Good afternoon, everyone. I'm Neville Mitchell, the Chair of Fisher & Paykel Healthcare Board. Welcome to the 2025 Annual Shareholders Meeting. A warm welcome to all of you here in person at our East Tamaki campus and online via our virtual meeting platform. You are able to vote and ask questions both online and in the room today. For those online, please refer to the online portal guide for instructions, and if you need assistance, phone our Corporate Market Helpline on 0800 200 220. Some housekeeping issues for those in the room before we move into the formalities. Bathrooms are located outside this meeting room to my left, and in the event of a fire alarm, please follow instructions from members of the F&P team who will be wearing lanyards. They will guide you to the assembly area in the car park directly ahead of us.
On the information conveyed to me, I declare that a quorum of shareholders is present and that the meeting has been duly convened. I would like to introduce your Directors to you. Joining me here are the CEO Lewis Gradon, Mark Cross, Sir Michael Daniell, Pip Greenwood, Lisa McIntyre, Graham McLean, and Cather Simpson. The minutes of the last Annual Shareholders Meeting have been approved by the Directors and are available for inspection at the back of the room. The notice of meeting, including the explanatory notes, has all been circulated to shareholders, and I intend to take it as read. First on the agenda is the Chair's address, in which I will provide some comments on the company's progress on behalf of the Board.
Following that, our Managing Director and CEO Lewis Gradon will provide an update on our performance in the last financial year and in the year to date and our opportunities looking forward. After addressing any questions on the financial statements for the year ended 31st March 2025, we will move to the resolutions contained in the notice of meeting. After each resolution is proposed, you will have the opportunity to ask questions with respect to that resolution, and then there will be an opportunity at the end to ask any general questions relating to the company. Now on to my talk. It is a privilege to address you for the first time as Chair of Fisher & Paykel Healthcare.
I will focus my address on a number of high-level matters that your Board has spent time on over the last year and will largely leave the company's operational matters to Lewis to discuss in his CEO address. First, I wanted to reiterate the context in which your Board and management view this company and make our decisions. We have a long-term way of thinking. In some companies, the phrase "long-term" means one to five years, but here at Fisher & Paykel Healthcare, we take a 15-year and often more perspective. Each year, the management team produces a comprehensive long-term plan that outlines our business objectives, the market opportunities, and the strategies for the next several decades. One of your Board's primary responsibilities is to critique that plan and to provide input.
The plan does not alter substantially, but it is a critical input to identifying long-term trends and the risks. The plan then determines which R&D activities to prioritize to deliver on our growth aspirations and whether the right people and infrastructure are in place to achieve that. A good example of how we used the long-term plan was our approval of future building and land expansion. Those joining us in person will have seen the construction is well underway for the fifth building here at East Tāmaki , and you may also recall that we have secured land for our second New Zealand campus at Karaka. These important infrastructure investments will help ensure the business continues to have capacity and resources to deliver innovative products well into the future and as identified in that long-term plan.
The long-term need for them was identified in the plan, and your Board approved the expenditure in that context. Now, I wanted to say a little bit about global geopolitics. Global politics has been an important subject for the Board and management this last year. One of the benefits of long-term thinking is that when challenges arise, we can analyze them through a long-term lens. This year, tariffs have been imposed by the U.S. administration. The Board has stayed close to this important topic, and we have consulted with a range of trade policy experts. We have been meeting regularly with senior New Zealand government officials and have also taken advice from our contacts on the ground in Washington. Your company's finished goods manufactured in Mexico and for sale in the United States are currently compliant with a free trade agreement called the USMCA. U.S.
tariffs do not apply to these products. The company's products, which are used in treating patients with obstructive sleep apnea, are also largely exempt from U.S. tariffs, which leaves a tariff rate of 15% imposed on hospital products, which we make here in New Zealand. To respond to these tariffs, we continue to make decisions aligned with our long-term plan and thinking. We are not looking to make substantive changes to our current arrangements. The team is focused on mitigating cost increases from any source by making continuous improvements across every process and function in the company. We believe this is the right thing to do to support our people, keep the trust of our customers, and maintain stability in our operations, all of which, of course, are essential for achieving sustainable, profitable growth.
Moving now to the financial results, and Lewis will explain the results in more detail, but 2025 was a successful year for your company. Operating revenues surpassed NZD 2 billion, and this was a record revenue result and was in line with our expectations. Net profit after tax was NZD 377 million, which on an underlying basis was a 43% increase over the previous financial year or a 30% increase in constant currency. Also, a great result. Now, moving on to dividends and the Board's view on that. As you know, it is our practice to pay a percentage of the company's profit to our shareholders, and for the full financial year, the Board approved dividends totaling NZD 0.425 per share. This was an increase of 2% over the previous full year and represented a dividend payout ratio of about 66% paid to shareholders.
We are committed to ongoing investments in R&D, global sales, and the support teams, and also to funding the infrastructure for our long-term growth. Your Board also believes it is important to maintain a prudent balance sheet. With this in mind, we believe a dividend payout ratio of around 65% is the right ratio over the long term. In addition to rewarding shareholders, the Board believes it is important to reward and retain selected high-performing employees who contribute to the company's success. One way to do this is by awarding discretionary long-term variable remuneration instruments, or DLTVRs. This year, the Board conducted a thorough review of these instruments and approved some modifications. The details are set out in Explanatory Note 4 of the notice of meeting. We believe these changes will create better alignment and outcomes for employees and also for shareholders. Now, some updates on the Board itself.
I'd like to update you on the composition of the Board. In October last year, Mark Cross joined as a Director, and he is up for election for the first time today. Mark is a strategic thinker with extensive governance experience and strong financial acumen. We have indeed been fortunate to have his perspective, and I ask for your support in his election today. I'm also very sad to announce the retirement of Pip Greenwood with effect from the 1st of September. Pip was recently appointed to the Australian Board of Westpac Banking Corporation and has other commitments in chairing the boards of both The a2 Milk Company and Westpac New Zealand Limited. She has provided wise counsel and has been a valued colleague to me, and we will all miss her.
Pip, this is your last day of service, and I would like to invite you to say a few words to shareholders and any observations you may have had over your time at Fisher & Paykel .
