Good day. Welcome to the Fisher & Paykel Healthcare half-year results call. At this time, I would like to turn the conference over to Marcus Driller, VP Corporate. Please go ahead, sir. Thanks, Jenny. Good morning, everyone, welcome to Fisher & Paykel Healthcare's results conference call for the first half of the 2023 financial year. On the call today are Lewis Gradon, our Managing Director and Chief Executive Officer, Lyndal York, Chief Financial Officer, Paul Shearer, Senior VP of Sales & Marketing, Andrew Somervell, our VP of Products & Technology. Lewis and Lyndal will first provide an overview of the results, then we can open it up to your questions for the team. We'll be discussing our results for the six months ending September 30, 2022. Earlier today, we issued our 2023 interim report, including financial statements and commentary to the NZX and ASX. These documents can be accessed on our website at fphcare.com/investor. With that, I'll pass over to Lewis. Okay. Well, thanks, Marcus, welcome to the call, everyone. Today, I'm going to be referring to the investor presentation pack that we released to the NZX and the ASX this morning. Before we look at our results, I would like to start by recognizing the ongoing efforts of people right across the healthcare sector. While it's been great to see a normalization of sorts after the peak of the pandemic, we do want to acknowledge that conditions remain challenging for our customers. At this time, I'd also like to make a special mention for the people of Fisher & Paykel Healthcare. Seasonal illness and COVID-19 have meant that we've had some periods of home isolation and continued disruption to our work environments and to our customers' work environments during this first half. We're grateful that our people have maintained their relentless commitment, so thank you. Turning now to page three. I'd like to call out some of the highlights during our first half, which included continued growth of our anesthesia sales force, the conditional purchase of land for a second New Zealand campus, and the rollout of a number of new products to more markets around the world. Move on now to the financials on page four. First half operating revenue was NZD 690.6 million. This is a 23% decline from the first half of the 2022 financial year, and it's a 27% decline in constant currency. As we said in our August update, this result does reflect how we're lapping a period of significant COVID-19-driven demand. It is, however, a solid performance compared to pre-pandemic levels, with revenue up 21% compared to the first half of the 2020 financial year. Net profit after tax for the first half was NZD 95.9 million. That's down 57% on the first half of the 2022 financial year, and 65% in constant currency. CFO Lyndal York is here today to unpack some of these figures shortly. Before we do that, let's have a look at our revenue from the product groups, starting with Hospital on page six. Hospital operating revenue for the first half is NZD 438.7 million, down 35% year-on-year and 37% in constant currency. New applications consumables revenue was down 20% year-on-year and 23% in constant currency. Customer inventory levels have played a role in this result. A number of our customers purchased a significant amount of product in the second half of our 2022 financial year to prepare for an Omicron wave that eventually required less intensive respiratory support than was expected at the time. As this half has progressed, we saw signs that customers were working through their excess inventory, and sales of our Hospital consumables have increased month on month since May. This trend has continued through the early stages of our second half. Ultimately, we see these stocking dynamics as short-term, and the fundamentals of our sales strategy remain the same. Our teams are committed to helping improve clinical practice and ensuring our hardware is used to benefit a broader range of patients requiring respiratory support. Now, let's move on to our Homecare product group on page eight. Homecare operating revenue was NZD 249.9 million, up 10% on the first half of 2022 or 4% in constant currency. OSA masks and accessories revenue was up 16% or 10% in constant currency, and a significant contributor to this was the strong reception of our Evora Full face mask. We received 510(k) clearance in April in the United States, and the feedback from clinicians and end users has been very positive. Now I'll hand over to our CFO, Lyndal York, for a more detailed look at the financials. Lyndal? Thanks, Lewis, and good morning, everyone. On page nine, gross margin decreased by 325 basis points to 59.8% for the half compared to the prior corresponding period, down 533 basis points in constant currency. The cost of freight continues to be elevated. The increased proportion of air freight and elevated rates compared to pre-COVID-19 rates impacted our constant currency growth margin by approximately 290 basis points for the half. This compares to a 190 basis point impact in the first half last year, as the average road and inbound air freight rates were higher than the same period last year. We have recently been seeing an easing of air freight rates out of New Zealand, which is encouraging. This half, we have also experienced manufacturing inefficiencies as we have been carefully balancing demand fluctuations with manufacturing throughput and higher sickness-related rates of absenteeism. We saw sales soften in February. In response, we progressively reduced our production volume and manufacturing workforce. This resulted in under recovery of overhead costs, which are largely fixed, and labor costs during the half. Our second half constant currency gross margin will likely improve from the first half by approximately 200 basis points, with improvements in the labor under recovery and freight, assuming current slightly lower freight rates continue. We expect second half production levels to remain lower than last year as we aim to reduce finished goods inventory. At October 31st, 2022 exchange rates, reported gross margin in the second half would be approximately 61%. Moving on to page 10. Total operating expenses grew 8% or 3% in constant currency. Operating