Philips delivers Q3 sales of EUR 5.0 billion, with 10% comparable
sales growth; income from continuing operations increases to EUR
341 million, Adjusted EBITA margin improves 300 basis points to
15.4%, and operating cash flow increases to EUR 770 million
Philips provides new financial targets for the 2021–2025
period
Amsterdam, October 19, 2020
-
Sales amounted to EUR 5.0 billion, with 10% comparable sales
growth
-
Comparable order intake increased 3% excluding the partial
termination of the ventilator contract with HHS*);
reported comparable order intake declined 18%
-
Income from continuing operations increased to EUR 341 million,
compared to EUR 211 million in Q3 2019
-
Adjusted EBITA margin increased to 15.4% of sales, compared to
12.4% of sales in Q3 2019
-
Income from operations improved to EUR 476 million, compared to EUR
320 million in Q3 2019
-
EPS from continuing operations (diluted) amounted to EUR 0.37;
Adjusted EPS increased to EUR 0.60, compared to EUR 0.46 in Q3
2019
-
Operating cash flow improved to EUR 770 million, compared to EUR
356 million in Q3 2019
Frans van Houten, CEO
“It is clear that the COVID-19 pandemic is far from over, and our
teams remain fully focused on delivering against our triple duty of
care: meeting critical customer needs, safeguarding the health and
safety of our employees, and ensuring business continuity.
I am pleased that, under challenging circumstances, we have been
able to execute our plans and return to growth and improved
profitability for the Group in the third quarter. Driven by the
successful conversion of the Connected Care order book for patient
monitors and ventilators, and a robust rebound of demand for our
Personal Health portfolio, Philips recorded a strong 10% comparable
sales growth and delivered an Adjusted EBITA margin improvement of
300 basis points to 15.4%.
The Connected Care businesses delivered a very strong 42%
comparable sales growth, and our Personal Health businesses
delivered a healthy 6% comparable sales growth. I am encouraged by
the performance improvement of our Diagnosis & Treatment
businesses to a low-single-digit comparable sales decline from a
high-single-digit decline in the previous quarter.
In August, we provided the update that Philips’ April 2020 hospital
ventilator contract with the Department of Health and Human
Services (HHS) had been unexpectedly partially terminated. As a
result, we recorded a comparable order intake decline for the Group
of 18%. Excluding this partial termination, comparable order intake
grew 3%, further building on the solid growth in the previous
quarters.
The work we are doing to support healthcare providers and medical
staff with the provision of both COVID-19 and regular care remains
a top priority for all of us at Philips. In close collaboration
with our suppliers and partners, we have steeply ramped up the
production volumes of products and solutions to help diagnose,
treat, monitor and manage COVID-19 patients. We introduced a new
Rapid Equipment Deployment Kit for ICU ramp-ups, allowing hospital
staff to quickly deploy patient monitoring capabilities when
additional critical care capacity is needed. To enhance patient
care and improve care provider productivity, Philips entered into
11 long-term strategic partnerships with hospitals in the US,
Europe and Asia. We announced a new multi-year partnership with
Tampa General Hospital, one of the largest hospitals in the US, to
replace all of its patient monitors and upgrade key imaging
technologies in the catheterization laboratories and interventional
radiology rooms. We will also provide this hospital with unique
workflow solutions and operational performance management
services.
Looking ahead, we continue to see uncertainty and volatility
related to the impact of COVID-19 across the world, but our order
book remains solid. For the full year 2020, we continue to expect
to deliver modest comparable sales growth, with an Adjusted EBITA
margin of around the level of last year.”
Business segment performance
The Diagnosis & Treatment businesses recorded a 3% comparable
sales decline, compared to a 9% sales decline in Q2 2020. The
postponement of installations and gradual recovery of elective
procedures resulted in a low-single-digit comparable sales decline
in Diagnostic Imaging and Image-Guided Therapy and a double-digit
decline in Ultrasound. Comparable order intake showed a 5%
decrease, compared to a 20% decrease in Q2 2020. The Adjusted EBITA
margin decreased to 9.7%, mainly due to lower volumes and factory
coverage, as well as mix changes.
Comparable sales in the Connected Care businesses increased 42%,
with double-digit growth in Monitoring & Analytics and Sleep
& Respiratory Care. Excluding the partial termination of the
ventilator contract with HHS, comparable order intake showed a
double-digit increase, with strong growth across all businesses.
The Adjusted EBITA margin increased to 27.1%, driven by higher
volumes and operating leverage.
