Philips on course to outstrip growth in rest of healthcare sector
Dutch industrial group posts 4% rise in like-for-like sales and hits lower end of target
Philips is on course to outstrip growth in the healthcare sector this year after a strong fourth quarter helped the Dutch industrial group hit its full-year growth target for 2017.
The health and electronics conglomerate posted a 4 per cent rise in like-for-like sales to €17.87bn in 2017 — hitting the lower end of a 4 per cent to 6 per cent sales target and in line with forecasts.
Philips’ fourth-quarter sales jumped 5 per cent, driven by the group’s personal electronics business and medical diagnostics unit.
Once famous for selling lightbulbs and televisions, Philips has concentrated on slimming down its sprawling business to focus on the lucrative market for medical equipment and consumer electronics.
Medical technology — such as ultrasound machines and imaging scanners — now accounts for more than half the company’s sales, while it also still makes everything from electronic toothbrushes to sleep masks.
The group’s full-year core earnings — as measured by earnings before interest, taxation and amortisation (ebita) — rose from €1.9bn to €2.15bn, just shy of consensus forecasts. Net income in the period jumped from €1.49bn to €1.87bn.
Frans van Houten, chief executive, said the company was sticking to its 4 per cent to 6 per cent target for this year — outstripping a 3 per cent to 5 per cent forecast for the rest of the sector.
“It has been a very good year and we see increasing momentum across the world and across our product ranges. Our order growth is also a testimony to the fact our innovations in diagnostics are gaining traction,” said Mr van Houten.
Philips’ expansion into medical technologies and healthcare “informatics” — which provides patients with details of their health data — has been driven by a series of acquisitions.
Last year the Amsterdam-based group announced a $1.7bn deal to buy Spectranetics, a lossmaking US vascular devices group, and bought up two Dutch software businesses.
Mr van Houten said the group would “continue to look at a couple of targeted acquisitions” in 2018.
Philips completed the sell-off of a controlling stake in its LED business Lumileds last year and has steadily reduced its stake in Philips Lighting to a non-controlling holding of 29 per cent. Costs related to the Spectranetics deal meant restructuring charges jumped from €94m to €316m in 2017.
“The integration of these acquisitions is on track,” said Mr van Houten.
Personal health appliances was Philips’ best performing division in 2017, with like-for-like sales up 6 per cent compared with 7 per cent in 2016. Demand for wellbeing products was driven by double-digit growth in Latin America, the Middle East and Turkey, followed by China and central and eastern Europe.
Mr van Houten said the group’s collection of sleep and respiratory care products — which help people suffering from difficulties in breathing — was a “star performer” last year.
“Our sleep platform is a rapidly growing business and in big emerging markets conditions like sleep apnoea are often undiagnosed. The business is growing in the high single digits.”
Sales growth in Philips’ diagnosis & treatment businesses slowed from 4 per cent to 3 per cent, to €6.89bn in the 12 months ending in December.