Record Result for FPH; Net Profit up 37%
News Release
STOCK EXCHANGE LISTINGS: NEW ZEALAND (FPH), AUSTRALIA (FPH)
Record Result for Fisher & Paykel Healthcare; Net Profit up 37%
Auckland, New Zealand, 29 June 2020 - Fisher & Paykel Healthcare Corporation Limited
announced today its results for the full year ended 31 March 2020. Operating revenue was
$1.26 billion, up 18% over last year, or 14% in constant currency.
Net profit after tax was $287.3 million, up 37% over the previous year, or 30% in constant
currency. Excluding the impact from tax changes, being the R&D tax credit and building tax
depreciation, net profit after tax grew 23% in constant currency.
The increase in revenue was largely driven by growth in the use of the company’s Optiflow
TM
nasal high flow therapy, demand for products to treat COVID-19 patients, and strong hospital
hardware sales throughout the course of the year.
“The 2020 financial year was already on track to deliver strong growth before the coronavirus
impacted sales,” said Managing Director and CEO Lewis Gradon. “Beginning in January, the
demand for our respiratory humidifiers accelerated in a way that has been unprecedented.”
“With new processes, new procedures and new ways of working safely, we managed to double
and in some instances triple, output for some of our hospital hardware products over just a few
months at the end of the year. I’m incredibly proud of our people and their unyielding
commitment to doing the right thing for patients,” said Mr Gradon.
For the Hospital product group, which includes products used in respiratory, acute and surgical
care, operating revenue increased 25%, or 21% in constant currency, to $801.3 million for the
year. Sales from new applications consumables, which includes products used for nasal high
flow therapy, increased by 23% in constant currency over the previous financial year.
For the Homecare product group, which includes products used in the treatment of obstructive
sleep apnea (OSA) and respiratory support in the home, revenue rose 9%, or 4% in constant
currency, to finish at $457 million for the year. During the year, the company introduced its F&P
Vitera
TM
OSA full face mask into the US market and launched the new F&P Evora
TM
compact
nasal mask in Australasia, Europe and Canada. Both of these new masks have been well
received.
Gross margin decreased by 73 basis points to 66.1%, primarily driven by additional air freight
costs required to acquire increased supply of raw materials and expedite finished goods to
customers for patient use towards the end of the financial year, as well as the additional start-up
costs of the company’s second Mexico manufacturing facility.
Capital management and dividend
The company also announced that it has expanded its previous dividend policy into a broader
capital management policy. The company’s priority is to appropriately invest in the business to
support long term sustainable growth. The company has maintained a target debt-to-debt-plus-
equity ratio in the range of +5% to -5%, and the company expects to increase dividends as
earnings grow, while taking into consideration the target gearing ratio. A copy of the new capital
management policy is available on the company’s website at www.fphcare.com/capital-
management.
In accordance with the company’s capital management policy, the directors have approved a
final dividend of 15.5 cents per share, an increase of 15% on the final dividend last year. This
brings the total dividend for the year to 27.5 cents per share, an increase of 18% on last year.
The final dividend, carrying full New Zealand imputation credit, will be paid on 17 July 2020 with
a record date of 7 July 2020.
Outlook for FY2021
“We cannot predict the scope, duration or impact of COVID-19 and its effects on our operations
and financial results,” said Mr Gradon. “In the midst of this uncertainty, we will continue doing
what we are known for – expanding our range of innovative products with patients at the centre.
“For the first three months of FY21 our Hospital product group growth has continued to
accelerate, with hardware growth of over 300%, and hospital consumables tracking at over a
one-third increase, compared to the first three months of FY20. In our Homecare product group
we are seeing evidence of both a lower OSA diagnosis rate, and OSA mask resupply levels in
the beginning of FY21 returning closer to expected levels compared to the elevated levels at the
end of FY20. Homecare growth for the first three months of FY21 has therefore been closer to
the FY20 full year rate.
“Some costs, most significantly freight, also remained elevated during the first three months of
FY21. We value a long term relationship with our customers, and we have not increased their
prices.
“Due to significant uncertainty in the extent and duration of the impact of COVID-19 on global
demand for our products, we have made some assumptions to allow us to provide some
guidance for FY21. As a result, our guidance is provided on the basis that global
hospitalisations due to COVID-19 peak for the first quarter of this financial year, and
hospitalisations for respiratory-related illnesses and OSA diagnostic activity steadily return to
normal by the end of our first half. On this basis and at current exchange rates, full year
operating revenue for the 2021 financial year would be approximately $1.48 billion and net profit
after tax would be approximately $325 million to $340 million.
“Our assumption for guidance is not a prediction of the course of COVID-19 around the world.
We are continuing to grow manufacturing capacity of hospital products during our 2021 financial
year to ensure a further increase in supply of our respiratory products is available if required.
“Construction is complete on our fourth manufacturing building in New Zealand. As we bring
forward capital expenditure spending for new product tooling and manufacturing capacity we
expect capital expenditure for the 2021 financial year to be approximately $160 million.
“I want to recognise our suppliers, customers, shareholders, clinical partners, government
agencies – and especially, our employees – for your support this year. Thanks to you, our
products were used to treat around 16 million patients last year, including patients with COVID-
19 all over the world.
“Fisher & Paykel Healthcare is resilient and well-positioned to respond to the global pandemic
and adapt to a ‘new normal’. We are confident that our innovative products and therapies will
continue to shape the future of care in hospitals and homes,” concluded Mr Gradon.
Overview of key results for the 2020 financial year
37% growth in net profit after tax to a record $287.3 million.
18% growth in operating revenue to a record $1.26 billion, 14% growth in constant currency.
25% growth in Hospital operating revenue, 21% growth in constant currency.
23% constant currency revenue growth for new applications consumables; i.e. products used
in non-invasive ventilation, Optiflow nasal high flow therapy, and surgical applications,
accounting for 64% of Hospital consumables revenue.
9% growth in Homecare operating revenue, 4% growth in constant currency.
4% growth in constant currency revenue in OSA masks.
Investment in R&D was 9% of revenue, or $118.5 million.
15% increase in final dividend to 15.5 cps (2019: 13.5 cps).
About Fisher & Paykel Healthcare
Fisher & Paykel Healthcare is a leading designer, manufacturer and marketer of products and
systems for use in respiratory care, acute care, surgery and the treatment of obstructive sleep
apnea. The company’s products are sold in over 120 countries worldwide. For more information
about the company, visit our website www.fphcare.com.
Ends
Media & Investor Contacts:
Karen Knott
Senior Communications Manager
karen.knott@fphcare.co.nz
+64 21 713 911
Hayden Brown
Investor Relations Manager
hayden.brown@fphcare.co.nz
+64 27 807 8073
Authorised by Fisher & Paykel Healthcare Corporation Limited’s Board of Directors.
Accompanying documents
Please find attached to this news release the following additional documents:
• Results in Brief
• Annual Report 2020
• Investor Presentation 2020
• Annual Review 2020
• NZX Results Announcement
• NZX Distribution Notice
Constant Currency Information
Constant currency information included within this news release is non-GAAP financial
information, as defined by the NZ Financial Markets Authority, and has been provided to assist
users of financial information to better understand and track the company’s comparative
financial performance without the impacts of spot foreign currency fluctuations and hedging
results and has been prepared on a consistent basis each year. A constant currency analysis is
included on page 36 of the company’s Annual Report 2020, and the company’s constant
currency framework can be found on the company’s website at www.fphcare.com/ccf.
---
Results in Brief
Year Ended Year Ended
% Change
(Reported)
% Change
(Constant
Currency
1
)
31-Mar-19 31-Mar-20
NZ$M NZ$M
(except as otherwise
stated)
(except as otherwise
stated)
FINANCIAL PERFORMANCE
Total operating revenue 1,070.4 1,263.7 +18% +14%
Cost of sales (354.6)
(427.9) +21% +19%
Gross profit 715.8
835.8 +17% +11%
Gross margin 66.9% 66.1% -73bps -150bps
Other income 5.0
- - -
Selling, general and administrative expenses (327.8)
(338.0) +3% -1%
Research and development expenses (100.4)
(118.5) +18% +18%
R&D percentage of operating revenue 9.4%
9.4% - -
Total operating expenses (428.2)
(456.5) +7% +3%
Operating profit before financing costs 292.6 379.3 +30% +21%
Operating margin 27.3% 30.0% +268bps +169 bps
Net financing (expense) (1.4)
(8.8) - -
Profit before tax 291.2
370.5 +27% +20%
Tax expense (82.0) (83.2) +1% -3%
Profit after tax 209.2
287.3 +37% +30%
Effective tax rate 28.2%
22.5%
Effective tax rate excluding R&D tax credit and re-
introduction of building depreciation
28.2% 27.5%
Revenue by Region:
North America 501.5
571.2 +14%
Europe 314.6
365.4 +16%
Asia Pacific 208.1
273.3 +31%
Other 46.2
53.8 +16%
Total 1,070.4
1,263.7 +18%
Revenue by Product Group:
Hospital 642.3
801.3 +25%
Homecare 421.4
457.3 +9%
Core products sub-total 1,063.7
1,258.6 +18%
Distributed and other 6.7 5.1 -24%
Total 1,070.4
1,263.7 +18%
FINANCIAL POSITION
Tangible assets 1,106.3 1,270.4 +15%
Intangible assets
2
100.4 164.6 +64%
Total assets 1,206.7
1,435.0 +19%
Total liabilities (293.5) (461.2) +57%
Shareholders’ equity 913.2
973.8 +7%
Gearing -6.7% -4.3% +241bps
Net tangible asset backing (cents per share) 146 141 -3%
1
Constant currency (CC) removes the impact of exchange rate movements. This approach is used to assess the Group’s underlying
comparative financial performance without any impact from changes in foreign exchange rates. The company’s constant currency
framework can be found on the company’s website at www.fphcare.com/ccf
. The reconciliation to reported results is included within
the Financial Commentary section of the Annual Report.
2
Includes Intangible and deferred tax assets.
Results in Brief
(continued)
Year Ended Year Ended
% Change
31-Mar-19 31-Mar-20
NZ$M NZ$M
(except as otherwise
stated)
(except as otherwise
stated)
CASH FLOWS
Net cash flow from operating activities 253.3 321.4 +27%
Net cash flow (used in) investing activities (125.7)
(155.7) +24%
Net cash flow (used in) financing activities (113.1)
(159.0) +41%
SHARES OUTSTANDING
Weighted average basic shares outstanding 572,780,545 574,192,388
Weighted average diluted shares outstanding 578,050,600
579,049,643
Basic shares outstanding at year end 573,708,739
574,570,603
DIVIDENDS AND EARNINGS PER SHARE
Dividends per share (cents) - declared 23.25 27.50 +18%
Basic earnings per share (cents) 36.5
50.0 +37%
---
Annual Report 2020
BEYOND
Constant currency information contained within this report
is non-conforming financial information, as defined by the
NZ FMA 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 financial
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 36 of this report. The company’s constant currency
framework can be found on our website at www.fphcare.com/ccf.
TONY CARTER
CHAIRMAN
FINANCIAL AND BUSINESS HIGHLIGHTS
6
CHAIRMAN’S REPORT
10
CEO’S REPORT
12
OVERVIEW OF OUR BUSINESS
14
MATERIAL MATTERS
20
FOCUS ON: HEALTH, SAFETY AND WELLBEING
22
FOCUS ON: BETTER PRODUCTS
24
FOCUS ON: GLOBAL REACH
26
BOARD
28
EXECUTIVE MANAGEMENT TEAM
30
FINANCIAL COMMENTARY
33
FINANCIAL STATEMENTS
37
NOTES TO FINANCIAL STATEMENTS
41
AUDITOR’S REPORT
66
CARING SUSTAINABLY: ESG REPORT
69
FIVE YEAR SUMMARY
106
GLOSSARY
109
GRI AND TCFD CONTENT INDICES
110
DIRECTORY
113
LEWIS GRADON
MANAGING DIRECTOR
AND CHIEF EXECUTIVE OFFICER
This report covers the financial year ended 31 March 2020 and is
dated 29 June 2020. The report has been approved by the Board
and is signed on behalf of Fisher & Paykel Healthcare Corporation
Limited by Tony Carter, Chairman and Lewis Gradon, Managing
Director and Chief Executive Officer.
ContentsAbout this Report
Welcome to our 2020 Annual Report – Beyond.
This report highlights the work we have done
this year to improve health and outcomes for
patients all over the world, and the financial
results we achieved while doing so.
This report is designed to meet the needs of
a wide range of stakeholders. Beyond our
financial performance, our investors, customers
and employees want to know about our track
record with regard to the environment, social
responsibility, and governance (ESG). For that
reason, we have outlined our ESG commitments
and metrics in the second half of this report,
called “Caring Sustainably”.
We have prepared this year’s annual report
in accordance with the Global Reporting Initiative
(GRI) standards: Core reporting option. This year
we are also implementing recommendations
of the Task Force on Climate-related Financial
Disclosures (TCFD), disclosing our global carbon
footprint and integrating commentary related
to governance, risk and sustainability.
As with all areas of our business, we are
always looking for opportunities to continuously
improve our annual reporting. Please address
any questions, comments or suggestions to
investor@fphcare.co.nz.
Digital versions of this report and our previous
annual, interim and sustainability reports are
available at www.fphcare.com/investor-reports.
More than fifty years ago, we looked
beyond what was possible. Through
ingenuity and collaboration, we created
a device to deliver humidified air and
oxygen to patients in hospital.
That device became a full range of
world-leading products and therapies
essential for treating patients in 2020
– and beyond.
Photo credit: © Victor J. Blue/The New York Times/Redux/Headpress. Article: https://www.nytimes.com/2020/04/12/nyregion/coronavirus-births-mothers.html
THINKINGDESIGNINGDELIVERING
In the 2020 financial year, our products
touched the lives of around 16 million
patients, including many with COVID-19.
BEYOND
Photo credit: © Victor J. Blue/The New York Times/Redux/Headpress. Article: https://www.nytimes.com/2020/04/12/nyregion/coronavirus-births-mothers.html
Financial &
business highlights
OPERATING REVENUE
$1.26b
▲
18% | 2019 $1.07B
GROSS MARGIN
66.1%
73 BASIS POINTS DECREASE
HOSPITAL REVENUE
$801.3m
▲
25% | 2019 $642.3M
NET PROFIT AFTER TAX
$287.3m
▲
37% | 2019 $209.2M
TOTAL DIVIDEND FOR YEAR
FULLY IMPUTED
27.50cps
▲
18% | 2019 23.25CPS
HOSPITAL HARDWARE
REVENUE GROWTH
37%
( CONSTANT CURRENCY)
SPEND ON R&D
$118.5m
9% OF OPERATING REVENUE
NEW APPLICATIONS CONSUMABLES
REVENUE GROWTH
23%
( CONSTANT CURRENCY)
ANNUAL REPORT 2020
6Fisher & Paykel Healthcare Corporation Limited
OPERATING REVENUE
NZ$ MILLIONS
NET PROFIT AFTER TAX
NZ$ MILLIONS
REVENUE BY PRODUCT GROUP
12 MONTHS TO 31 MARCH 2020
REVENUE BY REGION
12 MONTHS TO 31 MARCH 2020
120+
COUNTRIES
Hospital
Homecare
Distributed & Other
North America
Europe
Asia Pacific
Other
63%
<1%
36%
45%
29%
22%
4%
1617181920
815.5
894.4
1,070.4
1,263.7
980.8
1617181920
143.4
169.2
209.2
287.3
190.2
+
IMPACTED
the lives of approximately
16 million patients around
the world, including many
with COVID-19.
+
LAUNCHED
the F&P Evora™ compact nasal
mask for OSA in New Zealand,
Australia, Europe and Canada.
+
EXPANDED
release of the F&P 950™ heated
humidification system in Europe
and the F&P Vitera™ mask
in the US.
+
OPENED
new sales offices in Poland and
Mexico, with our own dedicated
sales teams promoting products
in these countries.
+
WELCOMED
Dr Jean-Pierre Frat, a global key
opinion leader, to present his
findings on the use of nasal high
flow therapy in his practice.
+
COMMEMORATED
50 years of care with
employee events around
the globe.
+
CONTINUED
with the global roll-out of our
enterprise resource planning
(ERP) system in the US.
+
INCLUDED
in the FTSE4Good and Dow Jones
Sustainability Indices for 2019.
+
JOINED
other New Zealand climate
leaders as a member of the
Sustainable Business Council.
+
HONOURED
to receive the inaugural
Value of Design Black Pin in
the NZ Best Design Awards.
ANNUAL REPORT 2020
7Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
Hospital
63%
OF OPERATING REVENUE
CONSTANT CURRENCY REVENUE FROM
NEW APPLICATIONS CONSUMABLES
23%
OPERATING REVENUE
$801.3M
25%
Invasive ventilation
Our products for invasive ventilation provide
warm, humidified air to patients with bypassed
airways. This can help maintain the natural balance
of heat and moisture in the airways.
Noninvasive ventilation
Noninvasive 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 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 2020
8Fisher & Paykel Healthcare Corporation Limited
Homecare
36%
OF OPERATING REVENUE
CONSTANT CURRENCY
REVENUE
4%
OPERATING REVENUE
$457.3M
9%
CPAP therapy
Our range of CPAP machines and masks
support patients with obstructive sleep
apnea. Our masks have become well known
for their comfort, simplicity and ease of use,
which is a key factor in patient compliance.
Our patient management and support tools
complete a seamless experience to help
patients succeed in embracing therapy.
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 F&P myAirvo™ device
provides flows of humidified air, which can
contain supplemental oxygen if necessary
through an Optiflow nasal cannula or
tracheostomy connector, and is used for
patients with chronic respiratory conditions
such as COPD or bronchiectasis.
ANNUAL REPORT 2020
9Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
Only weeks after we announced
our half-year results in November,
the novel coronavirus emerged in
China. Within the course of a further
few months, the virus had spread
to Europe and North America, and
suddenly, Fisher & Paykel Healthcare
was called on to play a key role
in the middle of a worldwide
pandemic. Across the globe, our
people stepped up to the challenge,
going above and beyond to deliver.
Report from
the Chairman
of the Board
Tony Carter
Last month, we completed the fourth building
on our Auckland campus, the Daniell Building,
which highlights our commitment to high-tech
innovation in New Zealand. This impressive
addition couldn’t have come at a better time,
providing additional research and development
facilities, manufacturing space and a state-of-
the-art distribution centre that will be crucial
to meeting the increased demand for our
respiratory products.
The COVID-19 pandemic has highlighted how
important it is to maintain manufacturing
operations in multiple locations. Having facilities
in both New Zealand and Mexico has been a
significant advantage and has given us a higher
level of confidence in our business continuity
plans. We will continue to progress our work
on increasing our manufacturing footprint.
Board update
Last November, I announced my intention to
retire as Board Chairman effective at the close
of the annual shareholders’ meeting in August
this year. As I mentioned in the interim report,
director Scott St John will step into the role of
Chairman at that time. Scott joined the Board
in 2015 and currently chairs our Audit & Risk
Committee. He is a strong leader with excellent
corporate governance and commercial skills,
and he has the full support of the Board.
Fisher & Paykel Healthcare continues to support
the New Zealand Future Directors’ programme,
and we were pleased to appoint our fifth
participant, Toni Moyes, to this position in
February. Toni brings a fresh perspective,
as well as executive experience in technology
companies, which is valuable as we continue
to innovate and grow.
Before COVID-19 impacted sales, the 2020
financial year was already on track to deliver
strong growth. As a result of increased
demand for our Hospital and Homecare
products, the second half of the 2020
financial year saw the company deliver
better-than-expected performance.
Operating revenue was $1.26 billion, up 18 per
cent over last year, or 14 per cent in constant
currency. Net profit after tax was $287 million,
up 37 per cent over the previous year.
Strategic progress
Innovation is a constant for us, and this year
we were pleased with the successful launch
of F&P Evora, a new compact nasal mask
for the treatment of obstructive sleep apnea.
We also released several new consumable
products for use on adult and neonatal
patients in hospitals. This included new sizing
for our Optiflow Junior 2+ products and a
new Airvo™ AirSpiral tube and chamber kit
for use in the US.
Consistent with our strategy to expand into
international markets, we opened new sales
offices in Poland and Mexico. Maintaining a
direct sales presence in these countries will
allow the company to scale more effectively
into Eastern Europe and Mexico and focus
on changing clinical practice through our
relationships with customers.
During the 2020 financial year we commenced
manufacturing in the Melville Building, our
second manufacturing facility in Tijuana, Mexico.
This building provides more than 4,000 square
metres of additional manufacturing space,
allowing us to increase our production capacity
on infant care and adult consumable products.
ANNUAL REPORT 2020
10Fisher & Paykel Healthcare Corporation Limited
Beyond COVID-19
At a time of great uncertainty, Fisher & Paykel
Healthcare is resilient and well-positioned to
respond to the global pandemic and adapt to
a ‘new normal’. Come what may, our innovative
products and therapies will continue to shape
the future of care in hospitals and homes.
TONY CARTER
Chairman
BEYOND2020
Our people
On behalf of the Board, I want to acknowledge
the 5,000 employees of Fisher & Paykel
Healthcare, who have gone above and beyond
to deliver this year, especially in response to
COVID-19. They were able to maintain daily
operations, supply product and continue to
innovate during mandatory lockdown periods
around the world. I also want to thank our
suppliers, government agencies and local
officials in New Zealand and Mexico for the
assistance they provided getting raw materials
and finished goods across borders.
Dividend
Our consistent practice has been to pay
a dividend to shareholders. In light of our
strong performance, the Board has approved
a final dividend of 15.5 cents per share.
This takes the total dividend for the 2020
financial year to 27.5 per share, which is an
increase of 18% and equates to a dividend
payout ratio of approximately 55% of net profit
after tax for the year. The dividend will be paid
on 17 July 2020.
Fisher & Paykel
Healthcare is
resilient and
well-positioned
to respond to the
global pandemic.
ANNUAL REPORT 2020
11Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
Report from
the Managing
Director &
Chief Executive
Officer
Lewis Gradon
We talk a lot about our business
purpose: to improve care and
outcomes through inspired and
world-leading healthcare solutions.
Never before in my tenure with the
company have I seen our people live
out this purpose with more drive or
clarity than over the past five months.
In February, the demand for our respiratory
therapies accelerated in a way that has been
unprecedented. At the same time, borders
were closing, governments were intervening,
supply chains were disrupted, and lockdowns
were announced in many of the countries
where we do business.
With so many patient lives hanging in the
balance, our people delivered. In late January
we activated a rapid response team who
worked out new processes, new procedures
and new ways of working safely, allowing us
to double, and in some instances triple, output
for some of our hospital hardware products
over just a few months.
In the Hospital product group, revenue
increased 25 per cent, or 21 per cent in constant
currency, to $801 million for the year. Revenue
from new applications consumables, which
include products used for nasal high flow
therapy, grew by 23 per cent over the previous
financial year in constant currency.
Nasal high flow therapy has steadily gained
traction in the treatment of patients with
COVID-19 as a way to reduce intubation rates.
Over the past three months several dozen
studies have been published demonstrating
the benefits for patients with COVID-19, and
Optiflow is becoming a ‘household name’
among respiratory therapists and intensivists.
We introduced several new Hospital products
in financial year 2020. For treating patients on
noninvasive ventilation, we launched our new
vented F&P Nivairo™ full face mask, which
incorporates design features to make the fit
more comfortable. For invasive ventilation,
we expanded our range of consumable
products for the F&P 950 system, including
neonatal breathing circuits in the UK and
Ireland and adult circuits across Europe.
Homecare product group
In the Homecare product group, which includes
our masks for obstructive sleep apnea (OSA),
revenue grew by 9 per cent, or 4 per cent in
constant currency to $457 million. The expansion
of our F&P Vitera™ full-face mask into the U.S.
contributed to our results, and we anticipate
continued success with this product.
In February we launched F&P Evora, a
new compact nasal mask for treating OSA.
Evora showcases our commitment to ‘care by
design’ with its innovative headgear, which is
put on like a baseball cap. This makes fitting
the mask easier, both for the patient and
for the respiratory therapist. Our Evora team
Our procurement teams worked at all hours
to keep raw materials and components flowing
in from suppliers. Our manufacturing teams
added people and shifts to ramp up production
of our Airvo, 850 and 950 humidifiers. Our sales
representatives and customer services teams
were inundated with inquiries, and they went
to extraordinary lengths to train customers and
answer their questions quickly. Our distribution
centres were under a lot of pressure, but our
people went above and beyond to ship
products out to those so desperate for them.
Where possible, everyone not directly involved
in manufacturing or distribution transitioned
to working remotely, where they have continued
to collaborate with key opinion leaders and
progress new ideas. Many of our people have
stepped up to take on challenges radically
different to their everyday roles.
The pandemic has brought a new level of
uncertainty into all our lives, but it has also
brought out the best of our unique F&P culture.
It’s a culture of trust – where our people work
relentlessly to keep doing the right thing for
patients, even when no one is watching.
Because of our people and their unyielding
commitment to doing the right thing for patients,
what would have been a strong year finished
better than we expected. Operating revenue
was up 18 per cent over last year, or 14 per cent
in constant currency, at $1.26 billion. Net profit
after tax for the year was $287.3 million, which
was up 37 per cent over the previous year.
Hospital product group
The increase in revenue we saw over the
previous year was largely driven by growth
in the use of our Optiflow nasal high flow
therapy, demand for products to treat COVID-19
patients, and strong hardware sales throughout
the course of the year.
ANNUAL REPORT 2020
12Fisher & Paykel Healthcare Corporation Limited
BEYOND2020
Outlook
At a time when many companies are struggling,
we do not take our success for granted. No one
can fully predict the scope, duration or impact
of COVID-19 and its effects on operations and
financial results. In the midst of the uncertainty,
we will continue doing what we are known for
– expanding our range of innovative products
with patients at the centre.
For the first three months of FY21, our Hospital
product group growth has continued to
accelerate, with hardware growth of over 300
percent, and hospital consumables tracking at
over a one-third increase, compared to the first
three months of FY20. In our Homecare product
group we are seeing evidence of both a lower
OSA diagnosis rate, and OSA mask resupply
levels in the beginning of FY21 returning closer
to expected levels compared to the elevated
levels at the end of FY20. Homecare growth for
the first three months of FY21 has therefore
been closer to the FY20 full year rate.
Some costs, most significantly freight, also
remained elevated during the first three months
of FY21. We value a long term relationship with
our customers, and we have not increased
their prices.
Due to significant uncertainty in the extent and
duration of the impact of COVID-19 on global
demand for our products, we have made some
assumptions to allow us to provide some
guidance for FY21. As a result, our guidance is
provided on the basis that global
hospitalisations due to COVID-19 peak for the
first quarter of this financial year, and
hospitalisations for respiratory-related illnesses
and OSA diagnostic activity steadily return to
normal by the end of our first half. On this basis
and at current exchange rates, full year
operating revenue for the 2021 financial year
would be approximately $1.48 billion and
net profit after tax would be approximately
$325 million to $340 million.
Our assumption for guidance is not a prediction
of the course of COVID-19 around the world. We
are continuing to grow manufacturing capacity
of hospital products during our 2021 financial
year to ensure a further increase in supply of
our respiratory products is available if required.
Construction is complete on our fourth
manufacturing building in New Zealand. As we
bring forward capital expenditure spending for
new product tooling and manufacturing capacity
we expect capital expenditure for the 2021
financial year to be approximately $160 million.
This has been a year of learning for all of us at
Fisher & Paykel Healthcare. We’ve scaled up our
manufacturing capabilities faster than we
thought possible. We’ve introduced Optiflow
and placed hardware in hospitals all over the
world, reducing some of the hurdles to
changing clinical practice. Most importantly,
we’ve helped patients get better faster.
I want to recognise our suppliers, customers,
shareholders, clinical partners, government
agencies – and especially, our employees –
for your support this year. Thanks to you, in the
2020 financial year our products were used to
treat around 16 million patients, including many
battling COVID-19 all over the world. We are
confident in our ability to respond to this
global pandemic, and we are optimistic about
our future beyond it.
LEWIS GRADON
Managing Director & Chief Executive Officer
had to implement a number of innovative
manufacturing processes, and they did a great
job of rising to the challenges. Already available
in Australia, New Zealand, Europe and Canada,
Evora will be launched next in the U.S.
Relationships
Fisher & Paykel Healthcare was founded on
relationships, and relationships with clinicians
are still at the heart of our business.
Before the COVID-19 outbreak, we welcomed
Dr Jean-Pierre Frat to our Auckland campus to
share the results of his studies into nasal high
flow therapy. Dr Frat is recognised by his peers
as a global key opinion leader, and his work has
been cited more than 600 times. He shared his
personal experiences involving the application of
the therapy within his practice in France and the
profound difference it has made to his patients.
In a year overshadowed by the challenges of
COVID-19, we continued to demonstrate our
commitment to building direct relationships
with our customers. Our new sales offices in
Poland and Mexico will bring opportunities for
further growth in those countries as our sales
representatives influence clinical practice there.
ANNUAL REPORT 2020
13Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
ANNUAL REPORT 2020
14Fisher & Paykel Healthcare Corporation Limited
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 help
clinicians around the world to deliver the
best possible patient care. They enable
patients to transition into less-acute care
settings, recover more quickly, and avoid
more serious conditions.
Because of our products and therapies,
many patients can be treated in the comfort
of their own homes instead of in the hospital.
Not only does this make life better for the
patient, it reduces costs for the world’s
healthcare systems.
Product innovation has been the cornerstone
of our success since 1969, when our first
prototype respiratory humidifier was
developed. Today, we are still striving to lead
the way in the development of medical devices
and technologies by continuously improving
our products, pioneering new therapies, and
changing clinical practice.
What we do
BEYOND2020
ANNUAL REPORT 2020
15Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
How our
business works
RESEARCH & DEVELOPMENT
Our R&D is based in New Zealand. The
team works extensively in hospitals, and
with patients and clinicians, in order to
develop better technology that enhances
patient care. We typically invest around
9–10% of our revenue in R&D annually.
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.
THERAPIES
63% of our operating revenue is from
products and systems used in hospitals in
invasive ventilation, noninvasive ventilation,
nasal high flow therapy and surgery. The
remainder is from products used in home
environments to treat patients suffering
from obstructive sleep apnea and those in
need of respiratory support.
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 by revenue are
North America, Europe and Asia Pacific.
MANUFACTURING
We manufacture in NZ (approximately
68%) and Mexico (approximately 32%).
The co-location of engineering, quality,
manufacturing, marketing and clinical 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.
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 R&D programme.
The needs of our customers
and their patients drive
everything we do.
We call this Care by Design.
ANNUAL REPORT 2020
16Fisher & Paykel Healthcare Corporation Limited
39
Our people are located
in 39 countries
1,645
People in North America,
including Mexico
333
People in Europe
2,738
People in New Zealand
365
People in the
rest of the world
Canada
Mexico
China
Hong Kong
Taiwan
Japan
South Korea
Portugal
Brazil
Saudi Arabia
United
Arab Emirates
Indonesia
Colombia
Chile
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
Sri Lanka
Direct Sales
Distributed sales with F&P people
Distribution Centres
Manufacturing Facilities
Note: people numbers are represented as full time equivalents.
ANNUAL REPORT 2020
17Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
C
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OUR INPUTS
OUR OUTPUTS
AGEING POPULATION | TECHNOLOGY ADVANCEMENT | HEALTHCARE COSTS INCREASING | OTHER EXTERNAL FACTORS
MARKET CONTEXT
Our
5,000+
people
50+ 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.
Improved
care &
outcomes for
patients
Increased
efficiency
of care
How we
deliver value
At Fisher & Paykel
Healthcare, our
people are motivated
by our purpose: to
improve care and
outcomes through
inspired and world
leading healthcare
solutions.
Our strategy has
remained consistent:
We aim to grow our
business in a profitable
way that is sustainable
over the long term by
creating better products,
extending our global
reach, and changing
clinical practice.
ANNUAL REPORT 2020
18Fisher & Paykel Healthcare Corporation Limited
OUR VALUES
Life
We relentlessly focus on
improving patients’ lives and
strive to provide a high quality
of life for our employees.
Relationships
We care for our patients,
customers, suppliers, shareholders,
the environment and each other.
Internationalism
We are global in people, in thinking
and in behaviours.
Commitment
We value people who are
self-motivated and have a desire
to make a real contribution.
Originality
We encourage original thinking
which leads to the innovative
solutions required to create better
products, processes and practices.
OUR BELIEFS
We believe in doing what is
best for the patient.
We believe the commitment to
doing the right thing is what our
customers will find compelling.
We believe that empathy,
effectiveness and efficiency
are essential to our success.
We believe our people
are our strength.
We believe lessons learned
are the cornerstones
of innovation.
We believe in the need to be
relentless in the pursuit of
healthcare innovation.
Our unique culture,
values and beliefs
Our people have a deep emotional
connection to our purpose. Care is
inherent in everything we do – our
relationships, our decisions, and our
daily interactions with each other and
with customers. Care is our philosophy
and our story. But it’s not by accident
– it’s intentional. It’s care by design.
Our values and beliefs reflect our
commitment to care and putting
patients first.
ANNUAL REPORT 2020
19Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
Material matters
In addition to financial and strategic information, investors and other stakeholders
are increasingly using nonfinancial information on other ‘material’ topics to make
decisions. Those topics may include trends and risks that could impact a company’s
long-term value, as well as the economic, environmental and social impacts of doing
business. ‘Materiality’ within this framework differs from financial and audit
interpretations and NZX/ASX definitions of material information.
HOW WE DETERMINED WHAT IS MATERIAL
Each year we aim to improve our reporting
on the material topics that are important to
our stakeholders. In 2018, we conducted a
materiality assessment using guidelines set
by the Global Reporting Initiative (GRI).
We identified and prioritised material matters
by considering:
• Our business risks matrix
• The United Nations (UN) Sustainable
Development Goals and the UN
Global Compact
• GRI guidelines
• Feedback from customers, healthcare
professionals, suppliers and investors
• Broader trends, such as the ageing
population, healthcare demographics
and disruptive technologies.
We then reflected on the results with members
of our executive management team. The results
of that materiality assessment are shown in the
materiality matrix on the opposite page.
In 2019, we validated and updated the
assessment by interviewing a small set of key
stakeholders representing different areas of
our business, as well as customers, healthcare
professionals, suppliers and investors. To assist
in this process, we engaged an independent,
third-party consultant, thinkstep.
The themes important to stakeholders remained
broadly consistent from FY18 to FY19, and in
our view, they remained the same in FY20.
To validate this assumption, we included a
question on material topics in a survey of our
investors conducted by Corporate Confidence
Index (CCI) in April 2020. The CCI survey results
were aligned with our previous materiality
assessments. Survey respondents reported
the following topics as most material:
• financial performance
• product innovation
• intellectual property
• product quality
• patient safety
We have grouped the highest-ranking material
matters into four categories aligned with our
business strategy:
Global reach
Better products
Change clinical practice
Sustainable profitable growth
We have chosen some of those topics to
discuss in more detail in this annual report
and in our ESG report, “Caring Sustainably.”
ANNUAL REPORT 2020
20Fisher & Paykel Healthcare Corporation Limited
MATERIALITY MATRIX
Patient safety
Product
innovation
Product quality
Health, Safety & Wellbeing
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)
5.56.06.57.07. 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
MATERIAL TOPICS
Global reach
Customer experience
Legal compliance
Anti-bribery and corruption
Market access risk
Better products
Product innovation
Product quality
Cybersecurity and data protection
Employee attraction, development
and retention
Change clinical practice
Patient safety
Ethical research
Sustainable profitable growth
Sustainable financial performance
Health, safety and wellbeing
Intellectual property
Business continuity
Corporate governance
ANNUAL REPORT 2020
21Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
FOCUS ON:
Health, safety
and wellbeing
PROTECTING OUR PEOPLE
DURING A GLOBAL PANDEMIC
Fisher & Paykel Healthcare products
are directly involved with the treatment
of patients with COVID-19 in hospitals.
As an essential service, manufacturing
operations have continued at our facilities
in New Zealand and Mexico, with the
health, safety and wellbeing of our
people our top priority.
When we first became aware of the
coronavirus threat, we acted quickly
to keep our people and products safe.
