Philips delivers Q3 sales of EUR 4.7 billion, with 6% comparable
sales growth, EUR 211 million income from continuing operations and
an Adjusted EBITA margin of 12.4%
October 28, 2019 Third-quarter highlights
• Sales in the quarter
amounted to EUR 4.7 billion, with 6% comparable sales
growth• Comparable order
intake was in line with Q3
2018• Income from
continuing operations amounted to EUR 211 million, including a
charge of EUR 78 million related to a goodwill impairment, compared
to EUR 307 million in Q3
2018• Adjusted EBITA
margin was 12.4% of sales, compared to 13.2% of sales in Q3
2018• Income from
operations amounted to EUR 320 million, compared to EUR 451 million
in Q3 2018• EPS from
continuing operations (diluted) amounted to EUR 0.23; Adjusted EPS
from continuing operations (diluted) increased 10% compared to Q3
2018 to EUR 0.46•
Operating cash flow increased to EUR 356 million, compared to EUR
265 million in Q3 2018; free cash flow increased to EUR 126
million, compared to EUR 52 million in Q3 2018
Frans van Houten, CEO
“In the third quarter, we delivered mixed results for the Group.
We recorded strong 6% comparable sales growth, driven by the
innovative products and solutions across our businesses. This was
reflected in the mid-single-digit comparable sales growth in mature
geographies and high-single-digit growth in growth geographies,
with double-digit growth in China.
Comparable order intake was flat, on the back of strong 11%
growth in the third quarter of 2018, reflecting the unevenness of
order intake dynamics and softness in North America. Over the last
12 months, comparable order intake grew 5%.
The Adjusted EBITA margin in the Diagnosis & Treatment and
Personal Health businesses showed continued improvement. However,
as we announced in our update on October 10, 2019, the Adjusted
EBITA margin in the Connected Care businesses declined to 11.3%,
due to increasing headwinds from tariffs and a delay in the impact
of the mitigating actions, factory under-coverage and an adverse
product mix impact. Adjusted EBITA for the Group was also impacted
by lower license income in the segment Other.
For the full-year 2019, we continue to expect growth to be
within the 4-6% range. We expect the Adjusted EBITA margin to
improve around 10 to 20 basis points given the overall significant
headwinds and the performance trajectory of the Connected Care
businesses, which we are addressing. For 2020, we expect 4-6%
comparable sales growth and an Adjusted EBITA margin improvement of
around 100 basis points.”
Reporting segment performance
The Diagnosis & Treatment businesses recorded 9% comparable
sales growth, with double-digit growth in Ultrasound and
high-single-digit growth in Diagnostic Imaging and Image-Guided
Therapy. Comparable order intake was in line with Q3 2018. The
Adjusted EBITA margin increased 2.1 percentage points to 14.0%,
driven by sales growth and productivity, partly offset by the
impact of tariffs.
Comparable sales in the Connected Care businesses increased 5%,
with mid-single-digit growth in Monitoring & Analytics and
Sleep & Respiratory Care. Comparable order intake was in line
with Q3 2018. The Adjusted EBITA margin decreased 4.5 percentage
points to 11.3%, as outlined above.
The Personal Health businesses delivered comparable sales growth
of 6%, with double-digit growth in Oral Healthcare and
high-single-digit growth in Domestic Appliances. The Adjusted EBITA
margin increased 0.3 percentage points to 14.7%, mainly due to
sales growth, partly offset by investments and the impact of
tariffs.
Philips’ ongoing focus on innovation and strategic partnerships
resulted in the following highlights in the quarter:
• Reinforcing its
global leadership in image-guided therapy, Philips launched its
highly successful Azurion platform in China, following clearance
from the National Medical Products Administration. Moreover, in the
US, Philips launched the longer 150 mm and 200 mm versions of its
Stellarex low-dose drug-coated balloons to broaden treatment
options for peripheral artery disease
patients.• Philips’
app-based, mobile Lumify ultrasound solution delivered double-digit
comparable sales and order intake growth, as it continues to set
the industry standard by consistently delivering what customers
need to provide the best care for their patients at the point of
care – diagnostic clarity, reliability and continuous scanning,
with a lightweight, replaceable
transducer.• Philips
introduced an industry-first ‘Tube for Life’ guarantee on its new
Incisive CT imaging platform in North America following its
successful introduction in Europe and Asia. The new CT platform
integrates innovations in imaging, workflow, and lifecycle
management, helping healthcare providers with smart clinical
decision-making, increased efficiency and improved experience for
patients and staff.•
Philips further expanded its Enterprise Diagnostic Informatics
portfolio with the completion of the acquisition of Carestream
Health’s Healthcare Information Systems business. Adding a
state-of-the-art cloud-based imaging data platform, Philips’
offering now includes advanced Vendor Neutral Archive solutions,
diagnostic and enterprise viewers, interactive multimedia
reporting, AI-enabled clinical, operational and business analytics
tools, as well as tele-radiology and diagnostic patient management
services.• Reinforcing
its leadership in patient monitoring solutions, Philips introduced
the next-generation IntelliVue MX750 and MX850 bedside patient
monitor platforms in Europe. These feature an extensive range of
measurements and analytics, as well as new cybersecurity
capabilities. Moreover, Philips signed multi-year enterprise
patient monitoring agreements with the Kantonsspital Frauenfeld
(Switzerland) and the University Clinic of Bonn (Germany) to
improve workflow and clinical outcomes in these
hospitals.• Philips
teamed up with Walgreens, one of the largest drugstore chains in
the US, to integrate the clinically validated Philips SmartSleep
Analyzer with the Walgreens Find Care platform, which helps connect
Walgreens’ millions of mobile and online visitors to healthcare
services. Walgreens Find Care users are now able to use Philips’
tool to help identify the potential reasons contributing to their
sleep issues and connect to sleep diagnostics, guidance, products
and solutions.• Further
broadening its product range in oral care, Philips has rolled out
its connected Philips Sonicare ExpertClean globally. The new smart
power toothbrush delivers superior oral care results with its sonic
technology and deep clean brushing mode.
Cost savings
In the third quarter of 2019, cost savings totaled EUR 96
million, reflecting procurement savings of EUR 41 million and
savings from overhead and other productivity programs of EUR 55
million.
Capital allocation
As of the end of the third quarter of 2019, Philips has
completed 32.9% of its 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 sold all of its remaining shares in
Signify (14.3%) for total proceeds of EUR 477 million.
Regulatory update
Philips continues to address the follow-up requests of the US
Food and Drug Administration (FDA) as part of its efforts to
fulfill its obligations under the Consent Decree [1] and remains in
dialogue with the agency.
[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 may also continue to service the AEDs provided that
certain conditions are met 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 80,000
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 and proceedings; 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 and industry consolidation and competition. 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 Third-Quarter Results 2019 Report
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