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Frans van Houten, CEO:
“Philips’ first-quarter 2016 results reflect solid comparable sales growth across our HealthTech businesses and our LED Lighting business, bolstered by the successful launch of several new products. We also delivered continued operational improvements throughout the company, driven by higher volume and improved product mix. Our overall performance strengthened, supported by the ongoing benefits of our multi-year Accelerate! transformation program, despite challenging macro-economic conditions in several markets.
Our outlook for 2016 remains unchanged, as we continue to expect earnings improvements in the year to be back-end loaded, taking into account ongoing macro-economic headwinds and the phasing of costs and sales.”
HealthTech
“Our HealthTech portfolio delivered another strong quarter, with 5% comparable sales growth overall, despite anticipated lower royalty income. We also achieved significant operational improvements, which were partly offset by ongoing investments in high-growth businesses, such as wearable patient monitoring solutions, digital pathology and health informatics. Equipment-order intake in the quarter declined by 3% on a comparable basis, after a quarter with double-digit order growth, largely reflecting the unevenness of our order intake dynamics.”
In Personal Health, comparable sales growth was 6%, with the Adjusted EBITA margin improving by 130 basis points. Diagnosis & Treatment showed 5% comparable growth, and the Adjusted EBITA margin improved by 80 basis points. Connected Care & Health Informatics grew 9%, while the Adjusted EBITA margin improved by 310 basis points.
Lighting
“Philips Lighting’s first-quarter performance improvement signals its great future as a focused, stand-alone company. Lighting posted its sixth consecutive quarter of year-on-year operational improvements, underpinning the strong potential of our LED business and the transformation from individual products to connected lighting systems and services. As a result of our market success in LED and its growing share of the overall business, Philips Lighting is expected to return to positive comparable sales growth in the course of 2016.”
LED lighting sales grew strongly by 27% and now account for 50% of overall Lighting sales. Conventional lamps sales continued their anticipated decline, contracting 15% year-on-year. The Home business delivered double-digit growth for the second consecutive quarter, while Professional in North America returned to positive growth in the quarter. The Adjusted EBITA margin at Philips Lighting increased by 60 basis points, driven by cost productivity and product mix.
Separation Update
As previously communicated, Philips continues to simultaneously prepare for an initial public offering (IPO) or a private sale of Philips Lighting. With equity markets’ sentiment improving compared to the first couple of months of the year, an IPO increasingly appears a more likely outcome, subject to further market developments and other relevant circumstances. However, the company has not yet concluded on all proposals in the private sale process and continues to assess the attractiveness of this route compared to the IPO, both in terms of value and conditions, while taking into account the best interests of Philips and its stakeholders. As such, Philips expects to update the market on conclusions and next steps shortly.
Costs related to the separation amounted to EUR 52 million in the first quarter of 2016. For 2016, Philips now expects separation costs to be in the range of EUR 200 - 225 million.
Cost Savings
Overhead cost savings amounted to EUR 19 million in the first quarter. The Design for Excellence (DfX) program generated EUR 67 million of incremental procurement savings in the quarter. The End2End improvement program achieved EUR 41 million in productivity gains.
Miscellaneous
As of March 31, 2016, Philips had completed 82% of the 3-year EUR 1.5 billion share buy-back program.
This first-quarter 2016 results publication is based on Philips’ new segment reporting structure. The related historical key figures for 2014 and 2015 have been published on the Investor Relations website.
Quarterly Report
First quarter results 2016 - Quarterly Report
Presentation
First quarter results 2016 - Quarterly Results Presentation
Conference call and audio webcast
A conference call with Frans van Houten, CEO, and Abhijit Bhattacharya, CFO, to discuss the results will start at 10:00AM CET, April 25, 2016. A live audio webcast of the conference call will be available through the link below.
Q1 2016 - First quarter 2016 results conference call audio webcast
More information about Frans van Houten and Abhijit Bhattacharya
Steve Klink
Philips Group Communications
Tel: +31 6 10888824
E-mail: steve.klink@signify.com
Joost Akkermans
Philips Group Communications
Tel.: +31 6 3175 8996
E-mail: joost.akkermans@signify.com
This 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 EBITA, 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 domestic and global economic and business conditions, developments within the euro zone, the successful implementation of Philips’ strategy and the ability to realize the benefits of this strategy, the ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs and actuarial assumptions, raw materials and employee costs, the ability to identify and complete successful acquisitions, and to integrate those acquisitions into the business, the ability to successfully exit certain businesses or restructure the operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition and the state of international capital markets as they may affect the timing and nature of the dispositions by Philips of its interests in the Lighting business and the Lumileds and Automotive business. As a result, Philips’ actual future results may differ materially from the plans, goals and expectations set forth in such forwardlooking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see the Risk management chapter included in the Annual Report 2015.
Third-party market share data
Statements 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-GAAP information
In presenting and discussing the Philips Group financial position, operating results and cash flows, management uses certain non-GAAP financial measures. These non-GAAP financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used in conjunction with the most directly comparable IFRS measures. Non-GAAP 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-GAAP measures to the most directly comparable IFRS measures is contained in this document. Further information on non-GAAP measures can be found in the Annual Report 2015.
Use of fair-value measurements
In presenting the Philips Group 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 2015. Independent valuations may have been obtained to support management’s determination of fair values.
Presentation
All amounts are in millions of euros unless otherwise stated. All reported data is unaudited. Financial reporting is in accordance with the accounting policies as stated in the Annual Report 2015, unless otherwise stated.