Fisher & Paykel Healthcare Corporation Limited

Thank you, Justin. Well, good morning, everyone, and welcome to the conference call for Fisher & Paykel Healthcare's full-year results for the 2025 financial year.

On the call today are Lewis Gradon, Managing Director and Chief Executive Officer; Lyndal York, Chief Financial Officer; Andy Niccol, our Chief Operating Officer; Justin Callahan, VP of Sales & Marketing; and Andrew Somervell, our VP of Products and Technology. Lewis and Lyndal will first provide an overview of the results and then we'll move on to questions for the team.

We will be discussing our results for the 12 months ended 31 March, 2025. Earlier today we provided our 2025 annual report, including financial statements and commentary on our results to the NZX and ASX.

These disclosures can be accessed on our website at fphcare.com/investor. With that, I'd now like to turn the call over to Lewis.

Okay. Thanks, Marcus, and welcome, everyone.

I'm going to be referring to the investor presentation pack that was released to the NZX and the ASX this morning. So we will start on Page 3 with a few of the highlights of the year.

We continue to work closely with clinicians to promote the adoption of our therapies globally, and that has supported the treatment of approximately 22 million patients during this financial year. We released new products across the hospital and homecare businesses during the year with the Nova Nasal being added to our OSA mask portfolio, and this is now available in New Zealand and Australia.

Our Airvo 3 and 950 were launched into the U.S., and they have been well received during the year or so. On the infrastructure front, we continued with the expansion of our East Tamaki campus here in Auckland, and construction is underway on our fifth building, which will complete the site.

So now I turn to Page 4. Operating revenue for the full-year was $2.02 billion, up 16% on FY2024, and that's 14% in constant currency.

Broad-based growth across the hospital consumables product portfolio as well as double-digit growth in OSA masks were key contributors to this result. Net profit after tax was $377.2 million, that's up 43% on FY2024 or 30% earned constant currency.

These growth rates are against the underlying net profit after tax figures for last year, which excludes those abnormal items. So turning now to Page 6.

Hospital operating revenue was $1.28 billion for the full-year. That's up 18% or 16% in constant currency.

New applications consumables revenue was up 20% on FY2024 or 18% in constant currency. And if you look at our second half, new applications consumables growth was 13% in constant currency.

Our hospital result was pleasing across the portfolio, including a noninvasive ventilation, Optiflow for both respiratory and anesthesia patients, and invasive ventilation. So turn now to Page 8.

Homecare operating revenue was $739.9 million, up 13% on FY2024 or 11% in constant currency. OSA mask revenue is 14% for the year or 11% in constant currency.

And if you look at our second half, growth was 9% in constant currency terms after a strong 14% in the first half. And we saw this good growth driven by the new masks that we launched during the year with a number of competitor introductions during our second half.

So I'll pause there and hand over to our CFO, Lyndal York, for more details on financial performance. And I'll speak to our guidance following that.

Over to you, Lyndal.

Thanks, Lewis, and good morning, everyone. On Page 9, our gross margin was 62.9% for the year.

Excluding the product recall provision last year, that's an increase of 181 basis points or 129 basis points in constant currency. The range of margin improvement efforts across our business, including manufacturing efficiency and overhead efficiency continued making a positive impact.

If the current global tariffs remain in effect as they currently are, our gross margin would be impacted by approximately 75 basis points on an annualized basis and approximately 50 basis points impacting in the 2026 financial year. Our ongoing improvement efforts are anticipated to more than offset this to provide an overall gross margin improvement of approximately 50 basis points in constant currency in FY2026.

At the end of April exchange rates, that would be approximately a 25 basis point improvement in reported currencies. Moving on to Page 10.

Total operating expenses grew 10% in both reported and constant currency compared to last year. This is as expected, given the impact of the people we added throughout the 2024 financial year.

Operating margin was 25.2% for the year. Excluding the product recall provision last year, this is an increase of 379 basis points or 260 basis points in constant currency.

This reflects the improvement in gross margin as well as our operating expenses growing below revenue growth. R&D expenses grew 14% to $227 million and were 11% of revenue for the year.

We continue to estimate that about 60% of our R&D spend is eligible for the 15% R&D tax credit. SG&A expenses were $534 million this year, an increase of 8% in both reported and constant currency.

Moving now to Page 11. Operating cash flow this year was $549 million, up 28% from last year.