Good afternoon, everyone, and thank you for your kind words, Neville. I really appreciated them. It's been an honor and an absolute privilege to serve as a Director on the Fisher & Paykel Healthcare Board for the last eight years, a time that's flown by. As I say goodbye, I'd just like to acknowledge what a phenomenal organization this is, inventing world-class technology in New Zealand and taking it out to the rest of the world. The growth at Fisher & Paykel Healthcare since I have been here in the last decade has been incredible, and I feel very proud to have played a role in the company's success. I'm grateful to have had the opportunity to be involved with such an outstanding group of people. This was actually my first governance role, and I don't think I realized quite at the time how lucky I was.
I'd like to thank Lewis and the management team, a number of whom are here today, and I encourage you to have a chat to them afterwards, as well as all the other 7,000 employees who design, make, and deliver the products that are helping millions of people around the world. I'd also like to thank you, Neville, and my Board colleagues. You're an insightful and principled group of people, and I have enjoyed and valued working with you. I have high praise for this Board, and I feel confident that the company is headed in the right direction. Finally, I would like to thank you, our shareholders. There are a number of familiar faces here today for supporting my re-election over the years.
As a fellow shareholder, I will continue to cheer on the business from the sidelines, and I look forward to more great news from Fisher & Paykel Healthcare in the years ahead. Thank you again for your support. Neville, back to you.
Thank you very much, Pip, for those words. It is our intention to appoint another New Zealand-based Director, and we will commence that process shortly. Recently, while we are on the Board, we farewelled Charlotte Walsh as she completed her tenure in the Future Directors Programme. We continue to support this initiative and will be announcing another talented emerging Director to join us in due course. I am standing for re-election as a Director at this year's ASM. I have been with Fisher & Paykel Healthcare for almost seven years and remain as committed as ever to our purpose of improving care and outcomes and to delivering value to shareholders. I believe my executive career and my directorships on a number of healthcare companies provide me with a depth of experience in the medical device industry that adds value to Fisher & Paykel .
With your support, I look forward to continuing to work alongside my colleagues on the Board and the wider team. In conclusion, Fisher & Paykel Healthcare is a unique company. A significant proportion of our manufacturing is done here in Auckland, and nearly all of our research and development team is also based here. Yet only 1% of our sales are made in New Zealand, and we sell into over 120 different countries. While the geopolitical situation is complex and uncertain, our approach remains clear and considered. Our management team are committed, talented, and experienced, and we are the world leader in respiratory care. We have deep geographical diversity in our sales reach and a world-leading suite of products. All this argues well for our continued success in growing the company and continuing to help more patients.
Finally, I want to say thank you to everybody who supports our success and our long-term way of thinking. That includes the people of Fisher & Paykel Healthcare, as well as our clinical partners, our suppliers, our customers, and of course you, our shareholders. Your investment makes a positive difference. I now invite Lewis, our Managing Director and Chief Executive, to say a few words.
Thank you, Neville, and good afternoon, everyone. I just want to say a real heartfelt appreciation that we have for the people that have turned up here today. I really hope you get something out of this. I hope you enjoy your afternoon with us. For us, it's so much nicer to be speaking to a room full of people rather than to a camera. Thank you so much. We really appreciate it. I usually start by running through our achievements over the last year, and I give an overview, as Neville said, of the financial results. Every year, we actually do this on the day of our announcement with a video that we circulate and we'll make available internally. We do that across all 7,500 people. We do that across the manufacturing staff.
We do it across the sales teams in the more than 50 countries that those people are present in. What we thought we'd do this year is we'll play you that video. It gives you the review that I normally would anyway, and it also gives you an insight into the culture, into how we communicate internally. I think it gives you a bit more of an insight into our way of thinking and how we think. We'll play that staff video for you now, I think. Hi, everyone. Today we announce our full year results for the 2025 financial year. When we do that, we like to share it with you all as well. First, Andy will cover some highlights of the year, and then Lyndal will give us an overview of the results, and then I'll tell you more about what's next. Over to Andy.
Thanks, Lewis. In FY 2025, our products were used to treat 22 million patients. That was a truly amazing achievement. We continued the rollout of our F&P Evo 3, F&P 950 system, and our suite of anesthesia products. We also launched some exciting new OSA masks. All our sales regions performed well, which contributed to a very successful year. A manufacturing facility in China also became fully operational in FY 2025, and we started shipping products for sale. We also signed the construction contract for our fifth building on our New Zealand campus, which is now well underway. Across the business, we stayed focused on continuous improvement, and that is making a really big difference day to day.
More than 8,000 ideas for improvement were raised in FY 2025, 1,400 of which came from our Mexico facility alone, and 3,000 were implemented globally. We will be celebrating the best projects for FY 2025 at the Global CI Awards in June. All of that helped us achieve a great result. With that, I'll hand over to Lyndal to tell us about the financials.
Thanks, Andy. I have some really exciting news. Our full year revenue surpassed NZD 2 billion for the first time in our company's history. If you were at F&P back in 2019, you may remember that revenue passed NZD 1 billion that year. Six years on, we have doubled our revenue, which is exactly what we strive to do. Total operating revenue for the 2025 financial year was NZD 2.02 billion, up 14% in constant currency, where we take out all of the impacts of exchange rates. In our hospital business, revenue was NZD 1.28 billion, up 16% in constant currency. In our home care business, revenue was NZD 739.9 million, up 11% in constant currency. That brings us to profit, which is the amount left over after our costs and our taxes are paid.
For the full financial year 2025, profit was NZD 377.2 million, up 30% in constant currency when we exclude the three abnormal items that we had last year. You may remember that we have a target of 65% for our gross margin. Gross margin is the percentage of money we keep from our sales revenue after we cover our costs to make our products. If we were making a simple product like a T-shirt, we could have a lower gross margin target. We're making complex medical devices, so we have to keep a certain amount of money left over to spend on developing new products and for our sales teams to explain the benefits of our products to our customers. We also need money left over in case there's an unexpected event like a product recall. I'm pleased to report that we got a little closer to our target.
For FY 2025, gross margin was 62.9%, an increase of 1.3% in constant currency. This was a great result, and we want to acknowledge everyone's contribution to it. Back to you, Lewis.
