Philips delivers Q2 sales of EUR 4.2 billion, with 9% comparable
sales growth; net income amounts to EUR 153 million and Adjusted
EBITA margin improves 280 basis points to 12.6%; company announces
EUR 1.5 billion share buyback program
July 26, 2021
Second-quarter highlights
- Group sales increased to EUR 4.2 billion, with 9% comparable
sales growth
- Comparable order intake decreased 15%, with strong double-digit
growth in the Diagnosis & Treatment businesses and a decline in
the Connected Care businesses on the back of COVID-19-related 167%
growth in Q2 2020
- Income from continuing operations decreased to EUR 65 million
due to a EUR 250 million provision related to field actions to
address a component quality issue. Income from continuing
operations was EUR 195 million in Q2 2020.
- Adjusted EBITA increased to EUR 532 million, or 12.6% of sales,
compared to EUR 390 million, or 9.8% of sales, in Q2 2020
- Operating cash flow amounted to EUR 332 million, compared to
EUR 446 million in Q2 2020
- Free cash flow was EUR 167 million, compared to EUR 212 million
in Q2 2020
Frans van Houten, CEO:
“We have mobilized the necessary resources across the company to
address the component quality issue in certain of our sleep and
respiratory care products. We fully understand the impact that this
is having on patients, as their well-being is at the heart of
everything we do at Philips. We are in discussions with the
relevant regulatory authorities to obtain authorization to start
deploying the repair kits and replacement devices that we are
producing.
I am pleased with the good performance momentum in all our
businesses except the Sleep & Respiratory Care business, as we
delivered a strong 9% comparable sales growth and 280 basis points
profitability improvement for the Group in the quarter. I am
particularly encouraged by the 29% order intake growth in our
Diagnosis & Treatment businesses, as well as the strong growth
of our Personal Health businesses.
In the quarter, we introduced exciting innovations, such as the
new Spectral CT 7500 to help improve disease characterization and
reduce rescans and follow-ups. The integration of BioTelemetry and
Capsule Technologies is proceeding well, and our customers
appreciate the expanded portfolio of end-to-end patient care
management solutions from the hospital to the home. We entered 12
new long-term strategic partnerships, building on the strength of
our portfolio and demonstrating the trust hospital leaders have in
our ability to enhance health outcomes and lower the cost of care,
while improving patient and staff experience.
Confident in our strategy and financial trajectory, we are
launching a new share buyback program of EUR 1.5 billion in line
with our balanced capital allocation policy.
Looking ahead, while we continue to see uncertainty related to
the impact of COVID-19 across the world and electronic component
shortages, our financial outlook remains within our guided range,
with low-to-mid-single-digit comparable sales growth and an
Adjusted EBITA margin improvement of 60 basis points expected for
the Group in 2021.”
Business segment performance
The Diagnosis & Treatment businesses recorded 16% comparable
sales growth, with double-digit growth in all businesses.
Comparable order intake increased 29%, with strong double-digit
growth in Image-Guided Therapy, Ultrasound and Diagnostic Imaging.
The Adjusted EBITA margin increased to 13.2%, mainly driven by
sales growth and productivity measures.
Comparable sales in the Connected Care businesses decreased 16%,
as mid-single-digit growth in Hospital Patient Monitoring was more
than offset by a double-digit decline in Sleep & Respiratory
Care. Comparable order intake decreased significantly following the
steep COVID-19-related increase in Q2 2020. The Hospital Patient
Monitoring business continues to perform well above 2019 levels.
The newly acquired BioTelemetry and Capsule Technologies businesses
continue to deliver strong sales growth with increasing
profitability. The Adjusted EBITA margin amounted to 11.3%, mainly
due to the impact in the Sleep & Respiratory Care business.
The Personal Health businesses recorded a strong comparable
sales growth of 33%, driven by double-digit growth across all
businesses. The Adjusted EBITA margin increased to 17.0%, mainly
driven by sales growth and productivity measures, partly offset by
investments in advertising & promotion.
Philips’ ongoing focus on innovation and partnerships resulted
in the following highlights in the quarter:
- In China, Philips signed a contract with Gansu Provincial
Maternity and Child Care Hospital to streamline and advance the
delivery of critical care across multiple departments of the
hospital. Philips will provide its advanced critical care
information system, patient monitoring solutions and diagnostic
cardiology solutions.
- Building on their successful cooperation in MR-guided adaptive
radiation therapy, Philips and Elekta deepened the partnership to
advance personalized cancer care through precision oncology
solutions to deliver more precise therapy, shorter treatment times,
and lower cost of care.
- Philips introduced the Spectral CT 7500 system, which delivers
high-quality spectral images for a broad patient base, including
cardiac, pediatric and bariatric patients, further expanding the
company’s comprehensive CT portfolio, which comprises spectral and
conventional CT systems, as well as radiation oncology CT systems,
and advanced informatics and services.
- Philips launched IntraSight Mobile, which offers users in
hospitals and office-based labs the integration, flexibility and
affordability of a single mobile system for intravascular imaging,
physiology measurements and co-registration for seamless workflows
and enhanced patient care. Building on the success of IntraSight,
the launch will further reinforce Philips’ leading position in
image- guided therapy.
- Philips announced progress on several clinical studies
including the positive two-year clinical study results for the Tack
Endovascular System for dissection repair, the first patient
enrollment in the DEFINE GPS multicenter study to further drive the
adoption of iFR for percutaneous coronary interventions based on
clinical evidence, and the start of the WE-TRUST multicenter stroke
study to shorten treatment times by identifying, planning and
treating ischemic stroke patients in the interventional suite.
Moreover, Philips announced the first structural heart repair
procedure at Mayo Clinic using its new 3D intracardiac
echocardiography catheter VeriSight Pro.
