Welcome to the Royal Philips second quarter 2018 results conference call on Monday, 23 of July, 2018. During the introduction hosted by Mr. Frans van Houten, CEO, and Mr. Abhijit Bhattacharya, CFO, all participants will be in a listen-only mode. After the instruction, there will be an opportunity to ask questions. [Operator Instructions]. Please note that this call will be recorded and is available by webcast on the website of Royal Philips. I will now hand the conference over to Mr. Pim Preesman, Head of Investor Relations.

Thank you. And good morning, ladies and gentlemen. Welcome to Philips' second quarter 2018 results conference call. I'm here with our CEO, Frans van Houten, and our CFO, Abhijit Bhattacharya. On today's call, Frans will take you through our strategic and financial highlights for the period and Abhijit will then provide you more detail on the financial performance and market dynamics. After that, we will take your questions. Our press release and related information slide deck were published at 7 AM CET this morning. Both documents are now available for download from our investor relations website. A full transcript of this conference call will be made available by end of today on our website. I would like to remind you that Philips' shareholding in Signify, formerly Philips Lighting, is currently 18% of Signify's issued share capital. The stake is presented as an investment included in assets held for sale in the financial statements of Royal Philips as from the end of November 2017. We provided you with guidance for the expected ethics translation combined with the consolidation and deconsolidation impact on sales during the respective quarter and for full year 2018. We will continue to do so this twice a quarter – once immediately after this analyst call and once during the last week of the quarter. Both thee updates will be available on our IR website. Finally, as mentioned in the press release, adjusted EBITDA is defined as income from operations excluding amortization of acquired intangible assets, impairment of goodwill and other intangible assets, restructuring charges, acquisition-related costs and other significant items. Comparable growth for sales and orders are adjusted for currency and portfolio changes. With that, I would like to hand over to Frans.

Thanks, Pim. And thank you all for joining us today. In the second quarter, we delivered 4% comparable sales growth, a strong 9% order intake growth and a solid 100 basis point improvement in operational performance, driven by growth and productivity programs. We continued the good traction of the new products and solutions that we introduced last year and this contributed to 8% comparable sales growth for the Diagnosis & Treatment businesses. The Connected Care & Health Informatics businesses grew 2% compared to last year with an encouraging mid-single digit order intake growth. As mentioned during the last two quarters, we continue to expect further improvements to be in the second half of the year. The Personal Health businesses grew 2% with high single-digit growth in sleep and respiratory care and low single-digit growth in personal care. The growth of the Personal Health businesses was impacted by a high single-digit decline in China, mainly due to an inventory alignment at our online distributors and lower demand in the air purification market. After a slow start, the Personal Health businesses gained momentum in the quarter and we expect this to continue in the second half of the year. The increase in margin was mainly driven by growth, our productivity program and operational improvements, contributing to an adjusted EBITDA margin increase of 100 basis points. Our Diagnosis & Treatment businesses and our Personal Health businesses delivered strong margin improvements with adjusted EBITDA improving by 180 and 80 basis points respectively versus last year. The Connected Care & Health Informatics businesses improved adjusted EBITDA margin with 40 basis points as the results for the quarter were impacted negatively by two one-off items. In the quarter, we continued to make good progress with our productivity programs. Additionally, we took action to further reduce our…

Thank you, Frans. Good morning to all of you on the call and the webcast. Let me start by providing some color on the second quarter comparable growth of 4%. The Diagnosis & Treatment businesses delivered an 8% comparable sales growth with solid growth in all the businesses – diagnostic imaging, ultrasound and image-guided therapy. We're very pleased to see the continued strong traction of these businesses, specifically image-guided therapy with strong double-digit sales growth, driven by both our Azurion platform and our devices portfolio. Comparable sales growth in Connected Care & Health Informatics businesses was 2%. High single-digit growth in healthcare informatics and low single-digit growth in monitoring and analytics were partly offset by a low single-digit decline in therapeutic care, which includes the impact of the consent decree on our defibrillator manufacturing in the US. Given the phasing of our order book, we continue to expect improved sales growth during the second half of the year. The Personal Health businesses delivered 2% comparable sales growth, driven by high single-digit growth in sleep and respiratory care. Frans mentioned earlier already the main reasons for the lower growth, visible mainly in the health and wellness and domestic appliances businesses. As we've said earlier, we expect the second half of the year to be stronger than the first half. In China, the inventory alignment at our online distributors took place in the second quarter. Additionally, we have a number of new product launches and rollouts to new markets, which will be well supported by advertising campaigns. For example, within health and wellness, we will be rolling out the mid-range Philips Sonicare ProtectiveClean power toothbrush to markets outside North America. Frans mentioned already further rollouts of the DreamWear full-face mask, OneBlade and the introduction of our new high-end shaver range. Sales in…

Thank you, sir. [Operator Instructions]. The first question comes from Ian Douglas-Pennant from UBS. Please state your question.

