Philips Is on Lookout for Acquisitions to Sharpen Health Focus

(Bloomberg) -- Royal Philips NV Chief Executive Officer Frans van Houten said the Dutch manufacturer of medical equipment remains on the hunt for companies to buy as it hones focus on the health-care sector.

“We are interested to do bolt-on acquisitions,” he said in an interview on Monday with Bloomberg TV after publishing quarterly earnings. “Deals done last year were bolt-on, not transformational from a size point of view, but very important nuggets.”

Philips Is on Lookout for Acquisitions to Sharpen Health Focus

The company based in Amsterdam reported 10 percent growth in comparable order intake, reflecting a series of multi year contracts to provide imaging services to hospitals including in the U.K. and Canada. It reiterated targets for the coming years as demand for health equipment like ultrasounds grows. The shares jumped as much as 4.2 percent, the most in nine months.

Philips has pledged to increase sales and improve profit margins after refocusing its business on health-care equipment and services while exiting from the manufacture of products like light bulbs, TVs and CDs. The Dutch company competes with General Electric Co. and Siemens AG in selling X-ray and scanning machines and last year, it spent about 2.3 billion euros ($2.8 billion) on acquisitions, including buying a U.S. maker of devices to treat cardiac diseases.

“Doing a transformation of a company is not easy,” the CEO said in the interview, citing Philips’s move from being a more diversified manufacturer to a “focused” health technology company that is now gaining market share.

On a call with reporters, he said the company’s higher order growth will pave the way for “structurally higher growth for Philips overall.”

Philips’s diagnostics and treatment business, which makes imaging machines, reported the fastest growth among the company’s divisions with comparable orders rising 15 percent while sales increased 9 percent.

First-Quarter Earnings Highlights:

  • Sales rose 5 percent on a comparable basis to 3.94 billion euros, in line with the average estimate of analysts surveyed by Bloomberg.
  • Adjusted earnings before interest, taxes and amortization rose 15 percent to 344 million euros, driven by demand for imaging machines like ultrasounds.
  • Reiterated targets for comparable sales growth of 4 percent to 6 percent during the 2017 to 2020 period; improvement in the adjusted Ebita margin of 100 basis points annually.

Philips has been cutting its holding in spinoff Philips Lighting NV, selling 12 percent stakes in February and November and raising about 1 billion euros. The shares rose as much as 4.2 percent, the most since July 24, 2017, and were trading 3.7 percent higher at 34.15 euros at 9:13 a.m. in Amsterdam, giving a market value of 32 billion euros.

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