorac
Soc. 2018;15(4):432-439.
3 http://www.nejm.org/doi/full/10.1056/
NEJMoa1714855
Results show that the use of NHF
to treat bronchiolitis, the leading
cause of pediatric hospital
admissions to Emergency
Departments (EDs) worldwide, is
an effective strategy to reduce the
level of care required in infants
with bronchiolitis. 12% of infants in
the NHF group required escalation
of care, compared to 23% in the
standard oxygen therapy group.
The PARIS trial shows how
Optiflow Junior can be used early
in the course of bronchiolitis to
reduce the burden of this disease
on patients, families and hospital
systems. Because it is a large
multicentre randomised controlled
trial, published in one of the most
highly regarded international
medical journals, we expect the
results to contribute to clinical
practice worldwide and help drive
an increased demand for our
products and services.
PARIS study – Infants requiring
escalation of care
NHF GROUP
12%
STANDARD OXYGEN THERAPY
23%
Required
escalation
of care
Required
escalation
of care
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited24
DESIGNING INNOVATION
INTO R&D
Designing innovative and high
quality products is a priority for
Fisher & Paykel Healthcare.
Andrew Somervell, Vice President
– Products and Technology talks
us through how we sustain
innovation over the long term and
the design controls that are put in
place to prioritise patient safety.
Better products
Continuously strive
to improve our products
PRODUCT
INNOVATION
PRODUCT
QUALITY
MATERIAL ISSUES
How do we choose which
R&D projects to invest in?
Often, the challenge for us is not
in deciding what to do, but in
what not to do. We have so
many ideas and opportunities,
but we need to challenge
ourselves to select only those
where we believe we can make
the greatest impact.
Right from the outset of any R&D
project, we are looking to create
unique, differentiated medical
devices that improve care and
outcomes for patients, clinicians,
payers and providers. Essentially,
it’s all about providing the best we
can for patients, and ensuring that
the product or system we are
working on has the potential to
lower costs for healthcare
providers.
ANDREW SOMERVELL
Vice President – Products & Technology
Annual Report 201825Fisher & Paykel Healthcare Corporation Limited
How do we ensure we
continue to innovate?
Our product development
approach is underpinned by a
philosophy of always doing
what is best for our patients.
By focusing on developing
products that better meet the
fundamental needs of the patient,
we are also developing devices
and systems that become
products of choice for clinicians
and healthcare providers.
Success relies on our R&D teams
having a deep understanding of
the patients they are developing
products for and the way their
care is delivered. Building that
level of knowledge takes time.
To facilitate this, we organise our
R&D teams into groups focused
on a single patient type or
therapy, and utilise our
relationships with healthcare
providers around the world to
ensure those teams have easy
access to the user environment.
That way, the people developing
the products gain first-hand
knowledge of the problems that
patients and their caregivers face
and lets them develop the unique
insights that lead to innovative
new products and solutions.
Coming up with the ideal product
can take many iterations. By
providing an extensive range of
prototyping and testing facilities
we allow our teams to rapidly
prototype ideas, test and learn.
Often the challenge we face is
how to manufacture the products
in high volumes. Co-locating R&D
with manufacturing at our
Auckland site helps our engineers
to solve those challenges.
How do we measure the
success of our investment in
R&D?
We invest around 9-10% of our
revenue into R&D. As innovation
is a priority for our business, we
plan to grow our investment in
R&D at the same rate as constant
currency revenue growth over
the long term.
Measuring R&D outcomes isn’t
straight-forward. Obviously sales
are the ultimate measure, and we
track the proportion of our
revenue that comes from our most
recent patent-protected products
and therapies. All products
undergo a number of clinical trials
before being released to the
market and the feedback we get
from these allows us to gauge
their success before launching
them into the market.
How do we ensure that our
products are of high quality
and safe for patients?
We have a quality system that is
set up to ensure the safety and
efficacy of our products. But most
importantly, it comes down to an
attitude of doing the best for
patients right from the beginning
of the design process. One of our
first requirements for product
design is that it must be safe.
We have over 200 people in our
Quality and Regulatory team,
and they work closely with
product design engineers to
design safety into our products
right from the start.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited26
SUSTAINABLE
FINANCIAL PERFORMANCE
When we think about
sustainability in the context of
financial performance we are
referring to the ability to grow our
business profitably at a rate that
can be maintained into the future.
We operate in an industry where
clinical change can take time. It is
frequently stated that it takes an
average of 17 years for research
evidence to reach clinical
practice.
1
Given the long-term commitment
required to effect changes in
clinical practice, we look to
manage all aspects of
our business in a sustainable
way, including our financial
performance. If we do this we
think we will be well positioned
to assist in improving the lives of
tens of millions of patients over
the long term.
To measure the sustainability
of our financial performance
we have developed a suite of
metrics which we believe are
lead indicators of our continued
sustainable, profitable growth.
We monitor these metrics on a
regular basis and they are
reviewed and updated as part
of our annual business and long
term planning processes.
Sustainable,
profitable growth
Ensure our growth is
managed in a sustainable way
SUSTAINABLE FINANCIAL
PERFORMANCE
MATERIAL ISSUE
1 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3241518/
Annual Report 201827Fisher & Paykel Healthcare Corporation Limited
OUR ASPIRATION: Sustainably DOUBLING
our constant currency revenue every 5-6 years.
LONGER-TERM
*CONSTANT CURRENCY
MEDIUM-TERM
HOME
RESPIRATORY
SUPPORT
HOSPITAL
RESPIRATORY
SUPPORT
SURGICAL
TECHNOLOGIES
RESPIRATORY
HUMIDIFICATION
CPAP
THERAPY/OSA
1970
SHORT-TERM
TO DAY
OUR ASPIRATION: 12%+ P.A. REVENUE GROWTH CC*
OUR ASPIRATION: Sustainably DOUBLING
our constant currency revenue every 5-6 years.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited28
Hospital
58%
OF OPERATING REVENUE
CONSTANT CURRENCY CONSUMABLE
REVENUE GROWTH FROM NEW
APPLICATIONS
22%
OPERATING REVENUE GROWTH
(NZ$572.1M)
14%
Invasive ventilation
Our products for invasive ventilation provide
warm, humidified air to intubated patients.
This maintains the natural balance of heat and
moisture in the airways.
Non-invasive ventilation
Non-invasive ventilation is a therapy which
provides airway support for patients through
a face mask. Heated and humidified gas flows
can improve patient comfort and compliance,
reduce airway drying and improve secretion
clearance.
Optiflow nasal high flow therapy
Nasal high flow is a respiratory care therapy
delivering high flows of air and oxygen through
a unique F&P Optiflow nasal cannula. This
allows comfortable, effective delivery of up
to 100% oxygen for hypoxemic patients in mild
to moderate respiratory distress.
Surgical technologies
Our surgical products provide warm,
humidified CO
2
during surgery, which may
protect patients from hypothermia and
post-operative pain and reduce the risk of
surgical site infections, adhesions and cancer
metastasis.
Annual Report 201829Fisher & Paykel Healthcare Corporation Limited
CPAP therapy
Our range of CPAP machines and masks
support patients with obstructive sleep
apnea. Our masks are extremely popular and
have become well known for their comfort,
simplicity and ease of use, which is a key
factor in patient compliance.
Home respiratory support
We have taken our expertise in nasal high
flow therapy and non-invasive ventilation
from the hospital to offer respiratory
support in the home and in long-term care
settings, with the intention of improving
patients’ quality of life and reducing
hospital admissions. The myAirvo device
provides high flows of air and oxygen
mixtures through an Optiflow nasal cannula
or tracheostomy and is used for patients
with chronic respiratory conditions such
as COPD or bronchiectasis.
Homecare
41%
OF OPERATING REVENUE
OPERATING REVENUE GROWTH
(NZ$398.1M)
4%
CONSTANT CURRENCY REVENUE GROWTH
4%
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited30
Tony Carter
Geraldine McBride
Lewis Gradon
Arthur Morris
Michael Daniell
Donal O'Dwyer
Pip Greenwood
Scott St John
Annual Report 201831Fisher & Paykel Healthcare Corporation Limited
Tony Carter
Chair
TERM OF OFFICE:
Appointed December 2010, last re-elected
24 August 2017, appointed Chair in April 2012
Tony was managing director of Foodstuffs
New Zealand Limited for ten years, until his
retirement in 2010. Tony is also chairman of
Air New Zealand Limited and Blues Management
Limited, a director of Fletcher Building Limited
and ANZ Bank New Zealand Limited, and a
trustee of the Maurice Carter Charitable Trust.
Master of Engineering, MPhil (Engineering)
COMMITTEE RESPONSIBILITIES:
Member People and Remuneration Committee,
Member Audit & Risk Committee, Member
Quality, Safety and Regulatory Committee.
Geraldine McBride
Independent Director
TERM OF OFFICE:
Appointed August 2013, last re-elected
24 August 2017
Geraldine has been involved in the technology
industry for 30 years and has a wealth of global
experience. She has held senior executive
roles at SAP AG and Dell Inc, and is a former
President of SAP North America. She is a current
director of National Australia Bank and Sky
Network Television Ltd, and the founder and
CEO of MyWave.
Bachelor of Science – Zoology
Lewis Gradon
Managing Director &
Chief Executive Officer
TERM OF OFFICE:
Appointed 1 April 2016, elected 23 August 2016
Lewis became Managing Director & Chief
Executive Officer in April 2016. Prior to that,
he spent 15 years as Senior Vice President
– Products & Technology, and six years as
General Manager – Research and Development.
During his 35 year tenure with Fisher & Paykel
Healthcare he has held various engineering
positions and overseen the development of
our complete healthcare product range.
Bachelor of Science – Physics
Arthur Morris
Independent Director
TERM OF OFFICE:
Appointed February 2008, last re-elected
27 August 2015
Arthur is a fellow of the Royal Australasian
College of Pathologists, the Australasian
Society for Microbiology and the Infectious
Diseases Society of America. Dr Morris trained
in Dunedin, Invercargill and Auckland before
spending three years at Duke University Medical
Centre, North Carolina, USA. He served as the
Chief Executive Officer of Diagnostic Medlab
Limited from 2005 until 2013. He is a director
of Mercy Healthcare Auckland Limited, Southern
Cross Hospitals Limited and a trustee of the
Auckland School of Medicine Foundation.
Arthur has indicated that he will not seek
re-election to the Board at this year’s annual
shareholders’ meeting and will therefore be
retiring from the Board at the meeting.
Bachelor of Science – Microbiology (Hons),
Doctor of Medicine
COMMITTEE RESPONSIBILITIES:
Chair Quality, Safety and Regulatory Committee.
Michael Daniell
Non-Executive Director
TERM OF OFFICE:
Appointed November 2001, elected
23 August 2016
Mike was Managing Director and Chief
Executive Officer of Fisher & Paykel Healthcare
from November 2001 to March 2016. He was
General Manager of Fisher & Paykel’s medical
division from 1990 to 2001 and previously held
various technical management and product
design roles within the company. Mike is a
member of the Council of the University of
Auckland, a director of Tait Limited and the
Medical Research Commercialisation Fund,
and Chair of the Medical Technologies Centre
of Research Excellence.
Bachelor of Engineering (Hons)
COMMITTEE RESPONSIBILITIES:
Member Audit & Risk Committee
Donal O’Dwyer
Independent Director
TERM OF OFFICE:
Appointed December 2012, last re-elected
23 August 2016
Donal is Chairman of Atcor Medical Pty Limited
and a director of Cochlear Limited, Mesoblast
Limited and nib Holdings Limited. From 1996 to
2003 he worked for Cordis Cardiology, initially
as its president (Europe) and from 2000 to
2003 as its worldwide president. Prior to joining
Cordis, Donal worked for 12 years with Baxter
Healthcare, rising from plant manager in Ireland
to president of the Cardiovascular Group,
Europe, now Edwards Lifesciences.
Bachelor of Engineering, Master of Business
Administration
COMMITTEE RESPONSIBILITIES:
Member Quality, Safety and Regulatory
Committee, Member People and Remuneration
Committee.
Pip Greenwood
Independent Director
TERM OF OFFICE:
Appointed June 2017, elected 24 August 2017
Pip became a director in June 2017. She is a
director of Spark New Zealand, a current trustee
of the Auckland Writers Festival and served as
a member of the New Zealand Takeovers Panel
from 2007 to 2011. Pip is a senior partner at
Russell McVeagh and has previously served as the
firm’s Board Chair. Pip joined Russell McVeagh as
a Partner in 2001 and has since advised on many
market-leading transactions that have changed
the face of different industries.
Bachelor of Laws
COMMITTEE RESPONSIBILITIES:
Chair People and Remuneration Committee.
Scott St John
Independent Director
TERM OF OFFICE:
Appointed October 2015, elected 23 August 2016
Scott is Chancellor of the University of Auckland,
and a director of Mercury, the NEXT Foundation,
Fonterra Cooperative Group Limited and
Fonterra Shareholders' Fund. Scott was Chief
Executive Officer of First NZ Capital from 2002
to March 2017. Scott is a member of Chartered
Accountants Australia and New Zealand and a
fellow of the Institute of Finance Professionals of
New Zealand.
Bachelor of Commerce, Diploma in Business
COMMITTEE RESPONSIBILITIES:
Chair Audit & Risk Committee, Member People
and Remuneration Committee.
Our Board
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited32
Lewis Gradon Debra LumsdenWinston Fong
Paul Shearer Andrew SomervellJonti Rhodes
Tony BarclayBrian Schultz Nicholas Fourie
Annual Report 201833Fisher & Paykel Healthcare Corporation Limited
Lewis Gradon
Managing Director &
Chief Executive Officer
Lewis was appointed Managing Director & Chief Executive
Officer in April 2016. He previously served as Senior Vice
President – Products & Technology and General Manager –
Research and Development. He has held various engineering
positions within Fisher & Paykel’s healthcare business, and has
overseen the development of our complete healthcare product
range. He received his Bachelor of Science degree in physics
from the University of Auckland, New Zealand.
Paul Shearer
Senior Vice President – Sales & Marketing
Paul was appointed Senior Vice President – Sales & Marketing
in 2001. Paul previously served as the General Manager – Sales
and Marketing of Fisher & Paykel’s healthcare business from 1996.
From 1990 to 1998, Paul held various positions in the business
and established our sales operations in the UK and US. He has
held various positions with Computercorp Ltd, a computer
systems integrator, and ICL Ltd., a multinational computer systems
company. Paul received his Bachelor of Commerce degree in
marketing from the University of Canterbury, New Zealand.
Tony Barclay
Chief Financial Officer
Tony was appointed Chief Financial Officer in 2001. He
previously served as the financial controller of Fisher &
Paykel’s healthcare business since 1996. Tony held various
positions with Arnotts Biscuits (NZ) from 1993 to 1996, and
with Price Waterhouse in New Zealand and Papua New Guinea
from 1987 to 1993. Tony has been a Chartered Accountant in
New Zealand since 1990. He received his Bachelor of Commerce
degree in accounting and finance from the University of Otago,
New Zealand. Tony retires at the end of May 2018, but will remain
in a consulting role to the business for a further 12 months.
Andrea Blackie will take up the role of Acting Chief Financial
Officer from 1 June 2018.
Debra Lumsden
Vice President - Human Resources
& Privacy Officer
Debra was appointed Vice President - Human Resources in
December 2016. Debra is from the United Kingdom and has over
20 years’ experience working in HR across a variety of industries
and sectors. Before joining Fisher & Paykel Healthcare, Debra
was Vice President HR at Gilbarco Veeder-Root, where she
headed up HR for Europe, the Middle East, Africa, and the Asia
Pacific regions. She has also held senior roles with Insurance
Australia Group, E2V Technologies and BAE Systems. She has a
Bachelor of Science in Social Sciences from Brunel University and
a Master of Business Administration from Warwick University,
United Kingdom.
Andrew Somervell
Vice President – Products & Technology
Andrew was appointed Vice President – Products & Technology
in April 2016. Since joining Fisher & Paykel Healthcare in 2006,
he has held various product development and operations
management roles, and most recently was General Manager
- Product Groups. He has overseen the development of the
OSA product range and managed research and development,
marketing, clinical, manufacturing, and aspects of the supply
chain. Before joining Fisher & Paykel Healthcare, Andrew was
a Research Fellow at the University of Auckland, New Zealand,
and holds a Doctorate in Physics from the same university.
Brian Schultz
Vice President – Quality & Regulatory
Brian was appointed Vice President - Quality & Regulatory
Affairs in 2015. Brian previously served as Quality Manager
for New Zealand Manufacturing since joining the company
in 2011. Prior to joining Fisher & Paykel Healthcare, Brian held
quality management positions within the medical device and
pharmaceutical industries in Australia, Switzerland, the United
Kingdom and the United States. He received his Bachelor of
Science degree from Grand Valley State University, Michigan,
United States.
Winston Fong
Vice President – Surgical Technologies
Winston was appointed Vice President – Surgical Technologies
in 2017. Winston previously served as Vice President – ICT from
2010 and held various IT management, systems engineering and
software development roles in the business since 1999. Winston
received his Bachelor of Engineering degree with honours in
Electronics & Software Engineering from Manukau Institute of
Technology and Master of Business Administration from the
University of Auckland, New Zealand.
Jonti Rhodes
General Manager – Supply Chain
Jonti was appointed General Manager – Supply Chain in 2015.
Jonti joined Fisher & Paykel Healthcare in 2007 as a product
design engineer, and since that time has held several roles, both
in New Zealand and the United States, in quality, regulatory, and
most recently as Group Logistics Manager. Jonti has overseen the
implementation of the New Zealand and US distribution hubs and
played a key role in the development of our product surveillance
system. He holds a Bachelor of Engineering (Mechanical) from
Auckland University of Technology and a Master of Business
Administration from the University of Auckland.
Nicholas Fourie
Vice President – Information & Communication Technology
Nicholas was appointed Vice President – Information &
Communication Technology in February 2017. Nicholas has been
with Fisher & Paykel Healthcare since 2007, and in that time has
held various systems engineering and IT management roles,
including his most recent position as ICT Manager – Development
& Engineering. Prior to joining Fisher & Paykel Healthcare, he
worked for the South African division of BHP Billiton. Nicholas
holds a Diploma in Computer Engineering from Damelin School
of Information Technology in South Africa.
Our Executive Management Team
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited34
Financials
CONSTANT CURRENCY ANALYSIS
A constant currency income statement is prepared each month to enable the Board and
management to monitor and assess the company’s underlying comparative financial
performance without any distortion from changes in foreign exchange rates. The table below
provides estimated New Zealand dollar income statements for the relevant periods, which have
all been restated at the budget foreign exchange rates for the 2018 financial year but after
excluding the impact of movements in foreign exchange rates, hedging results and balance
sheet translations. This constant currency analysis is non–conforming financial information,
as defined by the NZ Financial Markets Authority, and has been provided to assist users of
financial information to better understand and assess the company’s financial performance
without the impacts of spot foreign currency fluctuations and hedging results and has been
prepared on a consistent basis each year.
The company’s constant currency income statement framework can be found on the
company’s website at www.fphcare.com/ccis.
CONSTANT CURRENCY INCOME STATEMENTS
Year
ended
31 March
2016
NZ$M
Year
ended
31 March
2017
NZ$M
Variation
2016 to
2017
%
Year
ended
31 March
2018
NZ$M
Variation
2017 to
2018
%
Operating revenue774.3880.8+14958.0+9
Cost of sales285.6305.6+7329.1+8
Gross profit488.7575.2+18628.9+9
Gross Margin63.1%65.3%+219bps65.6%+34bps
Other income5.05.0–5.0–
Selling, general and administrative
expenses
233.4272.4+17290.3+7
Research & development expenses73.386.0+1794.7+10
Total operating expenses306.7358.4+17385.0+7
Operating profit187.0221.8+19248.9+12
Operating margin24.2%25.2%+103bps26.0%+80bps
Financing expenses (net)6.03.1-482.1-32
Profit before tax181.0218.7+21246.8+13
The significant exchange rates used in the constant currency analysis, being the budget
exchange rates for the year ended 31 March 2018, are USD 0.69, EUR 0.66, AUD 0.92, GBP 0.57,
CAD 0.94, JPY 80 and MXN 13.50.
A reconciliation of the constant currency income statements above to the actual income
statements by year is provided below.
RECONCILIATION OF CONSTANT CURRENCY TO ACTUAL INCOME STATEMENTS
Year ended 31 March
2016
NZ$M
2017
NZ$M
2018
NZ$M
Profit before tax (constant currency)181.0218.7246.8
Spot exchange rate effect20.00.45.6
Foreign exchange hedging result(4.0)22.114.7
Balance sheet revaluation3.8(2.7)0.7
Profit before tax (as reported)200.8238.5267.8
The reconciliation set out above illustrates that, when comparing the New Zealand dollar
profit before tax shown in the actual income statement for the year to 31 March 2018 with the
corresponding period for the prior year:
• the movement in average daily spot exchange rates had a favourable impact of
NZ$5.2 million; and
• the result of the company’s foreign exchange hedging activities was lower by
NZ$7.4 million.
Overall, the net favourable effect of movements in exchange rates and the hedging programme
was NZ$1.2 million, including the impact of balance sheet revaluations.
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201835
FINANCIAL COMMENTARY
FOREIGN EXCHANGE EFFECTS
The company is exposed to movements in foreign exchange rates, with approximately 51%
of operating revenue generated in US dollars, 20% in Euros, 5% in Australian dollars, 5% in
Japanese yen, 4% in British pounds, 3% in Canadian dollars, 1% in New Zealand dollars and 11%
in other currencies.
US dollars 51%
Euros 20%
Australian dollars 5%
Japanese yen 5%
British pounds 4%
Canadian dollars 3%
New Zealand dollars 1%
Other currencies 11%
Compared to the prior year, the proportion of revenue which was generated in US dollars has
reduced slightly to 51% from 52% which reflected no substantial changes in the company’s
operations. The company’s cost base continued to be increasingly diverse, although
manufacturing output from Mexico remained steady at 34% of total output.
On average over the reporting period there were opposing movements in relation to our largest
exposures, with the Euro strengthening and the US dollar weakening against the New Zealand
dollar. Previously placed US dollar hedges protected our US dollar receipts and resulted in
an improved conversion rate compared to the prior year. With regard to our Euro conversion
rate our very favourable hedging ended in the prior year so that even though the Euro spot
rate moved in our favour our conversion rate deteriorated a little against the prior year. This
drop in the Euro spot rate has, however, enabled us to top up our Euro cover for future years,
specifically FY21 through FY23 at rates significantly below current levels.
The hedging policy again served us well during the year, which resulted in a foreign exchange
hedging gain of NZ$14.7 million (2017: NZ$22.1 million) to operating profit.
The average daily spot rate and the average conversion exchange rate (i.e. the accounting rate,
incorporating the benefit of forward exchange contracts entered into by the company in respect
of the relevant financial year) of the main foreign currency exposures for the years ended
31 March 2017 and 2018 are set out in the table opposite.
Average daily spot rateAverage conversion exchange rate
Year ended 31 MarchYear ended 31 March
2017201820172018
USD0.70900.71480.69570.6823
EUR0.64670.61150.59350.5999
The effect of balance sheet translations of offshore assets and liabilities for the year ended 31
March 2018 resulted in an increase in operating revenue of NZ$1.8 million (2017: NZ$3.7 million
decrease) and an increase in profit before tax of NZ$0.5 million (2017: NZ$2.0 million decrease).
Foreign exchange hedging position
The hedging position for our main exposures, the US dollar and Euro, as at the date of this
report is:
Year to 31 March
20192020202120222023
USD % cover of expected exposure70%55%20%0%0%
USD average rate of cover0.6750.6590.628––
EUR % cover of expected exposure80%55%25%25%25%
EUR average rate of cover0.6080.5750.5360.5190.507
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited36
FINANCIAL COMMENTARY CONTINUED
1. Net interest-bearing debt (debt less cash and cash equivalents and short-term investments) to net interest-bearing debt and equity
(less hedging reserves). Gearing ratios have been calculated at 31 March of each financial year.
BALANCE SHEET
Gearing
1
at 31 March 2018 was -7.3%, lower than the 0.0% gearing at 31 March 2017. The decrease
in gearing since 31 March 2017 was a result of strong operating cash flow, generated from
improved earnings, assisted by the timing of capital expenditure. Gearing is below the debt to
debt plus equity target range of +5% to –5%, however is forecast to be back within the target
range by 31 March 2019 due to the significant building programme in New Zealand and Mexico.
Gearing
1
-10%
-5%
0
5%
10%
15%
20%
25%
30%
201320142015201620172018
FUNDING
The company had total available committed debt funding of NZ$225 million as at 31 March
2018, of which approximately NZ$165 million was undrawn, and cash and short-term investments
on hand of NZ$132 million. Bank debt facilities provide all available funding. Over the next 12
months debt facilities totalling NZ$30 million will mature. As at 31 March 2018 the weighted
average maturity of borrowing facilities was 2.3 years.
Debt maturity
The average maturity of the debt of NZ$66 million was 2.7 years and the currency split was 79%
US dollars; 13% Euros; 5% Australian dollars and 3% Canadian dollars (with no New Zealand dollar
denominated debt).
Interest rates
Approximately 84% of all borrowings were at fixed interest rates with an average duration of 2.7
years and an average rate of 2.4%. Inclusive of floating rate borrowings, the average interest rate
on debt was 2.4%. All interest rates are inclusive of margins but not fees.
Cash flow
Cash flow from operating activities was NZ$247.8 million compared with NZ$193.6 million for
the year ended 31 March 2017. The increase in cash flow from operating activities was at a faster
pace than earnings growth. The main reason for this was that working capital, in particular
inventory, did not grow as fast as earnings. The increase also included a benefit in the timing of
tax payments.
Capital expenditure for the year was NZ$98.7 million compared with NZ$63 million in the prior
year. The increase in capital expenditure related predominantly to new building projects, both
in New Zealand and Mexico, of NZ$41.4 million with the balance being product tooling and
manufacturing equipment costs. Intangible capital expenditure related predominantly to patent
acquisition costs as well as ERP implementation costs of NZ$4.1 million.
