Leading medical equipment company in Japan
We have been shareholders of Olympus for many years. Olympus is the largest medical equipment company in Japan with 70% global market share of gastrointestinal endoscopes. Despite its strong franchise, we have been concerned in the past with its complacent culture and low profitability.
However, since 2018 there have been positive changes at the company. In partnership with activist investor ValueAct, Olympus has taken visible steps to restructure its business and improve the governance. Its transformation plan, led by its capable senior leadership team, aims to drive a reduction in fixed costs and improve capital allocation by divesting noncore assets.
Operating profit margins subsequently improved from 3% in the fiscal year ending March 2019 (FY3/2019) to 18% in FY3/2022. The management guidance suggests that this could improve further, to 20% by FY3/2023 – which would be in line with global medical technology peers. While it is still early days in its transformation plan and there is much more to be done, we believe the direction of travel is encouraging. In a niche industry with few competitors, we believe Olympus can maintain its global leadership position in the medical devices industry and deliver sustainable growth over the long term.
Source: Bloomberg (as at March 2022), Company data (as at March 2023)
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