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Oct 22, 2018

Philips' Third Quarter Results 2018


Philips reports Q3 sales of EUR 4.3 billion, with 4% comparable sales growth; net income from continuing operations increased 17% to EUR 307 million, and Adjusted EBITA margin increased 40 basis points to 13.2%

Third-quarter highlights

  • Sales in the quarter were EUR 4.3 billion, with comparable sales growth of 4% 
  • Comparable order intake increased 11% compared to Q3 2017 
  • Net income from continuing operations increased 17% to EUR 307 million, compared to EUR 263 million in Q3 2017 
  • Adjusted EBITA margin improved by 40 basis points to 13.2% of sales, including a 60 basis points adverse currency impact, compared to 12.8% of sales in Q3 2017 
  • Income from operations (EBIT) increased to EUR 451 million, compared to EUR 299 million in Q3 2017 
  • Operating cash flow totaled EUR 265 million, compared to EUR 295 million in Q3 2017

 

Frans van Houten, CEO:

 

“While I am pleased with the continued strong 11% order intake growth in the quarter, operational improvements were partly offset by increased foreign exchange headwinds. This resulted in a 40 basis points improvement in Adjusted EBITA margin on the back of 4% comparable sales growth.

 

The Diagnosis & Treatment businesses continued their strong performance, driven by our innovative product and solutions portfolio. Our Connected Care & Health Informatics businesses also showed continued solid order intake growth; however, sales decreased 2% compared to a very strong third quarter in 2017. I am encouraged by the step-up in sales growth of the Personal Health businesses compared to the first half of 2018, but the recovery was slower than expected as good growth in our growth geographies was partially offset by lower growth in our mature geographies.

 

Looking ahead, while observing continuing headwinds, for which we are taking appropriate measures, we reiterate our targets for the 2017–2020 period of 4-6% comparable sales growth and an average annual 100 basis points improvement in Adjusted EBITA margin.”

Business segments

 

All of the Diagnosis & Treatment businesses recorded a double-digit increase in comparable order intake, driven by double-digit growth in China and Western Europe and high-single-digit growth in North America. Comparable sales increased by 6%, with double-digit growth in Ultrasound, high-single-digit growth in Image-Guided Therapy and mid-single-digit growth in Diagnostic Imaging. The Adjusted EBITA margin was 40 basis points higher than in the same period last year, mainly due to growth, partly offset by investments in growth.

 

The Connected Care & Health Informatics businesses delivered a mid-single-digit increase in comparable order intake, driven by Healthcare Informatics. Comparable sales decreased 2%, compared to 8% comparable sales growth in Q3 2017. The Adjusted EBITA margin decreased by 190 basis points year-on-year, mainly due to lower sales and an unfavorable mix impact.

 

In the Personal Health businesses, comparable sales growth was 4%, with mid-single-digit growth in Sleep & Respiratory Care and Personal Care. On a geographical basis, this reflected high-single-digit comparable sales growth in the growth geographies, and flat growth in the mature geographies. The Adjusted EBITA margin increased by 10 basis points, reflecting operational improvements, largely offset by adverse currency effects and higher advertising & promotion spend.

 

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

 