Thanks, Andy and Lyndal. Now, lately, we've been talking a lot about our fundamentals. These are the basic principles that guide how we work and how we make decisions. For example, we put the patient first in everything we do. That's one of our fundamentals. We deliver products that have unique customer-valued benefits. That's another one of our fundamentals. Of course, long-term thinking. That's another one. This year, I think it's really important that we stay focused on our fundamentals. There's a lot of noise out there right now about tariffs, but we don't want to let that noise distract us from our fundamentals. We want to continue to support our customers and each other and maintain stability in our operations. For some of us, that means progressing work on new products. For some, it's supporting our people or our customers.
For others, it's about coming to work every day and assembling high-quality products. It's also important to keep working on those continuous improvement projects across the business. Even if it's the 1%ers, it all helps. Everyone's effort makes a difference. I'm pleased with our performance for the year, and I'd like to thank everyone for contributing to the success. The work we do has a positive impact on so many people around the world. Thank you, everyone. Gee, I feel like saying thank you for that. That was the review that we shared internally. You saw mention in the video about U.S. tariffs. Neville's touched on U.S. tariffs. I haven't had a conversation with anyone anywhere in the last six months where tariffs don't come up. I'm going to spend just a little more time on that.
I kind of want to try and do two things: give you a good understanding of the current status, and then I want to try and give you a good understanding of our thinking and maybe try and future-proof your understanding of how we might respond if things should change. First of all, the current status. Our obstructive sleep apnea products go into the U.S. under an exemption for products used to treat chronic or permanent disabilities. Our products from Mexico go into the United States under a free trade agreement called the USMCA, and that's the agreement that replaced NAFTA in 2020. We don't ship to the United States from our China plant. That just leaves tariffs only on hospital products that are shipped from New Zealand to the United States.
The current status of that is that they have attracted a 10% tariff from shipping from approximately June through to August, and then 15% thereafter. In our Outlook note in our press release, we said that for this financial year, we'll be about a 75 basis point cost to gross margin. I'll just translate that for you. That's about NZD 16 million - NZD 17 million for the year. That's the current state of play. Moving on now, what are we going to do about that? The first thing you have to consider is that our supply chain right now across all the raw material suppliers from all around the world, from across three manufacturing sites, 120 countries all the way through to customers, is about as efficient as we can make it today.
If we were to now make some changes specifically to deal with tariffs, we'd be adding some kind of inefficiency into that. If the tariffs were to change, we'd be left with the inefficiency. Not only that, we would have made an investment in making that change, and that investment would have been instead of investing in growth. For now, at least, we're taking a holistic view of how we're thinking about these tariffs. We're thinking they're another source of cost in. We're a manufacturer. We have cost in every year, year after year after year, from all sorts of sources. We're used to dealing with that. It's business as usual for us, having a constant cost in occurring, happening to us year after year after year. We're thinking we'll manage that the same way as we always have.
That's those never-ending continuous improvements and efficiency improvements across the whole business. You would have seen the reference in the video to about 8,000 suggestions during last year, over 3,000. I saw the number today. It was 3,800, actually, implementations during the year. We're thinking the important thing is we keep doing that, and we do it across all the opportunities and not just through a tariff lens. That's how we mitigate cost ins in all times, really. One benefit of that is these are all things that are going to pay back whatever happens politically. These are pretty much all things we would do sooner or later anyway. Over the longer term, if the tariff situation stabilizes for what seems like a foreseeable future, we always have another option, which is where we put our growth in manufacturing.
We can adjust our global manufacturing footprint by where we put the growth. We're always growing. We're always going to have to do something somewhere else. That's something we would always do sooner or later. That's the most efficient use of our resources. If we need to make an adjustment in a stable situation, do it by where the growth goes. I hope that makes sense, and I hope that future-proofs your understanding of that as well. Before we move on to Outlook, there is a second topic I want to cover, and this is seasonal respiratory hospitalizations. We used to call that the flu season, right? This is a phenomenon where in the winter, more people are more likely to have some kind of respiratory ailment. That means generally there's more admissions to hospital during the winter season with or for a respiratory ailment.
Probably that means an increased demand for our products because of this. The first point is for us, that's a northern hemisphere winter. That's where most of our volume goes. That's in our second half. Typically, these flu seasons would last three or four months, and they might start October, November, December, occasionally January. That's a thing that affects our second half. Having said all that, I just want to put a context on it for you. Before COVID, we estimated that less than 5% of our hospital business most years is due to this seasonal effect. We're talking about less than 5%. It's a directional signal. It's not quantifiable. You can't work it out, predict it, forecast it, or analyze it.
The point of all this is that if we have a big flu season and then it's followed by a small flu season or vice versa, it can impact what our growth looks like depending on what year's following what year. Just occasionally, I think historically it's every decade or two. You have a very small one, then a very big one, or vice versa, and it affects our numbers. It affects what growth looks like. The reason I want to spend a little bit of time on this is these days you've got COVID in that seasonal respiratory hospitalization rate. That's why we don't call it flu season anymore. You've got COVID in there as well. That seasonal respiratory hospitalization rate has been steadily declining since 2022. That number's been going down.
We've grown our hospital business over the last two years despite that decline in second half seasonal admissions. That is a really good indicator for you that the primary growth driver is that change in clinical practice. That's more clinicians using more of our therapies to treat more patients, not COVID. Here's the point of all of this: if we were to see a second half for us with subdued growth in our hospital business and that coincided with a big reduction in that seasonal hospitalisation number, that's not a scenario that would cause us any panic. We've certainly seen it before in our business, and it would probably just be a movement in that seasonal component from a bigger year to a smaller year. Having said all that, I can move on to our outlook for the full year.
The company's outlook for the full year revenue is in the range of approximately NZD 2.15 billion - NZD 2.25 billion, and full year net profit after tax in the range of approximately NZD 390 million - NZD 440 million. As we've just talked about, if those seasonal respiratory hospitalisation rates for FY 2026 were similar to what they were in FY 2025, we'd expect that to push us towards the top end of that range. If they were lower, we'd be expecting that to push us towards the lower end of that range. Also, first half outlook. For our first half of FY 2026, we've provided outlook for revenue of approximately NZD 1.075 billion, net profit after tax approximately NZD 200 million. You can see on the slide there, we've done the math for you. That's about 13% growth in revenue and 30% growth in net profit after tax compared to last year.
