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Highlights conference call

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JustRevisited 1 februari 2023 08:45

Highlights uit de conference call | post 1 van 3 | Respironics gelelateerd
www.results.philips.com/publications/...

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So, indeed, we have shared encouraging testing results in December, including the details that are also part of the deck that we shared. The ozone testing is still due. As we shared earlier, we hope to disclose the data in due course, early 2023. Actually, we are also there positive on what we are seeing, but we need to run through the full cycle, and most importantly we also want to do it in, again, good alignment with the regulator before we bring out the data. So, we are testing all the cycles, so including, indeed, 200 and beyond. I do want – I do not want to pre-empt the results because we will disclose them when we also have discussed that, and in alignment with the regulator. But I can tell you that we are positive on it, and, kind of, we will come back to you when we are able to share.

Een duidelijk voorschot op de verwachting dat de andere testresultaten ook goed zijn. Maar nog niet officieel te communiceren

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We’ve also taken actions to ensure that the sleep and respiratory care business can operate with full authority and end-to-end necessary competences from 1st February, to swiftly respond and deliver on the commitments to patients, regulators and customers. It remains our clear intention to resolve all of these issues comprehensively and to restore Philips’ position in this market. I’m confident that the learnings from this recall will inform how we position patient safety and quality at the heart of our business and at the heart of our business and innovation strategy. Francis will talk about that today as well.

Wat ik hier uit haal is dat Philips nog geen akkoord heeft van de FDA maar wel voorsorteert op terugkeer op de markt en herstel van haar marktaandeel.

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Falko Friedrichs (Deutsche Bank): Thank you very much, good morning. My first question is whether you can update us on your latest thinking about your return to the market in your Sleep care business, and when you think you can be back to your previous market shares. Thank you.

Roy Jakobs:. So, as we shared, the first priority for the Sleep and Respiratory Care business is finalising the recall, and we were encouraged, as promised, we got to the 90% produced in end of 2022. We now want to bring that to 100% by end of Q1, so that then we can ensure all patients will get the devices. Now, that in combination with the dialogues that we currently have with the regulator, will determine when we can go to market. As these dialogues are ongoing, we don’t want to, kind of, get ahead of that. As shared, whenever we have that outcome, we will immediately come back to you. For the moment, the first priority is really finalising the recall as well finalising the testing, because we know how important that is for patients; and then also working through any other consequences. So that we can restore in full, the market position that we had. Now, I think it’s realistic to say that this will take a bit of time, because of the position that we are in, but we are really determined to get back to where we were.

"When" we go to the market, niet "if". Philips' doel is volledig herstel marktaandeel (over time)

JustRevisited 1 februari 2023 08:47

Highlights uit de conference call | post 2 van 3 | Financieel gerelateerd
www.results.philips.com/publications/...

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We will have better cash earnings. And the big element is the working capital. So, the receivables as well as the inventories will help next year get to a much better level. So then we get to the €0.7-0.9 billion. And then going further to 2025, you see that we will further improve our earnings. Our one-off costs will come down as we get towards the 2025 period. And of course, once we return to growth, there will be some more investments in working capital. With that, we expect the 2025 cash flow to be in the range of about €1.5 billion. [....] The cash flow from a range of €1.5 billion to the €2 billion. The adjusted EPS growth over the period will be in double digits. The organic ROIC will grow from low-teens to mid- to high- teens.

Over the last three years we have been building up inventory. That's the two primary factors. One is the sleep recall where we had to have significantly more inventory to be able to build the material that we need for the recall that will be wound down as we come to the end of the recall. But also, we have a lot of incomplete inventory, right, 90% of an MR or 95% complete because we cannot complete the coils and ship. And as the supply situation is remediated, you will find more of this going into revenue, and therefore we will bring it down.

Sterke groei in cashflow. Belangrijke factor daarin is inventaris afbouw. Apparaten die 95% af zijn en wachten op de laatste onderdelen, zoals schaarse chips. Daarnaast de recall die op zijn einde loopt. Cashflow. 2025 doel is 1,5 miljard en oplopend naar 2 miljard = EUR 1,50-2,00 per aandeel

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Let me now take you through what we want to do in terms of our capital allocation policy. It's a balanced capital allocation policy, as we always say. And the primary focus of this plan is organic growth. So that's our first priority. M&A will be on a reduced basis, which will be a few bolt-on acquisitions if we find it necessary in our stronger businesses, which are going to be the beachheads for growth.

Geen grote overnames, organische groei. Maar enkele kleine overnames worden nog wel gedaan. Dit geeft toch een signaal dat Philips vindt dat ze daar de ruimte voor heeft.