margin was 18% as we continued our focused investment through the demand fluctuations over the last few years. R&D expenses grew 11% to NZD 84 million as longer term projects accelerate. R&D expenses were 12% of revenue for the half. We are estimating that 60% of our R&D spend will be eligible for the 15% R&D tax credit this year. SG&A expenses increased 7% to NZD 202 million and were flat in constant currency. Our sales expenses grew 11% in constant currency as we continued our investment to support the strong hardware sales through COVID and deliver on our anesthesia opportunity. This was offset primarily by a reduction in our profit sharing schemes. Travel and sale events have increased. We estimate they were about 2/3 of the normal expected level for the half, up from about a 1/3 of normal levels last year. We anticipate that they'll continue to increase and approach approximately 3/4 of normal levels for the full year. We are targeting operating expense constant currency growth of 8% for the full year, with R&D being about 15% and SG&A about 5%. At October 31st, 2022 exchange rates, reported operating expense growth would be around 14%. Moving on to page 11. Operating cash flow this year was NZD 2 million, reflecting the lower profit. Our working capital increased as inventory grew and payables reduced. We have increased our raw materials and finished goods as we saw sales soften in February. In response, we progressively reduced our production volume and are managing our long lead time purchase commitments with suppliers. Capital expenditure, which includes purchases of intangible assets, was NZD 125 million for the half. The increase from NZD 81 million in the prior year is primarily due to land and buildings. We completed our third building in Mexico. Earthworks continue to progress for our fifth building in New Zealand. In September, we paid a deposit of NZD 27.5 m illion for the acquisition of land for our second New Zealand campus at Karaka. The purchase is conditional on receiving Overseas Investment Office consent. The next payment for this acquisition of NZD 190 million is anticipated to be in the first half of our 2024 financial year. Capital expenditure for the second half of FY 2023 is expected to be approximately in line with the first half, excluding that deposit for the Karaka land. The balance sheet remains strong. Debtor days were in line with the prior year at 42 days. As the majority of our receivables are in foreign currency, revaluing them to NZD resulted in an increase of approximately NZD 15 million in the half. Net debt at the September 30th, 2022 was NZD 43 million, and our gearing ratio was 2.7%. Interest-bearing debt was NZD 112 million, with NZD 70 million of that being non-current. At the September 30th, 2022, we had available liquidity of NZD 312 million between undrawn facilities and cash. Turning to page 12. We have declared a fully imputed interim dividend of NZD 0.175 per share. This represents a 3% increase on the interim dividend declared last year and continues our recent track record of increasing our dividends to shareholders. It will be paid on the December 21st, 2022. We want to maintain the strength and flexibility of our balance sheet as we fund our significant infrastructure investments over the next few years, including the Karaka land acquisition, which is a long-term strategic investment. To assist us in maintaining this flexibility and strength, we have reactivated our dividend reinvestment plan. We are offering a 3% discount to the market price commencing with this dividend. Shareholders who are resident in New Zealand, Australia, and the United Kingdom are eligible to participate and need to ensure they are opted in by the December 12th, 2022 to be able to participate for this dividend. Looking now at foreign currency on page 13. Foreign currency movements positively impacted our profit after tax by NZD 6 million compared to the same period last year, primarily due to the New Zealand dollar being weaker on average through the period. At end of October spot rates, we would have a pre-tax loss from hedging of approximately NZD 14 million for the full year. With that, it's back to you, Lewis. Okay, thanks, Lyndal. Turn now to page 15. Before we move on to our observations for the second half, I'd like to remind you of our long-term aspiration and provide a little more color on our manufacturing infrastructure, plans to support our growth. Many of you will be familiar with this graphic. We aspire to sustainably double our constant currency revenue every five to six years. You can see that over different time frames, we expect a progression of different applications to contribute to this longer-term goal. In the short to medium term, we see a very large opportunity for Optiflow nasal high flow with both general respiratory patients and in anesthesia. In both of these applications, we have world-leading technologies, and the market remains significantly under-penetrated. In the medium term, we see the opportunity to further develop Optiflow therapy in the home setting. For the long term, we're building out our surgical humidification set of products and a global sales channel. Our respiratory humidification and OSA businesses remain a core part of our overall strategy for growth, with demographic and geographical drivers. To support these overall growth aspirations, we continue to invest in R&D, manufacturing, and supply chain infrastructure. With the completion of our fifth building in New Zealand in approximately 2025, this current site in New Zealand will be at full capacity. We continue to view New Zealand as an attractive combination of people skills and healthcare infrastructure to continue growing our R&D and pilot manufacturing. We've entered into this conditional agreement during the half to purchase the land for our second site in New Zealand. In prior announcements, we've also talked about options for additional manufacturing locations, and we can now report that we've entered into a lease agreement for a manufacturing facility in Guangzhou, China. We have a well-established sales footprint in China, which has been run out of Guangzhou for almost 20 years now, and this new facility is