This reflects the growth in our profit. Tax payments were lower than usual last year as we prepaid tax during the 2023 financial year, requiring less tax to be paid in the 2024 financial year.

Capital expenditure, which includes purchases of intangible assets, was $103 million for the year down from $339 million last year, which included $190 million paid for the Karaka land acquisition. Capital expenditure for the 2026 financial year is expected to be approximately $225 million.

Within this is around $120 million on land and buildings, including the next payment on our Karaka land purchase and progress on the construction of our fifth building at East Tamaki. Looking at the balance sheet.

Debtor days were in line with last year at 44 days. Net cash at the 31st of March was $200.5 million, and our gearing ratio was minus 11.6%.

Interest-bearing debt was $60 million, all of it being current. Turning to Page 12.

We have declared a fully imputed final dividend of $0.24 per share. This is a 2% increase on the final dividend declared last year, and it will be paid on the 4th of July.

The full-year dividend totals $0.425 per share, up 2% on last year. This represents a 66% payout of our full-year profit.

Looking now at foreign currency on Page 13. Foreign currency movements positively impacted our net profit after tax, or NPAT, by $39 million compared to last year.

This primarily reflects the movements in spot rates and hedging results when compared to last year. In the 2025 financial year, hedging gains were $7 million before tax and foreign exchange gains on balance sheet translations were $0.5 million before tax.

At the end of April exchange rates, we would have an overall positive impact on profit before tax of approximately $10 million for FY2026 when compared to FY2025. That would be approximately $2 million after tax.

This includes hedging losses of $8 million before tax and losses on balance sheet translations of $3 million before tax in the 2026 financial year. Now back over to you, Lewis.

Okay. Thanks, Lyndal.

So turning now to outlook on Page 14. At 30 April exchange rates, we expect full-year operating revenue to be in the range of approximately $2.15 billion to $2.25 billion and net profit after tax to be in the range of approximately $390 million to $440 million.

One of the big movers in that revenue guidance is hospital consumables. They are sensitive to seasonal respiratory hospitalizations in the Northern Hemisphere, and these usually occur in our second half.

And to be clear, we are using the phrase seasonal respiratory hospitalizations to include all the contributors. So that's at least influenza, RSV, COVID.

Now we are also moving away from referencing seasons as low, moderate and high. These terms are often used by other parties for influenza only, and they include other metrics like test results.

They don't always neatly align with hospitalizations or our financial year. And of course, now there's a COVID component as well.

So it's just becoming less relevant. So this year, we are referencing our guidance against the year we just completed.

And on that basis, we would expect that if a similar cumulative respiratory seasonal hospitalization rate to FY2025 occurred in FY2026, that would be pushing the result towards the upper end of guidance. And conversely, a lower rate would push us towards the lower end of the guidance.

And I'd just like to put this flu season commentary into a context. We estimate that for most years, probably less than 5% of our hospital consumables business is due to the seasonality.

And it's a directional signal rather than a quantifiable number. But however, of course, the larger years versus smaller years or vice versa can impact the apparent progress of our major growth driver, which is the change in clinical practice.

The other major mover in guidance is OSA masks, and this guidance range accommodates similar conditions throughout this year as we experienced in our second half of FY2025. So moving on now to the NPAT portion of guidance.

So assuming the current global tariff rates, the policies and applications of them don't change for the remainder of this financial year. We are estimating about a 50 basis point impact to gross margin in constant currency terms for the 2026 financial year due to those tariff costs.

So annualized, that's about 75 basis points, but it kicks in part through the financial year. And a quick recap of those assumptions for the year is that practically all of our finished goods in Mexico are compliant with the USMCA.

And after applying the Nairobi protocol, that leaves us with a 10% tariff on hospital products out of New Zealand. And I think a really important point is that during the year, we are going to continue with a holistic approach to improving the gross margin just like we always have for all cost increases that come our way, whether it's driven by inflation, materials, exchange rate, freight or tariffs or whatever the source of the increase.

And that's our long-standing approach of continuous improvements across all of the business processes, improving efficiencies and making better use of our overheads. We've assumed in guidance that if these activities, along with our routine pricing negotiations during the year can generate a roughly 100 basis point improvement to gross margin, then the year could net out at roughly a 50 basis point improvement to gross margin, all in constant currency terms, of course.

So I'll end my comments there and we can move on to the questions.