I talked about this year, spent a lot of time talking about a couple of things that might affect this year. I'd like to take the next few slides just to stand back from this year and next year and look over a bit of a longer timeframe. What you can see there is our revenue since our listing in 2001. You can see the obvious COVID impact bumping up there for a few years. More recently, more like a return to our solid growth driven by what our historical growth drivers have been, which is that ongoing adoption of therapies and products that improve care and outcomes. Our business is also supported by a demographic effect of aging populations requiring more healthcare and developing countries building out their healthcare infrastructure. If we look at financial performance over a 10-year timeframe, you can see that 10-year compound annual growth rate.
FY 2025 for revenue is moving closer to aspiration. If you look at net profit after tax, you can see the COVID effect there in FY 2021 and 2022. That's as we've pretty much doubled output without doubling the people or the assets doing it. That's clearly not sustainable. You can see the impact in FY 2023 and FY 2024 of us adding that infrastructure over the previous three years and during those years to deal with that kind of volume. FY 2025 looks like back on track to solid growth. My second to last slide, I expect many of you will have seen this before, our long-term aspiration of doubling our constant currency revenue every five or six years in a sustainable way. You can also see there the opportunities that might allow us to achieve that over time.
Every time I show this graphic, I've got to remember to point out, probably not to this audience, most audiences, I've got to remember to point out short term, five years, long term, more like 20 to 30. I didn't mean to waste your time, but I've just talked an awful lot about tariffs and seasonal respiratory hospitalizations. It can impact our numbers from one year to the next. They're very, very topical. We're talking about them all the time. The point is, neither of those are things that affect the inspiration, the opportunity. They don't affect the growth drivers, and they don't affect our long-term thinking or plans in any way. That was the point I was hoping to communicate. They're important, and they're topical now. Before I hand back to Neville, I am standing for re-election as a Director this year.
I have been with Fisher & Paykel Healthcare for over 40 years now, the last nine years as Managing Director and CEO. That's pretty much my whole CV. I'm here to tell you that's a good thing. As always, I just want to say I really appreciate and thank you for your support over all that time. Thank you. And in the future.
Thank you, Lewis. The next item on the agenda is to receive and consider the financial statements and the auditor's report as contained in the company's annual report for the year ended 31 March 2025. This is the opportunity for shareholders to ask any questions specifically on the financial statements, the auditor's report, or the annual report. We have Indy Senna, who is the lead audit partner from PwC, with us in the room to answer any specific questions you might have on those items. Please note that there will be an opportunity for general questions once all the items on the agenda have been considered. Would anybody in the room wishing to ask a question specifically on the financial statements, auditor's report, or annual report, please raise your hand, and a microphone will be passed to you.
We will begin with questions in the room and then turn to our online audience. We ask that you please state your name before asking the question. Are there any questions from shareholders? Any questions online?
Yes, there is one question online. The question is from Stephen Main, and the question is, Xero suffered a 48% vote against its RIM report at today's AGM, partly because it is the only major New Zealand registered company trading on the ASX, which voluntarily does this. As a company capitalized at NZD 20 billion, which recently ran a major investor day in Melbourne, why haven't we done the same? Could Sydney-based board candidate Neville Mitchell, a veteran of many remuneration report vote processes, comment on whether he personally supports RIM voting and whether he'll attempt to persuade his colleagues to make the change next year?
The first point that I would make is that we are a New Zealand-based company, and we comply with all of the New Zealand regulations. In fact, we go further when it comes to remuneration, and we don't have to, under the current regulations, provide all the details that we do on Lewis's PSRs and options that you'll vote on a little bit later. We go beyond what we're required to do in New Zealand, and I think that we make very wholesome and adequate disclosures in our annual report, as well as those disclosures that we've made today in the notice of meeting. My personal view and the view I know of the board is that we are adequate in our disclosures that we make to the market, and we won't be looking to adopt the Australian remuneration report.
Thank you. We have one more online question from Robert Keen, and the question is, the five-year summary on page 165 makes interesting reading. The FY 2025 underlying profit of NZD 377.2 million was virtually identical to FY 2022. FY 2023 and FY 2024 underlying profits then dipped before restoring back to the FY 2025 reported value. The financial highlight % increase for FY 2025 on page six of +43% therefore looks very healthy compared to FY 2024. What are the directors' expectations for FY 2026 underlying profit and % increase compared to FY 2025?
Firstly, on the specifics, I'd refer to the outlook which Lewis gave, which gave guidance, very specific guidance for FY 2026, both at the revenue and at the profit line. I refer you to those. Going back to those anomalies during the COVID period, I think it came out very clearly from the graph that Lewis showed that we're on a long-term projectile here. Yes, there was a huge perturbation that came through from the COVID years, and there were spikes and then fall off after that. We're on a long-term projectile here of trying to double every five to six years in terms of our revenue, and then the profit falls in from that. I think that we're well placed to be on that projectile, as Lewis showed on that graph. The numbers are what they are for the specifics as we increase from year to year.
It's really that longer-term trend, which is the important one.
Any other questions?
There are no further questions online.
As there are no further questions, I would then move on to the next item. The fourth item on the agenda is the consideration of the formal resolution. There are seven resolutions, and each resolution is an ordinary resolution. This means they are required to be passed by a simple majority, more than 50% of the votes of shareholders who are entitled to vote on the resolutions and do vote. For shareholders joining us in person today, you would have received a voting card on your arrival. If you did not and wish to vote by this method, could you please make your way to the registration desk at the back, and the staff will assist you with that registration. Please also ask the Corporate Markets staff if you require a pen to vote.
Shareholders joining online will be able to cast their vote using the electronic voting card received when online registration is validated. To vote, you will need to click "Get a voting card" at the top of your web page or below the video. You will be asked to enter your shareholder number or proxy number to validate. You can then select how you wish to vote by clicking "For" or "Against" or "Abstain" in respect of each resolution. Remember to click "Submit Vote" on the bottom of the card once you have selected all of your votes. Further information is available from MUFG Corporate Markets online portal guide, and you can call the helpline on 0800 200 220 for assistance. Following voting on the resolutions, we will be happy to take any general questions you may have in regard to your company and operation.