  • Continuing Philips’ success in long-term strategic partnerships, the company signed six new agreements across the globe. Philips partnered with Children’s Health hospital in Dallas – one of the top pediatric hospitals in the US – to improve pediatric care with its patient monitoring and healthcare informatics solutions. In Australia, Philips announced its first two long-term strategic partnership agreements, which aim to support precision diagnosis and therapy and drive operational performance improvements across nine hospital sites.
  • As a leader in image-guided therapy, Philips launched its EPIQ CVxi ultrasound system combined with the latest version of its unique EchoNavigator software specifically designed for minimally invasive structural heart repairs, a fast-growing image-guided therapy segment. Moreover, the adoption of Philips’ proprietary iFR technology reached a major milestone after its inclusion in the European Society of Cardiology’s updated guidelines for the assessment of coronary artery lesions.
  • Continuing the renewal of its diagnostic imaging portfolio, Philips launched the Ingenia Ambition X 1.5T MR with fully sealed BlueSeal magnet technology in the US. As an industry first, Ingenia Ambition X enables imaging departments to perform more productive, helium-free operations.
  • Building on its strengths in healthcare informatics, Philips entered into a multi-year partnership agreement with St. Andrew’s Toowoomba Hospital in Australia for the hospital-wide installation of Philips Tasy EMR. Philips will fully digitize the hospital’s entire care management processes and enable anytime, anywhere access to clinical analytics.
  • Philips completely renewed the high-end range of its leading male grooming portfolio with the introduction of the Series 9000 Prestige shaver, which cuts facial hair feeling as close as a wet blade, while being very gentle on the skin.
  • Philips’ Sleep & Respiratory Care business continues to garner traction for its market-leading home ventilation offerings, such as the new Trilogy Evo ventilator platform, which is the only portable life support solution designed to stay with patients as they change care environments.
  • As the leading provider of digital and computational pathology solutions, Philips teamed up with Oxford University Hospitals NHS Foundation Trust to create a digital pathology network in the UK. Philips also released a new version of its AI-powered TissueMark, which will enable molecular research labs to reduce variability in tumor estimation and related costs.

 

Cost savings

 

In the third quarter, procurement savings amounted to EUR 72 million. Overhead and other productivity programs resulted in savings of EUR 52 million. With year-to-date savings of EUR 330 million, Philips is well on track to deliver annual savings of EUR 400 million in 2018, as the company is taking additional measures to mitigate the increased headwinds.

 

Capital structure

 

Details of Philips’ current EUR 1.5 billion share buyback program, which was initiated in the third quarter of 2017 for capital reduction purposes, can be found here.

 

Regulatory update

 

Philips continues to make progress in line with the terms of the consent decree, which is primarily focused on the defibrillator manufacturing in the US.

Quarterly Report

Third Quarter Results 2018 - Quarterly Report

Presentation

Third Quarter Results 2018 - Quarterly Results Presentation

Conference call and audio webcast

A conference call with Frans van Houten, CEO, and Abhijit Bhattacharya, CFO, to discuss the results will start at 10:00AM CET, October 22, 2018. A live audio webcast of the conference call will be available through the link below.

Q3 2018 – Third quarter 2018 results conference call audio webcast

 

More information about Frans van Houten and Abhijit Bhattacharya

 

Click here for Mr. van Houten's CV and images

Click here for Mr. Bhattacharya's CV and images


Visit our interactive results hub for more on our financial and sustainability performance over the past quarter, including the latest version of our dynamic Lives Improved world map.

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 2017 sales of EUR 17.8 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.

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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, 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; changes in currency exchange rates and interest rates; 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 (formerly Philips Lighting). 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 2017.

 

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 measures 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 2017.

 

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 2017 and Semi-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 2017 and Semi-Annual report 2018, unless otherwise stated.

 

Market Abuse Regulation
 

This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

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Contacts

Ben Zwirs

Ben Zwirs

Philips Group Press Office

Tel: +31 6 1521 3446

Martijn van der Starre

Martijn van der Starre

Philips Group Press Office

Tel: +31 6 2847 4617

Business Highlights Q3 2018

Business Highlight: St. Andrew’s Toowoomba Hospital first in Australia to install Philips’ next-generation EMR solution with advanced clinical analytics to drive patient safety
St. Andrew’s Toowoomba Hospital first in Australia to install Philips’ next-generation EMR solution with advanced clinical analytics to drive patient safety
Business Highlight - Philips launches Ingenia Ambition X 1.5T MR with industry-first fully sealed magnet for more productive, helium-free operations
Philips launches Ingenia Ambition X 1.5T MR with industry-first fully sealed magnet for more productive, helium-free operations
Business Highlights - Philips S9000 Prestige, the feeling of a blade-close shave with uncompromising skin comfort
Philips S9000 Prestige, the feeling of a blade-close shave with uncompromising skin comfort

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