Philips will complete its transformation to a health technology
business with the sale of its domestic appliances division, which no
longer fits with the company’s range of hospital equipment and personal
health products.
Once a sprawling conglomerate, Amsterdam-based Philips has narrowed
its focus in recent years, spinning off the lighting and consumer
electronics divisions for which it was previously best known.
Philips said on Tuesday it would carve out the domestic appliances
business, which produces coffee machines, vacuum cleaners and airfryers
and generated 2.3 billion euros (£1.9 billion) in sales last year, in
the coming 12 to 18 months.
“This business is not a strategic fit for our future as a health
technology leader,” Chief Executive Officer Frans van Houten said.
He added that all options remained open for the division, which he
said had a double-digit profit margin that was “slightly less” than the
average for Philips.
ING analyst Marc Hesselink said a “quick and dirty” calculation
valued the division at around 3 billion euros, assuming a 10% profit
margin with a price tag of 12 times gross profit.
“This was a, in our view, widely expected move…to focus even more on health tech”, he said.
DISAPPOINTING RESULTS
Philips shares fell 3% in Amsterdam, with analysts pointing to
fourth-quarter results that missed expectations, and disappointing sales
growth in all sectors.
Comparable sales increased 3% to 6 billion euros from a year earlier,
compared with an average forecast in a company poll of analysts for a
4.9% increase.
Adjusted earnings before interest, tax and amortisation (EBITA) rose
10% to 1.07 billion euros, also slightly below expectations.
Philips reaffirmed its 2020 targets for a 100 basis point improvement
in adjusted EBITA margin and a 4 to 6% increase in comparable sales,
but said it expected a slow start to the year with growth likely to be
dented by China’s efforts to contain a coronavirus outbreak.
The company has around 8,000 employees in China, many of whom have been ordered by authorities to stay at home.
Philips fell far short of a similar 100 basis point profit margin
improvement goal in 2019, having warned in October that it would miss
the target as the U.S.-China trade war forced it to shift production and
seek new suppliers.
The already struggling connected care business, which specialises in
remote patient monitoring, was the hardest hit and Van Houten said that
following a significant fall in margins, the division’s leader Carla
Kriwet would leave the company and be replaced by Philips veteran Roy
Jakobs.
Philips expects rising life expectancy and associated chronic
diseases to increase demand for devices that allow patients to be
monitored at home, but sales at the connected care unit have in recent
years lagged those of bigger divisions selling large medical equipment
and personal care devices.
https://www.marketscreener.com/ROYAL-PHILIPS-6289/news/Philips-bids-farewell-to-home-appliances-to-sharpen-health-focus-29899211/