For those online, you can submit general questions at any time during the meeting by using the online question function. The registrar will complete the counting of all votes and complete their duties as scrutineer for the purposes of the poll. We will make an announcement of the results of the voting to the NZX and ASX once this process has been completed. We now move to consideration of the individual resolution. Explanatory note one of the notice of meeting explains the requirement that a director of the company must not hold office without re-election past the third annual meeting following the director's appointment or three years, whichever is longer. We accordingly have four directors up for re-election today. I will ask Lisa McIntyre, Chair of our People and RIM Committee, to take over as Chair for the first resolution as it relates to my own re-election.
Thanks, Neville. Good afternoon, everyone. Neville addressed his re-election earlier in the meeting, and I now have the pleasure in moving as an ordinary resolution that Neville Mitchell be re-elected as a Director of the company. Are there any questions in the room from shareholders? Are there any questions online from shareholders?
Yes, there's one question from Stephen Main. It says, "In 2024, we lodged the 44 pages of formal addresses with the ASX at 9:31 A.M. ahead of the 2:00 P.M. AGM commencement. Why haven't we done the same today? Best practice is to disclose the proxy votes early with the formal addresses, something we didn't do last year. Will Chair Neville Mitchell commit to do that next year? Also, after seven years so far, could Neville confirm that this will be his final three-year term on the board and he won't be seeking re-election in 2028? Does he believe his successor is currently on the board?
Let's tackle the last one first. I won't be committing to that. We have a nine-year term, which is when we have a look at how directors are performing, what are their commitments, and the likes. At that nine-year period, we take a close look at things. There is no fixed rule that we need to retire at nine years, and with three years out, I'm certainly not making those sorts of commitments at this point. Now, to the first one, which regards the proxies and how we deal with the proxy numbers. There are two ways of having a look at this. The first is that before every resolution is looked at, we put up the proxy votes, which inevitably are overwhelmingly in favor. It is my view that that actually stifles conversation within the room here.
I think it's a better process to have the full conversation within the room and then at the conclusion of the meeting to display the proxies. That's what we'll do today. You will see what the proxy votes come in at, but it'll be after you've had time to consider those and talk about them here in the room without having a look at what the major shareholders have voted. We'll be listening to you, and then we'll be displaying those proxies later. That's our response to that.
Thank you, Neville. Excellent answers. Any other questions online?
Any questions online?
Thank you, Marcus. Since there's no further discussion, could you please now record your vote on this resolution? Thank you. I will now hand back to Neville.
Thank you, Lisa. Resolution two relates to the re-election of Lewis Gradon. Lewis spoke earlier in support of his own re-election, and I now move as an ordinary resolution that Lewis Gradon be re-elected as a director of the company. Are there any questions from shareholders in the room? There being no questions in the room, I move to you, Marcus.
Yeah, there is one question online, again from Stephen Main. When Lewis Gradon was last re-elected at the 2022 AGM, he was supported by 99.99% of voted stock. If he was CEO of an Australian-registered public company, he wouldn't have evidence of such remarkable popularity because Australian law doesn't require CEOs to be subjected to the three-yearly election cycle. Did Lewis enjoy the election process? Would he support U.S.-style annual director elections? How many of our 23,888 shareholders voted in favor of his re-election by proxy? Did he crack 1,000 votes on the headcount measure?
Maybe I'll have a go at some of those, Lewis. First of all, it's a requirement under New Zealand law, and Lewis is standing under New Zealand regulations, and that's not going to change. In terms of what the question is going at is how many shareholders as opposed to how many votes did Lewis get. Now, we'll be disclosing the number of votes that he got at the end of the meeting so that you can see what the proxies, so in other words, those companies that have voted by proxy have done. We're not going to be showing the number of individual shareholders that have voted. We are showing the number of votes. In a corporation, it's one vote, one share, one vote, and that's the route that we'll be taking. We won't be showing the number of individual shareholders that have voted.
Are there any further questions from online?
There are no further questions online.
There appears to be no further discussion, so could you please now record your vote on the resolution? Thank you. Resolution three relates to the re-election of Lisa McIntyre. I'd now invite Lisa to say a few words.
Thank you again, Neville. Good afternoon, everyone. As you can see from all of our presentations today, it's no exaggeration to say that Fisher & Paykel Healthcare is an outstanding company, an outstanding New Zealand company. It delivers world-class products in a global market, and I consider it a great privilege and a great responsibility to serve on this board. I have past experience as an advisor to the biomedical and healthcare industries in the U.S., Australia, and globally, as well as recent non-executive director experience with other clinical services companies. One of the key perspectives I have gained across a variety of healthcare organizations is the extraordinary ways in which innovation can improve clinical care. The patience, the experience, the intelligence that the Fisher & Paykel teams bring to solving important clinical problems and changing clinical practice to improve patient care is really inspiring.
All of my governance roles over the past several decades in healthcare have been linked by one common thread. When you deliver the best care for patients, the best support for clinicians, that is the best way to deliver optimal returns for shareholders. I am committed to supporting the board's high standards of corporate governance. I would be honored to continue my work with Fisher & Paykel Healthcare to provide market-leading respiratory, surgery, and sleep apnea solutions and continuing to deliver strong shareholder value. I look forward to continuing to work with my board colleagues, with our management team, and to create ongoing value for you, our shareholders, and also for our customers, for our employees, and for the communities in which we operate. With your support, I'll put myself forward for election again at this year's ASM. Thank you.
Thank you, Lisa. I now move as an ordinary resolution that Lisa McIntyre be re-elected as a director of the company. Are there any questions from shareholders in the room? Appears to be none. Are there? Oh, a question. Hold on. We'll just get you a mic.
Lewis, why do you consider your tenure at Fisher & Paykel ? How long? I know you've been here 40 years. Why have you been here that long?
Look, we're actually onto Lisa McIntyre's election, which has, so the question is relevant.
Why don't we take the question first? We'll answer that question.
Let's clear it up now. Do you want to answer it, Tim?
Almost forgotten. Why have I been here for 40 years? Was that the question?
Yeah.
Oh, I'm very tempted to say I couldn't get a better job, but yeah, that would be self-evident, wouldn't it?
Yeah, it would be.
I think one of the
Have a shot.