aligned with our distributed supply chain strategy. It will start with a select range of products to service local markets, and it provides us with optionality and flexibility to respond to demand over time. Let's look now at page 16. There's a number of uncertainties which I think we're all familiar with now leading into the coming half, and that leaves us unable to provide quantitative guidance for revenue or earnings at this time. As we note in our earnings release, we see a number of factors impacting the period, including the severity and extent of COVID-19, RSV, influenza, and that's in addition to the impact of ongoing hospital staffing pressures and potentially surgical backlogs. Speaking on a more qualitative basis, we have a number of things that lead us to believe that second half revenue will be higher than the first half. Historically, sales of our Hospital consumables are typically higher in the second half, and that reflects seasonal patterns in hospitals. Specifically, in the last two pre-COVID years, Hospital consumable sales were 19% higher in the second half than in the first half in constant currency terms. In addition, the proportion of customers cycling through their Omicron-driven consumable stock is likely to be lower in our second half than the first half. In Homecare, the recent launch of our Evora Full, in combination with an ongoing improving supply of CPAP hardware, is likely to contribute to continued Homecare growth for the remainder of the year. Lyndal's already mentioned our expectations for gross margin and operating expenses for the rest of this financial year, so I'll leave that there. With that, we're now happy to take your questions. Thanks, thanks, Lewis. We can now take your questions. Before we begin, can I please ask everybody to limit your questions to two. This is to ensure that everybody has an opportunity to participate. If you do have further questions, you're welcome to rejoin the queue, and we can do our best to cover everything off within the hour. Jenny, I think we can now open the line for questions. Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your speaker to reach our equipment. Again, please press star one to ask a question. A voice prompt will indicate when your line is open to ask the question. Our first question today is going to come from David Low from JP Morgan. Thanks very much. If I could start with the commentary around flu and RSV. Yeah, we've seen a lot of reports that the incidence of flu in the Northern Hemisphere, particularly the US, is weighted towards children. Just wondering what the implications are for Fisher & Paykel's consumable sales if we do see more children than adults than is perhaps normal. You know, I think flu most years includes adults and children. We have a neonatal range across everything we do, across nasal high flow, across noninvasive ventilation and across invasive. You know, we just view it as a flu impact historically. This year, probably no different, but maybe a bigger impact in the neonatal part of the business. Nothing to particularly read into that one way or the other, if it's a different weighting. The other question is just on hardware. I mean, I think my expectations was after selling so much hardware, we would see hardware sales really sort of fall back to a below normal experience for quite some time. Just wondering if you could talk about your observations there. It seems to have held up better than I might have thought. I'm just wondering what your expectations are going into the second half and beyond that, please. Yeah, you're not alone with those thoughts. I can talk to what we've seen in the first half really. In the first month or two, we saw some COVID-driven demand in hardware, in certain countries that had a COVID hospitalization surge. We saw the hardware pick up in those countries. In the latter part of the half, the last four months or so, we've kinda seen hardware at pretty similar levels to pre-COVID and for pretty similar reasons. Okay. Can I get you to elaborate a little bit on pretty similar reasons? You meant that demand just seems pretty normal. Yeah. Yeah. Yeah. It looks like pretty similar volume. When you dig into, you know, why are we buying this hardware, it's kinda business as usual. You've got some end of life replacements, you've got some fleet upgrades, you've got some hospital expansion, and you've got a little bit of change of clinical practice as well. Great. Thank you very much. Thanks for your questions, David. Next questions come from Gretel Janu at Credit Suisse. Go ahead, Gretel. Hi, can you hear me now? Can hear you now, Gretel. Perfect. Thanks. just first question is just around the level of stocking and destocking. just wondering if you can give us some further color around how it differs between regions? Are we seeing any normal buying patterns return, particularly post the end of that September and into October and November? Thanks. Well, you know, the complexity around trying to determine stocking and destocking, I would say we feel like it, there's similar trends across all the regions. In the United States, we have a distributor in the chain, so that adds another kind of step in the stocking, destocking, kind of phenomena compared to maybe Europe. Otherwise, I'd say fairly similar trends. And that similar trend is, you know, an increase during a COVID hospitalization surge, that steep, sharp drop-off in February, two months of low levels and then sequential increases. That's fairly universal. if we're comparing buying patterns currently to how it was pre-COVID, would you say it is back to normal or is there still significant irregularity from your customers? I think probably the best description we can give for that is sequential increases since May. On the whole, that's not so normal. Normal would be our Q2 would normally be less than our Q1. I'd say sequential increases is a little bit unusual and probably speaks to the destocking phenomena. Great. Thanks. Just in terms of the operating margin, long-term target of 30%, so trending well below that for reasons we all understand. I guess just how long will it take to get back to that 30% level? At some point in time, will you look to scale back on