Philips' First-Quarter Results 2024
apr 29, 2024 | 6 minuten leestijd
First-quarter highlights
Roy Jakobs, CEO of Royal Philips:
“We started the year in line with our plan, with order intake growth outside China turning positive and strong margin improvement. Supported by key innovation launches and strong focus on our execution priorities, we remain confident in our performance improvement plan for 2024. Patient safety and quality is our highest priority, and we have taken important steps in further resolving the consequences of the Respironics recall. The remediation of the sleep therapy devices for patients is almost complete, and the test results to date show the use of these devices is not expected to result in appreciable harm to health. We do regret the concern that patients may have experienced. The approved consent decree and economic loss settlement, and now the resolution of the personal injury and medical monitoring litigation in the US, are significant milestones and provide further clarity on the way forward for Philips.”
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Respironics litigation
The settlement addresses the claims filed in the US courts and potential claims submitted to the census registry. Under the settlement, Philips Respironics has agreed to pay a total of USD 1.1 billion. The related payments are expected in 2025 and will be funded from Philips’ cash flow generation. As a consequence, a EUR 982 million*) provision was recognized in Q1 2024. In April 2024, Philips Respironics signed a consent decree, which was court-approved, and obtained the final court approval for the previously announced economic loss settlement in the US, for which a provision was recognized in Q1 2023. Philips also concluded an agreement with insurers to pay Philips EUR 540 million to cover Respironics recall-related product liability claims. This income is expected to be recognized in Q2 2024 and payment is expected during 2024. Following the remediation of sleep therapy devices and the reassuring test results to date, these important milestones on litigation, the consent decree and insurance provide Philips with a clear path forward for sustainable value creation. See here for more information on the Respironics litigation.
Philips and plaintiffs’ leadership have reached an agreement, following a mediation with Judge Diane M. Welsh, to resolve the personal injury litigation and the medical monitoring class action to end the uncertainty associated with litigation in the US. Philips and Philips Respironics do not admit any fault or liability, or that any injuries were caused by Respironics’ devices.
*) After converting the USD 1.1 billion amount to euro and discounting for time.
Group and segment performance
Diagnosis & Treatment comparable sales increased 3%, with growth in Image Guided Therapy and Precision Diagnosis, on the back of double-digit growth in Q1 2023. Adjusted EBITA margin was 9.2%, mainly due to normalization of the product mix, as anticipated. Connected Care comparable sales declined 1%, with growth in Enterprise Informatics offset by a decline in Monitoring on the back of double-digit growth in Q1 2023. Adjusted EBITA margin increased to 6.4%. Personal Health comparable sales increased 3%, driven by growth in Personal Care and Mother & Child Care. Adjusted EBITA margin improved to 15.2%.
Group comparable sales increased 2.4%, with growth in mature and growth geographies, despite a decline in China. The market in China continues to be impacted by the industry-wide anti-corruption measures initiated by the government and by subdued consumer demand. In the first quarter, the government of China announced a subsidy program for hospitals to upgrade aged medical equipment, which will support gradual improvement of a fundamentally attractive market.
Productivity
Total productivity savings of EUR 151 million in the quarter: operating model savings of EUR 55 million, procurement savings of EUR 40 million, and other programs savings of EUR 56 million.
Outlook
Philips reiterates its confidence in delivering the 2025 plan, acknowledging that uncertainties remain. For the full year 2024, Philips continues to expect 3-5% comparable sales growth and an Adjusted EBITA margin of 11-11.5%. The expected free cash flow is now increased to EUR 0.9-1.1 billion in 2024, including the receipt from insurers for the Respironics product liability claims and the remaining payment related to the economic loss settlement. The personal injury and medical monitoring litigation settlement payment is expected in 2025. The outlook excludes the potential impact of other previously disclosed Philips Respironics-related legal proceedings, including the investigation by the US Department of Justice.
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Customer, innovation and ESG highlights
Capital allocation
In April 2024, Philips completed the EUR 1.5 billion share buyback program for capital reduction purposes announced on July 26, 2021, and in the second quarter intends to cancel the 4.4 million shares acquired this year. See here for more information on the share buyback program.
Philips Q1 2024 results downloads
Visit our results hub for more on our financial and sustainability performance over the past quarter.
Conference call and audio webcast
Roy Jakobs, CEO, and Abhijit Bhattacharya, CFO, will host a conference call for investors and analysts at 10:00 am CET today to discuss the first quarter results. A live webcast of the conference call will be available on the Philips Investor Relations website and can be accessed here. More information about Roy Jakobs and Abhijit Bhattacharya Click here for Mr. Jakobs' CV and images
Click here for Mr. Bhattacharya's CV and images
Contactpersoon
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Elco van Groningen
Philips External Relations
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Ben Zwirs
Philips External Relations
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Dorin Danu
Philips Investor Relations
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