Philips delivers Q1 sales of EUR 3.8 billion, with 9% comparable sales growth; net income amounts to EUR 40 million and Adjusted EBITA margin improves 390 basis points to 9.5%

Rhea-AI Summary

In Q1 2021, Royal Philips reported group sales of EUR 3.8 billion, reflecting a 9% comparable sales growth despite challenges related to COVID-19. The Domestic Appliances business has been classified as a discontinued operation following its sale to Hillhouse Capital. Income from continuing operations showed a loss of EUR 34 million, impacted by a EUR 250 million provision for quality issues in sleep and respiratory care products. Adjusted EBITA rose to EUR 362 million, while operating cash flow improved to EUR 321 million, highlighting strong performance in Diagnosis & Treatment and Personal Health segments.

Positive

• Group sales reached EUR 3.8 billion, 9% growth.
• Adjusted EBITA increased to EUR 362 million (9.5% of sales).
• Operating cash flow improved to EUR 321 million.
• Free cash flow was EUR 169 million, up from an outflow of EUR 15 million.
• Diagnosis & Treatment businesses saw 9% comparable sales growth and 11% order intake growth.
• Personal Health businesses recorded 17% comparable sales growth.

Negative

• Income from continuing operations a loss of EUR 34 million.
• EUR 250 million provision taken for component quality issues.
• Comparable order intake decreased 5%, with Connected Care businesses down 27%.

April 26, 2021

First-quarter highlights

• Following the agreement to sell the Domestic Appliances business to global investment firm Hillhouse Capital, this business is reported as a discontinued operation as of Q1 2021. Consequently, sales and results from the Domestic Appliances business are no longer included in the results of continuing operations.
• Group sales amounted to EUR 3.8 billion, with 9% comparable sales growth
• Comparable order intake decreased 5%, with double-digit growth in the Diagnosis & Treatment businesses and a double-digit decline in the Connected Care businesses on the back of 80% growth in Q1 2020
• Income from continuing operations was a loss of EUR 34 million. Excluding the impact of a provision related to precautionary actions to address a component quality issue, income from continuing operations improved by EUR 139 million year-on-year. Income from continuing operations was EUR 17 million in Q1 2020.
• Adjusted EBITA increased to EUR 362 million, or 9.5% of sales, compared to EUR 208 million, or 5.6% of sales in Q1 2020
• Operating cash flow improved to EUR 321 million, compared to EUR 181 million in Q1 2020
• Free cash flow was EUR 169 million, compared to an outflow of EUR 15 million in Q1 2020

Frans van Houten, CEO of Royal Philips:

“Despite the ongoing impact of COVID-19, our performance gained momentum with a strong 9% comparable sales growth and profitability improvement in the first quarter, with all business segments and markets contributing. We are encouraged by the strong 11% comparable order intake growth for the Diagnosis & Treatment businesses, and the strengthening performance of the Personal Health businesses. At the same time, the Connected Care businesses continued to successfully convert their strong order book, while comparable order intake decreased 27%, as anticipated following the 80% order intake growth for patient monitors and hospital ventilators in Q1 2020.

Our growth momentum is driven by our portfolio of innovative solutions, for example in the areas of precision diagnosis, image-guided therapy, and telehealth. Moreover, we continued to add long-term strategic partnerships with hospitals on the back of more than 50 new partnerships we signed in 2020. This illustrates our ability to meet the needs of today’s hospital leaders, across the globe, as they plan for the future.

In line with our plans, we signed an agreement to sell the Domestic Appliances business, which concludes our major divestments. We are pleased that we have found a good home for this business and we look forward to a successful partnership with the new owner, Hillhouse Capital. We are also pleased to have completed the acquisition of BioTelemetry and Capsule Technologies, which will further drive our transformation into a solutions company, and in particular further strengthen our position to improve patient care across care settings for multiple diseases and medical conditions.

Regretfully, we have identified a quality issue in a component that is used in certain sleep and respiratory care products, and are initiating all precautionary actions to address this issue, for which we have taken a EUR 250 million provision.

Looking ahead, while we continue to see uncertainty related to the impact of COVID-19 across the world, we see increased demand in the Diagnosis & Treatment and Personal Health businesses. We now plan to deliver low-to-mid-single-digit comparable sales growth for the Group in 2021 (compared to the earlier projection of low-single-digit growth), with an Adjusted EBITA margin improvement of 60-80 basis points."

Business segment performance

All business segments delivered comparable sales growth and increased Adjusted EBITA margin in the quarter, driven by sales growth and results of our productivity programs.

The Diagnosis & Treatment businesses recorded 9% comparable sales growth, with double-digit growth in Diagnostic Imaging, high-single-digit growth in Ultrasound, and mid-single-digit growth in Image-Guided Therapy. Comparable order intake showed 11% growth, driven by Diagnostic Imaging and Image-Guided Therapy. The Adjusted EBITA margin increased to 8.7%.

Comparable sales in the Connected Care businesses increased 7%, led by double-digit growth in Hospital Patient Monitoring. Comparable order intake showed a 27% decrease, as anticipated following the steep 80% increase in Q1 2020. The Adjusted EBITA margin increased to 12.8%.

The Personal Health businesses recorded comparable sales growth of 17%, with double-digit growth in Personal Care and mid-single-digit growth in Oral Healthcare. The Adjusted EBITA margin increased to 14.3%.

Philips’ ongoing focus on innovation and partnerships resulted in the following key developments in the quarter:

• Philips signed multiple new long-term strategic partnerships in North America, Europe and Asia, including a 5-year agreement with Spanish healthcare group Vithas. Philips will provide Vithas with diagnostic imaging systems combined with advanced informatics, and image-guided therapy solutions, to enhance patient care.
• Strong traction for Philips’ diagnostic and therapeutic catheter portfolio, which includes innovations such as Philips’ coronary and peripheral IVUS catheters, coupled with the resumption of elective procedures, resulted in a return to double-digit growth for the Image-Guided Therapy Devices business in the quarter.
• Philips received US FDA clearance for its SmartCT (Cone Be

FAQ

What were Royal Philips' Q1 2021 sales figures?

In Q1 2021, Royal Philips reported group sales of EUR 3.8 billion.

What is the financial impact of the quality issue identified by Royal Philips?

Royal Philips took a EUR 250 million provision for a quality issue impacting sleep and respiratory care products.

How much did Royal Philips' adjusted EBITA increase in Q1 2021?

Adjusted EBITA increased to EUR 362 million in Q1 2021.

What was the comparable sales growth for the Diagnosis & Treatment segment in Q1 2021?

The Diagnosis & Treatment businesses recorded 9% comparable sales growth.

What was the free cash flow for Royal Philips in Q1 2021?

Royal Philips reported a free cash flow of EUR 169 million in Q1 2021.