- Philips introduced its integrated Interventional Hemodynamic
System with the portable Patient Monitor IntelliVue X3, providing
advanced vital signs measurements at the tableside in the
interventional suite and continuous monitoring across care
settings. Uninterrupted patient monitoring can help to improve
clinical decision making and timely detection of potential adverse
events at every stage.
- The global launch of Philips’ most advanced electric
toothbrush, the Sonicare 9900 Prestige, was well received, with an
average 4.7 (out of 5) star rating by consumers. The premium
electric toothbrush leverages AI to optimize the user’s brushing
technique, ensuring full coverage of their teeth, and instills
brushing habits that improve oral health.
- Expanding the company’s leading male grooming portfolio,
Philips introduced the Shaver Series 9000 with SkinIQ technology in
China. The premium shaver leverages AI and sensors to offer a
personalized shave tailored to each unique skin and hair type. It
will also be launched in North America and Europe in the second
half of the year.
Cost savings
In the second quarter, productivity savings amounted to EUR 90
million, of which procurement savings amounting to EUR 44 million,
and savings of EUR 46 million delivered by overhead and other
programs.
Capital allocation Today, Philips is announcing
a new share buyback program for capital reduction purposes for an
amount of up to EUR 1.5 billion. At the current share price, the
program represents a total of approximately 36.8 million shares, or
4% of total shares outstanding. Philips expects to start the
program in the third quarter of 2021 and to complete it within
three years. It is expected that the program will be executed
through a number of forward purchase transactions with one or more
financial institutions and/or open market purchases by an
intermediary to allow for transactions during both open and closed
periods in accordance with the EU Market Abuse Regulation. Updates
on the progress of the program and further details will be made
available here, and through press releases as appropriate.
Under Philips’ ongoing EUR 1.5 billion share buyback program for
capital reduction purposes, which was initiated in the first
quarter of 2019, Philips repurchased shares in the open market and
entered into a number of forward transactions. Philips had
2,500,000 shares delivered in June 2021 as part of the program, and
under the currently outstanding forward contracts the company
expects to have another 17,976,023 shares delivered in the
remainder of 2021. These shares will be cancelled by December 31,
2021, resulting in an estimated total number of issued shares of
897 million by that date, compared to 917 million shares at the end
of Q2 2021. Further details can be found here.
Domestic Appliances
On March 25, 2021, Philips announced that it had signed an
agreement to sell its Domestic Appliances business to global
investment firm Hillhouse Capital. As planned, on July
1, 2021 the Domestic Appliances business became a stand-alone
entity and the sale is on track for completion in the third quarter
of 2021. Since the first quarter of 2021, the Domestic Appliances
business (which was previously part of the Personal Health segment)
is reported as a discontinued operation. Philips will continue to
consolidate Domestic Appliances under International Financial
Reporting Standards (IFRS) until the sale is completed.
Regulatory update
On June 14, 2021 Philips initiated a voluntary recall
notification in the US/field safety notice outside the US for
certain sleep and respiratory care products to address identified
potential health risks related to the polyester-based polyurethane
(PE-PUR) sound abatement foam in these devices.
Philips has established dedicated call centers and a device
registration process to support patients. The company is increasing
its production, service and repair capacity and has requested the
relevant regulatory clearances for the repair and replacement
actions. Subject to these regulatory clearances, Philips is ready
to start deploying the repair kits and replacement devices that it
is producing. Given the estimated scope of the field actions on the
installed base, Philips has taken a provision of EUR 250 million in
the second quarter of 2021, in addition to the provision that the
company recorded in the first quarter of 2021.
Click here to view the release online
For further information, please contact:
Martijn van der Starre Philips Global Press Office
Tel.: +31 6 2847 4617 E-mail: martijn.van.der.starre@philips.com
Derya Guzel Philips Investor Relations Tel.: +31
20 59 77055 E-mail: derya.guzel@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, 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 2020 sales of EUR 19.5 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.
Forward-looking statements and other important
informationForward-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 our 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. 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, political and societal
changes; Philips’ increasing focus on health technology and
solutions; the successful completion of divestments such as the
disentanglement and divestment of our Domestic Appliances
businesses; the realization of Philips’ objectives in growth
geographies; business plans and integration of acquisitions;
securing and maintaining Philips’ intellectual property rights, and
unauthorized use of third- party intellectual property rights;
COVID-19 and other pandemics; breaches of cybersecurity; IT system
changes or failures; the effectiveness of our supply chain;
challenges to drive operational excellence, productivity and speed
in bringing innovations to market; attracting and retaining
personnel; future trade arrangements following Brexit; compliance
with regulations and standards including quality, product safety
and data privacy; compliance with business conduct rules and
regulations; treasury risks and other financial risks; tax risks;
costs of defined-benefit pension plans and other post- retirement
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 2020.
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,
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
2020.
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 2020. 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 2020.
In 2020, Philips revised the definition of net finance expenses
used in the calculation of Adjusted income from continuing
operations attributable to shareholders, to exclude fair value
movements of limited life fund investments recognized at fair value
through profit and loss. This change leads to more relevant
information as the fair value movements are not indicative of
Philips' performance. The fair value movements do not represent
cash items. Philips believes making this change is helpful for
investors to evaluate Philips' performance.
As announced on March 25, 2021, Philips has signed an agreement
to sell its Domestic Appliances business. As of the first quarter
of 2021, the Domestic Appliances business is presented as a
discontinued operation. In this report, comparative results have
been restated to reflect the treatment of the Domestic Appliances
business as a discontinued operation. Further details of the
restatement have been published on the Philips Investor Relations
website and can be accessed here.
Prior-period amounts have been reclassified to conform to the
current-period presentation; this includes immaterial
organizational changes.
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