Financial results
Philips

Our Q4 2018 performance at a glance

  • Sales amounted to EUR 5.6 billion, with 5% comparable sales growth
  • Comparable order intake for the quarter increased 10%
  • Income from continuing operations increased to EUR 723 million, compared to EUR 476 million in Q4 2017
  • Adjusted EBITA margin improved by 70 basis points, despite a 40 basis points adverse currency effect, to 17.4% of sales, compared to 16.7% of sales in Q4 2017
  • Income from operations increased to EUR 769 million, compared to EUR 723 million in Q4 2017
  • Operating cash flow increased to EUR 1,293 million, compared to EUR 1,202 million in Q4 2017; free cash flow increased to EUR 1,019 million, compared to EUR 948 million in Q4 2017

Full-year highlights

  • Sales increased to EUR 18.1 billion, with 5% comparable sales growth
  • Comparable order intake increased 10% year-on-year
  • Income from continuing operations increased to EUR 1,310 million, compared to EUR 1,028 million in 2017
  • Adjusted EBITA margin improved by 100 basis points to 13.1% of sales, compared to 12.1% of sales in 2017
  • Income from operations amounted to EUR 1,719 million, compared to EUR 1,517 million in 2017
  • Operating cash flow totaled EUR 1.8 billion, compared to EUR 1.9 billion in 2017; free cash flow amounted to EUR 984 million, including a EUR 176 million outflow related to pension liability de-risking and an early bond redemption, compared to EUR 1,185 million in 2017
  • Proposal to increase dividend by 6% to EUR 0.85 per share; start of new EUR 1.5 billion share buyback program
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Key data

in millions of EUR unless otherwise stated

Q4 2017

Q4 2018

Sales

5,303

5,586

Nominal sales growth

0%

5%

Comparable sales growth

5%

5%

Comparable order intake

7%

10%

Income from operations

723

769

as a % of sales

13.6%

13.8%

Financial expenses, net

(9)

(58)

Investments in associates, net of income taxes

(2)

-

Income tax expense

(237)

12

Income from continuing operations

476

723

Discontinued operations, net of income taxes

423

(44)

Net income

899

678

Income from continuing operations attributable to shareholders1 per common share (in EUR) - diluted2

0.49

0.77

Adjusted income from continuing operations attributable to shareholders1 per common share (in EUR) - diluted

0.66

0.76

Net income attributable to shareholders1 per common share (in EUR) - diluted

0.91

0.72

EBITA

790

861

as a % of sales

14.9%

15.4%

Adjusted EBITA

884

971

as a % of sales

16.7%

17.4%

Adjusted EBITDA

1,072

1,170

as a % of sales

20.2%

20.9%

1Shareholders refers to shareholders of Koninklijke Philips N.V.
2The 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

Frans van Houten, CEO
“We continued to make progress during the year and delivered 5% comparable sales growth in the fourth quarter, with good mid-single-digit growth in our Diagnosis & Treatment businesses, low-single-digit growth in our Personal Health businesses in line with our expectations for this year, and higher IP royalties. I am encouraged by the comparable order intake growth in the Connected Care & Health Informatics businesses, which drove the 10% comparable order intake growth for the Group. The Adjusted EBITA margin improved by 70 basis points, despite a 40 basis points adverse currency effect.

For the full year, we delivered on our targets, with 5% comparable sales growth, 100 basis points improvement in the Adjusted EBITA margin, and a free cash flow of EUR 1.2 billion, excluding payments related to the US Pension Fund liability de-risking and premium payments related to an early bond redemption. We saw rising demand for our innovative product and solutions portfolio, resulting in 10% comparable order intake growth for the year, with good growth across the world.

Our continued focus on innovation combined with our growing order book provide a solid base to further strengthen our leadership position as a focused health technology company. This confidence enables us to propose a 6% dividend increase to EUR 0.85 per share and to announce a new EUR 1.5 billion share buyback program.

As Philips continues to navigate global geopolitical challenges and market volatility, for which we are taking necessary actions, we expect our performance momentum to improve in the course of the year. We reaffirm our overall targets of 4-6% comparable sales growth and an Adjusted EBITA margin improvement of 100 basis points on average per year for the 2017–2020 period.”

Frans van HoutenChief Executive Officer

Highlights of Q4

Philips Healthcare informatics win

Healthcare informatics win

NewYork-Presbyterian Hospital selected Philips’ IntelliSpace Enterprise Edition as its in-hospital clinical decision support platform to help address the Quadruple Aim of improved patient experience, better health outcomes, improved staff experience, and lower cost of care across its sites.

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Diagnostic imaging innovations with Philips Ingenia Ambition

Traction for diagnostic imaging innovations

Continuing the positive momentum of the Diagnostic Imaging business in China, the company received CFDA approval to market its advanced Vereos Digital PET/CT in China. Globally, Philips saw strong demand for its recently launched Ingenia Elition MRI system and Ingenia Ambition MRI system, which enables helium-free operations as well as featuring Compressed SENSE software, a breakthrough acceleration technique speeding up MR exams by up to 50%.

Ultrasound examination using Philips EPIQ ElastQ

New long-term strategic partnerships

Philips entered into multiple new agreements in the US and Europe. For example, the company announced an agreement with County Durham and Darlington NHS Foundation Trust in the UK to provide imaging and cardiology solutions across their sites, further building on the large number of long-term strategic partnerships.

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Enterprise telehealth using Philips eICU technology

Further success in enterprise telehealth

Leveraging Philips’ expertise in remote monitoring solutions, the company partnered with Dartmouth-Hitchcock Health in the US to implement Philips’ eICU technology at their hospital sites. Following the success of similar programs across the globe, Dartmouth-Hitchcock Health is the latest health system to incorporate this telehealth model to improve critical care support across multiple sites.

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Philips DreamWear CPAP mask

Continued strong performance in sleep care

Highlighting the success of Philips’ patient-centric product designs in sleep care, Philips has sold more than 10 million DreamWear CPAP masks and cushions in just three years after the Dream Family platform introduction, growing the DreamWear patient interface sales faster than the market.

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Philips Azurion with FlexArm

Advances in image-guided therapy

Philips launched an extension to the successful Azurion image-guided therapy platform, setting a new standard in the industry. Azurion with FlexArm includes innovations for optimal visualization across the whole patient in 2D and 3D to simplify and enhance a broad range of procedures. Additionally, Philips announced the enrolment of the first patient in the new Stellarex ILLUMENATE Below-the-Knee (BTK) Investigational Device Exemption (IDE) study in the US.

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Carbon emission targets

Industry-leading carbon emission targets

Philips became the first health technology company to have its new CO2 emission targets accepted by the Science Based Targets initiative, a collaboration between the UN Global Compact, the World Resources Institute and the World Wide Fund for Nature aimed at driving ambitious corporate climate action.

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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 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