Thanks, Lewis. Justin, if I could ask you to please open up the lines for questions.

And can I please ask everybody to limit your questions to two. This is to ensure that everybody has an opportunity to participate.

You can rejoin the queue for any additional questions.

Thanks, Justin. The first question comes from Davin Thillainathan at Goldman Sachs.

Please go ahead, Davin.

Thanks, Marcus. Good morning, Lewis and team.

Can I just start with the revenue guidance, FY2026? I hear your comments about the variability there in the hospital and the homecare segments, but maybe if I can just focus on the hospital side.

Clearly, you've got a few new products that are on the mix of launching or to come? Can we get an understanding within that guidance?

Just which products are materially contributing and some of the products from what we can see would be the Optiflow Switch, Airvo 3 NIVs and also potentially the F&P 950 for anesthesiology? Could you give us a sense of whether that's contributing into your guidance, please?

Yes, thanks for the question. Look, they kind of all contribute and they all contribute all base.

If you look at maybe, say, a 950 system, we've been rolling that out globally. Well COVID got in the way there.

But typically, that might be, say, a five-year rollout. So that's not unusual for us, same for everything you talked about.

We roll them out over a period of years. And then across the whole product portfolio, you've got kind of the whole range and the whole mix shift if you look at maybe Optiflow cannula duets the current run there.

That's version 5. And we still sell Version 3 and Version 4.

So a bit of a long-winded answer, but I think it's an important point that shift those new products, they contribute. Typically, for us, that's a 1% to 2% impact during the year.

That would be quite normal and it's kind of always there, and it's kind of across everything.

Yes. Okay.

And just to clarify that, because the sort of timing of when you launch this would be quite useful to understand your momentum in the hospital side of the business. So as an example, is the Optiflow Switch launched yet in the U.S.?

Is it to launch in that 2026 number?

Okay. So when you go to Switch and Trace, that's a little bit different in that we're coming off a pretty low installed base.

We're leading with Switch and Trace. So they actually do make up the majority of our anesthesia per se, anesthesia sales right now.

You could think of that as a mix shift within, say, Optiflow in general or mix shift with a new app. And then the other component to that is we've led with Trace.

We just – we got going with a dedicated anesthesia force in the U.S., and we kind of started that I'm looking at Justin two years ago, three years ago, when we first started. We led with Trace, and we're still working through the Trace leads there.

We haven't quite got Switch in the U.S. yet.

Okay. And just my next question then.

Just in terms of this comment, I think, that you made in the annual report, short-term challenges that you're seeing. Could I get you comment on how that would impact or feature in your hospital revenue guidance again?

Just trying to think about CapEx constraints perhaps in certain markets, just how have you thought about that, please?

CapEx constraints don't tend to have an impact on our business. I think it's fairly normal in the healthcare industry, most years that there's pressure on healthcare costs.

We might have been referring to tariffs with that comment as well. That's could be a challenge going forward.

Any other short-term challenges? I think that's it.

All right. Thanks.

Thanks for your questions Davin, really appreciate it. Next question come from Lyanne Harrison at BofA.

Please go ahead, Lyanne.

Hi. Good morning, Lewis, Lyndal and all.

I might start with hospital hardware. Obviously, very good growth this year, driven by the Airvo 3.

Can you comment on the rate of rollout and penetration particularly in the United States for the Airvo 3? Should we expect a little bit more growth to come as well in fiscal 2026?

And is that included in your assumptions?

Well, I think yes to all those comments, and I kind of actually go back to the opening comment that it's a continuous process. In the case of Airvo 3, we think of that as facilitating the change in clinical practice.

It makes it easier for customers to use the therapy in more parts of a hospital. It makes it easier with less training required.

And then in terms of uptake for those new products. Airvo 3 in the U.S.

right now would be maybe half our volume by now compared to similar to Airvo 2 volume right now? So yes, we expect this to continue.

But again, it's a dynamic that's always happening in the business in some product portfolio in some regions.

Okay. And if I could move on to gross margin.

So obviously, very good gross margin expansion this year. Can perhaps you, Lewis, or maybe even Lyndal comment on which factors contributed most towards the gross margin expansion?

And how should we think about that for fiscal 2026?

Yes, that will be Lyndal.

Hi, Lyanne. Yes, look, basically, everything that we do around the business and the margin improvement made a positive impact this year.