Have a shot. You know, to a certain extent, that is true, but I can't imagine a better job in New Zealand. One of the things about our company, I think it makes us different to a lot of companies, is when you look at what we do, it's very inspiring, you know, and it's very fulfilling to think that as a result, whatever you do in this company, as a result of your activities, someone's going to get better care this year. We said we impacted 22 million patients. Add families, friends, you know, and I think it's a great kind of business to be in. For most of us, most of the people I see around this business, that's the driver. That's why we're here. That's what we enjoy. I'm no different. Yeah, yeah. It's a very fulfilling kind of business. I can't imagine doing anything else. Yeah.
Thank you for the question. Is there anybody on? There are no questions on my line. There appears to be no further discussion on this matter, so could you please now record your vote on this resolution, which is to elect Lisa McIntyre on the paper. Resolution four relates to the re-election of Cather Simpson. I'd invite Cather to say a few words.
Thank you, Neville. As Neville said, I'm seeking re-election to the Board at this shareholders' meeting. It has been a privilege to be a member of the Fisher & Paykel Healthcare Board for the last three years. I joined the Board in 2022 in interesting times, just as the company and the rest of the world were coming up out of the COVID-19 pandemic. Now, Fisher & Paykel Healthcare stepped up when it was most needed by increasing production and putting critical respiratory technologies in the hands of clinicians worldwide. The stories the Board has heard from doctors in the U.S. in particular about how our products and our people made such a difference in life-saving technologies, in saving the lives of patients, and in helping all of the people that Lewis just talked about, that's truly inspirational.
The medical device industry continues to evolve rapidly, shaped by technological innovation, shifting regulatory landscapes, and growing demand for patient-centered care. I believe my experience in founding and leading science and technology businesses and advocating for the commercialization of research offers a very practical perspective to help this company navigate the opportunities and the challenges ahead. Through my lens as a serial deep tech entrepreneur, I'm confident that Fisher & Paykel Healthcare's investment in research and innovation will continue to drive success, both in positive patient outcomes and in strong business performance. Serving as a Director for a company like this is both an honor and a responsibility, and I remain committed to contributing my diligence and whatever wisdom I possess to the Board as it guides and tests the company's ambitious strategies for growth and superior patient care.
I will continue to act with the highest integrity, align with the Board's high standards of corporate governance, and bring a laser focus to supporting the Fisher & Paykel Healthcare leadership team to deliver value to all stakeholders. I ask for your vote for re-election to the Board. Thank you.
Thank you, Cather. I move as an ordinary resolution that Cather Simpson be re-elected as a director of the company. Are there any questions from shareholders in the room? Are there any questions online?
There is a question against this resolution from Stephen Main. I'm not sure that it really relates directly to Cather, but I will put it forward anyway. There was an 18.8% protest vote against Graham McLean's re-election last year. What was that about, and have any of the proxy advisors recommended a vote against any of today's resolutions leading to any material proxy protest votes? There was also a 17% protest vote against the increase in the fee cap for directors at the 2023 AGM. Staying with remuneration, were any concerns raised about the CEO's LTI grant, and could he briefly summarize his vesting history when it comes to past incentive grants approved by shareholders?
Look, there's a lot in that. I'm not sure I'll remember each part of it, but the gist of it, I think, is that the first part was about Graham and the vote last year, which related to the number of boards that he was on, which has been addressed. Along with Graham and all of the directors, we look at all of our commitments and see that we have adequate time, and I'm satisfied on all of those fronts. The second part of the question was.
It's about a 17% protest vote against the increase in the fee cap for directors?
In 2023, we haven't sought another increase, and that was passed at that point. You can see our numbers are all in the annual report, and I'm satisfied with those. I'm on a number of other boards, and I have a good sense of this. I'm very satisfied with where those director fees are.
The last part of the question is, are there any concerns raised about the CEO's LTI grant, and could he briefly summarize his vesting history when it comes to past incentive grants?
Look, we will get to this when we get to the LTIs, but perhaps if we just cover it now, they would. We had a very comprehensive consultation period before. I went along with Marcus and others to go and have a look at all the proxies, and we worked with them on the new scheme. As you know, there are a few changes to it. I then went and saw all of the top 20 shareholders in the company, and we spoke through it with them. There were no major concerns that related to that, and we were very happy to put the motion forward, knowing that it had strong shareholder support.
In terms of all of the share dealings, they're all reported in terms of the NZX and the ASX guidelines, and I'd refer him to the ASX and NZX if he wants to get a very detailed history of all the trading.
There are no further questions online.
All right. There appears to be no further discussion, so could you please record your vote on this resolution? Thank you. Explanatory note two of the notice of meeting explains the requirement that a director appointed by the board must not hold office without election past the next annual meeting following the director's appointment. To that end, our fifth resolution is on the election of Mark Cross to the board. Mark joined our board in October last year, and I will now ask Mark to say a few words.
Thanks, Neville. As he said, this is the first time that you get to have a say on my election, having joined the board in October last year. It's great to have that opportunity to address you on why I joined the board and what I believe I can contribute as a director of your iconic company. The question I ask myself when I join a new board is whether the inside matches the outside when it comes to culture and values. In my relatively short time as a director, I can say that I've been incredibly impressed by the long-term thinking and commitment of our people to their purpose, values, and beliefs.
Recently, the board visited Middlemore Hospital to talk to the staff there, and I can say that seeing our products in action in the neonatal emergency and intensive care wards was a powerful reminder of our united purpose to improve care and outcomes. As Lewis just said, fulfilling and inspiring it was. My experience comes from a combination of an executive career in corporate finance and over 15 years of governance across a range of different companies, public listed, private equity-owned, private, public sector. I've chaired a number of boards and audit and risk committees and remuneration committees, and I obviously chair the Fisher & Paykel Healthcare audit and risk. I think that experience enables me to contribute in the areas of growth strategy, global business scalability, capital allocation and management, and risk management, all in pursuit of driving shareholder value.
With your support, I look forward to continuing as a director. Thank you.
Thank you, Mark. I now move as an ordinary resolution that Mark Cross be elected as a Director of the company. Are there any questions from shareholders in the room? Are there any questions online?
There are no questions online.
There appears to be no further discussion, so could you please now record your vote on this resolution? Thank you. The sixth resolution is to authorize the directors to fix the fees and expenses of PwC as the company's auditor. Under the New Zealand Companies Act, PwC is automatically reappointed as the auditor of the company. A reminder that we have Indy Senna, our lead audit partner, with us here in the room to answer any questions you may have of him. I now move as an ordinary resolution that the directors be authorized to fix the fees and expenses of PwC as the company's auditor. Are there any questions from shareholders in the room? Are there any questions online?