the OpEx growth to get there? Thanks. Thanks, Gretel. Look, we do think that it will take us, you know, a few years to get back there. What we wanna do is make sure that we're investing in focused areas in the business still. We'll continue to do that, but we will be looking to grow our OpEx lower than our sales growth until we get back to those target levels, which we're confident that we'll get back to, but it certainly won't be a next year thing. Great. That's all I had. Thanks very much. Thanks, Gretel. Next question comes from Lyanne Harrison at Bank of America. Good morning, all. Thank you for taking my questions. I was just wondering, are you getting any insight on how the nasal high flow devices are used in the hospitals now, given, you know, the reduction in COVID volume? Yeah, we have to rely on anecdotal for that. I suppose the best I can give you is that most salespeople would say they've got a hospital that's considering changing their clinical protocols, is developing new clinical protocols or in the last stages of developing clinical protocols. We see anecdotal evidence of that change for nasal high flow. I think we all understand we don't see it coming through in our numbers just yet. What is Fisher & Paykel then doing to try and encourage, I guess, increased utilization? Can Fisher & Paykel do anything to accelerate it? Obviously, there's more devices in the market. you know, can they do something to accelerate the usage? Yeah. That's kinda what we do for a living. It's certainly the focus right now, and it really is a process of visiting a customer that's acquired a lot of hardware over COVID, and pointing out what the clinical practice guidelines are, and then offering to help them implement those clinical practice guidelines. Paul, do you want to add some color to that at all? Okay. Yeah, sure. Oh, yeah. It's Paul here. I mean, that's what we do. You know, we're just spending as much time as we possibly can getting in front of customers, educating them, in-servicing them if they haven't had a lot of in-service during COVID. Educating them to the applications outside COVID. If they've, you know, it could be used different areas of the hospital, you know, we're talking to them about that. Helping them, you know, go and talk to the clinicians in those different areas. This is work we do all day, every day, and we've been doing for many years. This is a continuation of. Would you say that level of interaction with customers, would that be, you know, would you say that's similar to the levels that you had pre-COVID, or would you say that's more elevated since then? Well, we're starting to get there. I mean, we're starting to get pretty good access in most hospitals around the world. The problem has been access, has really been, you know, the stumbling block. I think generally speaking, we're now getting, you know, pretty reasonable access to hospitals, clinicians. These people are still very busy, so that makes it harder. I don't think we're getting back to over than what it was in the past, but I think we're starting to head towards getting more normalized access to the people we need to talk to. Okay. Thank you very much. Thanks, Lyanne. Next question comes from Saul Hadassin at Barrenjoey Capital. Go ahead, Saul. Good morning, guys. Thanks for taking my questions. Just one. In, in the media release, it talks to seasonal patterns as it relates to your hospitals, consumable sales, noting 19% higher sales in second half as it's first in pre-COVID-19 times, 2018-2019. I'm just trying to work out what relevance that has to this half that we've just finished. Lewis, maybe some comments as to is that a trend we should read into this fiscal 2023 year, or is that first half revenue figure for consumables still difficult to interpret based on what's happened with destocking and stocking, et cetera? Yeah. I think I would say yes to all the above, Saul. It's difficult to read into the first half and all that. In the absence of data points, we think probably the best data point we can point to is FY 2018-2019, where... You know, for all of our history, just about second half is higher than the first half, and it's generally related to more hospital admissions in the Northern Hemisphere over our second half than our first half, you know, for all sorts of reasons. You know, in the absence of other data, that's probably about the best point we can give you. No problem. Okay. Thank you. Just a question on OpEx. I just noted that the, for the half itself, the constant currency OpEx growth was below where you guided to, I think, going into the first half, and I think for the full year as well, the guidance in constant currency is now also below where we were thinking it might land back at the Investor Day when I think that guidance was given. In terms of your ability to just flex that OpEx up and down, now that we're sort of into the second half, how much control do you have over that full year guidance of 8%? Do you think that's sort of a very realistic number, or do you still have leverage to pull that down if need be? Yeah. I'll pass that question over to Lyndal, but just a little bit of background there is that when we looked at this financial year, we thought we would try and aim for an OpEx growth, which would be a compound annual growth of FY 2020, our last normal year of about 11%. That's what we were aiming at. We did say at the time, that's what we're gonna try and do. That seems to make sense. We did say at the time that might be challenging, and that's kinda what's played out. Yeah. I guess just to expand on that, look, you know, we knew that it was quite optimistic to set those targets at the beginning of the year, which is why they're coming down. As everybody's experiencing, just taking a little bit longer to hire the people that we're wanting to do. Travel and sale events haven't ramped up to normal entirely, so it's just taking a little bit longer to get that back up to speed. Nothing that we're overly worried about. Again, as I said to Gretel's question, we're making sure that we're continuing to invest in focused areas in the business for the long-term, growth and the sales of the hardware that we've made through COVID and to make