We’re sort of back to BAU, what we've always been doing thousands of continuous improvement projects done throughout the organization, getting more efficient with our overheads and growing into the overhead structure there. I guess the color I'd give you there is about half of that 130 basis point improvement in constant currency came from overhead efficiency and freight.

And that's where sort of they'll come back a little bit in FY2026, which is why we're sort of going guiding to roughly about 100 basis points constant currency improvement. Freight gave us a little bit of a tailwind in 2025.

We expect that to be pretty flat in 2026 and then overhead efficiency will sort of reduce in terms of quantum as we've grown into the overhead structure.

Okay. And are you planning on taking any price increases in 2026 that will support gross margins?

Yes. And again, just like we always do, I mean, across the business on average – it averages out at 1% or so year after year after year.

Okay. Thank you very much.

I'll leave it there.

Thanks Lyanne. Next questions come from Daniel Hurren at MST Marquee.

Please go ahead, Dan.

Good morning everyone. Thanks very much.

Just actually following from the answers there, I mean I remember when you kind of had a look through your factory, there appeared to be a bit of frustration trying to get the factory back to sort of historic levels of efficiency. I know we're no longer talk about COVID too much.

But could you just talk about where is the factory today versus sort of the pre-COVID sort of baseline? And I understand there's always continuous improvement.

Just wondering if you're back to sort of where you want it to be?

We're not back where we want to be. We think we still have for existing products, a little bit of spare capacity.

So we think we've got a bit of room to go there. And financially, that translates into we should have a bit of a lower CapEx rate for plant and equipment going forward over the next few years.

We're still expecting that.

Thank you. And just on workforce.

I understand you've been through a couple of phases of expansion there, and you've previously given some sort of total OpEx guidance. Are you through the bulk of that expansion?

Is the workforce where you need it to be now?

In terms of manufacturing, yes, it’s where we needed to be. And in terms of OpEx, SG&A and R&D, we feel that we can take some leverage.

You've seen that in FY2025, and we think we’ve got a few more years to go of taking some leverage and operating expense base.

Okay, thanks. It's helpful.

Thank you.

Thanks.

Next question come from Matt Montgomerie at Forsyth Barr. Hi, Matt, we can't hear any – have we got Matt?

Okay. Thank you.

Next question come from Craig Wong-Pan at RBC. Please go ahead, Craig.

Great. Thank you.

Just noticed in your OSA masks revenue constant currency growth, that did slow a little bit from the first half to the second half. Could you just explain from your perspective, what you think has driven that?

Yes. So in our first half, we had the Solo range hit the United States.

So we think of it as a new product introduction boost. So you've got that as the primary driver of that first half 14% constant currency.

Then in our second half, we've got multiple introductions of new masks from multiple competitors. So that kind of takes the boost of the new product introduction cycle.

Okay. And so is that sort of second half growth kind of your expectations for where you think kind of looking forward, where you think that might go in FY2026?

Yes, that probably is our best guess for FY2026 because you got two things going on there. We're lapping that 14%.

So that's always challenging. But then offsetting that, we've got the Nova Nasal currently out in New Zealand, Australia.

We'll be getting that to the U.S. over this financial year as well.

So maybe offsetting that maybe lend around a similar nine percentage would be our thinking.

Okay. That makes sense.

And then just the last question on the gross margins. I mean given the current tariff environment, can you provide an update on the timeframe for when you might be able to get back to that sort of 65% target gross margin range?

Yes. Look, on an annualized basis, if everything stays as it is in place today, we think there's about a 75 basis point impact annually from tariffs.

So we think that probably adds another year to getting back to our target.

Okay. Thank you.

Thanks, Craig. Next questions come from Adrian Allbon at Jarden.

Please go ahead, Adrian.

Good morning team. Just one of the earlier questions.

You made the point, around the sales force cost base, I suppose, like taking leverage now and for the next couple of years. Can you kind of just provide a bit more color as to what's sort of making that decision?

Do you feel like the efforts you put in, I guess, post-COVID and protocolizing hospitals and stuff are starting to get more traction? Or is there something else going on there that we should consider?

No, it's really driven by when we look at our long-term revenue growth. We look at long-term OpEx growth if you aggregate that over the last six or seven years, OpEx growth has been a bit ahead of revenue growth, and we think we can bring that back a little bit.

