- Sales increased to EUR 5.9 billion, with consolidated comparable sales growth of 2% and the HealthTech portfolio growing by 5%
- Adjusted EBITA amounted to EUR 649 million, or 11.0% of sales, compared to 9.8% of sales in Q3 2015
- EBITA totaled EUR 567 million, or 9.6% of sales, compared to 7.4% of sales in Q3 2015
- Income from operations (EBIT) amounted to EUR 481 million, compared to EUR 342 million in Q3 2015
- Net income amounted to EUR 383 million, compared to EUR 324 million in Q3 2015
- Operating cash flow totaled EUR 500 million, compared to EUR 281 million in Q3 2015; free cash flow of EUR 280 million, compared to EUR 58 million in Q3 2015
Frans van Houten, CEO:
“I am pleased with the solid 5% comparable sales growth and 8% order intake growth in our HealthTech portfolio in the third quarter. Overall, Philips posted 2% comparable sales growth, and the operational improvements at the Personal Health and Diagnosis & Treatment businesses, combined with continued improvements at Philips Lighting, led to the 120-basis-point increase in the Adjusted EBITA margin for the Philips Group.
Our outlook for 2016 remains unchanged, as we expect further earnings improvements in the fourth quarter of the year. Going forward, we remain concerned about risk due to volatility in the markets in which we operate.”
“Underlining our strategic focus on innovation, we saw healthy growth in order intake in the quarter, as well as solid sales growth and margin expansion. This was driven by recent product introductions across our HealthTech portfolio and by continued synergies from the integration of Volcano in Image-Guided Therapy. Our Accelerate! transformation program again delivered operational improvements across our businesses, while we also continue to invest significantly in quality and innovation, including in health informatics, wearable patient monitoring solutions and digital pathology.”
The Personal Health businesses grew by 7% on a comparable basis, with growth across the portfolio, most notably double-digit growth in Health & Wellness, and the Adjusted EBITA margin improving by 130 basis points. The Diagnosis & Treatment businesses showed comparable sales growth of 6% and the Adjusted EBITA margin improved by 210 basis points, mainly driven by Image-Guided Therapy and improvements at the Cleveland site. In the Connected Care & Health Informatics businesses, comparable sales growth in Healthcare Informatics, Solutions & Services was mainly offset by a decline in Patient Care & Monitoring Solutions, which also resulted in a decrease of the Adjusted EBITA by 180 basis points. Equipment-order intake increased by 8% on a currency comparable basis, driven by the Connected Care & Health Informatics businesses.
- In line with Philips’ strategy of delivering solutions consisting of smart devices, software and services to address specific customer needs, the company signed a 3-year patient monitoring solutions agreement with Rush University Medical Center, Chicago.
- Leveraging its expertise in cardiology, Philips signed a 5-year interventional cardiology solutions agreement with DeltaHealth in China for its new DeltaHealth Hospital Shanghai, which will specialize in cardiac care. The agreement comprises interventional X-ray systems, ultrasound imaging, software and services.
- Philips introduced a range of personalized health programs at this year’s IFA trade show in Berlin, including the Philips Sonicare FlexCare Platinum Connected toothbrush and the uGrow medical-grade baby app. The health programs leverage Philips HealthSuite, a cloud-enabled connected health ecosystem of devices, apps and digital tools.
- Philips acquired Wellcentive, a leading US-based provider of population health management software solutions. Wellcentive complements Philips’ portfolio with cloud-based IT solutions to import, aggregate and analyze clinical, claims and financial data across hospital and health systems to help care providers deliver coordinated care.
- Building on its expertise in new care models based on telehealth technologies, Philips enabled Macquarie University’s MQ Health in Sydney, Australia, and Emory Healthcare in Atlanta, US, to provide continuous night-time critical care oversight to ICU patients back in Atlanta during daytime hours in Australia.
- In the 2016 Interbrand annual ranking of the world’s most valuable brands, Philips’ ranking improved to #41 from #47, with a total estimated brand value of approximately USD 11.3 billion.
- Philips became the Industry Group Leader in the Capital Goods category in the 2016 Dow Jones Sustainability Index, achieving the highest possible scores in three sections, including climate strategy and operational eco-efficiency.
In the third quarter, Adjusted EBITA improved by 250 basis points to 10.1% of sales, while comparable sales declined by 3% and free cash flow improved to EUR 164 million. Full details about the financial performance of Philips Lighting in the third quarter were published on October 20, 2016. The related report can be accessed here. Following the listing of Philips Lighting in Amsterdam, Philips holds a 71.225% stake with the aim of fully selling down over the next several years. As the majority shareholder in Philips Lighting, Philips continues to consolidate the financial results of Philips Lighting.
Group cost savings
In the third quarter, overhead cost savings amounted to EUR 12 million, the Design for Excellence (DfX) program generated EUR 102 million of incremental procurement savings, and the End2End improvement program achieved EUR 66 million in productivity gains.
As of September 30, 2016, Philips had completed 98% of the 3-year EUR 1.5 billion share buy-back program. The buy-back was completed on October 20, 2016. On October 19, 2016, Philips announced the final results of the tender offer for certain outstanding notes, which the company started on September 20, 2016. The aggregate principal amount of the purchased notes was USD 285 million, and in Q3 2016 the tender offer resulted in a EUR 98 million charge recognized in Financial expenses.
Conference call and audio webcast
A conference call with Frans van Houten, CEO, and Abhijit Bhattacharya, CFO, to discuss the results will start at 10:00 am CET, October 24, 2016. A live audio webcast of the conference call will be available through the link below.
Q3 2016 - Third quarter 2016 results conference call audio webcast
More information about Frans van Houten and Abhijit Bhattacharya