Philips Sonicare

Q2 2017 results

Message from the CEO

“Philips’ performance in the second quarter of 2017 was solid, with 4% comparable sales growth in our HealthTech portfolio driven by Western Europe, North America and China, and a strong 8% increase in our order intake. We achieved a 90-basis-point increase in the Adjusted EBITA margin, driven by higher volumes, operational improvements and cost productivity.

Our Personal Health businesses delivered another strong quarter, with 6% comparable sales growth and a 120-basis-point improvement in the Adjusted EBITA margin. In a soft market, our Diagnosis & Treatment businesses showed a robust 3% comparable sales growth, strong order intake growth and an 80-basis-point operational improvement. Our Connected Care & Health Informatics businesses recorded a 90-basis-point increase in the Adjusted EBITA margin, and I am confident that the performance of these businesses will continue to improve in the second half of the year, based on the strength of their order book.

In the second quarter, we extended our portfolio with targeted acquisitions that we identified in the past two years. For example, to strengthen the leading position of our Image-Guided Therapy business and expand its portfolio of therapy devices, we signed an agreement to acquire Spectranetics, a leader in vascular intervention and lead management solutions. We also acquired CardioProlific, a US-based start-up company that develops catheter-based thrombectomy technology to treat peripheral vascular disease. I am also pleased with the progress of several of our organic growth initiatives, such as the FDA clearance of our comprehensive Digital Pathology solution for primary diagnostic use in the US. Furthermore, we completed the Lumileds transaction and reduced our stake in Philips Lighting to 41.16% net.

In line with our Capital Allocation policy, which aims at a balanced mix of investments in organic and inorganic growth opportunities, actions to drive balance sheet efficiency and returns to shareholders, we also announced a new EUR 1.5 billion share buyback program to be launched in the third quarter of 2017. This program will more than offset the share dilution in connection with Philips’ long-term incentive programs and dividend in shares.

Despite continued volatility in the markets in which we operate, our outlook for 2017 remains unchanged as we expect further operational improvements and comparable sales growth in the year to be back-end loaded, supported by a strong order book. We are on track to deliver 4-6% comparable sales growth and an improvement in Adjusted EBITA margin of around 100 basis points per year.

Frans van Houten, Chief Executive Officer

Our Q2 2017 performance at a glance

Key datain millions of EUR unless otherwise stated

Q2 2016

Q2 2017

Sales

4,132

4,294

Nominal sales growth

0%

4%

Comparable sales growth

5%

4%

Income from operations (EBIT)

265

252

as a % of sales

6.4%

5.9%

Financial expenses, net

(86)

(43)

Investments in associates

2

(4)

Income taxes

(63)

(44)

Income from continuing operations

118

161

Discontinued operations

313

128

Net income

431

289

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

0.46

0.27

EBITA

326

329

as a % of sales

7.9%

7.7%

Adjusted EBITA

383

439

as a % of sales

9.3%

10.2%

Adjusted EBITDA

555

611

as a % of sales

13.4%

14.2%

1)Non-GAAP financial measure. Refer to Reconciliation of non-GAAP information.
  • Sales increased to EUR 4.3 billion, with comparable sales growth of 4%; comparable order intake increased 8% compared to Q2 2016
  • Net income from continuing operations amounted to EUR 161 million, compared to EUR 118 million in Q2 2016
  • Adjusted EBITA improved 15% to EUR 439 million, or 10.2% of sales, compared to EUR 383 million, or 9.3% of sales, in Q2 2016
  • Income from operations (EBIT) amounted to EUR 252 million, or 5.9% of sales, compared to EUR 265 million, or 6.4% of sales, in Q2 2016
  • Operating cash flow totaled EUR 73 million, compared to EUR 177 million in Q2 2016
  • EUR 1.5 billion share buyback program to start in the third quarter of 2017
  • As of Q2 2017, Philips presents the results of Philips Lighting as a discontinued operation
Philips diagnostic imaging system

Highlights of Q2

Long-term strategic partnerships

Building on its portfolio of long-term strategic partnerships, Philips signed multiple new agreements in the quarter. For example, Philips has partnered with the Singapore Institute of Advanced Medicine Holdings to provide its new oncology center with a range of Philips’ advanced diagnostic imaging systems, combined with clinical informatics and services for a multi-year term. Philips also signed a new 10-year Managed Equipment Services agreement for patient monitoring solutions with Le Confluent, one of the top three private hospitals in France for cardiovascular care.

More information

Philips IntelliSpace enterprise health informatics

Highlights of Q2

Health informatics

Demonstrating further progress on advanced data analytics, Philips received FDA clearance for its IntelliSpace Portal 9.0 and a range of innovative applications for radiology. The platform gives clinicians a comprehensive view of each patient, helping them to diagnose conditions. Further highlighting its leadership in health informatics, Philips signed several multi-year agreements with hospitals in the US to provide them with enterprise imaging informatics solutions.

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Philips IntelliSite Pathology Solution

Highlights of Q2

Digital pathology

Philips’ IntelliSite Pathology Solution is currently the only digital pathology solution in the US to receive FDA clearance for primary diagnostic use. This achievement reinforces Philips’ leadership in digital pathology, a solution that is central to the diagnosis of complex diseases such as cancer.

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Philips Sonicare DiamondClean Smart

Highlights of Q2

Oral healthcare

Building on its leadership in power toothbrushes, the Philips Sonicare DiamondClean Smart pilot with top Chinese online retailer JD.com reached a 94% rating (out of a full score of 100%), with consumers highlighting the benefits of the coaching app and the premium design. 

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Respiratory Technologies

Highlights of Q2

Personal Health acquisitions

Strengthening its Personal Health businesses, Philips acquired UK-based Health & Parenting, a leading developer of mobile applications for expectant and new parents, used by one in two expectant mothers in the UK. The company also signed an agreement to acquire Respiratory Technologies, a US-based provider of an innovative airway clearance solution for patients with chronic respiratory conditions.

More information (Health & Parenting) More information (RespirTech)

Spectranetics Corporation

Highlights of Q2

Diagnosis & Treatment acquisitions

To further strengthen its Diagnosis & Treatment businesses, Philips signed an agreement to acquire Spectranetics. Its highly complementary portfolio, including laser atherectomy catheters, the AngioSculptX drug-coated scoring balloon and the Stellarex drug-coated balloon, will support Philips’ expansion in image-guided therapy devices. Furthermore, to reinforce its leadership position in ultrasound, Philips acquired TomTec Imaging Systems, a leading provider of clinical applications and intelligent image-analysis software.

More information (Spectranetics) More information (TomTec)

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