Philips delivers strong order intake growth in the second quarter,
margin improvement and sales growth; reiterates full-year outlook
July 29, 2024
Second-quarter highlights
- Group sales amounted to EUR 4.5 billion, with comparable sales
growth of 2%
- Comparable order intake increased by 9%
- Income from operations EUR 816 million, including EUR 538
million insurance income*)
- Adjusted EBITA margin increased to 11.1% of sales
- Operating cash inflow of EUR 89 million, with a free cash
outflow of EUR 64 million
Roy Jakobs, CEO of Royal Philips:
“I am encouraged by our return to order intake growth this quarter,
primarily driven by North America. Within a challenging macro
environment we achieved strong margin improvement, supported by our
productivity program, solid operational cashflow due to improved
working capital management and comparable sales growth in line with
our plan.
Performance improvement was driven by progress on our execution
priorities and industry-leading innovations. These included
FDA-cleared AI tools within our next-generation cardiovascular
ultrasound platform to increase automation and productivity.
We continue to focus on enhancing execution, improving
end-to-end supply chain resilience and increasing agility and
productivity through simplifying our operating model. Patient
safety and quality remains our number one priority.”
Group and segment performance
Group comparable sales increased 2%, on the back of strong growth
in Q2 2023. Growth in mature and growth geographies was partly
offset by the decline in China. Comparable order intake grew 9% in
the quarter and 3% in the first half of 2024, reflecting quarterly
unevenness in the order-intake pattern. China remains a
fundamentally attractive growth market with strong underlying
demand while the government’s anti-corruption measures continued to
impact short-term hospital order lead times.
Adjusted EBITA margin for the group increased to 11.1% compared
with 10.1% in Q2 2023, with improvement across all businesses. Free
cash outflow was EUR 64 million and included payments of EUR 415
million in connection with the Respironics economic loss settlement
in the US, partly offset by initial receipt from insurers of EUR
150 million.
In the quarter S&P Global Ratings and Moody’s Ratings
upgraded their credit ratings outlook for Philips to stable.
Philips now has stable outlooks for its strong credit ratings
across all main global credit rating agencies. The relevant reports
and additional credit ratings information can be found here.
Diagnosis & Treatment comparable sales
increased 4%, on the back of double-digit growth in Q2 2023, with
growth across Image Guided Therapy and Precision Diagnosis.
Adjusted EBITA margin improved to 12.2%, mainly driven by improved
sales, pricing and productivity measures.
Connected Care comparable sales increased 2%,
driven by strong growth in Enterprise Informatics, while Monitoring
comparable sales growth was flat on the back of strong double-digit
growth in Q2 2023. Adjusted EBITA margin improved to 8.8%, mainly
driven by productivity measures and pricing.
Personal Health comparable sales increased 2%
globally, driven by sales growth outside of China. Adjusted EBITA
margin improved to 16.9%, mainly driven by operational improvements
and productivity measures.
Productivity
Total productivity savings of EUR 195 million in the quarter:
operating model savings of EUR 57 million, procurement savings of
EUR 71 million, and other programs' savings of EUR 67 million.
Outlook
Philips reiterates its confidence in delivering the 2025 plan,
acknowledging that uncertainties remain. For the full year 2024,
Philips continues to expect 3-5% comparable sales growth, an
Adjusted EBITA margin of 11-11.5%, and free cash flow of EUR
0.9-1.1 billion.
The outlook excludes the potential impact of the ongoing Philips
Respironics-related legal proceedings, including the investigation
by the US Department of Justice.
Customer, innovation and ESG highlights
- Philips signed multi-year partnerships for monitoring and
image-guided therapy with several university hospitals in the
Netherlands and will provide patient monitors for the new Grand
Hôpital de Charleroi in Belgium, as well as roll out its ePatch and
AI-driven analytics platform across 14 hospitals in Spain.
- Philips secured customer wins in the US including a major
multi-year strategic partnership with Bon Secours Mercy Health, one
of the country’s largest health systems, standardizing innovative
patient monitoring solutions across its 49 hospitals, driving
better patient outcomes and reducing burdens on staff.
- Reinforcing its #1 global position in cardiovascular
ultrasound, Philips is launching its next-generation AI-enabled
cardiovascular ultrasound platform with new FDA-cleared AI tools
integrated into the company’s EPIQ CVx and Affiniti CVx ultrasound
system to advance cardiovascular imaging and increase automation
and productivity.
- Demonstrating its innovation leadership in minimally invasive
treatments, Philips announced the first implant of the Duo Venous
Stent System following pre-market approval from the US FDA. The
system’s flexible design allows clinicians to better treat patients
with deep venous disease.
- Philips unveiled a series of consumer health innovations in the
Greater China market, meeting key consumer needs across the region.
This includes the launch of the first medical-grade Philips Lumea
8000 Series IPL hair removal device with cooling technology, the
limited-edition Transformers-themed 5000, 7000 and 9000 series
shavers, and the new Sonicare 5300 power toothbrush.
