Philips delivers Q4 sales of EUR 6.0 billion, with 7% comp. sales
growth; income from cont. operations increases to EUR 608 million,
Adjusted EBITA margin improves 110 bps to 19.0%, and operating cash
flow increases to EUR 1,305 million
January 25, 2021
Fourth-quarter
highlights•
Sales amounted to EUR 6.0 billion, with 7% comparable sales
growth• Comparable order
intake increased 7%•
Income from continuing operations increased to EUR 608 million,
compared to EUR 550 million in Q4
2019• Adjusted EBITA
margin increased to 19.0% of sales, compared to 17.9% of sales in
Q4 2019• Income from
operations improved to EUR 795 million, compared to EUR 730 million
in Q4 2019• EPS from
continuing operations (diluted) amounted to EUR 0.66; Adjusted EPS
increased to EUR 0.94, compared to EUR 0.83 in Q4
2019• Operating cash flow
improved to EUR 1,305 million, compared to EUR 1,271 million in Q4
2019• Free cash flow
improved to EUR 1,055 million, compared to EUR 959 million in Q4
2019 Full-year
highlights•
Sales amounted to EUR 19.5 billion, with 3% comparable sales
growth• Comparable order
intake increased 9%•
Income from continuing operations increased to EUR 1,205 million,
compared to EUR 1,192 million in
2019• Adjusted EBITA
margin was 13.2% of sales, in line with
2019• Income from
operations amounted to EUR 1,542 million, compared to EUR 1,644
million in 2019• EPS from
continuing operations (diluted) amounted to EUR 1.31; Adjusted EPS
amounted to EUR 1.98, in line with
2019• Operating cash flow
improved to EUR 2,777 million, compared to EUR 2,031 million in
2019• Free cash flow
improved to EUR 1,852 million, compared to EUR 1,053 million in
2019• Proposed dividend
of EUR 0.85 per share, in cash or shares at the option of the
shareholder
Frans van Houten, CEO of Royal Philips:
“Against the backdrop of the ongoing COVID-19 pandemic, we
continued to support healthcare providers and medical staff with
the provision of both acute COVID-19 care and regular healthcare.
In the quarter, Philips entered into 25 new long-term strategic
partnerships with hospitals in the US, Europe and Asia, to help
them achieve their clinical and operational goals with our
integrated solutions. We also supported consumers in their homes
with telehealth solutions such as tele-dentistry services and
remote monitoring.
I am pleased that, as a result of these efforts, in the quarter
we recorded 7% comparable sales growth for the Group and 7%
comparable order intake growth. The Adjusted EBITA margin improved
by 110 basis points, and we delivered a strong free cash flow of
EUR 1,055 million.
We launched several new products and solutions in the quarter,
including the Philips Shaver Series 1000 that specifically
addresses the personal care needs of young men in China. We also
introduced our next-generation IntelliSpace Portal advanced
visualization workspace with AI capabilities to support a precision
diagnosis. To expand our Connected Care solutions, we signed
agreements to acquire BioTelemetry and Capsule Technologies. These
acquisitions will further broaden and scale Philips’ patient care
management solutions for the hospital and the home to enhance
patient outcomes, streamline clinical workflows and increase
productivity. We target significant revenue synergies, and these
businesses will be accretive to Philips' sales growth and Adjusted
EBITA margin in 2021. This is another important step in our
strategy to become a leading solutions provider.
As a result of our stronger performance in the second half of
the year, following a challenging first half due to the impact of
COVID-19, our performance was resilient. For the full year 2020 we
delivered 3% comparable sales growth, an Adjusted EBITA margin of
13.2% and a strong free cash flow of EUR 1.9 billion. Moreover,
driven by 9% comparable order intake growth, we continued to gain
market share in our healthcare businesses, and ended the year with
a strong order book.
I am very grateful and proud of the commitment, resourcefulness
and hard work of our more than 80,000 employees in 2020. Through
our efforts, we were able to deliver against our triple duty of
care - meeting critical customer needs, safeguarding the health and
safety of our employees, and ensuring business continuity.
Looking ahead, we continue to see uncertainty related to the
impact of COVID-19 across the world. For 2021, Philips plans to
deliver low-single-digit comparable sales growth, driven by solid
growth in Diagnosis & Treatment and Personal Health, partly
offset by lower Connected Care sales, and an Adjusted EBITA margin
improvement of 60-80 basis points.” Business segment
performance
The Diagnosis & Treatment businesses returned to growth,
with 1% comparable sales growth in the quarter, driven by
high-single-digit growth in Diagnostic Imaging. Comparable order
intake showed a 3% increase, compared to a 5% decrease in the
previous quarter. The Adjusted EBITA margin decreased to 14.0%,
mainly due to mix changes. For the full year, the Diagnosis &
Treatment businesses recorded a 2% comparable sales decrease and an
Adjusted EBITA margin of 10.0%.