sure that we make the most of our anesthesia opportunity, and that's not really changing. I just wanna make really clear that we haven't intentionally pulled back OpEx growth from our initial guidance. No worries. Thank you. Sorry, just one other thing, that the lower profit share schemes are playing into that a little bit as well this year on a year-on-year growth. Thank you. Thanks for your questions. Next questions come from Chris Cooper at Goldman Sachs. Go ahead, Chris. Hi. Morning. Thank you. Just to follow up on that OpEx question, I had something similar. At the Investor Day in May, I mean, the reason for the OpEx guidance that you gave was primarily focused on, you know, the need to build sales reps and prioritize that sort of effort in terms of proportionately where the incremental COVID demand had been placed. Clearly, you know, you've got a role here to make sure these devices are gonna continue to be used. By not being able to effectively hit that OpEx target, is there any sort of concern in your mind that you don't have the necessary sales reps in place which is gonna sort of drive that additional utilization you were hoping for when you were speaking in May? Yeah. We'll probably all chip in on that one. A lot of that sales question, a lot of that salesperson growth occurred last year, not tied about that particular part of it. Yeah. I guess I just would point out, Chris, that we've got 11% growth in our R&D and sales offices, this half, so that is actually good, solid growth. Again, that focused investment, so we're not concerned about that. We're continuing foot down in those focused areas. To your previous comments, Lyndal, as well, are we to interpret this as more of a deferral of some of the OpEx that you had expected to come into 2023 that's now gonna be deferred into 2024? Is that the right way of thinking about things? Yeah. That's probably the best way of thinking of it. Got it. Delayed rather than deferred. Okay. Okay. Thanks. Yeah, understand. Gross margin, so that's now guided to 200 basis points up in the second half from what was previously flat. You commented in your statement today that the sort of New Zealand freight rates are sort of, you know, softening but still lagging the global easing. I just wanted to clarify, is the upgrade based on the view that New Zealand's costs will continue to follow global costs down? Or just based on spot today in New Zealand, you can upgrade by 200, and then the lagged easing should provide further upside into fiscal 2024? There's two components to that improvement in constant currency gross margin in the second half compared to the first. Freight rate's part of it. That's about a quarter of it or sort of 50 basis points based on rates that we're seeing today, which are sort of after the end of the first half. We have seen them come down, and if they continue, we'll see that. Obviously, if the decrease accelerates, there's potential further improvement there. If other components spike up, it could go either way. The other big factor there is the labor under recoveries that we had in the first half will reduce significantly in the second half as we've reduced our manufacturing workforce through the first half, being primarily the temporary employees in New Zealand that we hired during the COVID spike, as well as through natural attrition in Mexico. Coming into the second half, a lot of that labor under recovery would go away, assuming that production volumes remain fairly comparable half- on- half, to aim to reduce those finished goods inventory as we're hoping to do. Understood. Thanks very much. Thanks, Chris. Next question come from Matt Montgomerie at Forsyth Barr. Hey, guys. Thanks for taking my question. Maybe just firstly back onto gross margins. Just trying to get a feel for the track into, you know, 2020 or the second half and 2024. Would you be able to split out the impacts that you talked to in terms of, you know, the mix manufacturing and efficiencies and then the freight impact in terms of that, you know, 5 percentage point delta between your target? Sure. The one thing that I would point out is when we're talking reported gross margin, exchange rates are at a very favorable place for us at the moment. With exchange rates where they are today, we'd actually be wanting to overshoot that target somewhere around 67%-68%. That's why you see the difference in the constant currency and the reported year-on-year impact of gross margin. The key shifts other than that sort of currency from our target of 65%. We've got about 290 basis points of freight. Now, we are hoping that a little bit of that starts coming away next year. That will be a bit dependent on freight rates. We don't think all of that will come away. Some of it will stick. We're just where that is, we're not 100% sure. The labor under recoveries is sort of about 150 odd basis points, the overhead under recoveries is sort of the balance of that. No. No. There's no- That's great. Thank you. No, no real mixed impact there. Yeah. No, that makes sense. Maybe secondly, sort of going back to broader insights through the Hospital and, you know, talking to, you know, a lack of bandwidth for clinical change, would you be able to talk to that by geographies and, you know, particularly in your core North American and Europe markets relative to maybe, you know, the newer markets that you've sold into through the pandemic? Just, you know, trying to get a feel for g rowth by region at a utilization level going forward. Yeah, that's a tough one. Look, when you talk to individual salespeople from different regions, you really don't get much of a different story in terms of the dynamic in the day-to-day interactions. I'd say that part of it's fairly consistent. You think? I agree. Yeah. I think it is. I suppose growth by region. I'm just thinking, sorry about your growth by region part. The, I guess there probably is a difference there, and that is when you go outside North America and Europe, you've got countries that have come off a tiny installed base. They've had a massive growth in installed base, you know, relatively speaking, during COVID. I think that's a slightly different dynamic. They're a big part of the drop this half, but