Philips delivers Q4 sales of EUR 4.9 billion and income from
continuing operations of EUR 139 million; Adjusted EBITA margin
amounts to 13.1%, operating cash flow is EUR 720 million; good
demand drives mid-single-digit order intake growth
January 24, 2022 Fourth-quarter highlights
- Group sales amounted to EUR 4.9 billion, with a 10% comparable
sales decline
- Comparable order intake increased 4%, driven by double-digit
growth in the Diagnosis & Treatment businesses
- Income from continuing operations amounted to EUR 139 million
and included an impact of EUR 220 million related to the addition
to the Respironics field action provision; income from continuing
operations was EUR 508 million in Q4 2020
- Adjusted EBITA of EUR 647 million, or 13.1% of sales, compared
to EUR 995 million, or 19.0% of sales, in Q4 2020
- Operating cash flow was EUR 720 million, resulting in a free
cash flow of EUR 519 million
Full-year highlights
- Group sales amounted to EUR 17.2 billion, with
high-single-digit comparable sales growth in the Diagnosis &
Treatment and Personal Health businesses, offset by a decline in
the Connected Care businesses, resulting in a 1% comparable sales
decline
- Comparable order intake increased 4%, driven by double-digit
growth in the Diagnosis & Treatment businesses
- Income from continuing operations was EUR 612 million and
included an impact of EUR 719 million related to the Respironics
field action provision; income from continuing operations was EUR
999 million in 2020
- Adjusted EBITA of EUR 2,054 million, or 12.0% of sales,
compared to EUR 2,277 million, or 13.2% of sales, in 2020
- Operating cash flow was EUR 1,629 million, resulting in a free
cash flow of EUR 900 million
- Proposed dividend maintained at EUR 0.85 per share, in cash or
shares at the option of the shareholder
Frans van Houten, CEO of Royal Philips:
“In the fourth quarter, we recorded EUR 4.9 billion sales,
reflecting a 10% comparable sales decline, with an Adjusted EBITA
margin of 13.1%. As we announced on January 12, 2022, sales were
impacted by several headwinds, namely supply chain challenges,
postponement of equipment installations in hospitals related to
COVID-19, and the consequences of the Respironics field action.
Our strategy and portfolio continue to resonate very well with
customers and consumers, generating good demand for our products
and solutions. For the full year, I am pleased with the 8%
comparable sales growth in the Diagnosis & Treatment businesses
and 9% growth in the Personal Health businesses. Connected Care
sales declined, resulting in a 1% comparable sales decrease for the
Group. The aforementioned headwinds had a combined impact of 5
percentage-points on the Group’s full year comparable sales.
Group comparable order intake growth also remained robust
throughout the year, with 4% growth for the full year, driven by
double-digit growth in the Diagnosis & Treatment businesses.
This further builds on the high-single-digit Group comparable order
intake growth in 2020, resulting in an all-time-high order book.
During 2021, we signed 80 long-term strategic partnerships and
launched innovations such as the Spectral CT 7500 to support a
precision diagnosis, as well as expanding our Azurion image-guided
therapy platform with breakthrough applications to innovate
minimally invasive treatments. We also continued to help consumers
take better care of their health with our personal health
offerings.
Patient well-being is at the heart of everything we do at
Philips, and we remain extremely focused on repairing and replacing
the devices related to the Philips Respironics recall notification.
We are conducting a comprehensive test and research program and
provided an update in December on the positive VOC test results
related to the first-generation DreamStation devices.
Based on good customer demand and our growing order book, we
expect to resume our growth and margin expansion trajectory in the
course of 2022. In the short term, however, we continue to see
significant volatility and headwinds related to COVID-19 and supply
chain challenges, despite our ongoing mitigation efforts. Due to
this, the Respironics field action and the 9% comparable sales
growth in Q1 2021, we expect to start the year with a comparable
sales decline, followed by a recovery and strong second half of the
year. For the full year, we target to deliver 5-6% comparable sales
growth excluding Sleep & Respiratory Care. For the Group, we
target 3-5% comparable sales growth and a 40-90 basis-points
improvement in Adjusted EBITA margin.”
