Philips reports sales of EUR 5.7 billion in Q1, with the HealthTech portfolio growing at 3% on a comparable basis; net income improved to EUR 259 million, driven by an 18% increase in Adjusted EBITA to EUR 442 million April 24, 2017
First-quarter highlights
Sales increased to EUR 5.7 billion, with comparable sales growth of 3% in the HealthTech portfolio and 2% for the Group
Net income amounted to EUR 259 million, compared to EUR 37 million in Q1 2016
Income from operations (EBIT) amounted to EUR 348 million, compared to EUR 199 million in Q1 2016
EBITA improved to EUR 437 million, or 7.6% of sales, compared to EUR 290 million, or 5.3% of sales, in Q1 2016
Adjusted EBITA improved to EUR 442 million, or 7.7% of sales, compared to EUR 374 million, or 6.8% of sales, in Q1 2016
Operating cash flow totaled EUR 343 million, compared to EUR 10 million in Q1 2016; free cash flow of EUR 295 million, compared to an outflow of EUR 177 million in Q1 2016
Frans van Houten, CEO:
We had a solid start to the year, with 2% Group comparable sales growth and a 90-basis-point improvement in the Adjusted EBITA margin. Despite continued volatility in the markets in which we operate, our HealthTech portfolio grew 3% and achieved further operational improvements, resulting in an 80-basis-point increase in the Adjusted EBITA margin.
Our Diagnosis & Treatment businesses and our Personal Health businesses delivered strong margin improvements, while our Connected Care & Health Informatics businesses reflected the unevenness of sales from large hospital informatics deals. Comparable order intake growth was 2%, driven by mid-single-digit growth in the Diagnosis & Treatment businesses.
During what was a very active quarter, in line with our strategic plan we decreased our shareholding in Philips Lighting to 55%. We continued to strengthen our position as a leader in health technology by launching several breakthrough innovations, forging strategic partnerships and winning various integrated solutions deals. The recent STOXX Europe 600 Index reclassification of Philips' shares to Health Care' from Industrial Goods & Services' acknowledges our transformation into a health technology company.
As we execute our strategy, we will further improve our underlying performance and target to deliver 4-6% comparable sales growth and an improvement in Adjusted EBITA margin of around 100 basis points per year. Our outlook for 2017 remains unchanged as we expect further operational improvements and comparable sales growth in the year to be back-end loaded.
HealthTech
In the first quarter, the Personal Health businesses increased sales by 5% on a comparable basis, with growth across the portfolio as Health & Wellness and Sleep & Respiratory Care recorded high-single-digit growth; the Adjusted EBITA margin improved by 150 basis points. The Diagnosis & Treatment businesses posted comparable sales growth of 2%, and the Adjusted EBITA margin improved by 190 basis points, driven by Diagnostic Imaging. In the Connected Care & Health Informatics businesses, comparable sales increased 1%, while the Adjusted EBITA margin was 30 basis points lower than in the same period last year, mainly reflecting lower growth and higher channel investments.
The continued focus and investments in R&D led to a number of breakthrough innovations and strategic collaborations:
Philips reinforced its leadership in image-guided therapy solutions with the global launch of Philips Azurion, the next-generation image-guided therapy platform that enables clinicians to perform a wide range of routine and complex procedures, helping them to optimize interventional lab performance and provide superior care.
Philips Volcano continued its strong performance as the business reached an important milestone with the results of two large clinical trials demonstrating the benefits of Philips' Instant Wave-Free Ratio (iFR) technology compared to Fractional Flow Reserve (FFR), the current standard, removing a critical barrier for the use and adoption of iFR to decide, guide and confirm appropriate therapies.
B. Braun and Philips entered into a strategic alliance to innovate and accelerate growth in ultrasound-guided regional anesthesia and vascular access. The alliance launched Xperius, a new co-branded mobile ultrasound system specifically designed as the platform to support current and future integrated solutions in this fast-growing market.
Building on its strategy to deliver relevant solutions and business models, Philips signed an agreement to acquire Australian Pharmacy Sleep Services (APSS), a pioneer in pharmacy sleep testing. APSS will complement Philips' sleep and respiratory care portfolio and will help to accelerate the business's home sleep testing offering through the pharmacy channel in Australia.
At the International Dental Show in Germany, the world's leading trade fair for the dental sector, Philips revealed the Philips Sonicare DiamondClean Smart toothbrush and Philips Sonicare Breath care system with breath analyzer, an all-in-one connected oral care platform. Philips also presented the results of a new clinical study demonstrating the effectiveness of Philips Sonicare power toothbrushes and Philips AirFloss Ultra.
Demonstrating the success of telehealth technologies, Emory Healthcare (US) achieved savings of USD 4.6 million over a period of 15 months by using Philips' eICU platform. Similarly, with the help of Philips' Intensive Ambulatory Care program, Banner Health (US) reduced hospitalizations for chronically ill patients with multiple conditions by nearly 50%, reducing overall cost of care by more than one third.
Expanding its health informatics portfolio, Philips launched its IntelliSpace Enterprise Edition, an industry-first managed service solution for hospital-wide clinical informatics a