they're dropping to actually what's a pretty high level compared to, you know, FY 2020. I think that would be a different dynamic. Other than that, North America and Europe, similar with one exception, you've got a distributor in the chain in North America, which adds to the overstocking and then adds to the destocking timeframe a little bit. Otherwise, the dynamic in the hospital, I would say, is similar. Is that helpful? Yeah, that's great. Thank you very much. Thanks for your questions, Matt. Next questions come from Stephen Ridgewell at Craigs Investment Partners. Good morning. Good morning. Just first question for Lewis. Switching gears a little bit to product. You know, at the Investor Day, you showed us some really interesting new products. Can you talk a little bit to the rollout of Airvo 3 and the market response so far, and in particular, is the market accepting, you know, the higher price point for the added functionality and what you're seeing so far, and understand it's early days? Yeah. Yeah. Yeah. Yeah, good point. Early days. Airvo 3 at present is available in New Zealand and Australia. We have some, I'd call them, controlled release sites in Europe, probably not widely available in Europe until early next year and certainly hitting the price point. Right. I mean, just when you think medium term, Lewis, I mean, what proportion of, you know, hardware or Hospital device sales would you hope, you know, Airvo 3 might be able to achieve? You know, and are you expecting sort of different tiers, if you like, in systems where there's, you know, like Europe and North America, where there's perhaps more funding for, you know, this kind of device? Gee, going forward, I don't know. We're fairly agnostic to the hardware. I think maybe the only difference would be markets that have, you know, been penetrated or had usage of Airvo for a period of time would be coming around to some upgrade cycles. That's North America, Europe, Australia. Other than that, I can't really think of any color to add. Can you? Well, I just think that the, it's a, it's a very good product, Stephen. It's been, you know, we've shown it to, you know, customers, clinicians in Australasia and outside Australasia. People really appreciate the mobility, the, you know, the battery. There's lots of, you know, good features on that, and additional to Airvo 2. I think we're just gonna find that there's going to be growing demand for the product as we have time to get in front of customers and, you know, they get to view it, appreciate it, and get funding for it. I suppose I can add one other bit of color, and that is, you know, one of the common hurdles to using nasal high flow throughout a hospital, everywhere in a hospital is portability, moving patients around, you know, and that's something Airvo 3 facilitates. So far that's received very well. Yeah. Great. Okay. Thanks for that. Then just maybe one for Lyndal. On the tax rate, which was, you know, 16% in the first half, certainly lower than I was expecting. I mean, can you just tell us a little bit what's driven the tax rate that low? Are you able to provide some guidance for the tax rate in the second half and perhaps beyond? Is this a bit of a one-off, this low tax rate, or are you expecting low tax effective tax rates going forward? Thank you. Yeah, look, the biggest sort of impact in the first half there is the currency translation. As you're very well aware, different currencies have been very volatile through the half. Certain of our currency translations are taxable or tax-deductible, and certain of them are not. When you add up the combination of that, you can get a bit of a weird-looking tax rate at times. Nothing's changed in the long term in terms of we expect an effective tax rate of around 28%-29%, excluding the R&D tax credit. As we've guided to today, about 60% of our R&D spend, we'd expect to be eligible for that R&D tax credit. In the absence of ongoing currency, big different currency volatility in the second half, we'd expect the second half's tax rate to be more in line with that and the go forward in line with that. That's very clear. Thanks, Lyndal. That's all from me. Thanks, Stephen. Next questions come from Adrian Allbon at Jarden. Go ahead, Adrian. Good morning, team. Can you hear me? Loud and clear. Perfect. Just wondering, just coming back to the first half new applications consumables revenue, which I think is around NZD 260 million. Are you able to kind of give us a call out of how much is anesthesia? Maybe also just comment on what sort of what you're sort of seeing in noninvasive, just so we can sort of then make our own assessment of what's going on in Optiflow. Sure. anesthesia, a bit over 5%. A noninvasive ventilation, I think the way to think of it is your nasal high flow is most sensitive to the COVID movements, the overstocking and the destocking. Noninvasive is a little bit less sensitive to the COVID movements, invasive is less sensitive again to the COVID movements. Okay. Sort of from that, like NIV, relatively stable, like on a PCP basis. I wouldn't go that far. I would just, you know, if less variation. Okay. Then just like on the same theme, like just noting that, I guess inventories were circa NZD 400 million. like on your second half observations here, would you be expecting to sort of bring that down by about NZD 100 million as a target as we sort of round out the year? Like to circa NZD 300 million. Adrian, that will all depend on what our revenue's doing. We're estimating that our production volume will be lower than sales. That will be our aim for the second half, to try and reduce at least our finished goods inventory. Where that lands will absolutely depend on where revenue lands in the second half, which we're not guiding to at the moment. We don't have enough information to be able to guide to that. Aren't you guiding to, like, the second half revenue being higher than the first half? We're not guiding to that. We're saying that's our historic trend, seasonal trend. We would anticipate second half would be higher. We're not saying what sort of quantum that would be. Okay. if we, if that was to be achieved, like how much reduction in sort of, like I guess the other question, like