Business segment performanceDriven by Philips’
attractive portfolio, comparable order intake for the Diagnosis
& Treatment businesses increased 10%, with double-digit growth
in Image-Guided Therapy and mid-single digit growth in Ultrasound
in the fourth quarter. Comparable sales were in line with Q4 2020,
with double-digit growth in Image-Guided Therapy, offset by
declines in Ultrasound and Diagnostic Imaging. The Adjusted EBITA
margin was 13.0% in the quarter, mainly impacted by lower sales due
to supply chain headwinds. For the full year, the Diagnosis &
Treatment businesses recorded 8% comparable sales growth and an
Adjusted EBITA margin of 12.4%.
The Connected Care businesses’ comparable order intake declined
10% on the back of high COVID-19-generated demand in Q4 2020.
Hospital Patient Monitoring orders showed continued growth in Q4
2021, driven by the ongoing structural increase in adoption of
patient care management solutions in both high- and low-acuity care
settings in the hospital. Comparable sales decreased 32% in the
fourth quarter following the aforementioned high COVID-19-generated
demand in Q4 2020, and a double-digit decline in Sleep &
Respiratory Care in Q4 2021, because of the Respironics field
action. The Adjusted EBITA margin amounted to 11.7% in the quarter,
mainly impacted by the decline in sales. For the full year, the
Connected Care businesses recorded a 23% comparable sales decrease
and an Adjusted EBITA margin of 10.6%.
The Personal Health businesses’ comparable sales decreased 3%,
mainly impacted by supply chain shortages. The Adjusted EBITA
margin increased to 21.6%, mainly driven by productivity measures.
For the full year, the Personal Health businesses delivered 9%
comparable sales growth and an increased Adjusted EBITA margin of
17.6%.
Philips’ ongoing focus on innovation and partnerships resulted
in the following key developments in the quarter and the year:
- In 2021, Philips’ products and solutions improved the lives of
1.7 billion people, including 167 million people in underserved
communities. In addition, Philips was again recognized for its
leading sustainability performance in the 2021 Dow Jones
Sustainability Indices and CDP's Climate Change A-list.
- Philips signed 35 new long-term strategic partnerships in North
America, Europe and Asia, including a 10-year agreement with a
large integrated healthcare system in the US for advanced patient
monitoring and enterprise imaging solutions, as well as analytics
and services to enhance operational outcomes and performance.
- Philips further expanded its leading image-guide therapy
portfolio through the acquisition of Vesper Medical, adding a
venous stenting solution to address the root cause of chronic deep
venous disease and enhance patient care. This will complement
Philips’ strong IVUS offering in venous imaging and expand the
company’s growth in the vascular therapy market.
- Building on the ambulatory cardiac diagnostics and monitoring
solutions resulting from the BioTelemetry acquisition, Philips
acquired Cardiologs, adding a vendor-neutral heart disorder
screener and ECG analysis applications based on machine learning
algorithms. This technology will accelerate diagnostic reporting
and streamline clinician workflow and patient care.
- Philips has provided The First Affiliated Hospital of Zhengzhou
University – one of the biggest hospitals in the world, with more
than 10,000 beds – with a range of advanced diagnostic imaging and
image-guided therapy systems, including IQon Spectral CT and the
Azurion image-guided therapy platform.
- Expanding Philips’ unique helium-free operating MR imaging
portfolio, the company received FDA clearance for its new MR 5300
system. Powered by AI, the MR 5300 simplifies and automates complex
clinical and operational tasks for imaging departments to help
accelerate workflows and improve access to affordable, quality
care.
- Further expanding the company’s comprehensive CT portfolio,
Philips introduced the new CT 5100 Incisive with CT Smart Workflow,
comprising AI-enabled capabilities designed to accelerate
workflows, enhance diagnostic confidence, and maximize system
up-time.
- Highlighting the company’s leading position in high-acuity care
settings, Philips received FDA clearance for the IntelliVue MX750
and MX850 patient monitors, which are uniquely designed to support
scalability, alarm management, cybersecurity, and enhanced
infection prevention within the hospital.
- Philips completed the successful roll-out of the Sonicare 9900
Prestige in North America, China, Europe, Middle East and Asia
Pacific. The premium electric toothbrush finished #1 in the
Stiftung Warentest, Europe’s leading consumer organization. Philips
further expanded its oral healthcare portfolio with the launch of
innovative interdental cleaning devices in North America, China and
Asia Pacific.