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"Target an improvement of leverage ratio towards 1.5x EBITDA" Let me now tell you a bit about what we are doing to ensure that we are adequately funded. We have made quite some improvements this year. Our actions on liability management have led us to improving the debt repayment profile over the next two years. We’ve brought that down from €3.2 billion to €2 billion, so that gives us some room. In addition, we have increased the maturity period of our bonds by about 20%, so that goes up now close to eight years. And I think a very important point to understand is that none of our financial instruments have financial covenants on them, so that gives us a certain amount of freedom to operate.

2 miljard aflossen en op een schuldratio te komen van 1,5x EBITDA. Geen convenanten en 8-jarige bonds, dus handelingsruimte.

JustRevisited 1 februari 2023 08:48

Highlights uit de conference call | post 3 van 3 | Commercie gerelateerd
www.results.philips.com/publications/...

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We were doing 30% of our investment in research – or in R&D, in corporate research. Now we are shifting that to do 90% in the business. We still will have €1.7 billion of investment in innovation, so innovation is the core of what we do, will remain core to what we do, but we want to get it closer to the customer, so that we increase the innovation cycle, and make it as patient and people-centric, but also we want to get better returns by doing fewer projects, and scale them more. So, we expect actually to have even more relevant and impactful innovation to deliver to our customers, to our patients and our consumers, but doing it in a more efficient manner, while still spending above industry on innovation. We will still do some breakthrough, out of the corporate research, but more we will do in the businesses.

Let me give you a concrete example how this will work. The Image-Guided Therapy business segment is an area in the hospital where actually a lot of development is still taking place. Minimally invasive surgery is the surgery of the future. To develop that, you do a lot together with customers. Our IGT business and the platform that we have developed, the Azurion platform, is the leading system, more than 40% market share, actually that’s a very close collaboration with our customers. So, we pull from across Philips the best of technologies to actually then make it the most useful, impactful application for the practitioners to use every day.

Reductie in centrale, meer generieke R&D en fundamenteel onderzoek en een toename in toegepast onderzoek (samen met klanten)

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We have been looking at the quality of the order book, especially in orders that were older, because they were actually contracted at earlier pricing, as well as the lead times for them are long. A good area, as an example, is the MR. We have a lead time that is over a year, as well as then if you take the pricing that we had from the past, that actually has a negative effect. So, we combined both and said, okay, if we go back to the customers, actually we take lower margin orders out, strengthen the order book in terms of what we can deliver on when. And therefore, we have a better strength of the overall order book that we have. The overall cancellation impact is slightly more than 8%, so if you take out the impact of the cancelation, as well as the normalisation due to COVID – it would be roughly a, kind of, 1% growth. I think we have a lot of questions on the order book, and I’d like to clarify what we also showed on the slides earlier, that we start the year with a very, very good coverage for sales in 2023. You’ve seen in MR, we have 30% higher coverage in IGT and Patient Monitoring, and we didn’t have it on the slide, but also in Ultrasound, we have more than 20% better coverage, so the coverage for this year is actually in a very good space.

Op eigen initiatief bepaalde orders uit het orderboek gehaald die geen goede marge meer in zich hebben. Book to bill was nog steeds 1,14 (14% meer instroom dan uitstroom) Onderliggend groeide orderboek 1%. Er zitten meer producten in die Philips in het boek wil hebben. 30% meer in patient monitoring en 20% meer in ultrasound

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Graham Doyle: Okay, thank you very much. Just a quick follow-up on the order book actually, just the, sort of, trimming that was done, in order to, I suppose, reprice it and improve the quality of the order book. Is there any more of that to do, or do you feel like you’ve, kind of, gotten through that? Abhijit Bhattacharya: No, we have done that; so that is done, it was a onetime clean-up that we did, and that’s the end of it.

Krimp orderboek was eenmalige schoonmaakactie

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Robert Davies (Morgan Stanley): Yes, thanks for taking my question. It was just around the, post 2025 outlook, I saw you put, sort of, mid to high-teens margin targets. In simple terms, how do you get there? I mean, that’s obviously well above anything Philips has done before. Roy Jakobs: I think that question also really goes to the heart of what we present today, in which we say, actually we have a very compelling and strong portfolio, but we need to go in differentiated with our approach, to actually extract the maximum value.

Now, if you sort through the four buckets that I presented, the first bucket, accelerate growth and profit is a bucket that consists out of IGT, Ultrasound, HPM, PH. All of those businesses have been already in the range close to 70% of our sales, and actually dialling them up fast actually will get us very strongly into that range.

Now, then it’s also about how we can scale informatics, where we have been investing. It becomes a really very interesting differentiator for us, also with the customers, and we have the plan that we presented to you, in which actually you see informatics really starting to contribute. Then we know that we have to improve our margins in imaging. Now, that’s very much in conversion of the order books, so supply chain, operational excellence, but also service as pull through. And then ultimately it’s the SRC part, where, if we get back into restoring our business – that in totality actually should allow us to get into the range. Robert Davies: That’s great. Thank you for your answers.

Focus op schaal en kernproducten met hoge marge en leidende posities

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