The majority of our office employees
worldwide transitioned to working from
home to reduce the risk to themselves
and others.
At our production facilities, we have taken
many extra precautions, including:
• Keeping qualified medical staff on site
at all times
• Limiting the number of people on site
• Increasing awareness of good hand
hygiene and providing additional hand
sanitiser stations
• Implementing physical distancing
wherever possible on site
ANNUAL REPORT 2020
22Fisher & Paykel Healthcare Corporation Limited
• Erecting physical barriers or providing
appropriate PPE for roles where physical
distancing is a challenge
• Rearranging gowning rooms to allow for
greater spacing between people when
preparing to enter our clean rooms
• Increasing cleaning in high-traffic areas
and high-touch surfaces
• Introducing staggered break times
in cafeterias
• Introducing daily temperature monitoring
for people on site
• Establishing close-contact procedures and
a 24/7 call centre for workers concerned
about COVID-19
Our thoughts have especially been with our
team in Mexico, which has been more severely
impacted by the coronavirus than New Zealand.
Because COVID-19 testing has been limited in
the public health system in Mexico, we have
provided our Tijuana employees with access
to private health care for testing. Some of our
people tested positive for COVID-19 and have
been hospitalised. To meet their needs and
support the local healthcare community at
large, we donated 40 F&P Airvo humidifiers,
20 F&P 850s and associated consumables to
hospitals in Tijuana.
In New Zealand, we engaged a company called
Eat My Lunch to provide weekly food boxes
for our manufacturing people who were
needed on site during lockdown. Our salaried
people working remotely also received an
Eat My Lunch gift voucher, so they could have
food delivered to their homes. This lessened
risk by reducing the number of instances our
people and their family members needed to
visit supermarkets. For every meal purchased,
Eat My Lunch provides free lunches for kids in
need, so this initiative resulted in 9,034 free
meals for children.
BEYOND2020
ANNUAL REPORT 2020
23Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
What are the top three factors at F&P that
have contributed to product innovation?
First, we have a fundamental belief
in doing what is best for our patients.
Our company founders, who started in
the home appliances business, had a
relentless commitment to solving problems.
We have continued that philosophy
to improve outcomes for patients and
enthusiastically carry forward that culture
of original thinking.
Second, we’re big on collaboration, using
a multi-disciplined, diverse team approach,
while evolving and validating our ideas
with our end-users. Third, we still have an
underdog mentality, so we’re driven to deliver
innovative products that address a real need,
and ultimately change clinical practice.
How do you bring designers and patients
together? Is it through field work, clinics,
or workshops?
Each product team within our business is
focussed on a particular therapy and patient
demographic. That team coordinates and
conducts development clinical user trials,
and they provide market and customer
insight to help develop and evaluate our
products. This helps ensure a deeper
understanding of the environment in
which our product is used, along with the
individual needs of that patient and therapy
– whether that’s an intensive care unit for
our Hospital products, or a patient’s home
or sleep lab for our Homecare products.
Our teams gather the most valuable insights
through observation. This is where they
develop true empathy for the patient.
We have great facilities on site, with our own
sleep lab, collaboration spaces and usability
rooms that mimic the home environment or
the hospital ward.
We live in an age of data. Has that changed
the skills and processes that contribute to
good product design?
Not only does data confirm efficacy of
care, but it also enables efficiency of care.
By integrating sensors into devices, we can
optimise the delivery of therapy by measuring
numerous variables and responding with
custom algorithms. Through Bluetooth and
IoT connectivity, those sensors can provide
detailed and aggregated data. That data can
then provide actionable insights which lead to
better outcomes. This has become a core skill
requirement within our business, and we have
numerous roles and teams that focus on sensor
design, data reporting and analytics.
FOCUS ON:
Product innovation
INTERVIEW WITH CHRIS NIGHTINGALE,
GM, OSA OPERATIONS
Chris Nightingale, who has been with
Fisher & Paykel Healthcare for 11 years,
leads OSA operations on the Homecare
side of our business. His team recently
launched the F&P Evora™, a new nasal mask
for the treatment of obstructive sleep apnea.
We spoke with Chris about the unique
‘Care by Design’ culture at Fisher & Paykel
Healthcare and how innovative ideas emerge.
ANNUAL REPORT 2020
24Fisher & Paykel Healthcare Corporation Limited
What is it like to be a product designer
at Fisher & Paykel Healthcare?
One of the most impressive things is the
sheer number of tools and processes that
we can access. An engineer here could
sketch up a concept, model it using
computer-aided design (CAD), then design
an injection-mould tool, write the CNC code
for it, machine it and mould the prototype
components. This could happen all within
the same week, or even the same day in
some cases.
Whether it’s a CNC mill, a 3D printer, sewing
machine or a hot glue gun, we have the tools,
equipment, facilities, skills and enthusiasm to
conceive an idea, make it, and test it. All with
the aim of creating products that help solve
problems for our customers and patients.
I can’t think of a more enjoyable environment
for a product designer.
As a global company, is your design
workforce global, or mostly located
in New Zealand?
While we collaborate with key opinion
leaders and customers all over the world,
our R&D and product design functions are
based in New Zealand. That’s because we’re
fortunate in this country to have world-class
healthcare, efficient and effective processes
for conducting clinical trials, and strong links
with industry and universities for recruiting
talented staff.
Although our product designers are
generally New Zealand raised and trained,
we are also fortunate that we can attract
and retain international talent from around
the globe. The diversity and quality of our
design teams reflect that.
This year Fisher & Paykel
Healthcare launched an exciting
new mask for the treatment of
obstructive sleep apnea (OSA).
F&P Evora is a compact nasal
mask that sits comfortably
under the nose. The mask was
designed to make it easier to fit,
for both the respiratory therapist
and the patient, and to make it
easier to put on in the dark. It has
headgear the patient can put on
like a baseball cap in one simple
and intuitive movement. Evora
also has a ‘floating’ seal, which
sits inside stability wings and
allows for freedom of movement
during sleep. Evora has been
released in New Zealand,
Australia, Europe and Canada.
BEYOND2020
ANNUAL REPORT 2020
25Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
FOCUS ON:
Global reach
NEW SALES OFFICES
IN POLAND AND MEXICO
Fisher & Paykel Healthcare continued its
expansion into international markets with
direct sales offices in Poland and Mexico.
In a year overshadowed by the challenges
of COVID-19, opening our doors in these
countries was a demonstration of our
commitment to market expansion.
Poland: a global collaboration
F&P Healthcare’s direct launch into Poland
in September last year brought with it early
success and a strong possibility of further
growth into Eastern Europe.
Our Poznan-based national sales manager,
Karolina Stapf, heads a team of four product
specialists in Poland, drawing customer-service
expertise from the French office and logistics
and finance support from Germany. New Zealand
manages commercial sales.
New Zealand-based area manager Jonathan
Allan says the global approach greatly bolsters
the launch of new-player Poland, and places
the company in a solid position to scale more
effectively into Eastern Europe in the future.
The Poland office has already taken an order
for Airvos following a Polish government
initiative in March for the purchase of critically
needed medical products.
New hospital developments in Poland, including
a 1,000-bed facility in Krakow, signal avenues
for growth for the new office in the immediate
future. The F&P 950 humidification system,
launched recently into the country, also holds
promise, especially within neonatal care.
Poland sales team
ANNUAL REPORT 2020
26Fisher & Paykel Healthcare Corporation Limited
Changing clinical practice will be a focus
for the team, and Allan credits Stapf for
developing a strong network of key opinion
leaders within Poland that has already
established a name for the company
and its products.
Area manager Stuart Grant says going direct
as a wholesaler has given the company better
control when it comes to its clinical sales
approach in Mexico. It also means more
distributors can get on board to focus on
potential growth areas in the country and
work with hospitals through Mexico’s
integrated-service system.
Grant says the main challenge for the office
is in embedding the right regional distributors,
and this will call for flexibility in the year ahead.
Although governmental capital purchasing may
be unpredictable over the coming months due
to COVID-19, the office is in a strong position
to build on its achievements.
CHINA: HEROIC EFFORTS IN WUHAN
Our sales people based around the globe often
go above and beyond to meet our customers’
needs. Tina Cui, our sales representative in
Hubei Province, China, received an emotionally-
charged phone call soon after the news of the
coronavirus was reported in Wuhan. A former
nurse who joined Fisher & Paykel Healthcare
in 2018, Tina drove at dusk to the epicentre of
the crisis – the quarantined Wuhan Jinyintan
Hospital – to educate staff on how to set up
and use F&P Airvos.
Days later, the once-bustling capital of Hubei
province was under lock-down, and requests
for Airvos skyrocketed. Tina worked diligently
to meet the demand for essential devices.
She supported five Wuhan hospitals whose
staff desperately needed training, including the
two new hospitals the government had hastily
built to accommodate COVID-19 patients.
Heavy travel restrictions meant Tina had
to carry equipment on foot for about 3kms
through rain and mud to meet her training
commitments. Teaching while wearing
a mask wasn’t easy either, and she soon
lost her voice.
Tina said it was only at night, after leaving
her shoes at the front door of her home
and taking off her clothing to be disinfected,
that she allowed herself time to reflect on
the turmoil around her. “I knew my colleagues
were caring, and were supporting us. It let me
feel warm during the hard times. It made my
heart melt,” she said.
Mexico: off to a flying start
Fisher & Paykel Healthcare’s Mexican sales
office opened its doors after the combined
efforts of our supply chain, ICT, regulatory,
quality and international sales teams.
Based in Mexico City, the office is using a
multi-distribution channel. It works directly
with Mexican homecare medical gas and
small OSA companies and is now
experiencing a stronger relationship with
ventilator manufacturers. Run by country
manager Pamela Sanchez, the office was
invoicing products from its first day of
operation – an achievement that has
snowballed into increasing revenue and
sales opportunities for the emerging office.
Mexico sales team
Sales representative Tina Cui
BEYOND2020
ANNUAL REPORT 2020
27Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
Tony Carter
Geraldine McBride
Lewis Gradon
Neville Mitchell
Michael Daniell
Donal O'Dwyer
Pip Greenwood
Scott St John
ANNUAL REPORT 2020
28Fisher & Paykel Healthcare Corporation Limited
Our Board
Tony Carter
Chair and non-executive director
TERM OF OFFICE:
Appointed 1 December 2010, last re-elected
24 August 2017
Tony was managing director of Foodstuffs
New Zealand Limited for ten years until his
retirement in 2010. Tony is chairman of the
board of TR Group and Datacom Group,
a director of Vector Limited and ANZ Bank
New Zealand Limited, and a trustee of the
Maurice Carter Charitable Trust.
He was awarded the Companion of the
New Zealand Order of Merit for services to
business governance in the 2020 New Year
Honours list.
Master of Engineering, MPhil (Engineering)
COMMITTEE RESPONSIBILITIES:
Member People and Remuneration Committee,
Member Audit & Risk Committee, Member
Quality, Safety and Regulatory Committee.
Geraldine McBride
Non-executive 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
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 and
Chief Executive Officer
TERM OF OFFICE:
Appointed 1 April 2016, re-elected
28 August 2019.
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 37-year tenure with Fisher & Paykel
Healthcare he has held various engineering
positions overseeing the development of our
range of products as well the development of
our manufacturing, quality, intellectual property,
supply chain and clinical research functions.
Bachelor of Science – Physics
Neville Mitchell
Non-executive director
TERM OF OFFICE:
Appointed November 2018, elected
28 August 2019.
Neville was Chief Financial Officer and Company
Secretary of Cochlear Limited between 1995
and 2017. He is non-executive director of Sonic
Healthcare, Osprey Medical and Q’Biotics Group,
a member of the Australian Board of Taxation,
and a director of the South East Sydney Local
Health District Board. Previously, he served
on the New South Wales Medical Devices
Fund, was Chairman of the Group of 100, and
Chairman, Standing Committee (Accounting
and Auditing), for the Australian Securities
and Investments Commission.
Bachelor of Commerce
COMMITTEE RESPONSIBILITIES:
Member Quality, Safety and
Regulatory Committee.
Michael Daniell
Non-executive director
TERM OF OFFICE:
Appointed November 2001, last re-elected
23 August 2018.
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 Cochlear Limited, 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
Non-executive director
TERM OF OFFICE:
Appointed December 2012, last re-elected
28 August 2019.
Donal is a director of Cochlear Limited,
Mesoblast Limited and nib Holdings Limited.
From 1996 to 2003, he was with 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:
Chair Quality, Safety and Regulatory Committee,
Member People and Remuneration Committee.
Pip Greenwood
Non-executive director
TERM OF OFFICE:
Appointed June 2017, elected 24 August 2017.
Pip is a director of Spark New Zealand
Limited, Westpac New Zealand Limited and
a2 Milk Company Limited, a current trustee
of the Auckland Writers Festival and served
as a member of the New Zealand Takeovers
Panel from 2007 to 2011. Pip was a partner at
Russell McVeagh between 2001 and 2019 and
previously served as the firm’s Board Chair.
She has advised on many market-leading
transactions.
Bachelor of Laws
COMMITTEE RESPONSIBILITIES:
Chair People and Remuneration Committee.
Scott St John
Non-executive director
TERM OF OFFICE:
Appointed October 2015, last re-elected
23 August 2018.
Scott is Chancellor of the University of Auckland
and a director of Mercury Limited, the NEXT
Foundation and Fonterra Cooperative Group
Limited. Scott was Chief Executive Officer of
First NZ Capital from 2002 to 2017. He 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.
ANNUAL REPORT 2020
29Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
Our Executive Management Team
Lewis Gradon Lyndal YorkPaul ShearerAndrew Somervell
Winston Fong Brian SchultzDebra Lumsden
Jonti RhodesMarcus Driller
Nicholas Fourie
ANNUAL REPORT 2020
30Fisher & Paykel Healthcare Corporation Limited
Our Executive Management Team
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.
Winston Fong
Vice President – Surgical Technologies
Winston was appointed Vice President –
Surgical Technologies in February 2017.
Winston previously served as Vice President
- Information & Communication Technology
from 2010 and has held various IT management,
product and software development, and
systems engineering roles in the business
since 1999. Winston received his Bachelor of
Engineering degree with honours in Electronics
& Computer Engineering from Manukau
Institute of Technology and Master of Business
Administration from the University of Auckland.
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.
Lyndal York
Chief Financial Officer
Lyndal was appointed Chief Financial Officer
in March 2019. Before joining Fisher & Paykel
Healthcare, Lyndal was CFO at Asaleo Care and
prior to this held Head of Group Finance and
Group Financial Controller roles at Cochlear
in Australia over an 11-year period. She has
also spent time in the US, as VP Corporate
Accounting and Reporting at Edwards
Lifesciences. Lyndal is a member of Chartered
Accounts Australia and New Zealand, a graduate
of the Australian Institute of Company Directors,
and received her Bachelor of Economics from
Macquarie University and Masters in Business
Administration from Pepperdine University.
Brian Schultz
Vice President – Quality &
Regulatory Affairs
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, United Kingdom and
the United States. He received his Bachelor
of Science degree from Grand Valley State
University, Michigan.
Marcus Driller
Vice President – Corporate
Marcus was appointed Vice President Corporate
in February 2019. Marcus joined Fisher & Paykel
Healthcare in 2009 as an in-house lawyer and
since that time has held several roles in legal,
investor relations and communications and most
recently as General Manager – Corporate. Prior to
joining the company, he worked for New Zealand
law firm, Russell McVeagh where he specialised in
corporate and commercial law. Marcus received
his Bachelor of Commerce and Bachelor of Laws
from the University of Auckland.
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 several
roles 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.
Debra Lumsden
Vice President – Human Resources
Debra was appointed Vice President Human
Resources in December 2016. Debra is from the
UK 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.
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
and holds a doctorate in physics from the
same university.
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.
ANNUAL REPORT 2020
31Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
Financials
ANNUAL REPORT 2020
32Fisher & Paykel Healthcare Corporation Limited
INCOME STATEMENTS
Year ended 31 March
2019
NZ$M
2020
NZ$M
Variation
Reported
%
Variation
CC (1)
%
Operating revenue 1,070.41,263.7+18+14
Gross profit 715.8835.8+17+11
Gross margin 66.9%66.1%–73bps–150bps
Other income 5.0–––
SG&A expenses (327.8)(338.0)+3–1
R&D expenses (100.4)(118.5)+18+18
Total operating expenses (428.2)(456.5)+7+3
Operating profit 292.6379.3+30+21
Operating margin 27.3%30.0%268bps169bps
Financing expenses (net) (1.4)(8.8)––
Profit before tax 291.2370.5+27+20
Taxation(82.0)(83.2)+1–3
Profit after tax209.2287.3+37+30
1
Constant currency (CC) removes the impact of exchange rate movements. This approach is used to assess the Group’s
underlying comparative financial performance without any impact from changes in foreign exchange rates. See further
details on page 36.
Total profit after tax for the year was up 37% to NZ$287.3 million (30% in constant currency).
Profit after tax includes $18.7M of taxation expense benefits arising from the new R&D tax credit
that has been introduced in New Zealand and building tax depreciation changes.
Revenue
Operating revenue was NZ$1,263.7 million, which is 18% above last year or 14% in constant
currency. Hospital revenue grew 21% in constant currency largely driven by growth in our new
applications consumables, demand for products used to treat COVID-19 patients, and strong
hardware sales. Homecare revenue grew 4% in constant currency.
Gross margin
Our gross margin continues to track above our long term target of 65%. The gross margin
decrease of 150 basis points in constant currency largely reflected the full year of costs
associated with our new Mexico manufacturing facility as well as additional air freight to
expedite deliveries in response to COVID-19. This was partly offset by favourable product mix.
Operating expenses
Operating expenses increased 7% (3% in constant currency) to $456.5 million. Excluding
ResMed patent litigation expenses in the prior year of $23.4 million, operating expense
growth was 13% (9% in constant currency), reflecting ongoing expenditure to support
global sales growth.
R&D spend of $118.5 million grew 18%. The collection of R&D related costs was improved
this year to implement the new R&D tax credit. This resulted in approximately $8 million of
incremental costs being classified as R&D rather than SG&A. Excluding this reclassification
R&D growth was 10%. Over the long term we plan for R&D spend to grow in line with constant
currency revenue growth.
At the beginning of the financial year, the Group adopted NZ IFRS 16 Leases. On adoption of
NZ IFRS 16, rental and lease expenses are effectively reclassified into a depreciation component
and an interest component to reflect the implied financing in the lease. The overall profit after
tax impact of this is an increase of NZ$0.2 million for the year. The adoption has resulted in
an increase in our operating profit of NZ$2.1 million offset by an increase in interest costs of
NZ$1.8 million for the year in constant currency.
Financing expenses
Total reported financing expenses increased reflecting lease interest costs, lower interest
income on short-term deposits and foreign exchange losses on the translation of foreign
currency interest bearing liabilities, including lease liabilities.
Ta x
Our effective tax rate for the year was 22.5%, down from 28.2% in the prior year. Excluding
the benefit from the newly introduced R&D tax credit and the changes in tax deductibility
of building depreciation, the effective tax rate was 27.5% for the year.
Callaghan Grant and R&D Tax Credit
In May 2019 the New Zealand Government passed the Taxation (Research and Development
Tax Credits) Act 2019; an R&D tax incentive that provides a 15% tax credit on eligible R&D
expenditure. The R&D tax credit was effective from 1 April 2019 and replaced the Callaghan
Growth Grant, which was previously reported in Other Income. The tax credit reported this
year of $13.4 million reflects the estimated eligible R&D expenditure incurred during the year.
Building depreciation
During the year, the New Zealand government passed legislation to reintroduce commercial
building depreciation for tax purposes. Deferred tax liabilities have reduced by $5.3 million
resulting in a reduction in the tax expense of $5.3 million as the tax base of the Company's
buildings increased by $19.0 million.
FINANCIAL COMMENTARY
ANNUAL REPORT 2020
33Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
FOREIGN CURRENCY IMPACTS
The Group is exposed to movements in foreign exchange rates, with approximately 99%
of operating revenue generated in currencies other than NZD as shown below.
US dollars 49%
Euros 19%
Australian dollars 5%
Japanese yen 5%
Chinese yuan 5%
British pounds 4%
Canadian dollars 3%
New Zealand dollars 1%
Other currencies 9%
Others
NZ
D
CAD
GBP
CNY
J
PY
AUD
E
UR
USD
Approximately 55% of COGS and 57% of operating expenses are in currencies other than NZD.
The NZD weakened against all major currencies compared to the previous year. The USD and
EUR conversion rates were lower compared to the prior year. The average conversion exchange
rate movements were largely independent of COVID-19 volatility experienced in the later months
of the financial year.
Profit after tax benefited by $17.4 million compared to the prior year due to movements
in foreign currency. This $17.4 million benefit is net of a pre tax loss of $7.7 million from
the hedging programme in the current year (2019: $1.9 million loss). The effect of balance
sheet translations for the year resulted in an increase in operating revenue of $14.7 million
(2019: $2.4 million) and an increase in profit after tax of $3.1 million (2019: $0.7 million).
See further details on page 36.
The average daily spot rate and the average conversion exchange rate (i.e. the accounting rate,
incorporating the effect of forward exchange contracts in respect of the relevant financial year)
of the main foreign currency exposures for the reported periods are set out in the table below.
Average daily spot rateAverage conversion exchange rate
Year ended 31 March2019202020192020
USD0.68110.64770.68040.6671
EUR 0.58830.58280.6039 0.5760
Foreign exchange hedging position
Favourable exchange rate movements during the year have provided opportunities to add
hedges for future years, in particular, USD for 2021 to 2025. The hedging position for our main
currency exposures as at 26 June 2020 is:
Year to 31 March202120222023202420252026-27
USD % cover of expected
exposure 85% 60% 45% 35% 35% –
USD average rate of cover 0.652 0.652 0.637 0.630 0.624 –
EUR % cover of expected
exposure 85% 60% 50% 35% 35% 5%
EUR average rate of cover 0.551 0.536 0.518 0.509 0.502 0.470
Hedging cover has been rounded to the nearest 5%.
CASH FLOWS
The full statement of cash flows is provided on page 40.
Year ended 31 March
2019
NZ$M
2020
NZ$M
Change
NZ$M
Operating profit before financing costs292.6379.386.7
Plus depreciation and amortisation
(including leased assets)
41.761.019.3
Change in working capital and other1.7(23.0)(24.7)
Net interest paid (including lease interest)(1.1)(2.7)(1.6)
Net income tax paid(81.6)(93.2)(11.6)
Operating cash flows253.3321.468.1
Lease repayments
+
–(9.7)(9.7)
Purchase of land and buildings(74.0) (81.8)(7.8)
Purchase of plant and equipment(41.4) (63.5) (22.1)
Purchase of intangible assets(17.9) (25.4) (7.5)
Free cash flows120.0 141.0 21.0
Dividends paid(114.6)(146.4)(31.8)
+ Free cash flows includes lease liability repayments following the adoption of NZ IFRS 16.
Operating cash flows
Cash flows from operations for the year increased 27% to $321.4 million. Including lease
repayments, cash flows from operations increased by 23%. Working capital was impacted
by a significant increase in receivables from higher sales related to the COVID-19 pandemic.
FINANCIAL COMMENTARY CONTINUED
ANNUAL REPORT 2020
34Fisher & Paykel Healthcare Corporation Limited
Capital expenditure
Property, plant and equipment purchases for the year were $145.3 million, an increase
from $115.4 million in the prior year. This expenditure primarily related to building projects
in New Zealand, totalling $81.8 million with the remaining spend being production tooling
and equipment costs and fitting out the new buildings in Mexico and New Zealand.
Dividends
Dividends paid of $146.4 million were 28% higher than the prior year, reflecting the suspension
of the dividend reinvestment plan at the final 2019 dividend payment.
BALANCE SHEET
As at 31 March
2019
NZ$M
2020
NZ$M
Change
NZ$M
Trade receivables136.0192.956.9
Inventories136.1146.510.4
Less trade and other payables
+
(87.6)(108.5)(20.9)
Working capital184.5230.946.4
Property, plant and equipment
++
601.4735.3133.9
Intangible assets61.573.912.4
Lease liabilities–(33.6)(33.6)
Other net assets (liabilities)11.4(74.9)(86.3)
Net cash54.4 42.2 (12.2)
Net assets913.2973.860.6
+
Trade and other payables exclude all non-current payables and all employee entitlements and provisions
++
Property, plant and equipment includes lease assets recognised
Trade receivables at 31 March 2020 reflected the increased sales in response to COVID-19, and
currency translation benefits. Our debtors days were within the normal range being 45 days
(2019: 46 days). Higher inventories reflect a level of inventory build in raw materials in response
to the heightened demand. Trade and other payables increase reflected higher production levels
and purchases of raw materials.
The impact of the new leasing standard resulted in the recognition of right-of-use (or leased)
assets, included in property, plant and equipment, and lease liabilities. The detailed impact is
explained in Note 23 of the financial statements.
The increase in property, plant and equipment included the recognition of leased assets of
$24.7 million and capital expenditure of $145.3 million, of which $81.8 million related to building
additions, primarily our new building in Auckland. These increases were offset by $48.3 million
of depreciation, including depreciation of leased assets.
Intangible assets increased by $12.4 million including patent acquisition costs and ERP
implementation costs. The global SAP rollout will continue over the next two to three years,
with the US office successfully completed in June 2019.
Other net assets/liabilities movements included a significant decrease in net derivative
instrument assets of $141.0 million, partially offset by the associated deferred tax movements
of $38.7 million. The volatility in foreign currency markets, and the NZD decline, accelerated as
the financial year ended. This resulted in the majority of currency derivatives being in a liability
position as at 31 March 2020. All currency derivatives continued to be effective hedges.
COVID-19 impact on inventory counts
Given the Company’s focus on manufacturing and supplying products to treat patients in
response to COVID-19, along with lockdown restrictions in place, the decision was made
to postpone certain 31 March 2020 global inventory counts. As a result, PwC were unable
to perform all planned physical inventory verification procedures and has issued a qualified
audit opinion reflecting this limitation of scope. The Company has a solid history in inventory
management, as well as strong controls in place for global inventory balances including regular
cycle counting. Subsequent to year end, inventory counts have resumed and no unexpected
adjustments have arisen. Further details are set out in Note 3.
Funding and Short-term Investments
2019
NZ$M
2020
NZ$M
Change
NZ$M
Loans and borrowings
– Current–(49.9)(49.9)
– Non-current(69.0)(22.0)47.0
Bank overdrafts(17.3)(30.7)(13.4)
Total interest-bearing liabilities(86.3)(102.6)(16.3)
Cash and cash equivalents48.267.118.9
Short-term investments 92.577.7(14.8)
Total cash and investments 140.7144.84.1
Net cash 54.4 42.2 (12.2)
Gearing-6.7%-4.3%
Undrawn term debt facilities145.0148.0
The average maturity of loans and borrowings of $71.9 million was 1.4 years and the currency
split was 92% USD; 5% Australian dollars; and 3% Canadian dollars (with no NZD denominated
debt). Interest-bearing debt increased by $16.3 million, including the impact of unfavourable
currency revaluations. One of the Group's borrowing facilities is due to mature in November
2020. We expect to extend or replace this facility prior to its maturity.
We held cash balances and short-term investments, mainly in NZD, of $144.8 million at the end
of the year. This balance, and operating cash generated in 2021, will fund the payment of the
final dividend and ongoing capital expenditure including final payments for our new building
in Auckland and manufacturing capacity expansion.
Gearing
1
At 31 March 2020 the group had net cash of $42.2 million and gearing of -4.3%. Gearing was
within the target range of -5% to +5%.
FINANCIAL COMMENTARY CONTINUED
1 Net interest-bearing debt (debt less cash and cash equivalents and short-term investments) to net interest-bearing
debt and equity (less hedging reserves). Net interest-bearing debt excludes lease liabilities recognised on the
adoption of IFRS 16 – Leases.
ANNUAL REPORT 2020
35Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
FINANCIAL COMMENTARY CONTINUED
NOTES - CONSTANT CURRENCY
Constant currency analysis is non–Generally Accepted Accounting Practice (GAAP) financial
information that is not prepared in accordance with New Zealand Equivalents to International
Financial Reporting Standards (NZ IFRS). Constant currency information has been provided
to assist users of financial information to better understand and assess the Group’s financial
performance without the impacts of foreign currency fluctuations including hedging results.
Constant currency financial information is prepared each month to enable the Board and
management to monitor and assess the Group’s underlying comparative financial performance
without any distortion from changes in foreign exchange rates. Constant currency information
is prepared on a consistent basis for reported periods restated into NZD based on “constant”
exchange rates, typically the budgeted exchange rates for the current year. This information
excludes the impact of movements in foreign exchange rates, hedging results and balance
sheet translations.
The Group’s constant currency framework can be found on the company’s website
at www.fphcare.com/ccf. PwC perform assurance procedures over the constant
currency information.
RECONCILIATION OF CONSTANT CURRENCY TO REPORTED PROFIT AFTER TAX
Year ended 31 March
2019
NZ$M
2020
NZ$M
Change
NZ$M
Profit after tax (constant currency) 204.3 265.0 60.7
Spot exchange rate effect 5.524.8 19.3
Foreign exchange hedging result (1.3)(5.6)(4.3)
Balance sheet revaluation 0.7 3.1 2.4
Profit after tax (reported) 209.2 287.3 78.1
The significant exchange rates used in the constant currency analysis, being the budget
exchange rates for the year ended 31 March 2020, are USD 0.68, EUR 0.60, AUD 0.96, GBP 0.51,
CAD 0.90, JPY 76 and MXN 13.10.
ANNUAL REPORT 2020
36Fisher & Paykel Healthcare Corporation Limited
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2020
Notes
2019
NZ$M
2020
NZ$M
Profit after tax 209.2287.3
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation reserve
Exchange differences on translation of
foreign operations
0.22.8
Hedging reserves
Changes in fair value in hedging reserves29.3(147.0)
Transfers to profit before tax from cash flow
hedge reserve
(10.0)7.7
Tax on above reserve movements11(5.4)39.0
Items that will not be reclassified to profit or loss
Revaluation of land 934.1–
Other comprehensive income, net of tax 48.2(97.5)
Total comprehensive income 257.4189.8
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2020
Notes
2019
NZ$M
2020
NZ$M
Operating revenue 41,070.41,263.7
Cost of sales (354.6)(427.9)
Gross profit 715.8835.8
Other income 5.0–
Selling, general and administrative expenses (327.8)(338.0)
Research and development expenses (100.4)(118.5)
Total operating expenses (428.2)(456.5)
Operating profit before financing costs 292.6379.3
Financing income 3.32.2
Financing expense (2.5)(3.9)
Exchange loss on foreign currency
interest-bearing liabilities (2.2)(7.1)
Net financing expense (1.4)(8.8)
Profit before tax 5291.2370.5
Tax expense 11(82.0)(83.2)
Profit after tax 209.2287.3
Basic earnings per share 1636.5 cps50.0 cps
Diluted earnings per share 1636.2 cps49.6 cps
The accompanying Notes form an integral part of the Financial Statements.
FINANCIAL STATEMENTS
ANNUAL REPORT 2020
37Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2020
Notes
Share
capital
NZ$M
Retained
earnings
NZ$M
Reserves
NZ$M
Total
equity
NZ$M
Balance at 31 March 2018 198.4467.395.7761.4
Total comprehensive income –209.248.2257.4
Dividends paid 17–(127.3)–(127.3)
Issue of share capital under dividend reinvestment plan 1512.7––12.7
Issue of share capital under employee share plans 156.9––6.9
Movement in share based payments reserve 17––0.90.9
Movement in treasury shares 151.2––1.2
Balance at 31 March 2019 219.2549.2144.8913.2
Adjustment on adoption of NZ IFRS 16 (net of tax) 23–(3.8)–(3.8)
Balance at 1 April 2019 219.2545.4144.8909.4
Total comprehensive income – 287.3 (97.5) 189.8
Dividends paid 17–(146.4)–(146.4)
Issue of share capital under employee share plans 158.0––8.0
Movement in share based payments reserve 17––14.814.8
Movement in treasury shares 15(1.8)––(1.8)
Balance at 31 March 2020 225.4686.362.1973.8
The accompanying Notes form an integral part of the Financial Statements.
ANNUAL REPORT 2020
38Fisher & Paykel Healthcare Corporation Limited
CONSOLIDATED BALANCE SHEET
As at 31 March 2020
Notes
2019
NZ$M
2020
NZ$M
ASSETS
Current assets
Cash and cash equivalents 48.267.1
Short-term investments 92.577.7
Trade and other receivables 7157.9222.7
Inventories 8136.1146.5
Derivative financial instruments 619.24.1
Tax receivable 1.40.6
Total current assets 455.3518.7
Non-current assets
Derivative financial instruments 647.014.1
Other receivables 2.62.3
Property, plant and equipment 9601.4735.3
Intangible assets 1061.573.9
Deferred tax assets 1138.990.7
Total assets 1,206.71,435.0
LIABILITIES
Current liabilities
Interest-bearing liabilities 1217.380.6
Lease liabilities 23–11.6
Trade and other payables 13135.0165.6
Provisions 144.95.0
Tax payable 24.435.4
Derivative financial instruments 62.836.4
Total current liabilities 184.4334.6
Non-current liabilities
Interest-bearing liabilities 1269.022.0
Lease liabilities 23–22.0
Provisions 142.21.5
Other payables 1312.719.8
Derivative financial instruments 61.961.3
Deferred tax liabilities 1123.3–
Total liabilities 293.5461.2
Notes
2019
NZ$M
2020
NZ$M
EQUITY
Share capital 15219.2225.4
Retained earnings 549.2686.3
Reserves 17144.862.1
Total equity 913.2973.8
Total liabilities and equity 1,206.71,435.0
The accompanying Notes form an integral part of the Financial Statements.
On behalf of the Board
26 June 2020
Tony Carter Lewis Gradon
Chairman Managing Director and
Chief Executive Officer
ANNUAL REPORT 2020
39Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2020
Notes
2019
NZ$M
2020
NZ$M
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 1,058.11,200.9
Grants received 4.81.6
Interest received 3.52.5
Payments to suppliers and employees (726.9)(785.2)
Tax paid (81.6)(93.2)
Interest paid (4.6)(3.4)
Lease interest paid 23–(1.8)
Net cash flows from operating activities 253.3321.4
CASH FLOWS FROM INVESTING ACTIVITIES
Net short-term investments 7.515.0
Sales of property, plant and equipment 0.1–
Purchases of property, plant and equipment (115.4)(145.3)
Purchases of intangible assets (17.9)(25.4)
Net cash flows from investing activities (125.7)(155.7)
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of share capital under employee share plans 2.12.3
New borrowings 40.115.0
Repayment of borrowings (40.7)(20.2)
Lease liability payments 23–(9.7)
Dividends paid (114.6)(146.4)
Net cash flows from financing activities (113.1)(159.0)
Net increase in cash 14.56.7
Opening cash 15.830.9
Effect of foreign exchange rates 0.6(1.2)
Closing cash 30.936.4
RECONCILIATION OF CLOSING CASH
Cash and cash equivalents 48.267.1
Bank overdrafts (17.3)(30.7)
Closing cash 30.936.4
Notes
2019
NZ$M
2020
NZ$M
CASH FLOW RECONCILIATION
Profit after tax 209.2287.3
Add (deduct) non-cash items:
Depreciation - right-of-use assets 23–10.1
Depreciation and amortisation - other assets 41.750.9
Share based payments 5.56.1
Movement in provisions 0.3(0.6)
Movement in deferred tax assets / liabilities (3.3)(24.0)
Movement in net tax payables 3.814.0
Foreign currency translation 2.57.9
Other non-cash items (1.3)(2.0)
49.262.4
Net working capital movements:
Trade and other receivables (11.8)(64.8)
Inventories (10.7)(10.4)
Trade and other payables 17.446.9
(5.1)(28.3)
Net cash flows from operating activities 253.3321.4
The accompanying Notes form an integral part of the Financial Statements.
ANNUAL REPORT 2020
40Fisher & Paykel Healthcare Corporation Limited
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 both hospital and homecare settings. 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 consolidated financial statements were approved for issue by the Board of
Directors on 26 June 2020.