is this peak inventory? Like if you had your observations or your what you're saying the second half being ahead of the first half, like can you give us any sort of sense of how far the inventories would come back? We would hope that it's peaked at the moment for finished goods. We are aiming to reduce our finished goods going forward. I guess the one thing that I would say is the most important thing to us is to make sure that if a patient needs our product, they have it. We're not focused on really driving down inventory to a very minimal level. We wanna make sure that there's always product when it's needed. We feel like we've got room to move that inventory down at the moment and still be able to satisfy that, and that's what we're aiming to do. Yeah, there's no real inventory target. Okay. Understood. Perhaps just a couple of other timings that would be helpful. Is there any sort of update on the FDA approvals that you're sort of waiting for F&P 950 and Airvo 3 into the States? That's Andrew here. I'll answer that question. We have a number of products like the F&P 950 that are going through 510(k) processes at the moment. It's very difficult to predict the timelines for those. I can't really give you any more information under, except that they are underway right now. Airvo 3? Yes. That's one of the products that's going through 510(k) process at the moment. It's the same story. We can't really predict the timelines for that right now. Okay. Adrian, if you think predicting revenue is tough. If you think predicting revenue is tough, predicting when you get clearance is even tougher, my friend. Maybe just on Homecare then can, like, just in terms of like the response you have had for Evora, like how much do you, like how much do you think the sort of Philips situation is sort of aiding that to the extent you can sort of separate it? Yeah. We've got a lot of drivers going on there. We've got a new product that's had a fabulous reception. We've got CPAP supply improving over time. You've had Philips have had some difficulties. It's impossible for us to call out what the drivers are. I think it's fair to say we don't think Philips' problems have been a major driver. We think it's more about the reception to Evora Full. Adrian, the Evora Full, is a very, very good mask. We've had a excellent reception from it, and, we think that's driving, you know, growth. We don't know how much, but, you know, it's had a very good reception in the marketplace. Thanks for your questions, Adrian. Our next questions come from Marcus Curley at UBS. Go ahead, Marcus. Good morning. I just wondered if you could provide any observations around, you know, the equipment sales within the Hospital business. Obviously, Lewis, you spoke about you know, that remaining at a relatively surprising level. You know, are you able to see which hospitals they're going to, and does it tell you about, you know, what's happening to the existing stock of flow generators within the hospital? If you go specific hospital by hospital at a point in time, the answer to the question is yes. When we've explored why that hardware is being purchased, you know, we can definitely nail down what it's for. That's the list I gave you. Does that suggest that, you know, let's say that the surplus equipment, you know, still hasn't been relocated or isn't necessarily, you know, being, you know, easily, you know, used on other applications at the moment? I think it suggests if they're buying hardware, it's all those reasons. I've got some old product. I mean, I think that's all it tells us. I've got some old product that's end of life. I've added some beds to my hospital. I want some more equipment. We do also see fleet upgrades. You know, if they've upgraded all of their ventilators, they might like to upgrade all of their humidifiers. You know, all these things are still occurring. These are all normal reasons why we might sell hardware. Okay. yeah, just to be clear, you know, you've got hospitals that bought lots of equipment during COVID who are now buying more equipment today. Yes. Yep, for all those reasons. Then secondly, this is probably longer term. You know, I suppose when you, when you look at your experience, you know, you know, with new application consumable revenues, as Adrian mentioned around, you know, NZD 260, you know, it's about, you know, 26% above pre-COVID levels, you know, three years on. You know, traditionally, this, you know, I suppose part of the business used to grow at 20%. You know, when you think about the next couple of years, do you think you're sort of overdue some, you know, some higher-than-expected growth? Is it still a situation where you're sorta gonna, you know, bed down a new level and, you know, and sort of look to re-accelerate it towards where it used to be? Well, you know, if you go back to pre-COVID, you know, we were thinking that 20% number you mentioned, that growth rate steadily decreases. Over time, the masses, because it becomes a bigger proportion of your business, you know, the end result looks good. Where we sit relative to that pre-COVID one, I mean, that's the million-dollar question, isn't it? That's what we're still trying to gauge. We feel like we should be ahead, I mean, I'd probably think of it more as maybe maintaining that growth rate rather than accelerating it up, would be how I'd be thinking of it. Just to be clear, you know, maintaining the growth rate that you've seen over the last three years relative to pre-COVID or the growth rate that you saw, before pre-COVID? Yeah. I was thinking about maintaining the pre-COVID, rather than, you know, we were thinking it would steadily drop, so as a growth rate. Yeah, maybe not such a steady drop going forward. Okay. Not necessarily, you know, jumping up above the growth rate on the basis that you're sort of overdue a couple of years of, yeah, uptake, if you like to call it that. A hard one to call. Over two years, we think we'll be ahead. We'll be ahead of where we would have been, there could be some jumps in our future. If you wanna smooth things out over four or five years, we're thinking we're ahead. We're probably ahead of where we were pre-COVID, and pre-COVID, we were thinking that growth