Philips delivers Q2 sales of EUR 4.7 billion, with 6% comparable
sales growth and 8% comparable order intake growth; income from
continuing operations increases to EUR 260 million and Adjusted
EBITA margin improves to 11.8%
July 22, 2019 Second-quarter
highlights•
Sales in the quarter amounted to EUR 4.7 billion, with 6%
comparable sales growth•
Comparable order intake increased
8%• Income from
continuing operations increased to EUR 260 million, compared to EUR
186 million in Q2 2018•
Adjusted EBITA margin was 11.8% of sales, compared to 11.2% of
sales in Q2 2018• Income
from operations increased to EUR 350 million, compared to EUR 298
million in Q2 2018• EPS
increased as income from continuing operations per share (diluted)
amounted to EUR 0.28; adjusted EPS increased 23% as adjusted income
from continuing operations per share (diluted) amounted to EUR
0.43.• Operating cash
flow amounted to EUR 390 million, compared to EUR 130 million in Q2
2018; free cash flow was EUR 174 million, compared to a free cash
outflow of EUR 41 million in Q2 2018
Frans van Houten, CEO
“I am pleased with the 6% comparable sales growth in the second
quarter, with all businesses contributing. We also recorded strong
8% comparable order intake growth, driven by the continued demand
for our innovative product portfolio across the Diagnosis &
Treatment businesses. Adjusted EBITA margin for the Group improved
by 60 basis points, mainly driven by the performance improvement of
the Diagnosis & Treatment businesses, despite adverse currency
and tariff impacts.
We continue to expect our performance momentum to further
improve in the second half of the year, supported by sales growth
and our productivity programs. We maintain our overall targets of
4-6% comparable sales growth and an Adjusted EBITA margin
improvement of 100 basis points on average per year for the
2017-2020 period.”
Reporting segment performance
The Diagnosis & Treatment businesses recorded 6% comparable
sales growth, led by double-digit growth in Image-Guided Therapy.
Comparable order intake showed a double-digit increase, driven by
double-digit growth in China and Western Europe. The Adjusted EBITA
margin increased to 12.3%, reflecting sales growth and
productivity, partly offset by the impact of tariffs.
Comparable sales in the Connected Care businesses increased 6%,
with mid-single-digit growth in Monitoring & Analytics and
Sleep & Respiratory Care. Comparable order intake showed a
mid-single-digit decline, reflecting the uneven order intake
dynamics. The Adjusted EBITA margin decreased to 12.1%, mainly due
to tariffs, adverse currency impact and mix.
The Personal Health businesses delivered comparable sales growth
of 5%, with high-single-digit growth in Oral Healthcare and
mid-single-digit growth in Personal Care and Domestic Appliances.
The Adjusted EBITA margin decreased to 13.4%, as the operational
leverage from sales growth was offset by investments in
advertising.