2. BASIS OF PREPARATION AND PRINCIPLES OF CONSOLIDATION
Statement of compliance
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 also listed on the NZX and
the 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 2020 have been prepared
in accordance with New Zealand Generally Accepted Accounting Principles (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.
Basis of measurement
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.
Functional and presentation currency
The consolidated financial statements are presented in New Zealand dollars (NZD), which is
the Company's functional currency to the nearest hundred thousand dollars unless otherwise
stated. 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 material
global operations is NZD, with the exception of Fisher & Paykel Healthcare Mexico Properties
S.A. de C.V ("Mexico Properties"). Mexico Properties was established for the purpose of holding
the Group's property in Mexico, and its functional currency is United States dollars (USD).
The results and financial position of entities that have a different functional currency are
translated to NZD as follows: assets and liabilities are translated at the exchange rate at
balance date and Income Statement items are translated at rates approximating the foreign
exchange rates ruling at the dates of transactions. Exchange differences are recognised in
other comprehensive income as a currency translation reserve movement.
Foreign currency 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.
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.
Significant Accounting Policies
Accounting policies are disclosed in each of the applicable notes to the financial statements
and are designated with an symbol.
Basis of consolidation
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, 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.
ANNUAL REPORT 2020
41Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
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 2020:
Capital expenditure
During the year, construction work on the fourth building in Auckland, New Zealand has
been substantially completed. To date, spending on this project totals $141.2 million.
Capital commitments at 31 March 2020 include $7.6 million related to this project.
The building is expected to be operational in mid-2020.
Research and development tax incentive
During the year, the New Zealand government passed the Taxation (Research and Development
Tax Credits) Act 2019. This research and development tax incentive provides a 15% tax credit on
eligible research and development “R&D” expenditure.
For the year ended 31 March 2020 a tax credit of $13.4 million was recognised as a deduction to
tax expense, resulting in an effective tax rate of 22.5%. Excluding the tax credit, the effective tax
rate for the year would have been 26.1%. The R&D tax credit replaces the $5.0 million Callaghan
Growth Grant which was recognised in other income.
Adoption of NZ IFRS 16 Leases
During the year, the Group adopted NZ IFRS 16 ‘Leases’ (NZ IFRS 16). The Group recognised
additional lease assets of $29.4 million, and $35.2 million of lease liabilities as at 1 April 2019,
with a reduction in retained earnings of $3.8 million. The standard was adopted using the
modified retrospective approach, with no restatement of comparative information. Further
details of the adoption of NZ IFRS 16 and the new accounting policies are disclosed in Note 23.
ResMed litigation
As disclosed in the 2019 Annual Report, in February 2019 Fisher & Paykel Healthcare and
ResMed reached a settlement on patent infringement disputes. Net litigation costs related to
these actions incurred in the year to 31 March 2019 were $23.4 million. In the year 31 March
2020, no significant costs were incurred.
COVID-19
In March 2020, the World Health Organisation declared the outbreak of COVID-19 as a pandemic.
Since the outbreak of COVID-19, the Company’s focus has been on manufacturing and supplying
products that are directly involved in treating patients with COVID-19.
The Company relied on the NZX class waiver that provided listed companies an additional
30 days to prepare and release their full year results. This provided the Company sufficient
time to prepare these financial statements, including appropriately considering, assessing
and documenting relevant material impacts on its business.
COVID-19 impact on inventory counts
As a result of COVID-19 and the prioritisation of operational distribution of products that are
essential to patients, annual finished products inventory counts planned to be held on or close
to 31 March 2020 were not performed in Japan, Australia and Europe (including UK, Germany,
France and Sweden). Subsequent to year end finished products cycle count procedures were
performed in the majority of these locations with no significant inventory adjustments.
Certain planned materials cycle counts in New Zealand were not completed in the last few
weeks of the financial year. Subsequent to year end cycle counts were resumed and have
covered the majority of inventory line items. For those completed there have been no
significant inventory adjustments.
The Group has strong inventory management processes including the performance of periodic
counting procedures across the Group. Based on these, and counts performed after year end,
management are comfortable that no adjustment to inventory balances was required at 31
March 2020.
The Company’s auditors, PwC, were unable to attend certain 31 March 2020 annual inventory
counts and cycle counts in March 2020 as they had planned due to those specific counts not
being performed.
COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020
During the year, the New Zealand government passed the COVID-19 Response (Taxation
and Social Assistance Urgent Measures) Act that reintroduced depreciation on industrial
and commercial buildings for tax purposes. The change applies from 1 April 2020 and the
depreciation rate is 2% diminishing value. For the year ended 31 March 2020, as a result of
the Act, the tax base of the Company's buildings increased by $19.0 million. This reduced the
difference between the accounting carrying value and the tax base, resulting in a reduction
in deferred tax liabilities and a reduction in tax expense of $5.3 million.
Other
Management have assessed the impact of COVID-19 on all other aspects of the balance sheet.
The carrying value of land held at fair value has been assessed for appropriateness (refer
Note 9). Specifically, the carrying value of receivables and inventory were considered, with
provisioning reflecting management's best estimate of the impact based on information
available at the time of preparing these financial statements. There has been no material
impact on the balance sheet.
As a result of currency volatility during this period, the liability relating to the Group’s portfolio
of derivatives has increased, with the corresponding offset in the cash flow hedge reserve.
ANNUAL REPORT 2020
42Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
4. OPERATING REVENUE AND SEGMENTAL INFORMATION
2019
NZ$M
2020
NZ$M
Sales revenue 1,072.11,273.4
Foreign exchange loss on hedged sales (1.7)(9.7)
Total operating revenue 1,070.41,263.7
Revenue by Product Group
Hospital products 642.3801.3
Homecare products 421.4457.3
1,063.71,258.6
Distributed and other products 6.75.1
Total operating revenue 1,070.41,263.7
Revenue after hedging by geographical location of customer:
North America 501.5571.2
Europe 314.6365.4
Asia Pacific 208.1273.3
Other 46.253.8
Total operating revenue 1,070.41,263.7
Segmental reporting
The Group operates in one segment - being the design, manufacture, marketing and sale of
medical devices and systems globally. These products and systems are for use in respiratory
care, acute care, surgery and the treatment of OSA in the home and hospital. Resource allocation
decisions are made to optimise the Group’s financial operating profit. This is consistent with the
internal management reports the chief operating decision-maker (CODM)
1
reviews.
Non-current asset disclosures by geographical location are included in Note 9.
Revenue is recognised at the point in time performance obligations are satisfied by
transferring control of goods to the customer at the transaction price specified in the
contract. Control typically transfers to the customer at the same time as the legal title
passes to the customer, typically on delivery. The transaction price includes all amounts
which the Group expects to be entitled to net of sales taxes and other indirect taxes,
expected rebates and discounts. Where applicable, rebates and/or discounts are included
within the consideration using an estimation typically based on the most likely method,
and are only recognised to the extent that it is highly probable that a significant reversal
will not occur.
There are no significant financing components in the Group's revenue arrangements.
1 The CODM comprises the Board of Directors (which includes the Chief Executive Officer), Vice-President - Products
and Technology, Senior Vice-President - Sales and Marketing and the Chief Financial Officer.
5. EXPENSES
2019
NZ$M
2020
NZ$M
Profit before tax is after charging the following specific expenses:
Donations 0.10.1
Inventory written off (net) 3.53.6
Fees paid to auditors
2019
NZ$'000
2020
NZ$'000
Statutory audit and half year review (i) 915953
Other assurance and audit related services (ii) 5039
Total audit, other assurance services and audit-related services 965992
Other services (iii) 13163
Total fees paid to auditors 9781,155
Other fees paid to auditors
(i) Statutory audit and half year review includes $361,900 (2019: $306,000) paid to other
PwC network firms.
(ii) Other assurance and audit related services of $38,700 (2019: $50,100) include
assurance procedures in relation to compliance with the constant currency framework
and scrutineering the counting of votes at the Annual Shareholders' Meeting (ASM).
In 2019, other assurance and audit related services included these items as well as
assessment of eligible expenditure for the purposes of the Callaghan Growth grant.
(iii) Other services includes treasury related financial markets risk analysis and commentary,
regulatory tax compliance procedures in Mexico, and remuneration benchmarking.
The fee paid to PwC for the audit and review of the Group's financial statements is split across
the jurisdictions where there are subsidiary entities that require an audit or are a significant
component of the Group.
2019
NZ$'000
2020
NZ$'000
PwC New Zealand672793
PwC Overseas offices306362
9781,155
ANNUAL REPORT 2020
43Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
6. DERIVATIVE FINANCIAL INSTRUMENTS
20192020
Assets
NZ$M
Liabilities
NZ$M
Assets
NZ$M
Liabilities
NZ$M
CURRENT
Foreign currency forward exchange contracts - cash flow hedges 14.7 2.6 2.5 33.8
Foreign currency forward exchange contracts - not hedge accounted 0.2 – – 1.4
Foreign currency option contracts - cash flow hedges 3.8 – 1.6 0.5
Foreign currency option contracts - time value 0.3 – – –
Interest rate swaps - cash flow hedges 0.1 0.2 – 0.6
Interest rate options - cash flow hedges 0.1 – – 0.1
19.2 2.8 4.1 36.4
NON-CURRENT
Foreign currency forward exchange contracts - cash flow hedges 43.0 1.6 12.7 56.5
Foreign currency option contracts - cash flow hedges 3.1 – 1.4 3.2
Foreign currency option contracts - time value 0.5 – – –
Interest rate swaps - cash flow hedges 0.3 0.3 – 1.6
Interest rate options - cash flow hedges 0.1 – – –
47.0 1.9 14.1 61.3
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 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 its 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 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 21 for information on the calculation of fair values and maturity of undiscounted cash flows for these financial instruments.
ANNUAL REPORT 2020
44Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
6. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Contractual amounts of derivative financial instruments were as follows:
2019
NZ$M
2020
NZ$M
Foreign currency forward contracts and options
Sale commitments forward exchange contracts 982.1 1,873.2
Purchase commitments forward exchange contracts 63.1 86.8
Foreign currency borrowing forward exchange contracts 23.5 16.9
NZD call option contracts purchased 7.7 38.0
Collar option contracts - NZD call options purchased (i) 86.3 70.9
Collar option contracts - NZD put options sold (i) 94.6 76.6
Interest rate derivatives
Interest rate swaps 50.2 52.1
Interest rate options 22.0 12.5
(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
2019
M
2020
M
Sale commitments
United States dollars US$302.8US$659.3
European Union euros €241.5€322.3
Australian dollars A$16.5A$17.4
British pounds £19.4£25.8
Canadian dollars C$26.6C$37.3
Japanese yen ¥4,925.0¥11,075.0
Chinese yuan ¥88.0¥239.0
Korean won ₩7,719.1₩7,977.7
Swedish kronor kr23.3kr58.0
Danish krone kr3.5kr14.3
Purchase commitments
Mexican pesos MXN$941.0MXN$1,285.5
ANNUAL REPORT 2020
45Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
7. TRADE AND OTHER RECEIVABLES
2019
NZ$M
2020
NZ$M
CURRENT
Trade receivables 136.4 195.9
Loss allowance for doubtful trade receivables (0.4) (3.0)
136.0 192.9
Other receivables 21.9 29.8
157.9 222.7
Trade receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less loss allowance for doubtful trade
receivables. Estimates are used in determining the level of receivables that may not be
collected. The Group has applied the simplified approach to calculating expected credit
losses on trade receivables and recognises a doubtful debt based on the lifetime expected
credit loss at each reporting date.
Bad debts are written off when they are considered to have become uncollectable.
Trade receivables credit risk
As at balance date 88% of trade receivables were current (2019: 84%) with less than 1%
(2019: 1%) more than 90 days past due. The total loss allowance for doubtful trade receivables
represents an estimate of the expected credit losses in respect of trade receivables and covers
the majority of these more than 90 days past due balances. The expected credit losses are
assessed by reference to historical collection trends and are adjusted to reflect current and
forward-looking information on macroeconomic factors affecting the ability of the customers
to settle the receivables.
Customer and receivable concentration
2019 2020
Five largest customers' proportion of the Group's:
Operating revenue 18.0%17.7%
Trade receivables 16.6%16.6%
There is no history of default in relation to these customers. Further information about the credit
quality and the Group's exposure to credit risk can be found in Note 21.
8. INVENTORIES
2019
NZ$M
2020
NZ$M
Materials 38.8 50.3
Finished products 107.0 111.4
Provision for obsolete inventories (9.7) (15.2)
136.1 146.5
Inventories are stated at the lower of cost or net realisable value. Cost is determined using
the first-in, first-out (FIFO) method and includes expenditure incurred in acquiring the
inventories and bringing them to their existing location and condition. The cost of finished
products comprises materials, direct labour, other direct costs and related production
overheads (based on normal operating capacity). Net realisable value is the estimated
selling price in the ordinary course of business, less applicable variable selling expenses.
ANNUAL REPORT 2020
46Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
9. PROPERTY, PLANT AND EQUIPMENT
Reconciliation of carrying amounts at the beginning and end of the year
LandBuildingsPlant & equipmentCapital projectsTotal
NotesFair ValueStructure (i)
Fit out
and other
Leased
assetsPurchased
Leased
assetsBuildings (i)Other
NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M
Cost and revaluation
Balance at 31 March 2018 138.2 89.5 131.7 – 283.7 – 22.8 53.5 719.4
Revaluation recognised in asset revaluation reserve 34.1 – – – – – – – 34.1
Additions – 0.3 1.1 – 13.9 – 82.9 26.9 125.1
Transfers 7.4 27.1 8.6 – 25.6 – (43.1) (25.6) –
Disposals – – – – (4.4) – – – (4.4)
Foreign exchange differences 0.3 – – – – – – – 0.3
Balance at 31 March 2019 180.0 116.9 141.4 – 318.8 – 62.6 54.8 874.5
Adjustment on adoption of NZ IFRS 16 23 – – – 24.9 (0.9) 5.4 – – 29.4
Balance at 1 April 2019 180.0 116.9 141.4 24.9 317.9 5.4 62.6 54.8 903.9
Additions – 0.5 1.8 1.1 22.7 3.8 74.6 42.7 147.2
Transfers 0.7 – 0.4 – 26.6 – (0.9) (26.8) –
Disposals – – (0.1) – (3.7) (0.1) – – (3.9)
Foreign exchange differences 3.0 3.8 0.9 – (0.1) – – – 7.6
Balance at 31 March 2020 183.7 121.2 144.4 26.0 363.4 9.1 136.3 70.7 1,054.8
Depreciation and impairment losses
Balance at 31 March 2018 – 18.1 64.8 – 160.1 – – – 243.0
Depreciation charge for the year – 2.0 5.7 – 26.6 – – – 34.3
Disposals – – – – (4.2) – – – (4.2)
Balance at 31 March 2019 – 20.1 70.5 – 182.5 – – – 273.1
Adjustment on adoption of NZ IFRS 16 23 – – – – (0.4) 0.4 – – –
Depreciation charge for the year – 2.7 6.6 6.8 28.9 3.3 – – 48.3
Disposals – (0.1) (0.2) – (1.2) (0.1) – – (1.6)
Foreign exchange differences – (0.1) (0.1) – (0.1) – – – (0.3)
Balance at 31 March 2020 – 22.6 76.8 6.8 209.7 3.6 – – 319.5
Carrying amounts
At 31 March 2018 138.2 71.4 66.9 – 123.6 – 22.8 53.5 476.4
At 31 March 2019 180.0 96.8 70.9 – 136.3 – 62.6 54.8 601.4
At 1 April 2019 on adoption of NZ IFRS 16 180.0 96.8 70.9 24.9 135.8 5.0 62.6 54.8 630.8
At 31 March 2020 183.7 98.6 67.6 19.2 153.7 5.5 136.3 70.7 735.3
(i) Buildings additions in the year in New Zealand include capitalised finance costs of $2.1 million (2019: New Zealand and Mexico $2.2 million). The average effective interest rate used was 3.0%
(2019: New Zealand 2.8% and Mexico 5.4%).
ANNUAL REPORT 2020
47Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
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.
The accounting policy for leased assets is included in Note 23.
Land revaluation
As described in Note 21 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 ('psm') for similar properties adjusted to
reflect relevant physical and locational characteristics. Valuation of land is performed
in accordance with the provisions of NZ IAS 16 'Property, Plant and Equipment' and
NZ IFRS 13 'Fair Value Measurement'.
New Zealand
The New Zealand land holding was valued by Jones Lang LaSalle (JLL NZ), with an
effective date of 31 March 2019 in accordance with the Australia and New Zealand Property
Institute Valuation Standards. The valuation of land ranged from $400 psm for land with
improvements to $350 psm for development land.
Mexico
The Group holds approximately 15 hectares of land in Tijuana. An independent valuation
of the Mexico land was conducted by Jones Lang LaSalle (JLL Mexico) as at 31 March
2019 in accordance with the International Valuation standards. The land was valued at
US$15.7 million (NZ$26.0 million) representing US$100 psm (NZ$143 psm).
COVID-19 may have an impact on real estate transactions. We have considered any impact
of this disruption along with market conditions existing prior to COVID-19 on the carrying
value of land. The Directors taking into account these market conditions and uncertainties
and consultation with external parties, have considered that the carrying value of the land
at 31 March 2020 remains an appropriate fair value.
2019
NZ$M
542.1
108.7
12.1
2020
NZ$M
138.0
33.4
6 37. 8
New Zealand
Mexico
Other
Property, plant and equipment and intangible assets by geographical location:Carrying amounts of land if measured at historical cost
New ZealandMexico
2019
NZ$M
2020
NZ$M
2019
NZ$M
2020
NZ$M
At historical cost 70.9 71.6 21.2 24.2
At fair value 157.0 157.7 23.0 26.0
ANNUAL REPORT 2020
48Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
10. INTANGIBLE ASSETS
Software
NZ$M
Patents,
trademarks &
applications
NZ$M
Other
NZ$M
Capital
projects
in progress
NZ$M
Total
NZ$M
Cost
Balance at 31 March 2018 48.2 42.0 5.0 3.2 98.4
Additions 3.5 10.6 – 4.5 18.6
Transfers 2.7 – – (2.7) –
Disposals (0.1) (1.4) – – (1.5)
Balance at 31 March 2019 54.3 51.2 5.0 5.0 115.5
Additions 6.0 13.3 – 5.8 25.1
Transfers 4.0 – – (4.0) –
Disposals (0.2) (0.5) (0.8) – (1.5)
Foreign exchange differences – – – 0.3 0.3
Balance at 31 March 2020 64.1 64.0 4.2 7.1 139.4
Amortisation and impairment losses
Balance at 31 March 2018 19.5 24.9 3.6 – 48.0
Amortisation for the year 3.9 3.5 – – 7.4
Disposals – (1.4) – – (1.4)
Balance at 31 March 2019 23.4 27.0 3.6 – 54.0
Amortisation for the year 4.6 8.1 – – 12.7
Disposals (0.1) (0.3) (0.8) – (1.2)
Balance at 31 March 2020 27.9 34.8 2.8 – 65.5
Carrying amounts
At 31 March 2018 28.7 17.1 1.4 3.2 50.4
At 31 March 2019 30.9 24.2 1.4 5.0 61.5
At 31 March 2020 36.2 29.2 1.4 7.1 73.9
Software: Software development
costs that are directly attributable to
the design and testing of identifiable
and unique software products and
acquired computer software licences
controlled by the Group are recognised
as intangible assets and are initially
capitalised at cost. Directly attributable
costs that are capitalised as part of
the software include employee costs.
Software costs are amortised over the
useful economic life of 3 to 15 years.
Project costs are transferred from
Capital projects in progress to Software,
as each stage is completed.
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 that a patent is superseded
or a trademark registration is not
continued or renewed, the unamortised
costs are expensed immediately.
ANNUAL REPORT 2020
49Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
11. INCOME TAX
INCOME TAX EXPENSE
2019
NZ$M
2020
NZ$M
Profit before tax 291.2 370.5
Tax expense at the New Zealand rate of 28% 81.5 103.7
Adjustments to tax:
Non-assessable income (0.3) (0.1)
Non-deductible expenses 2.4 2.4
Foreign rates other than 28% (0.2) 0.5
Effect of foreign currency translations (0.8) (4.5)
R&D tax credit – (13.4)
Re-introduction of building depreciation – (5.3)
Prior period over provision (0.6) (0.1)
Tax expense 82.0 83.2
This is represented by:
Current tax 85.2 107.0
Deferred tax (3.2) (23.8)
Tax expense 82.0 83.2
Effective tax rate 28.2%22.5%
Effective tax rate excluding R&D tax credit and
re-introduction of building depreciation 28.2%27.5%
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 for 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.
The R&D tax credit is estimated based on the eligible R&D expenditure incurred during
the period and is recognised as a deduction to current tax expense and offset in current
tax payable. The R&D tax credit is only recognised when there is reasonable certainty the
Group will comply with the conditions of the tax incentive.
IMPUTATION CREDITS
2019
M
2020
M
New Zealand imputation credits available for use in
subsequent reporting periods NZ$118.8 NZ$143.0
Australian franking credits available for use in subsequent
reporting periods A$9.1 A$10.3
ANNUAL REPORT 2020
50Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
11. INCOME TAX (CONTINUED)
DEFERRED TAX ASSETS/(LIABILITIES)
Notes
Provisions
and accruals
NZ$M
Leases
NZ$M
Property,
plant and
equipment and
intangibles
NZ$M
Financial
instruments
NZ$M
Employee
Share based
payments
NZ$M
Other
NZ$M
Total
NZ$M
Balance at 31 March 2018 44.7–(19.4)(10.9)2.80.317.5
Amounts recognised in:
Other comprehensive income –––(5.4)––(5.4)
Directly in equity ––––0.3–0.3
In the Income Statement 6.1–(3.6)(0.3)0.50.53.2
Balance at 31 March 2019 50.8–(23.0)(16.6)3.60.815.6
Adjustment on adoption of NZ IFRS 16 23–1.5––––1.5
Balance at 1 April 2019 50.81.5(23.0)(16.6)3.60.817.1
Amounts recognised in:
Other comprehensive income –––39.0––39.0
Directly in equity ––––10.8–10.8
In the Income Statement 16.6–0.1(0.3)0.61.518.5
In the Income Statement – re-introduction of building depreciation––5.3–––5.3
Balance at 31 March 2020 67.41.5(17.6)22.115.02.390.7
Deferred tax assets and liabilities are offset within the Balance Sheet where they relate to income taxes levied by the same taxation authority.
ANNUAL REPORT 2020
51Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
12. INTEREST-BEARING LIABILITIES
2019
NZ$M
2020
NZ$M
CURRENT
Bank overdrafts 17.3 30.7
Borrowings – 49.9
17.3 80.6
NON-CURRENT
Borrowings expiring
Between one and two years 44.1 –
Between two and three years – 16.6
Between three and four years – 5.4
Between four and five years 24.9 –
69.0 22.0
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.
Lease liabilities are disclosed in Note 23.
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 year end the weighted
average interest rate is 2.6% (2019: 2.7%).
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:
(i) the interest cover ratio for the Group shall not be less than 3 times earnings
before interest, tax, depreciation and amortisation (EBITDA);
(ii) the net tangible assets of the Group shall not be less than $200 million; and
(iii) the total tangible assets of the Guaranteeing Group shall constitute at least 80%
of the total tangible assets of the Group.
There have been no breaches of debt covenants for the current or prior period.
2019
NZ$M
2020
NZ$M
Unused lines of credit
Bank overdraft facilities 31.2 19.1
Borrowing facilities 145.0 148.0
176.2 167.1
ANNUAL REPORT 2020
52Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
13. TRADE AND OTHER PAYABLES
2019
NZ$M
2020
NZ$M
CURRENT
Trade payables 55.1 69.3
Employee entitlements 47.4 57.1
Other payables and accruals 32.5 39.2
135.0 165.6
NON-CURRENT
Employee entitlements 11.2 16.6
Other payables and accruals 1.5 3.2
12.7 19.8
Trade and other payables represent liabilities for goods and services provided to the Group
prior to the end of the financial period which are unpaid. The amounts are unsecured and
are usually paid within 60 days of recognition. Trade payables are recognised initially at fair
value and subsequently measured at amortised cost using the effective interest method.
Refer to Note 18 for further details of employee entitlements and benefits.
14. PROVISIONS
2019
NZ$M
2020
NZ$M
Warranty provision
CURRENT
Balance at beginning of the year 4.7 4.9
Current year provision 7.6 6.3
Warranty expenses incurred (7.4) (6.2)
Balance at end of the year 4.9 5.0
NON-CURRENT
Balance at beginning of the year 2.1 2.2
Current year provision 0.1 (0.7)
Balance at end of the year 2.2 1.5
Provisions are recognised where the Group has a present legal or constructive obligation
as a result of past events and it is more likely than not that an outflow of resources will be
required to settle the obligation, and the amount can be reliably estimated.
Warranty
Provision for warranty covers the obligations for the unexpired warranty periods for
products, based on recent historical costs incurred on warranty exposure. Typical warranty
terms are 1 to 2 years for parts and/or labour.
The actual future warranty claims experienced by the Group may be different to that of the
past. Factors that could impact future warranty claims include the success of the Group’s
quality system, as well as future parts and labour costs. Where the Group is aware of
specific product warranty issues these are included in the provision.
ANNUAL REPORT 2020
53Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
15. SHARE CAPITAL
2019
NZ$M
2020
NZ$M
Share capital at beginning of the year 201.4 221.0
Issue of share capital under dividend reinvestment plan (i) 12.7 –
Issue of share capital under employee share plans 6.9 8.0
Share capital at end of the year 221.0 229.0
Less treasury shares (ii) (1.8) (3.6)
219.2 225.4
Number of issued shares
Number of shares on issue at beginning of the year 571,230,264 573,708,739
Shares issued:
Dividend reinvestment plan (i) 918,827 –
Employee share purchase schemes 90,510 167,316
Employee share based payments plans 1,469,138 694,548
Number of shares on issue at end of the year 573,708,739 574,570,603
Less treasury shares (ii) (210,457) (290,103)
573,498,282 574,280,500
Incremental costs directly attributable to the issue of new shares, rights or options are
shown in equity as a deduction, net of taxation, from the proceeds.
When shares are acquired by a member of the Group, the amount of consideration paid is
recognised directly in equity. These shares are classified as treasury shares and presented
as a deduction from share capital until the ownership transfers to a holder outside the
Group. When treasury shares are subsequently reissued under employee share plans the
cost of treasury shares is reversed and the realised gain or loss on sale or reissue, net of
any directly attributable incremental transaction costs, is recognised within Share Capital.
All shares are fully paid. All ordinary shares rank equally with one vote attached to each fully
paid ordinary share.
(i) In 2019, shares were issued under the Company's dividend reinvestment plan at an average
price of $13.87 per share.
(ii) Treasury shares are shares held and controlled by Fisher & Paykel Healthcare Employee
Share Purchase Trustee Limited.
16. EARNINGS PER SHARE
2019
NZ$M
2020
NZ$M
Profit after tax 209.2 287.3
Weighted average number of ordinary shares 572,780,545 574,192,388
Adjustment for share options, PSRs and ESRs 5,270,055 4,857,255
Weighted average number of ordinary shares for
diluted earnings per share 578,050,600 579,049,643
Basic earnings per share (cents per share) 36.5 cps 50.0 cps
Diluted earnings per share (cents per share) 36.2 cps 49.6 cps
Basic earnings per share is calculated by dividing the profit after tax of the Group by the
weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by adjusting the weighted average number
of ordinary shares outstanding to assume conversion of all dilutive potential ordinary
shares. Options, Performance Share Rights (PSRs) and Employee Share Rights (ESRs) are
convertible into the Company’s shares, and are therefore considered dilutive securities for
diluted earnings per share.
ANNUAL REPORT 2020
54Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
17. RESERVES AND DIVIDENDS
2019
NZ$M
2020
NZ$M
Hedging reserve 44.1 (56.2)
Asset revaluation reserve 87.6 87.6
Employee share based payment reserve 12.9 27.7
Foreign currency translation reserve 0.2 3.0
Total reserves 144.8 62.1
Nature and purpose of reserves
Hedging reserve
This reserve is used to record unrealised gains or losses on hedging instruments that are
recognised directly in equity and 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 payment reserve
This reserve is used to recognise the fair value of shares, options, PSRs and ESRs 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
shares, options, PSRs or ESRs are exercised or lapse.
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 NZD.
Dividends
All dividends are recognised as distributions to shareholders.
During the year, supplementary dividends of $16.0 million were paid to non-resident
shareholders (2019: $13.6 million), for which the Group received an equivalent foreign investor
tax credit entitlement. The foreign investor tax credit entitlement is included in income taxes
paid within the Statement of Cash Flows.
Cents
per share NZ$M
Dividends
2018 final 12.50 71.5
2019 interim 9.75 55.8
31 March 2019 22.25 127.3
2019 final 13.50 77.5
2020 interim 12.00 68.9
31 March 2020 25.50 146.4
Subsequent event - dividend declared
On 26 June 2020 the directors approved the payment of a fully imputed 2020 final dividend
of $89.1 million (15.50 cents per share) to be paid on 17 July 2020. A supplementary dividend
of 2.7353 cents per share was also approved for eligible non-resident shareholders.
ANNUAL REPORT 2020
55Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
18. EMPLOYEE EXPENSES
Employee expenses total $429.5 million (2019: $367.7 million).
a) Employee share based compensation
From 1 April 2019, the Company grants options and PSRs to certain employees under the
2019 Share Option Plan and the 2019 Performance Share Rights Plan. Prior to April 2019, the
Company granted options and PSRs to certain employees under the 2003 Share Option Plan
and Employee Performance Share Rights Plan.
Vesting of all schemes is subject to the employee still being in service at date of vesting.
No amounts are payable for the grant of any options or share rights. Options, PSRs and ESRs
granted to employees have no voting rights until they have been exercised and ordinary
shares issued.
(i) Share option plan
Under the 2019 Share Option Plan, one option gives the employee the right to acquire one
ordinary share in the Company. Options vest on either the third, fourth or fifth anniversary
date of the Grant as long as the FPH share price on the NZX on that date has exceeded the
“escalated price”. The “escalated price” is determined as at each anniversary of the grant date
and is calculated by:
• increasing the last calculated escalated price (which as at the grant date will be the exercise
price of the option) by a percentage amount determined by the Board to represent the
Company’s cost of capital; and
• reducing the resulting figure by the amount of any dividend paid by the Company in
respect of a share in the 12 month period immediately preceding that anniversary.
Under the 2003 Share Option Plan, 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”. The escalated price is
escalated for a period of three years only.
(ii) Performance share rights plan
Under the 2019 Performance Share Rights Plan, one share right gives the employee the potential
to exercise a share right for an ordinary share in the Company at no cost. Performance share
rights will only 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 (DJSMDQT) in NZD over the same period.
The plan is a 5 year scheme, with the potential for rights to fully vest on the third and fourth
anniversary of the grant date if the Company’s TSR performance exceeds that of the DJSMDQT
by 10 percentage points or more.
Under the previous Employee Performance Share Rights Plan partial vesting of PSRs was
possible at the third and fourth anniversary.
2019
NZ$M
362.2
5.5
2020
NZ$M
6.1
423.4
Wages and
salaries
Share based
benefits
Wages and salaries
Wages and salaries includes non monetary benefits, annual leave, long service leave and
contributions to superannuation plans.
Liabilities for wages and salaries, including non-monetary benefits, annual leave, long
service leave and accumulating sick leave are recognised within employee entitlements in
trade and other payables. These are measured at the amounts expected to be paid when
the liabilities are settled in respect of employees’ services up to the reporting date.
For the liabilities for long service leave, 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.
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 shares, options, PSRs and ESRs 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
shares, options, PSRs or ESRs are exercised, the amount in the share based payment
reserve relating to those instruments, together with the option exercise price paid by the
employee, is transferred to share capital. When any vested shares, options, PSRs or ESRs
lapse, the amount in the share based payment reserve relating to those shares, options,
PSRs or ESRs is also transferred to share capital.
ANNUAL REPORT 2020
56Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
18. EMPLOYEE EXPENSES (CONTINUED)
(iii) Employee share rights plan
Employee Share Rights (ESR) Plan entitles certain New Zealand and Australian employees to
be issued ordinary shares in the Company. ESRs automatically vest on the third anniversary
of their grant date at no cost to the employee. For each ESR that vests, one ordinary share
will be issued.
(iv) Other Employee share and stock purchase plans
Employee Share Purchase Plan: New Zealand and Australian full time employees are eligible,
after a qualifying period, to participate in this plan. Shares are issued up to the value of $2,000,
with a discount of up to $500 per employee. Loans are provided to employees for the purchase
and repaid over the vesting period. No interest is charged on the loans. (2019: up to $2,340
worth of shares, at a discount of 20%). The qualifying period between grant and vesting date
is 3 years. At 31 March 2020 the total receivable owing from employees was $2.1 million
(2019: $0.6 million).
Employee Stock Purchase Plan: North American employees working more than 20 hours per
week, in accordance with section 423 of the US Internal Revenue Code as amended, are eligible
to participate in this plan. Shares under this Plan are issued at a discount of 15%, are allocated
to employees at the time of issue and vest immediately. Shares issued under this plan in 2020
totalled 82,636 shares (2019: 90,510).
Measurement
The fair value of share options or PSRs is independently determined using a Monte Carlo
simulation valuation methodology. The fair value of ESRs is independently determined using
a discounted dividend approach. The key inputs and assumptions are included.
b) Key management and director compensation
2019
NZ$'000
2020
NZ$'000
Salary and other short-term benefits 6,493 7,887
Share based benefits 1,410 1,674
Directors fees 978 1,046
8,881 10,607
Key management personnel includes the Chief Executive Officer and senior executives reporting
directly to the Chief Executive Officer.
The table excludes any dividends received on the Company’s shares held by the Directors or key
management personnel.
ANNUAL REPORT 2020
57Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
18. EMPLOYEE EXPENSES (CONTINUED)
Movements in the number of options, PSRs and ESRs outstanding and their exercise prices are as follows:
20192020
Options
Performance
Share Rights
Employee
Share Rights Options
Performance
Share Rights
Employee
Share Rights
Number outstanding
As at beginning of the year 4,827,988 1,231,313 – 3,808,428 972,230 122,355
Granted during the year 670,303 216,937 126,377 815,732 257,701 127,713
Exercised during the year (1,569,457) (436,670) – (1,177,459) – –
Lapsed during the year (120,406) (39,350) (4,022) (64,814) (27,160) (5,412)
As at end of the year 3,808,428 972,230 122,355 3,381,887 1,202,771 244,656
Exercisable at year end 929,970 – – 870,744 353,603 –
Number of employees holding employee share options, PSRs and ESRs 478 478 227 426 459 261
Weighted average exercise price $10.46 – – $12.98 – –
Weighted average remaining contractual life (months) 33 39 29 33 33 23
Fair value of share options or rights granted during the year (NZ$M) 2.3 2.2 1.8 2.6 2.6 2.0
Fair value of share options or rights granted during the year ($ per share) $3.39 $10.16 $14.38 $3.19 $10.11 $15.82
Key inputs and assumptions used in fair value of grants during the year
Share price at grant date $15.16 $15.16 $15.16 $16.90 $16.90 $16.90
Contractual life (years) 5 5 3 5 5 3
Exercise price $14.91 NilNil$17.21 Nil Nil
Expected volatility (i) 27%27%n/a25.5%25.5%n/a
Expected dividend yield 1.99%n/a1.99%1.63%1.63%1.63%
Cost of equity 8.2%n/a8.2%7.6% n/a 7.6%
5 year NZD risk free rate 2.55%2.55%n/a1.24%1.24%n/a
5 year USD risk free rate n/a2.90%n/an/a1.83%n/a
NZD/USD exchange rate of grant date n/a0.6560n/an/a0.6400n/a
Expected NZD/USD volatility n/a13.00%n/an/a10.30%n/a
Expected DJSMDQT index volatility n/a13.00%n/an/a16.40%n/a
(i) The expected share price volatility is derived by analysing the historical volatility over the most recent historical period corresponding to the term of the option or PSR.
ANNUAL REPORT 2020
58Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
19. CONTINGENT LIABILITIES
Contingent liabilities are subject to uncertainty or cannot be reliably measured and are
not provided for. Disclosures as to the nature of any contingent liabilities are set out below.