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201837
FINANCIAL COMMENTARY CONTINUED
2014
NZ$M
2015
NZ$M
2016
NZ$M
2017
NZ$M
2018
NZ$M
(except as
otherwise stated)
FINANCIAL PERFORMANCE
Sales revenue 568.6 644.0 818.5 869.5 964.5
Foreign exchange gain (loss) on hedged sales 54.8 28.3 (3.0) 24.9 16.3
Total operating revenue 623.4 672.3 815.5 894.4 980.8
Cost of sales (258.0) (261.4) (293.8) (304.0)(330.4)
Gross profit 365.4 410.9 521.7 590.4 650.4
Gross margin58.6%61.1%64.0%66.0%66.3%
Other income 3.7 5.0 5.0 5.0 5.0
Selling, general and administrative expenses (171.5) (180.9) (242.3) (269.3)(290.9)
Research and development expenses (54.1) (65.0) (73.3) (86.0)(94.7)
Total operating expenses (225.6) (245.9) (315.6) (355.3)(385.6)
Operating profit before financing costs 143.5 170.0 211.1 240.1 269.8
Operating margin23.0%25.3%25.9%26.8%27.5%
Net financing expense (6.8) (11.3) (10.3) (1.6)(2.0)
Profit before tax 136.7 158.7 200.8 238.5 267.8
Tax expense (39.6)(45.5) (57.4) (69.3)(77.6)
Profit after tax 97.1 113.2 143.4 169.2 190.2
Revenue by region:
North America 261.6 290.7 385.9 433.0458.5
Europe 211.8 223.4 253.7 272.0 297.6
Asia Pacific 118.9 127.2 142.6 154.8 181.0
Other 31.1 31.0 33.3 34.643.7
Total 623.4 672.3 815.5 894.4 980.8
Revenue by product group:
Hospital products 336.9 357.2 436.3 500.4 572.1
Homecare products 270.0 302.0 365.8 381.5 398.1
Core products subtotal 606.9 659.2 802.1 881.9 970.2
Distributed and other products 16.5 13.1 13.4 12.5 10.6
Total 623.4 672.3 815.5 894.4 980.8
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited38
FIVE YEAR FINANCIAL SUMMARY
For the years ended 31 March
2014
NZ$M
2015
NZ$M
2016
NZ$M
2017
NZ$M
2018
NZ$M
(except as
otherwise stated)
FINANCIAL POSITION
Tangible assets 551.5 589.8 667.5 755.5 884.3
Intangible assets 78.8 80.0 99.3 122.7 140.8
Total assets 630.3 669.8 766.8 878.2 1,025.1
Liabilities (224.2) (198.6) (225.1) (216.6)(263.7)
Shareholders’ equity 406.1 471.2 541.7 661.6 761.4
Net tangible asset backing (cents per share) 73.0 79.7 86.3 105.6 121.4
Pre-tax return on average total assets percentage21.9%24.4%28.0%29.0%28.1%
Pre-tax return on average equity percentage35.1%36.2%39.7%39.6%37.6%
CASH FLOWS
Net cash flow from operating activities 99.5 146.8 144.6 193.6247.8
Net cash flow from investing activities (31.9) (53.6) (65.7) (62.9)(198.5)
Net cash flow from financing activities (62.1) (91.0) (74.7) (87.8)(79.1)
SHARES OUTSTANDING
Weighted average basic shares outstanding 547,094,526 555,542,677 561,036,045 566,124,701 570,023,436
Weighted average diluted shares outstanding 565,973,595 569,548,997 572,037,753 574,339,178 576,449,637
Basic shares outstanding at end of the year 551,110,270 557,940,257 563,841,265 567,686,436 571,230,264
DIVIDENDS AND EARNINGS PER SHARE (CENTS PER SHARE)
Dividends paid:
Final (i)7.007.008.0010.0011.25
Interim5.405.806.708.258.75
Total ordinary dividends12.4012.8014.7018.2520.00
Basic earnings per share17.720.425.629.933.4
Diluted earnings per share17.119.925.129.533.0
(i) Final dividend relates to the prior financial year.
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201839
FIVE YEAR FINANCIAL SUMMARY CONTINUED
For the years ended 31 March
2014
NZ$M
2015
NZ$M
2016
NZ$M
2017
NZ$M
2018
NZ$M
(except as
otherwise stated)
PATENTS
Number of United States patents 111 118 138 161 186
Number of United States patent applications (includes PCTs(i)) 220 287 329 357 385
Number of non-United States patents 459 496 559 714 870
Number of non-United States patent applications (excludes PCTs(i)) 306 410 582 732 912
RESEARCH AND DEVELOPMENT
Research and development expenditure 54.1 65.0 73.3 86.0 94.7
Percentage of operating revenue8.7%9.7%9.0%9.6%9.7%
CAPITAL EXPENDITURE
Operational24.038.1 46.3 44.141.8
Land and buildings3.3 1.2 1.7 3.841.4
Total27.3 39.3 48.0 47.983.2
Capital expenditure : depreciation ratio 1.0 1.4 1.6 1.5 2.4
NUMBER OF EMPLOYEES
By function:
Research and development 403 433 509 563 572
Manufacturing and operations 1,743 1,818 1,992 2,405 2,386
Sales, marketing and distribution 727 738 907 948 994
Management and administration 139 162 179 196 222
Total 3,012 3,151 3,587 4,112 4,174
By region:
New Zealand 1,904 1,943 2,142 2,307 2,258
North America 681 751 922 1,231 1,314
Europe 217 221 258 271 294
Rest of World 210 236 265 303 308
Total 3,012 3,151 3,587 4,112 4,174
(i) PCTs (Patent Cooperation Treaty) are unified patent applications across a number of jurisdictions
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited40
FIVE YEAR FINANCIAL SUMMARY CONTINUED
For the years ended 31 March
20142015201620172018
AVERAGE DAILY SPOT EXCHANGE RATES (NZ$1 = )
USD0.82080.80980.67860.70900.7148
AVERAGE CONVERSION EXCHANGE RATES (NZ$1 = )(ii)
USD0.67400.78960.72350.69570.6823
EUR0.49980.52590.57940.59350.5999
GBP0.51530.49530.47180.48120.5018
AUD0.82050.85830.90000.91430.9246
CAD0.76370.81300.87200.87870.9218
JPY64.9768.2768.3869.6772.34
MXN10.1410.6810.7112.0912.62
(ii) Actual exchange rates achieved in delivering or purchasing net foreign currency in relation to the Group’s exposures. The average rate includes hedged and spot transactions in each year.
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201841
FIVE YEAR FINANCIAL SUMMARY CONTINUED
For the years ended 31 March
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2018
Notes
2017
NZ$M
2018
NZ$M
Profit after tax 169.2 190.2
Other comprehensive income
Items that may subsequently be reclassified
to profit or loss
Hedging reserves
Changes in fair value in hedging reserves 21.3 22.7
Transfers to profit before tax (5.2) (17.6)
Tax on changes in fair value and transfers
to profit before tax
11 (4.5) (1.4)
Items that will not be reclassified to profit or loss
Revaluation of land 9 21.0 –
Other comprehensive income for the year, net of tax 32.6 3.7
Total comprehensive income for the year 201.8 193.9
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2018
Notes
2017
NZ$M
2018
NZ$M
Operating revenue 4 894.4 980.8
Cost of sales (304.0) (330.4)
Gross profit 590.4 650.4
Other income 5 5.0 5.0
Selling, general and administrative expenses (269.3) (290.9)
Research and development expenses (86.0) (94.7)
Total operating expenses (355.3) (385.6)
Operating profit before financing costs 240.1 269.8
Financing income 0.4 1.6
Financing expense (3.5) (3.7)
Exchange gain on foreign currency borrowings 1.5 0.1
Net financing expense (1.6) (2.0)
Profit before tax 5,11 238.5 267.8
Tax expense 11 (69.3) (77.6)
Profit after tax 169.2 190.2
Basic earnings per share 16 29.9 cps 33.4 cps
Diluted earnings per share 16 29.5 cps 33.0 cps
The accompanying Notes form an integral part of the Financial Statements.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited42
FINANCIAL STATEMENTS
Notes
Share
capital
NZ$M
Treasury
shares
NZ$M
Retained
earnings
NZ$M
Reserves
NZ$M
Total
equity
NZ$M
Balance at 31 March 2016 165.6 (2.4) 327.9 50.6 541.7
Adjustment on adoption of NZ IFRS 9 (net of tax) – – (2.8) 2.8 –
Total comprehensive income – – 169.2 32.6 201.8
Dividends paid 17 – – (103.3) – (103.3)
Issue of share capital under dividend reinvestment plan 15 13.9 – – – 13.9
Issue of share capital 15 0.8 – – – 0.8
Movement in share based payments reserve 17 – – – 2.8 2.8
Movement in treasury shares 15 – 0.7 – – 0.7
Increase in share capital under share based payment schemes for employee services 15 3.2 – – – 3.2
Balance at 31 March 2017 183.5 (1.7) 391.0 88.8 661.6
Total comprehensive income – – 190.2 3.7 193.9
Dividends paid 17 – – (113.9) – (113.9)
Issue of share capital under dividend reinvestment plan 15 11.4 – – – 11.4
Issue of share capital 15 0.5 – – – 0.5
Movement in share based payments reserve 17 – – – 3.2 3.2
Movement in treasury shares 15 – (1.3) – – (1.3)
Increase in share capital under share based payment schemes for employee services 15 6.0 – – – 6.0
Balance at 31 March 2018 201.4 (3.0) 467.3 95.7 761.4
The accompanying Notes form an integral part of the Financial Statements.
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201843
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2018
Notes
2017
NZ$M
2018
NZ$M
ASSETS
Current assets
Cash and cash equivalents 61.3 31.9
Short-term investments – 100.4
Trade and other receivables7 129.6 146.0
Inventories8 135.0 125.4
Derivative financial instruments6 21.2 18.8
Tax receivable 2.0 1.7
Total current assets 349.1 424.2
Non-current assets
Derivative financial instruments6 24.1 36.9
Other receivables 2.4 2.5
Property, plant and equipment9 425.2 476.4
Intangible assets10 44.5 50.4
Deferred tax assets11 32.9 34.7
Total assets 878.2 1,025.1
LIABILITIES
Current liabilities
Interest-bearing liabilities12 21.1 29.9
Trade and other payables13 103.0 112.8
Provisions14 3.2 4.7
Tax payable 14.7 22.0
Derivative financial instruments6 3.6 9.0
Total current liabilities 145.6 178.4
Non-current liabilities
Interest-bearing liabilities12 39.9 52.5
Provisions14 2.0 2.1
Other payables13 8.6 8.6
Derivative financial instruments6 5.1 4.9
Deferred tax liabilities11 15.4 17.2
Total liabilities 216.6 263.7
Notes
2017
NZ$M
2018
NZ$M
EQUITY
Share capital15 183.5 201.4
Treasury shares15 (1.7) (3.0)
Retained earnings 391.0 467.3
Reserves17 88.8 95.7
Total equity 661.6 761.4
Total liabilities and equity 878.2 1,025.1
The accompanying Notes form an integral part of the Financial Statements.
On behalf of the Board
25 May 2018
Tony Carter Lewis Gradon
Chairman Managing Director and
Chief Executive Officer
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited44
CONSOLIDATED BALANCE SHEET
As at 31 March 2018
Notes
2017
NZ$M
2018
NZ$M
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 897.3 968.6
Grants received 5.0 5.0
Interest received 0.2 1.0
Payments to suppliers and employees (627.4) (654.9)
Tax paid (74.6) (69.1)
Interest paid (6.9) (2.8)
Net cash flows from operating activities 193.6 247.8
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments– (100.0)
Sales of property, plant and equipment 0.1 0.2
Purchases of property, plant and equipment (47.9) (83.2)
Purchases of intangible assets (15.1) (15.5)
Net cash flows from investing activities (62.9) (198.5)
CASH FLOWS FROM FINANCING ACTIVITIES
Employee share purchase schemes 0.8 0.9
Issue of share capital 0.8 0.9
New borrowings – 31.4
Repayment of borrowings – (9.8)
Dividends paid (89.4) (102.5)
Net cash flows from financing activities(87.8)(79.1)
Net increase (decrease) in cash 42.9 (29.8)
Opening cash 2.5 45.6
Effect of foreign exchange rates 0.2 –
Closing cash 45.6 15.8
RECONCILIATION OF CLOSING CASH
Cash and cash equivalents 61.3 31.9
Bank overdrafts12 (15.7) (16.1)
Closing cash 45.6 15.8
2017
NZ$M
2018
NZ$M
CASH FLOW RECONCILIATION
Profit after tax 169.2 190.2
Add (deduct) non-cash items:
Depreciation of property, plant and equipment 32.2 35.0
Amortisation of intangibles 6.9 9.6
Share based payments 4.1 4.9
Movement in provisions (0.3) 1.6
Movement in deferred tax assets / liabilities (2.1) 0.5
Movement in working capital:
Trade and other receivables 4.3 (16.4)
Inventories (14.0) 9.6
Trade and other payables 2.0 6.6
Taxation payable / receivable (4.6) 7.1
Foreign currency translation (5.2) (0.8)
Other 1.1 (0.1)
Net cash flows from operating activities 193.6 247.8
The accompanying Notes form an integral part of the Financial Statements.
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201845
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2018
CONTENTS OF THE NOTES
TO THE FINANCIAL STATEMENTS
1Reporting entity
2Basis of preparation and principles of
consolidation
3Significant transactions and events in the
financial year
4Operating revenue
5Operating profit
6Derivative financial instruments
7Trade and other receivables
8Inventories
9Property, plant and equipment
10Intangible assets
11Income tax
12Interest-bearing liabilities
13Trade and other payables
14Provisions
15Share capital
16Earnings per share
17Reserves
18Employee benefits
19Contingent liabilities
20Commitments
21Segment information
22Financial risk management
23Significant events after balance date
24Other accounting policies
Notes to the
Financial
Statements
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited46
1. REPORTING ENTITY
Fisher & Paykel Healthcare Corporation Limited (the “Company” or “Parent”) together with its
subsidiaries (the “Group”) is a leading designer, manufacturer and marketer of medical device
products and systems for use in respiratory care, acute care, surgery and in the treatment of
obstructive sleep apnea. Products are sold in over 120 countries worldwide. The Company
is a limited liability company incorporated and domiciled in New Zealand. The address of its
registered office is 15 Maurice Paykel Place, East Tamaki, Auckland. These financial statements
were approved for issue by the Board of Directors on 25 May 2018.
2. BASIS OF PREPARATION AND PRINCIPLES OF CONSOLIDATION
Statement of compliance and measurement base
The Company is registered under the Companies Act 1993 and is an FMC reporting entity under
Part 7 of the Financial Markets Conduct Act 2013. The Company is listed on the New Zealand
Stock Exchange (NZX) and the Australian Stock Exchange (ASX). The consolidated financial
statements have been prepared in accordance with the requirements of Part 7 of the Financial
Markets Conduct Act 2013.
These consolidated financial statements for the year ended 31 March 2018 have been prepared
in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They
comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS),
other New Zealand accounting standards and authoritative notices that are applicable to entities
that apply NZ IFRS. The consolidated financial statements also comply with International
Financial Reporting Standards (IFRS). The Group is a for-profit entity for the purposes of
complying with NZ GAAP.
These consolidated financial statements are presented in New Zealand dollars (NZD) to
the nearest million (to one decimal place) unless otherwise stated.
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries
of the Group as at balance date and the results of all subsidiaries for the year then ended.
All subsidiaries are 100% owned within the Group.
Intercompany transactions and balances and unrealised gains on transactions between
subsidiary companies are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the
Group.
Significant accounting policies
Accounting policies are disclosed in each of the applicable notes to the financial statements
and are designated with an symbol.
Historical cost convention
These consolidated financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and liabilities (including
derivative instruments) at fair value through profit or loss and/or other comprehensive
income, and the revaluation of land.
Foreign currency
Functional and presentation currency
The consolidated financial statements are presented in New Zealand dollars, which is the
Group’s presentation currency. Items included in the financial statements of each of the
subsidiaries are measured using the currency of the primary economic environment in which
the entity operates (“the functional currency”).
The Group operates as one integrated business, and the functional currency of all global
operations is New Zealand dollars, with the exception of Fisher & Paykel Healthcare Mexico
Properties S.A. de C.V (“Mexico Properties”) which was established for the purpose of
holding the Group’s property in Mexico. The functional currency of Mexico Properties is
Mexican pesos.
The results and financial position of entities that have a different functional currency are
translated to New Zealand dollars as follows: assets and liabilities are translated at the
exchange rate at balance date and Income Statement items are translated at the average
exchange rates for the year. Exchange differences are recognised in other comprehensive
income as a currency translation reserve movement.
Transactions and balances
Foreign currency transactions are translated into the relevant functional currency at the
exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at period end exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognised in
the Income Statement, except when deferred in other comprehensive income as qualifying
cash flow hedges and qualifying net investment hedges.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with NZ IFRS requires the use of
certain critical accounting estimates. It also requires management to exercise its judgement
in the process of applying the Group’s accounting policies. The Directors regularly review all
accounting policies and areas of judgement in presenting the financial statements. Significant
estimates are disclosed in each of the applicable notes to the financial statements and are
designated with an symbol.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
47
3. SIGNIFICANT TRANSACTIONS AND EVENTS IN THE FINANCIAL YEAR
The following significant transactions and events affected the financial performance and
financial position of the Group for the year ended 31 March 2018:
Capital expenditure
During the year the acquisition of approximately 15 hectares of land in Tijuana, Mexico was
completed at a cost of NZ$21.1 million. During the year, we signed agreements to construct
the new Mexico manufacturing facility and campus infrastructure for the equivalent of
NZ$28.9 million. As at 31 March $19.7 million of capital commitments related to our Mexico
expansion project. The project will continue to be funded through existing debt facilities.
In December, a building construction contract was signed for a fourth building on our Auckland,
New Zealand campus. Capital commitments at 31 March include $126.4 million related to this
project. To date, spending on this project totals $10.3 million. The building is expected to be
operational in 2020.
Litigation
There have been a number of developments over the past year relating to our patent litigation.
We have incurred intellectual property litigation expenses of $15.6 million (2017: $20.7 million)
which is net of $3 million of costs recovered in relation to legal proceedings in Europe. An
update on our patent litigation is included in Note 19 of the financial statements.
Short-term investments
During the year, the Group has invested available cash on hand of $100 million in short-term
investments. These investments have maturities between 90 and 182 days and are with banking
institutions that have a long term credit rating of Standard & Poors’ A- and above. The assets in
short term investments as at 31 March 2018 were invested at an average rate of 3.04%.
These funds will be held on deposit and used to partially fund the construction of the fourth
building on our Auckland, New Zealand campus.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited48
4. OPERATING REVENUE
2017
NZ$M
2018
NZ$M
Sales revenue 869.5 964.5
Foreign exchange gain on hedged sales 24.9 16.3
Total operating revenue 894.4 980.8
Revenue by Product Group
Hospital products 500.4 572.1
Homecare products 381.5 398.1
881.9 970.2
Distributed and other products 12.5 10.6
Total operating revenue 894.4 980.8
Revenue includes the fair value of the consideration received or receivable for the sale
of products, net of sales taxes and other indirect taxes, rebates and discounts and after
eliminating sales within the Group. Revenue is recognised when the amount of revenue can
be reliably measured, when it is probable that future economic benefits will accrue to the
Group, and in accordance with the terms of sale when title has been transferred and the
benefits of ownership and risk pass to the customer.
5. OPERATING PROFIT
2017
NZ$M
2018
NZ$M
Profit before tax is after charging the following specific expenses:
Auditors’ fees:
Statutory audit and half year review 0.9 1.0
Other assurance and audit related services – 0.1
Total audit and other assurance services 0.9 1.1
Other services 0.2 0.1
Total fees paid to auditors 1.1 1.2
Donations 0.1 0.2
Inventory written off (net) 3.5 6.3
Rental and lease expense 10.5 11.2
Intellectual property litigation expense (net – refer Note 19) 20.7 15.6
Other fees paid to auditors
Other assurance and audit related services of $60,000 (2017: $39,000) include assurance
procedures in relation to compliance with the constant currency framework, assessment of
eligible expenditure for the purposes of the research and development grant and scrutineering
the counting of votes at the Annual Shareholders Meeting.
Other services includes accounting standards advice, risk management advice, treasury risk
management advice, remuneration committee advice as well as tax compliance.
Profit before tax is after crediting the following specific income:
Research and development growth grant 5.0 5.0
Government Grants
Government Grants are recognised in the Income Statement over the same period that the
related costs are expensed. Government Grants are recognised when there is reasonable
assurance the Group will comply with the conditions attaching to the grants.
Research and development growth grant
The Callaghan Growth Grant provides reimbursement for eligible research and development
‘R&D’ expenditure up to a maximum of $5.0 million per annum (excluding GST). The three
year term of the Callaghan Growth Grant concluded on 30 September 2016 and the Group was
granted an extension for a further two year period to 30 September 2018.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201849
6. DERIVATIVE FINANCIAL INSTRUMENTS
20172018
Assets
NZ$M
Liabilities
NZ$M
Assets
NZ$M
Liabilities
NZ$M
CURRENT
Foreign currency forward exchange contracts – cash flow hedges 14.5 3.0 14.4 8.6
Foreign currency forward exchange contracts – not hedge accounted – 0.1 – –
Foreign currency option contracts – cash flow hedges 5.8 – 4.0 0.2
Foreign currency option contracts – time value 0.7 – 0.1 0.1
Interest rate swaps – cash flow hedges 0.1 0.5 0.1 0.1
Interest rate options – cash flow hedges 0.1 – 0.2 –
21.2 3.6 18.8 9.0
NON-CURRENT
Foreign currency forward exchange contracts – cash flow hedges 14.1 4.7 27.0 4.7
Foreign currency option contracts – cash flow hedges 7.9 – 8.4 –
Foreign currency option contracts – time value 1.5 – 0.6 –
Interest rate swaps – cash flow hedges 0.4 0.4 0.6 0.2
Interest rate options – cash flow hedges 0.2 – 0.3 –
24.1 5.1 36.9 4.9
Derivatives are initially recognised at fair value on the date a derivative contract is entered
into, and are subsequently re-measured to their fair value. The method of recognising
the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. The Group generally applies hedge
accounting to all derivative financial instruments.
The Group designates certain derivatives as either (1) hedges of the fair value of recognised
assets or liabilities or a firm commitment (fair value hedges) or (2) hedges of highly probable
forecast transactions (cash flow hedges). At the inception of the transaction the Group
documents the relationship between hedging instruments and hedged items, as well as the
risk management objective and strategy for undertaking various hedge transactions. The
Group also documents their assessment, both at hedge inception and on an ongoing basis,
of whether the derivatives that are used in hedging transactions have been and will continue
to be highly effective in offsetting changes in fair values or cash flows of hedged items. Any
ineffective portion is recognised immediately in the Income Statement. Derivatives that are
designated as hedges will be classified as non-current if they have maturities greater than
12 months after the balance sheet date.
Some components of hedge accounted derivatives are excluded from the designated
risk. Cash flow hedges include only the intrinsic value of options. Time value on options is
excluded from the hedge designation and is marked to market through Other Comprehensive
Income and accumulated within a separate component of equity (‘the Costs of Hedging
Reserve’ within ‘Hedging Reserves’) until such time as the related hedge accounted cash
flows affect profit or loss. At this stage the cumulative amount is reclassified to profit or loss.
Master netting arrangements
The Group enters into derivative transactions under the International Swaps and Derivatives Association (ISDA) master agreements. The ISDA agreements do not meet the criteria for offsetting
derivatives in the balance sheet. Netting arrangements are only enforceable upon early termination, for example, on occurrence of a credit default.
Refer to Note 22 for information on the calculation of fair values and maturity of undiscounted cash flows for these financial instruments.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited50
6. DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED
Contractual amounts of derivative financial instruments were as follows:
2017
NZ$M
2018
NZ$M
Foreign currency forward contracts and options
Sale commitments forward exchange contracts 582.1 879.3
Purchase commitments forward exchange contracts 60.5 60.7
Foreign currency borrowing forward exchange contracts 3.7 8.5
Collar option contracts – NZD call options purchased (i) 193.0 113.7
Collar option contracts – NZD put options sold (i) 214.1 125.5
Interest rate derivatives
Interest rate swaps 53.7 42.1
Interest rate options 21.4 20.7
(i) Foreign currency contractual amounts of put and call options are equal.
Undiscounted foreign currency contractual amounts for outstanding hedges were as follows:
Foreign Currency
2017
M
2018
M
Sale commitments
United States dollars US$309.0US$294.5
European Union euros €110.3€210.7
Australian dollars A$14.2A$19.6
British pounds £18.0£21.5
Canadian dollars C$13.0C$21.0
Swedish kronor kr16.5kr38.3
Japanese yen ¥3,190.0¥3,670.0
Chinese yuan ¥46.0¥82.5
Korean won ₩3,746.2₩8,553.7
Danish krone – kr4.5
Purchase commitments
Mexican pesos MEX$815.5MEX$855.5
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
51
7. TRADE AND OTHER RECEIVABLES
2017
NZ$M
2018
NZ$M
CURRENT
Trade receivables 116.5 128.3
Provision for doubtful trade receivables (1.1) (0.5)
115.4 127.8
Other receivables 14.2 18.2
129.6 146.0
Trade receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment. Bad
debts are written off when they are considered to have become uncollectable.
Trade receivables credit risk
As at balance date 86% of trade receivables were current (2017: 87%) with less than 1% (2017:
2%) more than 90 days past due. The total provision for doubtful debts covers the majority of
these past due balances.
Customer and receivable concentration
20172018
Five largest customers’ proportion of the Group’s:
Operating revenue19.8%17.5%
Trade receivables16.2%12.9%
There is no history of default in relation to these customers. Further information about the credit
quality and the Group’s exposure to credit risk can be found in Note 22.
