This document and the related oral presentation, including responses to post-presentation questions, contain certain forward-looking statements relating to the financial condition, results of operations and business of Philips and certain of Philips’ plans and objectives relating thereto. Examples of forward-looking statements include statements about our strategy, estimates of revenue growth, future underlying EBITA*), future restructuring and acquisition-related and other costs, future developments in Philips’ organic business, and the completion of acquisitions and divestitures. Forward-looking statements can generally be identified as those containing words such as “anticipate”, “assume”, “believe”, “estimate”, “expect”, “should”, “will”, “likely to result”, “forecast” contain”, “outlook”, “projects”, “may” or similar expressions. By their nature, these statements involve risks and uncertainties because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements.
These factors include, but are not limited to: Philips’ ability to provide leadership in health informatics in response to developments in the health technology industry; Philips’ ability to transform its business model into health technology solutions and services; macroeconomic and geopolitical changes; integration of acquisitions and their implementation in business plans and value creation expectations; Securing and maintaining Philips intellectual property rights and unauthorized use of intellectual property rights of others; Philips’ ability to meet expectations regarding ESG-related matters; failure of products and services to meet quality or safety standards, thereby affecting patient safety and customer operations; cyber security breaches; Philips’ ability to execute and deliver business transformation programs and IT systems change and continuity; the effectiveness of our supply chain; recruitment and retention of personnel; COVID and other pandemics; Challenges to drive operational excellence and speed to market of innovations; Compliance with regulations and standards, including quality, product safety and (cyber) security; compliance with business conduct rules and regulations; treasury and funding risks; tax risks; Reliability of internal controls, financial reporting and management process. For a discussion of factors that could cause future results to differ from such forward-looking statements, see also the Risk Management section of the Philips Annual Report 2021. Reference is also made to Risk Management in the Philips Half-Year Report 2022.
Philips has accrued a provision related to the US voluntary recall notice/outside US Field Safety Notice for certain sleep and ventilation products based on Philips’ best estimate of expected field actions. Future developments are subject to significant uncertainties that require management to make estimates and assumptions about items such as quantities and the part to be replaced or repaired. Actual results in future periods could differ from these estimates and affect the company’s earnings, financial and cash flows.
During the quarter, an impairment indicator was identified for the cash-generating unit (CGU) Sleep and Respiratory Care as a result of revisions to the CGU’s expected future cash flows. The goodwill impairment recorded in this quarter reflects revisions to the financial outlook for our Sleep & Respiratory Care business within the Connected Care segment. The impairment loss was calculated by comparing the carrying amount of the Sleep & Respiratory Care CGU to its recoverable amount, which is based on value in use. The forecast used to calculate value in use required management to make significant estimates and assumptions about future cash flows. Actual results in future periods may differ from these estimates. After this impairment, the estimated recoverable amount for Sleep & Respiratory Care is equal to its carrying amount and consequently any adverse change in key assumptions would individually result in a material impairment.
Third Party Market Share Data
The market share statements contained in this document, including those relating to Philips’ competitive position, are based on external sources such as specialized research institutes, industry and vendor bodies in combination with estimates by management. If Philips does not yet have information, market share figures may also be based on estimates and forecasts made by management and/or on external sources of information. Management’s ranking estimates are based on order intake or sales, depending on the business.
Market Abuse Regulation
This press release contains insider information within the meaning of Article 7(1) of the EU Market Abuse Regulation. This press release was distributed on October 24, 2022 at 07:00 CET.
Use of Non-IFRS Information
In presenting and discussing the financial position, results of operations and cash flows of the Philips Group, management uses certain non-IFRS financial measures. These non-IFRS financial measures should not be viewed in isolation as an alternative to the corresponding IFRS measure and should be used in conjunction with the most directly comparable IFRS measure. Non-IFRS financial measures do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures of other issuers. A reconciliation of these non-IFRS measures to the most comparable IFRS measures is included in this document. For more information on non-IFRS measures, see the Annual Report 2021.
Use of Fair Value Information
In presenting the financial position of the Philips Group, fair values are used to measure various items in accordance with the applicable accounting standards. Where available, these fair values are based on market prices and come from sources considered reliable. Readers are cautioned that these figures are subject to change over time and are only valid as at the balance sheet date. When quoted prices or observable market data are not readily available, fair values are estimated using appropriate valuation models and unobservable inputs. Such estimates of fair value require management to make significant assumptions about future developments that are inherently uncertain and therefore may differ from actual developments. The critical assumptions used will be disclosed in the 2021 Annual Report. In certain cases, independent valuations are obtained to assist management in determining fair values.
All amounts are in millions of euros unless otherwise noted. Amounts may not add up exactly to the total shown due to rounding. All reported data is unaudited. The financial reporting is consistent with the accounting policies set out in the Annual Report 2021, except for the adoption of new standards and amendments to standards, which are also expected to be reflected in the Company’s consolidated financial statements for the year ended December 31, 2022.
Prior period amounts have been reclassified to conform to the current period presentation; this includes immaterial organizational changes.
*) Non-IFRS financial ratio. See Reconciliation of Non-IFRS Information.