Philips delivers Q1 sales of EUR 4.2 billion, with 2% comparable sales growth; income from continuing operations increased to EUR 171 million and Adjusted EBITA margin improved to 8.8%

April 29, 2019


First-quarter highlights
•        Sales in the quarter amounted to EUR 4.2 billion, with 2% comparable sales growth
•        Comparable order intake increased 2%
•        Income from continuing operations increased to EUR 171 million, compared to EUR 94 million in Q1 2018
•        Adjusted EBITA margin was 8.8% of sales, compared to 8.7% of sales in Q1 2018
•        Income from operations increased to EUR 245 million, compared to EUR 201 million in Q1 2018
•        Operating cash flow amounted to EUR 14 million, compared to EUR 92 million in Q1 2018; free cash outflow was EUR 206 million, compared to EUR 47 million in Q1 2018

Frans van Houten, CEO

“We had a reasonable start to the year, as we delivered 2% comparable sales and order intake growth, further building on strong growth in 2018. I am encouraged that the measures taken in the Personal Health businesses resulted in regained momentum and a step-up of sales growth, which was led by the high-teens comparable sales growth in the Oral Healthcare business. Moreover, I am pleased with the double-digit comparable sales and order intake growth for the Group in the growth geographies.

We continue to expect our performance momentum to improve over the course of the year, based on the demand for our innovative products and solutions to improve people’s health and enhance care provider productivity, supported by our order book. We reaffirm 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 2% comparable sales growth, led by double-digit growth in Image-Guided Therapy. Comparable order intake showed a mid-single-digit increase, further building on the double-digit growth in Q1 2018. The Adjusted EBITA margin increased to 6.2%.

Comparable sales in the Connected Care businesses decreased 1%, with low-single-digit growth in Sleep & Respiratory Care and a mid-single-digit decline in Monitoring & Analytics. Comparable order intake showed a mid-single-digit decline. The Adjusted EBITA margin decreased to 8.3%.

The Personal Health businesses delivered comparable sales growth of 5%, driven by high-single-digit growth in mature geographies and high-teens growth globally in Oral Healthcare. The Adjusted EBITA margin increased to 14.7%.

Philips’ ongoing focus on innovation and strategic partnerships resulted in the following highlights in the quarter:

•        Philips’ Image-Guided Therapy Devices delivered double-digit growth, driven by all major diagnostic and therapeutic catheter product families. The continued strong performance is supported by the tight integration with Philips’ highly successful Azurion platform and by a growing body of clinical evidence, such as the recent positive results of the DEFINE PCI study to assess the value of iFR, which is Philips’ new physiologic guidance technology.
•        Further expanding its offering in mobile image-guided therapy systems for conventional operating rooms (ORs), the company launched Philips Zenition, its new mobile C-arm imaging platform. Zenition is easy to move between ORs and allows hospitals to maximize OR performance, enhance clinical capabilities, and improve staff experience.
•        Reinforcing its commitment to deliver industry-leading medical imaging and healthcare IT solutions to improve patient care and enhance care provider productivity, Philips signed an agreement to acquire Carestream Health’s Healthcare Information Systems business, adding a cloud-based enterprise imaging informatics platform and complementary geographic footprint to its portfolio. In addition, Philips expanded its radiology solutions portfolio with new teleradiology services, building on the acquisition of Direct Radiology’s teleradiology platform.
•        To support the expansion of the Ultrasound business into attractive adjacencies such as General Imaging and Obstetrics & Gynecology, Philips launched its new premium ultrasound system EPIQ Elite, which combines the latest advances in transducer innovation and enhanced performance to improve clinical confidence and the patient experience.
•        Building on its success in forging long-term strategic partnerships, Philips signed multiple new agreements in the US, Europe and Asia. The company recently signed its first long-term strategic partnership agreement in Vietnam, to provide a turnkey hospital solution to the newly-built Hong Duc General Hospital II, comprising the latest medical imaging and healthcare IT solutions as well as design, consulting and financing services.
•        Expanding its range of successful patient-centric CPAP mask designs, Philips launched DreamWisp, the first-of-its-kind over-the-nose nasal mask that allows patients with sleep apnea to sleep in any position they want. With its robust nasal cushion and top-of-the-head tube design, DreamWisp delivers a new level of comfort and freedom of movement, providing patients with the therapy option that best suits their needs.
•        To advance patient care in the hospital, Philips launched IntelliSpace Epidemiology Solution, which combines clinical informatics and genomic sequencing information from pathogenic bacteria to optimize the detection of healthcare-associated infections in the hospital. A recent study shows an 87% reduction in time when identifying infection transmissions using Philips IntelliSpace Epidemiology Solution.
•        Philips launched its new smart S7000 Shaver series globally. Designed to address skin irritation and discomfort from shaving, the company’s first connected shaver comes with a personalized solution for sensitive skin and has received highly positive user reviews.
•        The strong performance of the Oral Healthcare business was driven by its innovative portfolio, including the mid-range Philips Sonicare ProtectiveClean toothbrush, which features pressure sensor technology that alerts users when they are applying too much pressure and automatically reduces brushing intensity, for a brushing experience that delivers healthier gums and cleaner teeth.

Cost savings

In the first quarter, procurement savings amounted to EUR 38 million. Overhead and other productivity programs delivered savings of EUR 75 million.

Capital allocation

On January 29, 2019, Philips announced its new share buyback program for an amount of up to EUR 1.5 billion. As of the end of the first quarter of 2019, Philips had completed 8.3% of this share buyback program. In the second quarter of 2019, Philips expects to complete its EUR 1.5 billion share buyback program for capital reduction purposes that was announced on June 28, 2017. Further details can be found here.

Regulatory update

Philips has continued to make progress towards fulfilling its obligations under the Consent Decree [1]. The US Food and Drug Administration (FDA) recently reverted to Philips with follow-up requests, which the company is currently acting on.

[1] Under the Consent Decree, Philips continues to export its complete 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.

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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 77,000 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 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 complete successful 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. As disclosed, per January 1, 2019 IFRS 16 lease accounting has been implemented.

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 of 2017 and 2018 have been restated. The restatement has been published on the Philips Investor Relations website and can be accessed here.

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