Philips Shares Tumble As Disappointing First Quarter Results Are Announced

Frans van Houten, CEO:

“Philips Lighting’s first-quarter performance improvement signals its great future as a focused, stand-alone company. Lighting posted its sixth consecutive quarter of year-on-year operational improvements, underpinning the strong potential of our LED business and the transformation from individual products to connected lighting systems and services. As a result of our market success in LED and its growing share of the overall business, Philips Lighting is expected to return to positive comparable sales growth in the course of 2016.”

The Group comparable sales growth in the quarter of 3% was a result of 5% growth in the HealTech sector which was partly offset by a 2% decline in Lighting.
LED lighting sales grew strongly by 27% and now account for 50% of overall Lighting sales. Conventional lighting sales declined 20% year-on-year and conventional lamps sales continued their anticipated decline, contracting 15% year-on-year. The Home business delivered double-digit growth for the second consecutive quarter. Professional in North America returned to positive growth but the overall business posted a single digit decline in the quarter. The Adjusted EBITA margin at Philips Lighting increased by 60 basis points, driven by cost productivity and product mix.

The above figures are excluding the combined businesses of Lumileds and Automotive, which are reported separately as Discontinued Operations. For these businesses, EBITA decreased by EUR 34 million as a result of lower sales.

Separation Update

As previously communicated, Philips continues to simultaneously prepare for an initial public offering (IPO) or a private sale of Philips Lighting. However, this is the first time that the company have stated that an IPO increasingly appears a more likely outcome, subject to further market developments and other relevant circumstances. The company has not yet concluded on all proposals in the private sale process and continues to assess the attractiveness of this route compared to the IPO, both in terms of value and conditions, while taking into account the best interests of Philips and its stakeholders. As such, Philips expects to update the market on conclusions and next steps shortly.

Costs related to the separation amounted to EUR 52 million in the first quarter of 2016. For 2016, Philips now expects separation costs to be in the range of EUR 200 – 225 million.

On news of the report, Philips shares fell on the Amsterdam stock exchange and at one point, were down 5.5%.

You can read the full report from Philips here.

By Julie Allen

25 Apr