- S&P recognized Philips as a leader in ESG as one of the
first ‘Light green’ scores in their newly launched Climate
Transition Assessment. Philips was also included in the ‘FTSE4Good’
ESG index, and NGO Health Care Without Harm confirmed that Philips
meets its Climate Excellence Standard for Health Care
Suppliers.
- Philips won 43 Red Dot design awards, including special
recognition for LumiGuide, the company’s 3D medical device guidance
solution that’s paving the way for radiation-free minimally
invasive surgery.
Capital allocation
In the second quarter, Philips completed the EUR 1.5 billion share
repurchase program for capital reduction purposes that was
announced on July 26, 2021, and canceled the 4,437,164 shares
acquired this year. Philips also distributed a dividend of EUR 0.85
per common share in the form of shares only, resulting in the
issuance of 30,860,582 new common shares. Following the
distribution of dividend and the cancellation of shares, the total
number of issued shares amounts to 939,939,384 common shares. More
information is available via this link.
*) Related to Respironics product liability claim.
Click here to view the release online
For further information, please contact:
Elco van Groningen
Philips External Relations
Tel.: +31 6 8103 9584
E-mail: elco.van.groningen@philips.com
Ben Zwirs
Philips External Relations
Tel.: +31 6 1521 3446
E-mail: ben.zwirs@philips.com
Dorin Danu
Philips Investor Relations
Tel.: +31 20 59 77055
E-mail: dorin.danu@philips.com
About Royal Philips
Royal Philips (NYSE: PHG, AEX: PHIA) is a leading health technology
company focused on improving people's health and well-being through
meaningful innovation. Philips’ patient- and people-centric
innovation leverages advanced technology and deep clinical and
consumer insights to deliver personal health solutions for
consumers and professional health solutions for healthcare
providers and their patients in the hospital and the home.
Headquartered in the Netherlands, the company is a leader in
diagnostic imaging, ultrasound, image-guided therapy, monitoring
and enterprise informatics, as well as in personal health. Philips
generated 2023 sales of EUR 18.2 billion and employs approximately
68,700 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 strategy, estimates of sales growth, future
Adjusted EBITA*), future restructuring and acquisition related
charges and other costs, future developments in Philips’ organic
business and the completion of acquisitions and divestments.
Forward-looking statements can be identified generally as those
containing words such as “anticipates”, “assumes”, “believes”,
“estimates”, “expects”, “should”, “will”, “will likely result”,
“forecast”, “outlook”, “projects”, “may” or similar expressions. 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: Philips’ ability to
gain leadership in health informatics in response to developments
in the health technology industry; Philips’ ability to keep pace
with the changing health technology environment; macroeconomic and
geopolitical changes; integration of acquisitions and their
delivery on business plans and value creation expectations;
securing and maintaining Philips’ intellectual property rights, and
unauthorized use of third-party intellectual property rights;
Philips’ ability to meet expectations with respect to ESG-related
matters; failure of products and services to meet quality or
security standards, adversely affecting patient safety and customer
operations; breaches of cybersecurity; challenges in simplifying
our organization and our ways of working; the resilience of our
supply chain; attracting and retaining personnel; challenges in
driving operational excellence and speed in bringing innovations to
market; compliance with regulations and standards including
quality, product safety and (cyber) security; compliance with
business conduct rules and regulations including privacy and
upcoming ESG disclosure and due diligence requirements; treasury
and financing risks; tax risks; reliability of internal controls,
financial reporting and management process; and global inflation.
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 2023. Reference is also made to section Risk
management in the Philips semi-annual report 2024.
Third-party market share data
Statements regarding market share contained in this
document, including those regarding Philips’ competitive position,
are based on outside sources such as specialized research
institutes, as well as industry and dealer panels, in combination
with management estimates. Where information is not yet available
to Philips, market share statements may also be based on estimates
and projections prepared by management and/or based on outside
sources of information. Management’s estimates of rankings are
based on order intake or sales, depending on the
business.
Market Abuse Regulation
This press release contains inside information within
the meaning of Article 7(1) of the EU Market Abuse
Regulation.
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
2023.
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 2023. Prior-period amounts have been reclassified to conform
to the current-period presentation; this includes immaterial
organizational changes.
Effective Q1 2024, Philips has revised the order intake policy to
reflect the full contract value for software contracts that start
generating revenue within an 18-month horizon, instead of only the
next 18-months-to-revenue horizon. This change has been implemented
to better align with the specific business model of our software
businesses, simplify the order intake process, and better align
with peers. Prior-period comparable order intake percentages have
been restated accordingly. This revision has not resulted in any
material changes to the order intake percentages for the periods
presented.
Per share calculations have been adjusted retrospectively for all
periods presented to reflect the issuance of shares in the second
quarter of 2024 in connection with the 2023 share dividend.
*) Non-IFRS financial measure. Refer to Reconciliation of
non-IFRS information.
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