Our Q1 2018 performance at a glance

First-quarter highlights

  • Sales in the quarter were EUR 3.9 billion, with comparable sales growth of 5%
  • Comparable order intake increased 10% compared to Q1 2017
  • Net income from continuing operations was EUR 94 million, which includes higher restructuring and acquisition-related charges and bond redemption costs of EUR 52 million, compared to EUR 128 million in Q1 2017
  • Adjusted EBITA margin improved by 130 basis points to 8.7% of sales, compared to 7.4% of sales in Q1 2017
  • Operating cash inflow totaled EUR 92 million
Key datain millions of EUR unless otherwise stated

Q1 2017

Q1 2018

Sales

4,035

3,942

Nominal sales growth

5%

(2)%

Comparable sales growth*

3%

5%

Income from operations

243

201

as a % of sales

6.0%

5.1%

Financial expenses, net

(50)

(80)

Investments in associates, net of income taxes

(2)

-

Income tax expense

(63)

(28)

Income from continuing operations

128

94

Discontinued operations, net of income taxes

131

30

Net income 1

259

124

Net income attributable to shareholders per common share (in EUR) - diluted

0.25

0.13

EBITA*

304

263

as a % of sales

7.5%

6.7%

Adjusted EBITA*

298

344

as a % of sales

7.4%

8.7%

Adjusted EBITDA*

463

512

as a % of sales

11.5%

13.0%

1)Q1 2017 includes operating results of Lighting and the combined Lumileds and Automotive businesses, which have subsequently been deconsolidated.

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Message from the CEO

“While there is more work to be done, 2018 started well, with 10% comparable order intake growth, 5% comparable sales growth and a 130 basis point improvement in operational profitability. Good traction of new products and solutions introduced last year contributed to 9% comparable sales growth in the Diagnosis & Treatment businesses. Across our markets, we continue to see strong customer interest in our innovations, as demonstrated by the mid-teens order intake growth in the Diagnosis & Treatment businesses. In the quarter, we continued to make good progress with our productivity programs and took action to further reduce our interest expenses.

We strengthened our position as a health technology leader with our innovative, integrated solutions as our strategy in Image-Guided Therapy is delivering results, evidenced by the robust order growth of the new Azurion platform and the continued strong growth in the device business, built on the Volcano and Spectranetics acquisitions. Furthermore, we signed 8 long-term strategic partnership agreements across the US, Europe and the Middle East. For example, in the UK, Philips signed an 11-year agreement with Wye Valley NHS Trust to transform radiology services across its sites. Philips will deliver its latest diagnostic imaging systems and advanced informatics, while also providing on-site collaboration and staff training to meet the agreed goals. Additionally in the Netherlands, Philips signed a 15-year partnership with ZorgSaam Hospital, comprising imaging and image-guided therapy systems, healthcare informatics and a range of services to advance the diagnosis and treatment of patients.

Looking ahead, 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.”

Frans van HoutenChief Executive Officer

Highlights of Q1

Highlights

Philips Elition

Diagnostic Imaging launches

As part of Philips’ new introductions to drive growth in Diagnostic Imaging, the company launched the Ingenia Elition, a new 3.0T MRI solution which offers superb image quality while performing exams up to 50% faster. In the US, Philips received FDA 510(k) clearance to market ProxiDiagnost N90, its latest digital X-ray system designed for low dose, high image quality and fast workflows.

Discover more (Philips Ingenia Elition 3.0T MRI) Discover more (Philips ProxiDiagnost N90)

PureWave

Expansion of Ultrasound business

The expansion of the Ultrasound business beyond its core strength in cardiac ultrasound into attractive adjacencies continues to be successful. For example, the new OB/GYN ultrasound innovations that Philips introduced in 2017 for its EPIQ and Affiniti ultrasound systems drove the strong double-digit growth in comparable order intake for the business in the quarter.

Discover more

Patient monitoring

Solutions deals in Canada

Leveraging its expertise in cardiology, Philips provided the University of Ottawa Heart Institute, the largest heart center in Canada, with image-guided therapy and patient monitoring solutions. Also in Canada, Philips provided image-guided therapy solutions to Royal Victoria Regional Health Centre.

Discover more (University of Ottawa Heart Institute) Discover more (Royal Victoria Regional Health Centre)

Cardio device systems

Trial supports benefits of iFR-guided strategy

Philips’ Image-Guided Therapy Devices continued its strong momentum, supported by a growing amount of clinical data. The recent results of the DEFINE FLAIR trial demonstrated that an iFR-guided strategy reduces costs, improves patient comfort compared to an FFR-guided strategy, and delivers consistent patient outcomes.

Discover more

IT Networking

FocusPoint application for patient monitoring solutions

To expand its leadership in patient monitoring solutions, Philips launched FocusPoint, a web-based operational performance management application for its patient monitoring solutions. The application aggregates, processes and stores statistical and alert information, which are presented on a dashboard for optimal management of the technology.

