ResMed (RMD) is a leading developer, manufacturer and distributor of medical equipment for treating, diagnosing, and managing sleep-disordered breathing and other respiratory disorders such as sleep apnoea.
RMD operates in over 65 countries through 16 direct offices and a network of distributors, including Australia, France, Germany, New Zealand, Singapore, the UK and the United States.
RMD delivered an outstanding FY12 result that came in ahead of market expectations. Revenue for the June 2012 quarter totalled $3.6 million, a 9% increase on June 2011’s result (constant-currency terms.).
Net income was up an impressive 31% in the same period to $76.8 million. For the full year, revenue grew 10% to $1.4 billion, whilst net profit rose 12% to $254.9 million.
The strong fourth quarter came on the back of healthy flow generator and mask sales in RMD’s core America’s division.
Flow generator sales growth came despite a slowing US economy, highlighting the success RMD is experiencing in penetrating the American sleep-disordered breathing market.
RMD achieved the profit result whilst benefiting from a lower Australian dollar, which helped contain general and R&D expense growth. Quarterly general and R&D expenses were up 3% on-year.
Importantly, the strong result allowed the group to declare a maiden quarterly dividend of 1.7 cents per Australian share.
The strong FY12 result bolster’s our confidence in RMD’s ability to maintain its high profit margins.
FY12 gross margin was 60%, with EBIT margin a similarly robust 21.5%. The numbers were similar to FY11, where gross margin was 59.6% and EBIT margin was 21.5%.
The strong margins came as the group benefited from favourable exchange rate movements and cost control measures such as supply chain efficiencies and expanding manufacturing in Malaysia.
Continued growth in flow generator sales combined with cost control measures and are likely to support margins going forward.
The balance sheet was also in healthy shape, with the group having a net cash position of $558,706 at the end of FY12.
RMD’s FY12 results show a company growing its share of the lucrative US sleep-disordered breathing market.
American flow generator sales were healthy despite concerns over the economy, and RMD demonstrated operational efficiency through good cost control.
RMD’s balance sheet was in pristine shape, and in our view, the company’s already robust margins will benefit from continued flow generator and mask sales growth.
As such we think RMD is a stock to watch in the coming months.