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Our Q3 2018 performance at a glance

Third-quarter highlights

  • Sales in the quarter were EUR 4.3 billion, with comparable sales growth of 4%
  • Comparable order intake increased 11% compared to Q3 2017
  • Net income from continuing operations increased 17% to EUR 307 million, compared to EUR 263 million in Q3 2017
  • Adjusted EBITA margin improved by 40 basis points to 13.2% of sales, including a 60 basis points adverse currency impact, compared to 12.8% of sales in Q3 2017
  • Income from operations (EBIT) increased to EUR 451 million, compared to EUR 299 million in Q3 2017
  • Operating cash flow totaled EUR 265 million, compared to EUR 295 million in Q3 2017
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Key datain millions of EUR unless otherwise stated

Q3 2017

Q3 2018

Sales

4,148

4,306

Nominal sales growth

0%

4%

Comparable sales growth*

4%

4%

Comparable order intake *

5%

11%

Income from operations

299

451

as a % of sales

7.2%

10.5%

Financial expenses, net

(35)

(26)

Investments in associates, net of income taxes

4

(3)

Income tax expense

(5)

(114)

Income from continuing operations

263

307

Discontinued operations, net of income taxes

160

(15)

Net income

423

292

Income from continuing operations attributable to shareholders per common share (in EUR) - diluted 1

0.28

0.32

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

0.33

0.31

EBITA*

364

512

as a % of sales

8.8%

11.9%

Adjusted EBITA*

532

568

as a % of sales

12.8%

13.2%

Adjusted EBITDA*

686

750

as a % of sales

16.5%

17.4%

1)The presentation of 2017 information has been updated compared to the information previously published to adjust for elements of Net income that were attributable to discontinued operations.

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Message from the CEO

“While I am pleased with the continued strong 11% order intake growth in the quarter, operational improvements were partly offset by increased foreign exchange headwinds. This resulted in a 40 basis points improvement in Adjusted EBITA margin on the back of 4% comparable sales growth.

The Diagnosis & Treatment businesses continued their strong performance, driven by our innovative product and solutions portfolio. Our Connected Care & Health Informatics businesses also showed continued solid order intake growth; however, sales decreased 2% compared to a very strong third quarter in 2017. I am encouraged by the step-up in sales growth of the Personal Health businesses compared to the first half of 2018, but the recovery was slower than expected as good growth in our growth geographies was partially offset by lower growth in our mature geographies.

Looking ahead, while observing continuing headwinds, for which we are taking appropriate measures, 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 Q3

Highlights

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Long-term strategic partnerships

Continuing Philips’ success in long-term strategic partnerships, the company signed six new agreements across the globe. Philips partnered with Children’s Health hospital in Dallas – one of the top pediatric hospitals in the US – to improve pediatric care with its patient monitoring and healthcare informatics solutions. In Australia, Philips announced its first two long-term strategic partnership agreements, which aim to support precision diagnosis and therapy and drive operational performance improvements across nine hospital sites.

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Advances in image-guided therapy

As a leader in image-guided therapy, Philips launched its EPIQ CVxi ultrasound system combined with the latest version of its unique EchoNavigator software specifically designed for minimally invasive structural heart repairs, a fast-growing image-guided therapy segment. Moreover, the adoption of Philips’ proprietary iFR technology reached a major milestone after its inclusion in the European Society of Cardiology’s updated guidelines for the assessment of coronary artery lesions.

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Diagnostic imaging innovation

Continuing the renewal of its diagnostic imaging portfolio, Philips launched the Ingenia Ambition X 1.5T MR with fully sealed BlueSeal magnet technology in the US. As an industry first, Ingenia Ambition X enables imaging departments to perform more productive, helium-free operations.

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Healthcare informatics partnership agreement

Building on its strengths in healthcare informatics, Philips entered into a multi-year partnership agreement with St. Andrew’s Toowoomba Hospital in Australia for the hospital-wide installation of Philips Tasy EMR. Philips will fully digitize the hospital’s entire care management processes and enable anytime, anywhere access to clinical analytics.

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High-end male grooming launch

Philips completely renewed the high-end range of its leading male grooming portfolio with the introduction of the Series 9000 Prestige shaver, which cuts facial hair feeling as close as a wet blade, while being very gentle on the skin.

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Traction for new home ventilation platform

Philips’ Sleep & Respiratory Care business continues to garner traction for its market-leading home ventilation offerings, such as the new Trilogy Evo ventilator platform, which is the only portable life support solution designed to stay with patients as they change care environments.

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Digital pathology partnership and innovation

As the leading provider of digital and computational pathology solutions, Philips teamed up with Oxford University Hospitals NHS Foundation Trust to create a digital pathology network in the UK. Philips also released a new version of its AI-powered TissueMark, which will enable molecular research labs to reduce variability in tumor estimation and related costs.

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Making the world healthier and more sustainable

Our strategic focus

Philips HD5 Ultrasound
Philips DreamWear
Philips Lifeline
Philips DreamStation Go

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.

Philips SonicareStrategic focus 6Philips Azurion

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.

Philips Health Continuum model background
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 spanning 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.

Icon Cardiology
Cardiology
Icon oncology
Oncology
Icon respiratory care
Respiratory care
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Fertility, pregnancy and parenting
Philips hospital consulting services

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:

Roadmap to win background
Roadmap to win background
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