Yes, thanks very much. It's Ian Douglas-Pennant at UBS. So, on your guidance please, at the beginning of the year, and I think you just reiterated it today, you said margin improvement would be H2 weighted. Given you've reiterated that this morning, are you deliberately saying that there is upside risk to the 100 basis points of margin improvement this year or is that just accidental?

No, we're not flagging that. We're steadily improving and there's no change in the story. We still expect a stronger second half of the year. Anything to add, Abhijit?

No, no. I think there's no second meaning to that, Ian.

Okay. Given it's a very quick answer, then maybe I can just ask another one. On the Personal Health slowdown, it seems like, especially in health and wellness, but also all the other subdivisions within Personal Health, the growth rate has slowed to low single-digit from comfortably double-digit pre-2016. This seems like more than a product issue. This seems like a structural change in the growth rates that you're able to achieve. What gives you confidence that your new product is going to fix this?

Well, actually, let's dissect that a little bit. So, health and wellness, we continue to see as a high-growth opportunity. Sleep and respiratory care, we see as a high growth opportunity. And then, personal care and domestic appliances are a more mature area where you see somewhat lower growth. We, clearly, reiterate today that we continue to see Personal Health in total as a mid-to-high single-digit growth opportunity. And we have flagged that the second half of the year will be stronger than the first half. And we believe we can still, in the aggregate, get to be within the range indicated. We also said that, already during the second quarter, we saw growth rates picking up again. And we have planned several product campaigns for the third quarter with tied-in A&P – advertising and promotion – investments that we believe will support this outlook. So, overall, continued belief in this business. Just wanted to be very clear about that.

And the range indicated is organic growth of 4% to 6% for that division. Is that what you're saying? Or high single-digit –?

The range indicated was mid to high-single digit. So, it's a wider guidance. And, yeah, historically, we were on upper end – upper side of that guidance, but we believe that, with a strong second half year, for the full year, we will still be in that guidance.

Very good. I'll let the next person take it away. Thank you.

All right. Thanks, Ian. All right, next person.

The next question comes from Veronika Dubajova from Goldman Sachs. Please go ahead.

Good morning, gentlemen, and thank you for taking my questions. I also want to go back to the Personal Health dynamics. And I think Abhijit and Frans, both of you have flagged that you saw the momentum accelerate as you moved through the quarter. Can you help us understand what the exit rate was for the business? And as you look to the second half of the year, what is the single biggest risk to your ability to come within this mid-to-single digit range that you're targeting?

Well, that's a very detailed question, Veronica. I'd say the exit rate in Q2 supports the given guidance of at least mid-single digit growth for the full year. And the confidence that we have is that we believe that the China impact in Q2 was largely a one-off. It was the inventory alignment with our online distributors. But we believe that the underlying demand remains strong. We also expect that the traction in North America in the second half of the year on the back of the products and the campaigns that I've referenced will be strong. And then, of course, sleep and respiratory care all along has demonstrated high growth as well.

That's very clear. Thank you. And if I can just ask a follow-up, I think there's been quite a lot of concerns around a tariff escalation and a trade war. I'm wondering, Franks, Abhijit, if you can help us understand what that might mean for your business if we were to see a broader tariff regime imposed on all imports from China. Thank you very much.

Yeah. Thanks, Veronica. Let's say the first wave of measures have a modest effect on Philips and we have mitigated any increase in duties within our results and, therefore, we don't really talk about it. Subsequent waves of tariffs, and potentially the tit-for-tat reaction from other regions, are more difficult to estimate. Of course, we do our scenarios. But also the underlying good flows are likely to be affected. So, at this time, we don't want to get ahead of ourselves in forecasting what it will mean other than that this will have to be passed on to consumers and hospitals through increased pricing.

That's very clear. Thank you.

The next question comes from Michael Jungling from Morgan Stanley. Please state your questions.

Good morning, everyone. And thanks for taking my call. And the question I have is a follow-up really on the tariffs. We now have the product list for the additional 200 billion. And it seems includes hair clippers, blades, cutting heads on shavers with self-contained motors and some domestic appliances. Can you comment on what impact this would have on your business? What percentage – what revenues are currently at risk of having a 10% tariff? And secondly, your ability to pass this on to the consumer because you mentioned before you could pass it on? But for you to be able to say that, I guess, you had to know the competitive environment to see whether other companies may have an advantage. So, can you comment on your competitive advantage versus your other players on your ability –

Sure, Michael. I'll answer that. We believe that, even this second wave, that is still manageable. Let me, first of all, clarify that blades and shavers for North America are manufactured in Europe and, therefore, not affected. That potentially can give us also a competitive advantage because we are not linked to China there versus our competitors. To the degree that products are touched – I'm thinking about the hair clippers, for example, which, of the top of my head, do come out of China. We will definitely reflect any duties in the pricing as we believe that our competitors are in the same situation.

Great. And can I just please follow-up. On the free cash flow, I think your guidance is €1 billion to €1.5 billion. If I look at page 60, and I think your free cash flow for the first half is minus €88 million. At what point do you think you're able to get to €1 billion or so run rate in terms of free cash flow?