Philips’ ongoing focus on innovation and strategic partnerships
resulted in the following highlights in the quarter:
• Philips signed a
10-year agreement with Centre Hospitalier Régional Universitaire de
Nancy in France to implement Philips’ IntelliSpace Enterprise
Imaging Solution. The collaboration will enable the hospital, which
provides 1.2 million consultation visits and inpatient stays each
year, to streamline complex medical image data management across
its departments.• Philips
announced a 10-year agreement with Rutherford Diagnostics to
deliver advanced imaging solutions to its five new diagnostic
centers across the UK. As the technology partner, Philips will
provide advanced imaging systems and software, as well as managed
technology services, including training and consultancy, and will
establish a joint innovation
program.• Strengthening
its leadership in cardiac ultrasound, Philips extended the advanced
automation capabilities on its EPIQ CVx cardiology ultrasound
platform, making exams faster and easier to conduct while improving
clinician productivity.•
Philips’ Image-Guided Therapy Devices business delivered
double-digit growth, driven by all major coronary and peripheral
vascular product families. The company presented the three-year
results from two major Stellarex clinical studies involving
approximately 600 patients, demonstrating that its Stellarex
drug-coated balloon (DCB) is the only low-dose DCB with a
significant treatment effect and high safety profile through three
years. Both studies showed no difference in mortality compared with
the current standard of
care.• Philips teamed up
with US insurance company Humana to improve care for at-risk,
high-cost populations. The pilot program will support independent
living for high-acuity patients with congestive heart failure by
providing 24/7 access to care. Philips’ remote monitoring
capabilities will allow care managers to deliver timely
interventions for these
patients.• Philips’
solutions to treat obstructive sleep apnea, a condition that
affects more than 100 million patients globally, continue to garner
healthy demand, supported by the continued strong reception for
DreamStation GO’s expanded portable therapy
options.• Broadening its
leading portfolio of power toothbrushes, Philips launched Sonicare
DailyClean, an entry-level proposition to address lower price
segments, and Sonicare ExpertClean, featuring premium brush heads,
connectivity and design, in the
US.• Following the
successful roll-out of the Philips Shaver Series 9000 Prestige in
Q4 2018, Philips has gained significant market share in the premium
shaver market, especially in China, Germany and the US. Consumers
appreciate the shaver, with global Rating & Review scores of
4.7 stars.
Cost savings
In the second quarter of 2019, cost savings totalled EUR 146
million, reflecting procurement savings of EUR 48 million and
savings from overhead and other productivity programs of EUR 98
million.
Capital allocation
In the second quarter of 2019, Philips completed its EUR 1.5
billion share buyback program for capital reduction purposes that
was announced on June 28, 2017. As of the end of the second quarter
of 2019, Philips has completed 21.1% of its new EUR 1.5 billion
share buyback program for capital reduction purposes that was
announced on January 29, 2019. Further details can be found
here.
In the quarter, Philips completed the cancellation of 30 million
shares that were acquired as part of the share buyback programs
mentioned above.
Additionally, Philips successfully placed a EUR 750 million
0.500% Green Innovation Bond due 2026.
Regulatory update
Philips continues to fulfill its obligations under the Consent
Decree [1]. The US Food and Drug Administration (FDA) reverted to
Philips with follow-up requests, on which the company is currently
acting.
[1] Under the Consent Decree, Philips continues to export its
range of AED devices and manufacture and distribute its
H1/OnSite/Home automated external defibrillator (AED) model in the
US. The company also continues to service the AEDs and provide
consumables and the relevant accessories.
Click here to view the release online
For further information, please contact:
Ben Zwirs Philips Group Press Office Tel: +31 6
1521 3446 Email: ben.zwirs@philips.com Martijn van der
Starre Philips Group Press Office Tel.: +31 6 2847 4617
E-mail: martijn.van.der.starre@philips.com About Royal
Philips
Royal Philips (NYSE: PHG, AEX: PHIA) is a leading health
technology company focused on improving people's health and
enabling better outcomes across the health continuum from healthy
living and prevention, to diagnosis, treatment and home care.
Philips leverages advanced technology and deep clinical and
consumer insights to deliver integrated solutions. Headquartered in
the Netherlands, the company is a leader in diagnostic imaging,
image-guided therapy, patient monitoring and health informatics, as
well as in consumer health and home care. Philips generated 2018
sales of EUR 18.1 billion and employs approximately 78,000
employees with sales and services in more than 100 countries. News
about Philips can be found at www.philips.com/newscenter.
Forward-looking statements and other important
information
Forward-looking statements
This document and the related oral presentation, including
responses to questions following the presentation, contain certain
forward-looking statements with respect to the financial condition,
results of operations and business of Philips and certain of the
plans and objectives of Philips with respect to these items.
Examples of forward-looking statements include: statements made
about the strategy; estimates of sales growth; future Adjusted
EBITA; future restructuring, acquisition-related and other costs;
future developments in Philips’ organic business; and the
completion of acquisitions and divestments. By their nature, these
statements involve risk and uncertainty because they relate to
future events and circumstances and there are many factors that
could cause actual results and developments to differ materially
from those expressed or implied by these statements.
