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Our Q2 2018 performance at a glance

Second-quarter highlights

  • Sales in the quarter were EUR 4.3 billion, with comparable sales growth of 4%
  • Comparable order intake increased 9% compared to Q2 2017
  • Net income from continuing operations was EUR 186 million, compared to EUR 161 million in Q2 2017
  • Adjusted EBITA margin improved by 100 basis points to 11.2% of sales, compared to 10.2% of sales in Q2 2017
  • Income from operations (EBIT) increased to EUR 298 million, compared to EUR 252 million in Q2 2017
  • Operating cash flow totaled EUR 130 million, compared to EUR 73 million in Q2 2017
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Key datain millions of EUR unless otherwise stated

Q2 2017

Q2 2018

Sales

4,294

4,288

Nominal sales growth

4%

0%

Comparable sales growth*

4%

4%

Comparable order intake *

8%

9%

Income from operations

252

298

as a % of sales

5.9%

6.9%

Financial expenses, net

(43)

(49)

Investments in associates, net of income taxes

(4)

1

Income tax expense

(44)

(63)

Income from continuing operations

161

186

Discontinued operations, net of income taxes

128

(184)

Net income 1

289

2

Income from continuing operations attributable to shareholders per common share (in EUR) - diluted 2)

0.17

0.20

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

0.27

0.00

EBITA*

329

430

as a % of sales

7.7%

10.0%

Adjusted EBITA*

439

482

as a % of sales

10.2%

11.2%

Adjusted EBITDA*

611

661

as a % of sales

14.2%

15.4%

1)Q2 2017 includes operating results of Signify (formerly Philips Lighting) and the combined Lumileds and Automotive businesses, which have subsequently been deconsolidated.
2)The presentation of Q2 2018 and Q2 2017 information has been updated compared to the information previously published on July 23rd, 2018 to adjust for elements of Net income that were attributable to discontinued operations.

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Message from the CEO

“In the second quarter, we delivered 4% comparable sales growth, a strong 9% order intake growth and a solid 100 basis points improvement in operational performance driven by our growth and productivity programs.

I am pleased with the continued strong performance improvement of the Diagnosis & Treatment businesses, driven by the breadth of our innovative product portfolio, which resulted in 8% comparable sales growth and double-digit order intake growth. At the same time, I am encouraged by the mid-single-digit order intake growth of the Connected Care & Health Informatics businesses. After a slow start, the Personal Health businesses gained momentum in the quarter, and we expect this to continue in the second half of the year.

Demonstrating our ongoing success in building our solutions business, we signed seven long-term strategic partnership agreements in the quarter. In Germany, Philips announced two multi-year agreements with Clinics of Cologne and Munich Municipal Hospital to deliver medical imaging solutions to support precision diagnosis and therapy, innovation and productivity improvements. We also signed a seven-year agreement with the governments of the Netherlands and Ethiopia to design, build and equip Ethiopia’s first specialized Cardiac Care Center for state-of-the-art diagnosis and treatment of cardiac diseases.

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 Q2

Highlights

Philips Azurion in operating room

Targeted acquisitions

To further strengthen Philips’ businesses through targeted acquisitions, the company acquired EPD Solutions*, an innovator that has developed a breakthrough technology for image-guided treatments for cardiac arrhythmia. Philips also acquired Remote Diagnostic Technologies, a leading provider of advanced monitoring, cardiac therapy and data management solutions for the pre-hospital market. RDT’s portfolio will complement Philips’ Therapeutic Care business and strengthen its leadership position in the EUR 1.4 billion resuscitation and emergency care market.

Discover more (EDP Solutions) Discover more (Remote Diagnostic Technologies)

* Philips announced the agreement to acquire EPD Solutions on June 5, 2018. The transaction was completed on July 9, 2018

Philips TouchVue

Ultrasound innovations

Driven by recently introduced innovations such as an advanced transducer optimized for OB/GYN and General Imaging applications and the telehealth capabilities of its Lumify app-based ultrasound solution, Philips continued its strong growth across the Cardiology, OB/GYN, General Imaging and Point-of-Care clinical segments.

Discover more

Jackson Memorial Hospital main entrance

Industry-first agreement

Philips and Jackson Health System – one of the largest public health systems in the US – entered into an agreement involving an industry-first ‘enterprise patient monitoring as a service’ business model. This will enable Jackson to standardize patient monitoring at all acuity levels for each care setting across its network for a per-patient fee.

Discover more

Philips eICU program or the intensive care unit

Tele-intensive care eICU program

Partnering with Showa University, Philips launched the first tele-intensive care eICU program in Japan. This delivers near real-time remote patient monitoring and early intervention through predictive analytics and advanced audio-visual technology. It has already been successfully implemented in the US, the UK, Australia and the Middle East.

Discover more

Dana-Farber Cancer Institute

Oncology partnership

Philips partnered with the Dana-Farber Cancer Institute to deploy best practices in cancer care. The incorporation of the Institute’s Clinical Pathways in Philips’ IntelliSpace Oncology Platform will help oncologists reach the most appropriate cancer treatments for patients, based on a unified view of the patient across diagnostic modalities and the embedded knowledge of both partners.

Discover more

Pathologist uses Philips IntelliSite Pathology Solution

Digital pathology collaboration

As the only provider of a digital pathology solution for primary diagnostic use in the US, Philips teamed up with life sciences leader LabCorp to fully digitize pathology workflows for LabCorp’s clinical laboratory and drug development services.

Discover more

Philips DreamWear

Continued success for sleep innovation

Following the successful launch of the DreamWear Full Face mask in the US at the end of the first quarter, the roll-out of this new mask in additional markets resulted in strong growth for Philips in the largest mask segment. Moreover, to further drive growth in the emerging sleep therapy market in China, Philips launched the connected Dream Family solution.

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 SonicarePhilips VolcanoPhilips 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 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.

Icon Cardiology
Cardiology
Icon oncology
Oncology
Icon respiratory care
Respiratory care
Fertility, pregnancy and parenting icon
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