The Personal Health businesses delivered a comparable sales
increase of 6%, driven by high-single-digit growth in Personal Care
and Domestic Appliances. The Adjusted EBITA margin amounted to
14.5%, which includes an adverse currency impact.
Philips’ ongoing focus on innovation and partnerships resulted in
the following key developments in the quarter:
-
Building on the strong results of its ‘Healthy people, Sustainable
planet’ 2016-2020 program, Philips announced a new set of ambitious
targets, commitments and detailed action plans across all the
Environmental, Social and Governance dimensions, including
improving the lives of 2 billion people a year by 2025 and further
reduction of its carbon footprint across its entire value chain in
line with the 1.5 oC global warming
scenario.
-
Philips signed 11 new long-term strategic partnerships across the
world, including multi-year agreements with Buon Ma Thuot
University Hospital in Vietnam, Mandaya Royal Hospital Puri in
Indonesia and Franciscus Gasthuis & Vlietland in the
Netherlands, to provide a comprehensive range of health technology
solutions.
-
Broadening its leading portfolio of power toothbrushes, the company
launched the Philips One by Sonicare. An entry-level proposition to
expand into new consumer segments, Philips One is a
battery-operated power toothbrush developed as a step up from
manual brushing. Users of this toothbrush can opt into a
subscription service for brush head and battery replacements.
-
Philips expanded its industry-leading image-guided therapy devices
portfolio through the acquisition of Intact Vascular, adding an
industry-first implantable device to treat peripheral artery
disease. Moreover, Philips launched QuickClear, an all-in-one
thrombectomy system for the removal of blood clots in peripheral
vessels, and OmniWire, a solid-core pressure wire – also an
industry-first – to guide coronary artery procedures.
-
Philips launched major extensions to its industry-leading Azurion
image-guided therapy platform, comprising a new range of
configurations – covering more price segments – to innovate
procedures in a broad range of therapeutic areas, and further
integration between imaging and diagnostic devices.
-
SimonMed Imaging, one of the largest outpatient medical imaging
providers in the US, is partnering with Philips to deploy its most
advanced 3T MRI technology, including software and services, at
their outpatient practices to enhance diagnoses, from brain
injuries, liver and cardiac disease to orthopedic injuries.
Moreover, the partners are collaborating to further enhance the
patient experience and flow.
-
Building on its leadership in therapeutic care, Philips launched
its new Tempus ALS remote monitoring and defibrillator solution for
emergency medical responders in the US, to help accelerate the
delivery of care in emergency settings outside the hospital.
Cost savings
In the third quarter, procurement savings amounted to EUR 62
million. Overhead and other productivity programs delivered savings
of EUR 58 million. As a result, Philips is on track to deliver over
EUR 400 million productivity savings for 2020 and exceed EUR 1.8
billion productivity savings for the Group for the 2017-2020
period.
Philips provides new financial targets
for the 2021–2025 period
At the company’s Capital Markets Day with investors and financial
analysts on November 6, 2020, Philips will provide further details
of its strategic plan and performance trajectory for the 2021–2025
period.
“We are excited to continue our journey to create further value by
improving growth and profitability, while recognizing that we are
in very uncertain times, and with the assumption that the world
economy will return to growth next year,” said Frans van Houten.
“The new targets are underpinned by our strategic imperatives to
further improve customer and operational excellence, boost growth
in our core businesses through geographical expansion and more
customer partnerships, and win with innovative solutions along the
health continuum. Our strategy to transform care along the health
continuum – from healthy living and prevention to diagnosis and
treatment, telehealth and home care – strongly resonates with
customers and has been further validated during the COVID-19
pandemic.”
Philips’ targets for accelerated growth, higher profitability and
improved cash flow for the 2021–2025 period are1):
-
An acceleration of the average annual comparable sales growth to
5-6%, with all business segments within this range. For 2021,
Philips’ current view is that Group comparable sales will deliver
low-single-digit growth, driven by solid growth in Diagnosis &
Treatment and Personal Health, partly offset by lower Connected
Care sales;
-
An Adjusted EBITA margin improvement of 60-80 basis points on
average annually from 2021, reaching the high teens for the Group
by 20252);
-
A free cash flow above EUR 2 billion by 2025;
-
Organic Return on Invested Capital (ROIC) of mid-to-high teens by
2025.
Conference call and audio webcast
Frans van Houten, CEO, and Abhijit Bhattacharya, CFO, will host a
conference call for investors and analysts at 10:00 am CET today to
discuss the results. A live audio webcast of the conference call
will be available on the Philips Investor Relations website and can
be accessed here.