And then the other comment, probably the exception to that actually is in the sales force. That's not a place we be planning on taking leverage.

And it looks pretty much in line with revenue growth over the last five, six years.

Okay. So the – leverage is more on the management and administration kind of growth?

Yes, it's in the S, the G and the R&D – sorry, the G, the A and the R&D. G, A and R&D.

Okay. Thank you.

Just within new app consumables. Would you be able to give us a sense of what the contributions by each of the three products?

Like I think anesthesia when – like last year it was kind of a touch under 10%. Are you able to give us an update on that?

Yes. Anesthesia closer to 10%.

And then roughly speaking, Optiflow, roughly speaking, say, Optiflow around about two-thirds of the new apps. Noninvasive would be about a quarter, and then anesthesia.

Okay. So anesthesia is sort of growing more in line with the overall new apps bucket, maybe a touch higher?

No, touch higher. I mean that's still in the 40s.

Okay. And then just – sorry, just one more question.

In hospital hardware, can you – like over the last couple of years, can you sort of give us a guide mainly for our modeling purposes, like how much of the sort of volumes are sort of replacement volumes versus sort of new volumes?

Yes, that's a tough one. We tend – and there's a way bit of a difference, but we tend to think of it as mostly new volume.

We tend to think of it as the growth driver rather than replacement. I think it goes to the idea that at these kind of growth rates, whatever you're replacing from 10 years ago is a relatively small component.

And typically again, driven by clinical change in clinical practice. It's driven by – I need more.

Maybe it's driven by I had 50, I want 10 more as opposed to definitely not, I want the latest model cycle. That's not how it works.

Okay. So we should think of it as mostly net growth of the strong increase that you experienced from COVID?

Yes. Look, if I had to put a number on it for a model, I think 5% or 10% or something like that as replace…

In terms of replacement?

I can’t even – it doesn't – it kind of doesn't work like that. I've got 50, they're all 850s.

I want 10 more. I'm going to go to all 950s.

So I don't know what you want to call that. Is that a replacement or growth or both.

All right. Thank you.

Thanks, Adrian. Next questions come from Sacha Krien at Evans and Partners.

Good morning. First question is just on seasonal hospitalizations.

I think you said that 5% in most years. Just wondering if you can clarify what you think it was this year.

I mean it's basically reasonable to assume that the difference between the top end and the bottom end of the range is largely the seasonal component?

Okay. That was really hard to hear, Sacha.

If I'm going to kind of read between the lines, the 5% comes from…

I can repeat. That would be helpful.

Yes. That would be helpful, Sacha.

So you crank the volume up and get closer to the speaker.

Yes. Okay.

So the question was just in terms of seasonal hospitalizations, I think you said it was 5% in most years. Just wondering if you can provide some guidance on what you think it was this year.

Is the difference between the top end and the bottom end of the revenue range, really, just the seasonal hospitalization? Is that the way to think about it?

I'll answer the second question – the last question first. Yes, that's what we're thinking top and bottom end is top end, we're thinking of similar seasonal to FY2025, bottom end, we're thinking is a heck of a lot less.

So that's that part. And we put a lot of attention on this, and we talk about it a lot.

So I just wanted to make the point that when we look at our history and we look at the seasonal impact second half versus first half, over the long-term, looking at that seasonality, we conclude it's less than 5% of the consumables business most years. That is kind of that's the proportion of our business that it typically makes up.

The trouble is it can swing from nothing to 10 and back the other way and obscure the change in clinical practice growth.

Okay. No, that's good.

Thank you. And then second question...

Sorry, go ahead.

You go ahead.

I just kind of want to make the point. I'm putting a lot of time and effort on it because it does throw the numbers around a bit, but we're talking about what's fundamentally probably about 5% of the hospital consumable business.

Okay. Thank you.

And then second question is just on hospital hardware. You provided a little bit of guidance before on the mix of where new apps consumables are being used.

I'm just wondering in terms of placing devices. Do you have visibility on whether they're going to ICUs or EDs or anesthesiology departments?

And can you provide a little bit of guidance on where you think they're going so we can think about the future growth of the consumables?

Yes. No, we don't have that visibility.

And our customers typically don't have that visibility either. I mean hospitals may well organize where there's a pool and they're using it across the hospital.

So we don't have that visibility. Very strong anecdotals and some hospitals when we can visit and some hospitals here and there, and we can get the insight into gives us the confidence that we've got usage outside ICU.