No questions online.
There appears to be no further discussion, so could you please record your vote on this resolution? Thank you. The seventh resolution is to approve the grant of equity-based discretionary long-term variable remuneration instruments to Lewis Gradon, Managing Director and Chief Executive Officer of the company. As explained in Explanatory Note 4. The notice of meeting approval is being sought to issue performance share rights and/or options up to a total of NZD 1,272,726 to Mr. Gradon. Prior to the grant date, Mr. Gradon will be entitled to choose the proportion of PSRs and options to make up the total value to be issued to him. The value of each PSR and option will be determined by an independent valuation undertaken by KPMG following the annual shareholder meeting. The key terms of the options and PSR plans under which these instruments will be issued to Mr.
Gradon are set out in Explanatory Note 4 of the notice of meeting. As we've talked about, the board undertook a review of these plans this year and has approved the minor modifications as a result of that review. The board is of the view that the updated plans create better alignment and outcomes for employees and shareholders, taking account of the company's performance compared to the markets, industries, and industry in which the company operates. I now move as an ordinary resolution that the grant of discretionary long-term variable remuneration instruments to Lewis Gradon, Managing Director and Chief Executive Officer, be approved. Are there any questions from shareholders in the room? Are there any questions online?
There are no questions online.
There appears to be no further discussion, so could you please now record your vote on this resolution? Thank you. That concludes the voting on the resolutions today. Thank you for your participation. If you have voted using a voting card here in person, you should now have completed your voting card. Our registrars will begin to move through the room collecting these. For those of you online, please ensure that you have submitted your electronic votes. The votes will then be counted by Corporate Markets. We will now display the proxy results that we have had as at Monday's voting deadline. Everybody can have a look at those. These are from people who have put in proxies. The final results of the voting, including yours lodged today, will be announced to the NZX and the ASX as soon as they are available this afternoon.
Just wait a moment while we collect the votes.
Nothing supported.
All right. Has everybody put their vote in? Good. I would now like to give shareholders an opportunity to ask any general questions concerning any matters related to the company. Are there any questions from shareholders in the room?
Just calling up to a shareholder. Thank you for the explanation at the beginning of the meeting relating to the tariffs. For my clarification, lots of companies that are subjected to tariffs, although we're all trying to get used to it, and there's a bit of distance to go yet before we know what the common practices are going to be, or in fact, there will be anything that's common, or every company makes its own decisions. Am I to understand from the comments you made that we're reducing our selling prices to absorb the tariff so that the buyer is in fact paying the same price as they were before the tariffs were applied?
No, no, we won't be changing our selling prices, but we will be responsible for paying the cost of the tariffs. As Lewis explained, that's somewhere between NZD 16 million and NZD 17 million this financial year. We'll pick up that cost.
Even though we're not the...
In the U.S., we are the importer.
Yeah, we sell them to our own company that sells them to hospitals. We're the importer, right?
Yeah.
Yeah.
Yeah, any other questions?
Can you give us an update on your purchase of the property in Karaka? I noticed you've written it down quite considerably of what you paid for it.
I'll say a few words and then maybe over to you, Lewis. We wrote that down in the last financial year, and we've made no further adjustment in this current financial year. This, as we spoke about, is really a long-term to meet our long-term plans, and it'll be several years before we actually start work there. We've put our foot on the land that we know that we'll need into the very long term, and it's currently going into another phase of planning consultations and so on. We should know in a year or so how those will go. There is. We'll have a look to do all of that, as I say, several years out. This is for the long term, this land. This is not in the immediate future. Lewis, I don't know if anything else you wanted to...
I just want to put it in maybe a context for you. If you look at this site here, that'll be the fifth building. The land at Karaka will get us up to nine to twelve buildings, depending on layout. Like this, you think you want to double your size every five or six years. You're at that kind of size of land. In terms of the value and the valuation, we bought it. We were quite happy with that purchase. There were some changes to Auckland City Council, let's say, zoning processes, which affected adjacent valuations. I think that's just a technicality. When you look at 104 hectares adjacent to all those services, they were not affected by any of the proposed changes. We think that's a great plot of land. We think it's in a great place. In our minds, we couldn't have done better. Yes, correct.
No change to when planned, and that all works for us at the moment.
Any other questions, Tim?
Thank you, Barbara O'Connor from the New Zealand Shareholders Association, but also an individual shareholder. Thanks for the presentations. They were hugely beneficial. My question is in relation to the clinicians being used in the research and development. As these medical devices get more complex, how do you ensure that you've got the right clinicians that can use them during the R&D phase? Also, how do they benefit in terms of any, not trademarks, but intellectual property that's gained by Fisher & Paykel Healthcare?
Maybe I'll just give it a quick go and then over to you. Look, the intellectual property, of course, remains with us. There's a long history of choosing highly professional and highly qualified clinicians to work with on our R&D and with the clinical trials that we do on products. I think we have a full suite of people who we work with right around the world, I'd say. I don't think there's been any significant change in our approach to that. You're right, you need very capable people. I think we've been very selective in who we choose, and we work with very capable people. Lewis, did you have anything?
In our hospital business, given that we're possibly at the front of developing that therapy, we tend to be working by definition with the leaders in clinical practice. Leaders in clinical practice, these will be people that are speakers at conferences, publishers in journals, editors of journals, members of practice committees, and they're easily identified. Now it's global, but in terms of care opinion leaders and respiratory support and these types of things, it's a relatively small world.
Another question. What proportion of those clinicians would be New Zealand-based?
Oh, geepers. We do a lot of clinical work in New Zealand. Generally, we do the early stages clinical work in New Zealand, early stages usability. When we're heading towards publications, that's when we're tending to go global. In terms of, I mean, just off the top of my head, at any one time, we'd have products under some kind of controlled clinical trial in New Zealand at all times. Probably as a snapshot, there'd be two or three or four hospitals in New Zealand trialing something working with us. It's off the top of my head at any time.
Do you want to follow up? Yeah, keep going. Is the mic just behind you or are you happy? Any further questions? Did you want...