Capital allocationIn the fourth quarter,
Philips completed the EUR 1.5 billion share repurchase program for
capital reduction purposes that was initiated in the first quarter
of 2019. Under the share buyback program that was announced on July
26, 2021, Philips acquired a total of approximately 21.8 million
shares in the fourth quarter and in January 2022 through open
market purchases. In previous quarters, Philips had already entered
into a number of forward transactions with settlement dates in
2022, 2023 and 2024.
Philips completed the cancellation of 33.5 million of its shares
that were acquired under both repurchase programs. Further details
on Philips’ current repurchase program and previous programs can be
found here.
Philips Respironics field actionAs announced on
January 12, 2022, Philips Respironics is increasing the field
action provision by EUR 220 million, mainly due to the higher
volume of registered devices eligible for remediation, following
the comprehensive customer and patient outreach program in the
fourth quarter, and increased supply costs.
Philips Respironics has submitted a comprehensive response and
action plan in connection with the November 2021 Form-483 to the
FDA, which are being evaluated. Philips Respironics continues to
engage with the FDA and other relevant competent authorities.
In December 2021, Philips provided an update on the VOC test
results to date for the first-generation DreamStation devices. The
results indicate that the VOC concentrations are within safe
exposure limits specified in the applicable safety standard (ISO
18562). Comprehensive particulate testing and analyses are expected
to be completed in the second quarter of 2022.
To date, Philips Respironics has produced a total of
approximately 1.5 million repair kits and replacement devices – of
which approximately 750,000 have reached customers – and aims to
complete the repair and replacement program in the fourth quarter
of 2022.
As previously disclosed, in relation to the affected devices,
Philips Respironics is a defendant in several class-action lawsuits
and individual personal injury claims. Given the uncertain nature
and timing of the relevant events and potential associated
obligations, if any, the company is unable to reliably estimate the
financial effect of these matters.
Cost savingsGross cost savings amounted to EUR
91 million in the fourth quarter, and EUR 398 million for the full
year 2021. After deducting cost increases related to increases in
supply costs, net savings amounted to EUR 19 million in the fourth
quarter, and EUR 279 million for the full year.
Click here to view the release online
For further information, please contact:
Ben Zwirs Philips Global Press Office Tel.: +31 6
1521 3446 E-mail: ben.zwirs@philips.com Derya
Guzel Philips Investor Relations Tel.: +31 20 59 77055
E-mail: derya.guzel@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 2021 sales of EUR 17.2 billion and
employs approximately 78,000 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 statements 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 our
strategy; estimates of sales growth; future Adjusted EBITA; future
restructuring and acquisition-related charges 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; the realization of Philips' objectives
in growth geographies; business plans and integration of
acquisitions; securing and maintaining Philips’ intellectual
property rights, and unauthorized 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 2020. Philips has recognized
a provision related to the voluntary recall notification in the
US/field safety notice outside the US for certain sleep and
respiratory care products, based on Philips’ best estimate for the
expected field actions. The future developments are subject to
significant uncertainties, which require management to make
estimates and assumptions about items such as quantities, costs to
repair or replace, and duration. Actual outcomes in future periods
may differ from these estimates and affect the company's results of
operations, financial position and cash flows. Third-party
market share data Statements regarding market share,
contained in this document, including those regarding Philips’
competitive position, are based on outside sources such as
specialized research institutes, industry and dealer panels in
combination with management estimates. Where information is not yet
available to Philips, market share statements may also be based on
estimates and projections prepared by management and/or based on
outside sources of information. Management's estimates of rankings
are based on order intake or sales, depending on the business.
Market Abuse Regulation This press release
contains inside information within the meaning of Article 7(1) of
the EU Market Abuse Regulation. Use of non-IFRS
information In 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 the Annual Report 2020. Use of fair value
information In 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 2020. In certain cases independent valuations are obtained
to support management’s determination of fair values.
Presentation All 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 accounting policies
as stated in the Annual Report 2020 except for the adoption of new
standards and amendments to standards which are also expected to be
reflected in the company's consolidated IFRS financial statements
as at and for the year ending December 31, 2021. On September 1,
2021, Philips completed the sale of the Domestic Appliances
business. The results of this transaction, which Philips announced
on March 25, 2021, are presented under Discontinued Operations in
this report. Comparative results have been restated to reflect the
treatment of the Domestic Appliances business as a discontinued
operation since Q1 2021. Further details of the restatement have
been published on the Philips Investor Relations website and can be
accessed here. Prior-period amounts have been reclassified to
conform to the current-period presentation; this includes
immaterial organizational changes.
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