Okay. Thank you.

Thanks, Sacha. Next questions come from Stephen Ridgewell at Craigs Investment Partners.

Yes. Good morning.

And first of all, congratulations to the team on another great result. My first question is on anesthesia.

Lewis, you mentioned earlier almost starting at 10% of new apps in FY2025 was from anesthesia and it was growing at 40%. I mean at a high level, what are the expectations for anesthesia consumables growth in the FY2026 guidance, please?

Are you still kind of expecting growth from that call it 30% to 40% range? And is that being supported by a similar growth in the sales force for that product?

Are you still taking a little bit of leverage there?

I'll turn to Justin for the sales force comment. But yes, of that still really low base, we are expecting to see 30% to 40% in FY2026.

Yes. Thanks, Lewis.

And yes, Steve, I think from a sales force perspective, we tended just to invest with the growth. So as that business grows, we're still investing in the team.

So we should expect to see that as we move forward in line with those growth rates.

Got it. That's very clear.

Thank you. And then my second question is on hospital devices.

F&P has been a very strong innovation cycle in the last few years with a number of new device launches. Can you talk a little bit to the revenue and revenue growth you're expecting in the FY2026 year?

And perhaps some flavor on the extent to what you expect the contribution from Airvo 3 and the 950. Any comments you can provide on the commercialization timeline of Airvo 3 would be useful.

Thanks. Is there an expectation for material revenue from the Airvo 3 NIV in the FY2026 year?

Thank you.

No, we don't have an expectation that's currently in a controlled market release. I kind of just want to point one thing up.

We're calling it Airvo 3 NIV, we're not thinking of it as an NIV machine. We're thinking of it as a way to efficiently move patients around the hospital onto different acuities within the hospital and facilitate the use of nasal high flow throughout the hospital.

That's how we're thinking of it. So it's not a straightforward NIV machine.

And then just going back to the earlier part of the question about revenue expected from hospital devices in FY2026 and it sounds like that will mainly be coming from Airvo 3 and the 950?

Sorry, mate. So the way we – well, as you've seen, that can be lumpy year-to-year.

I mean we'd probably just referenced FY2025 plus or minus 10% wouldn't surprise us or give us any indication of anything.

Okay. No, that's – that's fair enough.

And then just one quick one for Lyndal. Does the guidance for 2026 assume a benefit from accelerated depreciation on New Zealand CapEx that was announced in the budget last week?

Or is that still to come?

No, that's just a cash flow benefit, so it won't flow through the P&L.

Okay. Thank you.

That's all from me.

Thanks, Stephen. Next questions come from Andrew Paine at CLSA.

Please go ahead, Andrew.

Good morning all. Thanks for taking my question.

Just want to know if there's any concerns around budget pressures from purchases just resulting from the trade policies, just thinking if there's any communication or any conversations you're having given the current environment around purchasing, especially in the hospital segment?

I didn't catch all of that interaction sorry, Andrew. So you're talking about concerns around hospital budgets?

Yes. I guess concerns around budget pressures from purchases just under the current trade environment, instead of having at least some of the costs of that?

Right. Got you.

I think in this hospital business, there's always cost pressure. Every year, there's some kind of cost pressure on the hospital business.

And at the end of the day, for all of our therapies and all about product range, we're going to point to an improvement in outcomes, and we're going to point to an economic benefit. So that's how we navigate it.

I'd have to say I can't remember a time when – well, one of these cost pressures didn't exist or two, it had – we felt like it had any material impact on us.

Yes. Okay.

That's great. And then just sorry if it’s been asked, my line has been a bit overshot.

But what stage do you think you're at in terms of the U.S. tariff discussions?

Are you able to give the timeline there or kind of indication of where you are at that process?

Well, for the current situation, we think we're pretty well done. Mexican manufacturing is covered by the USMCA and anything else has been suspended indefinitely.

And then in New Zealand, you've got the 10% on the hospital products. There's no indication at present that that's changing.

I'm just more thinking about any exclusions that you could fall under?

Okay. Yes, sure.

So OSA products are covered by the Nairobi protocol. So we've applied that to our thinking and to our guidance.

Well, I think for now, we've kind of left it there.

Yes. Okay.

No problem. Thanks so much.

Okay. Thanks, Andrew.

Next question comes from Marcus Curley at UBS.