Judgements and estimates are applied to determine the probability that an outflow of
resources will be required to settle an obligation. These are made based on a review of
the facts and circumstances surrounding the event and advice from both internal and
external parties.
Periodically the Group is party to litigation including product liability and patent claims.
The Directors are unaware of the existence of any claim or contingencies that would have
a material impact on the operations of the Group.
20. COMMITMENTS
2019
NZ$M
2020
NZ$M
Capital expenditure commitments contracted for but not
recognised as at the reporting date:
Within one year 79.7 31.2
Between one and two years 1.2 0.3
Between two and five years – –
80.9 31.5
21. 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
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest
rates and prices will affect the Group's profit or the value of financial instruments.
The objective of market risk management is to manage and control market risk exposures
through the use of various financial instruments in accordance with the Group's treasury
management policy.
(i) Foreign exchange risk
Foreign exchange risk arises when future transactions and recognised assets and liabilities
are denominated in a currency that is not the entity’s functional currency.
The Group operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily US dollar (USD), Euro (EUR), Japanese yen (JPY)
and Mexican peso (MXN).
Foreign exchange risk is hedged in accordance with the treasury management policy.
The Group enters into foreign currency option contracts and forward foreign currency contracts
within policy parameters to hedge the foreign exchange 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 5 years, but may have terms of up to 10 years with Board
approval.
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.
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) 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 within policy parameters.
Interest rate swaps and options are accounted for as cash flow hedges.
ANNUAL REPORT 2020
59Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
21. FINANCIAL RISK MANAGEMENT (CONTINUED)
The carrying amounts of significant non-derivative 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$M
2019
Cash 27.410.01.60.3–0.8–1.76.448.2
Short-term investments 92.5––––––––92.5
Trade receivables 1.657.833.216.17.85.64.7–9.6136.4
Trade and other payables (31.7)(23.9)(6.3)(1.4)(3.2)(0.6)(3.9)(3.4)(14.7)(89.1)
Bank overdraft –(2.0)(2.6)(10.0)(0.4)–(1.2)–(1.1)(17.3)
Borrowings (2.9)(55.9)(4.9)–(3.4)(1.9)–––(69.0)
86.9(14.0)21.05.00.83.9(0.4)(1.7)0.2101.7
2020
Cash 35.8 12.3 3.4 – 2.2 0.4 – 4.9 8.1 67.1
Short-term investments 77.7 – – – – – – – – 77.7
Trade receivables 2.4 82.9 51.2 20.1 8.0 8.7 8.6 0.9 13.1 195.9
Trade and other payables (41.2) (24.1) (10.7) (1.6) (3.5) (0.9) (4.9) (7.0) (17.8) (111.7)
Bank overdraft – (10.5) (4.9) (11.3) – (0.1) (2.4) – (1.5) (30.7)
Lease liabilities (0.2) (8.6) (5.8) (1.0) (4.6) (0.8) (0.5) (7.5) (4.6) (33.6)
Borrowings – (66.5) – – (3.4) (2.0) – – – (71.9)
74.5 (14.5) 33.2 6.2 (1.3) 5.3 0.8 (8.7) (2.7) 92.8
ANNUAL REPORT 2020
60Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
21. FINANCIAL RISK MANAGEMENT (CONTINUED)
a. Market risk (continued)
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial
liabilities to interest rate risk and foreign exchange risk.
A sensitivity of +/-10% for foreign exchange risk has been selected (2019: +/-10%). The Group
believes that an overall sensitivity of +/-10% is reasonably possible given the exchange rate
volatility observed on a historical basis. A sensitivity of +/-1% has been selected for interest rate
risk (2019: +/-1%). This sensitivity is based on reasonably possible changes over a financial year
using the observed range of historical data.
All variables other than the applicable interest rates and exchange rates are held constant.
20192020
NZ$M NZ$M NZ$M NZ$M
-1%+1%-1%+1%
Interest rate change
Impact on profit after tax (0.7) 0.7 (0.3) 0.4
Impact on hedging reserves
(within equity) (1.7) 1.7 (1.6) 1.5
(2.4) 2.4 (1.9) 1.9
-10%+10%-10%+10%
Foreign exchange rate change
Impact on profit after tax (0.9) 0.7 (0.2) 0.1
Impact on hedging reserves
(within equity) (70.1) 60.3 (152.5) 124.7
(71.0) 61.0 (152.7) 124.8
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).
Financial Instruments
All the Group's financial instruments held at fair value have been measured at the fair value
measurement hierarchy of level 2 (2019: level 2).
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.
Land
Refer to Note 9 for further information about land that is measured at fair value including
a summary of the valuation techniques used.
Other
All financial assets other than derivatives are measured at amortised cost including short-
term investments. 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 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.
b. Credit risk
The Group is exposed to 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. Over 93% of cash and short-term investments
(2019: 96%) 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.
ANNUAL REPORT 2020
61Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
21. FINANCIAL RISK MANAGEMENT (CONTINUED)
c. Liquidity risk
Management monitors rolling forecasts of the Group’s liquidity position on the basis of expected cash flows. The table below sets out the contractual, undiscounted cash flows for non-derivative
financial liabilities and derivative financial instruments.
< 1 year
NZ$M
1-2 years
NZ$M
2-5 years
NZ$M
5+ years
NZ$M
Contractual
cash flows
NZ$M
Consolidated
Balance Sheet
NZ$M
2019
Bank overdrafts 17.3 – – – 17.3 17.3
Trade and other payables 90.8 – – – 90.8 89.1
Borrowings 1.9 45.5 26.6 – 74.0 69.0
Total non-derivative financial liabilities 110.0 45.5 26.6 – 182.1 175.4
Foreign currency forward exchange contracts 12.4 15.1 24.9 – 52.4 53.7
Foreign currency option contracts – – – – – 7.7
Interest rate derivative instruments net inflows (outflows) (i) – – – – – 0.1
Total derivative financial instruments – assets 12.4 15.1 24.9 – 52.4 61.5
2020
Bank overdrafts 30.7 – – – 30.7 30.7
Trade and other payables 111.7 – – – 111.7 111.7
Borrowings 51.2 0.6 22.5 – 74.3 71.9
Lease liabilities 11.9 9.0 6.6 1.8 29.3 33.6
Total non-derivative financial liabilities 205.5 9.6 29.1 1.8 246.0 247.9
Foreign currency forward exchange contracts (32.9) (21.0) (24.7) 1.3 (77.3) (76.5)
Foreign currency option contracts – – – – – (0.7)
Interest rate derivative instruments net inflows (outflows) (i) (0.5) (0.4) (1.2) (0.2) (2.3) (2.3)
Total derivative financial instruments – (liabilities) (33.4) (21.4) (25.9) 1.1 (79.6) (79.5)
(i) Interest rate swaps derivative cash flows are estimated using forward interest rates at reporting date.
ANNUAL REPORT 2020
62Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
22. SIGNIFICANT EVENTS AFTER BALANCE DATE
Other than the dividends disclosed in Note 17, there are no other significant events after
balance date.
23. OTHER ACCOUNTING POLICIES
a. Changes to accounting policies
During the year the Group adopted NZ IFRS 16 ‘Leases’, effective 1 April 2019, using the
modified retrospective approach. The cumulative effect of adopting NZ IFRS 16 was
recognised as an adjustment to the opening balance of retained earnings at 1 April 2019, with
no restatement of comparative information. The reduction in retained earnings on 1 April 2019
was $3.8 million. This is a non cash adjustment and did not impact the Group’s ability to comply
with its debt covenants.
Adjustments recognised on adoption of NZ IFRS 16
Prior to 1 April 2019, the majority of leases of property, plant and equipment were classified as
operating leases with an operating lease expense recognised on a straight-line basis over the
term of the lease. From 1 April 2019, leases are recognised as a right-of-use (or leased) asset
and a corresponding lease liability at the date at which the leased asset is available for use by
the Group. Each lease payment is allocated between the liability and financing expense. The
financing expense is charged to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period.
Balance sheet impact of NZ IFRS 16
The impact of NZ IFRS 16 on the Group’s opening balance sheet is as follows:
31 March 2019
NZ$M
Adjustment
NZ$M
1 April 2019
NZ$M
ASSETS
Non-current assets
Property, plant and equipment 601.4 29.4 630.8
Deferred tax assets 38.9 1.5 40.4
Total assets 30.9
LIABILITIES
Lease liabilities - Current – 9.9 9.9
Lease liabilities - Non-current – 25.3 25.3
Trade and other payables 147.7 (0.5) 147.2
EQUITY
Retained earnings 549.2 (3.8) 545.4
Total liabilities and equity 30.9
Lease liabilities
The table below presents the reconciliation from lease commitments in accordance with
NZ IAS 17 to the opening balance of lease liabilities recognised in accordance with NZ IFRS 16.
1 April 2019
NZ$M
Operating lease commitments disclosed as at 31 March 2019 26.7
Discounted at the date of initial application (2.4)
Add: finance lease liabilities recognised as at 31 March 2019 0.5
(Less): short-term leases, or low-value leases not recognised (0.9)
Add: adjustments as a result of a different treatment of extension options 11.3
Lease liabilities recognised as at 1 April 2019 35.2
Profit impact of NZ IFRS 16
The following table shows the adjustments to profit or loss for the year as a result of the
adoption of NZ IFRS 16.
Prior to
adoption
NZ$M
Impact of
NZ IFRS 16
NZ$M
Reported
Result
NZ$M
For the year ended 31 March 2020
Total operating expenses 458.6 (2.1) 456.5
Rental and lease expenses 13.1 (12.2) 0.9
Depreciation and amortisation 50.9 10.1 61.0
Operating profit 377.2 2.1 379.3
Operating margin 29.8%30.0%
Financing expense 2.1 1.8 3.9
Profit before tax 370.2 0.3 370.5
Tax expense 83.1 0.1 83.2
Profit after tax 287.1 0.2 287.3
ANNUAL REPORT 2020
63Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
23. OTHER ACCOUNTING POLICIES (CONTINUED)
a. Changes to accounting policies (continued)
Cash flows presentation impact of NZ IFRS 16
Prior to the adoption of NZ IFRS 16, operating lease payments were included in payments
to suppliers within operating activities. Following the adoption of NZ IFRS 16 the interest
component is allocated to operating cashflows, and the repayment of the lease liability
principal is classified within financing activities.
2020
NZ$M
For the year ended 31 March 2020
Interest paid on leases (operating activities) (1.8)
Payments for lease liabilities principal (financing activities) (9.7)
Total cash outflows from lease liabilities (11.5)
Practical expedients applied
In applying NZ IFRS 16 for the first time, the Group has used the following practical expedients
permitted by the standard:
• the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
• the accounting for operating leases with a remaining lease term of less than 12 months as at
1 April 2019 as short-term leases;
• the exclusion of initial direct costs for the measurement of the right-of-use asset at the date
of initial application;
• the use of hindsight in determining the lease term where the contract contains options to
extend or terminate the lease; and
• the election not to reassess whether a contract is, or contains a lease at the date of initial
application. Instead, for contracts entered into before the transition date the Group relied
on its assessment made applying NZ IAS 17 and NZ IFRIC 4 'Determining whether an
Arrangement contains a lease'.
There have been no other changes in accounting policies.
Leases
The Group's leases predominantly relate to property or equipment outside New Zealand,
the majority of which were classified as operating leases until 31 March 2019. All leases
are included within property, plant and equipment (refer to Note 9). Lease contracts are
typically made for fixed periods between 3-12 years but may have extension options.
Lease terms are negotiated on an individual basis and contain a wide range of different
terms and conditions. The lease agreements do not impose any covenants, but leased
assets may not be used as security for borrowing purposes. The right-of-use (leased)
asset is depreciated over the shorter of the asset's useful life and the expected lease term
on a straight-line basis.
Lease liabilities have been measured at the present value of the remaining lease payments,
discounted using a discount rate derived from the incremental borrowing rate for each
relevant territory on 1 April 2019 when the interest rate implicit in the lease was not
readily available. Incremental borrowing rates applied to lease liabilities range between
1% - 25%, with a weighted average rate of 5.3%. Leases that commenced after 1 April use
an incremental borrowing rate that was applicable on commencement date.
Extension options
Some property leases contain an extension option exercisable by the Group. At the
commencement of a lease, the Group assesses whether it is reasonably certain an
extension option will be exercised. The assessment is reviewed if a significant event
or a significant change in circumstances occurs which affects this assessment and
that is within the control of the Group. The extension options are only exercisable by
the Group and not by the lessor. Where it is reasonably certain the extension will be
exercised, that extension period and related costs are recognised on the balance sheet.
Short-term and low-value leases
Payments associated with short-term leases and leases of low-value assets are recognised
on a straight-line basis as an expense in the Income Statement. Short-term leases
are leases with a lease term of 12 months or less and predominantly relate to motor
vehicle leases with less than 12 months lease term remaining on transition to NZ IFRS 16.
Low-value leases predominantly relate to computer equipment.
ANNUAL REPORT 2020
64Fisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
23. OTHER ACCOUNTING POLICIES (CONTINUED)
b. Standards, Interpretations and Amendments to Published Standards
Other than the adoption of NZ IFRS 16, there are no new standards or amendments to existing
standards which have or are expected to 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
depreciation or 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 of disposal, 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.
f. Short-term investments
Short-term investments includes all other current investments that do not meet the
definition of cash and cash equivalents. The balance represents deposits with financial
institutions with maturities at the date of acquisition between 90 and 120 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.
ANNUAL REPORT 2020
65Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Fisher & Paykel Healthcare Corporation Limited
We have audited the consolidated financial statements which comprise:
• the consolidated balance sheet as at 31 March 2020;
• 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.
QUALIFIED OPINION
In our opinion, except for the possible effects of the matter described in the Basis for qualified
opinion section of our report, the accompanying consolidated financial statements present fairly,
in all material respects, the financial position of the Group as at 31 March 2020, and 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 QUALIFIED OPINION
As explained in Note 3, due to the COVID-19 pandemic, certain of the Group’s annual finished
products inventory counts and materials cycle counts planned to be held on or close to 31 March
2020 did not occur. In planning and scoping our audit we intended to verify the quantities and
condition of 100% of the Group’s materials and 80% of the Group’s finished products by value
through physical inventory count procedures at 31 March 2020 and cycle count procedures
across the financial year. We were able to verify 32% of the Group’s total materials and 62% of
the Group’s total finished products but were unable to satisfy ourselves by alternative means as
to the quantities and condition of the remaining materials and finished products planned to be
verified. Consequently, we were unable to determine whether any adjustments to the materials
balance of $50.3 million and finished products balance of $111.4 million at 31 March 2020 were
necessary. Since closing inventories affect the determination of the results of operations, we
were unable to determine whether adjustments to the results of operations might be necessary
for the year ended 31 March 2020.
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 qualified audit 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 treasury related financial
markets risk analysis and commentary, remuneration benchmarking, regulatory tax compliance
procedures in Mexico, scrutineering the counting of votes at the Annual Shareholders’ Meeting
and other assurance services in relation to constant currency disclosures. The provision of these
other services has not impaired our independence as auditor of the Group.
ANNUAL REPORT 2020
66Fisher & Paykel Healthcare Corporation Limited
INDEPENDENT AUDITOR’S REPORT
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, 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.
In addition to the matter described in the Basis for qualified opinion section, we have determined that we have one key audit matter, revenue recognition, to be communicated in our report.
Revenue recognition
Description of the key audit matter
The Group’s revenue primarily consists of the sale of products which totalled $1,263.7 million
in the year ended 31 March 2020 as outlined in Note 4.
In determining the appropriate recognition of revenue, management has considered the
following characteristics of the sale of products:
• products are sold to customers in multiple territories with varying sales contract terms
and conditions;
• in certain markets sales are made to distributors and include rebate arrangements; and
• the manual intervention required in some cases to allow for the time between despatch
of products and the transfer of control to customers.
Management has concluded that:
• revenue is primarily derived from the satisfaction of a single performance obligation
for each contract which is the sale of products; and
• control of product transfers to the customer/distributor at the same time as legal
title passes.
Given the above and the higher sales in the final quarter of the year ended 31 March 2020
related to the COVID-19 pandemic, we have given significant audit focus and attention to
the recognition of revenue.
How our audit addressed the key audit matter
On a sample basis for each major operating subsidiary:
• we examined contracts with customers to validate that management’s conclusion in
relation to when control transfers was appropriate; and
• validated that the rebate, payment and pricing arrangements supported the recognition
of a sale on transfer of control to the distributor.
We completed detailed audit procedures over revenue including:
• obtaining an understanding of systems, processes and controls and evaluating and testing
key controls in place over the recording of revenue;
• utilising data assurance techniques to match cash received during the year and amounts
receivable at balance date to invoices issued to customers and obtaining supporting
evidence for any significant transactions that were not matched to cash or receivables;
• 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 of the amount
owing from alternative procedures including testing of subsequent receipts or shipping
documentation; and
• defining the time period, both before and after 31 March 2020, 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 legal title passes. For a sample of
transactions recognised within the defined time period we confirmed that the date
on which revenue was recognised by management was appropriate by examining
the associated invoice, the terms of the sales contract, and the relevant product
delivery documentation.
The sample size for this testing was increased from that originally planned, given the high
volume of sales around 31 March 2020 of products essential to the COVID-19 response and
because we were unable to attend certain planned inventory counts, as referred to in the
Basis for qualified opinion section of this report. Where exceptions were identified in our
sample testing, we considered the nature of the exceptions and used audit techniques to
determine the results for the remainder of the population. No material exceptions were
identified from our procedures.
ANNUAL REPORT 2020
67Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
INDEPENDENT AUDITOR’S REPORT
OUR AUDIT APPROACH
Overview
Materiality
Audit scope
Key audit
matters
An audit is designed to obtain reasonable assurance whether the
financial statements are free from material misstatement.
Overall Group materiality: $15.5 million which represents an average
of approximately 5% of profit before tax over the past three years.
We chose an average of profit before tax over the last three years as
the benchmark because, in our view, profit before tax is the benchmark
against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark. We chose
to use an average of the last three years because of higher sales in the
final quarter of the year ended 31 March 2020 related to the COVID-19
pandemic and the impact of this on the Group’s results.
As noted above we have determined that there is one key audit matter
being revenue recognition.
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 focussed 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 for full scope audit procedures contributed 86% of the Group’s revenue and 89% of the
Group’s profit before tax. We performed analytical procedures over the other subsidiaries.
Audits of the selected subsidiaries are performed at a materiality level determined by reference
to a proportion of Group materiality appropriate to the relative scale of the business concerned.
INFORMATION OTHER THAN THE CONSOLIDATED 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
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 consolidated 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
Keren Blakey.
For and on behalf of:
Chartered Accountants
26 June 2020 Auckland
ANNUAL REPORT 2020
68Fisher & Paykel Healthcare Corporation Limited
Caring Sustainably
Environmental, Social and
Governance Report
Contents
MESSAGE FROM THE CEO70
PERFORMANCE SUMMARY71
PEOPLE72
COMMUNITY78
ENVIRONMENT80
REMUNERATION85
GOVERNANCE89
RISK MANAGEMENT97
SHAREHOLDER & COMPANY INFORMATION102
In honour of our 50th anniversary, a sculpture was
designed by our own engineers and designers and
constructed beside the lake at the heart of our Auckland
campus. Named Tā Te Manawa, which means “a time to
rest, to breathe”, the artwork pays tribute to our products
and is surrounded by a calming medicinal garden.
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69Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
MeSSage froM the Ceo
MESSAGE FROM THE CEO
By looking after our people, local communities and the
environment, we can be more innovative and more successful
in the long term. In turn, we can continue to return a portion
of our profits to shareholders as dividends.
At Fisher & Paykel Healthcare, we are fully committed to our purpose – improving care
and outcomes through inspired and world leading healthcare solutions. Our products and
therapies were used to treat around 16 million patients, including many battling COVID-19.
We have made a significant contribution to the health and wellbeing of the world’s people
during a global pandemic.
We know that we have a responsibility to look after our own people, our local communities
and the environment. By doing so, we can be more innovative and more successful in the
long term, and in turn, we can continue to return a portion of our profits to shareholders
as dividends.
Reporting on environmental, social and governance topics is one way to hold ourselves
accountable for continuous improvement in this area. With that in mind, in this report
we have provided disclosures on the topics our investors and other stakeholders consider
most important.
This year we are integrating the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD). This includes commentary in the governance, risk
management and environment sections of this report, along with disclosures
addressing our global carbon footprint. We have also integrated some of the
Sustainability Accounting Standards Board (SASB) standards and Climate Disclosure
Standards Board (CDSB) guidance.
We are a fifty-year-old business with thousands of suppliers, and making our operations
more sustainable is a journey of continuous improvement. I’m encouraged that we have
a team of talented, passionate people who are providing guidance on how to manage
our environmental and social impacts, while supporting our work to improve patient care
and outcomes. Future generations are counting on us to do both.
LEWIS GRADON
Chief Executive Officer
ANNUAL REPORT 2020
70fisher & Paykel healthcare Corporation Limited
Sustainability disclosures and indices
We participate annually in a suite of
well-respected sustainability disclosure
programmes and have been included
this year in the Dow Jones Sustainability
Index and the FTSE4Good index.
United Nations
Sustainable Development Goals
Our business purpose, along with our
commitments to look after our people,
invest in our local communities and
manage our environmental impact,
is aligned with the UN Sustainable
Development Goals, particularly SDG 3,
8 and 12.
PerforMaNCe SUMMarY
ClimateSupplier EngagementWaterForests
BB–CTo be reported
in FY2021
Science Based Targets (SBT)Dow Jones Sustainability Index (DJSI)MSCIFTSE4Good
Committed
Jan 2020
SBTi disclosure
includes Scope 3
forecast
2019 Index
Constituent
Screened2019 Index
Constituent
CDP Scores
Other ESG ratings and recognitions
ANNUAL REPORT 2020
71Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
PeoPLePeoPLe
PEOPLE
We know we need the best people and the best environment in which the best ideas
can grow. We have more than 5,000 people working in, or supporting, over 120 countries
around the globe. The tables below outline our total numbers of people by headcount
as at 31 March.
People: by region
20192020
RegionPermanentTemporaryPermanentTemporary
New Zealand2,2262182,443293
Mexico1,126661,29428
Rest of World95361,01417
Total4,3052904,751338
People: permanent and temporary
20192020
GenderPermanentTemporaryPermanentTemporary
Women2,0891992,386239
Men2,216912,36594
Not disclosed–––5
Total4,3052904,751338
People: full-time and part-time
20192020
GenderFull-timePart-timeFull-timePart-time
Women2,083292,35630
Men2,245202,35411
Total
1
4,328494,71041
1
Temporary employees (casual, fixed term, temporary, temporary part time and contract temporary) are not included
in these numbers due to the changing nature of their hours.
Caring for our people
We offer our people the opportunity to work for a world-class, successful company where
each person is valued and respected. We fully support the principles in the United Nations
Declaration on Human Rights and the International Labour Organisation Declaration on
Fundamental Principles and Rights at Work, including non-discrimination, freedom of
association and collective bargaining, and freedom from forced and child labour. We seek
to uphold human rights in all business activities.
We recognise that the results we achieve are built on the hard work and dedication of our
employees. In recognition of this contribution, and as has been our longstanding practice, we
pay our employees a profit-sharing bonus. In FY20, this represented on average 3.9% of
annual base pay for each employee, and a total profit-share of $12.0 million (2019:$5.9 million).
Diversity and Inclusion Policy
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.
This commitment involves:
1. Empowering employees to reach their potential
We believe our people are our strength, and are committed to providing equal
employment opportunities for our people, and an environment where everyone has
the opportunity to reach their full potential.
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 strive to
develop a workforce consisting of individuals with diverse skills, values, backgrounds,
ethnicities and experiences.
This commitment to diversity and inclusion means ensuring that no individual is
excluded from a position, for which they are 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 opportunity to perform to their full potential.
2. Creating an inclusive culture
We are global in people, in thinking and in behaviours, and we believe that an inclusive
culture is essential for diversity to thrive. We are committed to fostering an inclusive
workplace where our employees feel they are treated fairly and their contributions are
ANNUAL REPORT 2020
72fisher & Paykel healthcare Corporation Limited
PEOPLE CONTINUED
respected and valued. We believe this promotes continuous questioning and continuous
improvement which builds innovative and high performing teams.
3. Measuring and reporting on our diversity and inclusion objectives and progress
We relentlessly strive to provide a high quality of life for our employees and believe
that “what gets measured gets improved”. We will use both quantitative and qualitative
measures to review our diversity and inclusion performance and, as with all areas of
our business, have a focus on continuous improvement. The Board is responsible for
establishing measurable objectives for achieving a diverse and inclusive workforce.
Each year in our annual report we will disclose the measurable objectives for achieving
gender diversity set by the Board in accordance with this policy and our progress
towards achieving those objectives.
Gender pay ratio
We pay our employees fairly based on performance and the complexity and size of the
individual role. The table below outlines the gender pay ratio calculated within salary bands
and functions using the average pay ratio between females and males.
20192020
New Zealand
(salaried and waged)99.4%99.4%
Outside of New Zealand
(Salaried only)98.0%98.0%
Total98.9%98.9%
For New Zealand, we embedded last year’s New Zealand annual salary review procedure
into the FY20 procedure. This required managers to report each employee’s performance
rating to allow calibration across the business.
During the year we completed the assessment of the job sizes for our roles in Mexico using
the same Hay Evaluation Methodology applied to other roles globally. This allowed us to
more accurately assess employee pay in like-for-like roles, giving us a more accurate
representation of the gender pay ratio.
The gender pay ratio, both in New Zealand and globally, remained
stable this year with no statistical difference in employees’ pay for
like-for-like roles based on gender. This result, as well as the other
initial work from our gender diagnostic, was recognised at the 2019
Diversity Awards hosted by DiversityWorks NZ, where we received
a Highly Commended award. We were also included in the Bloomberg
Gender-Equality Index for 2020. The Bloomberg Gender-Equality Index
(GEI) tracks the financial performance of public companies committed
to supporting gender equality through policy development, representation and transparency.
Bloomberg captures all its data from direct sources and runs quality control systems to ensure
that it conforms to the highest standards.
Board and employees by gender
The table below shows the ratio of women to men among our Board members, senior
executives and all employees. The gender demographics across our workforce are
comparable to those seen in 2019.
20192020
WomenMenWomen %Men %WomenMenWomen %Men %
Board2625%75%2625%75%
Senior executives
1
2820%80%2820%80%
All employees
2
2,0892,21649%51%2,3862,36550%50%
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.
Board and employees by age
The table below shows the age ranges of our people among our Board members, senior
executives and all employees. The age demographics across our workforce are comparable
to those seen in 2019.
20192020
Board
Senior
executives
1
All
employees
2
Board
Senior
executives
1
All
employees
2
Under 30 years old––1,134001,269
30 – 50 years old–82,460082,694
Over 50 years old8271182788
% Under 30 years old––26%––27%
% 30 – 50 years old–80%57%–80%57%
% Over 50 years old100%20%17%100%20%16%
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.
ANNUAL REPORT 2020
73Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
PEOPLE CONTINUED
Creating an inclusive culture
We strive to create an environment in which our people feel a sense of belonging and no
one is excluded in their day-to-day interactions. This year, we reinforced policies that aimed
to allow equal participation and inclusion in the workforce and sought to get a deeper
understanding of the impact of inclusion in dimensions of diversity other than gender.
Flexible working policy and procedure
The perceived lack of workplace flexibility was seen as a barrier to inclusivity by our people
in the 2018 MySay engagement survey. In FY19, we updated our flexible working policy in
New Zealand to allow a wider range of working arrangements to meet the changing needs
of our people. As part of our FY20 diversity and inclusion objectives, we monitored the
impact of the updated policy.
We found that of the New Zealand salaried workforce who formally adopted a flexible
working arrangement:
• Male and female employees were equally likely to work flexibly
• Younger generations – Millennials (24-39 years old) and Gen Z (up to 23 years old) –
were much less likely to work flexibly
• Variations to start and end times were the most common form of flexibility, with some
employees trialling a condensed working week or 9-day fortnight.
Parental leave procedure
When families welcome a new child, the early months are both valuable and vital. We are
committed to supporting our people throughout all phases of this transition, from pregnancy,
to birth or adoption, through to a child’s first moments. We want our people to feel they
can choose to spend time at home if they wish, with less financial pressure. This year in
New Zealand, we introduced our F&P Whānau Care as part of our updated Parental Leave
policy, which offers increased benefits to both primary carers and partners.
Established the IDEA Council
The IDEA Council – Inclusion, Diversity, Equality and Awareness – was established this year,
and was one of our FY20 diversity and inclusion objectives.
Made up of seven members from across the organisation, the purpose of the Council
is to champion the advancement of diversity and inclusion at F&P, ensure sustainable
outcomes for our initiatives and act as spokespeople to the executive management
team and the Board.
Following establishment, the IDEA Council has:
• Organised a pilot unconscious bias workshop.
• Initiated Spectra, an employee-led society whose aim is to enable the rainbow
community to be their full authentic self at F&P. Spectra ran its first bite-sized
learning session to raise awareness on LGBTQIA+ terminology for the workplace.
• Conducted workshops to gain insight into what may contribute to the current state
of gender diversity in our R&D area. We are using the information gathered from
these workshops to determine the next steps toward improving gender representation
among engineers, and this will form one of our FY21 objectives.
The council also initiated the investigation into the ethnicity diagnostic and perceived value
of ideas, as summarised below.
Ethnicity diagnostic
As part of our 2020 diversity and inclusion objectives, we commenced an ethnicity
diagnostic of our operations in New Zealand. The preliminary results suggest that there are
differences in ethnic diversity in different areas of our business, across both functions and
levels. This may indicate biases in our recruitment, development or retention processes. In
the 2021 financial year, we will be verifying demographic data on a large proportion of our
people. We will be using the updated data to complete the ethnicity diagnostic and identify
root causes.
Perceived value of ideas
The perception that ideas are not valued equally was seen as a barrier to inclusivity by our
people in the 2018 MySay engagement survey. This will be investigated further in FY21 using
updated employee engagement information.
ANNUAL REPORT 2020
74Fisher & Paykel Healthcare Corporation Limited
PEOPLE CONTINUED
Attracting great talent
We work closely with universities, schools and community groups to attract the best
graduates for our teams. For roles requiring more experience or specialised skills, we search
across the global employment market through targeted recruitment campaigns. We take a
proactive approach to finding people whose values match ours.
The tables below outline the total number and rate of our new employee hires. Hire rate is
calculated as the number of new hires in each category divided by the total number of
employees in that category as at 31 March.
Hire rate: by region
20192020
RegionNew employeesHire rateNew employeesHire rate
New Zealand25711%40416%
Mexico38234%40131%
Rest of World18619%19219%
Total82519%99721%
Hire rate: by gender
20192020
GenderNew employeesHire rateNew employeesHire rate
Women44321%62526%
Men38217%37216%
Total82519%99721%
Hire rate: by age group
20192020
Age groupNew employeesHire rateNew employeesHire rate
Under 30 years old46140%52141%
30 – 50 years old34814%43016%
Over 50 years old162%466%
Total82519%99721%
Growing our talent
We develop our people through work experience combined with coaching and learning.
Our learning and development function runs development programmes for our people,
supported where necessary by third-party providers. Our programmes are designed for
people at all levels within the organisation, including leadership training for those in
management positions.
Average training hours
The figures below illustrate the average hours of training that employees in New Zealand
have undertaken during the reporting period. There was an overall increase in training for
employees in 2020 compared to previous years.
0
5
10
15
20
25
30
35
MenWomenAll employees
2019
2020
Internal recruitment policy
We strive to provide an environment where our people have the opportunity to reach their
full potential through planned career development and succession conversations. One way
of achieving this is to offer all employees the opportunity to broaden their skills, taking on
new opportunities within the business in accordance with their potential and aspirations.
This is aided by the release of our new Internal Recruitment Policy. The implementation of
this policy also provides a sustainable and highly-skilled pool of talent to enable our growth.
Succession planning
Our succession planning process involves identifying experiences that employees require
to develop the knowledge and skills for progression. This allows us to be deliberate as we
provide opportunities for our people through initiatives such as secondments, project
assignments, job enrichment and enlargement.
ANNUAL REPORT 2020
75Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
PEOPLE CONTINUED
Employee development
In New Zealand, we provide a nine-week programme called “Growing our Business”.
This is facilitated by The Learning Wave for our manufacturing teams in New Zealand.
This programme supports our strategic approach of enabling and developing our people,
giving them the confidence to speak up and improve how they work every day. We have
had 90 employees graduate from the programme since its launch in 2017. In 2019, the
company won the Skills Highway Champion Employer Award for supporting our people
through the programme.
In Mexico, we strive to enable the growth of our employees by supporting employees to
complete their secondary and tertiary education. In FY20, 28 employees graduated from
their educational programmes. This represents a better quality of life and increased
opportunities for them and their families.
Manager development
Managers play a vital role in leading and developing our people. In order to engage and
equip managers for the challenge of leadership and people management, the “Manage,
Engage and Lead” workshop is a manager onboarding programme we successfully piloted
this year. The goal of the programme is to provide a positive and effective onboarding
experience for all newly hired and newly promoted managers. Full implementation is
planned for FY21.
Additionally, we implemented the roll out of our Situational Leadership module to our
global leaders. Since its launch in 2017, we have had 314 managers complete the course
across Europe, United Kingdom, United States, Mexico, Asia, Australia and New Zealand.
Retaining our talent
We believe that maintaining a culture where teamwork, flexibility and diversity are valued
will create an environment that will retain our people. We understand that people’s needs
and goals can be different, and we segment our employees and individualise retention
interventions specific to their needs and in line with our culture.
The tables below outline the total number and rate of our employee turnover. The turnover
rate is calculated as the number of leavers in each category divided by the total number of
employees in that category as at 31 March.
Employee turnover: by region
20192020
RegionNumber of leaversTurnover rate
Number of
leaversTurnover rate
New Zealand1979%1938%
Mexico24322%27321%
Rest of World13915%13814%
Total57913%60413%
Employee turnover: by gender
20192020
GenderNumber of leaversTurnover rate
Number of
leaversTurnover rate
Women27513%33814%
Men30414%26611%
Total57913%60413%
Employee turnover: by age group
20192020
Age groupNumber of leaversTurnover rate
Number of
leaversTurnover rate
Under 30 years old22520%26220%
30 – 50 years old30412%28811%
Over 50 years old507%547%
Total57913%60413%
Collective Bargaining Agreements
Of all permanent employees globally, 19% were covered by collective bargaining agreements
in the 2020 financial year.
ANNUAL REPORT 2020
76Fisher & Paykel Healthcare Corporation Limited
PEOPLE CONTINUED
Diversity and inclusion
objectives for FY21
The People and Remuneration Committee
is responsible for overseeing the company’s
Diversity & Inclusion 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.
The company has appointed the Chief
Executive Officer and Vice President –
Human Resources as the company’s
diversity managers. In order to continue
to advance our progress with improving
diversity and inclusion in the company,
the following objectives are set for the
2021 financial year.
1. Extend gender diagnostic activities
to global offices
2. Pilot unconscious bias workshop
for New Zealand
3. Complete ethnicity diagnostic
for New Zealand
4. Understand and improve female
representation in the R&D function
CaSe StUDY
Golden days for a golden celebration
Fisher & Paykel Healthcare’s golden anniversary in November
2019 was an international celebration of our people and culture.
Teams from Mexico, North America, Australia, Germany, India,
Japan and Russia marked the 50-year anniversary with events
that highlighted our core values of Internationalism, Life,
Relationships, Originality and Commitment.
New Zealand celebrated the milestone with a two-day World
Fair festival for our employees and their families at our
Auckland campus. Attended by more than 4,000 people, the
event featured performances from numerous employee-led
cultural groups, lunch, and award presentations for long service,
sustainability, upholding our corporate values and continuous
improvement.
To further mark the occasion, a sculpture was erected beside the
lake at the heart of our Auckland campus. The artwork, named
Tā Te Manawa, pays tribute to our humidifier prototype – a
copper coil inside an Agee preserving jar – and is surrounded
by a medicinal garden. Smaller sculpture-inspired artworks were
distributed to our offices worldwide in a symbolic gesture of
connectedness.