8. INVENTORIES
2017
NZ$M
2018
NZ$M
Materials 35.6 32.6
Finished products 110.2 103.1
Provision for obsolete inventories (10.8) (10.3)
135.0 125.4
Inventories are stated at the lower of cost or net realisable value. Cost is determined using
the first-in, first-out (FIFO) method and includes expenditure incurred in acquiring the
inventories and bringing them to their existing location and condition. The cost of finished
goods comprises raw materials, direct labour, other direct costs and related production
overheads (based on normal operating capacity). Net realisable value is the estimated
selling price in the ordinary course of business, less applicable variable selling expenses.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited52
9. PROPERTY, PLANT AND EQUIPMENT
Land is measured at fair value, based on periodic but at least triennial valuations by
external independent valuers less any impairment losses recognised after the date of the
revaluation. Valuations are performed with sufficient regularity to ensure that the fair value
does not differ materially from its carrying amount.
All other property, plant and equipment is stated at historical cost less depreciation
and impairment. Historical cost includes expenditure that is directly attributable to the
acquisition of the items. This cost includes labour attributable to bringing the assets to the
location and working condition for its intended use.
Depreciation is generally calculated using the straight line method and is expensed over
the estimated useful lives. Depreciation methods, residual values and useful lives are
reassessed at each reporting date. Estimated useful lives are as follows:
Buildings – structure 25 – 50 years
Buildings – fit-out and other 3 – 50 years
Plant and equipment 3 – 15 years
An asset’s carrying amount is written down immediately to its estimated recoverable
amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Revaluations of land
Any revaluation increment is credited to the asset revaluation reserve included in equity,
except to the extent that it reverses a revaluation decrement for the same asset previously
recognised in the Income Statement, in which case the increment is recognised in the
Income Statement.
Any revaluation decrement is recognised in the Income Statement, except to the extent
that it offsets a previous revaluation increment for the same asset, in which case the
decrement is debited directly to the asset revaluation reserve to the extent of the credit
balance existing in the revaluation reserve for that asset. Upon disposal or derecognition,
any revaluation reserve relating to the particular asset being sold is transferred to retained
earnings.
Land revaluation
New Zealand
The New Zealand land holding was valued by Jones Lang LaSalle (JLL), with an effective date
of 31 March 2017 in accordance with the Australia and New Zealand Property Institute Valuation
Standards and the provisions of NZ IAS 16 ‘Property, Plant and Equipment’ and NZ IFRS 13
‘Fair Value Measurement’. The valuation was performed using a comparable sales comparison
methodology based on average prices per square metre of $311 for land that has improvements
and $305 for undeveloped land.
The change in value from the 2015 valuation, being an increment of $21.0 million, was included
in other comprehensive income for the 2017 year and added to the asset revaluation reserve
in equity.
The independent valuation of the New Zealand land and buildings, excluding capital projects
and leasehold improvements, conducted by JLL as at 31 March 2017 was $295.8 million.
The historical cost of the land at the East Tamaki campus is $63.5 million (2017: $63.5 million).
Mexico
During the year the acquisition of approximately 15 hectares of land in Tijuana, Mexico was
completed at a cost of NZ$21.1 million.
As described in Note 22 land in Mexico and New Zealand is considered to be a level 3 asset
within the fair value hierarchy for valuation purposes. There are certain estimates associated
with determining fair value, with the significant input being comparable land sales information
per square metre. The Directors consider that the carrying value of the land at 31 March 2018
remains consistent with the current market value, based on freely available market information
and discussion with valuation professionals.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201853
9. PROPERTY, PLANT AND EQUIPMENT CONTINUED
LandBuildings
Plant &
equipmentCapital projectsTotal
Fair ValueStructure
Fit out
and otherBuildings (i)Other
NZ$MNZ$MNZ$MNZ$MNZ$MNZ$MNZ$M
Cost and revaluation
Balance at 31 March 2016 95.7 89.4 127.4 235.7 0.6 57.0 605.8
Revaluation 21.0 – – – – – 21.0
Additions 0.3 – 0.8 25.3 3.3 17.2 46.9
Transfers – 0.1 0.5 24.0 (0.6) (24.0) –
Disposals – – – (4.5) – – (4.5)
Balance at 31 March 2017 117.0 89.5 128.7 280.5 3.3 50.2 669.2
Additions 19.9 – 1.1 8.4 20.5 36.2 86.1
Transfers 1.2 – 1.9 30.8 (1.0)(32.9) –
Disposals – – – (36.0) – – (36.0)
Foreign exchange differences 0.1 – – – – – 0.1
Balance at 31 March 2018 138.2 89.5 131.7 283.7 22.8 53.5 719.4
Depreciation and impairment losses
Balance at 31 March 2016 – 14.5 52.2 149.4 – – 216.1
Depreciation charge for the year – 1.8 6.1 24.3 – – 32.2
Disposals – – – (4.3) – – (4.3)
Balance at 31 March 2017 – 16.3 58.3 169.4 – – 244.0
Depreciation charge for the year – 1.8 6.5 26.7 – – 35.0
Disposals – – – (36.0) – – (36.0)
Balance at 31 March 2018 – 18.1 64.8 160.1 – – 243.0
Carrying amounts
At 31 March 2016 95.7 74.9 75.2 86.3 0.6 57.0 389.7
At 31 March 2017 117.0 73.2 70.4 111.1 3.3 50.2 425.2
At 31 March 2018 138.2 71.4 66.9 123.6 22.8 53.5 476.4
(i) Includes land improvement projects in progress
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited54
10. INTANGIBLE ASSETS
Software
Patents,
trademarks &
applicationsOther
ERP
project
in progressTotal
NZ$MNZ$MNZ$MNZ$MNZ$M
Cost
Balance at 31 March 2016 35.6 26.3 5.0 1.3 68.2
Additions 7.0 7.7 – 1.0 15.7
Transfers 2.0 – – (2.0) –
Disposals (0.2) – – – (0.2)
Balance at 31 March 2017 44.4 34.0 5.0 0.3 83.7
Additions 4.4 8.0 – 3.2 15.6
Transfers 0.3 – – (0.3) –
Disposals (0.9) – – – (0.9)
Balance at 31 March 2018 48.2 42.0 5.0 3.2 98.4
Amortisation and impairment losses
Balance at 31 March 2016 13.6 15.3 3.6 – 32.5
Amortisation for the year 3.3 3.6 – – 6.9
Disposals (0.2) – – – (0.2)
Balance at 31 March 2017 16.7 18.9 3.6 – 39.2
Amortisation for the year 3.6 6.0 – – 9.6
Disposals (0.8) – – – (0.8)
Balance at 31 March 2018 19.5 24.9 3.6 – 48.0
Carrying amounts
At 31 March 2016 22.0 11.0 1.4 1.3 35.7
At 31 March 2017 27.7 15.1 1.4 0.3 44.5
At 31 March 2018 28.7 17.1 1.4 3.2 50.4
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
55
Software: Acquired computer software licences are initially capitalised at cost, which
includes the purchase price and other directly attributable cost of preparing the asset for
its intended use including employee costs. Direct expenditure, which enhances or extends
the performance of computer software beyond its specifications and which can be reliably
measured, is added to the original cost of the software. Software costs are amortised over
the useful economic life of 3 to 15 years.
Patents and trademarks: Patents and trademarks have a finite useful life and are carried
at cost less accumulated amortisation and impairment losses. Amortisation is calculated
using the straight line method to allocate the cost of patents and trademarks over their
anticipated useful lives of 5 to 15 years. In the event of a patent being superseded or a
trademark registration is not continued or renewed, the unamortised costs are expensed
immediately.
The ERP implementation project is being capitalised in stages as each implementation is
undertaken. As each implementation is completed its costs are transferred from ERP project
in progress to Software.
11. INCOME TAX
INCOME TAX EXPENSE
2017
NZ$M
2018
NZ$M
Profit before tax 238.5 267.8
Tax expense at the New Zealand rate of 28% 66.8 75.0
Adjustments to tax:
Non-assessable income (0.4) (0.4)
Non-deductible expenses 1.3 1.7
Foreign rates other than 28% 0.9 1.1
Effect of foreign currency translations 0.6 (0.1)
Prior period under provision 0.1 0.3
Tax expense 69.3 77.6
This is represented by:
Current tax 70.8 77.1
Deferred tax (1.5) 0.5
Tax expense 69.3 77.6
Effective tax rate 29.1%29.0%
IMPUTATION CREDITS
M M
New Zealand imputation credits available for use in subsequent
reporting periods NZ$70.5 NZ$92.5
Australian franking credits available for use in subsequent
reporting periods A$7.5 A$8.3
Tax expense comprises current and deferred tax. Tax expense is recognised in the Income
Statement except to the extent that it relates to items recognised outside of the Income
Statement, in which case it is recognised in other comprehensive income or directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at the balance date. It also includes any adjustment to
tax payable in respect of previous financial years.
Deferred tax arises due to temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and those for tax purposes.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively
enacted by balance date and are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited56
11. INCOME TAX CONTINUED
DEFERRED TAX
Provisions
and accruals
Property,
plant and
equipmentIntangibles
Financial
instrumentsOtherTotal
NZ$MNZ$MNZ$MNZ$MNZ$MNZ$M
Balance at 31 March 2016 37.8 (17.6) 4.3 (4.7) (0.2) 19.6
Amounts recognised in other comprehensive income – – – (4.5) – (4.5)
Amounts recognised directly in equity – – – – 0.9 0.9
Amounts recognised in the Income Statement 4.5 (1.0) (2.6) 0.3 0.3 1.5
Balance at 31 March 2017 42.3 (18.6) 1.7 (8.9) 1.0 17.5
Amounts recognised in other comprehensive income – – – (1.4) – (1.4)
Amounts recognised directly in equity – – – – 1.9 1.9
Amounts recognised in the Income Statement 2.4 (0.6) (1.9) (0.6) 0.2 (0.5)
Balance at 31 March 2018 44.7 (19.2) (0.2) (10.9) 3.1 17.5
Deferred tax assets and liabilities are offset within the Balance Sheet where they relate to income taxes levied by the same taxation authority.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
57
12. INTEREST-BEARING LIABILITIES
2017
NZ$M
2018
NZ$M
CURRENT
Bank overdrafts 15.7 16.1
Borrowings 5.4 13.8
21.1 29.9
NON-CURRENT
Borrowings expiring
Between one and two years 8.4 –
Between two and three years 3.0 52.5
Between three and four years 28.5 –
Between four and five years – –
39.9 52.5
Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequent
to initial recognition, borrowings are measured at amortised cost, applying the effective
interest rate method. Financing expenses directly attributable to the acquisition, construction
or production of a qualifying asset are capitalised as part of the cost of that asset.
Borrowings are classified as current liabilities unless the Group has an unconditional right
to defer settlement of the liability for at least 12 months after the reporting date.
Borrowing facilities
Borrowings have been aged in accordance with the expiry dates of the facilities as there are
no required principal payments before the expiry of each facility. At balance date the weighted
average interest rate is 2.4% (2017: 2.8%).
Key lenders to the Group are Debt Certificate Holders under the Negative Pledge Deed.
In April 2017, an amended Negative Pledge Deed was executed. The negative pledge includes
the covenant that security can be given only in limited circumstances.
The companies in the Group providing the undertakings under the amended Negative Pledge
Deed are:
Fisher & Paykel Healthcare Corporation Limited
Fisher & Paykel Healthcare Limited
Fisher & Paykel Healthcare Treasury Limited
Fisher & Paykel Healthcare Properties Limited
The principal covenants of the negative pledge are that:
(a) the interest cover ratio for the Group shall not be less than 3 times earnings before
interest, tax, depreciation and amortisation (EBITDA);
(b) the net tangible assets of the Group shall not be less than $200 million; and
(c) the total tangible assets of the Guaranteeing Group shall constitute at least 80% of the
total tangible assets of the Group.
Refer to Note 22 (d) for further information on these covenants.
2017
NZ$M
2018
NZ$M
Unused lines of credit
Bank overdraft facilities 23.6 26.8
Borrowing facilities 150.5 138.5
174.1 165.3
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited58
13. TRADE AND OTHER PAYABLES
2017
NZ$M
2018
NZ$M
CURRENT
Trade payables 29.3 32.7
Employee entitlements 39.4 43.4
Other payables and accruals 34.3 36.7
103.0 112.8
NON-CURRENT
Employee entitlements 7.1 8.0
Other payables and accruals 1.5 0.6
8.6 8.6
Trade and other payables represent liabilities for goods and services provided to the Group
prior to the end of the financial period which are unpaid. The amounts are unsecured and
are usually paid within 60 days of recognition. Trade payables are recognised initially at fair
value and subsequently measured at amortised cost using the effective interest method.
Refer to Note 18 for further details of employee entitlements and benefits.
14. PROVISIONS
2017
NZ$M
2018
NZ$M
Warranty provision
CURRENT
Balance at beginning of the year 3.9 3.2
Current year provision 4.4 8.6
Warranty expenses incurred (5.1) (7.1)
Balance at end of the year 3.2 4.7
NON-CURRENT
Balance at beginning of the year 2.4 2.0
Current year provision (0.4) 0.1
Warranty expenses incurred – –
Balance at end of the year 2.0 2.1
Provisions are recognised where the Group has a present legal or constructive obligation
as a result of past events and it is more likely than not that an outflow of resources will be
required to settle the obligation, and the amount can be reliably estimated.
Warranty
Provision for warranty covers the obligations for the unexpired warranty periods for
products, based on recent historical costs incurred on warranty exposure. Currently
warranty terms are 1 to 2 years for parts or parts and labour.
As the provision for warranty is based on historical warranty rates, the actual future
warranty claims experienced by the Group may be different to that of the past. Factors
that could impact the provision for warranty include the success of the Group’s quality
system, as well as future parts and labour costs. Where the Group is aware of specific
product warranty issues these are included in the provision.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
59
15. SHARE CAPITAL
2017
NZ$M
2018
NZ$M
Share capital at beginning of the year 165.6 183.5
Issue of share capital under dividend reinvestment plan (i) 13.9 11.4
Issue of share capital 0.8 0.5
Increase in share capital under share based payment schemes
for employee services 3.2 6.0
Share capital at end of the year 183.5 201.4
Less treasury shares (ii) (1.7) (3.0)
181.8 198.4
Number of issued shares
Number of shares on issue at beginning of the year 563,841,265 567,686,436
Shares issued:
Dividend reinvestment plan (i) 1,478,690 946,443
Employee share purchase schemes – 182,982
Exercise of share options 296,540 138,619
Exercise of share options under cancellation facility 1,502,991 1,727,514
Exercise of performance share rights 566,950 548,270
Number of shares on issue at end of the year 567,686,436 571,230,264
Less treasury shares (ii) (310,176) (425,725)
567,376,260 570,804,539
Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction. Where any Group company purchases the Company’s equity
share capital (treasury shares), the consideration paid, including any directly attributable
incremental costs (net of income taxes), is deducted from equity attributable to the
Company’s equityholders until the shares are cancelled or reissued.
Where such shares are subsequently reissued, any consideration received (net of any
directly attributable incremental transaction costs and the related income tax effects) is
included in equity attributable to the Company’s equityholders.
All shares are fully paid. All ordinary shares rank equally with one vote attached to each fully
paid ordinary share.
(i) 946,443 (2017: 1,478,690) shares were issued under the Company’s dividend reinvestment
plan at an average price of $12.05 (2017: $9.36) per share.
(ii) The treasury shares are used to recognise those shares held and controlled by Fisher &
Paykel Healthcare Employee Share Purchase Trustee Limited.
16. EARNINGS PER SHARE
2017
NZ$M
2018
NZ$M
Profit after tax 169.2 190.2
Weighted average number of ordinary shares 566,124,701 570,023,436
Adjustment for share options and PSRs 8,214,477 6,426,201
Weighted average number of ordinary shares
for diluted earnings per share 574,339,178576,449,637
Basic earnings per share (cents per share) 29.9 cps 33.4 cps
Diluted earnings per share (cents per share) 29.5 cps 33.0 cps
Basic earnings per share is calculated by dividing the profit after tax of the Group by the
weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by adjusting the weighted average number of
ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
Options and Performance Share Rights (PSRs) are convertible into the Company’s shares,
and are therefore considered dilutive securities for diluted earnings per share.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited60
17. RESERVES
2017
NZ$M
2018
NZ$M
Hedging reserves 26.5 30.2
Asset revaluation reserve 53.5 53.5
Share based payments reserves 8.8 12.0
Foreign currency translation reserve – –
Total reserves 88.8 95.7
Nature and purpose of reserves
Hedging reserves
Cash flow hedge reserve: This reserve is used to record unrealised gains or losses on hedging
instruments that are recognised directly in equity.
Costs of hedging reserve: This reserve contains the cumulative net change in the time value on
currency options which are excluded from hedge designations of foreign currency risk.
Amounts are recycled to the Income Statement when the associated hedged transactions affect
the Income Statement.
Asset revaluation reserve
The asset revaluation reserve relates to the revaluation of land. For details refer to Note 9.
Share based payments reserves
Employee share option reserve: This reserve is used to recognise the fair value of options and
performance share rights granted but not exercised or lapsed. Tax deductions in excess of the
cumulative share based payment expense are recognised in equity.
Amounts are transferred to share capital (including income tax benefits) when the vested
options or performance share rights are exercised by the employee or lapse upon expiry.
Employee share entitlement reserve: This reserve is used to recognize the fair value of shares
granted but not vested. Amounts are transferred to share capital when the shares vest to the
employee.
Foreign currency translation reserve
The foreign currency translation reserve contains foreign exchange differences arising on
consolidation of assets and liabilities of overseas entities with a functional currency other than
New Zealand dollars.
Dividends
All dividends are recognised as distributions to shareholders.
During the year, supplementary dividends of $10.7 million were paid to non resident shareholders
(2017: $9.5 million), for which the Group received a foreign tax credit entitlement. The foreign
tax credit entitlement is presented net of income taxes paid within the Cash Flow Statement.
Cents
per shareNZ$M
Dividends
2016 final 10.00 56.5
2017 interim 8.25 46.8
31 March 2017 18.25 103.3
2017 final 11.25 64.0
2018 interim 8.75 49.9
31 March 2018 20.00 113.9
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
61
18. EMPLOYEE BENEFITS
2017
NZ$M
2018
NZ$M
Wages and salaries 273.5 302.7
Other employment costs 13.7 15.2
Employer contributions to defined contribution
superannuation plans inclusive of tax 7.0 8.4
Equity settled share based payment expense 4.1 4.9
Movement in liability for long service leave 1.2 0.7
299.5 331.9
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and
accumulating sick leave are recognised within employee entitlements in respect of
employees’ services up to the reporting date, and are measured at the amounts expected
to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are
recognised when the leave is taken and measured at the rates paid or payable.
Equity settled share based payments
The fair value (at grant date) of performance share rights (PSRs) and options granted
to employees is recognised as an employee expense in the Income Statement over the
vesting period with a corresponding increase in the employee share based payment
reserve. When options or PSRs are exercised, the amount in the share based payment
reserve relating to those options, together with the option exercise price paid by the
employee, is transferred to share capital. When any vested options or PSRs lapse, upon
employee termination or unexercised options reaching maturity, the amount in the share
based payment reserve relating to those options or PSRs is also transferred to share capital.
Long service leave
The liability for long service leave is recognised in employee entitlements in trade and
other payables and measured as the present value of expected future payments to be
made in respect of services provided by employees up to the reporting date. Consideration
is given to expected future wage and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted using market yields at the
reporting date on national government bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows.
a) Employee share based compensation
The Board believes that the issue of a combination of options and share rights broadly in equal
value proportions provides appropriate incentive for participating employees to grow the total
shareholder return of the Company. The combination of the Option Plan and the Share Rights
Plan assists the Group to attract, motivate and retain key employees in an environment where
such employees are in high demand both within New Zealand and internationally. Options and
share rights are issued to employees under the Option Plan and Share Rights Plan as a long-
term component of remuneration in accordance with the Group’s remuneration policy. Details
of the Option and Share Rights issues are described below.
(i) Employee option plans
The Employee Share Option Plans allow Group employees to acquire shares of the Company.
One option gives the employee the right to subscribe for one ordinary share in the Company
subject to meeting the vesting conditions. No amount is payable for the grant of options.
Options vest at any time between the third and the fifth anniversary of the grant date, as long
as the Company’s share price on the NZX has, at any time on or after the third anniversary,
exceeded the “escalated price” and as long as the employee remains in the service of the Group.
This “escalated price” is determined using a base price established on or around the grant date
being the volume weighted average price for a share on the NZX for the 5 business days prior
to the grant date; and
• increasing the last calculated base price each year by a percentage determined by the
Board, based on independent advice, to represent the Company’s cost of capital; and
• reducing the resulting figure by any dividend paid by the Company in respect of a share
in the 12 month period immediately preceding that anniversary.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited62
(ii) Employee performance share rights plan
The Employee Performance Share Rights (PSR) Plan allows Group employees to acquire shares
of the Company. One share right gives the employee the potential to exercise a share right for
an ordinary share in the Company at no cost. Share rights become exercisable if the Company’s
gross total shareholder return (TSR) performance exceeds the performance of the Dow Jones
US Select Medical Equipment Total Return Index (DJSMQDT) in New Zealand dollars over the
same period. If the Company’s TSR performance exceeds that of the DJSMQDT at either of the
third, fourth or fifth anniversary of the grant date of the PSRs, some or all of the PSRs become
exercisable as long as the employee remains in the service of the Group. Where an employee
has exercised a portion of their PSRs before the fifth anniversary of the grant date, the
remaining PSRs lapse at the time that portion has been exercised.
All unexercised PSRs and options expire on the fifth anniversary of the grant date.
PSRs and options granted to employees have no voting rights until they have been exercised
and ordinary shares issued.
(iii) Other Employee share and stock purchase plans
All New Zealand and Australian full time employees are eligible, after a qualifying period, to
participate in the Employee Share Purchase Plans, which operate in accordance with sections
DC13 and 14 of the New Zealand Income Tax Act 2007, with no interest being charged on the
loans, and shares issued at a discount of 20% of market price. The qualifying period between
grant and vesting date is 3 years, at which point the shares are transferred to the employees and
become freely transferable. 425,725 shares (2017: 310,176) are held by the Trustees of the plans,
being 0.1% (2017: 0.1%) of the Company’s issued and paid up capital. At 31 March 2018 the total
receivable owing from employees was $1.4 million (2017: $0.7 million).
North American employees working more than 20 hours per week, in accordance with section
423 of the US Internal Revenue Code, as amended are eligible to participate in an Employee
Stock Purchase Plan. Shares under this Plan are issued at a discount of 15%, are allocated to
employees at the time of issue and vest immediately. Shares issued under this plan in 2018
totalled 40,409 shares (2017: nil).
Movements in the number of options and PSRs outstanding and their exercise prices are as follows:
20172018
Performance
Share RightsOptions
Performance
Share RightsOptions
Number outstanding
As at beginning of the year 1,612,560 7,508,036 1,410,109 6,326,248
Granted during the year 401,605 1,236,607 408,183 1,119,685
Exercised during the year (566,950) (2,308,366) (548,270) (2,527,553)
Lapsed during the year (37,106) (110,029) (38,709) (90,392)
As at end of the year 1,410,109 6,326,248 1,231,313 4,827,988
Exercisable at year end 2,530 2,404,570 1,480 1,299,717
Number of employees holding employee share options and PSRs 521 521 503 503
Weighted average exercisable price – $5.56 – $8.16
Weighted average contractual life (months) 40 30 41 33
Fair value of share options or rights granted during the year (NZ$M) 2.5 2.5 3.2 3.0
Fair value of share options or rights granted during the year ($ per share) $6.25 $2.03 $7.72 $2.72
18. EMPLOYEE BENEFITS CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
63
Key inputs and assumptions
2017 2018
Performance Share Rights
Share price at grant date$9.85 $12.13
NZD/USD exchange rate of grant date0.73400.7260
5 year NZD risk free rate1.79%2.47%
5 year USD risk free rate1.53%1.76%
Expected/historical share price volatility27.00%27.00%
Expected/historical NZD/USD volatility13.00%12.00%
Expected/historical DJSMDQT index volatility15.00%14.00%
Employee Option Plans
Share price at grant date$9.85$12.13
Exercise price at grant date$9.82$11.81
Expected/historical share price volatility27.00%27.00%
Dividend yield2.18%1.55%
Option life (years)55
Risk free interest rate1.79%2.47%
Cost of equity8.10%8.60%
The expected price volatility is derived by analysing the historical volatility over the most recent
historical period corresponding to the term of the option or PSR.
b) Key management and director compensation
2017
NZ$M
2018
NZ$M
Short term benefits 5.5 6.6
Directors fees 0.9 1.0
Share based benefits 1.0 1.1
Employer contributions to defined contribution
superannuation plans 0.2 0.2
7.6 8.9
Key management personnel includes the Chief Executive Officer and direct reports. The
amounts of key management and director compensation outstanding as at balance date are
$2.5 million (2017: $1.6 million).
The table excludes any dividends received on the Company’s shares held by the Directors or
key management personnel.
18. EMPLOYEE BENEFITS CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited64
19. CONTINGENT LIABILITIES
Contingent liabilities are subject to uncertainty or cannot be reliably measured and are not
provided for. Disclosures as to the nature of any contingent liabilities are set out below.
Judgements and estimates are applied to determine the probability that an outflow of resources
will be required to settle an obligation. These are made based on a review of the facts and
circumstances surrounding the event and advice from both internal and external parties.
United States: In August 2016, Fisher & Paykel Healthcare filed patent infringement proceedings
in the US District Court for the Southern District of California seeking judgment that ResMed’s
AirSense 10 and AirCurve 10 range of flow generator products, ClimateLineAir heated air tubing,
and water chambers for use with such flow generator products, as well as Swift LT and Swift FX
masks infringe patents held by Fisher & Paykel Healthcare. ResMed responded that the patents
asserted are not infringed and/or are invalid.
ResMed also filed a counterclaim in the US District Court for the Southern District of California
seeking judgment that Fisher & Paykel Healthcare’s Simplus and Eson range of masks used in
the treatment of OSA infringe patents held by ResMed. Fisher & Paykel Healthcare responded
that it does not infringe and/or the patents of ResMed are invalid.
Also in August 2016, ResMed requested that the US International Trade Commission (ITC)
conduct an investigation into patent infringement allegations. Shortly before the start of the
trial in May 2017, ResMed withdrew its complaint to the ITC. ResMed indicated at the time that
it intended to file an additional ITC complaint but has not yet done so.