Good morning guys. Yes.

First one, could you talk a little bit about your OSA mask sales by category in the second half. Obviously, you're referring to competitor launches.

I assume you're talking full face or have you seen a slowdown in your – in the categories that you've actually got new products in?

I think the only comment I can make to that, Marcus, is the growth that we've seen is in the new masks that we've launched, in those categories.

So is it fair enough to assume that full face is an area of focus at the moment, given you sort of probably overdue a new product in that category?

I think that's absolutely fair, Marcus.

Great. I look forward to it.

Secondly, just a little bit of math around your guidance would suggest constant currency revenue growth at the top end at 11% for the year. If you take what you said about homecare being similar to the second half, it then suggests is that you're looking at hospital growth around about 12% for the year at the top end, which obviously includes a similar level of hospitalizations in the peak.

12% is probably a little lower than your long-term sort of target or 13% sort of style number for that. Is there anything that you'd call out other than your normal conservatism around that level of growth in hospital?

I think the best answer I can give you there, Marcus, is if you look at our second half, we've delivered 12% growth in hospital consumables, right? And that's where the flu season or cumulative seasonal respiratory hospitalizations.

Can we just call out a flu season for now? That's for the flu season.

It's a little less than FY2024 by all indications. So we think maybe at the top end, if you had the same, you might be a little bit above 12%, everything else being equal.

Okay. Like if I was extending that answer, I'd say your underlying business is growing better than 12%, if you – flu season adjusted for FY – or for the second half yet the guidance looks like it's a little slower in FY2026, but it doesn't sound like you're necessarily calling out anything yes, that's a specific headwind for the hospital business as you stand here today?

Well, I'll just point out one other thing. We are lapping 14% for the total business.

And then for the hospital business, in our first half FY2025, you've got some seasonal stuff in there which has flowed through from FY2024. So you're potentially lapping that as well.

Okay. And sorry, I think I might have missed this.

But Lyndal, did you give OpEx guidance growth for 2026?

We didn't. But look, probably similar growth to 2025 wouldn't be unreasonable.

Okay. Thank you.

Thanks, Marcus. Next questions come from Matt Montgomerie at Forsyth Barr.

Hi, guys. Good morning.

Hopefully, you can hear me now. Just Lyndal, one for you on CapEx sort of beyond FY2026, like Cognizant of the balance sheet being in quite good shape.

You've got the new New Zealand building coming online but presumably not much out. So I'd just be interested if you could talk to the CapEx maybe over a slightly longer-term view, yes, three to five years.

I think previously, you had a five-year target out there around land and buildings and just be interesting to roll that forward a few years now, particularly with cracker coming maybe at the end of the decade?

Yes. Sure.

So look, I guess, Building 5 here at East Tamaki will be building for 2026, 2027 and 2028. It will complete.

We're estimating the end of calendar 2027. We also still will have one more payment for Karaka land acquisition in FY2027.

So for those two sites, we'd be looking at probably another $130 million spend through 2027, 2028, weighted more to 2027, and then that completes East Tamaki campus, that also completes the land acquisition. Wouldn't anticipate material building costs at Karaka in that timeframe.

Great. That's useful.

And then one just on sort of R&D of sales, it's been sort of over 11% for the last couple of years now. Essentially is what you're saying in terms of leverage that we'll see it trend back to sort of 9%, 9.5% over the next few years?

Yes, maybe back towards 10-ish.

Yes. Okay.

And I might squeeze one more in. Just within the anesthesia business, Cognizant of comments around Switch versus Trace timelines?

Are you able to give us – or roll out more so. Are you able to give us a sense of within the anesthesia business today, what percentage is in Trace?

We don't want to go there, sorry.

That's right. Thought I try.

Yes. No, look, it's okay.

It's just not all of our listeners as benevolent as you might be.

Thanks for your questions, Matt, appreciate it. Let's now move on to Saul Hadassin from Barrenjoey.

Please go ahead, Saul.

Yes. Good morning.

Can you guys hear me?

Loud and clear.

Perfectly.

Excellent. So your first question, Lewis, and apologies if you may have mentioned this, but regarding the outlook for revenue into FY2026, I just wanted to get a sense of your expectations for new app sales growth within that.

And the reason I ask is because for the last few halves, there's obviously been a very disparate rate of growth in terms of your first half rate of growth for that sales line versus second half. So I just wanted to get a sense into FY2026 for the full-year.

