18.08.23 FPH Updates Earnings Guidance at ASM

News Release
STOCK EXCHANGE LISTINGS: NEW ZEALAND (FPH), AUSTRALIA (FPH)

FISHER & PAYKEL HEALTHCARE UPGRADES GUIDANCE AND ANNOUNCES NEW
NEONATAL PRODUCT

Auckland, New Zealand, 23 August 2018 - Fisher & Paykel Healthcare Corporation Limited
announced that it has upgraded its earnings guidance for the financial year ending 31 March
2019 at its Annual Shareholders’ Meeting today. The company also announced that it has
launched a new neonatal respiratory care device, the F&P 950™ Heated Humidification
System.

The 2019 financial year has started strongly. At current exchange rates, the company
expects operating revenue for the first half of the 2019 financial year, ending 30 September
2018, to be approximately NZ$510 million and net profit after tax to be approximately NZ$95
million.

The full year guidance previously provided in May, based on a NZ:US exchange rate of 69.5
cents, was for operating revenue to be approximately NZ$1.05 billion and net profit after tax
to be approximately NZ$210 million.

There has since been a weakening of the NZ dollar. Assuming a NZ:US exchange rate of
approximately 67 cents for the balance of the year, the company expects full year operating
revenue to be approximately NZ$1.07 billion and net profit after tax to be approximately
NZ$215 million.

“The year has started well,” said Managing Director and CEO Lewis Gradon. “We are
building on the strong growth we achieved last year, and are on track to pass 1 billion NZ
dollars in revenue this year. As 99% of our revenue is generated outside of New Zealand,
our NZ dollar results can be influenced by exchange rate movements. This year, the New
Zealand dollar has weakened against a number of other currencies, which is the major
contributor to the upgrade in our earnings guidance.

“We are also pleased to announce the release of the neonatal breathing circuits for the F&P
950 Humidification System, which follows on from the successful launch of the adult system
in 2016. The feedback we received from nurses during clinical trials has been
overwhelmingly positive, principally in terms of ease of use and performance. In particular,
the introduction of Thermadapt technology, in which the circuit automatically adjusts its
temperature according to the baby’s current environmental condition – ambient, warmer or
incubator – is a stand out feature that makes it very easy for nurses to set up and operate.
This is a great product and we are pleased to add it to our product range.”

The neonatal circuits for the F&P 950 System are currently available in New Zealand and
Australia, and will be rolled out to other countries over the next few years.

The company has provided the Chairman’s speech, CEO’s speech and slide presentation for
the 2018 Annual Shareholders’ Meeting to the NZX and ASX today, and provided an
update (below) on the company’s foreign exchange hedging position as at today’s date. The
Annual Shareholders’ Meeting is scheduled to begin at 2:00pm NZST, 12:00pm AEST
(10:00pm USEDT) and will be broadcast simultaneously over the internet. To view the
webcast, go to: www.virtualmeeting.co.nz/fph18.

ENDS

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.


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


Foreign Exchange Hedging Position
The hedging position for our main exposures, the US dollar and Euro, as at today’s date is:


Year to 31 March

2019 2020 2021 2022 2023 2024 2025-2027
USD % cover of expected
exposure
95%

70%

40%

- - - -
USD average rate of cover
0.681

0.668

0.652

- - - -
EUR % cover of expected
exposure
90%

65%

45%

35%

30%

15% 5%
EUR average rate of cover
0.606

0.572

0.542

0.522

0.508

0.505 0.473

Note: Hedging cover percentages have been rounded to the nearest 5%

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1

FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED
ANNUAL SHAREHOLDERS’ MEETING
23 AUGUST 2018

ADDRESS BY TONY CARTER,
CHAIRMAN


Introduction
Fisher & Paykel Healthcare is a world leader in medical devices and
systems for use in respiratory care, acute care, surgery and the treatment of
obstructive sleep apnea.

In the 2018 financial year, we delivered record sales of 980 million New
Zealand dollars, an increase of 10%, and a 12% increase in net profit after tax
to 190 million dollars.

We estimate that our products were used in the care of over 13 million
patients in 120 countries over the 2018 financial year. Our global team of
over 4,000 is dedicated to providing high quality, innovative medical devices
that assist healthcare providers to deliver outstanding patient care.

Our business is broadly structured into two major product groups: Hospital
and Homecare. Products in our Hospital group are used primarily to
humidify the gases used in invasive ventilation, non-invasive ventilation,
nasal high flow therapy and laparoscopic and open surgery.

In the 2018 financial year, our Hospital revenue grew 14% to 572 million
New Zealand dollars.

In our Homecare product group, our systems are used to treat the growing
number of people with obstructive sleep apnea, or OSA, and also patients
requiring respiratory support in the home. Like our Hospital products, our

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products in this group are designed to be effective, simple and comfortable to
use and to support patient independence. This year, revenue in the
Homecare group was up 4% to 398 million New Zealand dollars.