Both Fisher & Paykel Healthcare and ResMed have filed for inter partes review (IPR) with the
US Patent Trial and Appeal Board (PTAB) of the patents asserted by the other in the US. The
PTAB has issued decisions in respect of a number of the patents in dispute, invalidating some
of the patent claims asserted by each party and upholding others. Several decisions on IPRs
filed by Fisher & Paykel Healthcare against ResMed patents are still pending. A number of the
decisions issued by the PTAB have been appealed by the parties to the US Court of Appeals
for the Federal Circuit.
Germany: ResMed initiated patent infringement proceedings in the Regional Court in Munich
in relation to Fisher & Paykel Healthcare’s Simplus and Eson range of masks. Two of these
proceedings are currently stayed pending the outcome of challenges to the validity of ResMed’s
patents that will be heard by the European Patent Office. The third will be heard by the Regional
Court in Munich in late 2018.
Fisher & Paykel Healthcare also filed patent infringement proceedings against ResMed in the
Regional Court in Munich in relation to ResMed’s AirSense 10 and AirCurve 10 range of flow
generator products and Lumis series of non-invasive ventilators. One case is currently stayed
pending the outcome of a validity challenge and one is awaiting its second hearing which has
been scheduled for late 2018. In a third case the court ruled that a German utility model patent
was not infringed. Fisher & Paykel Healthcare has appealed that decision.
New Zealand: In August 2016, ResMed initiated proceedings in the High Court of New Zealand in
relation to Fisher & Paykel Healthcare’s ICON CPAP device and Simplus, Eson and Eson 2 masks.
Fisher & Paykel Healthcare responded that the patents asserted are not infringed and has filed a
counterclaim in the High Court of New Zealand that the asserted patents are invalid and should
be revoked. In March 2018, ResMed narrowed its claims, dropping the infringement case against
the ICON CPAP device and the Eson mask.
United Kingdom: In the United Kingdom Fisher & Paykel Healthcare sought a declaration of
non-infringement and invalidity in the High Court of Justice Chancery Division Patents Court
in respect of three patents asserted against Fisher & Paykel Healthcare in Germany. ResMed
counterclaimed for infringement. In November 2017, just before the trial was to start, ResMed
conceded to the revocation of two of its patents in the UK. The trial proceeded in relation to
a third patent and the Court found that ResMed’s patent was invalid in its entirety. This patent
has consequently been revoked in the UK.
Australia: In December 2017, Fisher & Paykel Healthcare initiated proceedings against ResMed
in the Federal Court of Australia in relation to ResMed’s AirSense 10, AirCurve 10, S9 and S9
VPAP flow generators, Lumis non-invasive ventilators, ClimateLine and ClimateLineAir heated
air tubing and HumidAir heated humidifier. ResMed responded that the patents asserted are not
infringed and has filed a counterclaim in the Federal Court of Australia that the asserted patents
are invalid and should be revoked.
20. COMMITMENTS
2017
NZ$M
2018
NZ$M
Capital expenditure commitments contracted for
but not recognised as at the reporting date
Within one year 34.8 99.1
Between one and two years 2.1 50.3
Between two and five years – 2.1
36.9 151.5
Gross commitments under non-cancellable operating leases
Within one year 8.1 8.8
Between one and two years 7.1 6.7
Between two and five years 10.7 7.2
Over five years 0.9 –
26.8 22.7
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by
the lessor are classified as operating leases. Payments made under operating leases (net of
any incentives received from the lessor) are charged to the Income Statement on a straight
line basis over the period of the lease.
Operating lease commitments relate mainly to building leases. Certain building leases give the
Group the right to renew the lease.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
65
21. SEGMENT INFORMATION
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided
to the chief operating decision-maker (CODM). For the purposes of NZ IFRS 8 ‘Operating
Segments’ the CODM is a group comprising the Board of Directors (which includes the Chief
Executive Officer), Vice-President – Products and Technology, Senior Vice-President – Sales and
Marketing and Chief Financial Officer. This has been determined on the basis that it is this group
which determines the allocation of the resources to segments and assesses their performance.
The operating segments of the Group have been determined based on the components of the
Group that the CODM monitors in making decisions about operating matters. These components
have been identified on the basis of internal reports that the CODM reviews regularly in order to
allocate resources and to assess the performance of the Group.
The Group has four operating segments reportable under NZ IFRS 8, as described below, which
are the Group’s strategic business units or groupings of business units. All other operating
segments have been included in ‘New Zealand segments’.
The strategic business units all offer the same products, being medical device products and
systems for use in hospital and homecare settings. Products are sold in over 120 countries
worldwide through the Group’s distribution subsidiaries, third party distributors and original
equipment manufacturers (OEMs), with these sales being managed geographically from
New Zealand and other locations worldwide. It is the management of these worldwide sales
relationships that forms the basis for the Group’s reportable segments. The following summary
describes the operations in each of the Group’s reportable segments:
1) New Zealand. Includes all activities controlled by entities or employees based in New Zealand,
principally research and development, manufacturing, marketing, sales and distribution
and administration. The research and development activity relates to New Zealand. The
manufacturing activity principally relates to New Zealand, however the Mexico manufacturing
activity is also included in this segment as the Mexico facility is managed by New Zealand-based
employees. In addition to the manufacturing activity, the new properties company located
in Mexico is also included in the New Zealand segment. The sales and distribution activity
principally relates to New Zealand, Latin America, Africa, the Middle East and other countries in
Asia not included in 4) below. Also included are sales made to countries within Europe and Asia-
Pacific where the management of the sale is from New Zealand.
2) North America. Includes all activities controlled by entities or employees based in the United
States of America and Canada, principally sales, distribution and administration activities.
3) Europe. Includes all activities controlled by entities or employees based in the United
Kingdom, France, Germany, Sweden, Turkey and Russia, principally sales, distribution and
administration activities. These sales and distribution hubs also distribute product into
neighbouring European countries.
4) Asia Pacific. Includes all activities controlled by entities or employees based in Australia,
Japan, India, China, South Korea, Taiwan and Hong Kong, principally sales, distribution and
administration activities.
All minor or other activities have been included in the New Zealand segment as they are
controlled by New Zealand entities or employees.
There are varying levels of integration between these geographical segments. This integration
includes transfers of finished product, principally from the New Zealand segment to other
segments, and shared costs.
Information regarding the operations of each reportable segment is included below.
Performance is measured based on segment operating profit or earnings before interest and
tax (EBIT). Segment profit is used to measure performance as the CODM believes that such
information is the most relevant in evaluating the results of certain segments relative to other
entities that operate within this industry. Inter-segment pricing is determined on an arm’s
length basis.
Product Segments
The Group’s products and systems are for use in respiratory care, acute care and the treatment
of obstructive sleep apnea and are sold in over 120 countries worldwide. Revenues are managed
on a regional basis, but a split by product group is set out in Note 4. Assets are not split by
product group.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited66
21. SEGMENT INFORMATION CONTINUED
Operating Segments
New Zealand
NZ$M
North America
NZ$M
Europe
NZ$M
Asia Pacific
NZ$M
Eliminations
NZ$M
Total
NZ$M
2017
Sales revenue – external 59.2 427.5 245.8 137.0 – 869.5
Sales revenue – internal 648.0 – – – (648.0) –
Foreign exchange gain on hedged sales 24.9 – – – – 24.9
Total operating revenue 732.1 427.5 245.8 137.0 (648.0) 894.4
Other income 5.0 – – – – 5.0
Depreciation and amortisation 35.7 3.2 0.9 0.8 (1.5) 39.1
Segment operating profit before financing costs 235.8 11.7 7.6 6.8 (21.8) 240.1
Financing income 2.8 – – – (2.4) 0.4
Financing expense (2.4) (2.6) (0.6) (0.3) 2.4 (3.5)
Exchange gain (loss) on foreign currency borrowings 1.8 – (0.3) – – 1.5
Segment net profit before tax 238.0 9.1 6.7 6.5 (21.8) 238.5
Segment assets 841.0 148.3 104.8 63.3 (279.2) 878.2
Segment capital expenditure 58.7 1.8 1.3 1.2 – 63.0
2018
Sales revenue – external 70.1 448.0 282.2 164.2 – 964.5
Sales revenue – internal 671.1 – – – (671.1) –
Foreign exchange gain on hedged sales 16.3 – – – – 16.3
Total operating revenue 757.5 448.0 282.2 164.2 (671.1) 980.8
Other income 5.0 – – – – 5.0
Depreciation and amortisation 41.2 4.8 0.90.9 (3.2)44.6
Segment operating profit before financing costs 245.0 12.3 10.5 10.7 (8.7) 269.8
Financing income 4.8 – – – (3.2) 1.6
Financing expense (3.3) (2.7) (0.6) (0.3) 3.2 (3.7)
Exchange gain (loss) on foreign currency borrowings 0.2 – (0.1) – – 0.1
Segment net profit before tax 246.7 9.6 9.8 10.4 (8.7) 267.8
Segment assets 1,004.4 143.1 120.1 71.7 (314.2) 1,025.1
Segment capital expenditure 96.6 0.7 0.4 1.0 – 98.7
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
67
22. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk (including currency
risk and interest rate risk), credit risk and liquidity risk.
The Board of Directors has approved policies and guidelines for the Group that identify and
evaluate risks and authorise various financial instruments to manage financial risks. These
policies and guidelines are reviewed regularly.
a. Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the US dollar, Euro, British pound, Australian
dollar, Japanese yen, Canadian dollar and Mexican peso.
Foreign exchange risk arises when future commercial transactions and recognised assets and
liabilities are denominated in a currency that is not the entity’s functional currency.
The purpose of the Group’s foreign currency risk management activities is to protect the
Group from exchange rate volatility with respect to New Zealand dollar net cash movements
resulting from the sale of products in foreign currencies to foreign customers, and the purchase
of raw materials in foreign currencies from foreign and domestic suppliers. The Group enters
into foreign currency option contracts and forward foreign currency contracts within policy
parameters to manage the risk associated with anticipated sales or costs. The terms of the
foreign currency option contracts and the forward foreign currency contracts generally do not
exceed five years. However, with Board approval, the foreign currency option contracts and the
forward foreign currency contracts may have terms of up to ten years.
Foreign exchange contracts and options in relation to sales are designated at the Group level
as hedges of foreign exchange risk on specific forecast foreign currency denominated sales.
Major capital expenditure in foreign currency may be hedged with forward exchange contracts
and options and may be designated as hedges.
Balance sheet foreign exchange risk arising from net assets held by the Group may be hedged
either by debt in the relevant currency, foreign currency swaps or by foreign currency option
contracts and forward foreign currency contracts.
(ii) Price risk
The Group has no material exposure to price risk.
(iii) Interest rate risk
The Group’s main interest rate risk arises from floating rate borrowings drawn under bank debt
facilities. When deemed appropriate, the Group manages floating interest rate risk by using
floating-to-fixed interest rate swaps and interest rate options. Interest rate swaps have the
economic effect of converting borrowings from floating to fixed rates. Interest rate options give
the right, but not the obligation, to enter into an interest rate swap at a fixed rate at a future
date. Under the Group Treasury policy, the mix between economically fixed and floating debt is
reviewed on a regular basis. Interest rate swaps and options are accounted for as cash flow hedges.
The carrying amounts of significant financial assets and liabilities are denominated in the following foreign currencies:
NZD
NZ$M
USD
NZ$M
EUR
NZ$M
JPY
NZ$M
AUD
NZ$M
CAD
NZ$M
GBP
NZ$M
MXN
NZ$M
Other
NZ$M
Total
NZ$M
2017
Cash 48.2 5.0 1.9 0.1 0.4 0.6 – 1.0 4.1 61.3
Trade receivables 1.5 55.0 27.0 11.6 5.5 5.2 3.6 – 7.1 116.5
Trade and other payables (27.9) (15.4) (6.3) (1.9) (2.9) (0.7) (2.4) (3.9) (3.7) (65.1)
Bank overdraft – (2.1) (4.2) (6.3) (0.7) – (2.1) – (0.3) (15.7)
Borrowings – (28.5) (11.4) – (3.6) (1.8) – – – (45.3)
21.8 14.0 7.0 3.5 (1.3) 3.3 (0.9) (2.9) 7.2 51.7
2018
Cash 12.7 11.6 2.1 0.2 – 0.4 – 1.5 3.4 31.9
Short term investments 100.4 – – – – – – – – 100.4
Trade receivables 1.4 53.3 31.7 14.3 6.9 5.5 5.2 – 10.0 128.3
Trade and other payables (25.3) (20.5) (8.5) (1.6) (3.1) (0.5) (2.9) (4.0) (3.6) (70.0)
Bank overdraft – (2.7) (4.0) (6.2) (0.7) (0.2) (1.0) – (1.3) (16.1)
Borrowings – (52.5) (8.5) – (3.5) (1.8) – – – (66.3)
89.2 (10.8) 12.8 6.7 (0.4) 3.4 1.3 (2.5) 8.5 108.2
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited68
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial
liabilities to interest rate risk and foreign exchange risk.
A sensitivity of +/-10% for foreign exchange risk has been selected (2017: +/-10%). The Group’s
primary foreign currency exposure is the New Zealand dollar versus the US dollar, with other
currencies as discussed above forming the balance of the exposure. The Group believes that an
overall sensitivity of +/-10% is reasonably possible given the exchange rate volatility observed
on a historical basis for the preceding 5 year period with a higher weighting given to exchange
rate volatility over the preceding year and the range of market expectations for potential future
movements. A sensitivity of +/-1% has been selected for interest rate risk (2017: +/-1%). This
sensitivity is based on reasonably possible changes over a financial year using the observed
range of historical data for the preceding 5 year period.
All variables other than the applicable interest rates and exchange rates are held constant.
20172018
NZ$M NZ$M NZ$M NZ$M
-1%+ 1%-1%+ 1%
Interest rate change
Impact on net profit after tax (0.2) 0.2 (0.6) 0.6
Impact on hedging reserves
(within equity) (1.8) 1.8 (1.9) 2.0
(2.0) 2.0 (2.5) 2.6
-10%+ 10%-10%+ 10%
Foreign exchange rate change
Impact on net profit after tax 3.0 (2.7) 0.8 (0.7)
Impact on hedging reserves
(within equity) (49.1) 42.2 (63.3) 52.7
(46.1) 39.5 (62.5) 52.0
Fair value estimation
NZ IFRS 13 for financial assets and liabilities measured at fair value requires disclosure of the fair
value measurements by level from the following fair value hierarchy:
• Level 1 – Quoted price (unadjusted) in active markets for identical assets and liabilities;
• Level 2 – Inputs, other than quoted price included within level 1, that are observable for the
asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices);
• Level 3 – Inputs for assets and liabilities that are not based on observable market data (that
is, unobservable inputs).
All the Group’s financial instruments held at fair value have been measured at the fair value
measurement hierarchy of level 2 (2017: level 2), as all significant inputs required to ascertain
the fair value are observable.
The fair value of derivative instruments designated in a hedging relationship is determined using
the following valuation techniques:
• Foreign currency forward exchange contracts have been fair valued using quoted forward
exchange rates and discounted using yield curves from quoted interest rates that match the
maturity dates of the contracts.
• Foreign currency option contracts have been fair valued using observable option volatilities,
and quoted forward exchange and interest rates that match the maturity dates of the
contracts.
• Interest rate swaps are fair valued by discounting the future interest and principal cash
flows using current market interest rates that match the maturity dates of the contracts
These valuation techniques maximise the use of observable market data where it is available
and rely as little as possible on entity-specific estimates.
Refer to Note 9 for further information about land that is measured at fair value including a
summary of the valuation techniques used.
All financial assets other than derivatives are classified as loans and receivables. All financial
liabilities other than derivatives are classified as measured at amortised cost. Financial liabilities
measured at amortised cost are fair valued using the contractual cash flows. The carrying
value of financial assets and liabilities other than derivatives approximates their fair value. In
considering the fair value of interest bearing assets and liabilities the estimated future interest
rates approximate the discount rates used in a fair value assessment.
22. FINANCIAL RISK MANAGEMENT CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
69
22. FINANCIAL RISK MANAGEMENT CONTINUED
b. Liquidity risk
Management monitors rolling forecasts of the Group’s liquidity position on the basis of expected cash flow. The table below set out the contractual, undiscounted cash flows for non-derivative
financial liabilities and derivative financial instruments.
< 1 year
NZ$M
1–2 years
NZ$M
2–3 years
NZ$M
5+ years
NZ$M
Contractual
cash flows
NZ$M
Consolidated
Balance Sheet
NZ$M
2017
Bank overdrafts 15.7 – – – 15.7 15.7
Trade and other payables 64.2 – – – 64.2 64.2
Borrowings 6.6 12.4 29.1 – 48.1 45.3
Total non-derivative financial liabilities 86.5 12.4 29.1 – 128.0 125.2
Foreign currency forward exchange contracts
— Inflow 331.2 209.7 101.8 – 642.7
— Outflow (319.5) (205.1) (96.5) – (621.1)
11.7 4.6 5.3 – 21.6 20.8
Foreign currency option contracts
— Inflow – – – – –
— Outflow – – – – –
– – – – – 15.9
Interest rate derivative instruments net inflows (outflows) (i) (0.5) (0.2) (0.1) 0.2 (0.6) (0.1)
Total derivative financial instruments 11.2 4.4 5.2 0.2 21.0 36.6
2018
Bank overdrafts 16.1 – – – 16.1 16.1
Trade and other payables 70.0 – – – 70.0 70.0
Borrowings 15.3 1.3 53.4 – 70.0 66.3
Total non-derivative financial liabilities 101.4 1.3 53.4 – 156.1 152.4
Foreign currency forward exchange contracts
— Inflow 407.5 289.0 244.3 – 940.8
— Outflow (400.6) (277.9) (230.6) – (909.1)
6.911.113.7–31.728.0
Foreign currency option contracts
— Inflow – – – – –
— Outflow – – – – –
– – – – – 12.8
Interest rate derivative instruments net inflows (outflows) (i) (0.1) – 0.3 0.1 0.3 0.9
Total derivative financial instruments 6.8 11.1 14.0 0.1 32.0 41.7
(i) Interest rate swaps derivative cash flows are estimated using forward interest rates at reporting date.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited70
c. Credit risk
The Group incurs credit risk in respect of trade receivables, financial instruments, cash and
cash equivalents and short-term investments in the normal course of business. The maximum
exposure to credit risk is represented by the carrying value of these financial assets. Credit risk
is managed on a Group basis with no significant concentration of credit risk.
The Group has policies in place to ensure that sales of products and services are made to
customers with an appropriate credit history. There are no significant trade receivable balances
relating to customers who have previously defaulted on amounts due to the Group.
Derivative counterparties, cash transactions, cash at banks and short-term investments are
limited to high credit quality financial institutions. The Group has policies that limit the amount
of credit exposure to any one financial institution according to the credit rating of the financial
institution concerned. Over 97% of cash and short term investments (2017: 95%) is held with
counterparties with credit rating of Standard and Poors’ A- and above.
The Group’s exposure to credit risk from derivative financial instruments is limited because it
does not expect non-performance of the obligation contained therein due to the credit rating
of the financial institutions concerned. The Group does not require collateral or other security to
support derivative financial instruments.
d. Capital risk management
The main objective of capital risk management is to ensure the Group operates as a going
concern, meets debts as they fall due, maintains an appropriate capital structure, and manages
the cost of capital. Group capital comprises all components of equity. To maintain or alter
the capital structure the Group has the ability to review the size of the dividends paid to
shareholders, return capital or issue new shares, reduce or increase debt or sell assets.
There are a number of external bank covenants in place relating to debt facilities. These
covenants are calculated monthly and reported to the banks semi-annually. The principal
covenants relating to capital management are the interest cover ratio, the net tangible assets
minimum requirement and total tangible assets ratio. The consequences of a breach of these
covenants would depend on the nature of the breach, but could range from an instigation of an
event of review, to a demand for repayment. There have been no breaches of these covenants or
events of review for the current or prior period.
22. FINANCIAL RISK MANAGEMENT CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
71
23. SIGNIFICANT EVENTS AFTER BALANCE DATE
On 25 May 2018 the directors approved the payment of a fully imputed 2018 final dividend
of $71.4 million (12.5 cents per share) to be paid on 6 July 2018. A supplementary dividend of
2.2059 cents per share was also approved for eligible non-resident shareholders.
24. OTHER ACCOUNTING POLICIES
a. Changes to accounting policies
There have been no changes in accounting policies.
Where necessary comparative information has been reclassified to achieve consistency in
disclosure with the current period.
b. Standards, Interpretations and Amendments to Published Standards
The following accounting standards and amendments to existing standards are not yet effective
and have not been early adopted by the Group:
NZ IFRS 15, ‘Revenue from Contracts with Customers’ deals with revenue recognition and
establishes principles for reporting useful information to users of financial statements about
the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s
contracts with customers. Revenue is recognised when a customer obtains control of a good
or service and thus has the ability to direct the use and obtain the benefits from the good or
service. The standard replaces NZ IAS 18 ‘Revenue’ and NZ IAS 11 ‘Construction Contracts’ and
related interpretations. The standard is effective for the Group from 1 April 2018.
Management has assessed the effects of applying the new standard through the detailed
assessment of significant and more complex contracts across the Group. The assessment
identified minor differences between the current recognition of certain aspects of the Group’s
contracts and their recognition under NZ IFRS 15. The impact of these differences on the 2018
financial year has been assessed and is not material. The differences are also not expected to
have a material impact on the Group in the foreseeable future.
The majority of revenue earned by the Group is derived from the satisfaction of a single
performance obligation for each contract which is the sale of products. This revenue has
historically been recognised at the time legal title of the products passes to the customer. The
detailed assessment of contracts performed by Management has determined that the customer
obtains control of products at the same time as legal title passes to the customer. In relation to
the contract price, the detailed assessment performed by Management has not identified any
material changes under NZ IFRS 15 to the accounting for rebates, discounts, or any other items
of variable consideration.
NZ IFRS 16, ‘Leases’, has not been early adopted. The current accounting model for leases
required a distinction between a finance lease (on balance sheet) and an operating lease (off
balance sheet). NZ IFRS 16 now requires a lessee to recognise a lease liability reflecting future
lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The IASB has included
an optional exemption for certain short-term leases and leases of low-value assets. The standard
becomes effective for periods beginning after 1 January 2019. Lease commitments as set out in
Note 20 predominantly relate leased properties outside New Zealand that are expected to be
brought onto the balance sheet. The adoption is not expected to have a significant impact on
the Income Statement.
There are no other new standards or amendments to existing standards effective for the
financial year ended 31 March 2018 which have or will have a material impact on the Group.
c. Impairment of non-financial assets
Assets that have an indefinite useful life or are under development are not subject
to amortisation and are tested annually for impairment. Assets that are subject to
amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. The recoverable amount is
the higher of an asset’s fair value less costs to sell, and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash generating units).
d. Goods and Services Tax (GST)
The Income Statement has been prepared so that all components are stated exclusive
of GST. All items in the Balance Sheet are stated net of GST, with the exception of trade
receivables and payables, which include GST invoiced.
e. Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term highly liquid investments with maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown
within current interest-bearing liabilities on the Balance Sheet.
f. Short-term investments
Short-term investments includes all other current investments that do not meet the
definition of Cash and cash equivalents. The Group’s balance is made up of deposits with
financial institutions with maturities at the date of acquisition between 90 and 182 days.
g. Research and development
Research expenditure is expensed as incurred. Development costs that are directly
attributable to the design and testing of identifiable and unique products controlled by
the Group are recognised as intangible assets only when all the following criteria are met:
it is technically feasible to complete the product so that it will be available for use or sale;
management intends to complete the product and use or sell it; there is an ability to use
or sell the product; it can be demonstrated that the product will generate future economic
benefits; adequate technical, financial and other resources to complete the development
and to use or sell the product are available; and the expenditure attributable to the product
during its development can be reliably measured and is material. Directly attributable
costs capitalised as part of the product would include employee costs and an appropriate
portion of relevant overheads. Other development expenditures that do not meet these
criteria are recognised as an expense as incurred. Development costs previously recognised
as an expense are not recognised as an asset in a subsequent period. Development costs
recognised as an asset are amortised over their estimated useful lives.
h. Financial guarantee contracts
A financial guarantee contract is a contract that requires a company within the Group to
make specified payments to reimburse the holder for a loss it incurs because a specified
debtor fails to make payment when due. Financial guarantee contracts are initially
recognised at fair value. Financial guarantees are subsequently measured at the greater of
the initial recognition amount less amounts recognised as income or the estimated amount
expected to have to be paid to a holder for a loss incurred.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited72
INDEPENDENT AUDITOR’S REPORT
To the shareholders of Fisher & Paykel Healthcare Corporation Limited
The consolidated financial statements comprise:
• the consolidated balance sheet as at 31 March 2018;
• the consolidated income statement for the year then ended;
• the consolidated statement of comprehensive income for the year then ended;
• the consolidated statement of changes in equity for the year then ended;
• the consolidated statement of cash flows for the year then ended; and
• the notes to the financial statements, which include significant accounting policies.
OUR OPINION
In our opinion, the consolidated financial statements of Fisher & Paykel Healthcare Corporation Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 31 March 2018, its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of accounting standards advice, risk management advice, treasury risk management advice, tax compliance, scrutineering the counting
of votes at the Annual Shareholders Meeting, and other assurance services in relation to constant currency disclosures and the assessment of eligible expenditure for the purposes of the research &
development growth grant. The provision of these other services has not impaired our independence as auditor of the Group.
OUR AUDIT APPROACH
Overview
An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement.
Overall group materiality: $13 million, which represents 5% of profit before tax.
We chose profit before tax as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured by users,
and is a generally accepted benchmark.
We have determined that there are two key audit matters:
• Legal proceedings with ResMed
• Revenue recognition
Materiality
Audit scope
Key audit
matters
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201873
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as
set out above. These, together with qualitative considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements, both individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
Our Group audit scope focused on the major operating subsidiaries which were selected based on their contribution to the Group’s revenue or profit before tax. In aggregate, the subsidiaries
selected contributed 84% of the Group’s revenue and 93% of the Group’s profit before tax.