If I may, and you may not be able to say much about it, what are the exciting innovations that you've got in the pipeline to give and maintain your competitive advantage?
You're right. We don't want to say that. I'll give you a little bit of context. You know, nearly 1,000 R&D people, a couple hundred million dollars a year on R&D. There's a lot of stuff coming. You're right, we don't like to mention anything until it's available for sale.
That's right. Lewis is quite right. I mean, we're spending over NZD 200 million a year, and you put that into a five-year context, and that's NZD 1 billion of research that's going into products and improvements, all with patients and clinicians in mind. Any further questions?
You talked about distribution internationally and covered the countries that are well known. Is there a point where you start to, is there more growth available in which countries, which areas in the world do you think that will come from?
Look, we're in 120 countries, so you're right. There's probably, in terms of numbers of countries, but we are very underpenetrated when you have a look at how we're going in terms of the number of people who would benefit from our products. There's enormous penetration still to go, even in countries like New Zealand or Australia, let alone some of the bigger countries like the U.S. or whatever. Yes, there's geographical growth, but there's also enormous growth potential within those countries just because of the penetration levels that we're at. Any other questions?
Hi. I'm a shareholder through ShareSees. My question is, the company's revenue has doubled from 2010 to 2019, from NZD 500 million to NZD 1 billion. From 2019 to 2025, in six years, it has become NZD 1 billion to NZD 2 billion. What is the time frame you're expecting for another doubling of the revenue?
Lewis spoke to it, and there's a slide in his deck there that talks about our aim is to double the revenue every five to six years. That's a very ambitious target, but we've been able to achieve it to date. Obviously, the numbers get bigger and bigger, but that's our stated aim, and that's what we're working towards.
Oh, sorry. I have only a second question. My second question is regarding, I think there are two people on the panel who have a PhD in science. I think both ladies, Lisa and that lady, last one, yeah. I have read, I read way back in 2020 on some YouTube comment section that coronavirus was found in North German caves and people have done research in 2008. I just checked it again, and I can again see an academic research. The question is for the ladies who have a PhD degree. People have already found a coronavirus in 2008, and there are so many skeptics going on. Right now, the U.S. government is having a complete new inquiry. Similarly, the New Zealand government is having an inquiry about how it happened.
As a science company, as a company having an R&D, what is the company's, what was the company's research division's opinion about the coronavirus? Was it seriously severe, or is it like something that was exaggerated?
This is well before, 2008 is well before I was on the board. Do you want to comment on that, or do you want to take it up with Lewis?
I'm happy to discuss absolutely anything, but I'm not sure I was understanding the question. I'm sorry.
No, sir. My question is a bit of an academic one, because I myself am a bit of a coronavirus skeptic. The question is, all the governments are having inquiries about how the coronavirus crisis was handled. The U.S. government is thinking of having an inquiry. The New Zealand government is thinking of having an inquiry. Fisher & Paykel Healthcare is having a research department. I thought I'd check with the real-life people working on the research and science to know whether it was really serious, because there are already academic research papers showing that coronavirus was existent in North German caves in 2008. It's an academic question.
Why don't we leave that and take it off?
I think because this is probably outside of our expertise. If someone else wants to, it was very real for a couple of years, and there's no doubt about that. I think it's beyond our expertise to delve into that kind of research. Maybe in a...
Why don't you have a chat with one of the PhD ladies afterwards? I think that would probably be useful. Good. All right. Any other questions? One then.
Thomas Lee here. Speaking about innovation, I want to know if, because like Asia, a country like Asia, there's lots of air pollution. I want to know if you are thinking about making a portable device for the filtration for the airflow, like what Dyson have done with their mask, with their portable. I just want to know your view.
Look, it's an interesting question. It's certainly not on our immediate radar. Lewis is saying, no, nothing in the pipeline. Any further questions? All right, let's move to the online.
Yes, we have a question here from Ray Tolleson saying, I understand vaccination rates in the U.S. and in other countries are lower than historic rates. Assuming that is correct, do you expect the reduced rates will lead to greater hospitalizations? Is there surplus hardware capacity in hospitals to cope with a likely increase in hospitalizations, or do you expect an increase in F &P hardware sales to hospitals above the usual increase?
Look, the company has had to look at this in some detail, and the short answer is we don't anticipate very much change to the trends that we're seeing now. I might let you, because we've spent a lot of time on this, and Lewis has some of the specifics around it.
With a lot of detail too. Let me try and give you a top line look at that, because I do have that question quite a bit. I talked about seasonal hospitalizations, less than 5% of the business. That's everything that's seasonal. If you just go to viral infections, influenza, that's what vaccines can do something about. That less than 5% gets quite a bit under 1%. You go to the impact and change in vaccination rates and vaccination efficiencies, we're at fractions of a percent. Yes, it's real, and everything in the question is real, but in terms of impacting our business and those admissions, not much impact at all.
The next question comes from Robert Keane, and the question is, the last dividend reinvestment was in June 2024. Do the directors envisage a DRP being reactivated for any future dividend payments?
I spoke a little bit about dividends, and just to give you a little bit of a history, our aim is to try and pay out about a 65% payout ratio, and that ratio was actually a little bit below that in the very high years that we had in COVID when the profits were super profits, if you like. It's meant as profits have come back onto the projectile that some of our payout ratios were actually quite high. During that time, which 2023 and 2024, we actually used the dividend reinvestment plan as a way to save cash. We're now on a more steady projection now, and as we sort of announced, we aim to pay at about that 65% payout ratio. In the immediate future, there isn't an anticipation of a dividend reinvestment plan.
Next question comes from Shirley Wong. Can you tell us about any new products yet?
I think what we have done in the annual report, which is a very good document, and I'd really commend it to all of you, is lay out the products that we did release in 2025. There were quite a number of those, both in the hardware and in the OSA. I think that's really what we want to talk about at this point. We're not giving the roadmap of our future product developments, but we had a very exciting number of launches in 2025.
There are no further questions online.
Okay. All right. That appears to be all for today. That concludes the formalities, everyone. Thank you for coming out today, and I invite everyone to stay and share some refreshments afterwards at the back of the room. For those of you that joined online, we appreciate your attendance and participation. I know I speak on behalf of the board and the wider company when I say that we value your backing and your confidence in our growth story. Thank you.