Market context
Healthcare providers are currently facing unprecedented challenges through
changing demographics, which in turn are putting upward pressure on
healthcare costs.

Spending on healthcare in OECD countries increased by approximately 3%,
on average, in 2016, which is the highest rate of increase since 2009. Health
spending as a share of GDP averaged almost 9% in 2016. The United States
has the highest expenditure rate at 17% of GDP.

In per capita terms, health spending in 2017 is estimated to have reached
over 4,000 US dollars, on average, across the OECD. This is approximately
70% more than OECD countries spend on education for each citizen.

Our products directly respond to these needs through their dual ability to
positively impact patient outcomes and reduce costs to healthcare providers.

Most healthcare costs are incurred through labour, which rise in relation to
the increasing complexity of care required. The more acute the area of
hospital and the longer the patient stay, the greater the cost is to healthcare
providers.

Our products can help to prevent a patient’s condition escalating, thereby
avoiding the need for treatment in more acute areas of a hospital. Our
products are less labour-intensive to use, and they support faster recovery
times and sometimes even treatment at home.

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In light of the market context, these attributes make our products very
appealing to our customers.

The team
While great products are of course important to a company’s success, so too
is its culture. The F&P way is, I think, unique among its peers, established
early in a culture of innovation, continuous improvement and collaboration
that continues to this day. I am sure that many of the early F&P team
continue to support the company as shareholders, and perhaps may even be
in the audience here today.

From humble beginnings and a can-do attitude, Fisher & Paykel Healthcare
has evolved into a true world leader. Philosophies such as open-plan
working, ready access to management, and a resolute focus on always doing
what is best for the patient first and foremost, have established a culture of
care.

Culture is reflected in many ways, but one obvious example is the profit-
sharing bonus that is paid to our employees around the world every six
months – and which totalled over 4.5 million dollars in the 2018 financial
year. In the past year, the profit sharing bonus equated to more than a
week’s additional pay for our people. We acknowledge that the results we
have attained would not be possible without the collaboration, dedication and
commitment of our people in 37 countries around the world.

Your Board
Turning now to your Board.

Today, long-serving director Dr Arthur Morris retires from the Board at the
conclusion of this meeting. On behalf of the Board, management team,
shareholders and wider company, I would like to acknowledge his significant

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contribution over the past 10 years, which has been very much valued.
Arthur will give an address later in this meeting.

A search for a new director is underway and we expect an appointment to be
announced within the next few months.

We continue to support the New Zealand Future Directors’ programme,
which provides Board participation opportunities for up and coming directors.
This year we welcomed Claudia Wyss, who is currently Chief Executive
Officer at Healthvision, a home-based healthcare agency that operates
across New Zealand. Claudia has over 25 years’ experience across the
health industry, and I am sure we will benefit from her industry insights.

Dividend
The Board approved an increased final dividend for the year of 12.5 cents
per share. The total dividend for the financial year was therefore 21.25 cents
per share, which is 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.

Conclusion
I would like to thank you, our shareholders, for your continued support and
loyalty. We value your contribution and look forward to our joint success.

I will now pass you onto Lewis, our Managing Director and CEO, who will
provide further commentary on the company’s performance and an update
on our current outlook for the 2019 financial year.

Lewis.

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FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED
ANNUAL SHAREHOLDERS’ MEETING
23 AUGUST 2018

ADDRESS BY LEWIS GRADON,
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER


Thank you Tony.

The year has started well. We are building on the strong growth we achieved
last year, and are on track to pass 1 billion NZ dollars in revenue this year, the
50
th
since development of the first Agee jar humidifier.

We continue to roll out our latest products into new markets around the world,
and are making good progress on the construction of our fourth New Zealand
building, which we expect to be complete in 2020. Our second manufacturing
facility in Mexico is also progressing well, and we expect it will be completed in
late 2018. The SAP roll out also continues successfully and we continue to
enjoy the benefits of this new system.

Characteristics of our business
Today, I would like to spend some time talking about several of the unique
characteristics of our business.

We hold leading positions in respiratory care and obstructive sleep apnea
around the world, and generate 99% of our revenue from outside New
Zealand.

87% of our revenue is from recurring items, such as consumables and
accessories, which generally helps make our revenue relatively reliable.

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R&D is a consistent area of investment and we currently have 572 people in
R&D roles, based in our Auckland offices. Last year we invested 95 million
NZ dollars in R&D. The proven quality of the R&D team that we have here
in New Zealand is as good as or better than anything you would find
anywhere else in the world.

We generate significant barriers to entry due to the technological and
intellectual property advantages we have built up over our nearly 50 years
of research and development. The regulatory environment we operate in,
the relationships we have built with customers around the world, and our
unique access to healthcare environments offer us a key advantage.

These factors help put us in a strong position to continue to deliver the
growth rates and success we have seen in recent years.