Comparable sales in the Connected Care businesses increased 24%
in the quarter, with double-digit growth in Monitoring &
Analytics and Sleep & Respiratory Care. Comparable order intake
showed a 17% increase, with strong growth across all businesses.
The Adjusted EBITA margin increased to 27.2%, due to operating
leverage and productivity programs. For the full year, the
Connected Care businesses delivered 22% comparable sales growth and
an Adjusted EBITA margin of 21.5%.
The Personal Health businesses delivered a comparable sales
increase of 5% in the quarter, with double-digit growth in Domestic
Appliances and mid-single-digit growth in Personal Care. The
Adjusted EBITA margin was 20.0%, in line with Q4 2019. For the full
year, the Personal Health businesses recorded a 4% comparable sales
decline and an Adjusted EBITA margin of 13.0%.
Philips’ ongoing focus on innovation and partnerships resulted
in the following key developments in the quarter and the year:
• In 2020, Philips’ products and
solutions improved the lives of 1.75 billion people, compared to
1.64 billion in 2019. This figure includes 207 million people in
underserved communities, compared to 194 million in 2019. In
addition, Philips was once again recognized in 2020 for its
sustainability performance in the 2020 Dow Jones Sustainability
Indices and CDP's Climate Change A-list.
• Philips signed 25 new long-term
strategic partnerships in the quarter, including a 5-year
technology and innovation partnership with Rennes University
Hospital, one of the top 10 hospitals in France, with four sites
and more than 1,800 beds. Philips will deliver integrated solutions
to support a precision diagnosis, image-guided therapies, and
patient monitoring and management. This includes consultancy
services to help optimize the hospital’s clinical pathways.
• Expanding its range of
patient-centric solutions for the home, Philips launched the BiPAP
A40 EFL non-invasive ventilator. With this introduction, Philips is
extending its respiratory care solutions with a new ventilation
therapy feature to treat COPD patients with expiratory flow
limitation (EFL) with targeted therapy to reduce symptoms and
increase their comfort while sleeping.
• Highlighting the company’s
strength in enterprise imaging solutions, Philips created a single
system for all 12 hospitals in the Region of Southern Denmark to
store, retrieve, and view radiology and nuclear medicine images and
data. This unified imaging ecosystem, which comprises Philips’
Vendor-Neutral Archive and Universal Viewer, will serve all of the
region’s radiologists and nuclear medicine specialists, improving
collaboration and enhancing patient care.
• Leveraging Philips’ remote
patient monitoring capabilities, Philips and BioIntelliSense have
been selected by the U.S. Department of Defense to validate
BioIntelliSense’s BioSticker sensor for the early detection of
COVID-19 symptoms. The validation study aims to accelerate the use
of wearable diagnostics for the early identification and
containment of pre-symptomatic COVID-19 cases.
• Highlighting its leadership in
image-guided therapy, there was strong demand for Philips’ mobile
surgery solutions, including the Philips Zenition mobile C-arm
platform, resulting in double-digit growth for this category during
the quarter. Earlier in the year, Philips introduced several new
innovations on its Zenition platform to improve the workflow of
complex surgical procedures.
• Philips launched a
vendor-neutral, multimodality Radiology Operations Command Center
to enable real-time, remote collaboration between technologists,
radiologists and imaging operations teams across multiple sites,
with the aim of increasing productivity, minimizing issues with
image quality, and expanding access to MR- and CT-based
diagnosis.
Cost savings
In the fourth quarter of 2020, cost savings totaled EUR 123
million, with procurement savings of EUR 67 million and savings
from overhead and other productivity programs of EUR 56 million,
resulting in annual savings of EUR 447 million in 2020. As a
result, Philips has delivered EUR 1.9 billion productivity savings
for the Group over the 2017-2020 period, exceeding the target of
EUR 1.8 billion. Click here to view the release online
For further information, please contact:
Ben Zwirs Philips Global Press Office Tel: +31 6
1521 3446 Email: ben.zwirs@philips.com Martijn van der
Starre Philips Global Press Office Tel.: +31 6 2847 4617
E-mail: martijn.van.der.starre@philips.com About Royal
Philips
Royal Philips (NYSE: PHG, AEX: PHIA) is a leading health
technology company focused on improving people's health and
well-being, and enabling better outcomes across the health
continuum – from healthy living and prevention, to diagnosis,
treatment and home care. Philips leverages advanced technology and
deep clinical and consumer insights to deliver integrated
solutions. Headquartered in the Netherlands, the company is a
leader in diagnostic imaging, image-guided therapy, patient
monitoring and health informatics, as well as in consumer health
and home care. Philips generated 2020 sales of EUR 19.5 billion and
employs approximately 82,000 employees with sales and services in
more than 100 countries. News about Philips can be found at
www.philips.com/newscenter.