Are you still expecting a circa high teens percentage growth rate for new app sales?

Yes. Look, it seems pretty – it's quite dependent on what the seasonal respiratory hospitalizations do.

And bearing in mind, there's a bit of variation in there in that it's all very well going with the seasonal numbers, but the level of respiratory intensity can vary. And you saw a classic of that with Omicron versus Delta in COVID.

Omicron had about half the respiratory intensity. So that can kind of impact the relative ratios.

But I would expect that if you were looking at low teens for hospital and you had kind of a more normal distribution, you'd be looking at mid-teens for new apps. And you'd be looking at high single digits for invasive would be kind of a more common, more normal distribution of the growth rates.

Thank you for that. And then just another comment or a question on OSA and again, just looking at the rate of mask growth, particularly in the second half.

I'm assuming the bulk of your growth in masks is from your installed base of mask users rather than new products. Have you seen any indications of OSA users ceasing usage of their devices due to introduction of GLP-1 products and weight loss, is there any anecdotal evidence that you can see or that you've noted that might be reducing your census of the installed base of mask users?

Nothing I've seen or heard and Justin is shaking his head as well. So we haven't seen anything that we'd pin on GLP-1 at all.

Thank you. That's all I had.

Thanks, Saul. Next questions come from Vanessa Thomson at Jefferies.

Good morning. Thank you for taking my questions Lewis and team.

I just ask about the FX and the hedging cover. And wondered if you've made any – or intend to make any further change in hedge duration, et cetera, given the current situation?

Thank you.

Hi, Vanessa. I'm sort of caught, I think, most of your questions.

We've got quite a robust hedging procedure around here, and we're not looking to change that at all. What we do is build out further cover when rates are favorable and then less so when they're not.

So when we've seen the dips, we have actually taken some more out, which I think you can sort of see reflected in the coverage that we've got there in the accounts.

And so that will happen dynamically throughout the year, I suppose?

It happens every day, yes. We're always looking at it.

Yes.

Okay. Thank you.

And then my second question, we're seeing a lot of commentary about ambulatory surgical center growth, and I wondered how this affects your sales strategies approach to clinical care education and so on, given it's perhaps selling into a different business? Thank you.

Yes. Hi, Vanessa, this is Justin.

I think probably from an ambulatory surgical center, that's probably more around the anesthesia space than any of our other traditional products. And that's just – that's part of our growing market.

And where those surgical centers are important to us, we're growing on them. So it's – it just fits into our core cycle really.

So with more procedural work is getting done through the ASC, how does that affect what happens in the traditional hospital for your products?

Well, I think – I don't think it really changes. It's just the location of care, really our products in both places.

So it's just the location of...

We're selling and calling on the anesthesiologist. And typically, they do travel from hospital to hospital and center to center, the anesthesiologist or the anaesthetist depending where you grew up.

That's our target.

Okay. Thank you.

Thanks Vanessa. Looks like we have time for one more question.

And we've got Adrian Allbon from Jarden. Please go ahead, Adrian.

Thanks again team. I just – question for you, Lewis.

Just around the tariff situation on the New Zealand hospital products. Are you anticipating like a pricing response to cover some of that?

Or are you kind of more looking at your sort of GM improvement as sort of your cover for that over time?

Very much the latter. I mean I think it's kind of a really important point.

We're approaching this as a cost in. And we're mitigating it the way we mitigate all cost in.

We're not doing a heck of a lot different or special just for tariffs. We get some mitigation in our cost against tariffs just by what we normally do in normal growth.

And then we're thinking of the pricing cycle is exactly the same. We're doing what we normally do.

Okay. All right, that's clear.

Thank you.

Okay. Thanks.

Thanks, Adrian. Look, that concludes the time we have for questions.

I'll now turn over to Lewis for some final comments.

Okay. Thanks, Marcus, and thank you, everybody, for your questions.

We really do appreciate your interest and your support in Fisher & Paykel Healthcare. To wrap up, I really would like to acknowledge the more than 7,000 people working day in, day out at Fisher & Paykel Healthcare globally.

Thank you once again for your commitment to patient care to outcomes and to our business. My thanks also go to our customers, suppliers, clinical partners and shareholders for your ongoing support.

Thank you, everyone, and please enjoy the rest of your day.