Audits of each subsidiary are performed at a materiality level calculated by reference to a proportion of Group materiality appropriate to the relative scale of the business concerned.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matterHow our audit addressed the key audit matter
Legal proceedings with ResMed
As described in Note 19, the Group is involved in patent
litigation with ResMed. There are a number of ongoing
related proceedings in multiple jurisdictions. This was an
area of audit focus because the estimation of any likely
financial reporting impact or potential outcome requires
significant judgement due to the uncertainties associated
with the litigation process. There is also a heightened risk
that the associated disclosures may not be adequate.
For proceedings where there has been no determination,
no amount has been recorded in the financial statements
for any potential asset or liability arising from the litigation
process.
To understand the status of the litigation with ResMed across all jurisdictions we performed the following audit procedures:
• We held discussions with senior management and in-house legal counsel.
• We read external legal advice received by the Group in relation to ongoing litigation.
• We examined legal expenses incurred during the year to obtain an understanding of the status of proceedings through the
costs incurred with external legal counsel.
• We communicated directly with external legal advisors to ensure that our understanding of the ongoing litigation was
complete and that our understanding of the fact pattern for each of the proceedings was accurate.
We reviewed the accuracy and adequacy of the disclosure in Note 19 based on the understanding obtained from the procedures
described above.
Based on the work performed, management’s judgement in relation to the likely outcome of ongoing litigation was consistent
with the results of the audit procedures we performed.
INDEPENDENT AUDITOR’S REPORT
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited74
Key audit matterHow our audit addressed the key audit matter
Revenue recognition
The Group’s revenue primarily consists of the sale of goods
which totalled $964.5 million in the year to 31 March 2018,
as outlined in Note 4.
There is complexity involved in the recognition of revenue
as the Group’s products are sold to customers in multiple
territories with differing terms in the sales contracts.
In addition, there is potential for management to manually
intervene in the timing of the recognition of revenue.
Our audit procedures included evaluating the processes and controls in place over the recording of sales revenue.
We utilised data assurance techniques to match cash received during the year to invoices issued to customers. For revenue
transactions that were not completely settled via the receipt of cash or were not a receivable at balance date we obtained
evidence that the transactions were valid and recognised in the correct financial year. For a sample of transactions within
accounts receivable at balance date we obtained either a confirmation of the amount owing from the customer, or evidence that
the amount owing was received by the Group subsequent to year end.
We also utilised data assurance techniques to identify journal entries posted to revenue during the year and obtained evidence
that any significant journals were appropriate and recorded in the correct period.
We defined the time period, both before and after 31 March 2018, where there was a heightened risk of error in relation to the
timing of recognition of sales transactions. This involved determining the potential time difference between when revenue is
recognised in the accounting system, and when revenue should be recognised according to the range of applicable sales terms
in the respective contracts. For a sample of transactions recognised within the defined time period we confirmed that the date
on which revenue was recognised was appropriate by examining the associated invoice, the terms of the sales contract, and the
relevant delivery documentation.
We believe that the procedures performed responded to the heightened risk and no exceptions were identified.
INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR’S REPORT
The Directors are responsible for the annual report. Our opinion on the consolidated financial statements does not cover the other information included in the annual report and we do not and will
not express any form of assurance conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the
other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such
internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs NZ and ISAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
WHO WE REPORT TO
This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might state those matters which we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as
a body, for our audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Jonathan Skilton.
For and on behalf of:
Chartered Accountant Auckland
25 May 2018
INDEPENDENT AUDITOR’S REPORT
Fisher & Paykel Healthcare Corporation LimitedAnnual Report 201875
Corporate
Governance
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited76
CORPORATE GOVERNANCE
AND STATUTORY INFORMATION
The Board and management of Fisher & Paykel Healthcare are committed to ensuring that the
company adheres to best practice governance principles and maintains the highest ethical
standards. The Board regularly reviews and assesses the company’s governance structures to
ensure that they are consistent, both in form and in substance, with best practice.
The company is listed on both the New Zealand and Australian stock exchanges. Corporate
governance principles and guidelines have been introduced in both countries. These include
the NZX Corporate Governance Code and the Australian Securities Exchange (ASX) Corporate
Governance Council’s Corporate Governance Principles and Recommendations (3rd edition)
(collectively, the “Principles”).
As at 25 May 2018, the Board considers that the company’s corporate governance practices and
procedures substantially reflect the Principles.
As encouraged by the ASX Corporate Governance Council, the company has published certain
corporate governance disclosures on its website. These disclosures are set out in the company’s
Annual Corporate Governance Statement as approved by the company’s Board on 25 May
2018 (the “2018 Corporate Governance Statement”), which is incorporated into this Annual
Report by cross-reference and can be viewed at www.fphcare.co.nz/corporategovernance (the
“Company’s Website”).
The full content of the company’s corporate governance policies, practices and procedures can
be found on the Company’s Website.
THE BOARD
Board composition
There are eight directors on the Board. Seven of the eight directors are non-executive directors.
Lewis Gradon, the Managing Director and Chief Executive Officer, is the only executive director
on the Board. The Chair of the Board is Tony Carter.
During the twelve months to 31 March 2018:
• On 1 June 2017 Pip Greenwood was appointed to the Board as a non-executive director.
• At the company’s annual shareholders’ meeting on 24 August 2017:
(a) Lindsay Gillanders retired from the Board;
(b) Pip Greenwood stood for election and was elected to the Board; and
(c) Geraldine McBride and Tony Carter retired by rotation and, being eligible, offered
themselves for re-election and were re-elected to the Board.
The biography of each Board member, including each director’s skills, experience, expertise and
the term of office held by each director at the date of this Annual Report, is set out in the “Our
Board” section of this Annual Report.
Independence of directors
The company considers that six of the current directors were independent directors, namely
Tony Carter, Scott St John, Pip Greenwood, Geraldine McBride, Arthur Morris and Donal
O’Dwyer. Please refer to the 2018 Corporate Governance Statement for more information about
the company’s assessment of the directors’ independence.
Committees
Specific responsibilities are delegated to the Audit & Risk Committee, the People and
Remuneration Committee and the Quality, Safety and Regulatory Committee.
The People and Remuneration Committee was formed on 2 May 2018, as a result of the Board’s
decision to amalgamate the duties and responsibilities of the Remuneration and Human
Resources Committee and the Nomination Committee.
These Board committees support the Board by working with management on relevant issues
at a suitably detailed level and then reporting back to the Board. Please refer to the 2018
Corporate Governance Statement for a summary of each committee’s responsibilities and
functions. Each committee has a charter detailing its objectives, procedures, composition and
responsibilities. Copies of these charters are available on the Company’s Website.
Committee membership
• Audit & Risk Committee – members of this committee are Scott St John (Chair), Tony Carter
and Michael Daniell.
• People and Remuneration Committee – members of this committee are Pip Greenwood
(Chair), Tony Carter, Donal O’Dwyer and Scott St John.
• Quality, Safety and Regulatory Committee – members of this committee are Arthur Morris
(Chair), Tony Carter and Donal O’Dwyer.
Board processes
The Board held 8 meetings during the year ended 31 March 2018. The table below shows
attendance at all meetings of the Board and committees referred to above. At the company’s
Annual Meeting of Shareholders held on 24 August 2017, all of the then-serving directors
attended the meeting.
Annual Report 201877Fisher & Paykel Healthcare Corporation Limited
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Board
Audit & Risk
Committee
Remuneration and Human
Resources Committee
Nomination
Committee
Quality, Safety and
Regulatory Committee
Eligible
to attendAttended
Eligible
to attendAttended
Eligible
to attendAttended
Eligible
to attendAttended
Eligible
to attendAttended
Tony Carter8844333333
Lewis Gradon
88
Michael Daniell
1
8833
Lindsay Gillanders
2
3311
Pip Greenwood
3
772222
Geraldine McBride
87
Arthur Morris
8833
Donal O’Dwyer
88333333
Scott St John
88443333
Directors’ remuneration
The maximum total monetary sum payable by the company by way of directors’ fees is $1,050,000 per
annum as approved by shareholders at the 2017 annual shareholders’ meeting. This increase took effect
from September 2017. As a result, for the year end 31 March 2018, the directors were paid at the previous
remuneration rate for quarters 1 and 2, and an increased remuneration rate for quarters 3 and 4. The table
below shows the total directors’ fees paid by the company in the year ended 31 March 2018:
1 Joined Audit & Risk Committee on 24 August 2017.
2 Retired from Board on 24 August 2017.
3 Appointed to Board on 1 June 2017.
DirectorBoard Fees
Audit & Risk
Committee
Remuneration and
Human Resources
Committee
Nomination
Committee
1
Quality, Safety
and Regulatory
Committee
Shares and
other payments
Total
remuneration
Tony Carter (Chair)
2
$218,350$0$0$0$0$218,350
Michael Daniell
3
$96,065$9,750$105,815
Lindsay Gillanders
4
$38,867$6,625$45,492
Pip Greenwood
5
$80,518$13,875 (Chair)$94,393
Geraldine McBride$95,642
6
$95,642
Arthur Morris$96,065$21,825 (Chair)$117,890
Donal O’Dwyer$96,065$13,725$0$16,375$21,200 (travel allowance)$147,365
7
Scott St John$96,065$27,300 (Chair)$13,725$0$137,090
Total$817,637$43,675$41,325$0$38,200$21,200$962,037
Non-executive directors do not take a portion of their remuneration under an equity security plan but
directors may hold shares in the company, details of which are set out in the “Directors’ Shareholdings”
section of this Annual Report. It is the company’s policy to encourage directors to own shares in the
company and to acquire any shares on-market.
No non-executive director is entitled to receive a retirement payment unless eligibility for such payment
has been agreed by shareholders and publicly disclosed during his or her term of Board service or such
retirement payment is within the limits prescribed by the NZX Main Board Listing Rules. More information
about the NZX Main Board Listing Rules, and the Board resolution approved at the 2004 Annual Meeting
of Shareholders, in each case relating to directors’ retirement payments, is set out in the 2018 Corporate
Governance Statement. A non-executive director’s retirement allowance of NZ$106,605, being an
amount that did not exceed the total remuneration of Lindsay Gillanders in the three years preceding his
retirement, was paid to Lindsay Gillanders following his retirement on 24 August 2017.
1 Fees for Nomination Committee role are included in Remuneration and Human Resources
Committee fee. As noted above these committees have now merged into the People and
Remuneration Committee.
2 No additional fees are paid to the Board Chair for committee roles.
3 Appointed to Audit & Risk Committee to replace Lindsay Gillanders on 24 August 2017.
4 Retired from the Board and the Audit & Risk Committee on 24 August 2017.
5 Appointed to the Board on 1 June 2017 and appointed Chair of Remuneration and Human
Resources Committee fee on 1 October 2017.
6 Fee includes minor reduction for cost of airfares paid by the company in April 2017.
7 The remuneration for Donal O’Dwyer is set in NZD but paid in AUD at the prevailing
exchange rate at the date of payment.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited78
CEO REMUNERATION
CEO Remuneration Disclosure
CEO remuneration 2018
2018Salary
Employer superannuation
contribution
Fixed remuneration
subtotal
Annual Variable
Remuneration (AVR)
Long-term Variable
Remuneration (LTVR) AwardedSubtotal
Total remuneration
(single figure)
Lewis Gradon$992,639$74,690$1,067,329$629,253$616,327$1,245,580$2,312,909
CEO remuneration 2017
2017Salary
Employer superannuation
contribution
Fixed remuneration
subtotal
Annual Variable
Remuneration (AVR)
Long-term Variable
Remuneration (LTVR) AwardedSubtotal
Total remuneration
(single figure)
Lewis Gradon$881,238$65,296$946,534$552,216$296,160$848,376$1,794,910
Two Year Summary – CEO remuneration
Single Figure
Remuneration% AVR against maximumSpan of LTVR performance period
2018 Lewis Gradon$2,312,90980%3-5 years
2017 Lewis Gradon$1,794,91086%3-5 years
Explanation of the above benefits
1. Lewis Gradon does not receive any directors fees.
2. The FY18 Annual Variable Remuneration (AVR) was earned in FY18 but will be paid in FY19
and is included in the above FY18 AVR figures. The FY17 AVR was earned in FY17 but paid
in FY18 and is included in the above FY17 AVR figures. AVR includes performance-based
at-risk components and the company-wide profit share programme.
3. Long-term Variable Remuneration (LTVR) includes the Share Option Plan and the
Performance Share Rights (PSR) Plan. Details of the plans and valuation methodology is
set out in note 18 to the financial statements. In FY18, Lewis Gradon was granted 40,598
performance share rights and 111,364 share options. In FY17, Lewis Gradon was granted 24,000
performance share rights and 72,000 share options. Share option and PSR plans granted in
FY17 and FY18 will vest, if the performance criteria is met, in FY20 and FY21 respectively.
FY18 Total Remuneration
0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
FixedOn PlanMaximum
27%
23%
33%
44%
100%
26%
47%
Fixed remuneration
LTVR
AVR
The remuneration disclosures for the Chief Executive Officer are influenced by the New Zealand
Shareholders’ Association’s Framework for Reporting of CEO Remuneration in NZ Companies.
Annual Report 201879Fisher & Paykel Healthcare Corporation Limited
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
CEO Remuneration Disclosure (continued)
Fixed Remuneration comprises salary and employer superannuation contributions as disclosed
on the previous page of this report.
The annual variable remuneration plan pays out at 53% of fixed remuneration at target.
The long term variable remuneration amount represents awards granted in FY18 that will vest
following the performance period 2020 to 2023.
The following long terms incentives vested in FY18. These awards were granted to Lewis in his
previous capacity as Senior VP, Products and Technology:
Grant yearsecurities
Performance
period
Performance
measure
Vesting
outcome
Shares
vested
Value on
vesting
FY15
Performance
Share Rights
August 2014
to August
2017
Absolute
TSR
100%
vested30,000$344,400
(i)
Share Options
August 2014
to August
2017
Cost of
capital
escalated
share price
100%
vested80,000$528,000
(ii)
(i) Represents the NZX closing price of Fisher & Paykel Healthcare Corporation Limited Ordinary Shares
on the vesting date multiplied by the number of PSR vested
(ii) Represents the difference between the exercise price and the NZX closing price of Fisher & Paykel
Healthcare Corporation Limited Ordinary Shares on the vesting date, multiplied by the number of
Share Options vested
Pay for performance breakdown
PlanPerformance measures
Annual Variable
Remuneration Plan (AVR)
The Annual Variable Remuneration Plan is designed to
incentivise growth in annual financial measures as well as
targeted individual objectives.
MeasuresWeighting
Amount
of Target
Achieved
Constant currency operating profit45%100.1%
Constant currency revenue25%97.7 %
Constant currency pre-tax operating
cash flow
10%105.2%
Non-financial measures20%100%
Long Term Variable
Remuneration (LTVR)
Share Option Plan – Options vest at any time between the third
anniversary and the fifth anniversary of the grant date as long
as the share price on the NZX has exceeded the escalated price.
The escalated price is determined by a representative amount
representing the company’s cost of capital.
Performance Share Rights Plan – PSRs become exercisable
if the company’s gross total shareholder return exceeds the
performance of the Dow Jones US Select Medical Equipment
Total Return Index over the same period.
5 Year Summary – TSR Performance
100
150
200
250
300
Mar 14Mar 15Mar 16Mar 17
Fisher & Paykel Healthcare
Mar 18
S&P/NZX 50 Index
Dow Jones U.S. Select
Medical Equipment Index
To enable better comparability of the relative shareholder return performance, the FPH and
S&P/NZX 50 closing prices on the NZX have been converted to US dollars at the daily closing
rate quoted by the Reserve Bank of New Zealand.
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited80
SENIOR MANAGEMENT REMUNERATION
Please see the “Employee Remuneration” section below, where the company has disclosed remuneration (inclusive of the value of other benefits) received by employees or former employees of the
company or its subsidiaries in the relevant bandings of employee remuneration totalling NZ$100,000 or more received in the year ended 31 March 2018. More information about the company’s senior
management remuneration policy and packages is set out in the 2018 Corporate Governance Statement.
EMPLOYEE REMUNERATION
The Group operates in a number of countries where remuneration market levels differ widely. The offshore remuneration amounts are converted into New Zealand dollars.
Of the employees noted in the table below 45% are employed by the Group outside New Zealand. During the year ended 31 March 2018 a number of employees or former employees of the Group,
not being directors of the company, received remuneration and other benefits totalling NZ$100,000 or more in value as follows:
Remuneration
Number of
employees
$
100,000 – 110,000155
110,001 – 120,000119
120,001 – 130,000105
130,001 – 140,00099
140,001 – 150,00074
150,001 – 160,00049
160,001 – 170,00048
170,001 – 180,00043
180,001 – 190,00035
190,001 – 200,00023
200,001 – 210,00012
210,001 – 220,00012
220,001 – 230,00016
230,001 – 240,00011
240,001 – 250,00010
250,001 – 260,00011
260,001 – 270,0004
270,001 – 280,0005
280,001 – 290,0004
290,001 – 300,0003
300,001 – 310,0002
Remuneration
Number of
employees
$
310,001 – 320,0004
320,001 – 330,0001
340,001 – 350,0003
350,001 – 360,0001
360,001 – 370,0005
370,001 – 380,0002
380,001 – 390,0001
390,001 – 400,0001
400,001 – 410,0002
410,001 – 420,0001
450,001 – 460,0001
470,001 – 480,0001
490,001 – 500,0001
560,001 – 570,0001
590,001 – 600,0001
620,001 – 630,0001
700,001 – 710,0001
770,001 – 780,0001
920,001 – 930,0001
1,250,001 – 1,260,0001
1,270,001 – 1,280,0001
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 201881Fisher & Paykel Healthcare Corporation Limited
PRINCIPAL ACTIVITIES
The company is a world-leading designer, manufacturer and marketer of products and systems
for use in respiratory care, acute care, surgery and the treatment of obstructive sleep apnea.
There were no significant changes to the state of affairs of the company or to the nature of the
company’s (or its subsidiaries’) principal activities during the year ended 31 March 2018.
POLICIES
The company has in place a number of policies including those covering performance
evaluation of the Board, Board committees, individual directors and senior executives, external
financial auditors, remuneration, market disclosure, communication with shareholders, share
trading and human resources and health and safety.
Summary information with respect to a number of the company’s policies can be found in the
2018 Corporate Governance Statement. More detailed information about all these policies can
also be found on the Company’s Website.
Diversity Policy
Our business’ purpose is to improve care and outcomes for patients, clinicians and communities
around the world. This is a purpose that’s about people. And if we are to truly deliver on this,
we know we need the best people and the best environment in which the best ideas can grow.
As a global company, we value the differences our people bring as we believe this creates
a diversity of thinking that forms the foundations of our culture. We believe that these
differences foster continuous questioning and continuous improvement which builds innovative
and high performing teams.
We strive to provide an environment where all our people have the opportunity to reach their
full potential. If we can achieve that, then we know we are doing the best we can for not only
our people and our company, but also for our patients and our communities.
Commitment to doing the right thing by our people
One of our core beliefs is that the commitment to doing the right thing is what our customers
will find compelling. This extends to doing the right thing by our own people.
What does doing the right thing by our own people look like?
1. Providing equal employment opportunities
Fisher & Paykel Healthcare and its Board are committed to providing equal employment
opportunities and as such, have a workforce consisting of many individuals with diverse
skills, values, backgrounds, ethnicity and experiences.
For Fisher & Paykel Healthcare, a commitment to diversity means ensuring that no
individual is excluded from a position, for which he or she is skilled and qualified, by
inappropriate systems, practices and attitudes. It also means eliminating barriers to ensure
that everyone is considered for the employment of their choice and that our people have
the chance to perform to their full potential.
We will ensure our selection processes for recruitment and employee development
opportunities are free from bias and are based on merit.
2. Commitment to an inclusive workplace
At Fisher & Paykel Healthcare, we have fostered a culture where people are treated fairly
and with respect and we are committed to ensuring an inclusive workplace. We will:
• Promote awareness around the importance of a diverse and inclusive workforce;
• Encourage employees to offer views and suggestions towards achieving
organisational goals;
• Review our systems, policies and practices to make sure an inclusive approach is
taken; and
• Ensure our built environment continues to support an inclusive workplace.
3. Establishing measurable objectives and reporting on progress
As the saying goes, “what gets measured gets improved”. The Board is responsible for
establishing measurable objectives for achieving a diverse and inclusive workforce.
We will use both quantitative and qualitative measures to review our diversity performance
and, as with all areas of our business, have a focus on continuous improvement.
The company has appointed the Chief Executive Officer and Vice President – Human Resources
as the company’s Diversity Managers.
The People and Remuneration Committee is responsible for overseeing the company’s Diversity
Policy. Each year the People and Remuneration Committee review and report to the Board on
the company’s Diversity Policy, its diversity objectives and the company’s achievement against
its diversity objectives, including the representation of women at all levels of the organisation.
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited82
Review of progress against last year’s objectives
Our diversity and inclusion objectives for the 2018 financial year were to:
1. Conduct a detailed review of all New Zealand salaried employee records and rectify any
instances where employees have been under-paid relative to their experience in the role.
2. Review policies to identify sources of potential bias and implement preventative
measures, specifically related to:
• gender pay equality; and
• the promotion of men and women to management positions.
3. Commence a Gender Diagnostic of Fisher & Paykel Healthcare’s operations outside of
New Zealand.
4. Measure employee perceptions on diversity and inclusion at Fisher & Paykel Healthcare
through the next employee engagement survey.
Salaried Employee Review
A detailed review of New Zealand salaried employees identified potential instances of
under-payment relative to experience and peers which we rectified through our annual salary
review process. This action was a factor in the closure of the pay gap as illustrated in the table
opposite. We have an ongoing process to monitor relativity of salaries and will continue to
rectify any under-payments as appropriate.
Policy and Practice Review
We now proactively identify employees who may be ready for a promotion or a move to a new
role, considering experience, time in role and performance. This pool of potential talent is open
for our leaders to consider when hiring for a new role.
We have put in place guidelines for our annual salary review which encourage leaders to
consider internal relativity and provides a framework for consistency across teams. In addition,
we have also introduced a guide for setting salary offers for both new joiners, internal moves
and promotions, again highlighting the importance of considering internal relativity and
requiring additional approval and justification for any offers that are either high or low within
the salary band for the role.
Global Gender Diagnostic
The diagnostic exercise highlighted a pay gap associated with gender in two of our
international locations (Mexico and the US). In 2019, we will ensure that all roles in Mexico are
evaluated using the same criteria as all other locations and put in place measures that have
had a positive impact on the New Zealand gender pay gap and will continue to undertake
diagnostics across all our locations to identify and act on any areas of pay differentials.
20172018
WomenMenWomen %Men %WomenMenWomen %Men %
Board1713%87%2625%75%
Senior executives
1
1811%89%1811%89%
All employees
2
1,8512,13546%54%1,9102,13847%53%
1. “Senior executive”, as it is used in the table above, refers to the Chief Executive Officer and senior executives reporting directly to the Chief Executive Officer.
2. Temporary staff are not included in the above numbers.
Employee Diversity Perceptions
Our employee engagement survey, My Say, illustrated that 76% of our employees feel that
Fisher & Paykel Healthcare values diversity (e.g., age, gender, ethnicity, language, education,
qualifications, ideas, and perspectives). The survey also provided our people with the
opportunity to comment on diversity and inclusion and once the full results are available this
will enable a richer understanding of how employees perceive Fisher & Paykel Healthcare and
will guide our diversity and inclusion objectives in 2019.
Gender pay ratios
FY17FY18
New Zealand (Salaried and Waged)98.8%99.3%
Outside of New Zealand (Salaried only)–¹97.6%
Total–¹98.7%
1. FY18 was the first year that gender pay ratios were calculated in respect of salaried
employees outside of New Zealand.
We measured the pay equity difference within salary bands and functions using the average
compa-ratio between males and females.
Objectives for the 2019 financial year
New Zealand
• Monitor Key Gender Metrics
–Monthly Internal Fill Rate for vacancies by Gender
–Monthly Labour Turnover by Gender
–Quarterly Pay Gap Metric
–Quarterly Gender Promotion Metric
–Quarterly Learning & Development Programme Attendance
–Quarterly Applicant Tracking Metrics by Gender
Rest of the World
• Evaluate all roles in Mexico using Hay Evaluation Methodology
• Monitor Key Gender Metrics
–Monthly Labour Turnover by Gender
–Quarterly Pay Gap Metric
The company’s Diversity Policy was reviewed during the year ended 31 March 2018 and updates
were approved by the Board on 25 May 2018. A copy of the updated policy is available on the
Company’s Website.
The table above shows the respective proportions of men and women on the board, in senior
executive positions and across the whole organisation as at 31 March 2017 and 31 March 2018.
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 201883Fisher & Paykel Healthcare Corporation Limited
RISK MANAGEMENT
In working to achieve our purpose of improving care and outcomes through inspired and
world-leading healthcare solutions, at Fisher & Paykel Healthcare it is our responsibility to
understand and manage the risks faced across our entire organisation.
The purpose of designing, implementing and maintaining an effective, structured approach to
risk management is to help improve the quality of decisions the business makes in the pursuit
of achieving our growth objectives of providing an expanding range of innovative medical
devices that improve care and outcomes.
Through our approach to risk management, we can:
• Increase the likelihood of achieving our business objectives
• Enhance our competitive advantage
• Deal with market instability more effectively
• Enable us to better meet customers’ expectations, contractual and regulatory requirements
• Enhance shareholder and customer confidence
• Have confidence that the right risks are being taken and that decisions across the extended
business are intelligent and informed
Components of our risk management approach
Our business risk management approach is derived from ISO 31000 Risk Management –
Principles and Guidelines, but enhanced to focus on our key strategic objectives. Whilst for
product risk ISO 14971 Medical Devices Application of Risk Management is the standard we
follow specific to medical device design and manufacturing. For Health and Safety our focus is
on the implementation of global health, safety & wellbeing standards that are aligned with ISO
45001 and a greater emphasis on the effective management of critical risks.