PEOPLE
ATTENDED
4,000+
ANNUAL REPORT 2020
77Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
CoMMUNItY
COMMUNITY
Building build brighter and healthier communities
through care and collaboration
One of the hallmarks of a successful company is looking after the wider community.
At Fisher & Paykel Healthcare, we seek to build and nurture strong, lasting partnerships
with like-minded organisations. Through a combination of financial and in-kind support,
we have facilitated and sponsored various community development programmes.
Our volunteer-led community relations programme in New Zealand, called F&P in the
Community, focuses on three areas aligned with our business purpose: improving access to
healthcare, STEM (science, technology, engineering and mathematics) education and career
paths, and environmental sustainability. A committee identifies and facilitates opportunities
to create shared value with our community partners. Teams at our global offices also select
and sponsor community initiatives at their discretion.
Improving access to healthcare
Urgent help for our local communities during the COVID-19 pandemic
During the COVID-19 pandemic, we acted quickly to help our local communities. Because
the majority of our employees work at our facilities in Auckland, New Zealand and Tijuana,
Mexico, that is where we have concentrated our COVID-19 community response.
When the COVID-19 virus first rose to crisis level in January 2020, clinicians were worried
there could be a shortage of ventilators in New Zealand. Although Fisher & Paykel
Healthcare does not produce ventilators, our R&D engineers use them to develop and test
our respiratory humidification devices. Our clinical specialists had the foresight to check
our R&D labs to locate any ventilators on site, in case they were needed for patients.
We identified 12 ventilators on site that would be usable for COVID-19 patients and loaned
them to two local hospitals. We also provided $60,000 worth of personal protective
equipment (masks and filters) to Middlemore and Auckland Hospital.
Our thoughts have been with our team in Mexico, which has been more severely impacted
by the coronavirus than New Zealand. As COVID-19 testing has been limited in the public
health system in Mexico, we have provided our Tijuana employees with access to private
healthcare for testing. Some of our people have tested positive for COVID-19 and have
been hospitalised. To meet their needs and support the local healthcare community at
large, we donated 40 F&P Airvo humidifiers, 20 F&P 850s and associated consumables
to hospitals in Tijuana.
Absorbing increased air freight and supply chain costs
Since the outbreak of the pandemic in China, there has been an unprecedented and urgent
demand for our respiratory products. Because of challenges with global supply chains,
we have used air freight to bring in raw materials quickly and deliver product to customers.
The cost of air freight and expediting the supply of raw materials has been significant;
however, we have opted to absorb these cost increases instead of passing them on to
our customers in the form of increased pricing.
Clinical research for Counties Manukau Health and Middlemore Hospital
In December 2019, we signed a ten-year, $1.5 million partnership agreement with Counties
Manukau Health to provide funding for clinical research that will be allocated by Middlemore
Hospital. The hospital will use the funds for research projects that benefit local communities
in South Auckland. The partnership also helps Counties Manukau Health recruit and retain
their top clinicians, who are drawn to research opportunities, and enables Middlemore
Hospital to extend its research agenda.
Auckland Health Foundation Sponsorship
This year the company provided $250,000 to the Auckland Health Foundation at Auckland
City Hospital. The funds will be used to refurbish the Fisher & Paykel Healthcare Clinical
Education Centre, which opened in 2004. The Centre will benefit from upgrades to lighting,
technology and furnishings, and clinicians will benefit from the enhanced meeting and
lecture spaces.
Biomedical engineering internships in Tonga
As another one of our improving access to healthcare initiatives, we partnered with the
University of Canterbury (UC), Callaghan Innovation, and charity Take My Hands on a
summer internship programme in Tonga. Seven UC biomedical engineering students served
for 10 weeks as Fisher & Paykel Healthcare interns working with the Tongan Ministry of
Health to upskill local biomedical technicians, improve processes, and take an inventory of
existing medical devices. The interns gained valuable real-world experience in biomedical
projects and insight into the challenges and opportunities for the use of medical products
in the developing world.
ANNUAL REPORT 2020
78fisher & Paykel healthcare Corporation Limited
COMMUNITY CONTINUED
STEM education and career paths
We run a comprehensive programme of educational events in which our employees
visit schools and universities to discuss career pathways in science, technology,
engineering and mathematics (STEM). This year we once again partnered with the
Faculty of Engineering at the University of Auckland to help achieve their goal of 33%
women in their first-year student cohort. We also sponsored a number of events, such
as the NZ Robotics Charitable Trust Kiwibots programme, that encourage local youth
to engage with science and consider careers in STEM-related fields.
SouthSci
This year our New Zealand team continued their partnership with SouthSci, an organisation
that helps enable education opportunities for kids in science, technology, engineering and
maths. An initiative of COMET Auckland, SouthSci aims to spark students’ interest in
science-related fields and to build relationships between local businesses, researchers,
schools and youth. Our people have been involved in SouthSci for the past five years,
volunteering their time to mentor project groups, assess community applications, and
advise students on their project plans.
One of our most successful SouthSci projects was the Beachlands School Sleep Project,
which focussed on teaching young people the importance of sleep. Through this initiative,
100 students aged 10 and 11 years used the scientific method to answer self-developed
research questions about their sleep habits by tracking and analysing their own sleep.
The students also toured our New Zealand campus, where engineers set up models and
working machinery for the students to experience.
Wonder Project
The company also supported the Wonder Project Rocket Challenge, a science initiative led
by Engineering New Zealand and funded by the New Zealand government. Dozens of our
employees served as mentors, donating their time to work with kids and impart their
wisdom, passion and excitement – inspiring students to pursue a career in STEM.
Environmental sustainability
Please refer to the section “Environment” of this report for information on our volunteer-led
environmental initiatives.
Sustainable Tax Strategy
Collecting and paying tax is an important contribution to the communities in which we
operate. In support of our overall business strategy and objectives, we pursue a tax strategy
that is principled, transparent and sustainable in the long term.
Our Group’s tax contribution includes paying corporate income taxes, employment-related
taxes and other taxes that we pay or collect on behalf of governments. We support the
OECD Business and Industry Advisory Committee (BIAC) Statement of Tax Principles
for International Business and have endorsed these principles in our published Group Tax
Strategy, which was reviewed and approved by our Board in November 2019.
Our tax strategy sets out our approach to tax governance and tax management and is
aligned to our conservative appetite for tax risk. Its primary purpose is to ensure that we
comply with all of our tax obligations, undertake all transactions with a business purpose
considering all of our stakeholders, and have an open and transparent relationship with
tax authorities.
Our business model is centred in New Zealand, and the majority of our taxes are paid
in New Zealand. Most of our manufacturing activities and tangible assets are located in
Auckland. All of our R&D is performed in New Zealand, and the associated intellectual
property is owned in New Zealand as well.
ANNUAL REPORT 2020
79Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
eNVIroNMeNt
ENVIRONMENT
Protecting our environment by minimising our carbon footprint, using resources efficiently and reducing waste
At Fisher & Paykel Healthcare, we are committed to measuring and managing our impact on the natural environment. We have a team of passionate people providing guidance on how to
reduce our environmental impact while supporting our work to improve patient outcomes. Although our climate change and environmental commitments continue to evolve, our current
focus is on minimising our carbon footprint, using resources efficiently and reducing waste.
Summary of key environmental metrics
TopicDescription of measureTarget201820192020
Scope 1 & 2 carbon emissionsTonnes CO
2
e4.2% annual reduction from 2019 base year10,79811,19810,881
Scope 3 carbon emissionsTonnes CO
2
eSBTi supplier engagement25,72121,93148,728
Recycling efficiency% waste recycled at our NZ campus75%74%69%66%
Recycling trialsProduct in market recycling trials underway3113
Water useCubic metres of water used2% annual reduction from 2019 base year88,461106,37398,772
Carbon and energy
We remain committed to reducing our long term carbon footprint. We have engaged Toitū
Envirocare (formerly Enviro-Mark Solutions) to conduct third-party carbon footprint audits
since 2013, including additional sites in our audit scope as the company has grown.
Scope 1 & 2 carbon emissions are within our operational control, while Scope 3 emissions
largely rely on the carbon performance of our suppliers – such as freight carbon intensity,
raw material carbon intensity or even the carbon intensity of hospitals where our products
are used.
Scope 1 and 2 emissions
For the first time, we are reporting a 3% reduction in overall Scope 1 & 2 carbon emissions.
Scope 1 emissions were 2,067 tonnes CO₂e for FY20, compared to 2,104 tonnes CO₂e for
the previous year (attributable to seasonal fuel use). Scope 2 emissions were 8,814 tonnes
CO₂e, compared to 9,094 tonnes CO₂e for FY19.
This success was largely due to our ability to procure Renewable Energy Certificates from
Meridian Energy. These certificates verify that the electricity used at our New Zealand
campus is apportioned to low-carbon renewable energy sourced from Meridian’s
Benmore hydro station in the Waitaki Valley.
During FY20 our new manufacturing facility began operating in Mexico, resulting in
a 44% increase in electricity use across our Mexico operations. Mexico electricity now
makes up 70% of our global Scope 2 emissions. We have noted the higher carbon
intensity of electricity generated in Mexico when compared to New Zealand and are
developing solar array capabilities for the Mexico facilities.
Scope 3 emissions
This year, we sought to achieve greater transparency by including data on inbound freight
in our audit of Scope 3 emissions. This impacted our overall carbon footprint, particularly in
the fourth quarter of the year. Due to COVID-19 and increased global demand for respiratory
products, we relied heavily on air freight.
As a result, our overall carbon footprint increased by 26,482 tonnes to 59,609 tonnes of
CO₂e for FY20. Our increased reliance on air freight will likely impact FY21 carbon reporting
as well, until product demand stabilises.
FY19 Audited Carbon Footprint Disclosure FY20 Audited Carbon Footprint Disclosure
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
TotalScope 3
(Non-
mandatory)
Scope 3
(Mandatory)
Scope 2Scope 1
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
TotalScope 3
(Non-
mandatory)
Scope 3
(Mandatory)
Scope 2Scope 1
Tonnes CO
2
eTonnes CO
2
e
2,104
9,094
19,862
2,067
33,127
2,067
8,814
47,152
1,576
59,609
ANNUAL REPORT 2020
80fisher & Paykel healthcare Corporation Limited
ENVIRONMENT CONTINUED
Science-based targets
The Science Based Targets initiative (SBTi) is a collaboration between CDP, the United
Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund
for Nature (WWF). The SBTi defines and promotes best practice in science-based target
setting and independently assesses companies’ targets.
Science-based targets are emissions reduction targets in line with what the latest climate
science says is needed to meet the goals of the Paris Agreement – to limit global warming
to well-below 2°C above preindustrial levels and pursue efforts to limit warming to 1.5°C.
Fisher & Paykel Healthcare has set science-based targets for emissions, and those targets
have been approved by SBTi as consistent with levels required to meet the goals of the
Paris Agreement. Carbon reduction targets support future carbon cost risk mitigation by
providing incentives for the reduction of carbon emissions.
Since 2013, Fisher & Paykel Healthcare has used a 5% annual carbon intensity reduction
target. In FY20 we updated this to be a 4.2% absolute reduction in Scope 1 and 2 carbon
emissions annually from a 2019 baseline.
This updated business target aligns with our approved Science Based Targets. In FY20,
actual carbon reduction for Scope 1 & 2 was 3%. Mexico electricity growth of 44% offset
what otherwise would have been a 26% reduction in carbon.
Short, medium and long-term carbon reduction targets have been set for Scope 1 and 2
emissions as follows (in tonnes of CO₂).
ScopeDescription202420292034
1 & 2Fuels and refrigerants used
directly; electricity and heat
purchase directly
8,8466,4944,143
As described previously, Scope 3 emissions largely rely on the carbon performance
of our suppliers. We will continue to educate and engage with our suppliers to help
manage Scope 3 emissions and will continue to collaborate with suppliers through
our ecodesign programme.
As part of our TCFD due diligence, we have proactively forecast our Scope 3 carbon
footprint using the Science Based Targets Initiative Screening Tool. This assessment gives
us better visibility of the carbon impacts across our full supply chain – all the way through
to customer product use. Applying this tool has resulted in a forecast that our total carbon
footprint may be ~500,000 to 650,000 tonnes CO₂e higher when supply chain impacts
and customer product use is considered.
Using the SBTi screening tool, we have estimated the proportion of our FY19 emissions
in each scope category to be as follows:
ScopeDescription%
1Fuels and refrigerants used directly0.4%
2Electricity and heat purchased directly1.6%
3Carbon used upstream and downstream
(indirectly, wider supply chain)
98.0%
CASE STUDY
Renewable energy certificates
In FY20 we set out to reduce
Scope 2 carbon emissions at the
New Zealand campus by participating
in a programme from Meridian Energy.
The third-party renewable energy
verifier, NZ Energy Certificate System
(NZECS) audits Meridian’s energy-
generating facilities at Benmore Hydro
station and then issues renewable
energy certificates for each MWh of
energy generated. Customers then
purchase renewable energy certificates
to cover the amount of MWh of
electricity they have used.
Fisher & Paykel Healthcare is one of
the first companies in New Zealand to
purchase renewable energy certificates
to verify that the electricity we use
has a carbon intensity factor of zero.
It is the first initiative of scale we have
implemented to assist in reducing our
carbon emissions.
During FY20 we purchased 24,283
renewable energy certificates,
which is equal to our documented
electricity consumption of 24,283
MWh. By sourcing renewable energy
in this way, we have been able to
reduce Scope 2 carbon emissions
by 2,373 tonnes of CO₂e.
REDUCING SCOPE 2
CARBON EMISSIONS BY
2,373T
CO₂E
ANNUAL REPORT 2020
81Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
ENVIRONMENT CONTINUED
We are currently modelling the impact of our operations in the context of the wider
healthcare system, because overall carbon emissions can be reduced when patients
are able to receive treatment in their homes instead of in hospitals. Many of our products
make this possible.
Carbon commitments
Below are our carbon commitments:
• We have committed to reducing absolute Scope 1 & 2 GHG emissions by 67.2% by
FY2034 from a 2019 baseline.
• We have committed that 87% of our suppliers (by spend) covering purchased goods
and services and the use of sold products will have science-based emission reduction
targets by FY2024.
In summary, we have set carbon-reduction targets out to the end of 2034, and we continue
to focus on reducing carbon emissions over the long term. Our goal is to continue our
initiatives to reduce Scope 1 and 2 emissions, while engaging and educating our suppliers
to manage Scope 3 emissions. Across the broader healthcare system we will continue to
collaborate and find innovative ways to achieve these shared goals.
Environmental management
ISO14001 audits
Our global teams continue to perform well in external ISO14001 Environmental Management
System audits. These evaluate the day-to-day management of environmental risks and
opportunities across our manufacturing sites in New Zealand and Mexico. We are audited
annually against the standard and are certified tri-annually by the Swiss-based European
notified body, Société Générale de Surveillance.
CaSe StUDY
Eco-efficiency programme and
life cycle assessment
Fisher & Paykel Healthcare has
cross-company teams working on
a range of eco-efficiency topics,
including sustainable packaging,
bioplastics and 3D printing recycling.
One of the key tools we use is
environmental lifecycle assessment
software, which helps our engineers
assess the environmental impact of
a product across its full lifecycle.
Last year, we conducted an
environmental life cycle assessment
of the F&P 950 humidification system
used in hospitals. We found that 81%
of the system's carbon footprint comes
from the energy required to operate it.
The carbon footprint varies, therefore,
depending on where it is used and the
energy sources in that region. The chart
below shows the life cycle assessment
of the F&P 950 system, including all
parts and consumables required over
the life of the product.
Production 17%
Distribution 2%
Use 81%
End-of-life 0%
Production 43%
Distribution <1%
Use 56%
End-of-life 1%
US customer total usage –
2,660 kg C0₂e
NZ customer total usage –
1,030 kg C0₂e
2,660
kg C0₂e
1,030
kg C0₂e
ANNUAL REPORT 2020
82Fisher & Paykel Healthcare Corporation Limited
ENVIRONMENT CONTINUED
Recycling and reducing waste
Global recycling capacity constraints, including the Chinese National Sword policy, continue
to impact our recycling performance. In FY20, 66% of our New Zealand waste stream was
recycled. This was a slight reduction from 69% during the prior year.
During FY20 we piloted two recycling trials for some of our products used by customers
in New Zealand. Furthermore, we developed onsite recycling machinery in FY20 which
will become operational in FY21 for some recycling streams.
Water usage
During FY20, we established an absolute water reduction target of 2% per year. Actual
water use reduced by 7% during the year.
Eco-efficiency programme
As part of our eco-efficiency strategy, we have established collaborative teams to work on
a range of topics which include sustainable packaging, bioplastics and 3D printing recycling.
Disclosures, awards and community initiatives
Carbon Disclosure Project (CDP) scores
Fisher & Paykel Healthcare participates in CDP (formerly known as the Carbon Disclosure
Project) and has received scores for climate change for the past nine years. In 2019 we
disclosed our water usage for the first time and received a score of “C”. CDP also assessed
our Supply Chain Climate Change engagement for the first time, providing a score of “B-”.
Below is a summary of our CDP scores for the past two years. 2020 scores will be
announced later this year.
201820192020
Climate Change BBTBC
Water–C TBC
Supply Chain –B-TBC
Climate Leaders Coalition
Fisher & Paykel Healthcare is a member of the Climate Leaders Coalition, a group of leading
New Zealand companies who are committed to taking voluntary action on climate change.
This includes measuring and publicly reporting emissions, setting a public emissions
reduction target, and working with suppliers to reduce their emissions.
Sustainable Business Council
Fisher & Paykel Healthcare is a voluntary member of the Sustainable Business Council,
which aims to mainstream sustainability within the New Zealand business community.
SBC members make a commitment to address greenhouse gas emissions, build
sustainability into their purchasing decisions, and introduce annual reporting practices.
Sustainable Business Network Smarter Transport Award
The Fisher & Paykel Healthcare Sustainable Commuting team won a Smarter Transport
award at the Sustainable Business Network awards in November 2019. The award recognised
our commitment to promoting more sustainable modes of transport. We currently have 56
electric vehicle (EV) chargers installed at our New Zealand campus, and this year we funded
the installation of EV chargers at Auckland Hospital and at Middlemore.
ANNUAL REPORT 2020
83Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
ENVIRONMENT CONTINUED
Green Team
In addition to the environmental initiatives led by our Sustainability team, interest in
our volunteer-led Green Team has grown exponentially and now includes more than
300 people promoting environmental sustainability on our Auckland campus and in
the wider community.
This year our Green Team led a number of initiatives to encourage employees to move to
alternative forms of commuting as a way of reducing greenhouse gas emissions and local
air pollution. The group sponsored a number of events to drive employee awareness of
alternative ways to commute – such as to drive electric vehicles, ride bikes, e-bikes or
e-scooters, take public transport and carpool. They also created an online carpooling tool
to connect employees who live near each other and allow easy creation of carpool groups.
Community environmental initiatives
In FY20 we hosted several tree planting events on our New Zealand campus, and more than
50 employees pitched in to clean up an estuary during Keep New Zealand Beautiful Week.
Our team in Tijuana, Mexico, planted trees at a local school, volunteered their time to clean
up a beach, and led a bottled water elimination initiative.
PROMOTING ENVIRONMENTAL SUSTAINABILITY ON OUR
AUCKLAND CAMPUS AND IN THE WIDER COMMUNITY
300+ people
ANNUAL REPORT 2020
84Fisher & Paykel Healthcare Corporation Limited
reMUNeratIoN
REMUNERATION
We focus on attracting, motivating and retaining high-quality employees who will help us to
achieve our short and long-term strategic objectives. We operate in international markets
where substantial competition exists for skilled employees. Our ability to attract, motivate
and retain capable people depends in large part upon the remuneration packages we offer.
This section describes how we remunerate our employees, Executive Management and
non-executive directors.
Employee remuneration
Our employee remuneration programme consists of a base wage or salary, a discretionary
component providing the potential for an annual bonus based on relevant company
performance and, in certain countries, superannuation, life insurance and the opportunity to
purchase shares and/or receive share options.
Employees receive base remuneration packages that are generally benchmarked against
similar positions in companies of comparable size and complexity. The People and
Remuneration Committee uses industry remuneration surveys, conducted by outside
consultants in determining remuneration levels. Remuneration is generally reviewed
annually with the amount of any increases determined by factors such as company
performance, general economic conditions, marketplace remuneration trends and
individual performance.
The tables below show the remuneration (inclusive of the value of other benefits)
1
totalling
NZ$100,000 or more received by employees or former employees in 2020, not including
the CEO who is a director of the company. We operate in a number of countries where
remuneration market levels differ widely. The offshore remuneration amounts are converted
into New Zealand dollars.
1
The table includes salary and wages, profit-sharing bonus and annual variable remuneration (AVR) paid during the
2020 financial year. It also includes the fair value of long term variable remuneration (LTVR) as expensed in the period.
Remuneration
$
Number of
employees
340,001 - 350,0001
350,001 - 360,0004
370,001 - 380,0006
380,001 - 390,0004
390,001 - 400,0004
400,001 - 410,0001
410,001 - 420,0002
430,001 - 440,0001
440,001 - 450,0001
470,001 - 480,0001
480,001 - 490,0002
Remuneration
$
Number of
employees
510,001 - 520,0001
530,001 - 540,0002
540,001 - 550,0001
560,001 - 570,0001
570,001 - 580,0001
580,001 - 590,0001
640,001 - 650,0002
770,001 - 780,0001
950,001 - 960,0001
980,001 - 990,0001
1,500,001 - 1,510,0001
Remuneration
$
Number of
employees
100,000 – 110,000180
110,001 – 120,000172
120,001 – 130,000133
130,001 – 140,000107
140,001 – 150,00088
150,001 – 160,00075
160,001 – 170,00056
170,001 – 180,00041
180,001 – 190,00036
190,001 – 200,00032
200,001 – 210,00033
210,001 – 220,00029
Remuneration
$
Number of
employees
220,001 – 230,00021
230,001 – 240,00026
240,001 – 250,00015
250,001 – 260,00018
260,001 – 270,00021
270,001 – 280,00013
280,001 – 290,00022
290,001 – 300,00012
300,001 – 310,0005
310,001 – 320,0008
320,001 – 330,0004
330,001 – 340,0005
Executive management remuneration
The People and Remuneration Committee is responsible for reviewing the remuneration
of Executive Management in consultation with the CEO. The remuneration packages of
the Executive Management consist of a combination of a fixed remuneration package, an
annual variable remuneration (AVR) component, a long term variable remuneration (LTVR)
component, and the company-wide profit sharing bonus, as described further below.
The total remuneration earned by Executive Management is set out in Note 18 of the
financial statements.
Fixed remuneration
All members of Executive Management receive a fixed remuneration component that
is based on the scale and complexity of the role, market relativities, qualifications and
experience, and performance. This also includes any KiwiSaver or other superannuation
contribution. Other benefits, including life insurance, are also available to Executive
Management and are included in fixed remuneration.
ANNUAL REPORT 2020
85Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
REMUNERATION CONTINUED
Variable remuneration
Executive management receive variable remuneration linked to performance each financial
year. The table below shows how variable remuneration is calculated.
PlanMeasures
Annual Variable
Remuneration
(AVR)
The AVR component is designed to remunerate executive management relative
to the company’s annual financial performance and non-financial objectives.
Meeting both the financial and non-financial 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 financial targets resulting in a 2% increase or decrease
in payment. The maximum payment is 132% of the AVR amount at 20% over
achievement. Should the financial measures in aggregate be underachieved
by more than 10%, no AVR is payable.
The relative weighting of AVR measures and the target achieved in 2020 is
set out below.
MeasuresWeighting
% of Target
Achieved
Constant currency operating profit45%106.7%
Constant currency revenue25%106.1%
Constant currency pre-tax operating cash flow10%104.6%
Non-financial measures20%Variable
Long Term
Variable
Remuneration
(LTVR)
LTVR components are designed to align executive management with
shareholder interests over the longer term, and provide a longer term
employee retention benefit.
The LTVR plans available to executive management are described below.
Further information on these and other LTVR plans can be found in the
“Long Term Variable Remuneration” section of our website.
Share Option Plan – Options vest if during the period from the date of
grant of an option to the third, fourth, or fifth anniversary of the grant date
the Company’s 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 partially or fully vested if the
company’s gross total shareholder return (TSR) exceeds the performance of
the Dow Jones US Select Medical Equipment Total Return Index (DJSMDQT)
at the fifth anniversary of the grant date of the PSRs. PSRs fully vest if the
company's TSR exceeds the performance of the DJSMQT by 10 percentage
points or more on either the third or the fourth anniversary.
Employee Share Purchase Plan – Executive management can choose to
participate in this Plan up to the value of $2,000 with a discount of up to $500,
with no interest charged on the loans. The qualifying period between grant and
vesting date is 3 years.
During 2019, the Board conducted a review of the LTVR Instruments provided to selected
executives, managers and employees of the company. The Board instructed an independent
advisor, PwC, to conduct a review of the LTVR Instruments. PwC was of the view that the
LTVR Instruments have provided strong alignment of the interests of employees and
shareholders and recommended amendments to the company’s performance share
rights and option plans to provide even stronger alignment. The Board agreed with the
recommendations and during 2019, two new Long Term Variable Remuneration (“LTVR”)
equity settled schemes were introduced as a replacement for the previous Employee Share
Option Plan and the Performance Share Rights Plan. Further details of the schemes are
included in Note 18 of the financial statements and on the company’s website.
Participants in the company’s equity-based remuneration schemes are not permitted to
enter into transactions (whether through the use of derivatives or otherwise) which limit
the economic risk of their unvested entitlements. For the avoidance of doubt, this does not
prevent participants entering into financial arrangements for them to be able to exercise
vested entitlements under any company equity-based remuneration scheme.
Profit sharing bonus
As outlined in the ‘People’ section all our employees, including executive management,
who have worked with us for a qualifying period are eligible to receive a profit-sharing
bonus at the discretion of the Board.
5-year summary of TSR performance
The chart below shows our total shareholder return (TSR) compared with the performance
of DJSMDQT and the S&P NZX50 index over the previous five years . From 2015 to 2018,
our TSR performance exceeded that of the DJSMDQT, and PSRs on issue 100% vested.
When the PSRs were last tested, in September 2019, the TSR performance was below the
DJSMDQT, and PSRs on issue did not meet the performance hurdle at that point in time.
50
100
150
200
250
300
350
Fisher & Paykel Healthcare
S&P/NZX 50 Index
Dow Jones U.S. Select
Medical Equipment Index
Mar 16Mar 17Mar 18Mar 19Mar 20
1
To enable better comparability of the relative shareholder return performance, the Dow Jones U.S. Select Medical
Equipment Index closing prices have been converted to NZD at the daily closing rate quoted by the Reserve Bank of
New Zealand.
ANNUAL REPORT 2020
86Fisher & Paykel Healthcare Corporation Limited
REMUNERATION CONTINUED
CEO remuneration
The CEO remuneration structure is consistent with the executive management remuneration
structure described previously.
CEO target remuneration summary
The CEO remuneration target and maximum total remuneration mix for the 2020 financial
year is set out below.
CEO remuneration summary
Salary
$
Other
1
$
Fixed
remuneration
subtotal
$
AVR
2
$
LTVR
awarded
3
$
Total
remuneration
$
% AVR
against
maximum
$
20201,340,971 109,327 1,450,298865,581885,723 3,201,60283%
20191,231,953 85,867 1,317,820 690,356 669,916 2,678,091 78%
1
Other includes employee superannuation contribution and life insurance
2
The 2020 AVR above was earned in the 31 March 2020 financial year, but will be paid in the 2021 financial year.
The 2019 AVR was earned in the 31 March 2019 financial year but was paid in the 2020 financial year. AVR value
includes the company-wide profit sharing bonus.
3
LTVR includes Options and PSRs awarded during the financial year. In the 2020 financial year, Lewis Gradon
was granted 43,848 PSRs and 138,827 share options (2019: 32,466 PSRs and 100,313 share options). Options
and PSRs granted in the 2019 and 2020 financial years will vest, if the performance criteria are met in the 2022
to 2024 financial years respectively. Details of the plans and valuation methodology are set out in Note 18 to the
financial statements.
AVR achieved in 2020
The AVR financial targets achieved are set out in the Executive Management section on the
previous page. During 2020 the CEO achieved 100% of his non-financial measures. The AVR
earned in the 2020 financial year is 60% of the fixed remuneration.
LTVR vested in 2020
The following long term Share Option incentives vested in the 2020 financial year. PSRs
issued in September 2016 were first tested on 6 September 2019 and did not meet the
performance hurdle at that point in time.
Grant yearSecurities
Performance
period
Performance
measure
Vesting
outcome
Shares
vested
Value on
vesting
Financial
year 2017
Share
Options
September
2016 to
September 2019
Cost of capital
escalated
share price
100%
vested
72,000 563,040
1
PSRs September
2016 to
September 2019
Absolute
TSR against
DJSMDQT
0%
vested
––
1
Represents the difference between the exercise price and the NZX closing price of FPH ordinary shares on the vesting
date, multiplied by the number of Share Options vested.
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
Millions
Fixed
Remuneration
Target Total
Remuneration
Maximum Total
Remuneration
LTVR
AVR
FIXED REMUNERATION
100%47%
24%
29%
44%
29%
27%
ANNUAL REPORT 2020
87Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
REMUNERATION CONTINUED
Non-executive directors' remuneration
Remuneration strategy
The People and Remuneration Committee is responsible for establishing and monitoring
remuneration policies and guidelines for directors. This enables us to attract and retain
directors who contribute to the successful governing of the business and create value
for shareholders.
We also take advice from independent consultants and take into account fees paid to
directors of comparable companies in New Zealand and Australia as part of our assessment
of the appropriate level of remuneration of directors. A summary of our independent
consultants’ remuneration report is available on our website.
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. 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; however, directors may hold shares in the company. Details are set out on
page 94 of this report. It is our policy to encourage directors to acquire shares on-market.
No non-executive director is entitled to receive a retirement payment.
Approved director remuneration for the 2020 financial year
The total directors’ fees received by non-executive directors in 2020, including a breakdown
of Board fees and Committee fees, is set out below. The fees payable are determined based
on the time commitment and responsibilities of each role.
Fees per annum
Chair
$
Member
$
Board of Directors 234,812103,298
People and Remuneration Committee23,46017,608
Quality, Safety and Regulatory Committee23,46017,608
Audit and Risk Committee29,36517,608
Director remuneration received in the 2020 financial year
Director
Board
Fees
$
People and
Remuneration
Committee
$
Quality,
Safety and
Regulatory
Committee
$
Audit
and Risk
Committee
$
Travel
Allowance
1
$
Total
$
Tony Carter
2
234,812––––234,812
Michael Daniell103,298––17,608–120,907
Pip Greenwood103,29823,460^–––126,759
Geraldine
McBride103,298––––103,298
Neville Mitchell
3
103,298–17,608–22,154143,061
Donal O'Dwyer
3
103,29817,60823,460^–22,154166,521
Scott St John103,29817,608–29,365^–150,271
Total854,60158,67741,06946,97344,3081,045,627
^ Designates Chair of Committee
1
Directors based in Australia are paid a travel allowance to attend Board meetings in New Zealand.
2
Tony Carter is the Board Chair. No additional fees are paid to the Board Chair for Committee roles.
3
Neville Mitchell’s and Donal O’Dwyer’s remuneration is set in NZD but paid in AUD at the prevailing exchange rate
at the date of payment.
ANNUAL REPORT 2020
88Fisher & Paykel Healthcare Corporation Limited
goVerNaNCe
GOVERNANCE
Corporate Governance Statement
The Board and management of the company 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 NZX and the ASX (Foreign Exempt Listing category).
Corporate governance principles and guidelines apply in both countries. As at the date of
this report, the company complies with all of the recommendations of the NZX Corporate
Governance Code. In addition, although the company is not required to comply with the ASX
Corporate Governance Council’s Corporate Governance Principles and Recommendations
(ASX Principles) given its Foreign Exempt Listing on the ASX, the company considers its
corporate governance practices and procedures substantially reflect the ASX Principles.
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.
Ethical behaviour
As a business we are committed to doing the right thing. It is important to us and is what
our customers, employees, and shareholders find compelling. We ensure we comply with
our legal and ethical obligations throughout our business operations, from the way we
source materials, design and manufacture our products, through to selling our products
across the world.
We have policies and procedures in place to ensure we conduct our business in a legally,
ethically, and socially responsible manner. These policies are available on our website,
and summary information with respect to a number of our policies can also be found
throughout this section.
Securities Trading Policy and Guidelines
We are committed to ensuring our people are aware of their obligations when trading
in or intending to trade in company financial products. Our Securities Trading Policy and
Guidelines detail our policy on, and rules for, all directors, officers, contractors or employees
who intend to trade in company financial products. The policy explains insider trading laws
and the legal and reputational risks of failing to comply with such laws. A copy of the policy
is available on our website.
Codes of Conduct
We expect our 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.
The Codes cover a range of areas relevant to legal and ethical behaviour, including
competing fairly, health and safety, data protection and privacy, working with customers
and suppliers, sanctions compliance, responsible marketing, financial records and
reporting, continuous disclosure and insider trading, combating bribery and corruption
and interactions with healthcare professionals. It also covers matters such as confidentiality,
conflicts of interest, receipt of gifts, and corporate opportunities.
The Codes explain how an employee or director can report an actual or suspected breach
of the Code. This is also detailed in our Speak Up (or whistle-blowing/protected disclosures)
policy, which ensures employees know how to report potentially unethical or illegal
behaviour or breaches of our Code of Conduct, without fear of retaliation or harassment.
We have developed training on the Code of Conduct, and since 2017 this training has been
undertaken by employees globally, and it is now part of induction for new employees. The
Code of Conduct is available on our internal intranet and our external website. New directors
are provided a copy of the Director’s Code of Conduct during their induction training.
We have an in-house legal team that provides advice and assistance to the business globally
on how to comply with our various legal obligations and engage external legal counsel to
assist us as and when required.
We maintain a schedule for regularly reviewing and updating corporate governance policies
and charters. The Code of Conduct was last reviewed in March 2020.
Supplier Code of Conduct
We are committed to building a supply chain structure that supports our approach to
corporate social responsibility and sustainability. To ensure that our supply chain is
transparent and coordinated across our wider supply chain network, an integrated ERP
system in conjunction with our strong quality management system is utilised.
Our Supplier Code of Conduct reflects our values and our expectations for the conduct of all
suppliers, contractors and consultants, and their affiliates, who provide goods or services to
our group of companies. We find business relationships are more productive and effective
when they are built on trust, mutual respect and common values. As such, we seek
relationships with suppliers who share a common commitment to:
1. Incorporate quality business processes within their day to day operation;
2. Conduct their business ethically and with integrity;
3. Comply with all laws and regulations;
4. Respect human and employee rights;
5. Promote and maintain a health and safety culture within their organisation;
6. Design for sustainability;
7. Monitor and minimise any negative impacts on the environment; and
8. Have systems in place to ensure business continuity, continuous improvement and
protection of intellectual property.
Within our upstream supply chain, our active risk mitigation means we continuously
monitor and partner with socially responsible organisations that believe in doing the right
thing. We aim to dual source directly from manufacturers, service providers and third parties
all over the world within our key risk areas.
While materials are procured from all over the globe, a large portion of the externally
procured materials originate from suppliers in Asia and North America. To support our
suppliers and ensure transparency, we have local teams that enable us to personally
interact and be present within our suppliers’ operations on a regular basis. The local teams
also organise visits from the New Zealand-based global procurement teams to enable
mutual collaboration.
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Sustainable procurement
We aspire to impact society in a positive way and to develop, manufacture and distribute
our products in accordance with principles of sustainable development. The raw materials
and components we use to manufacture our products come from a network of suppliers
around the globe. Achieving our vision depends not only on what we do, but on the
activities of our supply chain. For that reason, we seek to purchase goods and services
from suppliers that minimise negative impacts and increase positive outcomes through
sustainable and ethical business practices.