Forward-looking statements and other important
information
Forward-looking statementsThis document and the
related oral presentation, including responses to questions
following the presentation, contain certain forward-looking
statements with respect to the financial condition, results of
operations and business of Philips and certain of the plans and
objectives of Philips with respect to these items. Examples of
forward-looking statements include: statements made about the
strategy; estimates of sales growth; future Adjusted EBITA; future
restructuring, acquisition-related and other costs; future
developments in Philips’ organic business; and the completion of
acquisitions and divestments. By their nature, these statements
involve risk and uncertainty because they relate to future events
and circumstances and there are many factors that could cause
actual results and developments to differ materially from those
expressed or implied by these statements.
These factors include but are not limited to: changes in
industry or market circumstances; economic, political and societal
changes; Philips’ increasing focus on health technology and
solutions; the successful completion of divestments such as the
disentanglement and divestment of our Domestic Appliances
businesses; the realization of Philips’ objectives in growth
geographies; business plans and integration of acquisitions;
securing and maintaining Philips’ intellectual property rights
andunauthorized use of third-party intellectual property rights;
COVID-19 and other pandemics; breaches of cybersecurity; IT system
changes or failures; the effectiveness of our supply chain;
challenges to drive operational excellence, productivity and speed
in bringing innovations to market; attracting and retaining
personnel; future trade arrangements following Brexit; compliance
with regulations and standards including quality, product safety
and data privacy; compliance with business conduct rules and
regulations; treasury risks and other financial risks; tax risks;
costs of defined-benefit pension plans and other post- retirement
plans; reliability of internal controls, financial reporting and
management process. As a result, Philips’ actual future results may
differ materially from the plans, goals and expectations set forth
in such forward-looking statements. For a discussion of factors
that could cause future results to differ from such forward-looking
statements, see also the Risk management chapter included in the
Annual Report 2019.
Third-party market share dataStatements
regarding market share, including those regarding Philips’
competitive position, contained in this document are based on
outside sources such as research institutes, industry and dealer
panels in combination with management estimates. Where information
is not yet available to Philips, those statements may also be based
on estimates and projections prepared by outside sources or
management. Rankings are based on sales unless otherwise
stated.
Use of non-IFRS informationIn presenting and
discussing the Philips Group’s financial position, operating
results and cash flows, management uses certain non-IFRS financial
measures. These non-IFRS financial measures should not be viewed in
isolation as alternatives to the equivalent IFRS measure and should
be used in conjunction with the most directly comparable IFRS
measures. Non-IFRS financial measures do not have standardized
meaning under IFRS and therefore may not be comparable to similar
measures presented by other issuers. A reconciliation of these
non-IFRS measures to the most directly comparable IFRS measures is
contained in this document. Further information on non-IFRS
measures can be found in Annual Report 2019.
Use of fair value informationIn presenting the
Philips Group’s financial position, fair values are used for the
measurement of various items in accordance with the applicable
accounting standards. These fair values are based on market prices,
where available, and are obtained from sources that are deemed to
be reliable. Readers are cautioned that these values are subject to
changes over time and are only valid at the balance sheet date.
When quoted prices or observable market data are not readily
available, fair values are estimated using appropriate valuation
models and unobservable inputs. Such fair value estimates require
management to make significant assumptions with respect to future
developments, which are inherently uncertain and may therefore
deviate from actual developments. Critical assumptions used are
disclosed in the Annual Report 2019. In certain cases independent
valuations are obtained to support management’s determination of
fair values.
PresentationAll amounts are in millions of
euros unless otherwise stated. Due to rounding, amounts may not add
up precisely to totals provided. All reported data is unaudited.
Financial reporting is in accordance with the significant
accounting policies as stated in the Annual Report 2019.
Effective Q1 2020, Philips has simplified its order intake
policy by aligning horizons for all modalities to 18 months to
revenue, compared to previously used delivery horizons of 6 months
for Ultrasound, 12 months for Connected Care and 15 months for
Diagnosis & Treatment. At the same time, Philips has aligned
order intake for software contracts to the same 18 months to
revenue horizon, meaning that only the next 18 months conversion to
revenue under the contract is recognized, compared to the full
contract values recognized previously. This change eliminates major
variances in order intake growth and better reflects expected
revenue in the short term from order intake booked in the reporting
period. This realignment has not resulted in any material
additional order intake recognition.
In 2020, Philips revised the definition of net finance expenses
used in the calculation of Adjusted income from continuing
operations attributable to shareholders, to exclude fair value
movements of limited life fund investments recognized at fair value
through profit and loss. This change leads to more relevant
information as the fair value movements are not indicative of
Philips' performance. The fair value movements do not represent
cash items. Philips believes making this change is helpful for
investors to evaluate Philips' performance.
Per share and weighted average share calculations have been
adjusted for all periods presented to reflect the issuance of
shares for the share dividend in respect of 2019.
Prior-period amounts have been reclassified to conform to the
current-period presentation. Market Abuse
RegulationThis press release contains inside information
within the meaning of Article 7(1) of the EU Market Abuse
Regulation.
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