These factors include but are not limited to: global economic
and business conditions; political instability, including
developments within the European Union such as Brexit, with adverse
impact on financial markets; the successful implementation of
Philips’ strategy and the ability to realize the benefits of this
strategy; the ability to develop and market new products; changes
in legislation; legal claims; increased healthcare regulation;
changes in currency exchange rates and interest rates; changes in
foreign currency import or export controls; future changes in tax
rates and regulations, including trade tariffs; pension costs and
actuarial assumptions; changes in raw materials prices; changes in
employee costs; the ability to identify and successfully complete
acquisitions, and to integrate those acquisitions into the
business, the ability to successfully exit certain businesses or
restructure the operations; the rate of technological changes;
cyber-attacks, breaches of cybersecurity; political, economic and
other developments in countries where Philips operates; industry
consolidation and competition; and the state of international
capital markets as they may affect the timing and nature of the
disposal by Philips of its remaining interests in Signify. As a
result, Philips’ actual future results may differ materially from
the plans, goals and expectations set forth in such forward-looking
statements. For a discussion of factors that could cause future
results to differ from such forward-looking statements, see the
Risk management chapter included in the Annual Report 2018.
Third-party market share data
Statements regarding market share, including those regarding
Philips’ competitive position, contained in this document are based
on outside sources such as research institutes, industry and dealer
panels in combination with management estimates. Where information
is not yet available to Philips, those statements may also be based
on estimates and projections prepared by outside sources or
management. Rankings are based on sales unless otherwise
stated.
Use of non-IFRS information
In presenting and discussing the Philips Group’s financial
position, operating results and cash flows, management uses certain
non-IFRS financial measures. These non-IFRS financial measures
should not be viewed in isolation as alternatives to the equivalent
IFRS measure and should be used in conjunction with the most
directly comparable IFRS measures. Non-IFRS financial measures do
not have standardized meaning under IFRS and therefore may not be
comparable to similar measures presented by other issuers. A
reconciliation of these non-IFRS measures to the most directly
comparable IFRS measures is contained in this document. Further
information on non-IFRS measures can be found in the Annual Report
2018.
Use of fair value information
In presenting the Philips Group’s financial position, fair
values are used for the measurement of various items in accordance
with the applicable accounting standards. These fair values are
based on market prices, where available, and are obtained from
sources that are deemed to be reliable. Readers are cautioned that
these values are subject to changes over time and are only valid at
the balance sheet date. When quoted prices or observable market
data are not readily available, fair values are estimated using
appropriate valuation models and unobservable inputs. Such fair
value estimates require management to make significant assumptions
with respect to future developments, which are inherently uncertain
and may therefore deviate from actual developments. Critical
assumptions used are disclosed in the Annual Report 2018. In
certain cases independent valuations are obtained to support
management’s determination of fair values.
Presentation
All amounts are in millions of euros unless otherwise stated.
Due to rounding, amounts may not add up precisely to totals
provided. All reported data is unaudited. Financial reporting is in
accordance with the accounting policies as stated in the Annual
Report 2018, except for IFRS 16 lease accounting, which is
implemented per January 1, 2019.
As announced on January 10, 2019, Philips has realigned the
composition of its reporting segments effective as of January 1,
2019. The most notable changes are the shifts of the Sleep &
Respiratory Care business from the Personal Health segment to the
renamed Connected Care segment and most of the Healthcare
Informatics business from the renamed Connected Care segment to the
Diagnosis & Treatment segment. Accordingly, the comparative
figures have been restated. The restatement has been published on
the Philips Investor Relations website and can be accessed
here.
Market Abuse Regulation
This press release contains inside information within the
meaning of Article 7(1) of the EU Market Abuse Regulation.
- Philips Second-Quarter Results 2019 Report
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