Discover more

Lobi

IntelliSpace Portal: 2018 Best in KLAS

Highlighting Philips’ leadership in Healthcare Informatics, IntelliSpace Portal, Philips’ advanced data integration, visualization and analysis platform, has been named 2018 Category Leader in the Advanced Visualization category in the 2018 Best in KLAS: Software & Services report.

Discover more

Body comb

Driving growth through innovations

In line with Philips’ focus on innovations, the company launched the new Philips Sonicare ProtectiveClean power toothbrush in North America, with further roll-out planned in the coming quarters. Furthermore, Philips introduced the Philips OneBlade Face + Body, its latest innovation in male grooming technology, in the US, UK, France and Canada.

Discover more (Philips OneBlade Face + Body) Discover more (Philips Sonicare ProtectiveClean)

DreamWear

New developments in sleep and respiratory care

Building on the success of Philips’ integrated Dream Family, the company introduced the DreamWear Full Face mask, the third option available for its award-winning DreamWear mask system. Helping drive clinical education in its growth geographies, Philips opened South-East Asia’s first Sleep and Respiratory Education Center in Singapore to train healthcare professionals from across the region to better diagnose and treat sleep and respiratory disorders.

Discover more

Making the world healthier and more sustainable

Our strategic focus

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All around the world, resource constraints are driving a shift to value-based healthcare – a system that aims to increase access to care and improve patient outcomes while also raising cost productivity. At the same time, aging populations and the rise of chronic diseases like heart disease and respiratory conditions are driving up demand for healthcare.

In parallel, a growing focus on healthy living and prevention means more and more people are looking for new ways to proactively monitor and manage their health, also in home and community settings. And the digitalization of healthcare has reached the point where value is shifting from stand-alone products to solutions combining systems, smart devices, software and services, which deliver greater benefits to customers.

Philips sees significant value in more integrated forms of healthcare, unlocking the power of data and artificial intelligence at the point of care, while at the same time optimizing care delivery across the health continuum. This includes putting increased emphasis on both primary and secondary prevention and population health management programs.

At Philips, we are striving to make the world healthier and more sustainable through innovation, with the goal of improving the lives of 3 billion people a year by 2025.

In today’s increasingly connected world, the convergence of Philips’ consumer technologies that facilitate healthy living, medical technologies that help clinicians to deliver better diagnosis and treatment, and cloud-based technologies that support data sharing and analysis, will be a key enabler of more effective, lower-cost integrated health solutions.

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We like to visualize healthcare as a continuum since it suggests the notion of continuous care. And it becomes very compelling when one thinks of this continuum as being connected.

Health continuum model
Healthy living
Prevention
Diagnosis
Treatment
Home care
Connected care and health informatics

By addressing healthcare as a ‘connected whole’ in this way, we can unlock gains and efficiencies and drive innovations that help deliver on the ‘quadruple aim’: enhancing the patient experience, improving health outcomes, lowering the cost of care, and improving the work life of care providers.

With our global reach, deep insights and leading innovations, we are uniquely positioned in ‘the last yard’ to consumers and care providers, delivering:

  • connected products and services supporting the health and well-being of people
  • integrated modalities and clinical informatics to deliver definitive diagnosis
  • real-time guidance and smart devices for minimally invasive interventions
  • connected therapeutic products and services for chronic care patients.

Underpinning these solutions, and de-emphasizening the health continuum, our connected care and health informatics solutions enable us to:

  • connect patients and providers for more effective, coordinated, personalized care
  • manage population health, leveraging real-time patient data and clinical analytics.

We are focusing on end-to-end pathways – at present primarily cardiology, oncology, respiratory care, and pregnancy and parenting – where we believe our integral approach can add even greater value for our customers.

More and more, we are teaming up with hospital and health systems to understand their needs, provide integrated solutions, and engage in multi-year cooperation to drive improvements in terms of patient outcomes, quality of care delivery and cost productivity.

Cardiology image
Cardiology
Oncology image
Oncology
Respiratory image
Respiratory care
Fertility image
Fertility, pregnancy and parenting
This picture shows Philips teaming up with hospital and health systems

In this context, we are pioneering new business models that fit our customers’ needs better. These include Technology Managed Services, as well as Software as a Service and Product as a Service models. We have also started to take co-accountability for our customers’ patient outcomes and productivity.

As we embark on the next phase of our health technology journey, the drivers below are designed to help deliver higher levels of customer value and quality, boost growth, deliver winning solutions, and improve our results:

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Focus on
Driven by
Resulting in
Growth in core businesses
  • Capture geographic growth opportunities
  • Pivot to consultative customer partnerships and business models
  • Drive innovative value-added, integrated solutions
Growth in adjacencies
  • Portfolio extensions through M&A, organic investments and partnerships
Customer and operational excellence
  • Continue to lead the digital transformation
  • Improve customer experience, quality systems, operational excellence and productivity
Revenue growth

Margin expansion

Increased cash generation

Improved return on invested capital
Increased shareholder value