rate steadily declines. We're thinking if you wanna go ahead and smooth over five years, maybe we can maintain closer to that pre-COVID growth rate. Okay. Thank you. Thanks, Marcus. Next questions come from Mathieu Chevrier at Citi. Go ahead, Mathieu. Yeah, good morning, all. Thanks for taking my question. The first one is just around the challenges that you're facing when you're trying to get your new Optiflow customers to actually use the device on a more regular basis. Well, I think probably the best descriptor of that, we did a survey of Canadian hospitals a few months ago. I forget the exact number, but it was something, 20 something percent of our customers were aware of the clinical practice guidelines. I think, you know, really that's the challenge. It's an age-old challenge. It's what we normally do. There's actually nothing unusual in that. You know, it's about getting those clinical practice guidelines in front of our customers and working through it with them. Yeah. Making sure they adhere to it. Yeah, once there is a second step, Paul Shearer's pointing out. Once they've, you know, signed off and agreed and think the clinical practice guidelines make good sense, they can put protocols in place, and that's a good step, but then they also have to follow the protocols is the next step. Yeah, understood. Six months ago, you've given us some scenarios around the potential Hospital consumable sales growth over time, assuming that 85% of the devices that you sold during the pandemic would actually get used. How has your thinking around those scenarios evolved since then? Maybe I should put that into a context. What we were doing at the time is we were trying to provide a context for the opportunity. We said that, you know, if 85% of this hardware is used, if it returns to, you know, very long-term historical average consumable usage, and if that takes three or four or five years, this is the kind of growth rates you can see. The point was that that installed base of hardware drives pretty decent growth rates. Whether you assume 15% isn't used or 20 or 10, or whether you assume five years or three years or eight years, the only point of that model was to say, hey, that installed base, however you look at it, drives pretty decent growth in consumables. I don't want you to stick on the 15% as a, as a number or an expectation. It's kinda just a model. Go ahead. Do you wanna add to that? Um, and just- I was just gonna say, Mathieu, for that, you know, over the last six months, the impact of stocking, destocking hasn't really given us any further insight into... That's a really, really good point in that, you know, if you look at the last six months, we've sold hardware and consumables volume is down. It kinda tells you pretty clearly that's not a predictive model or a go-forward model that we provided. Yeah. Yeah, understood. Just finally on your choice on making Guangzhou your next manufacturing hub, what are the factors that make you decide on that location versus others? The overall strategy is geographical diversification and local manufacturing. We've had a sales team based out of Guangzhou in China for over 20 years now, so that's the logical place. It is a manufacturing hub in China, so that makes it a logical place. China is a large and growing market for us, so that also makes it a logical place. Understood. Thank you. Thanks for your questions, Mathieu. last questions, last person in the queue is, Dan Hurren from MST. Please go ahead, Dan. Good morning, everyone. Thanks very much. Look, we've had a little bit of discussion on the call about the F&P 950. I know we can't talk about or expect when it will be launched, but two questions around that. One, what's been the experience in the F&P 950 in the markets that it has been operating in? Two, is the market right for a new product? Is this one of those sort of cyclical times where there's large fleets ready to be upgraded, or will that also be impacted by the big hardware buy that we saw during COVID? Yeah, look, historically for us, when we introduce new models of hardware, that's like a 10-year kind of changeover timeframe. 950 is no different. Typically, customers don't wanna have 30 850s and five 950s when they get five more ventilators. They can go with 850s for quite a long time until that gets end of life, and then they might look at upgrading to 950s. Do you wanna add color to that, Paul? Yeah, I do. Yeah, I mean, otherwise, so it's like a 20-year cycle, actually, Dan. Fair comment. You know, the reality is that the F&P 950 is a very good product. I think in neonatal, it's extremely well received, and that was an area, of course, where COVID wasn't, you know, suddenly COVID-related hardware purchases. You know, we're just making very good progress. It's a very good product, we'll just gradually sell more products as we go. Right. I guess what I'm asking is, sort of put, to put it simply, did we sell a whole bunch of 850s? Is it a whole bunch of 850s in the COVID period, which has made the average age of the installed fleet younger than it normally would be? I guess I'm just trying to understand how we should model the launch of the 950 and, you know, will it be a soft or a hard launch is what I'm trying to get to. I mean, clearly that's correct. You've got a younger average age of the fleet. When we model going forward, given Paul's 20-year kind of life cycle, upgrade cycles are never really that material. It's not something we actually model going forward or plan on. It's kind of a continuous process. If you think of it as a 20-year upgrade cycle and you introduce a new product every 10 years, it's kind of, it's continuous. It's not a cycle of, oh, got a new product, rush out and upgrade everything. Got it. All right. That's very helpful. Thank you very much. Thank you, Dan. That's the end of our questions, so I'll pass it back over to Lewis to conclude. Okay. Thanks, Marcus. Thanks, everyone, for joining the call, and thanks a lot for your questions. I would like to end on a note of thanks for to all of our shareholders for your continued support. Thank you very much and enjoy the rest of your day. This concludes today's call. Thank you for your participation. You may now disconnect.