Governance
We have in place a number of risk management functions and systems which are intended
to identify and manage areas of material business risk. However, the Board is ultimately
responsible for overseeing the effectiveness of risk management, and the adequacy of the
internal controls and assurance which it believes should be monitored and managed on a
continuing basis.
For more detail, please refer to the 2018 Corporate Governance Statement, which is available
on the company’s website: www.fphcare.co.nz/corporategovernance.
Defining risk
We face a wide range of internal and external sources of uncertainty, both positive and
negative, that may affect our ability to achieve our objectives.
Risk to our success can be grouped into five categories: (1) Strategic, (2) Operational, (3)
Compliance, (4) Financial, and (5) Reputational. Some examples of each type of risk are
included in the table below.
Risk TypesRisk Examples
Strategic
• Inability to continue to innovate
• Reduction in business viability (changing technology, market
access issues, healthcare reform)
• Freedom to operate
• Commercialisation and protection of Intellectual Property
Operational
• Disruption to product supply
• Physical damage to key manufacturing centres
• Loss of critical systems for a prolonged period of time
• People and physical capacity requirements cannot keep up
with growth
Compliance
• Product Quality / Safety issues including violation of FDA
and other Health Authority regulations
• Employee Health & Safety
• Selling and promotion of our products
• Protection of personal data
• Local Tax and other laws
• Intellectual Property Infringement
Financial
• Foreign exchange volatility
• Reporting requirements
• Performance does not meet market expectations or FPH
guidance
Reputational
• Significant product quality issue
• Product recall
• Breach of anti-trust laws
• Ethical labour concerns
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited84
DIRECTORS’ AND OFFICERS’ INSURANCE AND INDEMNITY
The Group has arranged, as provided for under the company’s Constitution, policies of
directors’ and officers’ liability insurance which, with a Deed of Indemnity entered into with
all directors, ensure that generally directors will incur no monetary loss as a result of actions
undertaken by them as directors. Certain actions are specifically excluded, for example, the
incurring of penalties and fines which may be imposed in respect of breaches of the law.
USE OF COMPANY INFORMATION
There were no notices from directors of the company requesting to use company information
received in their capacity as directors which would not otherwise have been available to them.
CREDIT RATING
The company does not currently have an external credit rating status.
DONATIONS
Please refer to Note 5 of the Financial Statements for the Group’s donations in the financial
year to 31 March 2018.
ANNUAL SHAREHOLDERS’ MEETING
The company’s 2018 annual shareholders’ meeting will be held at the Guineas Ballroom,
Ellerslie Event Centre, Auckland, New Zealand on Thursday, 23 August 2018 at 2pm (NZST).
STOCK EXCHANGE LISTINGS
The company’s shares were listed on the NZX Main Board on 14 November 2001. The
company’s shares were listed on the ASX on 21 November 2001. On 20 June 2016 Fisher &
Paykel Healthcare changed its admission category to an ASX Foreign Exempt Listing. As part of
this change, the company is still required to comply with the NZX Main Board Listing Rules but
is not required to comply with many of the ASX listing rules. For the purposes of ASX Listing
Rule 1.15.3, the company confirms that is has complied with the NZX listing rules during the
year ended 31 March 2018.
There is no current on-market buy-back of the company’s ordinary shares and during the year
ended 31 March 2018 none of the company’s ordinary shares were purchased on-market under
or for the purposes of an employee incentive scheme or to satisfy the entitlements of holders
of options or other rights to acquire ordinary shares granted under an employee incentive
scheme. The company does not have any restricted securities or securities subject to voluntary
escrow on issue.
INCORPORATION AND LIMITATIONS ON THE ACQUISITION OF SHARES
The company is incorporated in New Zealand and is not subject to Chapters 6, 6A, 6B and
6C of the Australian Corporations Act 2001. In general, securities in the company are freely
transferable and the only significant restrictions or limitations in relation to the acquisition of
securities are those imposed by the New Zealand Takeovers Code, the Overseas Investment
Act 2005 (NZ), and the Commerce Act 1986 (NZ). The company does not impose additional
ownership restrictions.
CURRENT NZX WAIVERS
No waivers were sought from or granted by either of the NZX Main Board or ASX Listing Rules
within the 12 month period preceding the balance date of the company. During the same period
the company relied on the following three waivers previously granted by the NZX to issue
options under its share option plans, performance share rights under its performance share
rights plan and shares under its share purchase plans:
(1) waiver from NZX Main Board Listing Rule 7.1.10 and 7.1.16 in respect of the issue of options
under the company’s share options plans (granted 19 August 2011);
(2) waiver from NZX Main Board Listing Rule 7.1.10, 7.1.16 and 8.1.7 in respect of the company’s
performance share rights plan (granted 7 August 2012).
DISCIPLINARY ACTION TAKEN BY THE NZX OR THE ASX
Neither the NZX nor the ASX has taken any disciplinary action against the company during the
year ended 31 March 2018.
SHARE ISSUES
During the year ended 31 March 2018:
• 946,443 shares were issued under the company’s dividend reinvestment plan;
• 182,982 shares were issued under approved employee share purchase schemes;
• 138,619 shares were issued under employee share option plans upon the exercise of
previously granted share options;
• 1,727,514 shares were issued under employee share option plans using the Cancellation Offer
Facility as approved by shareholders on 12 August 2004;
• 548,270 shares were issued under the employee share rights plan upon exercise of
previously granted performance share rights;
• 1,119,685 share options were issued under an employee share option plan; and
• 408,183 performance share rights were issued under a performance share rights plan.
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 201885Fisher & Paykel Healthcare Corporation Limited
DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS
As disclosed in Note 18 of the Financial Statements, there were 4,827,988 options on issue to 503 employees and 1,231,313 performance share rights on issue to 503 employees as at 31 March 2018.
The company only has one class of shares on issue, ordinary shares, and these shares are listed on the NZX Main Board and ASX. There are no other classes of equity security currently on issue.
The company’s ordinary shares each carry a right to vote on any resolution at a meeting of shareholders. Holders of ordinary shares may vote at a meeting in person, or by proxy, representative or
attorney. Voting may be conducted by voice, by show of hands, or poll. There are no voting rights attaching to options or performance share rights. As at 30 April 2018 the company has not carried
out any issues of securities approved for the purposes of Item 7 of section 611 of the Australian Corporations Act 2001.
Size of Shareholding
Number of
holders%
Number of
Ordinary Shares%
1 to 1,000
7,51333.63,466,5510.6
1,001 to 5,000
10,27946.025,218,3164.4
5,001 to 10,000
2,65511.918,963,6573.3
10,001 to 50,000
1,6907.531,856,5785.6
50,001 to 100,000
1030.57,072,1781.2
100,001 and over1160.5484,735,99284.9
Total22,356100.0571,313,272100.0
The details set out above are as at 30 April 2018.
SUBSTANTIAL PRODUCT HOLDERS
According to company records and notices given under the Financial Markets Conduct Act 2013 there were no substantial product holders in ordinary shares (being the only class of quoted voting
products) of the company as at 31 March 2018.
The total number of ordinary shares (being the only class of quoted voting products) of the company on issue at 31 March 2018 was 571,230,264 ordinary shares and at 30 April 2018 was 571,313,272
ordinary shares.
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited86
PRINCIPAL SHAREHOLDERS
The names and holdings of the twenty largest registered shareholders in the company as at 30 April 2018 were:
Shareholder
1
Ordinary Shares%
HSBC Nominees (New Zealand) Limited 73,360,787 12.8
HSBC Custody Nominees (Australia) Limited 53,284,863 9.3
HSBC Nominees (New Zealand) Limited 50,758,604 8.9
JPMORGAN Chase Bank 49,713,386 8.7
J P Morgan Nominees Australia Limited 29,846,073 5.2
Citibank Nominees (NZ) Ltd 28,910,718 5.1
New Zealand Superannuation Fund Nominees Limited 14,217,802 2.5
Accident Compensation Corporation 13,918,732 2.4
National Nominees Limited 13,905,013 2.4
Tea Custodians Limited 13,593,077 2.4
Citicorp Nominees Pty Limited 10,224,132 1.8
Custodial Services Limited 9,604,374 1.7
Cogent Nominees Limited 8,729,859 1.5
FNZ Custodians Limited 8,366,027 1.5
Premier Nominees Limited 6,495,637 1.1
Bnp Paribas Noms Pty Ltd 6,035,127 1.1
Bnp Paribas Nominees NZ Limited 5,871,054 1.0
Custodial Services Limited 5,795,120 1.0
Forsyth Barr Custodians Limited 5,555,853 1.0
JBWERE (NZ) Nominees Limited 4,668,055 0.8
1 In the above table, the shareholding of New Zealand Central Securities Depository Limited (NZCSD) has been re-allocated to the underlying beneficial owners.
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 201887Fisher & Paykel Healthcare Corporation Limited
DISCLOSURE OF INTERESTS BY DIRECTORS
Directors’ certificates to cover entries in the company’s interests register in respect of remuneration, insurance, indemnities, dealing in the company’s shares, and other interests have been disclosed
as required by the Companies Act 1993.
DIRECTORS’ SHAREHOLDINGS
Directors held interests in the following ordinary shares in the company as at 31 March 2018:
Name OwnershipOrdinary Shares
Tony CarterBeneficial74,962
Lewis Gradon
1
Beneficial546,786
Michael Daniell
2
Beneficial969,592
Pip GreenwoodBeneficial3,800
Arthur MorrisBeneficial29,467
Donal O’DwyerBeneficial67,467
Scott St JohnBeneficial13,256
1 Lewis Gradon also had a beneficial interest in 336,364 options issued under the 2003 Share Option Plan and a beneficial interest in 90,598 performance share rights issued under the Performance Share
Rights Plan.
2 Michael Daniell also had a beneficial interest in 230,000 options issued under the 2003 Share Option Plan and a beneficial interest in 30,000 performance share rights issued under the Performance Share
Rights Plan.
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited88
SHARE DEALINGS BY DIRECTORS
In accordance with the Companies Act 1993 and the Financial Markets Conduct Act 2013, the Board has received disclosures from the directors named below of acquisitions or dispositions of relevant
interests (as defined in the Financial Markets Conduct Act 2013) in the company between 1 April 2017 and 31 March 2018, and details of those dealings were entered in the company’s interests register.
NameTransactionNumber of sharesPrice per shareDate
Tony CarterPurchase of ordinary shares under DRP¹47$11.22177 July 2017
Purchase of ordinary shares under DRP647$11.12847 July 2017
Purchase of ordinary shares under DRP30$13.801320 December 2017
Purchase of ordinary shares under DRP423$13.363520 December 2017
Lewis GradonSale of ordinary shares30,000$10.443029 May 2017
Share issue for cancellation of 70,000 options47,293$11,00528 June 2017
Sale of ordinary shares280,000$11.244117 July 2017
Exercise of 30,000 performance share rights30,000–31 August 2017
Granted 111,364 options––5 September 2017
Granted 40,598 performance share rights ––5 September 2017
Sale of ordinary shares17,000$13.350013 December 2017
Share issue for cancellation of 62,000 options45,627$13,519013 December 2017
Michael DaniellSale of ordinary shares20,000$10.191424 May 2017
Sale of ordinary shares20,000$10.107424 May 2017
Sale of ordinary shares25,000$10.644030 May 2017
Sale of ordinary shares25,000$10.670030 May 2017
Share issue for cancellation of 125,000 options 90,287$10.680431 May 2017
Sale of ordinary shares30,000$11.580025 August 2017
Sale of ordinary shares20,000$11.580325 August 2017
Exercise of 50,000 performance share rights50,000–1 September 2017
Sale of ordinary shares25,000$12.60628 September 2017
Sale of ordinary shares20,000$12.580011 September 2017
Sale of ordinary shares28,000$12.891815 September 2017
Share issue for cancellation of 100,000 options72,432$12.9497 15 September 2017
Sale of ordinary shares20,000$13.400012 December 2017
Share issue for cancellation of 25,000 options18,398$13,5190 13 December 2017
Sale of ordinary shares30,000$13.700015 December 2017
Lindsay GillandersSale of ordinary shares100,000$13.074330 November 2017
Arthur MorrisPurchase of ordinary shares under DRP88$11.08987 July 2017
Purchase of ordinary shares under DRP57$13.358220 December 2017
Purchase of ordinary shares3,243$13.266322 March 2018
Purchase of ordinary shares4,257$13.103123 March 2018
Purchase of ordinary shares12,500$13.061126 March 2018
Donal O’DwyerPurchase of ordinary shares under DRP671$11.10977 July 2017
Purchase of ordinary shares under DRP439$13.359820 December 2017
Scott St JohnPurchase of ordinary shares under DRP123$11.10977 July 2017
Purchase of ordinary shares under DRP80$13.410520 December 2017
1 DRP means the company’s dividend reinvestment plan, available for NZ and Australian resident shareholders. For more information: https://www.fphcare.co.nz/our-company/investor/dividend-information/
dividend-reinvestment-plan/.
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 201889Fisher & Paykel Healthcare Corporation Limited
GENERAL DISCLOSURE OF INTERESTS BY DIRECTORS
In accordance with Section 140(2) of the Companies Act 1993, the directors named below have made a general disclosure of interest by a general notice disclosed to the Board and entered in the
company’s interests register. General notices given by directors which remain current as at 31 March 2018 are as follows:
NameEntityRelationship
Tony CarterAir New Zealand LimitedChair
Blues Management LimitedChair
Fletcher Building Limited Director
Fisher & Paykel Healthcare Employee Share Purchase Trustee LimitedDirector
ANZ Bank New Zealand Limited Director
Loughborough Investments LimitedDirector & Shareholder
Avonhead Mall LimitedDirector & Shareholder
Antony Carter Family Trust No 2 Trustee
Foodstuffs Auckland Perpetuation TrustTrustee
Foodstuffs Auckland Protection TrustTrustee
Maurice Carter Charitable TrustTrustee
Tony and Frances Carter Family TrustTrustee
Capital Solutions LimitedAdvisor
Capital Training LimitedAdvisor
Lewis GradonFisher & Paykel Healthcare Employee Share Purchase Trustee LimitedDirector
Other company subsidiaries as listed in the section ‘Subsidiary Company Directors’ of this Annual ReportDirector
Michael DaniellMedical Technologies Centre of Research ExcellenceChair
Tait LimitedDirector
MRCF Pty LimitedDirector
MRCF IIF GP Pty LimitedDirector
Council of the University of AucklandCouncil member
Lindsay Gillanders Auckland Packaging Company LimitedChair
(retired)LRS Management LimitedDirector
Rangatira LimitedDirector
Bio-Strategy Holdings LimitedDirector
Black Magic Tackle LimitedDirector
Black Magic Tackle IP LimitedDirector
Pip GreenwoodRussell McVeaghPartner
Spark New Zealand LimitedDirector
Auckland Writers Festival TrustTrustee
Rakino TrustTrustee
Theresa Gattung Investment TrustTrustee
Milbrook 7th TrustTrustee
Oriental TrustTrustee
Portia TrustTrustee
Geraldine McBrideNational Australia Bank LimitedDirector
Sky Network Television LimitedDirector
MyWave Holdings LimitedDirector
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited90
NameEntityRelationship
Arthur MorrisMercy Healthcare Auckland LimitedDirector
Southern Cross Hospitals LimitedDirector
Auckland School of Medicine FoundationTrustee
Southern Cross Health TrustTrustee
Donal O’DwyerAtcor Medical Pty LimitedChair
Cochlear LimitedDirector
Mesoblast LimitedDirector
nib Holdings LimitedDirector
Scott St JohnTe Awanga Terraces LimitedDirector
Fonterra Cooperative Group LimitedDirector
Hutton Wilson Nominees LimitedDirector
Captain Cook Nominees LimitedDirector
NEXT FoundationDirector
Fonterra Shareholders FundDirector
Mercury NZ LimitedDirector
First NZ Capital Holdings LimitedDirector
St John Family TrustBeneficiary
Macleod TrustBeneficiary
Council of the University of AucklandChancellor
Butland Medical FoundationTrustee
ENTRIES RECORDED IN THE INTERESTS REGISTER
Except for disclosures made elsewhere in this Annual Report, there have been no entries in the
company’s interests register made during the year ended 31 March 2018.
No entries were made in the interests register of any subsidiary of the company during the year
ended 31 March 2018.
SUBSIDIARY COMPANY INFORMATION
Section 211(2) of the Companies Act 1993 requires the company to disclose, in relation to its
subsidiaries, the total remuneration and value of other benefits received by directors and
former directors, and particulars of entries in the interests registers made, during the year
ended 31 March 2018.
As at 31 March 2018, all directors of subsidiaries were full-time employees of the Group, with
the exception of:
(a) Tony Carter who is a director of Fisher & Paykel Healthcare Employee Share Purchase
Trustee Limited.
(b) Lawrence Gibbons who is a director of Fisher & Paykel Healthcare S.A. de C.V. (Mexico).
(c) Alex Koshy who is a director of Fisher & Paykel Healthcare India Private Limited (India).
Tony Carter and Lawrence Gibbons do not receive any remuneration or other benefits for their
roles as directors of the above subsidiaries. In the year end 31 March 2018, Alex Koshy received
NZ$6,936.92 for his role as a director of Fisher & Paykel Healthcare India Private Limited.
No employee of the Fisher & Paykel Healthcare Group who is appointed as a director of Fisher
& Paykel Healthcare Corporation Limited or its subsidiaries receives or retains any remuneration
or other benefits in his or her capacity as a director. The remuneration and other benefits of
such employees and former employees (received as employees) totalling NZ$100,000 or more
during the year ended 31 March 2018 are included in the relevant bandings for remuneration
disclosed in the ‘Employee Remuneration’ section of this Annual Report.
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 201891Fisher & Paykel Healthcare Corporation Limited
Fisher & Paykel Healthcare India Private Limited (India)
Lewis Gradon, Paul Shearer, David Boyle, Alex Koshy¹
Fisher & Paykel Healthcare K.K. (Japan)
Lewis Gradon, Paul Shearer, Hideo Goto
Fisher & Paykel Healthcare S.A. de C.V. (Mexico)
Lewis Gradon, Andrew Somervell, Lawrence Gibbons
Fisher & Paykel Healthcare Mexico S.A. de C.V. (Mexico)
Lewis Gradon, Paul Shearer, Bryan Peterson
Fisher & Paykel Healthcare Mexico Properties S.A. de C.V. (Mexico)
Lewis Gradon, Andrew Somervell, Tony Barclay
Limited Liability Company Fisher & Paykel Healthcare (Russia)
Lewis Gradon, Paul Shearer, Bryan Peterson, Anatoly Filippov
Fisher & Paykel Healthcare AB (Sweden)
Lewis Gradon, Paul Shearer, Patrick McSweeny, Ian Hopkinson
Fisher Paykel Sağlık Ürünleri Ticaret Limited Şirketi (Turkey)
Lewis Gradon², Paul Shearer, Patrick McSweeny
Fisher & Paykel Healthcare Limited (UK)
Lewis Gradon, Paul Shearer, Nicholas Connolly, Patrick McSweeny
Fisher & Paykel Holdings Inc. (USA)
Lewis Gradon, Paul Shearer, Tony Barclay
Fisher & Paykel Healthcare Inc. (USA)
Lewis Gradon, Paul Shearer, Justin Callahan
Fisher & Paykel Healthcare Distribution Inc.
Lewis Gradon
1 Alex Koshy was appointed to replace Thekkanathu Paily Bastin as a director during the year 1 April
2017 – 31 March 2018.
2 Lewis Gradon was appointed to replace Michael Daniell as a director during the year 1 April 2017
– 31 March 2018.
The persons who held office as directors of subsidiary companies at 31 March 2018 were
as follows:
Fisher & Paykel Healthcare Limited (NZ)
Lewis Gradon, Paul Shearer, Tony Barclay
Fisher & Paykel Healthcare Properties Limited (NZ)
Lewis Gradon, Paul Shearer, Tony Barclay
Fisher & Paykel Healthcare Treasury Limited (NZ)
Lewis Gradon, Paul Shearer, Tony Barclay
Fisher & Paykel Healthcare Asia Limited (NZ)
Lewis Gradon, Paul Shearer, Tony Barclay
Fisher & Paykel Healthcare Asia Investments Limited (NZ)
Lewis Gradon, Paul Shearer, Tony Barclay
Fisher & Paykel Healthcare Americas Investments Limited (NZ)
Lewis Gradon, Paul Shearer, Tony Barclay
Fisher & Paykel Healthcare Employee Share Purchase Trustee Limited (NZ)
Tony Carter, Lewis Gradon, Tony Barclay
Fisher & Paykel Healthcare Pty Limited (Australia)
Lewis Gradon, Paul Shearer, David Boyle
Fisher & Paykel do Brasil Ltda (Brazil)
Brazilian law does not require directors. Decision making authority lies with the directors of
its shareholders.
Fisher & Paykel Healthcare Limited (Canada)
Lewis Gradon, Paul Shearer, Justin Callahan
Fisher & Paykel Healthcare (Guangzhou) Limited (China)
Lewis Gradon, Paul Shearer, David Boyle, Zhiping Hou
Fisher & Paykel Healthcare Colombia S.A.S.
Legal Representatives: Bryan Peterson, James Tuck
Fisher & Paykel Healthcare SAS (France)
Lewis Gradon, Paul Shearer, Patrick McSweeny, Ian Hopkinson
Fisher & Paykel Holdings GmbH (Germany)
Ian Hopkinson, Patrick McSweeny
Fisher & Paykel Healthcare Limited (Hong Kong)
Lewis Gradon, Paul Shearer, David Boyle, Zhiping Hou
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited92
GROUP STRUCTURE
All subsidiary companies in the Fisher & Paykel Healthcare group (detailed below) are
ultimately 100% owned by Fisher & Paykel Healthcare Corporation Limited.
Fisher & Paykel Healthcare Corporation Limited* Owns:
Fisher & Paykel Healthcare Limited (NZ)*
Fisher & Paykel Healthcare Treasury Limited (NZ)*
Fisher & Paykel Healthcare Employee Share Purchase Trustee Limited (NZ)
Fisher & Paykel Healthcare Asia Limited (NZ)
Fisher & Paykel Healthcare Americas Investments Limited (NZ)
Fisher & Paykel Healthcare Pty Limited (Australia)
Fisher & Paykel Healthcare Limited (UK)
Fisher & Paykel Holdings Inc. (USA)
Fisher & Paykel do Brasil Ltda (Brazil)
Fisher & Paykel Healthcare (Guangzhou) Limited (China)
Fisher & Paykel Healthcare Limited (Canada)
Fisher & Paykel Healthcare Limited* (NZ) Owns:
Fisher & Paykel Healthcare Properties Limited (NZ)*
Fisher & Paykel Healthcare Asia Limited (NZ) Owns:
Fisher & Paykel Healthcare Asia Investments Limited (NZ)
Fisher & Paykel Healthcare Asia Investments Limited (NZ) Owns:
Fisher & Paykel Healthcare India Private Limited (India)
Fisher & Paykel Healthcare K.K. (Japan)
Fisher & Paykel Healthcare Limited (Hong Kong)
Fisher & Paykel Healthcare Americas Investments Limited (NZ) Owns:
Fisher & Paykel Healthcare S.A. de C.V. (Mexico)
Fisher & Paykel Healthcare Colombia S.A.S (Colombia)
Fisher & Paykel Healthcare Mexico S.A. de C.V. (Mexico)
Fisher & Paykel Healthcare Mexico Properties S.A. de C.V. (Mexico)
Fisher & Paykel Healthcare Limited (UK) Owns:
Fisher & Paykel Healthcare SAS (France)
Fisher & Paykel Holdings GmbH (Germany)
Fisher & Paykel Healthcare AB (Sweden)
Fisher Paykel Sağlık Ürünleri Ticaret Limited Şirketi (Turkey)
Limited Liability Company Fisher & Paykel Healthcare (Russia)
Fisher & Paykel Holdings Inc. (USA) Owns:
Fisher & Paykel Healthcare Inc. (USA)
Fisher & Paykel Healthcare Distribution Inc. (USA)
* Companies operating under a Negative Pledge Deed
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 201893Fisher & Paykel Healthcare Corporation Limited
DIRECTORS’ DETAILS
The persons holding office as directors of the company at any time during, or since the end of,
the year ended 31 March 2018 are as follows:
Tony CarterChair, Non-Executive, Independent
Lewis GradonManaging Director and Chief Executive Officer
Michael DaniellNon-Executive
Lindsay Gillanders
1
Non-Executive, Independent
Pip Greenwood
2
Non-Executive, Independent
Geraldine McBrideNon-Executive, Independent
Arthur MorrisNon-Executive, Independent
Donal O’DwyerNon-Executive, Independent
Scott St JohnNon-Executive, Independent
1 Retired from Board on 24 August 2017.
2 Appointed to Board on 1 June 2017.
EXECUTIVES’ DETAILS
Lewis GradonManaging Director and Chief Executive Officer
Paul ShearerSenior Vice President – Sales & Marketing
Tony BarclayChief Financial Officer
Winston FongVice President – Surgical Technologies
Nicholas Fourie Vice President – Information & Communication Technology
Debra Lumsden Vice President – Human Resources
Jonathan RhodesGeneral Manager – Supply Chain, Facilities and Environment
Brian SchultzVice President – Quality & Regulatory Affairs
Andrew SomervellVice President – Products & Technology
CORPORATE GOVERNANCE AND STATUTORY INFORMATION CONTINUED
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited94
Constant Currencyis a way to measure performance of a company without any
distortion from changes in foreign exchange rates
COPDChronic Obstructive Pulmonary Disease
CPAPContinuous Positive Airway Pressure
DRPDividend Reinvestment Plan
ERPEnterprise Resource Planning
FDAUnited States Food & Drug Administration
IPIntellectual Property
NHFNasal high flow
OSAObstructive Sleep Apnea
R&DResearch and Development
RACRespiratory and Acute Care
SG&ASales, General and Administrative
Annual Report 201895Fisher & Paykel Healthcare Corporation Limited
GLOSSARY
GRI CONTENT INDEX
DisclosureDescriptionLocation
GRI 102General
Disclosures
Organisational profile
102-1Name of the
organisation
Cover
102-2Activities, brands,
products, and
services
Annual Report: pp. 28-29
102-3Location of
headquarters
Annual Report: p. 97
102-4Location of
operations
Annual Report: p. 7
102-5Ownership and
legal form
Annual Report: pp. 77-93
102-6Markets servedAnnual Report: p. 7
102-7Scale of the
organisation
Annual Report: p. 7
102-8Information on
employees and
other workers
Fisher & Paykel Healthcare in Numbers
Available online at:
https://annualreport.fphcare.com
102-9Supply chainSupply chain and sustainable procurement
www.fphcare.co.nz/sustainability
102-10Significant
changes to the
organisation and
its supply chain
None
102-11Precautionary
Principle or
approach
We support a precautionary approach towards
environmental management. While we see little
apparent risk for our own operations, we do see
an opportunity to help our customers manage
this risk through effective product lifecycle
management and sustainable design.