As mentioned on the previous page, our Supplier Code of Conduct outlines our minimum
expectations in the principal areas of human rights, labour practices, the environment and
anti-corruption. We seek to engage suppliers that share our vision and continually strive
to develop in these areas to deliver more environmental, social, and economic benefits.
We are committed to working with our suppliers to increase transparency and promote
responsible business practices, often beyond simple compliance. We collaborate with them
to implement frameworks to identify and mitigate risks and create stronger, sustainable
supply chains. Where these principles or remediation plans cannot be agreed, Fisher &
Paykel Healthcare may decline to enter or may conclude business relationships with those
parties.
Anti-bribery and corruption
In the course of our business we interact with a wide range of government officials and
private sector individuals or businesses, including government regulators, inspection
authorities and healthcare professionals.
We do not tolerate bribery, corruption, kickbacks or other types of improper benefits,
whether committed by our own people or by anyone we deal with.
Most of the countries in which we operate have strict anti-bribery and corruption laws
that apply to our interactions with public officials. Failing to comply with these laws could
have serious consequences for us, both as individuals and as an organisation. In some
cases, these consequences could include criminal charges. We have processes in place for
assessing anti-bribery and corruption risk and implement measures to mitigate these risks.
Our Code of Conduct sets out our expectations for all employees in combatting bribery and
corruption. We never offer or accept (or ask a third party to offer or accept) bribes, illegal
facilitation payments, secret commissions or kickbacks to or from any person. These rules
apply to all our business activities, including any interactions we may have with government
officials or with any private person or business, either locally or overseas.
The Code requires that where we suspect bribery or corruption, either by our own people
or by any of our suppliers, customers or other business partners, we report it immediately.
The Speak Up policy ensures that all employees know how to make such a report and can
be confident that concerns will be taken seriously and investigated and will not result in
retaliation or other harassment.
During the year ended 31 March 2020 the company is not aware of any instances of
corruption or of incidents in which employees were dismissed or disciplined for corruption.
Interactions with healthcare professionals
As we are a medical device business, we must comply with laws and regulations on
interacting with healthcare professionals in various countries around the world. It is
critical that our activities do not improperly influence the medical decisions of healthcare
professionals or the purchasing decisions of entities that buy our products.
Our Policy on Interactions with Healthcare Professionals ensures that we act ethically and
legally in our interactions with healthcare professionals, comply with all applicable laws, and
do not provide improper benefits or inducements to healthcare professionals. We provide
training to employees on this policy.
Ethical research
We have formal procedures in place to ensure that we adhere to the International
Conference on Harmonisation Good Clinical Practice (GCP) standards during all clinical
investigations we carry out. GCP standards cover the design, conduct, recruitment,
recording and reporting of clinical investigations that involve the participation of
human subjects.
Our procedures have also been compiled based on the ISO 14155:2011 standard for:
Clinical investigation of medical devices for human subjects – Good clinical practice
and the EU Medical Devices Directive.
These procedures are designed to ensure that the data and reported results of all clinical
trials are credible and accurate and that the rights, integrity and confidentiality of trial
participants are protected.
Animal ethics
We sometimes participate in or observe testing to assess biocompatibility and obtain
worldwide regulatory clearances. This includes animal testing on rabbits, guinea pigs
and mice. We conduct this testing according to International Standards 10993 and 18562.
Our external test labs maintain accreditation with the Association for Assessment
and Accreditation of Laboratory Animal Care (AAALAC), and all applicable portions of
study protocols are conducted as per regulations and guidelines regarding animal care
and welfare.
Wherever possible, we look for alternatives, such as in vitro or analytical chemistry testing,
which do not require the use of laboratory animals. We take great care to ensure there is
no duplicate testing of our products.
The Board
The Board plays a vital role in setting and overseeing our strategic direction and driving
the business forward. Strong governance from a diverse and experienced Board ensures
we can achieve our aims of improving patient care and outcomes through inspired and
world leading healthcare solutions, thereby sustainably increasing shareholder value.
The biography of each Board member, including each director’s skills, experience, expertise
and term of office, is set out in the “Our Board” section of this report.
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Role of the Board
The Board is ultimately responsible for our strategic direction. The specific roles and
responsibilities of the Board, and the Board’s procedures, are set out in detail in our Board
Charter, available on our website. In summary, the Board is elected by our shareholders to:
• approve our strategies and objectives;
• identify and manage risks;
• review and approve budgets and business plans;
• approve our remuneration policy and other policies governing the way we operate
our business; and
• provide governance of internal decision making and management.
The Board delegates management of the day-to-day affairs and responsibilities of the
company to the CEO and executive management to deliver the strategic direction and
goals set by the Board. The specific responsibilities delegated to executive management
are recorded in the Board Charter and the Delegation Policy. A summary of the Delegation
Policy is also available on our website.
The Board regularly reviews and assesses our governance structures, policies, and
procedures to ensure these are in-line with international best practice and legal
requirements. The Board Charter was last updated on 29 March 2019.
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.
Under the NZX Listing Rules, a director must not hold office (without re-election) past the
third annual meeting following the director’s appointment or 3 years, whichever is longer.
A director appointed by the Board must not hold office (without re-election) past the next
annual meeting following the director’s appointment.
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,
independence and the Board skills matrix. It may use external search firms to assist with
locating possible candidates and gathering relevant information.
When considering the re-election of an existing director, the People and Remuneration
Committee will also consider the length of service of the director, and the director’s
performance on the Board to date. It is the Board’s general expectation that a non-
executive director will hold office for an aggregate period of approximately nine years
(including re-elections).
We undertake a number of checks before appointing a director and putting forward to
shareholders a candidate for election as a director, and ensure we provide shareholders with
all relevant information to inform their decision on whether to elect or re-elect a director.
At the ASM on 28 August 2019, Lewis Gradon and Donal O’Dwyer retired by rotation and,
being eligible, offered themselves for re-election and were re-elected to the Board. Neville
Mitchell, having been appointed to the Board on 12 November 2018, offered himself for
election and was elected to the Board.
On 27 November 2019, Board Chairman Tony Carter announced his intention to retire with
effect from the close of the company’s ASM in August 2020. Current director Scott St John
has been elected by the Board to succeed Tony Carter as chairman.
Other procedures relating to the nomination and appointment of directors are outlined
in the Appointment and Selection of New Directors Policy available on our website.
Board diversity and skills matrix
At Board level, diversity allows the company to benefit from a range of different
perspectives, which leads to healthier debate and decision making. As we operate 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 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
Neville
Mitchell
Donal
O’Dwyer
Scott
St John
Financial acumen✓✓✓✓✓✓✓✓
Sales/Marketing✓✓✓✓✓✓✓✓
Engineering/
Science/Technology/
Manufacturing
✓✓✓✓✓✓
Medicine/Medical
Device
✓✓✓✓
Legal/Regulatory✓✓✓✓✓✓
Governance✓✓✓✓✓✓✓✓
International
Business Experience
✓✓✓✓✓✓✓✓
Tenure (years)9.5418.5*36.51.57.54.5
*
Michael Daniell was appointed as a non-executive director on 1 April 2016 following his retirement as Managing
Director and CEO.
While some directors will have greater expertise in certain areas than others, the Board has
determined the table above on the basis of directors who have at least the minimum
required level of skill and experience in each area.
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 their role and duties, time
commitments, term of appointment, remuneration and insurance, access to information,
and disclosure and compliance obligations. A copy of the standard form of this letter is
available on our website. The CEO has an employment agreement setting out his roles and
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conditions of employment. Further information about the remuneration of directors is set
out in the Remuneration section of this report.
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.
Independence of directors
We are committed to ensuring that a majority of directors are independent of the company,
and do not have any interests, positions, associations or relationships which might interfere,
or might reasonably be seen to interfere, with their ability to bring independent judgement
to the issues before the Board and to act in the best interests of the company and to
represent the interests of the company’s shareholders generally.
The Board has regard to the factors described in the NZX Corporate Governance Code
when assessing the independence of directors. After consideration of these factors, the
company is of the view that:
1. Lewis Gradon is a director who is currently employed in an executive role by
the company;
2. Michael Daniell is a director who was employed in an executive role by the company
until 31 March 2016 and there was not a period of at least three years between ceasing
such employment and serving on the Board;
3. No director currently holds, nor has held within the last 12 months, a senior role in a
provider of material professional services to the company or any of its subsidiaries;
4. No director currently has, nor has had within the last three years, a material business
relationship (such as a supplier or customer) with the company or any of its
subsidiaries;
5. No director is a substantial shareholder of the company, nor a senior manager of,
nor otherwise associated with, a substantial shareholder of the company;
6. No director currently has, nor within the last three years has had, a material contractual
relationship with the company or any of its subsidiaries, other than as a director;
7. No director has close family ties with anyone in the categories listed above; and
8. No director has held the position of director of the company for a length of time that
may compromise independence.
Based on these assessments, the Board considers that as at 31 March 2020 a majority
(six) of the directors are independent, namely Tony Carter (Chairman), Pip Greenwood,
Geraldine McBride, Neville Mitchell, Donal O’Dwyer and Scott St John, and that
Michael Daniell and Lewis Gradon are not independent.
Induction and continuing development of directors
A formal induction programme is available to new directors to ensure that they have a
working knowledge of our business. The programme includes one-on-one meetings with
management and a tour of our R&D 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
We have a Performance Evaluation Policy in place relating to the performance of the Board,
the Board Committees and individual directors. The Performance Evaluation Policy is
available on our website. The 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 appointed an external consulting company to facilitate the Board’s
performance evaluation during 2020.
Our executive management are also subject to regular performance reviews. The
performance of senior executives is reviewed by the CEO, 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.
Board 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 Committees and their members as at 31 March 2020 are:
• Audit & Risk Committee
Members: Scott St John (Chair), Tony Carter and Michael Daniell
All members are non-executive directors, and two of three (including the Chair)
are independent.
• People and Remuneration Committee
Members: Pip Greenwood (Chair), Tony Carter, Donal O’Dwyer and Scott St John
All members are independent non-executive directors.
• Quality, Safety and Regulatory Committee
Members: Donal O’Dwyer (Chair), Tony Carter and Neville Mitchell
All members are independent non-executive directors.
Each Committee has a charter setting out its objectives, procedures, composition and
responsibilities. A summary is set out on the following page, and copies of these charters
are available on our website. The Board may from time to time establish other committees
for specific purposes.
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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 Committee also assists the Board in monitoring and reporting
the company's strategies, activities and performance regarding sustainability, corporate
social responsibility and the environment. The Committee has an annual work plan and
reports to the Board following each meeting of the Committee, which enables it to properly
and regularly inform the Board on significant financial matters relating to the company.
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 closely monitors financial reporting risks in relation to the
preparation of the financial statements. The 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 CEO and CFO 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.
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 & Inclusion 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.
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 and health and safety risk management
system. As part of the company’s internal audit function, regular quality system specific
internal audit reports are received by the Committee.
Board & Committee meetings
Normally, the Board holds eight formal meetings a year. One of those meetings is typically
focused on reviewing the company’s annual 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. At the company’s ASM held on
28 August 2019, all of the then-serving directors attended the meeting.
Committees generally meet three or four times per year, or as required to carry out their
responsibilities. Details of attendance at Board and Committee meetings during the year
ended 31 March 2020 are set out below:
Committees
Board
Audit & Risk
Committee
People &
Remuneration
Committee
Quality, Safety
& Regulatory
Committee
Eligible
to
attendAttended
Eligible
to
attendAttended
Eligible
to
attendAttended
Eligible
to
attendAttended
Tony Carter88444444
Lewis Gradon88
Michael Daniell8844
Pip Greenwood8844
Geraldine McBride87
Neville Mitchell8843
Donal O’Dwyer884444
Scott St John884443
Takeover Protocol
The Board has 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.
Company Secretary
The Company Secretary is Marcus Driller, VP - Corporate. The Company Secretary
is responsible for supporting the proper functioning of the Board and ensuring the
appropriate policies and procedures are followed. The Company Secretary reports directly
to the Board, through the Chair, on all governance matters as outlined in the Board Charter.
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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 2020:
NameOwnershipOrdinary Shares
Tony CarterBeneficial76,101
Lewis Gradon
1
Beneficial603,502
Michael Daniell
2
Beneficial974,267
Pip GreenwoodBeneficial3,800
Geraldine McBrideBeneficial1,262
Neville MitchellBeneficial7,200
Donal O’DwyerBeneficial68,569
Scott St JohnBeneficial17,500
1
Lewis Gradon also had a beneficial interest in 465,504 options issued under the 2003 Share Option Plan and a
beneficial interest in 140,912 performance share rights under the PSR Plan
2
Michael Daniell also had a beneficial interest in 20,000 options issued under the 2003 Share Option Plan
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 2019 and 31 March 2020, and details of those dealings were
entered in the company’s interests register.
NameTransaction
Number of
shares
Price per
shareDate
Lewis GradonGranted 43,848 PSRs––11 September 2019
Granted 138,827 Options––11 September 2019
Michael DaniellSale of Shares11,000$22.003602 December 2019
Share issue for cancellation
of 20,000 Options
13,458$21.300003 December 2019
Geraldine
McBride
Share purchases1,262$15.830011 September 2019
Scott St JohnShare purchases1,543$15.420011 June 2019
1,500$15.260026 June 2019
1,000$21.220003 December 2019
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 2020 are as follows:
NameEntityRelationship
Tony CarterTR Group
Datacom Group Limited
Chair
ANZ Bank New Zealand Limited
Fisher & Paykel Healthcare Employee Share Purchase
Trustee Limited
Vector Limited
Director
Avonhead Mall Limited
Loughborough Investments Limited
Director &
Shareholder
Antony Carter Family Trust No 2
Foodstuffs Auckland Perpetuation Trust
Foodstuffs Auckland Protection Trust
Maurice Carter Charitable Trust
Tony and Frances Carter Family Trust
Trustee
Capital Solutions Limited
Capital Training Limited
Advisor
Independent Selection Panel of Fonterra Co-Op Group
Limited
Member
Lewis GradonFisher & Paykel Healthcare Employee Share Purchase
Trustee Limited
Other Group entities listed in the ‘Subsidiary Company
Directors’ section of this Report
Director
Michael DaniellMedical Technologies Centre of Research ExcellenceChair
Cochlear Limited
MRCF IIF GP Pty Limited
MRCF Pty Limited
Tait International Limited
Tait Limited
Director
Council of the University of AucklandCouncil Member
Daniell Family TrustBeneficiary &
Trustee
Nyxoah SA (by virtue of directorship of Cochlear)Shareholder
Pip GreenwoodA2 Milk Company Limited
Spark New Zealand Limited
Vulcan Steel Limited
Westpac New Zealand Limited
Director
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NameEntityRelationship
Pip Greenwood
(continued)
Auckland Writers Festival Trust
Milbrook 7th Trust
Oriental Trust
Portia Trust
Rakino Trust
Theresa Gattung Investment Trust
Trustee
Geraldine McBrideMyWave Holdings Limited
National Australia Bank Limited
Sky Network Television Limited
Director
Neville MitchellOsprey Medical
Q’Biotics Limited
Sonic Healthcare Limited
Director
Board of Taxation
South East Sydney Local Health District
Board Member
Donal O’DwyerCochlear Limited
Mesoblast Limited
NIB Holdings Limited
Director
Nyxoah SA (by virtue of directorship of Cochlear)Shareholder
Scott St JohnTe Awanga Terraces LimitedDirector &
Shareholder
Captain Cook Nominees Limited
Fonterra Cooperative Group Limited
Hutton Wilson Nominees Limited
Mercury NZ Limited
NEXT Foundation
Director
St John Family Trust
Macleod Trust
Beneficiary &
Trustee
Council of the University of AucklandChancellor
Butland Medical FoundationTrustee
Reporting and disclosure
We are committed to the promotion of investor confidence by ensuring that the trading
of our shares takes place in an efficient, competitive and informed market. We believe that
evenly balanced disclosure is fundamental to building shareholder value and earning the
trust of employees, customers, suppliers, communities and shareholders.
Continuous disclosure
Our Market Disclosure Policy establishes our disclosure policies for meeting our continuous
disclosure obligations. The Market Disclosure Policy is available on our 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 CEO, CFO and VP – Corporate, and the
Disclosure Officer, the VP – Corporate or alternatively the General Counsel NZ, are
responsible for administering compliance with our Market Disclosure Policy, including
continuous disclosure obligations. Market disclosure requires the approval of either the
Board or the Disclosure Committee, depending on the circumstances. The Market Disclosure
Policy was last updated on 29 March 2019.
Company policies
We have policies and procedures in place to ensure we conduct our business with integrity,
and in a legally, ethically, and socially responsible manner. Key governance documents
including our Codes of Conduct, Securities Trading Policy and Guidelines, Board and
Committee Charters, Diversity Policy, Remuneration Policy, and Market Disclosure Policy
are all available on our website.
Financial reporting
We are committed to reporting our financial information in an objective, balanced, and
clear manner. Financial results are reported in this annual report in accordance with the
New Zealand equivalent of International Financial Reporting Standards. This annual report
includes detailed financial commentary and notes to the financial statements which explain
any changes to financial reporting.
This annual report also includes the Chair’s comments on strategic progress and the CEO’s
report summarises performance and progress towards our strategic objectives. It explains
how we deliver value for shareholders and key performance indicators such as revenue,
profit, constancy currency information, dividend growth and gearing, and explains how
our results link to our strategy.
We ensure that financial information reported in investor material for roadshows,
company overviews, and other documents is portrayed in an accurate, fair, and
understandable format.
Other reporting
Fisher & Paykel Healthcare is committed to transparent reporting of non-financial
objectives, such as environmental, social, and governance (ESG) factors, as well as risk,
health and safety, and business strategy. Our annual report references the guidelines and
principles set out by the Global Reporting Initiative (GRI) and includes a GRI referenced
content index. This year we have also integrated content recommended by the Task Force
on Climate-related Financial Disclosures (TCFD) content, and a TCFD content index can be
found at the end of this report.
Governance of climate-related issues
Role of the Board in overseeing climate-related issues
The Board has delegated to the CEO and executive management matters relating to
environmental sustainability, with oversight of these matters sitting with the Audit & Risk
Committee. The Committee meets four times per year and reports directly to and advises
the Board on such matters.
During the last financial year, management has briefed the Board on environmental
sustainability, including climate-related issues. Briefings have included reviews of internal
compliance with both internally established and externally applicable sustainability codes
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and principles across the company’s global operations. This has included scenario
planning with the use of multiple internal carbon prices along with modelling the effects
of temperature change on business as usual (>3°C versus rapid decarbonisation or <1.5°C).
Significant environmental sustainability risks have been presented to the Board for their
review and consideration. The company’s largest environmental sustainability risk is the
organisation’s carbon footprint, while healthcare waste, ethical sourcing and sustainability
data integrity are also potentially material risk areas.
Executive management responsibilities for environmental sustainability sit with the CEO
and GM Supply Chain, Facilities & Sustainability, with environmental sustainability strategy,
policy development, long term planning and global environmental management system
performance managed day-to-day by the company’s Sustainability Team.
Ecodesign Advisory Board
To further support good environmental sustainability governance, an external Ecodesign
Advisory Board was established in FY20, made up of four independent experts who are
subject matter experts in their respective fields. The role of the Ecodesign Advisory Board is
to provide expert external independent guidance and support in relation to ecodesign and
environmental sustainability. Members of our Ecodesign Advisory Board are shown below.
David Trubridge
Globally renowned
ecodesign practitioner
Dr Elspeth MacRae
Leading global
bio-economy expert
Dr Ann Smith
Leading global
carbon expert
Dr David Galler
Leading sustainability
medical practitioner
Role of management in overseeing climate-related issues
Environmental sustainability, including climate-related issues, are integrated in the company’s
environmental management system, which is externally audited each year to the ISO14001
international standard. Environmental sustainability issues and risks are reviewed and
monitored following formal environmental management review processes. Over the next year,
climate-related risks will also be further embedded in enterprise risk management systems.
The development of the organisation’s long-term carbon reduction plan began in FY20,
with involvement from senior management. This has included the development of a suite
of carbon reduction initiatives across a number of time horizons stretching to 2034. To assist
in providing context to the carbon reduction initiatives, senior management formally
committed to setting Science Based Targets. During FY20, proposed targets were submitted,
and these were approved in April 2020.
The organisation also became a member of the Climate Leaders Coalition with management
and Board support. Our involvement in the Climate Leaders Coalition complements our
participation in the New Zealand Sustainable Business Council. Our involvement in these
two organisations allows for proactive visibility of climate-related risks and opportunities
experienced by other member organisations, as well as the opportunity for collaboration
to manage and mitigate such risks.
Auditors
External audit
The Audit & Risk Committee has oversight responsibility for our 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 we engage. The purpose of the Policy
is to ensure that our external auditor carries out its function independently and without
impairment, safeguarding the reliability and credibility of 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 CFO 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 our external financial auditors to attend the ASM each year 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 our website.
Internal audit
Internal audit is a key component of our objective-centric risk management approach.
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 as needed. The focus is to assist the business with the evaluation
of the effectiveness of key risk management control.
ANNUAL REPORT 2020
96Fisher & Paykel Healthcare Corporation Limited
rISK MaNageMeNt
RISK MANAGEMENT
As we work to achieve our purpose of improving care and outcomes through inspired and
world-leading healthcare solutions, our leaders have a responsibility to understand and
manage the key risks that impact our organisation. We have designed, implemented and
maintained an effective, structured approach to risk management to help improve the
quality of our business decisions.
Components of our risk management approach
Our business risk management approach is derived from ISO 31000 Risk Management
– Principles and Guidelines and enhanced to focus on Fisher & Paykel Healthcare’s key
strategic objectives. For product risk, we follow the ISO 14971 Medical Devices Application
of Risk Management standard specific to medical device design and manufacturing.
For health and safety, our focus is on the implementation of global health, safety and
wellbeing standards that are aligned with ISO 45001 and a greater emphasis on the
effective management of critical risks.
The diagram below provides a high-level summary of our risk management approach:
PUrPoSe
Inform decision
making regarding
risks to the business
to create and
protect value
1.
eStaBLIShINg
the CoNteXt
2.
IDeNtIfY &
eVaLUate
rISKS
3.
DeVeLoP
& IMPLeMeNt
a reSPoNSe
5.
MoNItor
aND reVIeW
4.
CoMMUNICate
aND CoNSULt
Through this approach to risk management, we can:
• Ensure prompt resolution of internally identified risk to compliance with laws and
regulations to maintain the provision of quality products, protect patient safety
and ensure appropriate relationships with customers and stakeholders;
• Enable improved decision making, planning and prioritisation through a structured
understanding of opportunities and threats to strategic objectives, and new product
introductions; and
• Support value creation by enabling management to deal effectively with future
events that create uncertainty, pose a significant risk or opportunity and to respond
in a prompt, efficient and effective manner.
While no risk management system can ever be infallible, our goal is to make sure that
material risks are appropriately identified and managed within acceptable levels.
Examples of activities to identify and mitigate our material risks are described below.
Business risk management
As part of our annual business planning process we conduct an analysis of risks and
opportunities to strategies. The purpose of this approach is to generate better quality
information on risks and opportunities to our strategies and help us make the best possible
decisions regarding strategy execution.
We analyse the macro and industry risks that we face as a medical device manufacturer
selling product globally. A quantitative risk analysis is completed annually using the inputs
gathered during a discovery process which involves interviews with employees across
the business.
Our modelling process uses a simulation, which generates a probability distribution curve
showing the impact of risk on the relevant metric. These include patients treated, time,
or a financial measure, depending on what is relevant for the risk metric. This approach
provides better insights over single-point estimates by showing not only what could
happen, but how likely each outcome is.
Product quality and safety
Ensuring patient safety and the quality of our products is a key priority. We establish
processes that effectively manage risk and drive continuous improvement in product
quality throughout the lifecycle of our products.
We have introduced proactive quality control mechanisms within our manufacturing
operations. Through the use of data collection and statistical analysis, we are improving the
control of our manufacturing processes, with the aim of being able to intervene and correct
a process prior to product quality being compromised. This approach is providing further
assurance that our customers and patients receive high quality products that are safe and
effective.
Health, safety and wellbeing
We are committed to ensuring the health, safety, and wellbeing of our people. To do so,
we continue to drive performance improvement across our global operations through
the ongoing development and implementation of global health, safety and wellbeing
management systems and processes which are aligned with ISO 45001:2018.
Targeted interventions to prevent high frequency/low consequence musculoskeletal injuries
have been particularly effective during the past financial year as illustrated by the significant
improvement in our ‘lag’ performance indicators, the Total Recordable Injury Frequency
Rate (TRIFR) and the Lost Time Injury Frequency Rate (LTIFR), as shown in the ‘Health
and safety data’ section.
In addition, we have placed greater emphasis on the effective management of the critical
risks common across our global operations; i.e. low frequency/very high consequence risks
with the potential to result in a fatality, serious injury or illness.
We have established critical risk standards across our operations globally, and we are
monitoring their implementation. These critical risk standards are becoming an important
‘lead’ performance indicator for us.
ANNUAL REPORT 2020
97Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
RISK MANAGEMENT CONTINUED
Continuing to improve our health, safety and wellbeing risk management systems and
performance indicators will result in a safer and healthier work environment for our people.
Material business risks and strategies to mitigate
After completing the risk management processes outlined on the previous page, and in
line with the materiality assessment in the ‘Material Topics’ section of this Report, we have
identified and described a selection of key business risks, and strategies to mitigate these,
as shown in the table below.
AreaRiskStrategies to mitigate
Health and
safety
Work-related
injuries or illnesses
Our focus is on implementing global health, safety and
wellbeing standards that are aligned with ISO 45001,
with greater emphasis on managing critical risks.
We design and implement preventative and recovery
risk controls for critical health and safety risks across
our global business.
Our health and safety progress is reported regularly to
the Board of Directors and to the Quality, Safety and
Regulatory Committee of the Board three times a year.
Product
quality and
patient safety
Patients are harmed
as a result of using
our products
We operate a worldwide quality management system
related to the design, testing and manufacture of our
products. Furthermore we foster an organisational
attitude of product safety and continuous improvement.
Market accessMaintaining
regulatory
compliance is
required to market
and sell our
products in certain
countries
We have a regulatory affairs process that enables us to
obtain and maintain product licenses, as well as a quality
management system that ensures compliance with
applicable regulatory requirements.
We have monitoring steps in place to evaluate the
effectiveness of our programmes, and our executive
management team conducts regular management
reviews.
Intellectual
property
Third parties
asserting IP rights
against us
We have a comprehensive patent portfolio across our
technologies and we actively and robustly manage
IP litigation risk. As part of our product development
phase we conduct freedom-to-operate searches during
product design. We monitor competitor patent filings
and take action as required.
Sustainable
profitable
growth
Foreign exchange
losses
Currency risk is hedged in accordance with the Board-
approved hedging policy. The hedging policy aims to
reduce the impact of short-term currency fluctuations
on our cash flow. We use derivative financial instruments
to hedge exposures in the current and future years.
A diversity of currency exposures also provides some
natural hedge.
AreaRiskStrategies to mitigate
Business
Continuity
Continuity and
quality of supply
To ensure risk is managed within our global supply
chain we actively monitor our end-to-end processes and
systems through an internal risk management process
and implement actions to prevent disruption. We use
a business impact analysis to identify, understand and
quantify the impact of a material disruption to a key
facility, location, supplier or business process. This
approach enables us to prioritise the most significant
potential exposures to the business. It is also aligned
with our crisis planning, simulation and response
outlined below and has been valuable during our
response to COVID-19.
Cyber
security
and data
protection
Cyber security
attack resulting
in disruption to
operations and data
breach
To manage our risk and protect the data entrusted to
us, we are constantly reviewing and honing our control
mechanisms to ensure our protections can proactively
respond to developing cyber threats. We continue to use
independent reviews to test and identify potential risks
to ensure we focus on the right cyber risks.
Governance of risk
Our Board is dedicated and fully committed to its role of ensuring quality, safety,
compliance and effective risk management. The Board provides oversight of senior
leadership’s management of risk, meets regularly with key risk management functional
leaders and receives regular reports from senior representatives on material risk and
mitigation strategies.
The Audit & Risk Committee reports to and assists the Board by reviewing and ensuring
our risk management processes (excluding any risks related to quality, safety and regulatory
functions) can provide reliable information to the Board on the status of major risks that
could impact on the achievement of our objectives.
The Quality, Safety & Regulatory Committee reports to and assists the Board by reviewing
our quality, health and safety and regulatory risk management approach to ensure effective
mechanisms and internal controls are in place to identify and manage areas of material risk
and maintain compliance with applicable regulations.
ANNUAL REPORT 2020
98Fisher & Paykel Healthcare Corporation Limited
RISK MANAGEMENT CONTINUED
Health and safety data
Injury rates by year
Injury rates
1
201820192020
TRIFR7.792.332.29
LTIFR4.820.471.09
Injury rates (per million hours worked) and severity
New ZealandMexicoRest of world
201920202019202020192020
TRIFR4.332.830.000.390.523.46
LTIFR0.680.650.000.390.522.97
Fatality000000
Serious injury100002
Lost time injury
2
300214
Medical treatment injury440001
Restricted work injury1260000
First aid injury213163283287
Pain and discomfort136412622813
1
In 2018 we reviewed our incident reporting processes and lag indicator (LTI, MTI, RWI) definitions to align
with internationally recognised standards. As a result, our TRIFR and LTIFR reflect improvements in our global
reporting process.
2
One LTI reported in Mexico in 2020 relates to a contractor and is not included in LTIFR.
Crisis planning, simulation and response
The key to managing through a crisis is preparedness. In 2018 Fisher & Paykel Healthcare
conducted a crisis simulation exercise with a facilitator in order to improve our planning
processes and increase resilience. The exercise identified a number of areas where we
could improve, such as how we escalate key facts and updates to the executive
management team so that decisions can be made quickly.
Response to measles outbreak 2019
Our learnings from the exercise guided our crisis response to an outbreak of measles in
Auckland in September 2019. After an employee case of measles was identified, a rapid
response team was activated to help manage the crisis and mitigate risk. After identifying
the most likely potential impacts on the business, we established two separate streams of
work, one to address risk to our people, and one to address risk to our products. Actions,
metrics and population trends were recorded in our control room and reported daily to
the executive team.
Our crisis response ran over two months and included a massive vaccination programme,
whereby more than 300 employees at our Auckland facility were vaccinated for measles.
The outcome was highly successful, and no further cases of measles were identified on site.
Response to COVID-19 pandemic
The process improvements we made following the simulated exercise in 2018 and
the actual measles crisis in 2019 informed our response to COVID-19. When we first
became aware of the coronavirus threat, we activated our rapid response team quickly
to keep our people and products safe first, and then formed a plan to meet the global
increase in demand for our products.
We established multiple control rooms and seven separate streams of work to address
people and safety; production capacity; distribution response; product delivery;
external communications and government relations; operations at our Mexico facility;
and corporate social responsibility initiatives. Cross-functional teams from across the
business were mobilised to lead and execute plans for each work stream.
Responding to COVID-19 has been challenging. However, the crisis has allowed us
to scale up our processes, stress-test our response protocols, identify subject-matter
experts across the business, and build relationships between people previously
unconnected. Moreover, during the crisis we have strengthened key relationships
with our suppliers and customers, as well as leaders in government, trade and foreign
affairs. Our executive management team is confident that the business is more
resilient now than ever before.
Measles vaccination initiative, New Zealand
ANNUAL REPORT 2020
99Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
RISK MANAGEMENT CONTINUED
Climate-related risks
Processes for identifying and managing climate-related risks
We assess and manage climate-related risks as part of our overall sustainability strategy,
which is reviewed by senior management twice per year. As carbon, healthcare waste and
other sustainability topics have been identified as being potentially material to stakeholders
in our materiality assessment, these risks have been reviewed by our risk management team
and will continue to be monitored and reviewed. This includes identifying direct and indirect
climate-related risks as well as considering short, medium and long-term risk horizons.
Further to this, two climate scenarios have been assessed considering a business as usual
and a rapid decarbonisation approach.
Sustainability risks, including climate-related risks, are assessed against a standardized
criteria encompassing severity and likelihood. Substantive financial impacts are defined
as greater than $5,000,000. The Audit & Risk Committee review processes and risks to
reputation or operational assets. Risks can be localised to one facility or a particular asset
or across the organisation at a system level. Our risk management process includes a
>6-year risk horizon.
How processes for identifying, assessing and managing climate-related risks are
integrated into our overall risk management
Processes for identifying, assessing and managing climate-related risks are integrated into
our operations in three ways. Environmental sustainability risk, including climate-related
risk, is documented, risk-scored and managed through our ISO14001 Environmental
Management System process.
Key sustainability risks, including climate-related risks, have also been reviewed by our
risk management team and will be further embedded into group wide risk management
in FY21 with additional scenario and sensitivity analysis work planned.
In May 2020, oversight of environmental sustainability risk, including climate-related
risk transitioned from the Quality, Safety & Regulatory Committee to the Audit & Risk
Committee to better align management and reporting of these risks within our broader
risk management framework.
Actions completed in FY20 to quantify and document climate-related risk included in
this report are the results of the Toitū external carbon footprint audit, detailing direct
exposure to and impact on carbon emissions from our operations, as well as completion
of our first expanded Scope 3 carbon footprint forecast based on the Science Based
Targets Initiative screening tool. Internal carbon price trends are provided by the finance
function to assist in providing visibility of potential future carbon cost impacts as part
of this integrated approach.
Metrics used to assess climate-related risks and opportunities
We have adopted parts of the Sustainability Accounting Standards Board (SASB) standard
for the Medical Equipment & Supplies industry related to climate-related disclosure.
This includes integrating accounting metrics HC-MS-410a.1 and HC-MS-410a.2. into our
reporting on our environmental management system.
We report environmental impacts following the Climate Disclosure Standards Board (CDSB)
principles and ‘REQ-04 Sources of environmental impacts’. Environmental impact reporting
can be found in the Environment section of this report.
Potential climate-related risks
Climate-related risks have been identified across a range of topic areas. Risks that have
been classed as having the potential to have a substantive financial or strategic impact
include carbon cost impacts, supply chain weather disruption and water scarcity. In addition
to these highlighted risks, the development of international climate-related regulations
(Paris Agreement Implementation, EU Green Deal) and carbon markets may have a
significant impact on regulatory, market access and cost implications over the long-term
(15+ years).
Carbon cost impacts
Through the use of internal carbon prices and monitoring of carbon regulatory
developments we have assessed that there is a likely short-term (<5 years) risk of increased
carbon costs to our global operations. We class this as a transition risk, which will likely
result in higher operating costs. These costs include fuel, freight, electricity, insurance and
raw materials. We also believe there will be increased compliance costs.
Both the New Zealand and Mexican Governments have had climate-related legislation
under review during the past year, with the Zero Carbon Act now enacted in New Zealand.
The release of the first three New Zealand carbon budgets in February 2021 will provide
more detailed analysis to support likely cost impacts for our New Zealand operations.
Current financial estimates for the range of increased costs relating to this risk are in the
range of $600,000 to $1,500,000 per year.
Supply chain weather disruption
We acknowledge that more uncertain weather patterns may affect supply chain
distribution, which could lead to supply issues and impact our ability to deliver on time
to global customers. We are monitoring other related changes caused by physical climate
parameters to assess how these impacts could develop to affect parts of our business.
This risk is classed as a short to medium-term (<10 year) risk. Annual cost impact if this
were to occur could be in the range of $100,000 to $1,000,000 per year.
Supply chain disruption caused by more uncertain weather patterns could have a financial
impact, although we note that this is difficult to estimate. For example, having multiple raw
material suppliers so that supply risk is not concentrated with one company or location
could already provide some environmental risk mitigation. Future forecast sea-level rise
and impacts on strategic supply chain locations will be re-assessed over the next two years
to broaden the current visibility of climate-based ecosystem scenarios.
ANNUAL REPORT 2020
100Fisher & Paykel Healthcare Corporation Limited
RISK MANAGEMENT CONTINUED
Water scarcity
Changes in weather patterns in North and Central America have increased the demand on
natural resources such as water. This could have a direct impact on our operations in Mexico,
due to the requirement to have water-cooling capacity at these sites. This risk is classed as
a short-term risk, because water is already considered scarce in this region. Annual cost
impact is estimated to be in the range of $100,000 to $1,000,000 per year.
