recent result sets the tone for the future, page-25

Imagine you came down from outer space and landed on earth for the first time and one of the local earthlings said to you that there was this company that had just experienced the perfect storm in its business environment:

1. There had been a once-in-a-generation regulatory change that had wreaked havoc in that company’s intermediated distribution channel.

2. It’s competitors had launched a series of new products in the immediate prior financial period.

3. One of its major regional customer geographies was at an ebb during its typical lumpy ordering cycle.

4. It has been cycling robust growth from in the previously corresponding financial period, namely of 12% at the Revenue line and over 40% at the Net Income line.


With this sort of backdrop, you would be forgiven for thinking that the company’s financial performance in the period just reported would have been horrible, indeed even decimated, possibly.


You certainly wouldn’t expect to see the following growth being achieved:

Revenue: +5.3%
EBITDA: +15.1%
EBIT: +20.4%
NPAT: +13.6%
EPS: +14.7%
DPS: +47%


Yet that is what has just happened to Resmed in the past quarter.

That this company can deliver this sort of impressive result – one that would be the envy even of most companies operating in relatively benign environments – in an acutely challenging quarter when all the planets were lined against it, says a lot about the durability and the sheer impeccable quality of the business model, I think.

This is a company whose market value has, over the past two decades almost, risen by an average rate in excess of 20%pa.

This has been supported by compound annual growth rates for Revenue, EBITDA and NPAT of 20%pa, 22%pa, and 25%pa, respectively.

EPS has never gone backwards in any given year.

And, importantly, it has achieved this phenomenal growth without reverting to shareholders for a single dollar of funding.

On the contrary, RMD has over the past decade returned over $600m of capital back to shareholders via dividends ($100m) and share buybacks ($1.1bn in total share buybacks netted off against $600m worth of incentivisation stock issued to staff and management over the past 15 years).

Interesting fact: RMD today has almost $600m in net cash on the balance sheet.

That was the entire market cap of the company a mere ten years ago!

Plus, as an owner of the business, toy would have received a similar amount in capital returns!

Ten years ago, RMD was earning around $35m of NPAT on revenues of around $200m.

This year, the company will earn about 10 times that level of NPAT, and Revenue will be over eight-fold higher!


I defy anyone who can find a company who can match this sort of wealth creation for shareholders.


Importantly - and I will seek to quantify this in a later post - I think the next decade looks at least equally promising given some of the structural and technological changes underway in the Sleep Disorder market, on which RMD – as industry leader – is sure to capitalise.


Cam