102-12External initiativesCaring for our people
www.fphcare.co.nz/sustainability
102-13Membership of
associations
Our communities
www.fphcare.co.nz/sustainability
DisclosureDescriptionLocation
Strategy
102-14Statement from
senior decision
maker
Annual Report: pp. 16-19
Ethics and integrity
102-16Values, principles,
standards,
and norms of
behaviour
Code of Conduct. Available online at:
www.fphcare.co.nz/corporategovernance
Governance
102-18Governance
structure
Corporate Governance Statement 2018.
Available online at: www.fphcare.co.nz/
corporategovernance
Stakeholder
engagement
102-40List of stakeholder
groups
Annual Report: p. 10
102-41Collective
bargaining
agreements
Fisher & Paykel Healthcare in Numbers.
Available online at:
https://annualreport.fphcare.com
102-42Identifying
and selecting
stakeholders
Annual Report: p. 10
102-43Approach to
stakeholder
engagement
Annual Report: p. 10
102-44Key topics and
concerns raised
Annual Report: pp. 10-11
Reporting practice
102-45Entities
included in the
consolidated
financial
statements
Annual Report: p.94
102-46Defining report
content and topic
Boundaries
Annual Report: pp. 10-11
102-47List of material
topics
Annual Report: pp. 10-11
This report references the guidelines and principles set out by the Global Reporting Initiative.
Below is a list of the standards that have been applied.
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited96
DisclosureDescriptionLocation
102-48Re-statements of
information
We have reviewed our incident reporting
processes and lag indicator (LTI, MTI, RWI)
definitions to align with internationally
recognised standards. As a result, our TRIFR
& LTIFR for FY16, FY17 and FY18 have been
recalculated to more accurately reflect
improvements in our global reporting process.
Visit: https://annualreport.fphcare.com
102-49Changes in
reporting
No changes in reporting
102-50Reporting periodCover
102-51Date of most
recent report
Cover
102-52Reporting cycleCover
102-53Contact point
for questions
regarding the
report
investor@fphcare.co.nz
102-54Claims of
reporting in
accordance with
the GRI Standards
Annual Report: pp. 10-11 and p. 97
102-55GRI content indexAnnual Report: pp. 97-98
102-56External
assurance
No external assurance for non-financial
disclosures
External assurance for financial statements
(See Annual Report: pp.73-75)
GRI CONTENT INDEX CONTINUED
Annual Report 201897Fisher & Paykel Healthcare Corporation Limited
GRI CONTENT INDEX CONTINUED
GRI 400 Social
standard series
GRI 401: Employment
GRI 103Management approach 2018Our people
https://annualreport.fphcare.com
Annual Report: pp. 82-83
Caring for our people
www.fphcare.co.nz/sustainability
401-1New employee hires and
employee turnover
Fisher & Paykel Healthcare
in Numbers. Available online at:
https://annualreport.fphcare.com
GRI 403:
Occupational health
and safety
GRI 103Management approach 2018Health and safety
www.fphcare.co.nz/sustainability
403-2Types of injury and rates of injury,
occupational diseases, lost days,
and absenteeism, and number of
work-related fatalities
Fisher & Paykel Healthcare
in Numbers. Available online at:
https://annualreport.fphcare.com
GRI 404: Training
and education
GRI 103Management approach 2018Caring for our people
www.fphcare.co.nz/sustainability
https://annualreport.fphcare.com
404-1Average hours of training per
year per employee
Fisher & Paykel Healthcare in
Numbers. Available online at:
https://annualreport.fphcare.com
GRI 416: Customer
Health and Safety
GRI 103Management approach 2018www.fphcare.co.nz/sustainability
416-2Incidents of non-compliance
concerning the health and safety
impacts of products and services
No instances of non-compliance.
SPECIFIC STANDARD DISCLOSURES
DisclosureDescriptionLocation
GRI 200 Economic
standard series
GRI 201: Economic
performance
GRI 103Management approach 2018Annual Report: pp. 35-37
201-1Direct economic value generated
and distributed
Annual Report: pp. 35-72
GRI 205: Anti-
corruption
GRI 103Management approach 2018Ethics and legal compliance
www.fphcare.co.nz/sustainability
205-3Confirmed incidents of
corruption and actions taken
Ethics and legal compliance
www.fphcare.co.nz/sustainability
Annual Report 2018Fisher & Paykel Healthcare Corporation Limited98
DIRECTORY
DIRECTORY
In New Zealand:
The details of the company’s principal administrative and registered office are:
Physical address: 15 Maurice Paykel Place, East Tamaki,
Auckland 2013, New Zealand
Telephone: +64 9 574 0100
Facsimile: +64 9 574 0158
Postal address: PO Box 14348, Panmure,
Auckland 1741, New Zealand
Internet address: www.fphcare.com
Email: investor@fphcare.co.nz
In Australia:
The details of the company’s registered office are:
Physical address: 19-31 King Street, Nunawading, Melbourne,
Victoria 3131, Australia
Telephone: +61 3 9871 4900
Postal address: PO Box 159, Mitcham,
Victoria 3132, Australia
SHARE REGISTER
In New Zealand:
Link Market Services Limited
Physical address: Level 11, Deloitte Centre,
80 Queen Street, Auckland 1010, New Zealand
Postal address: PO Box 91976, Auckland 1142, New Zealand
Facsimile: +64 9 375 5990
Investor enquiries: +64 9 375 5998
Internet address: www.linkmarketservices.co.nz
Email: enquiries@linkmarketservices.co.nz
In Australia:
Link Market Services Limited
Physical address: Level 12, 680 George Street,
Sydney, NSW 2000, Australia
Postal address: Locked Bag A14, Sydney South, NSW 1235, Australia
Facsimile: +61 2 9287 0303
Investor enquiries: +61 2 8280 7111
Internet address: www.linkmarketservices.com.au
Email: registrars@linkmarketservices.com.au
Annual Report 201899Fisher & Paykel Healthcare Corporation Limited
Fisher & Paykel Healthcare is a world leader in
medical devices and systems for use in respiratory
care, acute care, surgery and in the treatment of
obstructive sleep apnea.
www.fphcare.com
© 2018 Fisher & Paykel
Healthcare Corporation Limited
Fisher & Paykel Healthcare Corporation Limited
Annual Report 2018
Annual Review
For the year ended 31 March 2018
RECORD OPERATING PROFIT
NZ$M 12%
269.8
RECORD NET PROFIT AFTER TAX
NZ$M 12%
190.2
RECORD OPERATING REVENUE
NZ$M 10%
980.8
TOTAL DIVIDEND FOR YEAR
NZCPS FULLY IMPUTED 9%
21.25
GROSS MARGIN
66.3%
HOSPITAL REVENUE GROWTH
NZ$M 14%
572.1
HOMECARE REVENUE GROWTH
NZ$M 4%
398.1
41%
OF OPERATING REVENUE
The 2018 financial year was another
positive year for our company. We delivered
a record financial result of $190.2 million
net profit after tax, up 12% on the previous
year. Revenue growth was up 10% to
$980.8 million.
Operating revenue in our Hospital product group
grew 14% to a record $572.1 million. This was driven
largely by growth in new applications of 22%, which
is our Optiflow™ nasal high flow therapy, non-invasive
ventilation and surgery products.
It was particularly pleasing to report growth of
27% in new applications in the second half as more
hospitals and clinicians choose to use our Optiflow
nasal high flow therapy to treat a broader range of
patients with respiratory complications.
Revenue growth of 4% in our Homecare product
group was not as strong as the previous few
years, but we are pleased with the response to
our most recently released mask, the F&P Brevida
TM
nasal pillows mask.
Our obstructive sleep apnea (OSA) masks
incorporate market-leading technology and we look
forward to expanding our innovative OSA mask
range later this year.
Dividend
The Board has approved an
increased final dividend for the
year of 12.5cps. This takes the total
dividend for the financial year to
21.25cps, an increase of 9% on the
previous year.
Our products used in home respiratory support
are growing well, although we are still at the very
early stages of the product lifecycle. We are
beginning to see clinical evidence supporting the
use of Optiflow therapy in the home emerging with
encouraging results.
Our global team continues to grow to meet the
increasing demands of the healthcare sector.
We remain dedicated to producing high quality,
innovative medical devices that assist healthcare
providers to deliver outstanding patient care, help
people recover sooner, and where possible, be
treated in the home rather than the hospital.
As healthcare systems strive to balance the need
to provide excellent patient care with the growing
costs of caring for ageing and growing populations,
we will continue to support them with our
technology innovations.
At current exchange rates we expect full year
operating revenue for the 2019 financial year to be
approximately NZ$1.05 billion and net profit after tax
to be approximately NZ$210 million.
Our outlook is exciting and we are looking forward
to another year of positive revenue and earnings
growth. We are well positioned to meet the growing
demand for our products from an increasing
investment in healthcare across the globe.
TONY CARTER, CHAIRMAN
LEWIS GRADON, MANAGING DIRECTOR
AND CHIEF EXECUTIVE OFFICER
Dear Shareholder
Lewis Gradon Tony Carter
Results in brief
OPERATING REVENUE
NZ$ MILLIONS
NET PROFIT AFTER TAX
NZ$ MILLIONS
REVENUE BY PRODUCT GROUP
12 MONTHS TO 31 MARCH 2018
GLOBAL PRODUCT SALES
2018
120+
COUNTRIES
Hospital
Homecare
Distributed & Other
North America
Europe
Asia Pacific
Other
58%
1%
41%
47%
30%
18%
5%
1415161718
623.4
672.3
815.5
894.4
980.8
1415161718
97.1
113.2
143.4
169.2
190.2
+
WELCOMED
significant new clinical research
using our Optiflow
TM
Junior and
myAirvo
TM
products
+
ENCOURAGED
by the publication of 259 new
clinical studies in nasal high flow
therapy in 2017
+
INTRODUCED
F&P SleepStyle
TM
CPAP device,
F&P Nivairo
TM
non-invasive
ventilation mask and Optiflow
Junior 2 into global markets
+
INCLUDED
in the MSCI World investor index
+
CONTINUED
with the global roll out of our
enterprise planning system
(ERP) in Japan, Canada and
Korea
+
PROGRESSED
with our building programmes
in New Zealand and Mexico
+
AWARDED
prestigious product design
awards, such as the Red Dot
award for the F&P Brevida
TM
mask for OSA
+
IMPACTED
the lives of 13 million patients
around the world
HospitalHomecare
For further reading visit:
www.fphcare.co.nz/investor-reports and
https://annualreport.fphcare.com
© 2018 Fisher & Paykel Healthcare Corporation Limited
SHARE REGISTRAR
IN NEW ZEALAND:
Link Market Services Limited
Investor enquiries: +64 9 375 5998
Internet address: www.linkmarketservices.co.nz
Email: enquiries@linkmarketservices.co.nz
IN AUSTRALIA:
Link Market Services Limited
Investor enquiries: +61 2 8280 7111
Internet address: www.linkmarketservices.com.au
Email: registrars@linkmarketservices.com.au
We offer medical devices for
use in the hospital where
patients are receiving invasive
and non-invasive ventilation,
nasal high flow therapy or
undergoing surgery.
Humidity is crucial to respiratory
health and well-being. Our
products incorporate patented
and proprietary technologies
designed to emulate the balance
of temperature and humidity that
occurs naturally in the body.
This approach restores natural
balance and seeks to ensure
optimal outcomes for patients
and their caregivers.
Obstructive sleep apnea
(OSA) occurs when one’s
airway temporarily closes during
sleep, forcing sufferers to wake
either partially or completely
to breathe again. This can occur
up to several hundred times a
night, and if left untreated, can
lead to serious health problems.
Our continuous positive airway
pressure (CPAP) devices and
innovative masks are used to
treat OSA. CPAP therapy keeps
the airway open, and is
recognised as a simple and
effective treatment for OSA.
We also offer products that provide
respiratory support in the home in
the treatment of chronic respiratory
conditions such as chronic
obstructive pulmonary disease.
58%
OF OPERATING REVENUE
41%
OF OPERATING REVENUE
OPERATING REVENUE GROWTH
(NZ$398.1M)
4%
OPERATING REVENUE GROWTH
(NZ$572.1M)
14%
CONSTANT CURRENCY
CONSUMABLE REVENUE GROWTH
FROM NEW APPLICATIONS
22%
CONSTANT CURRENCY REVENUE
GROWTH
4%
Annual Corporate Governance Statement 2018
APPROVED BY THE BOARD OF FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED ON 25 MAY 2018
The Board and management of Fisher & Paykel Healthcare Corporation Limited
(the “company” or “Fisher & Paykel Healthcare”) are committed to ensuring that
the company adheres to best practice governance principles and maintains the
highest ethical standards. The Board regularly reviews and assesses the company’s
governance structures to ensure that they are consistent, both in form and in
substance, with best practice.
The company is listed on both the New Zealand and Australian stock exchanges.
Corporate governance principles and guidelines have been introduced in both
countries. These include the Australian Securities Exchange (ASX) Corporate
Governance Principles and Recommendations, the NZX Main Board Listing Rules
relating to corporate governance and the NZX Corporate Governance Code
(collectively, the “Principles”). The Board considers that the company’s corporate
governance practices and procedures substantially reflect the Principles.
The NZX Listing Rules require the company to report against the NZX Corporate
Governance Code, which came into effect in October 2017. While the company is
an ASX Foreign Exempt Listing and is no longer obliged to report against the ASX’s
Corporate Governance Principles and Recommendations, these continue to inform
the company’s approach to governance.
This statement was approved by the Board on 25 May 2018 and is accurate as at
that date. The company’s annual report for the financial year ended 31 March 2018
(“Annual Report”) incorporates this corporate governance statement by cross-
reference.
The full content of the company’s corporate governance policies, practices and
procedures can be found in the corporate governance section of the company’s
website - www.fphcare.com/corporategovernance (the “Company’s Website”).
PRINCIPLE 1: CODE OF ETHICAL BEHAVIOUR
Codes of Conduct
The company expects its employees and directors to maintain high ethical
standards. A Code of Conduct for the company and a separate Directors’ Code of
Conduct set out these standards.
Both codes address, among other things:
• conflicts of interest;
• receipt of gifts;
• corporate opportunities;
• confidentiality;
• expected behaviours;
• reporting issues regarding possible breaches of the codes, legal obligations
and other polices of the company;
• managing breaches of the code; and
• obligations for a director to act in good faith and in what the director or
employee believes to be the best interests of the company.
Copies of the company’s Code of Conduct and Code of Conduct for Directors can
be found on the Company’s Website. The Code of Conduct is also available on the
company’s internal intranet. The company has developed e-training on the Code of
Conduct, and in 2017 and 2018, this training was undertaken by existing company
employees globally. The e-training is part of induction for new employees.
The company maintains a schedule for regularly reviewing and updating corporate
governance policies and charters. The Code of Conduct was last reviewed on 21
November 2016.
In addition to the Code of Conduct, the company has policies to facilitate the
disclosure and investigation of matters of serious wrongdoing within the company.
The company also has a policy that it does not make corporate level political
donations.
Securities Dealing Policy and Guidelines
The company is committed to complying with legal and statutory requirements
with respect to ensuring directors, officers, contractors and employees do
not trade company securities while in possession of material information. The
Securities Dealing Policy and Guidelines identifies circumstances where directors,
officers, contractors and employees are permitted to trade, or prohibited from
trading, company securities. It describes insider trading laws and highlights the
consequences an individual and the company may face as a result of breaching
these laws.
A copy of the Securities Dealing Policy and Guidelines is available on the Company’s
Website.
PRINCIPLE 2: BOARD COMPOSITION & PERFORMANCE
Board Charter
The business and affairs of the company are managed under the direction of the
Board of Directors. At a general level, the Board is elected by shareholders to:
• establish the company’s objectives;
• manage risks;
• determine the overall policy framework within which the business of the
company is conducted; and
• monitor management’s performance with respect to these matters.
The Board Charter regulates internal Board procedure and describes the Board’s
specific roles and responsibilities. A copy of the Board Charter is available on the
Company’s Website. The Board Charter is reviewed regularly, and was last updated
on 27 September 2016.
The Board delegates management of the day-to-day affairs and responsibilities
of the company to the Chief Executive Officer and the executive to deliver the
strategic direction and goals set by the Board. The specific responsibilities
delegated to management are recorded in the Board Charter and the Delegation
Policy. A summary of the Delegation Policy is available on the Company’s Website.
Annual Corporate Governance Statement 2018Fisher & Paykel Healthcare Corporation Limited1
Nomination and appointment of directors
The number of directors is determined by the Board, in accordance with the
company’s constitution. The constitution requires that there are at least four
directors, and no more than nine directors, and governs the process for the
appointment and removal of directors. A director is appointed by ordinary
resolution of the shareholders although the Board may fill a casual vacancy.
The Board has delegated to the People and Remuneration Committee the
responsibility for recommending candidates to be nominated or re-elected as a
director and candidates for the Board Committees. The People and Remuneration
Committee’s role and procedure is governed by the People and Remuneration
Committee Charter, a copy of which is available on the Company’s Website. The
members of the People and Remuneration Committee are Pip Greenwood (Chair),
Tony Carter, Donal O’Dwyer and Scott St John. All members of the People and
Remuneration Committee are independent directors.
At Board level, diversity allows the company to benefit from a range of different
perspectives, which leads to healthier debate and decision making. As the company
operates in specialised international markets, the Board believes that it is important
to have a Board consisting of members with diverse backgrounds, experience and
skills. The Board also believes that the tenure of each of its members is important as
it seeks to balance independent, institutional knowledge gained through length of
service and the importance of fresh perspectives in decision-making.
The People and Remuneration Committee uses external search firms to assist with
locating possible candidates and gathering relevant information. When searching
for and nominating candidates to act as a director, the People and Remuneration
Committee takes into account such factors as it deems appropriate, including
diversity of gender, background, experience, and qualifications of the candidate,
and the Board skills matrix.
The company undertakes a number of checks before appointing a director and
putting forward to shareholders a candidate for election as a director, and provides
shareholders with information in its possession relevant to a decision on whether or
not to elect or re-elect a director.
The following table summarises the current key skills and experience, and tenure of
the Board.
Skills and
experience
Tony
Carter
Lewis
Gradon
Michael
Daniell
Pip
Greenwood
Geraldine
McBride
Arthur
Morris
Donal
O’Dwyerr
Scott
St
John
Financial
acumen
Sales/
Marketing
Engineering/
Science/
Technology/
Manufacturing
Medicine/
Medical Device
Legal/
Regulatory
Governance
International
Business
Experience
Tenure (years)7. 5216.5*14.5105.52.5
*Michael Daniell was appointed as a Non-executive director on 1 April 2016 following his retirement as
Managing Director and Chief Executive Officer.
Note that the Board considers that some directors will have greater expertise
in certain areas than others, but have regarded directors who have at least the
minimum required level of skill and experience in this area as the basis for the table
above.
Further information about the company’s policies for the appointment and selection
of new directors is available on the Company’s Website.
Written agreements with directors
Upon appointment, non-executive directors are issued a letter setting out the terms
and conditions of their appointment. This includes information about:
• the role of a director;
• expected time commitments;
• term of appointment;
• remuneration entitlements;
• indemnity and insurance arrangements;
• disclosure of relevant interests;
• ability to seek independent professional advice regarding discharge of
director’s responsibilities; and
• access to company information.
A copy of the standard form of this letter is available on the Company’s Website.
The Chief Executive Officer has an employment agreement setting out his roles and
conditions of employment.
Annual Corporate Governance Statement 2018Fisher & Paykel Healthcare Corporation Limited2
Independence of directors
The Board currently comprises eight directors, being Tony Carter, Lewis Gradon,
Michael Daniell, Pip Greenwood, Geraldine McBride, Arthur Morris, Donal O’Dwyer
and Scott St John. Lewis Gradon is the only executive director on the Board, and the
other seven directors are non-executive directors.
The Chair of the Board is Tony Carter. The roles of Chair of the Board and Chief
Executive Officer are held by separate individuals. The Board’s Charter provides
that the Chair is required to be an independent director and may not be the Chief
Executive Officer.
The factors that the company will take into account when assessing the
independence of its directors are set out in its Board Charter, a copy of which is
available on the Company’s Website. No quantitative materiality thresholds have
been adopted by the company because it was considered more appropriate to
determine independence on a case by case basis.
After consideration of these factors, the company is of the view that:
1. No director is a substantial shareholder of the company or an officer of, or
otherwise associated directly with, a substantial shareholder of the company.
2. Michael Daniell and Lewis Gradon are directors who, within the last three years,
have been employed in an executive capacity by the company or another group
member, or have been a director after ceasing to hold any such employment.
3. No director has been a principal of a material professional adviser or a material
consultant to the company or another group member, or an employee materially
associated with such service provider, within the last three years.
4. No director is a material supplier or customer of the company or other group
member, or an officer of, or otherwise associated directly or indirectly with, a
material supplier or customer.
5. No director has a material contractual relationship with the company or another
group member other than as a director of the company.
6. No director has served on the Board for a period which could, or could
reasonably be perceived to, materially interfere with the director’s ability to act
in the best interests of the company.
7. All directors are free from any interest or any business or other relationship
which could, or could reasonably be perceived to, materially interfere with the
director’s ability to act in the best interests of the company.
Based on these assessments, the company considers that six of the directors are
independent directors, namely Tony Carter (Chair), Pip Greenwood, Geraldine
McBride, Arthur Morris, Donal O’Dwyer and Scott St John.
Information about the experience, length of service, independence, and relevant
interests of each director is set out in the “Board of Directors” section of the Annual
Report.
Diversity Policy
Diversity is recognised and respected at Fisher & Paykel Healthcare. The company
has a Diversity Policy which provides that the Board will set measurable objectives
for diversity.
The People and Remuneration Committee is responsible for setting diversity
objectives and monitoring progress towards achieving these. The Committee’s
roles and responsibilities in this regard are set out in the People and Remuneration
Committee Charter.
Information about diversity at Fisher & Paykel Healthcare, including progress
towards achieving its objectives and the respective proportions of men and women
across the company, can be found in the “Diversity” section of the Annual Report.
The Diversity Policy, People and Remuneration Committee Charter, and the Annual
Report are available on the Company’s Website.
Induction and continuing development of directors
A formal induction programme is available to new directors to ensure that they
have a working knowledge of the company. The programme includes one-on-one
meetings with management and a tour of the company’s research and development
and manufacturing facilities. All directors are regularly updated on relevant industry
and company issues. From time to time the Board may also undertake educational
trips to receive briefings from customers and visit operations of the company
outside of New Zealand. There is an on-going programme of presentations to the
Board by all business units.
All directors are members of the Institute of Directors (or overseas equivalent), and
attend training sessions to remain current on their duties as directors. The company
also arranges training for directors and management on specific issues as the need
arises.
Board performance
The Board has a Performance Evaluation Policy in place relating to the performance
of the Board, the Board Committees and individual directors. A summary of the
company’s Performance Evaluation Policy is available on the Company’s Website.
The Performance Evaluation Policy, in accordance with the Board Charter, requires
the Board to undertake a two-yearly performance evaluation of itself that:
• compares the performance of the Board with the requirements of its Charter;
• reviews the performance of the Board Committees;
• sets forth the goals and objectives of the company for the upcoming year; and
• effects any improvements to the Board Charter deemed necessary or
appropriate.
The Board has engaged an external consulting company to facilitate the Board’s
performance evaluation during 2018.
The company’s senior executives are also subject to regular performance reviews.
The performance of senior executives is reviewed by the Chief Executive Officer
who meets with each senior executive to discuss their performance, as measured
against key performance targets (both financial and non-financial) previously
established and agreed with that executive.
Annual Corporate Governance Statement 2018Fisher & Paykel Healthcare Corporation Limited3
Board meetings
Normally, the Board holds eight formal meetings a year. One of those meetings is
typically focused on reviewing the company’s business plan and budget, and at a
separate meeting the long-term strategic plan is considered. The Board also meets
with senior executives to consider matters of strategic importance.
Details of attendance at Board and Committee meetings during the year ended 31
March 2018 are contained in the Annual Report.
Role of the Company Secretary
The Company Secretary reports directly to the Board, through the Chair, on all
matters to do with the proper functioning of the Board.
PRINCIPLE 3: BOARD COMMITTEES
Responsibilities of Committees
The Board has three permanent Committees which support the Board by working
with management on relevant issues at a suitably detailed level and then reporting
back to the Board. These are:
• Audit & Risk Committee;
• People and Remuneration Committee; and
• Quality, Safety and Regulatory Committee.
The People and Remuneration Committee was formed in May 2018 as a result of
the Board’s decision to amalgamate the Remuneration and Human Resources
Committee and the Nomination Committee.
Each of these Committees has a charter setting out the Committee’s objectives,
procedures, composition and responsibilities. Copies of these charters are available
on the Company’s Website. The company reports on attendance at Committee
meetings in the Annual Report.
Audit & Risk Committee
The primary function of the Audit & Risk Committee is to assist the Board in fulfilling
its responsibilities relating to the company’s risk management and internal control
framework, the integrity of its financial reporting, and the company’s internal and
external auditing processes and activities. The Audit & Risk Committee has an
annual work plan and monthly reporting to the Board which enables it to properly
and regularly inform the Board monthly on significant financial matters relating to
the company.