Water conservation is already an important priority for our Mexico operations, and our new
facilities have been constructed taking into account the inclusion of water-efficient cooling
equipment. The company has committed to disclosure via CDP Water to assist in verifying
water use and water risk management as part of our sustainability programme. A specific
water policy will also be developed during FY21.
Impact of climate-related risks and opportunities
on our business, strategy and financial planning
Fisher & Paykel Healthcare has identified a number of impacts of climate-related risks and
opportunities on our operations. As discussed above, these financial impacts have been
estimated and the risks feed into our business, strategy and financial planning as part of our
annual business planning process. Examples of this include the procurement of renewable
energy certificates for our New Zealand campus to mitigate potential higher carbon costs
for non-renewable energy in New Zealand, as well as the development of solar array options
for our Mexico operations.
For the FY20 year there are no material financial carbon or climate-related costs. In future
years we believe that there may need to be allowances or provisions made for carbon or
climate-related cost increases. We see that future regulatory requirements as well as market
and environmental factors will likely contribute to these future costs growing in comparison
to current levels.
Resilience of our strategy, taking into account
different climate-related scenarios
Analysing the potential impacts of climate change on our operations is important to us.
We have assessed a range of climate-related scenarios, including a business-as-usual
scenario (>3°C increase) and a rapid decarbonisation approach (<1.5°C increase) over
medium and long-term time frames. We have assessed the potential impact on our
manufacturing operations, supply chain and distribution system, as well as customer needs.
Our analysis takes into account the following:
• impact of changing weather patterns
• increasing average temperatures, coupled with the by-products of these environmental
system changes, such as sea-level rise, large-scale population displacement, and
impacts on the global healthcare system
• supply chain disruption risk
• natural resource scarcity
• impact of regulatory controls related to climate-related issues.
All of the above will be important issues to continually monitor now and into the future.
Examples of current climate-related risks are detailed in this risk management section,
including estimates of cost impacts.
At this stage, our strategy is resilient to current and likely future climate-related risks.
We have identified carbon as a design challenge, committed to setting Science Based
Targets and launched an ecodesign program to assist in reducing our carbon footprint.
We are developing a long-term carbon reduction plan and will engage widely with our
suppliers to educate and support a low carbon transition.
ANNUAL REPORT 2020
101Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
SharehoLDer aND CoMPaNY INforMatIoN
SHAREHOLDER AND COMPANY INFORMATION
The company has in place an investor relations programme to facilitate effective two-way
communication with investors. We aim to build strong relationships with our shareholders
and investors based on integrity, transparency and trust. Our intention is to provide
shareholders with all relevant information about the company to enable them to actively
engage with us and exercise their rights as shareholders in an informed manner.
Shareholder communications
Our Shareholder Communication Policy facilitates communication with shareholders
through written and electronic means, and by facilitating shareholder access to directors,
executive management and our auditors. A copy of our Shareholder Communication Policy
is available on our website.
We communicate with shareholders through the following channels:
• investor section of our website;
• annual report;
• interim report;
• annual shareholder meeting (ASM);
• webcasts;
• regular disclosures on company performance and news; and
• disclosure of presentations provided to analysts and investors during regular briefings,
meetings and roadshows.
Our Website
Our website is frequently the first port of call for shareholders and is therefore a core
component of our Shareholder Communication Policy. We include on our website a
range of information relevant to shareholders and others concerning the operation of
the company.
We make available a webcast of our ASM and management presentations of financial
results. Webcast details will be published on the NZX and ASX before the event so that
shareholders and other interested parties may participate.
We encourage shareholders to receive their shareholder communications electronically
to help reduce our environmental footprint and costs.
Direct communication
Shareholders may, at any time, direct questions or requests for information to directors
or management by contacting Marcus Driller, our VP – Corporate and Company Secretary,
at marcus.driller@fphcare.co.nz or +64 27 578 9663.
We have a modern communication framework in place so shareholders can receive
communications in a manner that best suits them. We provide shareholders with the option
to receive communications from, and send communications to, us and our share registrar
electronically. We offer shareholders the ability to attend our ASM digitally, ask questions
through a virtual tool, and to vote electronically or using an app.
ASM and shareholder voting
Our next ASM will be held online at www.virtualmeeting.co.nz/FPH20 and in person at the
Guineas Ballroom, Ellerslie Event Centre, Auckland, New Zealand on Friday, 21 August 2020
commencing at 2.00pm (NZST).
The company is closely monitoring the situation in New Zealand with regard to COVID-19. In
the event of any significant developments, the company may, in its sole discretion, elect to
hold the Annual Shareholders’ Meeting as an online only meeting if it considers there are
potential risks to the health of meeting attendees or if an in-person meeting is prohibited by
law. In such circumstances, the company will provide shareholders with as much notice as is
reasonably practicable by way of an announcement to the NZX and ASX and on our website
at www.fphcare.com/asm.
Notice of the ASM will be released to the NZX and ASX and posted on our website, along
with instructions for attending the virtual meeting, at least 20 working days prior to the
meeting. We encourage active participation by shareholders at the ASM, and shareholders
may present questions to engage with the Board and executive management.
Shareholders have the right to vote on major decisions which may change the nature of
the company. Each shareholder has one vote per ordinary share they own in the company,
equally with other shareholders, and may vote at a meeting in person, or by proxy,
representative or attorney. We offer an electronic voting facility to allow shareholders
to vote ahead of the meeting without having to attend or appoint a proxy.
Share information
Stock exchange listing requirements
The company’s shares were listed on the NZX Main Board on 14 November 2001 and on the
ASX on 21 November 2001. On 20 June 2016 the company 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 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 it has
complied with the NZX listing rules during the year ended 31 March 2020.
Neither the NZX nor the ASX has taken any disciplinary action against the company during
the year ended 31 March 2020. In particular, there was no exercise of powers by the NZX
under NZX Listing Rule 9.9.3.
Current on-market share buy-back
There is no current on-market buy-back of the company’s ordinary shares. During the year
ended 31 March 2020 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.
ANNUAL REPORT 2020
102fisher & Paykel healthcare Corporation Limited
SHAREHOLDER AND COMPANY INFORMATION CONTINUED
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.
Credit rating
The company does not currently have an external credit rating status.
Current NZX waivers
On 7 August 2019, the company was granted a waiver from NZX Main Board Listing
Rule 3.13.1, allowing the company to aggregate issues of company shares under the
company’s employee share plans over a 10 business day period for the purposes of
market notifications. The company relies on this waiver in respect of the issue of company
shares under its share option plans, its PSR plans, its ESR plan and its share purchase plans.
In response to COVID-19, an NZX class waiver dated 19 March 2020 provided listed
companies with an additional 30 days to prepare and release their full year results.
In accordance with that waiver, the company is reporting full year results within 90 days
after year end instead of 60 days after year end. In order to provide shareholders with the
most up-to-date information, we are reporting on the distribution of shareholdings and
principal shareholders as at 29 May 2020 in this year’s report.
Distribution of shareholders and holdings
The company only has one class of shares on issue, ordinary shares, each conferring to the
registered holder the right to one vote on any resolution, and these shares are listed on the
NZX and ASX. There are no other classes of equity security currently on issue. The total
number of ordinary shares on issue as at 31 March 2020 was 574,570,603 shares. The total
number of ordinary shares of the company on issue at 29 May 2020 was 574,634,155 shares.
The distribution of shareholdings as at 29 May 2020 was as shown in the table below:
Size of shareholding
Number
of holders%
Number of
ordinary shares%
1 to 1,00011,68147.584,546,7230.79
1,001 to 5,0009,29437.8622,227,326 3.87
5,001 to 10,0002,1068.5815,046,8032.62
10,001 to 50,0001,3005.3024,018,0894.18
50,001 to 100,000760.305,226,9370.91
100,001 and over940.38503,568,27787.63
Total24,551100.0574,634,155100
The employee share options, rights and PSRs on issue to employees are disclosed in Note 18
of the Financial Statements. There are no voting rights attaching to share options, rights,
or PSRs.
Substantial product holders
According to company records and notices given under the Financial Markets Conduct Act
2013 the substantial product holders in ordinary shares (being the only class of quoted
voting products) of the company as at 31 March 2020, were as follows:
Substantial Product HolderDate of notice
Number of
ordinary shares
held as at date
of notice
Holding as a %
of total ordinary
shares on issue as
at 31 March
The Capital Group Companies, Inc.17 Sep 1937,000,0526.44%
BlackRock, Inc and related bodies
corporate21 Mar 1928,725,4585.00%
The Vanguard Group, Inc18 Dec 1830,145,1415.25%
ANNUAL REPORT 2020
103Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
Shareholder and company information CONTINUED
Principal shareholders
The names and holdings of the 20 largest registered shareholders in the company as at
29 May 2020 were:
Investor NameTotal Units
% Issued
Capital
HSBC Nominees (New Zealand) Limited77,154,54413.43
JPMORGAN Chase Bank77,153,10213.43
HSBC Nominees (New Zealand) Limited66,206,77511.52
HSBC Custody Nominees (Australia) Limited43,308,5817.54
Citibank Nominees (NZ) Ltd38,413,2306.68
J P Morgan Nominees Australia Pty Limited26,906,0114.68
Citicorp Nominees Pty Limited12,341,4132.15
Accident Compensation Corporation12,190,7262.12
Tea Custodians Limited10,942,1071.9
New Zealand Superannuation Fund Nominees Limited10,316,5161.8
National Nominees New Zealand Limited9,193,6191.6
Cogent Nominees Limited9,041,6751.57
National Nominees Limited8,744,1331.52
BNP Paribas Nominees NZ Limited Bpss407,957,6121.38
Custodial Services Limited6,968,4761.21
Custodial Services Limited6,896,8521.2
Premier Nominees Limited6,171,3001.07
FNZ Custodians Limited5,871,4671.02
JBWERE (NZ) Nominees Limited4,646,3380.81
BNP Paribas Noms Pty Ltd4,474,9020.78
other Group information
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 2020.
Use of company information
We did not receive any notices from directors requesting to use company information
received in their capacity as directors which would not otherwise have been available
to them.
Donations
Please refer to Note 5 of the Financial Statements for the Group’s donations in the
financial year to 31 March 2020.
Entries recorded in the interests register
Except for disclosures made elsewhere in this report, there have been no entries in the
Company’s interests register made during the year ended 31 March 2020.
Other subsidiary company information
No entries were made in the interests register of any subsidiary during the year ended
31 March 2020.
No employee of the Group who is appointed as a director of a Group entity receives or
retains any remuneration or other benefits in his or her capacity as a director. The
remuneration and other benefits of Group employees and former employees totalling
$100,000 or more during the year ended 31 March 2020 are included in the relevant
bandings for remuneration disclosed in the ‘Remuneration’ section of this report.
During the year ended 31 March 2020, all directors of subsidiaries were full-time employees
of the Group, with the exception of:
(1) Tony Carter who is a director of Fisher & Paykel Healthcare Employee Share Purchase
Trustee Limited.
(2) Lawrence Gibbons who is a director of Fisher & Paykel Healthcare S.A. de C.V. (Mexico).
(3) Stuart Herbert who is a director of Highbrook Insurance Company Pte. Limited
(Singapore).
Tony Carter and Lawrence Gibbons do not receive any remuneration or other benefits for
their roles as directors of the above subsidiaries. Stuart Herbert also does not receive any
remuneration personally for his role as director as described above; however, a management
fee is paid to his employer (Marsh Singapore Ltd).
ANNUAL REPORT 2020
104Fisher & Paykel Healthcare Corporation Limited
SHAREHOLDER AND COMPANY INFORMATION CONTINUED
Group structure
All subsidiary companies in the Group are ultimately 100% owned by the Company.
The Group structure and the persons who held office as directors of subsidiary companies
at 31 March 2020 are detailed below.
Entities Directors
Fisher & Paykel Healthcare Corporation Limited* owns:
Fisher & Paykel Healthcare Limited (NZ)*Lewis Gradon, Paul Shearer,
Andrew Somervell
Fisher & Paykel Healthcare Treasury Limited (NZ)*Lewis Gradon, Paul Shearer,
Andrew Somervell
Fisher & Paykel Healthcare Employee Share Purchase
Trustee Limited (NZ)
Tony Carter, Lewis Gradon
Fisher & Paykel Asia Limited (NZ)Lewis Gradon, Paul Shearer,
Andrew Somervell
Fisher & Paykel Healthcare Americas Investments
Limited (NZ)
Lewis Gradon, Paul Shearer,
Andrew Somervell
Fisher & Paykel Healthcare Pty Limited (Australia)Lewis Gradon, Paul Shearer,
David Boyle, Graham Gourd
Fisher & Paykel Healthcare Limited (UK)Lewis Gradon, Paul Shearer,
Nicholas Connolly, Patrick McSweeny
Fisher & Paykel Holdings Inc. (USA)Lewis Gradon, Paul Shearer,
Andrew Somervell
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 (Guangzhou) Limited (China)Lewis Gradon, Paul Shearer,
David Boyle, Zhiping Hou
Fisher & Paykel Healthcare Limited (Canada)Lewis Gradon, Paul Shearer,
Justin Callahan
Highbrook Insurance Company Pte. Limited (Singapore)Lyndal York, Grant Gillingham,
Stuart Herbert
Fisher & Paykel Healthcare Limited* (NZ) owns:
Fisher & Paykel Healthcare Properties Limited (NZ)*Lewis Gradon, Paul Shearer,
Andrew Somervell
Fisher & Paykel Healthcare Asia Limited (NZ) owns:
Fisher & Paykel Healthcare Asia Investments
Limited (NZ)
Lewis Gradon, Paul Shearer,
Andrew Somervell
Entities Directors
Fisher & Paykel Healthcare Asia Investments Limited (NZ) owns:
Fisher & Paykel Healthcare India Private Limited (India)Lewis Gradon, Paul Shearer,
David Boyle, Prashant Kate
Fisher & Paykel Healthcare K.K. (Japan)Lewis Gradon, Paul Shearer,
Hideo Goto
Fisher & Paykel Healthcare Limited (Hong Kong)Lewis Gradon, Paul Shearer,
David Boyle, Zhiping Hou
Fisher & Paykel Healthcare Supply Chain Limited
(Hong Kong)
Jonathan Rhodes
Fisher & Paykel Healthcare Colombo (Private) LimitedLewis Gradon, Paul Shearer,
David Boyle
Fisher & Paykel Healthcare Americas Investments Limited (NZ) owns:
Fisher & Paykel Healthcare S.A. de C.V. (Mexico)Lewis Gradon, Andrew Somervell,
Lawrence Gibbons
Fisher & Paykel Healthcare Colombia S.A.S (Colombia)Legal Representatives: Bryan Peterson,
James Tuck
Fisher & Paykel Healthcare Mexico S.A. de C.V. (Mexico)Lewis Gradon, Paul Shearer,
Bryan Peterson
Fisher & Paykel Healthcare Properties
S.A. de C.V. (Mexico)
Lewis Gradon, Andrew Somervell,
Jonathan Rhodes
Fisher & Paykel Healthcare Chile SpA (Chile)No directors. Bryan Peterson and
James Tuck are delegates for the
shareholder of the Company (with
the power to act individually).
Fisher & Paykel Healthcare Limited (UK) owns:
Fisher & Paykel Healthcare SAS (France)Lewis Gradon, Paul Shearer,
Patrick McSweeny, Ian Hopkinson
Fisher & Paykel Holdings GmbH (Germany)Ian Hopkinson, Patrick McSweeny,
Kerstin Bille
Fisher & Paykel Healthcare AB (Sweden)Lewis Gradon, Paul Shearer,
Patrick McSweeny, Ian Hopkinson
Fisher Paykel Sağlık Ürünleri Ticaret Limited
Şirketi (Turkey)
Lewis Gradon, Paul Shearer,
Patrick McSweeny
Limited Liability Company Fisher & Paykel
Healthcare (Russia)
Lewis Gradon, Paul Shearer,
Bryan Peterson, Anatoly Filippov
Fisher & Paykel Holdings Inc. (US) owns:
Fisher & Paykel Healthcare Inc. (USA)Lewis Gradon, Paul Shearer,
Justin Callahan
Fisher & Paykel Healthcare Distribution Inc. (USA)Lewis Gradon
*
Companies operating under a Negative Pledge Deed
ANNUAL REPORT 2020
105Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
fIVe Year SUMMarY
FIVE YEAR SUMMARY
fIVe Year SUMMarY
For the years ended 31 March
All figures in NZ$M (except as otherwise stated)
20162017201820192020
FINANCIAL
PERFORMANCE
Sales revenue 818.5 869.5 964.5 1,072.1 1,273.4
Foreign exchange gain (loss) on hedged sales (3.0)24.9 16.3 (1.7)(9.7)
Total operating revenue 815.5 894.4 980.8 1,070.4 1,263.7
Gross profit 521.7 590.4 650.4 715.8 835.8
Gross margin 64.0%66.0%66.3%66.9%66.1%
Other income 5.0 5.0 5.0 5.0 –
SG&A expenses (242.3)(269.3)(290.9)(327.8)(338.0)
R&D expenses (73.3)(86.0)(94.7)(100.4)(118.5)
Total operating expenses (315.6)(355.3)(385.6)(428.2)(456.5)
Operating profit before financing costs 211.1 240.1 269.8 292.6 379.3
Operating margin 25.9%26.8%27.5%27.3%30.0%
Net financing expense (10.3)(1.6)(2.0)(1.4)(8.8)
Tax expense (57.4)(69.3)(77.6)(82.0)(83.2)
Profit after tax 143.4 169.2 190.2 209.2 287.3
REVENUENorth America 385.9 433.0 458.5 501.5 571.2
By Region and
product group
Europe 253.7 272.0 297.6 314.6 365.4
Asia Pacific 142.6 154.8 181.0 208.1 273.3
Other 33.3 34.6 43.7 46.2 53.8
Hospital products 436.3 500.4 572.1 642.3 801.3
Homecare products 365.8 381.5 398.1 421.4 457.3
Core products subtotal 802.1 881.9 970.2 1,063.7 1,258.6
Distributed and other products 13.4 12.5 10.6 6.7 5.1
Total operating revenue 815.5 894.4 980.8 1,070.4 1,263.7
Growth Rates
Reported
Revenue 21.3%9.7%9.7%9.1%18.1%
Gross profit 27.0%13.2%10.2%10.1%16.8%
R&D expenses 12.8%17.3%10.1%6.0%18.0%
Profit before tax 26.5%18.8%12.3%8.7%27.2%
Profit after tax 26.7%18.0%12.4%10.0%37.3%
Growth Rates
in Constant
Currency (1)
Revenue 13.0%14.0%9.0%8.0%13.8%
Gross profit 19.0%17.0%9.0%9.0%11.3%
R&D expenses 13.0%17.0%10.0%6.0%18.0%
Profit before tax 18.0%21.0%12.0%9.0%20.3%
(1)
Constant Currency (CC) removes the impact of exchange rate movements. This approach is used to assess the company’s underlying comparative financial performance without any distortion from changes in foreign exchange rates.
A full reconciliation for the most recent 2 years and basis of preparation is set out on page 36. The 2016, 2017 and 2018 growth rates in constant currency have been sourced from the 2017 and 2018 annual reports respectively.
ANNUAL REPORT 2020
106fisher & Paykel healthcare Corporation Limited
FIVE YEAR SUMMARY CONTINUED
For the years ended 31 March
All figures in NZ$M (except as otherwise stated)
20162017201820192020
FINANCIAL
POSITION
Property, plant and equipment 389.6 425.2 476.4 601.4 735.3
Total assets 766.8 878.2 1,025.1 1,206.7 1,435.0
Total liabilities (225.1)(216.6)(263.7)(293.5)(461.2)
Shareholders' equity 541.7 661.6 761.4913.2 973.8
Return on assets (%) 28.0%29.0%28.1%26.1%28.1%
Return on equity (%) 39.7%39.6%37.6%34.8%39.3%
Net debt / (cash) (including short-term investments) 44.4 (0.2)(49.9)(54.4)(42.2)
Gearing Ratio (1) 7.7%0.0%-7.3%-6.7%-4.3%
DIVIDENDS AND
EARNINGS PER
SHARE (CENTS PER
SHARE)
Basic shares outstanding at 31 March 563,841,265 567,686,436 571,230,264573,708,739 574,570,603
Dividends declared
Interim 6.708.258.759.7512.00
Final (2) 10.011.2512.5013.5015.50
Total ordinary dividends 16.7019.5021.2523.2527.50
Basic earnings per share 25.629.933.436.550.0
Diluted earnings per share 25.129.533.036.249.6
CASH FLOWS Net cash flow from operating activities 144.6 193.6 247.8 253.2 321.4
Free cash flow (3) 77.1 130.6 149.3 120.0141.0
Dividends paid (68.2)(89.4)(102.5)(114.6)(146.4)
CAPITAL
EXPENDITURE
Plant and equipment 46.3 44.1 41.8 41.4 63.5
Land and buildings 1.7 3.8 41.4 74.0 81.8
Intangible assets 17.7 15.1 15.5 17.9 25.4
Total 65.7 63.0 98.7 133.3 170.7
Plant & equipment capital expenditure : depreciation ratio (4) 1.6 1.5 1.3 1.32.2
(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).
Net interest-bearing debt excludes lease liabilities recognised on the adoption of IFRS 16 – Leases.
(2)
Final dividend is paid in the following financial year.
(3)
Free cash flow represents net cash flows from operating activities less capital expenditure - including lease liability repayments following the adoption of IFRS 16 – Leases.
(4)
Depreciation excludes leased asset depreciation.
ANNUAL REPORT 2020
107Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
FIVE YEAR SUMMARY CONTINUED
For the years ended 31 March
All figures in NZ$M (except as otherwise stated)
20162017201820192020
PATENT
PORTFOLIO
NUMBERS
US patents 138 161 186 222 302
US patent applications (includes PCTs) (1) 329 357 385 427 430
Non-US patents 559 714 870 988 1,236
Non-US patent applications (excludes PCTs) (1) 582 732 912 1,080 1,228
PEOPLE
NUMBERS
People numbers (2) 3,587 4,112 4,174 4,547 5,081
By function:
Research and development509 563 572 581 597
Manufacturing and operations 1,992 2,405 2,386 2,680 3,098
Sales, marketing and distribution 907 948 994 1,047 1,132
Management and administration 179 196 222 239 254
By region:
New Zealand 2,142 2,307 2,258 2,416 2,738
North America 922 1,231 1,314 1,493 1,645
Europe 258 271 294 303 333
Rest of World 265 303 308 335 365
EXCHANGE RATES
NZ$ 1 =
AVERAGE DAILY SPOT RATES USD 0.67860.70900.71480.68110.6477
AVERAGE CONVERSION RATES (3) USD 0.72350.69570.68230.68040.6671
EUR 0.57940.59350.59990.60390.5760
GBP 0.47180.48120.50180.51050.4921
AUD 0.90000.91430.92460.91630.9235
CAD 0.87200.87870.92180.89730.8748
JPY 68.3869.6772.3473.2172.44
MXN 10.7112.0912.6213.2413.47
(1)
PCTs (Patent Cooperation Treaty) are unified patent applications across a number of jurisdictions.
(2)
People numbers are represented as full time equivalents, not as headcount.
(3)
Actual exchange rates achieved in delivering or purchasing net foreign currency in relation to the Group's exposures. The average rate includes hedged, spot and close-out transactions in each year.
ANNUAL REPORT 2020
108Fisher & Paykel Healthcare Corporation Limited
Glossary
GLOSSARY
ASMAnnual Shareholders’ Meeting
ASXAustralian Stock Exchange
AUDAustralian Dollar
AV RAnnual Variable Remuneration
CEOChief Executive Officer
CFOChief Financial Officer
CODMChief Operating Decision Maker
Companymeans Fisher & Paykel Healthcare
Corporation Limited
Constant
Currency
is our way to measure performance
of the company without any distortion
from changes in foreign exchange rates
CPScents per share
CSRCorporate Social Responsibility
DJSMDQTDow Jones US Select Medical Equipment
Total Return Index
EBITDAEarnings before interest, tax,
depreciation and amortisation
ERP Enterprise Resource Planning
which is software used to track
information across all departments
and business functions
ESGEnvironmental, Social and Governance
ESREmployee Share Right
Executive
Management
the Executive Management team
as set out on pages 30 and 31
FDA United States Food & Drug Administration
FMAFinancial Markets Authority
FTEFull Time Equivalent
FYFinancial Year
GHGGreenhouse gas
GRIGlobal Reporting Initiative
Groupmeans Fisher & Paykel Healthcare
Corporation Limited together with
its subsidiaries
GSTGoods and Services Tax
IFRSInternational Financial Reporting Standards
IP Intellectual Property
LTIFRLost Time Injury Frequency Rate
LTV RLong Term Variable Remuneration
MSCIMorgan Stanley Capital International
Net DebtDebt less cash and cash equivalents
and short-term investments
New Applications
Consumables
Applications outside of traditional
invasive ventilation
NZ GAAPNew Zealand Generally Accepted
Accounting Practice
NZ IAS New Zealand International
Accounting Standards
NZ IFRSNew Zealand Equivalents to International
Financial Reporting Standards
NZDNew Zealand Dollar
NZXNew Zealand Stock Exchange
OECDOrganisation for Economic Cooperation
and Development
PCTPatent Cooperation Treaty
PSRPerformance Share Right
QSRQuality, Safety & Regulatory
R&D Research and Development
SBTiScience Based Targets initiative
SDGSustainable Development Goal
SG&A Sales, General and Administrative
STEMScience, Technology, Engineering
and Mathematics
TCFDTask Force on Climate-related
Financial Disclosures
TRIFRTotal Recordable Injury Frequency Rate
TSRTotal Shareholder Return
UNUnited Nations
USDUnited States Dollar
VPVice President
Key medical terms used throughout this Report
COPD Chronic Obstructive Pulmonary Disease
CPAP Continuous Positive Airway Pressure
GCPGood Clinical Practice
ICUIntensive Care Unit
NICUNeonatal Intensive Care Unit
OSA Obstructive Sleep Apnea
ANNUAL REPORT 2020
109Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
grI CoNteNt INDeX
GRI CONTENT INDEX
DisclosureDescriptionLocation/Response
GRI 102 General Disclosures
102-1Name of the
organisation
Cover
102-2Activities, brands,
products, and
services
Annual Report: pp. 7–9 and 15–16
102-3Location of
headquarters
Inside back cover
102-4Location of
operations
Annual Report: p. 17
102-5Ownership and legal
form
Annual Report: pp. 41 and 102–105
102-6Markets servedAnnual Report: p. 17
102-7Scale of the
organisation
Annual Report: pp. 10 and 106–108
102-8Information on
employees and other
workers
Annual Report: pp. 72–77
102-9Supply chainAnnual Report: pp. 89–90
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 initiatives• Business and Industry Advisory Committee (BIAC)
Statement of Tax Principles for International
Business UN Declaration on Human Rights
• ILO Declaration on Fundamental Principles and
Rights at Work
DisclosureDescriptionLocation/Response
102-13 Membership of
associations
• American Association of Homecare
• American Association of Respiratory Care
• American Chamber of Commerce
• Association for Anaesthetic and Respiratory
Device Suppliers
• Australasian Investor Relations Association
• Australasian Sleep Association
• Australian College of Critical Care Nurses
• Business New Zealand
• Colorectal Society of Australia and New Zealand
• Diversity Works
• Employers and Manufacturers Association
• Guangdong Investment Promotion Association
in China
• International Electrotechnical Commission /
Technical Committee 62
• International Organisation for Standardisation /
Technical Committee 121
• Japan Association of Health Industry Distributors
• Japan Association of Medical Devices Industries
• Latin America New Zealand Business Council
• Medical Technology Association New Zealand
• National Association for Medical Direction of
Respiratory Care
• Sleep Health Foundation
• Sustainable Business Council
• Taipei Medical Instruments Commercial Association
• The Japan Fair Trade Council of the Medical
Devices Industry
Strategy
102-14Statement from
senior decision
maker
Annual Report: pp. 10–13
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 structureAnnual Report: pp. 89–96
ANNUAL REPORT 2020
110fisher & Paykel healthcare Corporation Limited
GRI CONTENT INDEx CONTINUED
DisclosureDescriptionLocation/Response
Stakeholder engagement
102-40List of stakeholder
groups
Annual Report: p. 20
102-41Collective bargaining
agreements
Annual Report: p. 76
102-42Identifying
and selecting
stakeholders
Annual Report: p. 20
102-43Approach to
stakeholder
engagement
Annual Report: p. 20
102-44Key topics and
concerns raised
Annual Report: pp. 20–21
Reporting practice
102-45Entities included in
the consolidated
financial statements
Annual Report: p. 105
102-46Defining report
content and topic
boundaries
Annual Report: pp. 20–21
102-47List of material topicsAnnual Report: pp. 20–21
102-48Re-statements of
information
No restatements
102-49Changes in reportingNo significant changes from previous reporting periods
102-50Reporting periodCover
102-51Date of most
recent report
Inside cover
102-52Reporting cycleAnnual reporting cycle
102-53Contact point for
questions regarding
the report
investor@fphcare.co.nz
102-54Claims of reporting in
accordance with the
GRI standards
Inside cover
102-55GRI content indexAnnual Report: pp. 110–111
102-56External assuranceNo external assurance for non-financial disclosures
External assurance for financial statements
(See Annual Report: pp. 66–68)
SPECIFIC STANDARD DISCLOSURES
DisclosureDescriptionLocation/Response
GRI 200 Economic standard series
GRI 103Management approach 2020Annual Report: pp. 12–13
GRI 201: Economic performance
201-1Direct economic value generated
and distributed
Annual Report: pp. 32–65
GRI 205: Anti-corruption
GRI 103Management approach 2020Annual Report: p. 90
205-3Confirmed incidents of
corruption and actions taken
Annual Report: p. 90
GRI 400 Social standard series
GRI 401: Employment
GRI 103Management approach 2020Annual Report: pp. 72–77
401-1New employee hires and
employee turnover
Annual Report: pp. 75–76
GRI 403: Occupational health and safety
GRI 103Management approach 2020Annual Report: pp. 97–99
403-2Types of injury and rates of
injury, occupational diseases,
lost days, and absenteeism, and
number of work-related fatalities
Annual Report: p. 99
GRI 404: Training and education
GRI 103Management approach 2020Annual Report: pp. 75–76
404-1Average hours of training
per year per employee
Annual Report: p. 75
GRI 416: Customer Health and Safety
GRI 103Management approach 2020Annual Report: p. 97
416-2Incidents of non-compliance
concerning the health and safety
impacts of products and services
No instances of non-compliance
with regulations resulting in
a fine, penalty or warning.
GRI 418: Customer Privacy
GRI 103Management approach 2020www.fphcare.com/privacy
418-1Substantiated complaints
concerning breaches of
customer privacy and losses
of customer data
No substantiated complaints
received concerning breaches
of customer privacy.
ANNUAL REPORT 2020
111Fisher & Paykel Healthcare Corporation LimitedFisher & Paykel Healthcare Corporation Limited
tCfD INDeX
TCFD INDEX
The Task Force on Climate-related Financial Disclosures (TCFD) seeks to develop recommendations for voluntary climate-related financial disclosures that are consistent,
comparable, reliable, clear, and efficient, and provide decision-useful information to lenders, insurers, and investors. Fisher & Paykel Healthcare is integrating the
recommendations of the TCFD, and we have included commentary in the governance, risk management and environment sections of this report, along with disclosures
addressing our global carbon footprint. Below is an index for locating these disclosures.
GovernanceStrategyRisk ManagementMetrics & Targets
Disclose the organisation’s governance around
climate-related risks and opportunities.
Disclose the actual and potential impacts
of climate-related risks and opportunities
on the organization’s businesses, strategy,
and financial planning where such information
is material.
Disclose how the organization identifies,
assesses, and manages climate-related risks.
Disclose the metrics and targets used
to assess and manage relevant climate-
related risks and opportunities where
such information is material.
a) Describe the Board’s oversight of
climate-related risks and opportunities.
pp. 95–96
a) Describe the climate-related risks and
opportunities the organization has
identified over the short, medium,
and long term. p. 100
a) Describe the organization’s processes for
identifying and assessing climate-related
risks. p. 100
a) Disclose the metrics used by the
organization to assess climate-related
risks and opportunities in line with its
strategy and risk management process.
p. 100
b) Describe management’s role in assessing
and managing climate-related risks and
opportunities. p. 96
b) Describe the impact of climate-
related risks and opportunities on the
organization’s businesses, strategy,
and financial planning. p. 101
b) Describe the organization’s processes
for managing climate-related risks.
pp. 100–101
b) Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas
(GHG) emissions, and the related risks.
pp. 80–83
c) Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C
or lower scenario. p. 101
c) Describe how processes for identifying,
assessing, and managing climate-related
risks are integrated into the organization’s
overall risk management. p. 100
c) Describe the targets used by the
organization to manage climate-
related risks and opportunities and
performance against targets. pp. 80–83
ANNUAL REPORT 2020
112fisher & Paykel healthcare Corporation Limited
DIreCtorY
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 2020
113Fisher & Paykel Healthcare Corporation LimitedFisher & 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
© 2020 Fisher & Paykel
Healthcare Corporation Limited
---
1
Full Year Results Presentation FY2020
For twelve months ended 31 March 2020
2
Important notice
Disclaimer
The information in this presentation is for general purposes only and should be read in conjunction with Fisher & Paykel
Healthcare Corporation Limited’s (FPH) Annual Report 2020 and accompanying market releases.Nothing in this
presentation should be construed as an invitation for subscription, purchase or recommendation of securities in FPH.
This presentation includes forward-looking statements about the financial condition, operations and performance of FPH and
its subsidiaries.These statements are based on current expectations and assumptions regarding FPH’s business and
performance, the economy and other circumstances.As with any projection or forecast, the forward-looking statements in
this presentation are inherently uncertain and susceptible to changes in circumstances.FPH’s actual results may differ
materially from those expressed or implied by those forward-looking statements.