Products & Technology
One example that clearly demonstrates our technological leadership is the
F&P 950 heated humidification system. Following the launch of the adult
system in 2016, we recently released the neonatal version in New Zealand
and Australia.

Driving much of the design process behind this product is a commitment to
better usability and performance. The first example of this is a feature called
Thermadapt. In a neo-natal intensive care unit, or NICU, babies may be in
warmers, incubators, or just in the room, which means that there are
different temperature environments affecting our equipment. Our system
incorporates a control centre that automatically adjusts to manage the
different conditions the baby is in, without the need for nurses to manually
modify the therapy, which is the current practice. This ensures the patient is
receiving their therapy at the ideal temperature and humidity, whatever
environment they might be in.

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Another key innovation enabled by better technology is much longer
delivery tubing. Parents are able to move around the room more, and not
be restricted to a single chair close to the cot and the bundle of equipment
that is common in these areas. This facilitates kangaroo care, which is
important for babies and their parents.

Sometimes it is what appears to be the simplest, or most obvious ideas that
are the most complex to implement. These innovations are the results of
deep, ongoing relationships between our sales representatives and
healthcare providers, as well as observations made by our R&D people
while in these hospital environments.

Overall, the feedback we have received from nurses so far is
overwhelmingly positive, and we look forward to rolling this product out
around the world in the coming years.

Changing Clinical Practice
We talk a lot about changing clinical practice. It is a key focus for us and
instrumental to our success and our opportunities. Clinical change takes a
long time, and requires a specialist sales force with a focus on customer
support, care, education and clinical data.

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, which used our Optiflow
Junior system, found that significantly fewer patients required escalation of
care. This study is a major addition to the growing body of strong evidence
supporting the use of nasal high flow therapy in both adults and children.

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In Homecare, this year we also saw the publication of a major long-term
study that clearly demonstrates the effectiveness of Optiflow nasal high flow
therapy in the home. This research was the first of its kind and was
conducted in Denmark in 200 patients with COPD, chronic obstructive
pulmonary disease. Like the hospital study, it too showed statistically
significant results, with the primary outcome being a significant reduction in
patients’ exacerbation rate for those receiving nasal high flow therapy with
our myAirvo device.

This research is an important addition to the small but growing body of
evidence beginning to influence how patients with COPD are treated in the
home. Over time, we expect to see this growing body of work drive clinical
change and the adoption of our myAirvo system.

Progress to date this financial year
Turning now to the current financial year. Both our Hospital and Homecare
product groups have started well.

In the Hospital, our Airvo and Optiflow products continue to grow strongly
on the back of that growing body of clinical evidence into the benefits of
nasal high flow therapy.

As we sell respiratory products, our revenue can be sensitive to the strength
of the northern hemisphere flu season. The 2017-18 northern hemisphere
flu season was the strongest flu season since the 2009-10 season. Given
that nobody knows how strong the upcoming northern hemisphere flu
season will be, we have assumed a moderate 2018-19 flu season for the
purposes of our forecasting. We continue to expect similar constant
currency revenue growth in our Hospital product group for the FY19 year to
what we delivered last year.

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In our Homecare product group, we have had a very positive response from
customers to our newly released SleepStyle CPAP device in NZ, Australia,
Japan, Canada and certain countries in Europe where it has been released.
We expect to expand our range of innovative and popular OSA masks later
this year but as we have said previously, we expect contribution from new
products in the FY19 year will be muted.

Revenue from our “Distributed & Other” business, which includes infant
warmer sales, was 10 million NZ dollars in the last financial year. As we
took last time orders for infant warmers in September last year, we expect a
reduction in revenue in this category in the current financial year.

Outlook
On to outlook.
The full year guidance provided in May, based on an NZ:US exchange rate of
69.5 cents, was for operating revenue to be approximately 1.05 billion NZ
dollars and net profit after tax to be approximately 210 million NZ dollars.

There has been a weakening of the NZ dollar since May.
Assuming an NZ:US exchange rate of approximately 67 cents for the balance
of the year, we expect full year operating revenue to be approximately 1.07
billion NZ dollars and net profit after tax to be approximately 215 million NZ
dollars.

At current exchange rates, who expect operating revenue for the first half of
the 2019 financial year to be approximately 510 million NZ dollars and net
profit after tax to be approximately 95 million NZ dollars.

Conclusion
During the year we farewelled our long-standing CFO, Tony Barclay, who
retired at the end of May. Tony was a key member of the business for over

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22 years and he has left big shoes to fill. Tony is currently in a consulting
role with us until the end of May 2019, and we expect to announce his
successor in the coming months. I would like to thank Tony for his long,
valued contribution and his commitment and wish him all the very best.

In closing, I would like to thank our customers, clinical partners, suppliers,
employees and shareholders for their continued support of the company. Our
results are testament to the care and commitment of our global team and the
support of all those who interact with us. We are on a journey of continued
improvement to patient care and outcomes, and it is a privilege that with your
support, we are able to effect such positive change around the world every
day.

Thank you.