Philips delivers Q4 sales of EUR 6 billion, with 3% comparable
sales growth; income from continuing operations amounted to EUR 550
million and Adjusted EBITA margin increased to 17.9%
January 28, 2020
Fourth-quarter highlights
- Sales amounted to EUR 6 billion, with 3% comparable sales
growth
- Comparable order intake increased 3%
- Income from continuing operations was EUR 550 million, compared
to EUR 723 million in Q4 2018
- Adjusted EBITA margin improved by 50 basis points to 17.9% of
sales, compared to 17.4% of sales in Q4 2018
- Income from operations amounted to EUR 730 million, compared to
EUR 769 million in Q4 2018
- EPS from continuing operations (diluted) amounted to EUR 0.61;
Adjusted EPS from continuing operations (diluted) increased 9%
compared to Q4 2018 to EUR 0.83
- Operating cash flow amounted to EUR 1,271 million, compared to
EUR 1,293 million in Q4 2018; free cash flow was EUR 959 million,
compared to EUR 1,019 million in Q4 2018
Full-year highlights
- Sales increased to EUR 19.5 billion, with 4% comparable sales
growth
- Comparable order intake increased 3%
- Income from continuing operations was EUR 1,192 million,
compared to EUR 1,310 million in 2018
- Adjusted EBITA margin increased 10 basis points to 13.2% of
sales, compared to 13.1% of sales in 2018
- Income from operations amounted to EUR 1,644 million, compared
to EUR 1,719 million in 2018
- EPS from continuing operations (diluted) amounted to EUR 1.30;
Adjusted EPS from continuing operations (diluted) increased 15%
compared to 2018 to EUR 2.02
- Operating cash flow totaled EUR 2,032 million, compared to EUR
1,780 million in 2018; free cash flow increased to EUR 1,053
million, compared to EUR 984 million in 2018
- Proposed dividend of EUR 0.85 per share
Company update
- Philips to review ownership options for the Domestic Appliances
business
- Roy Jakobs appointed as the new Chief Business Leader of the
Connected Care businesses, succeeding Carla Kriwet, who will leave
the company
Frans van Houten, CEO
“I am encouraged that the three business segments together
delivered 4% comparable sales growth and an Adjusted EBITA margin
improvement of 120 basis points in the fourth quarter, despite a
more challenging environment. This performance was partly offset by
lower IP royalties compared to Q4 2018, resulting in 3% comparable
sales growth and an Adjusted EBITA margin improvement of 50 basis
points for the Group. Comparable order intake grew a further 3%, on
the back of strong 10% growth in Q4 2018.
For the full year, we are pleased to have grown the company to
EUR 19.5 billion sales with 4.5% comparable sales growth, achieving
a free cash flow of more than EUR 1 billion, and increasing
adjusted earnings per share from continuing operations by 15%. Our
profitability improvement of 10 basis points for the year fell
short of our plan, partly due to headwinds.
Looking ahead at 2020 we continue to see geopolitical and
economic risks. We aim for 4-6% comparable sales growth and an
Adjusted EBITA margin improvement of around 100 basis points, with
a performance momentum that is expected to improve in the course of
the year.”
Business segment performance
In the fourth quarter, all business segments delivered growth
and increased profitability.
The Diagnosis & Treatment businesses recorded 5% comparable
sales growth in the quarter, driven by high-single-digit growth in
Image-Guided Therapy and mid-single-digit growth in Ultrasound.
Comparable order intake showed a low-single-digit increase on the
back of high-single-digit growth in Q4 2018. The order intake
growth was driven by double-digit growth in China and Western
Europe. The Adjusted EBITA margin increased to 16.3%, mainly due to
sales growth, partly offset by investments and tariffs. For the
full year, the Diagnosis & Treatment businesses delivered 5%
comparable sales growth and an increased Adjusted EBITA margin of
12.7%.
The Connected Care businesses delivered 2% comparable sales
growth in the quarter, driven by mid-single-digit growth in
Monitoring & Analytics. Comparable order intake showed a
mid-single-digit increase, driven by double-digit growth in North
America and China. The Adjusted EBITA margin increased to 19.4%,
mainly due to sales growth and productivity, partly offset by the
impact of tariffs. For the full year, the Connected Care businesses
delivered 3% comparable sales growth and the Adjusted EBITA margin
decreased to 13.2%.
The Personal Health businesses delivered comparable sales growth
of 4% in the quarter, driven by double-digit growth in Oral
Healthcare and mid-single-digit growth in Personal Care. The
Adjusted EBITA margin increased to 20.1%, mainly due to sales
growth, a positive mix impact and productivity, partly offset by
tariffs. For the full year, the Personal Health businesses
delivered 5% comparable sales growth and an increase in Adjusted
EBITA margin to 16.1%.
Philips’ ongoing focus on innovation and strategic partnerships
to make the world healthier and more sustainable resulted in the
following highlights in the quarter and the full year:
- In 2019, Philips’ products and solutions improved the lives of
1.64 billion people, compared to 1.54 billion in 2018; this
includes 194 million people in underserved communities, compared to
175 million in 2018. Additionally, for the seventh consecutive year
Philips was ranked on CDP's Climate Change A-list in recognition of
its actions to reduce emissions, mitigate climate risks and develop
the low-carbon economy. Philips is the first health technology
company to have committed to become carbon-neutral in its
operations by 2020.