3
Full year business highlights
+ IMPACTED
the lives of approximately 16 million patients
around the world, including many with COVID-19 in
hospital
+ LAUNCHED
the F&P Evora™ compact nasal mask for OSA in
New Zealand, Australia, Europe and Canada
+ EXPANDED
release of the F&P 950
TM
heated humidification
system in Europe and the F&P Vitera™ mask
in the US
+ COMMEMORATED
fifty years of care with employee events around
the globe
+ OPENED
new sales offices in Poland and Mexico, with our
own dedicated sales teams promoting products in
hospitals
+ INCLUDED
in the FTSE4Good and Dow Jones Sustainability
Indices for 2019
4
Impact of COVID-19
•Our people
- Priority has been ensuring the safety of our people, and therefore protect our
ability to manufacture, supply and train end users on essential respiratory support
- Since January 2020, have hired 548 additional direct manufacturing staff in NZ and
518 additional direct manufacturing staff in Mexico
- Our people have gone above and beyond
- Provided additional leave and profit sharing bonus to recognise the incredible
efforts of our people
•Hospital product group
- Publication of 14 clinical papers on use of nasal high flow on COVID-19 patients and
inclusion in global clinical guidelines
1
has encouraged the early use of NHF
- Doubling and, in some instances, tripling of output for some of our hospital
hardware products over just a few months
- H2 FY20 hardware growth of 53% CC
- Brought forward capex spend for new product tooling and manufacturing capacity
5
Key full year financial results
FY20 (for 12 months ended 31 March 2020)
% of RevenueNZ$MPCP^CC*
Operating revenue100%1,263.7+18%+14%
Hospital operating revenue63%801.3+25%+21%
Homecare operating revenue36%4 57. 3+9%+4%
Gross margin / Gross profit66%835.8-73bps-150bps
SG&A27%338.0+3%-1%
R&D9%118.5+18%+18%
Total operating expenses36%456.5+7%+3%
Operating profit30%379.3+30%+21%
Profitafter tax23%2 8 7. 3+37%+30%
^ PCP = prior comparable period * CC = constant currency
Recurring items, consumables and accessories approximately 85% of operating revenue (FY19: 86%)
6
Hospital product group
14%
86%
HardwareConsumables
FY20 HOSPITAL REVENUE COMPOSITION
HARDWARE
CONSUMABLES
Invasive
ventilation
Non-invasive
ventilation
Optiflow
TM
nasal
high flow
Surgical
FY19 Hospital revenue composition
Hardware: 12% Consumables: 88%
7
Hospital product group –H2 FY20 results
65%
OF OPERATING
REVENUE
30%
NZ$
24%
CONSTANT
CURRENCY
29%
NZ$
23%
CONSTANT
CURRENCY
HOSPITAL OPERATING REVENUE
NEW APPLICATIONS*
CONSUMABLES REVENUE
*New applications = Noninvasive ventilation (NIV), nasal high flow therapy, surgical
•Strong customer demand
for our Optiflowand AIRVO
systems, driven by clinical
trial results and COVID-19
H2 FY20 $447.7M
•New applications consumables*
made up 65% of H2 FY20 Hospital
consumables revenue,
63% in H1 FY20
•Hospital hardware
growth of 53% in H2
FY20 in constant
currency
8
Homecare product group
16%
84%
HardwareConsumables
FY20 HOMECARE REVENUE COMPOSITION
HARDWARE
CONSUMABLES
CPAP Therapy/OSAHome Respiratory Support
FY19 Homecare revenue composition
Hardware: 16% Consumables: 84%
9
Homecare product group –H2 FY20 results
35%
OF OPERATING
REVENUE
15%
NZ$
9%
CONSTANT
CURRENCY
15%
NZ$
MASKS REVENUE
9%
CONSTANT
CURRENCY
HOMECARE OPERATING REVENUE
H2 FY20 $242.6M
•Home Respiratory Support business continues to grow well
•Strong H2 FY20 growth in OSA masks
•F&P ViteraOSA mask launched in the US in October 2019
•Released F&P Evora February, receiving US regulatory
clearance in June 2020
10
New lease accounting standard impact (IFRS 16)
FY20 impact to Statement of Cash Flows (NZ$M)
Prior to adoptionImpactAdjusted after adoption
Cash flows from operating activities
311.7 9.7 321.4
Cash flows from financing activities
(149.3)(9.7)(159.0)
Opening adjustment to Balance Sheet at 1 April 2019 (NZ$M)
Prior to adoptionImpactAdjusted afteradoption
Property, plant & equipment
601.4 29.4 630.8
Deferred tax assets
38.9 1.5 40.4
Lease liabilities
-35.2 35.2
Retained earnings
549.2 (3.8)545.4
FY20 impact to Income Statement (NZ$M)
Prior to adoptionImpactAdjusted afteradoption
Rental and lease expenses
13.1 (12.2)0.9
Depreciation and amortisation
50.9 10.161.0
Operating profit
377.2 2.1 379.3
Financing expense
2.1 1.8 3.9
Tax expense
83.1 0.1 83.2
Net profit after tax
2 8 7.1 0.2 287.3
11
Gross margin
Long term gross margin target
GROSS MARGIN
0%
10%
20%
30%
40%
50%
60%
70%
201520162017201820192020
•Gross margin for the full year:
−decreased by 73 bps to 66.1%
−decreased by 150 bps in constant currency
−decrease primarily driven by an increase in
freight cost as a result of COVID-19 and
first full year of costs of our second Mexico
manufacturing facility (first products
shipped late in the financial year)
−partially offset by favourableproduct mix
12
Operating margin
OPERATING (EBIT) MARGIN
Long term operating margin target
0%
5%
10%
15%
20%
25%
30%
201520162017201820192020
Research & Development expenses
•NZ$118.5M, +18% (+18% CC)
•Reflecting underlying growth and timing of R&D
projects
•Long term plan to grow in line with constant
currency revenue growth
Selling, General & Administrative expenses
•NZ$338M, +3% (-1% CC)
•Patent litigation expenses of NZ$23.4M were
incurred in FY19
Operating expenses
•NZ$456.5M, +7% (+3% CC)
13
Interest and Tax
Financingexpense
FY19
NZ$M
FY20
NZ$M
Change
NZ$M
Interest income
3.32.2(1.1)
Lease interest expense
-(2.1)(2.1)
Interest expense
(2.5)(1.8)0.7
FX loss on interest bearing liabilities
(2.2)(7.1 )(4.9)
Net financing expense
(1.4)(8.8)( 7.4 )
Tax and R&D grant changes
FY19
NZ$M
FY20
NZ$M
Change
NZ$M
Reintroduction of building tax depreciation (Tax expense)
-5.35.3
R&D tax credit* (Tax expense)
-13.413.4
Callaghan growth grant (Other income)
3.6-(3.6)
Net profit after tax
3.618.715.1
* R&D taxcredit of 15% on eligible spend; replaces Callaghan Innovation growth grant of NZ$5M other income per year.
14
Cash Flow and Balance Sheet
FY19 NZ$MFY20 NZ$M
Operating cash flow253.3321.4
Capital expenditure
(includingpurchases of intangible assets)133.3170.7
Lease liability payments-9.7
Free cash flow120.0141.0
FY19 NZ$MFY20 NZ$M
Net cash /(debt) (including short-term investments)54.442.2
Total assets1,206.71,435.0
Total equity913.2973.8
Pre-tax return on average total assets26.1%28.1%
Pre-tax return on average equity34.8%39.3%
Gearing(net debt/net debt + equity)*-6.7%-4.3%
* Calculated using net interest bearing debt (debt less cash and cash equivalents) to net interest-bearing debt and equity (lesshedge reserve).
15
Capital management and Dividend
•Increased final dividend by 15% to
15.50 cps fully imputed (gross
dividend of NZ 21.53 cps). 2.7353
cps non-resident supplementary
dividend
•Target gearing ratio* of +5% to -5%
debt to debt plus equity
* Calculated using net interest bearing debt (debt less cash and cash equivalents) to net interest-bearing debt and equity (lesshedge reserve).
GEARING*
-15%
-10%
-5%
0%
5%
10%
15%
201520162017201820192020
Target gearing ratioGearing ratio
•Total dividend for the year
increased by 18% to 27.50cps
•Expanded previous dividend policy into
a broader capital management policy.
Priority to appropriately invest in the
business to support long term
sustainable growth.
Gearing ratio as at 31 March 2020 was -4.3%
16
Foreign exchange effects
•49% of operating revenue in USD (FY19: 50%) and 19% in € (FY19: 19%).
Year to 31 March
Hedging position for our main exposures
FY21FY22FY23FY24FY25FY26-28
USD % cover of expected exposure85%60%45%35%
35%-
USD average rate of cover0.6520.6520.6370.6300.624-
EUR % cover of expected exposure85%60%50%35%35%5%
EUR average rate of cover0.5510.5360.5180.5090.5020.470
Hedging cover percentages have been rounded to the nearest 5%
Reconciliation of constant currency to actual income statements
FY19
NZ$M
FY20
NZ$M
Profit after tax (constantcurrency)204.3265.0
Spot exchange rate effect5.524.8
Foreign exchange hedgingresult(1.3)(5.6)
Balance sheet revaluation0.73.1
Profit after tax (as reported)209.22 8 7. 3
17
Revenue and expenses by currency
1%
49%
19%
<1%
30%
NZDUSDEURMXNOther
REVENUE BY CURRENCY
45%
36%
3%
11%
5%
NZDUSDEURMXNOther
COST OF SALES BY CURRENCY
43%
27%
11%
<1%
19%
NZDUSDEURMXNOther
OPERATING EXPENSES BY CURRENCY
FY20 (for 12 months ended 31 March 2020)
18
Outlook FY2021
•Strategic direction remains consistent
•For the first three months of FY21:
−Hospital hardware growth >300% and Hospital consumables growth >33% on PCP
−Homecare growth closer to FY20 full year rate of growth in Homecare
Guidance assumptions(note these are not a forecast or a prediction of the course of COVID-19):
−Respiratory hospitalisationspeak Q1 due to COVID-19, return to normal by beginning of H2
−OSA diagnosis rates lower in H1, returning to normal by H2
−Freight costs remain at elevated levels through end of 2020
−Exchange rates of NZD:USD 0.64, NZD:EUR 0.57
•For FY21, based on the assumptions listed above:
−Operating revenue – approximately NZ$1.48 billion
−Net profit after tax –approximately NZ$325 million to NZ$340 million
•Capital expenditure expected to be approximately NZ$160 million
−Manufacturing capacity and new product tooling brought forward
19
Key Financials
Key Financials
20
Key full year financial results
FY20 (for the 12 months ended 31 March 2020)
NZ$MPCP^CC*
Operating revenue1263.7+18%+14%
Hospital operating revenue801.3+25%+21%
Homecare operating revenue4 57. 3+9%+4%
Hospital new applications consumables revenue+27%+23%
OSAmasks revenue+8%+4%
Gross margin(basis points decrease)-73bps-150bps
Net profit before tax370.5+27%+20%
Net profit after tax2 87. 3+37%+30%
^ PCP = prior comparable period * CC = constant currency
21
Key second half financial results
H2 FY20 (for the 6 months ended 31 March 2020)
NZ$MPCP^CC*
Operating revenue692.8+24%+18%
Hospital operating revenue4 47.7+30%+24%
Homecare operating revenue242.6+15%+9%
Hospital new applications consumables revenue+29%+23%
OSA masks revenue+15%+9%
Gross margin(basis points decrease)-156bps-290bps
Net profit before tax210.8+36%+24%
Net profit after tax166.1+49%+35%
^ PCP = prior comparable period * CC = constant currency
22
Overview
Overview
Overview
23
Fisher & Paykel Healthcare at a glance
•Medical device manufacturer with leading
positions in respiratory care and obstructive
sleep apnea
•Over 50 years’ experience in changing clinical
practice to solutions that provide better clinical
outcomes and improve effectiveness of care
•Estimated NZ$20+ billion and growing market
opportunity driven by demographics
•Significant organic long-term growth
opportunities in respiratory care, OSA, COPD and
surgery
•Large proportion (85%) of revenue from recurring
items, consumables and accessories
•High level of innovation and investment in R&D
with strong product pipeline
•High barriers to entry
Global leader in respiratory
humidification devices
Global presence
Strong financial performance
Our people are located in 39 countries
2,738
of our people in
New Zealand
1,645
of our people in
North America
333
of our people
in Europe
365
of our people
in the rest of
the world
•Continued target, and history of, doubling our
revenue (in constant currency terms) every
5 to 6 years
•Targeting gross margin of 65% and operating
margin of 30%
•Growth company with a strong history of
increasing dividend payments
24
~NZ$20+ billion and growing market opportunity
HOSPITAL
HOMECARE
NEW APPLICATIONS
Applications outside of invasive ventilation
Invasive
Ventilation
Surgical
Humidification
Non-invasive
Ventilation
Hospital
Respiratory Support
Home
Respiratory Support
Obstructive Sleep
Apnea
* Based on US HCUP data using ICD10 codes for 2018, extrapolated to the world using healthcare spend as a % of GDP
Total addressable market estimates
~90+ million patients (including ~50+ million in Hospital Respiratory Support)*
~100+ million patients
25
OUR ASPIRATION:
Sustainably
DOUBLING
our constant
currency revenue
every 5-6 years.
Our aspiration
26
Markets and products
•Hospital
−Heated humidification
−Respiratory care
−Neonatal care
−Surgery
•Homecare
−Masks
−Flow generators
−Data management tools
−Respiratory care in the home
Recurring items, consumables and
accessories approximately 85% of
operating revenue (FY19: 86%)
REVENUE BY PRODUCT GROUP
12 MONTHS TO 31 MARCH 2020
<1%
Hospital
Homecare
Distributed & Other
63%
36%
27
Impact of changing demographics
0
10
20
30
40
50
60
70
80
90
100
19701990201020302050
US POPULATION OVER AGE 65
(MILLIONS)
•Population age and weight both
increasing
−US population 65 years+ to grow
~80% over next 20 years
2
−US males 60 - 74 years,
average weight increased
0.4 kg/year since 1960
3
•60% of US healthcare cost is after age
65 years
4
•Developing markets increasing
healthcare spending
−Total health spending is increasing
more rapidly in low and middle
income countries (close to 6% on
average) than in high income
countries (4%)
5
28
Hospital cost breakdown
Source: Estimates of Medical Device Spending in the United States, Donahoe, G and King, G, June 2014
Other –includes labour,
utilities, drugs, supplies,
food, depreciation.
Medical devices
94%
6%
29
Source: AnandA Dalal, Laura Christensen, Fang Liu,and Aylin A Riedel. Direct costs of chronic obstructive pulmonary disease among managed care patients.
IntJ ChronObstruct PulmonDis. 2010; 5: 241-249.
MEAN ANNUAL COPD-RELATED MEDICAL, PHARMACY
AND TOTAL COSTS BY CARE INTENSITY COHORT
$0
$10,000
$20,000
$30,000
$40,000
$50,000
Outpatient cohortUrgent outpatient cohortED cohortStandard admission cohortICU cohort
Mean cost (2008 US$)
Lower care intensity = lower cost
30
Overview
Overview
Hospital
31
Respiratory humidification
•Normal airway humidification
is bypassed or compromised
during ventilation or oxygen
therapy
•Mucociliarytransport system
operates less effectively
•Need to deliver gas at
physiologically normal levels
−37°C body core
temperature
−44mg/L 100% saturated
32
Optiflow-displacing conventional oxygen therapy
CONVENTIONAL
OXYGEN THERAPY
NON-INVASIVE
VENTILATION
~4million
Estimated patients were treated with our
Optiflownasal high flow therapy over the
past year
33
Patient groups who may benefit from Optiflow
A D U LT S:
•Acute respiratory
failure
•Asthma
•Atelectasis
•Bronchiectasis
•Bronchitis
•Burns
•COPD
•Chest trauma
PAEDIATRICS/NEONATES:
•Infant respiratory
distress
•Emphysema
•Palliative Care
•Pneumonia
•Pulmonary embolism
•Respiratory
compromise
•Viral pneumonia
•Carbon monoxide
poisoning
•Bronchiolitis
These patients are located throughout the hospital - in the ICU, NICU, PICU, SICU, HDU, Ward and ED.
34
Clinical outcomes of Optiflownasal high flow therapy
A D U LT S:
•REDUCED intubation
6
•REDUCED re-intubation
7, 8, 9
•REDUCED bilevel ventilation
8
•REDUCED nursing workload
8
•INCREASED ventilator free days
6
•IMPROVED comfort & patient
tolerance
7
•IMPROVED compliance
7
•REDUCED COPD exacerbations
10
PAEDIATRICS:
•REDUCED intubation
11
•REDUCED length of stay
12
•REDUCED respiratory distress
13
NEONATES:
•NON-INFERIORITY with nasal
CPAP
14
•REDUCED nasal trauma
15, 16
•REDUCED respiratory distress
17
Optiflow NHF therapy is associated with:
35
OptiflowNHF -a growing body of clinical evidence
NASAL HIGH FLOW CLINICAL PAPERS PUBLISHED ANNUALLY
Source: PubMed. Data in years 2000-2018 restated to be consistent with updated PubMed database
* Controlled studies: randomised controlled trials, non-randomised controlled trials and randomised crossover trials
0
50
100
150
200
250
300
AdultNeonatal and Paediatric
•The publication of
437 clinical papers
on NHF continues to
signify a high level of
clinical interest in the
therapy
•Of the 65 controlled
studies* on the use
of NHF for
respiratory support
in adults, F&P
products have been
used in 60
36
SPOLETINI
25
2018
Kim, ES
21
2018
Pilcher, J
23
2017
Lee, MK
24
2018
Longhini, F
25
2019
Millar, J
26
2014
Pavlov, I
27
2017
Yuste, M
22
2019
Nasal High Flow in AHCRF patients**
IMPROVES
Hypercapnia
IMPROVES
Respiratory
Rate
REDUCED
PH
IMPROVES
PtCO2 /
PaCO2
IMPROVES
Comfort
* No significant difference to comparator. **Select studies included in the systematic review publication by Pantazopouloset al. 2019
AHCRF: Acute Hypercapnic Respiratory Failure (Type 2 respiratory patients)
Medical
ICU
ICU
ED
ED & Ward
ICU
Medical
ward
Respiratory
ward
ICU & Ward
Max flow
rate
Comparator
COT
-
COT
NIV
>50
>50
>35
60
>50
>50
Rittayamai, N
28
2019
>55
50
COT
-
-
-
*
*
*
37
Consistently strong growth in hospital new applications
•New applications consumables currently make up 64% of Hospital
consumables revenue, up from 59% in FY18 and 62% in FY19
CONSTANT CURRENCY REVENUE GROWTH RATE
IN NEW APPLICATIONS CONSUMABLES*
0%
5%
10%
15%
20%
25%
30%
35%
2011201220132014201520162017201820192020
New applications consumables: Non-invasive ventilation, Optiflow, AIRVO, Surgical
* Adjusted to exclude impact of US distribution transition in FY16 and FY17
38
Homecare
Homecare
39
Obstructive sleep apnea
•Temporary closure of airway during sleep
•Can greatly impair quality of sleep, leading
to fatigue; also associated with
hypertension, stroke and heart attack
•Estimate >100 million people affected in
developed countries
•Most common treatment is CPAP
(Continuous Positive Airway Pressure)
−Key issue with CPAP is compliance
−Humidification provides significant
acceptance and compliance
improvements
40
Mask matters most
F&P VITERA
™
F&P EVORA
™
F&P BREVIDA
™
•Masks are key to compliance
•Unique, patented designs
•Viteralaunched in US in October. Evora launched in NZ, Australia, Europe and Canada
in February and received US regulatory clearance in June
41
Home respiratory support
•Chronic obstructive pulmonary disease (COPD)
is a lung disease which is commonly associated
with smoking
•Emphysema and chronic bronchitis are both
forms of COPD
•Chronic respiratory disease, primarily COPD, is
the third leading cause of death in the world
18
•6% of US adults have been diagnosed with
COPD
19
(~15 million people)
•4- 10% COPD prevalence worldwide
20
(~400
million people)
•Emerging evidence for COPD patients using
NHF at home, reduced exacerbation rates
10
,
reduced hypercapnia
2 7, 2 8
, and improved Quality
of life
10,27
.
42
High level of innovation and investment in R&D
•R&D represents 9% of operating
revenue:
*
NZ$118.5M
•Product pipeline includes:
−Humidifier controllers
−Masks
−Respiratory consumables
−Flow generators
−Compliance monitoring
solutions
•302 US patents, 430 US pending,
1,236 Rest of world patents,
1,228 Rest of world pending
†
*For 12 months ended 31 March 2020
†As at 31 March 2020
43
Growing patent portfolio
Average remaining life of FPH patent portfolio (all countries): 11.5 years*
FISHER & PAYKEL HEALTHCARE US PATENT PORTFOLIO (2008 –2020)
*As at 31 March 2020
0
50
100
150
200
250
300
350
400
450
2008201020122014201620182020
US PatentsUS Patent Applications
44
Manufacturing and operations
•Vertically integrated
•Will grow manufacturing capacity to
accommodate future volume growth
•Modest growth in NZ
•Most growth outside NZ
Auckland, New Zealand
•Four buildings: 110,000 m
2
/ 1,180,000 ft
2
•100 acres / 40 hectares land
•Fourth building was completed in 2020
•Co-location of R&D and manufacturing in
NZ a competitive advantage
Tijuana, Mexico
•Two buildings: 41,000 m
2
/ 450,000 ft
2
Daniell Building – the fourth building on our
Auckland site, completed May 2020
45
Environmental Social Governance
Summary of key environmental metrics
TopicDescription
of measure
Target
Scope 1 & 2
carbon
emissions
Tonnes
Co
2
e
4.2% annual reduction
from 2019 base year
Scope 3
carbon
emissions
Tonnes
Co
2
e
SBTisupplier engagement
Sustainability disclosures
and indices
We participate annually in a suite of well-
respected sustainability disclosure
programmes and have been included this
year in the Dow Jones Sustainability
Index and the FTSE4Good index.
Increasein carbon emissions in 2020 driven by the inclusion of inbound freight in our audit of Scope 3 emissions.
0
10
20
30
40
50
60
70
201820192020
Tonnes
CO
2
e
Scope 1 & 2Scope 3Total
CDP (Carbon Disclosure Project) grading
ClimateSupplier
engagement
Water
BB -C
46
Strong global presence
•Direct/offices
−Hospitals, home care dealers
−Sales/support offices in North
America, Europe, Asia, South
America, Middle East and
Australasia, 18 distribution centres
−~1,000 employees in 39 countries
−Ongoing international expansion
•Distributors
−+150 distributors worldwide
•Original Equipment Manufacturers
−Supply most leading ventilator
manufacturers
•Sell in more than 120 countries in total
REVENUE BY REGION
12 MONTHS TO 31 MARCH 2020
29%
22%
4%
45%
North America
Europe
Asia Pacific
Other
47
Ownership structure and listings
•Listed on NZX and ASX (NZX.FPH, ASX.FPH)
15%
60%
23%
2%
NZ InstitutionsOther Institutions
Brokers & RetailOther
36%
23%
25%
7%
5%
3%
1%
New ZealandAustralia
North AmericaUK
Europe (ex UK)Asia
Rest of World
GEOGRAPHICAL OWNERSHIP AS AT
31 MARCH 2020
SHAREHOLDING STRUCTURE AS AT
31 MARCH 2020
48
Consistent growth strategy
49
References
References
1.Clinical guidelines for use of NHF on COVID-19 patients, including those issued by the HHS, WHO, SCCM, ACEP, NIH and the CDC.
2.Grayson K. Vincent, Victoria A. Velkoff. The Next Four Decades. The Older Population in the United States: 2010 to 2050. US Census Bureau, 2010.
3.Cynthia L Ogden, Cheryl D Fryar et al. Mean Body Weight, Height, and Body Mass Index (BMI) 1960-2002. US Centers for Disease Control and Prevention, 2004.
4.BerhanuAlemayehu, Kenneth E Warner. The Lifetime Distribution of Health Care Costs. Health ServRes. 2004 June; 39(3): 627–642
5.KeX, Agnes S et al. Public Spending on Health: A Closer Look at Global Trends. World Health Organisation2018.
6.Frat JP, ThilleAW, MercatA et al. High-flow oxygen through nasal cannula in acute hypoxemic respiratory failure. N EnglJ Med. 2015;372(23):2185-96
7.Maggiore SM, IdoneFA, VaschettoR et al. Nasal high-flow versus Venturimask oxygen therapy after extubation. Effects on oxygenation, comfort, and clinical outcome. Am J RespirCritCare Med. 2014;190(3):282-8
8.StéphanF, BarrucandB, Petit P et al. High-Flow Nasal Oxygen vs Noninvasive Positive Airway Pressure in Hypoxemic Patients After Cardiothoracic Surgery: A Randomized Clinical Trial. JAMA. 2015;313(23):2331-9
9.Hernández G, Vaquero C, González P, et al. Effect of PostextubationHigh-Flow Nasal Cannula vs Conventional Oxygen Therapy on Reintubation in Low-Risk Patients: A Randomized Clinical Trial. JAMA.2016;315(13):1354-1361.
doi:10.1001/jama.2016.2711
10.Storgaard LH, Hockey HU, Laursen BS, Weinreich UM. Long-term effects of oxygen-enriched high-flow nasal cannula treatment in COPD patients with chronic hypoxemic respiratory failure. Int J ChronObstructPulmonDis
2018;16;13:1195-1205
11.Wing R, James C, Maranda LS et al. Use of high-flow nasal cannula support in the emergency department reduces the need for intubation in pediatric acute respiratory insufficiency. PediatrEmergCare. 2012;28(11):1117-23
12.McKiernan C, Chua LC, VisintainerPF et al. High flow nasal cannulaetherapy in infants with bronchiolitis. J Pediatr. 2010;156(4):634-8
13.MilésiC, BaleineJ, MateckiS et al. Is treatment with a high flow nasal cannula effective in acute viral bronchiolitis? A physiologic study. Intensive Care Med. 2013 Jun;39(6):1088-94
14.Manley BJ, Owen LS, Doyle LW et al. High-flow nasal cannulaein very preterm infants after extubation. N EnglJ Med. 2013;369(15):1425-33
15.Yoder BA, Stoddard RA, Li M, King J et al. Heated, humidified high-flow nasal cannula versus nasal CPAP for respiratory support in neonates. Pediatrics. 2013;131(5):e1482-90
16.Collins CL, HolbertonJR, Barfield C, Davis PG. A randomized controlled trial to compare heated humidified high-flow nasal cannulaewith nasal continuous positive airway pressure postextubationin premature infants. J Pediatr.
2013;162(5):949-54
17.SaslowJG, AghaiZH, NakhlaTA et al. Work of breathing using high-flow nasal cannula in preterm infants. J Perinatol. 2006;26(8):476-80
18.World Health Organise(2018) The top 10 causes of death, Available at: https://www.who.int/news-room/fact-sheets/detail/the-top-10-causes-of-death (Accessed: 24 May 2018)
19.Nicole M Kosacz, Antonello Punturieriet al. Chronic Obstructive Pulmonary Disease Among Adults -United States 2011. US Centers for Disease Control and Prevention, 2012.
20.R J Halbert, Sharon Isonaka, Dorothy George, AhmarIqbal. Interpreting COPD Prevalence Estimates. Chest. 2003; 123:5 1684 – 1692.
21.Kim ES, Lee H, Kim SJ, et al. Effectiveness of high-flow nasal cannula oxygen therapy for acute respiratory failure with hypercapnia. J ThoracDis. 2018;10(2):882–888. doi:10.21037/jtd.2018.01.125.
22.YusteME, Moreno O, NarbonaF, et al. Efficacy and safety of high-flow nasal cannula oxygen therapy in moderate acute hypercapnic respiratory failure. Rev Bras Ter Intensiva. 2019; 31(2):156–163. doi:10.5935/0103-507X.20190026.
23.Pilcher J, Eastlake L, Richards M, et al. Physiological effects of titrated oxygen via nasal high-flow cannulaein COPD exacerbations: a randomized controlled cross-over trial. Respirology2017; 22(6):1149–1155. doi:10.1111/resp.13050.
24.Lee MK, Choi J, Park B, et al. High flow nasal cannulaeoxygen therapy in acute-moderate hypercapnic respiratory failure. Clin Respir J. 2018;12(6):2046–2056. doi:10.1111/crj.12772..
25.LonghiniF, Pisani L, Lungu R, et al. High-flow oxygen therapy after noninvasive ventilation interruption in patients recovering from hypercapnic acute respiratory failure: a physiological crossover trial. CritCare Med. 2019;47(6):e506–e511.
doi:10.1097/ CCM.0000000000003740.n
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28.RittayamaiN, PhuangchoeiP, TscheikunaJ, et al. Effects of high-flow nasal cannula and non-invasive ventilation on inspiratory effort in hypercapnic patients with chronic obstructive pulmonary disease: a preliminary study. Ann Intensive
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---
Annual Review
For the year ended 31 March 2020
36%
OF OPERATING REVENUE
BEYOND
OPERATING REVENUE
$1.26b
▲
18% | 2019 $1.07B
NET PROFIT AFTER TAX
$287.3m
▲
37% | 2019 $209.2M
TOTAL DIVIDEND FOR YEAR
FULLY IMPUTED
27.50cps
▲
18% | 2019 23.25CPS
GROSS MARGIN
66.1%
HOSPITAL HARDWARE
REVENUE GROWTH
37%
(CONSTANT CURRENCY)
NEW APPLICATIONS CONSUMABLES
REVENUE GROWTH
23%
(CONSTANT CURRENCY)
Annual Review
For the year ended 31 March 2020
HIghlights
Before COVID-19 impacted sales, the 2020
financial year was already on track to deliver
strong growth. As a result of increased demand
for our Hospital and Homecare products, the
second half of the 2020 financial year saw
the company deliver better-than-expected
financial performance.
Operating revenue was $1.26 billion, up 18 per cent
over last year, or 14 per cent in constant currency.
Net profit after tax was $287 million, up 37 per cent
over the previous year.
The increase in revenue was largely driven by growth
in the use of our Optiflow™ nasal high flow therapy,
demand for products to treat COVID-19 patients,
and strong hardware sales throughout the course
of the year.
In the Hospital product group, revenue increased
25 per cent, or 21 per cent in constant currency,
to $801 million for the year. Revenue from new
applications consumables, which includes products
used for nasal high flow therapy, grew by 23 per cent
over the previous financial year in constant currency.
We introduced several new Hospital products in
financial year 2020. For treating patients on
noninvasive ventilation, we launched our new vented
F&P Nivairo™ full face mask, which incorporates
design features to make the fit more comfortable.
For invasive ventilation, we expanded our range
of consumable products for the F&P 950™ system,
including neonatal breathing circuits in the UK and
Ireland and adult circuits across Europe.
In the Homecare product group, which includes our
masks for obstructive sleep apnea (OSA), revenue
grew by 9 per cent, or 4 per cent in constant
currency, and finished at $457 million for the year.
The expansion of our F&P Vitera™ full-face mask into
the U.S. contributed to our results, and we anticipate
continued success with this product.
In February we launched F&P Evora™, a new
compact nasal mask for treating OSA. Evora
showcases our commitment to ‘care by design’
with its innovative headgear, which is put on like
a baseball cap. Already available in Australia,
New Zealand, Europe and Canada, Evora will
be launched next in the U.S.
No one can fully predict the scope, duration or
impact of COVID-19 and its effects on operations
and financial results. In the midst of this uncertainty,
we will continue doing what we are known for –
expanding our range of innovative products with
patients at the centre.
For the first three months of FY21, our Hospital
product group growth has continued to accelerate,
with hardware growth of over 300 percent, and
hospital consumables tracking at over a one-third
increase, compared to the first three months of
FY20. In our Homecare product group we are seeing
evidence of both a lower OSA diagnosis rate, and
OSA mask resupply levels in the beginning of FY21
returning closer to expected levels compared to the
elevated levels at the end of FY20. Homecare growth
for the first three months of FY21 has therefore been
closer to the FY20 full year rate.
Some costs, most significantly freight, also
remained elevated during the first three months
of FY21. We value a long term relationship with our
customers, and we have not increased their prices.
Due to significant uncertainty in the extent and
duration of the impact of COVID-19 on global
demand for our products, we have made some
assumptions to allow us to provide some guidance
for FY21. As a result, our guidance is provided
on the basis that global hospitalisations due to
COVID-19 peak for the first quarter of this financial
year, and hospitalisations for respiratory-related
illnesses and OSA diagnostic activity steadily return
to normal by the end of our first half. On this basis
and at current exchange rates, full year operating
revenue for the 2021 financial year would be
approximately $1.48 billion and net profit after tax
would be approximately $325 million to $340 million.
Our assumption for guidance is not a prediction
of the course of COVID-19 around the world.
We are continuing to grow manufacturing
capacity of hospital products during our 2021
financial year to ensure a further increase in supply
of our respiratory products is available if required.
Construction is complete on our fourth manufacturing
building in New Zealand. As we bring forward
capital expenditure spending for new product
tooling and manufacturing capacity we expect
capital expenditure for the 2021 financial year to
be approximately $160 million.
Fisher & Paykel Healthcare is resilient and well-
positioned to respond to the global pandemic
and adapt to a ‘new normal’. Come what may, our
innovative products and therapies will continue to
shape the future of care in hospitals and homes.
TONY CARTER LEWIS GRADON
CHAIRMAN MANAGING DIRECTOR
AND CHIEF EXECUTIVE OFFICER
Dear Shareholder
Dividend
The Board has approved a final
dividend of 15.5 cents per share.
This brings the total dividend for
the year to 27.5 cents per share, an
increase of 18 per cent on last year.
Lewis Gradon Tony Carter
Results in brief
OPERATING REVENUE
NZ$ MILLIONS
NET PROFIT AFTER TAX
NZ$ MILLIONS
REVENUE BY PRODUCT GROUP
12 MONTHS TO 31 MARCH 2020
REVENUE BY REGION
12 MONTHS TO 31 MARCH 2020
Hospital
Homecare
Distributed & Other
North America
Europe
Asia Pacific
Other
63%
<1%
36%
45%
29%
22%
4%
1617181920
815.5
894.4
1,070.4
1,263.7
980.8
1617181920
143.4
169.2
209.2
287.3
190.2
+
IMPACTED
the lives of approximately
16 million patients around
the world, including many
with COVID-19.
+
LAUNCHED
the F&P Evora compact nasal
mask for OSA in New Zealand,
Australia, Europe and Canada.
+
EXPANDED
release of the F&P 950 heated
humidification system in Europe
and the F&P Vitera mask
in the US.
+
OPENED
new sales offices in Poland and
Mexico, with our own dedicated
sales teams promoting products
in these countries.
+
WELCOMED
Dr Jean-Pierre Frat, a global key
opinion leader, to present his
findings on the use of nasal high
flow therapy in his practice.
+
COMMEMORATED
50 years of care with
employee events around
the globe.
+
CONTINUED
with the global roll-out of our
enterprise resource planning
(ERP) system in the US.
+
INCLUDED
in the FTSE4Good and Dow Jones
Sustainability Indices for 2019.
+
JOINED
other New Zealand climate
leaders as a member of the
Sustainable Business Council.
+
HONOURED
to receive the inaugural
Value of Design Black Pin in
the NZ Best Design Awards.
HospitalHomecare
For further reading visit:
www.fphcare.co.nz/investor-reports
© 2020 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 noninvasive ventilation,
nasal high flow therapy or
undergoing surgery.
Humidity is crucial to respiratory
health and wellbeing. 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.
63%
OF OPERATING REVENUE
36%
OF OPERATING REVENUE
OPERATING REVENUE GROWTH
(NZ$457.3M)
9%
OPERATING REVENUE GROWTH
(NZ$801M)
25%
CONSTANT CURRENCY
REVENUE GROWTH FROM
NEW APPLICATIONS CONSUMABLES
23%
CONSTANT CURRENCY
REVENUE GROWTH
4%
---
29 June 2020
Results announcement
Results for announcement to the market
Name of issuer Fisher & Paykel Healthcare Corporation Limited
Reporting Period 12 months to 31 March 2020
Previous Reporting Period 12 months to 31 March 2019
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$1,263,700 +18%
Total Revenue $1,263,700 +18%
Net profit/(loss) from
continuing operations
$287,300 +37%
Total net profit/(loss) $287,300 +37%
Final Dividend
Amount per Quoted Equity
Security
0.15500000 $/share
Imputed amount per Quoted
Equity Security
0.06027778 $/share
Record Date 7 July 2020
Dividend Payment Date 17 July 2020
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
NZ$1.41 NZ$1.46
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Not applicable
Authority for this announcement
Name of person
authorised
to make this announcement
Marcus Driller
Contact person for this
announcement
Marcus Driller
Contact phone number +64 9 574 0110
Contact email address marcus.driller@fphcare.co.nz
Date of release through MAP
29 June 2020
Audited financial statements accompany this announcement.
---
29 June 2020
Distribution Notice
Section 1: Issuer information
Name of issuer Fisher & Paykel Healthcare Corporation Limited
Financial product name/description Final Dividend
NZX ticker code FPH
ISIN NZFAPE0001S2
Type of distribution
Full Year X Quarterly
Half Year Special
DRP applies
Record date 7 July 2020
Ex-Date 6 July 2020
Payment date 17 July 2020
Total monies associated with the
distribution
$89,069,595 based on shares on issue at 29 June 2020
for cash distribution
Source of distribution Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution 0.21527778 $/share
Gross taxable amount 0.21527778 $/share
Total cash distribution 0.15500000 $/share
Excluded amount N/A
Supplementary distribution amount 0.02735294 $/share
Section 3: Imputation credits and Resident Withholding Tax
Is the distribution imputed Fully imputed
If fully or partially imputed, please
state imputation rate as % applied
100%
Imputation tax credits per financial
product
0.06027778 $/share
Resident Withholding Tax per
financial product
0.01076389 $/share
Section 4: Distribution re-investment plan (if applicable)
Not applicable
Section 5: Authority for this announcement
Name of person
authorised to make
this announcement
Marcus Driller
Contact person for this
announcement
Marcus Driller
Contact phone number +64 9 574 0110
Contact email address marcus.driller@fphcare.co.nz
Date of release through MAP 29 June 2020
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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