Koninklijke Philips N.V. NY Registry Shares

Welcome to the Royal Phillips second quarter and semi-annual 2023 results conference call on Monday, July the 24th, 2023. During the call, hosted by Mr. Roy Jacobs, CEO, and Mr. Abhijit Bhattacharya, CFO, all participants will be in a listen-only mode. After the introduction, there'll be an opportunity to ask questions. Please note that this call will be recorded and replay will be available on the Investor Relations website of Phillips. of Royal Philips. I will now hand the conference over to Mr. Leandro Mazzoni, Head of Investor Relations. Please go ahead, sir.

Hi, everyone. Welcome to Philips' second quarter and half year 2023 results webcast. I have here with me our CEO, Roy Jacobs, and our CFO, Abhijit Bhattacharya. The second quarter and half year press release and slide deck, as well as the frequently asked questions and deck on the Respironics Recall, were published on our investor relations website this morning. The replay and full transcript of this webcast will be made available on the website as well. Before we start, I want to draw your attention to our safe harbor statement on screen. You will also find the statement in the presentation published on our investor relations website. In today's call, we will discuss our results as well as the progress on the actions we're taking across different areas to drive performance improvement. With that, I would like to hand over to Roy. Thank you, Leandro.

Good morning, everyone, and welcome. It's good to be with you. I want to start with the key highlights for this quarter. First, we delivered an improved operational performance with 9% comparable sales growth and improvements in profitability and operating cash flow. The improvements were across the company, with all business segments and all regions contributing. These positive results are results from our ongoing actions to strengthen our execution. Secondly, we are making progress in executing our plan and on our three priorities, enhancing patient safety and quality, strengthening our supply chain reliability, which supported our performance in Q4 last year and the first half of this year, and establishing a simplified more agile operating model, supporting our productivity. Thirdly, resolving the Respironics recall for patients remains our highest priority. The vast majority of the sleep therapy devices are now within the hands of patients and care providers, and the complete testing and analysis for sleep devices affected by the recall showed positive and reassuring results for patients. Looking ahead, Based on our strong performance in the first half of the year, our order book, and the ongoing actions to improve execution, we have raised the outlook for the full year 2023. Whilst acknowledging that uncertainties remain, we now expect mid-single-digit comparable sales growth and adjusted EBITDA margin at the upper end of the high single-digit range. Now, onto the key financial highlights in the quarter. we had a strong comparable 9% sales growth. Diagnosis and treatment grew 12%, connected care grew 6%, and I'm encouraged by the return to growth in personal health. Our adjusted EBITDA margin was 10.1%, a strong improvement of 490 basis points compared to Q2 2022. Operating cash saw an inflow of 135 million euros, a step up of 440 million versus last year. Our order book increased 3% year-on-year, even after strong order book to sales conversion of the last three quarters. I'm confident that this order book will continue to support sales growth in the coming quarters. On the back of the high order intake in Q2 2022 and Q1 2023, comparable order intake declined 8% in the quarter. Excluding Russia, this would have been 4%. This confirms our earlier view that orders would be lumpy, as we work hard to deliver order intake growth in the second half of the year. This is founded upon strong fundamentals of the markets in which we operate, as they remain strong. And I'm very confident that our innovation portfolio is well positioned to help hospitals worldwide address their staffing shortages, enhance productivity, and improve patient and staff experience. The order funnel remains healthy, and we see signs of improvement in cost inflation and staff shortages in hospitals compared to 2022. But we also continue to expect hospitals and healthcare systems in the U.S. and other mature geographies to exhibit cautious buying behavior in the short term, given the global macroeconomic conditions. During the second quarter, we achieved some key customer and innovation milestones. We signed a multi-year agreement with University of California Urban Health to provide enterprise monitoring as a service, including informatics solutions to standardize, centralize, and scale monitoring across the health system. Five top hospitals in Shanghai with more than 10,000 beds installed the Spectral CT 7500. We also expanded our leading image-guided therapy portfolio with the launch of CENITION 10. cost-effective mobile imaging system to guide high-volume routine surgery, as well as complex orthopedic and trauma procedures. We introduced the cloud-based Philips HealthSuite Image Impacts on Amazon Web Services, designed to enhance image access speed, reliability, and data orchestration for clinicians across the imaging workflow. And in personal health, we launched the Premium 7 Series Shaver in China in partnership with JD.com, which debuted as the number one shaver on this online channel. With that, I would like to give the floor to Abhijit to take us through Q2 in more detail, after which I will come back on the progress on our execution priorities.