Menu

Philips' First Quarter Results 2014 - Healthcare Sector

Royal Philips ElectronicsRoyal Philips (NYSE:PHG, AEX: PHIA) reports that healthcare comparable sales showed a 2% decline year-on-year. Home Healthcare Solutions posted mid-single-digit growth, while Customer Services and Patient Care & Clinical Informatics achieved low-single-digit growth. Imaging Systems recorded a double-digit decline. In growth geographies, comparable sales showed a mid-singledigit decline. Currency-comparable equipment order intake increased by 1% year-on-year, with Patient Care & Clinical Informatics recording double-digit growth, while Imaging Systems posted a mid-single-digit decline. EBITA margin excluding restructuring and acquisition-related charges declined to 8.8%, a decrease of 1.7 percentage points year-on-year.

Business highlights

  • Philips, as a leading provider of innovative healthcare solutions, and MEDSI, Russia's largest network of private clinics, have signed a memorandum of understanding for a multi-year partnership that will provide MEDSI hospitals with the latest Philips healthcare equipment and technology, hospital management and consultancy services.
  • Combining market-leading monitoring expertise with its life-saving defibrillator technology, Philips has launched a newly integrated defibrillator and monitor solution, Efficia DFM100, in India and Malaysia. This locally relevant solution was designed to meet the growing needs of the value segment of the healthcare market.
  • To meet the growing demand for digital imaging solutions in growth geographies and expand access to affordable care, Philips has introduced several new imaging innovations, such as the Ingenia CX MRI and the PrimaryDiagnost DR and DuraDiagnost x-ray solutions, which deliver excellent image quality, reliability, ease of use, and efficient workflows.
  • Recognizing Philips' strength in providing healthcare solutions for the home, Partners HealthCare At Home, a leading Massachusetts home health provider, selected Philips as its telemonitoring partner. This further enhances Philips' range of innovative home-based clinical programs in the areas of emergency response systems for the elderly and medication dispensing systems.
  • Philips has enabled Box Hill Hospital in Melbourne, Australia, to extend the benefits of patient monitoring from the hospital's critical care settings to its general wards by installing IntelliSpace Guardian patient monitors and clinical decision support tools, which provide ubiquitous non-intrusive monitoring of patients.

Financial performance

  • Currency-comparable equipment orders showed low-single-digit growth year-on-year. Patient Care & Clinical Informatics recorded double-digit growth. Imaging Systems posted a mid-single-digit decline.
  • Equipment order intake in North America showed mid-single-digit growth. Growth geographies showed a low-single-digit increase as strong growth in Latin America, Middle East & Turkey and India was partially offset by a decline in China and Russia & Central Asia. Western Europe recorded low-single-digit growth, while other mature geographies showed a double-digit decline.
  • Healthcare comparable sales showed a low-single-digit decline year-on-year. Home Healthcare Solutions posted mid-single-digit growth, while Customer Services and Patient Care & Clinical Informatics achieved low-single-digit growth. Imaging Systems recorded a double-digit decline.
  • Comparable sales showed low-single-digit growth in Western Europe and mid-single-digit growth in other mature geographies, while North America and growth geographies recorded a mid-single-digit decline.
  • EBITA amounted to EUR 152 million, or 7.7% of sales, compared to EUR 222 million, or 10.4% of sales, in Q1 2013.
  • Excluding restructuring and acquisition-related charges, EBITA amounted to EUR 173 million, or 8.8% of sales, compared to EUR 224 million, or 10.5% of sales, in Q1 2013. The decrease was mainly due to lower gross margins and the production suspension in our Cleveland facility.
  • Net operating capital, excluding a negative currency translation effect of EUR 590 million, increased by EUR 145 million. This increase was largely driven by higher working capital.
  • Inventories as a percentage of sales improved by 0.8 percentage points year-on-year.
  • Compared to Q1 2013, the number of employees decreased by 764. This decrease was due to overhead reduction, industrial footprint rationalization and divestments, offset by investments in growth geographies. Compared to Q4 2013, the number of employees decreased by 502, due to overhead reduction and industrial footprint rationalization.

Frans van Houten, CEO, mentioned: "Our first-quarter financial results reflect a challenging start to the year. Significant currency impact, market headwinds in, among others, China and Russia, and the business impact of the voluntary suspension at our healthcare production facility in Cleveland resulted in flat comparable sales growth and a decline in EBITA as a percentage of sales of 130 basis points. We recorded a lower level of profitability at Healthcare, whereas Lighting and Consumer Lifestyle continued to deliver a year-on-year operational margin improvement.

At Lighting, LED-based sales grew by 37%, and we are encouraged by the positive reception given by our customers to our broad range of new connected lighting solutions demonstrated at the Light + Building trade fair in Germany. Consumer Lifestyle grew 7%, with a particularly strong performance at Floor Care and Air Purifiers. At Healthcare, we see encouraging developments in our order book and increasing opportunities for multi-year deals.

Our multi-year transformation program Accelerate! continues to show strong traction, driven by a solid innovation pipeline, investments in future growth and a company-wide focus on improved operational and financial performance. We are also taking comprehensive measures to raise the efficacy of our quality management system to Philips Excellence standards in close collaboration with industry experts. Our overhead cost reduction program and our Design for Excellence program are on track, thus helping to partly offset the negative currency impact.

Looking ahead, 2014 will be a challenging year, but we remain very confident of achieving our 2016 mid-term financial targets."

Related news articles:

About Royal Philips
Royal Philips (NYSE: PHG, AEX: PHIA) is a diversified health and well-being company, focused on improving people's lives through meaningful innovation in the areas of Healthcare, Consumer Lifestyle and Lighting. Headquartered in the Netherlands, Philips posted 2013 sales of EUR 23.3 billion and employs approximately 115,000 employees with sales and services in more than 100 countries. The company is a leader in cardiac care, acute care and home healthcare, energy efficient lighting solutions and new lighting applications, as well as male shaving and grooming and oral healthcare.