- Philips entered into several new long-term strategic
partnerships, including a 5-year partnership with the Regional
Medical Center in South Carolina to provide diagnostic imaging and
image-guided therapy solutions to innovate patient care. Philips
also announced a 5-year agreement with US-based Inspira Health to
standardize patient monitoring and drive innovation in diagnostic
imaging and image-guided therapies in order to enhance patient care
and improve clinical workflow performance.
- Driven by Philips’ innovative portfolio of diagnostic imaging,
image-guided therapy and patient monitoring solutions, the company
continues to win large contracts in China. For example, Philips
signed an agreement with the Xi’an International Medical Group to
deliver solutions to address clinical and research needs in
cardiology, radiation oncology and critical care.
- Philips continues to set the standard in integrated solutions
for image-guided therapy with the expansion of its Azurion platform
with FlexArm and the seamless integration of its smart catheters in
the platform. The successful launch of Azurion in China and
expansion of its smart catheter offering in Europe and Asia
contributed to double-digit comparable sales and order intake
growth for the Image-Guided Therapy business in 2019.
- Demonstrating the success of Philips’ telehealth solutions for
critical care, US-based Health First achieved significant results
by using Philips’ acute telehealth platform. Powered by Philips’
eCareManager, Health First’s VitalWatch eICU achieved a 23%
reduction in overall mortality, a 49% reduction in ICU length of
stay, and a 35% reduction in length of stay across its four
hospitals.
- Philips expanded its General Care solutions portfolio with the
launch of the EarlyVue VS30 in the US. This new vital signs monitor
uses automated Early Warning Scoring (EWS) to collect critical
vital signs and calculate risk-based alerts that allow clinicians
to identify subtle signs of patient deterioration and facilitate
communication between caregivers for timely intervention and
patient care.
- Building on the success of Philips’ leading oral care
solutions, the company rolled out the BrushSmart program in
collaboration with Delta Dental of California, the largest provider
of dental benefits in the US. The subscription-based program
includes a discounted Sonicare toothbrush, coaching and
teledentistry, and connects brushing behaviors at home with
professional dental care to better understand, motivate and drive
improvements in oral health.
- The global roll-out of Philips’ premium Shaver S9000 Prestige
with BeardAdapt Sensor, which adapts the shaver automatically to
the user’s hair, and mid-range Shaver S7000 with a personalized
solution for sensitive skin, continues to result in positive user
reviews and supported strong performance of the Male Grooming
business in the quarter.
Domestic Appliances review
Philips announced this morning that it will review options for
future ownership of the Domestic Appliances business, and start the
process of creating a separate legal structure for this business.
The Domestic Appliances business is a global leader with EUR 2.3
billion sales in 2019 in kitchen appliances, coffee, garment care
and home care appliances.
Frans van Houten: “The Domestic Appliances business has
significantly contributed to Philips, but it is not a strategic fit
for our future as a health technology leader, as we choose to
further sharpen our focus along the health continuum and invest in
our consumer health and professional healthcare-related
businesses.”
Executive Committee management changes
Roy Jakobs, currently Chief Business Leader of the Personal
Health businesses, has been appointed as the new Chief Business
Leader of the Connected Care businesses with immediate effect. He
succeeds Carla Kriwet, who will leave the company.
Frans van Houten: “On behalf of Philips’ Executive Committee, I
want to thank Carla for her contributions to Philips, and wish her
the best in her future endeavors. At the same time, I am pleased to
announce Roy as the new leader of the Connected Care businesses and
would like to highlight his global leadership experience, with a
strong business performance record, and accomplishments in
strategy, digital innovation and new business development in the
business-to-consumer and business-to-business domains.”
A successor for the Personal Health Chief Business Leader role
will be announced in due course. Philips CEO Frans van Houten will
lead the Personal Health businesses on an interim basis.
Cost savings
In the fourth quarter of 2019, cost savings totaled EUR 125
million, with procurement savings of EUR 39 million and savings
from overhead and other productivity programs of EUR 86 million,
resulting in annual savings of EUR 480 million in 2019.
Capital allocation
As of the end of the fourth quarter of 2019, Philips has
completed 41.5% 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 completed the cancellation of 8.5
million shares that were acquired as part of the share buyback
program mentioned above.
At the end of the fourth quarter of 2019, the total number of
issued shares outstanding was 890,973,790 shares, compared to
914,184,087 shares at the end of the fourth quarter of 2018.
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
range of AED devices and manufacture and distribute its
HS1/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 Global Press Office Tel: +31 6
1521 3446 Email: ben.zwirs@philips.com Martijn van der
Starre Philips Global 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 2019
sales of EUR 19.5 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: changes in industry or market circumstances;
economic and political developments; Philips’ increasing focus on
health technology; the realization of Philips’ growth ambitions and
results in growth geographies; lack of control over certain joint
ventures; integration of acquisitions; securing and maintaining
Philips’ intellectual property rights and unauthorized use of
third-party intellectual property rights; compliance with quality
standards, product safety laws and good manufacturing practices;
exposure to IT security breaches, IT disruptions, system changes or
failures; supply chain management; ability to create new products
and solutions; attracting and retaining personnel; financial
impacts from Brexit; compliance with regulatory regimes, including
data privacy requirements; governmental investigations and legal
proceedings with regard to possible anticompetitive market
practices and other matters; business conduct rules and
regulations; treasury risks and other financial risks; tax risks;
costs of defined-benefit pension plans and other postretirement
plans; reliability of internal controls, financial reporting and
management process. 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 also 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 and the
adoption of IFRIC 23 Uncertainty over Income Tax Treatments
effective January 1, 2019, resulting in a balance sheet
reclassification. In addition, certain prior-year amounts have been
reclassified to conform to the current year presentation. 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.
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