Under the Audit & Risk Committee Charter, the Committee must be made up of
non-executive directors, the majority of whom must be independent. Further, the
Chair of the Committee must be an independent director and cannot be the Chair
of the Board. The current members of the Audit & Risk Committee are Scott St John
(Chair), Tony Carter and Michael Daniell. All members of the Audit & Risk Committee
are non-executive directors, and two of three (including the Chair) are independent
directors.
Employees and external auditors are invited to attend meetings when it is
considered appropriate by the Committee. The Committee, at least once per year,
meets with the auditors without any representatives of management present and
is encouraged to seek advice from external consultants or specialists where the
Committee considers that necessary or desirable.
The Audit & Risk Committee is responsible for recommending the appointment
and removal of external financial auditors, reviewing the company’s auditing
practices, and communicating with internal and external auditors. It has adopted a
policy in respect of the independence of the external financial auditor. This policy
places limitations on the extent of non-audit work which can be carried out by the
external financial auditors, and requires the external auditor or lead audit partner
of the external financial auditors to change every five years. The External Financial
Auditors Independence Policy can be found on the Company’s Website.
The Audit & Risk Committee closely monitors financial reporting risks in relation
to the preparation of the financial statements. The Audit & Risk Committee, with
the assistance of management, works to ensure that the financial statements are
founded on a sound system of risk management and internal control and that
the system is operating effectively in all material respects in relation to financial
reporting risks. As part of this process, before the company’s financial statements
are approved, the Chief Executive Officer and Chief Financial Officer are required
to state in writing to the Board that, to the best of their knowledge, the company’s
financial reports present a true and fair view of the company’s financial condition
and operational results and are in accordance with the relevant accounting
standards and those reports are founded on a sound system of risk management
and internal control which is operating effectively.
Further details about the role and responsibilities of the Audit & Risk Committee are
set out in the Audit & Risk Committee Charter available on the Company’s Website.
People and Remuneration Committee
The People and Remuneration Committee’s role is to oversee and regulate
remuneration and organisation matters of the company, including recommending
the company’s human resources strategy for directors and senior executives,
reviewing remuneration and benefits policies, monitoring company performance
against the Diversity Policy, and reviewing performance objectives and
remuneration of the company’s Chief Executive Officer and senior executives. It also
seeks advice on and recommends director remuneration structure and recommends
director appointments to the Board.
Under the People and Remuneration Committee Charter, the Chair must be an
independent director and the majority of its members must be independent. The
current members of the People and Remuneration Committee are Pip Greenwood
(Chair), Tony Carter, Scott St John, and Donal O’Dwyer. All members of the People
and Remuneration Committee are independent non-executive directors.
Further details about the role and responsibilities of the People and Remuneration
Committee are set out in the People and Remuneration Committee Charter available
on the Company’s Website.
Quality, Safety and Regulatory Committee
The Quality, Safety and Regulatory Committee addresses characteristics specific
to the company’s business. The objective and purpose of the Quality, Safety and
Regulatory Committee is to assist the Board in fulfilling its responsibilities relating to
the oversight of the company’s quality management system, health and safety risk
management system, and strategies, activities and policies regarding sustainability,
corporate social responsibility and the environment. As part of the company’s
internal audit function, regular quality system specific internal audit reports are
received by the Committee.
Under the Quality, Safety and Regulatory Committee Charter, the Chair must be an
independent director and the majority of its members must also be independent.
Annual Corporate Governance Statement 2018Fisher & Paykel Healthcare Corporation Limited4
The current members of the Quality, Safety and Regulatory Committee are Arthur
Morris (Chair), Tony Carter and Donal O’Dwyer. All members of the Quality, Safety
and Regulatory Committee are independent non-executive directors.
Further details about the role and responsibilities of the Quality, Safety and
Regulatory Committee are set out in the Quality, Safety and Regulatory Committee
Charter available on the Company’s Website.
Other Committees
The Board may from time-to-time establish other Committees for specific purposes.
Takeover Protocol
In 2018 the Board adopted a new Takeover Protocol to assist the directors and
management with the response to unexpected takeover activity. The Protocol
summarises key aspects of takeover preparation, and sets out governance, conflict
and communications protocols for takeover response. This Protocol provides that in
the event of a takeover offer, the Board would establish an Independent Takeover
Response Committee to manage its takeover response obligations.
PRINCIPLE 4: REPORTING & DISCLOSURE
The company is committed to the promotion of investor confidence by ensuring
that the trading of company shares takes place in an efficient, competitive and
informed market. The company believes that evenly balanced disclosure is
fundamental to building shareholder value and earning the trust of employees,
customers, suppliers, communities and shareholders.
Continuous disclosure
The company’s Market Disclosure Policy establishes the company’s disclosure
policies for meeting the company’s continuous disclosure obligations. A summary
of the Market Disclosure Policy is available on the Company’s Website. This
explains the respective roles of directors, officers and employees in complying
with continuous disclosure obligations, confidentiality of information, external
communications with analysts and shareholders, and responding to rumours and
market speculation.
The Disclosure Committee, comprising the Chief Executive Officer, the Chief
Financial Officer, the General Manager Corporate and the General Counsel, is
responsible for administering the company’s compliance with its Market Disclosure
Policy, including its continuous disclosure obligations. Market disclosure requires
the approval of either the Board or the Disclosure Committee, depending on the
circumstances.
Financial reporting
The company is committed to reporting its financial information in an objective,
balanced, and clear manner. Financial results are reported in the Annual Report in
accordance with the New Zealand equivalent of International Financial Reporting
Standards. The Annual Report includes detailed financial commentary and notes to
the financial statements which explain any changes to financial reporting.
The Annual Report also includes the Chair’s comments on strategic progress and
the Chief Executive Officer’s report summarises the company’s performance and
progress towards its strategic objectives. It explains how the company delivers value
for shareholders and key performance indicators such as revenue, profit, constancy
currency information, dividend growth and gearing, are used to link results to the
company’s strategy.
The company ensures that financial information reported in investor material for
road shows, company overviews, and other documents is portrayed in an accurate,
fair, and understandable format.
Other reporting
The company is also committed to transparent reporting of non-financial objectives,
such as environmental, social, and governance (ESG) factors. The company’s Annual
Report references the guidelines and principles set out by the Global Reporting
Initiative (GRI), and a GRI referenced content index, based on the 2016 standards. It
is anticipated that future annual reports will be in accordance with Global Reporting
Initiative Standards (Core).
Company policies
Key governance documents including the company’s Code of Conduct, Financial
Product Dealing Policy, Board and Committee Charters, Diversity Policy,
Remuneration Policy, and Market Disclosure Policy are available on the Company’s
Website.
PRINCIPLE 5: REMUNERATION
Director’s remuneration
The People and Remuneration Committee is responsible for establishing and
monitoring remuneration policies and guidelines for directors which enable the
company to attract and retain directors who contribute to the successful governing
of the company and create value for shareholders. The company also takes advice
from independent consultants, and takes into account fees paid to directors of
comparable companies in New Zealand and Australia as part of its assessment of
the appropriate level of remuneration of directors.
The maximum total monetary sum payable by the company by way of directors’
fees is NZ$1,050,000 per annum as approved by shareholders at the 2017 annual
shareholders’ meeting. The total directors’ fees received by non-executive
directors in the year ended 31 March 2018, including a breakdown of Board fees
and Committee fees, are set out in the Annual Report. Executive directors are not
entitled to receive any remuneration solely in their capacity as directors of the
company.
Non-executive directors do not take a portion of their remuneration under an equity
security plan but directors may hold shares in the company, details of which are
set out in the “Directors’ Shareholdings” section of the Annual Report. It is the
company’s policy to encourage directors to acquire shares on-market.
No non-executive director is entitled to receive a retirement payment unless
eligibility for such payment has been agreed by shareholders and publicly disclosed
during his or her term of Board service or such retirement payment is within the
limits prescribed by the NZX Main Board Listing Rules.
As approved at the 2004 Annual Shareholders’ Meeting, the Board has resolved that
it will not pay any future retirement benefits to non-executive directors other than,
in accordance with the NZX Main Board Listing Rules and at the Board’s discretion,
a retirement allowance of one year’s directors’ fees to each non-executive director
in office at the time of the 2004 meeting that has continued to hold office since
that date, such amount being equal to the average of the annual fees paid to that
director in any three years prior to that director’s retirement or cessation of office,
and payable on retirement or cessation of office.
Annual Corporate Governance Statement 2018Fisher & Paykel Healthcare Corporation Limited5
The last director eligible for this allowance was Lindsay Gillanders, who received a
retirement allowance of $106,605 following his retirement in August 2017. No other
non-executive director retirement allowances have been provided for.
Senior management remuneration
The People and Remuneration Committee is responsible for reviewing the
remuneration of the company’s senior management in consultation with the
Managing Director of the company.
The remuneration policy for senior management is designed to attract, reward and
retain high quality employees who will enable the company to achieve its short and
long term objectives.
The remuneration packages of senior management consist of a combination of a
fixed remuneration package, the company-wide profit sharing bonus, an annual
variable remuneration (AVR) component and a long term variable remuneration
(LTVR) component.
Annual Variable Remuneration
The AVR component is based 80% on financial measures and 20% on non-financial
measures.
The weighting of the performance measures for financial AVR targets in the 2018
financial year, together with the results of performance against those targets during
that financial year, is set out below:
Performance measureWeightingAmount of target achieved
Constant currency operating profit45%100.1%
Constant currency revenue25%97. 7 %
Constant currency pre-tax operating cash flow10%105.2%
Meeting both the financial and individual targets results in a payment of 100% of the
AVR amount. The AVR payment amount is adjusted pro-rata, with each 1% above
or below target resulting in a 2% increase or decrease in payment. The maximum
payment is 140% of the AVR amount at 20% over achievement. Should the financial
measures in aggregate be underachieved by more than 10%, no AVR is payable.
Long Term Variable Remuneration
The LTVR component consists of share options, performance share rights and
participation in the company’s employee share purchase plan. These long term
plans are intended to encourage the retention of senior management and increase
the commonality between the interests of management and shareholders. Further
information on the company’s LTVR arrangements can be found in the “Long Term
Variable Remuneration” section of the Company’s Website.
A general and wider disclosure of senior management remuneration is included
in the “Employee Remuneration” section set out in the Corporate Governance
and Statutory Information section of the Annual Report, where the company
has disclosed remuneration (inclusive of the value of other benefits) received by
employees or former employees of the company or its subsidiaries in the relevant
bandings of annual employee remuneration exceeding $100,000 received in the
year ended 31 March 2018.
With respect to employee share purchase plans or equity-based remuneration
schemes operating with respect to company securities, no director or employee is
permitted to enter into financial products or arrangements which operate to limit
the economic risk of their vested or unvested entitlements.
Chief Executive Officer remuneration
The remuneration arrangements for the Chief Executive Officer, including base
salary, AVR and LTVR, and the performance criteria for performance based
payments are disclosed in the Annual Report and are influenced by the New
Zealand Shareholders’ Association’s Framework for Reporting of CEO Remuneration
in NZ Companies.
PRINCIPLE 6: RISK MANAGEMENT
The company has a number of risk management policies for the oversight and
management of financial and non-financial material business risks, as well as related
internal compliance systems that are designed to:
• optimise the return to, and protect the interests of, stakeholders;
• safeguard the company’s assets and maintain its reputation;
• improve the company’s operating performance; and
• fulfil the company’s strategic objectives.
Senior management and the Board take their responsibility to manage and oversee
risk very seriously. The company assesses its approach to risk management against
risk governance best practice with the goal of constantly improving the quality of
information relating to key objectives.
The company has adopted an objective-centric approach to risk management and
assurance that focuses on identifying risk to the most critical value creation and
preservation objectives. Once identified, objectives are added to an objectives
register and assigned specific management personnel in the company. These
personnel are responsible for assessing and reporting upward to the Board on the
state of retained and residual risk and engaging with senior management and the
Board to determine which end-result objectives warrant formal risk assessments
and the appropriate level of risk assessment rigour and independent assurance to
be applied in light of cost/benefit considerations.
The benefit of this objective-centric approach is an improved understanding of
how all the risks that impact upon the business directly affect our key objectives.
As a result, the company seeks to improve the likelihood and extent of success by
understanding what might happen, while striving to achieve our objectives.
A summary of the company’s Risk Management Policy including a summary of
material business risk and how we manage risk is available on the Company’s
Website. Although the Board ultimately has responsibility for internal compliance
and control, the Audit & Risk Committee is responsible for oversight of the
company’s risk management and internal control framework, and regularly reviews
this framework to ensure it is fit for purpose. Please see “Principle 3” for information
regarding the composition of the Audit & Risk Committee.
The Audit & Risk Committee, in conjunction with management, reports to the Board
on the effectiveness of the company’s management of its material business risks
Annual Corporate Governance Statement 2018Fisher & Paykel Healthcare Corporation Limited6
and whether the risk management framework and systems of internal compliance
and control are operating efficiently and effectively in all material respects.
The company has in place a number of mechanisms and internal controls intended
to manage these areas of material business risk. These include:
• Board Committees, including the Audit & Risk Committee and Quality Safety and
Regulatory Committee;
• a quality management system;
• intellectual property teams that conduct a thorough freedom to operate process
before products are released to market, and monitor competitor product
releases for breaches of our intellectual property;
• ICT risk management systems;
• detailed management and financial accounting reporting systems, controls and
policies;
• delegated authorities;
• risk management and internal audit structures to assess and evaluate risk and
controls;
• systems to ensure that capital expenditure and leasing commitments above
a certain size obtain prior Board approval and that business transactions are
properly authorised and executed;
• established organisational structures, setting out clear lines of responsibility for
managers and staff;
• regular building services monitoring and maintenance;
• comprehensive human resources policies;
• environmental policies; and
• risk transfer mechanisms to financially mitigate major risks such as product
liability claims and damage to manufacturing assets.
Health and safety
The company is focused on implementing and maintaining global health, safety and
wellbeing standards that are aligned with ISO 45001 and places great emphasis
on the effective management of critical risks. The company’s internal health and
safety team regularly reports to the Board as well as to the Quality, Safety and
Regulatory Committee. The Quality, Safety and Regulatory Committee assists the
Board in fulfilling its responsibilities relating to the company’s health and safety risk
management system. The Workplace Health and Safety Policy sets out the role of
the Board in the governance of workplace health and safety, and is available on the
Company’s Website.
From May 2018, information on the company’s health and safety performance and
management will be available on the company’s sustainability webpage
https://www.fphcare.co.nz/sustainability/.
PRINCIPLE 7: AUDITORS
External audit
The Audit & Risk Committee has oversight responsibility for the company’s external
audit arrangements. The Board has adopted the External Financial Auditors
Independence Policy which complements the Audit & Risk Committee Charter by
outlining the requirements for the provision of services by any external auditor
engaged by the company. The purpose of the Policy is to ensure that the company’s
external auditor carries out its function independently and without impairment,
safeguarding the reliability and credibility of the company’s external financial
reporting.
The External Financial Auditors Independence Policy establishes a framework for
the selection and appointment of external auditors, outlines the services which
may be ordinarily performed, may be performed with approval of the Audit & Risk
Committee, or must not be performed by external auditors, and the responsibilities
of external auditors. The Policy requires the Chief Financial Officer to report at each
Audit & Risk Committee meeting any work (audit and non-audit) conducted by
the external auditor, including the fees paid to the external auditors for non-audit
services. Procedures for communication between the Audit & Risk Committee,
Board, senior management, and the external auditors are set out in the Audit & Risk
Committee Charter.
The Audit & Risk Committee is responsible for monitoring performance and
independence of the external auditors. The Policy requires the external auditor to
report to the Audit & Risk Committee annually in writing, confirming that they are
independent and disclosing all relationships that may bear on independence. Under
the Audit & Risk Committee Charter, the Audit & Risk Committee is responsible for
recommending appropriate action to the Board in response to this report.
The Board requires the external financial auditors to attend the company’s annual
shareholders’ meeting in order to answer any question from shareholders relating to
the audit for that financial year.
The Audit & Risk Committee Charter and the External Financial Auditors
Independence Policy can be found on the Company’s Website.
Internal audit
Internal audit is a key component of the objective-centric risk management
approach being implemented by the company. In addition to internal mechanisms,
including self-assessments and internal reviews, the Board engages external
advisors to carry out internal audit functions on various parts of the business on a
rotation basis each year. The focus is to assist the business with the evaluation of
the effectiveness of key risk management controls.
PRINCIPLE 8: SHAREHOLDER RIGHTS & RELATIONS
Shareholder communications
The aim of the company’s communication arrangements is to provide shareholders
with information about the company and to enable shareholders to actively engage
with the company and exercise their rights as shareholders in an informed manner.
The company’s Shareholder Communication Policy facilitates communication with
shareholders through written and electronic means, and by facilitating shareholder
access to directors, management and the company’s auditors. A copy of the
Shareholder Communication Policy is available on the Company’s Website.
The company provides shareholders with communication through the following
channels:
• the investor section of the Company’s Website;
• the Annual Report;
• the Interim Report;
Annual Corporate Governance Statement 2018Fisher & Paykel Healthcare Corporation Limited7
• the annual shareholders’ meeting;
• regular disclosures on company performance and news; and
• disclosure of presentations provided to analysts and investors during regular
briefings.
Company’s Website
The Company’s Website is an important part of the company’s communication
with shareholders. Included on the website is a range of information relevant
to shareholders and others concerning the operation of the company and its
subsidiaries, including information about the company and its history, biographies
of the company’s directors and senior management, annual and interim reports,
NZX announcements, notices and results of meetings, upcoming calendar dates,
historical market data, media releases, downloadable forms for shareholders,
the company’s constitution, Board Charter (and the Charters of the various
Committees), and other corporate governance policies of the company.
Shareholders may, at any time, direct questions or requests for information to
directors or management through the Company’s Website or by contacting the
company’s General Manager Corporate, the contact details for whom are available
on the Company’s Website.
The company provides shareholders with the option to receive communications
from, and send communications to, the company and its share registrar
electronically.
The company has in place an investor relations programme to facilitate effective
two-way communication with investors. A summary of issues discussed at one-
on-one or group meetings with investors and analysts, including a record of those
present, time and venue of the meeting, is kept for internal reference only.
Shareholder meetings
The annual shareholders’ meeting of the company (“ASM”) is currently held
in Auckland, New Zealand, as the Board believes this location best facilitates
attendance by shareholders at the meeting. From 2018 onwards, the company will
also offer shareholders the ability to attend the meeting digitally. Notice of the ASM
is posted on the Company’s Website as soon as possible and at least 28 days prior
to the meeting.
The Board encourages active participation by shareholders at the annual
shareholders’ meeting and shareholders may present questions during the meeting.
Use of a virtual tool will enable shareholders attending the ASM digitally to engage
with the Board and executive leadership and ask questions.
Shareholders have the right to vote on major decisions which may change the
nature of the company. Each shareholder has one vote per share they own in the
company, equally with other shareholders. The company also offers an electronic
voting facility to allow shareholders to vote ahead of the meeting without having to
attend or appoint a proxy.
Annual Corporate Governance Statement 2018Fisher & Paykel Healthcare Corporation Limited8
NZX Appendix 1 Information
Results for announcement to the market
FULL YEAR REPORTING
Reporting Period 12 months to 31 March 2018
Previous Reporting Period 12 months to 31 March 2017
EARNINGS
Amount (NZ$000) Percentage change
Operating revenue from ordinary activities $980.8 10%
Earnings before interest and tax $269.8 12%
Net profit attributable to shareholders $190.2 12%
DIVIDENDS
Amount per share
NZ cents
Imputed amount per share*
NZ cents
Gross amount per share*
NZ cents
Final Dividend 12.5 cents 4.861 cents
17.361 cents
* NZ resident shareholders
Record Date 22 June 2018
Dividend Payment Date 6 July 2018
The company operates a dividend reinvestment plan for New Zealand and Australian resident shareholders. For the Final
Dividend no discount will be applied. Participation notices must be received on or before the first business day after the Record
Date to be eligible to participate in entitlements under the plan. A copy of the plan offer document is available
at www.fphcare.com/drp
.
FINANCIAL INFORMATION AND COMMENTARY
For commentary on the results please refer to the news release and financial commentary section of the company’s 2018 Annual
Report. This appendix should be read in conjunction with the company’s financial statements for the year ended 31 March 2018,
contained in the company’s 2018 Annual Report, and the company’s most recent audited financial statements.
NET TANGIBLE ASSETS PER SECURITY
31 March 2017 31 March 2018
Net tangible assets per security NZ$1.06 NZ$1.21
CONTROL OF ENTITIES GAINED OR LOST
There was no gain or loss of control of entities during the year ended 31 March 2018.
ASSOCIATES AND JOINT VENTURES
The company does not have any associates or joint ventures.
ACCOUNTING STANDARDS
The company’s full year financial statements have been prepared in accordance with New Zealand Generally Accepted
Accounting Practice (NZ GAAP) and comply with New Zealand equivalents to International Financial Reporting Standards (NZ
IFRS), other New Zealand accounting standards and authoritative notices that are applicable to entities that apply NZ IFRS. The
consolidated financial statements also comply with International Financial Reporting Standards (IFRS).
BASIS OF REPORT
This report is based on the audited company financial statements.
APPENDIX 7 – NZSX Listing Rules
Number of pages including this one
(Please provide any other relevant
NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10. details on additional pages)
For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required.
Full name
of Issuer
Name of officer authorised to
Authority for event,
make this notice
e.g. Directors' resolution
Contact phone
Contact fax
numbernumber
Date
Nature of event
Bonus
If ticked,
Rights Issue
Tick as appropriate
Issue
state whether:Taxable
/ Non TaxableConversionInterest
Renouncable
Rights IssueCapital
CallDividend
If ticked, stateFull
non-renouncable
change
whether:
Interim
Year
SpecialDRP Applies
EXISTING securities affected by this
If more than one security is affected by the event, use a separate form.
Description of theISIN
class of securities
If unknown, contact NZX
Details of securities issued pursuant to this eventIf more than one class of security is to be issued, use a separate form for each class.
Description of theISIN
class of securities
If unknown, contact NZX
Number of Securities toMinimum
Ratio, e.g
be issued following eventEntitlement
1 for 2 for
Conversion, Maturity, Call
Treatment of Fractions
Payable or Exercise Date
Tick if
provide an
pari passu
ORexplanation
Strike price per security for any issue in lieu or date
of the
Strike Price available.
ranking
Monies Associated with Event
Dividend payable, Call payable, Exercise price, Conversion price, Redemption price, Application money.
Source of
Amount per security
Payment
(does not include any excluded income)
Excluded income per security
(only applicable to listed PIEs)
Supplementary
Amount per security
Currencydividendin dollars and cents
details -
NZSX Listing Rule 7.12.7
Total monies
TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
Imputation Credits
issue state strike priceWithholding Tax(Give details)
Foreign
FDP Credits
Withholding Tax(Give details)
Timing
(Refer Appendix 8 in the NZSX Listing Rules)
Record Date 5pmApplication Date
For calculation of entitlements -Also, Call Payable, Dividend /
Interest Payable, Exercise Date,
Conversion Date.
Notice DateAllotment Date
Entitlement letters, call notices,For the issue of new securities.
conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:Security Code:
Cease Quoting Old Security 5pm:
22 June, 20186 July, 2018
$0.868056 cents/share4.861111 cents/share
$
New Zealand Dollars2.205882 cents/share
$71,417,714
Date Payable
6 July, 2018
Enter N/A if not
applicable
NZFAPE0001S2
In dollars and cents
Revenue Reserves
12.50 cents/share
(09) 574 0119(09) 574 017625052018
Ordinary Shares
EMAIL: announce@nzx.com
Notice of event affecting securities
Fisher & Paykel Healthcare Corporation Limited
Antony G. BarclayDirectors' Resolution
Dear Shareholder,
FISHER & PAYKEL HEALTHCARE ANNUAL REVIEW AND ANNUAL REPORT 2018
We are pleased to provide you with a copy of our annual review for the year ended 31 March 2018. The 2018
financial year was another positive year for our company and we have exciting opportunities in front of us.
Fisher & Paykel Healthcare’s annual report for the year ended 31 March 2018 is also now available on our website at
http://www.fphcare.co.nz/investor-reports. Future annual and interim reports will also be available from the same
website.
Request for electronic communications
If you do not currently receive your Fisher & Paykel Healthcare shareholder communications electronically, we
would encourage you to elect to do so by providing your email address details in the box below. It keeps costs
down, delivery to you is faster and it is better for the environment.
I/We wish to receive all Fisher & Paykel Healthcare shareholder communications electronically (by email)
where possible at my / our email address as stated below:
Report request
Although Fisher & Paykel Healthcare’s annual and interim reports are available electronically at the website set out
above, you may, at any time, request a free printed or electronic copy of the most recent and any future annual and
interim reports prepared. Please note that previous requests for printed copies of annual and interim reports no
longer apply.
To update your communication preference or request copies of future annual and interim reports, please visit the
Link Market Services Investor Centre at https://investorcentre.linkmarketservices.co.nz. You will require your CSN/
Holder Number and FIN to access your holding information. Alternatively, please complete the section below and
return this form to our registry, Link Market Services.
I/We wish to receive a printed copy of Fisher & Paykel Healthcare’s annual and interim reports when available
each year.
I/We wish to receive an electronic copy of Fisher & Paykel Healthcare’s annual and interim reports when
available each year.
Please return the form to our registry, Link Market Services in any of the following ways:
Scan & email to: operations@linkmarketservices.com
(please put “FPH Annual Report” in the subject line for easy identification)
Fax to: +64 9 375 5990
Mail: Please insert this entire page in an envelope, affix the necessary postage and mail to
Link Market Services, PO Box 91976, Victoria Street West, Auckland 1142, New Zealand.
Deliver: Level 11, Deloitte Centre, 80 Queen Street, Auckland 1010, New Zealand
If you have any questions about changing how you receive shareholder communications as a Fisher & Paykel Healthcare
shareholder please contact Link Market Services on +64 9 375 5998 or by email at: enquiries@linkmarketservices.co.nz.
Thank you for your continued support of Fisher & Paykel Healthcare.
Lewis Gradon
Managing Director & Chief Executive Officer
Fisher & Paykel Healthcare Corporation Limited
28 May 2018
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Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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