Yeah. Our cash flow, Michael, is largely Q4 driven, right? So, we will get, let's say, most part of the cash flow. The reason why it's minus in the first half was, of course, we ended last year very well on working capital. And then, you build up a little bit for the selling season in the second half and, of course, the slow sales in PH. So, once those are addressed in the second half, we will see that coming back to the €1 billion to €1.5 billion range for this year.

So, by the end of this year, we'll be about €1 billion, is that a fair comment?

Yeah, yeah, yeah. Above a billion, yeah.

Great, thank you.

The next question comes from David Adlington from JP Morgan. Please state your question, sir.

Good morning, chaps. Thanks for taking the question. Again, just coming back to personal healthcare, just wondered if you're able to quantify the Chinese destocking and what drove that? You talked about end market being pretty decent demand. But I just wondered if your distributors were looking at potentially slowing down in the end market. Thanks.

Let's say the original assumption on consumer growth turned out to be a bit too optimistic. What we had underestimated is that the traditional seasonality in China is changing with all the marketing that online channels do. Let me explain that a bit. So, these online channels have the special days for singles and for other days and they basically shift the traditional seasonality away from traditional Chinese New Year and so on. We had perhaps counted too much on the old seasonality when looking at supplying our online distributors. By the way, in the meantime, online is 60% of total PH business, excluding sleep and respiratory care. And so, given to the shift in seasonality in China, we saw a slower sell-in in Q2. And we expect, let's say, a higher seasonality now in the second half of the year through these online channels.

Understood, thank you. And then, maybe just a quick follow-up on air purification. Obviously, it had bigger headwind in the first quarter, but I thought, seasonally, the second quarter was a lighter quarter, maybe just if you could just pull out the issues there. Thank you.

Yeah, the impact was significantly lower. If I remember right, I think first quarter was 150 basis points. The second quarter was less than half of that. But the impact was still there. And again, like we said, it's a small business, but especially with this inventory realignment, I think that just added to it in the second quarter. But, again, for the rest of the year, overall, for the PH business in China, we see good growth coming in.

Understood. Thanks very much.

And maybe, David, also to further clarify, this kind of realignment in online channels is not the first time that it happens. We've seen that happening in India before. These are quick corrections that are made because the online channel grows so rapidly and dramatically that you have to sometimes be very quick to adjust. So, it's not something that we see as a structural issue.

Great, thanks.

The next question comes from Yi-Dan Wang from Deutsche Bank. Please go ahead, madam.

Thank you very much. Two question. One follow up on the Personal Health business. If I were to look at the growth by region, it seems like there was quite a large weakness in developed markets, so Western Europe and North America, in the first quarter. And then, in the second quarter, North America picked up, but Western Europe was still showing a low single-digit decline. So, I did expect those regions to be growing at low single-digits relatively steadily. So, could you comment on the dynamics there and what we should be expecting in those regions going forward? And then, secondly, on the D&T business, so the order intake was 9% for the group as a whole and double-digit for D&T. Can you give us the order intake for the different parts of D&T? So, D&I, ultrasound and also IGT. That will be great. Thank you.

Okay. Let me start with the D&T question and Abhijit will answer the Personal Health question. So, very pleased with the continued order strength in D&T, thanks to a slate of strong innovations and solutions, coupled with health informatics. In DI, we continue to see a mid-to-high single-digit order growth around 6%. IGT, even low 20s. And ultrasound, around 13%. So, basically, the story continues. These products are very well-received. And I daresay, as we now will get more word-of-mouth marketing support from the doctors of these technologies, it will become a self-driven story. Maybe also interesting is that the MAT, the moving annual total, order growth for D&T stands now at 11%. So, we're building up a nice order book. And then, at the same time, we now also see the order growth for Connected Care & Health Informatics pick up, which is great. So, also there, we expect perhaps finally a stronger momentum coming in the second half year. Abhijit?

Yeah. Also, on PH, I think it's good to understand the dynamics because we have a large number of new product introductions in the second half. Therefore, we also hold back some of your advertising firepower to basically strengthen the launch of these products, which by definition means that you go a bit slow before your new products come into the market, which is why we said in the beginning of the year that we expected the second half to be stronger. We expect both NAM and Western Europe to be in positive territory in the second half, so there will resume growth. And that will contribute, let's say, to the overall PH business getting back to good growth in Q3 and Q4.

Okay, thank you very much.

Yeah.

Our next question is from Scott Bardo from Berenberg. Please state your question, sir.

Yeah, thanks very much for taking my questions. So, first question, please, just relates to the Diagnosis & Treatment division. Obviously, seeing some relatively nice growth in the first half met by order book. Given that your orders are largely longer cycle with your interventional imaging and MRI and those orders are still to be booked, I understand, I guess could you share some comments about the sustainability of these current high growth rates into the back half of the year? Is this sort of growth rate something that we should expect? Just following on, please, for this division. You announced during the quarter the acquisition of EPD, which was a relatively reasonable consideration, I think, of about $0.5 billion worth of contingency payments. So, just wondered if you could share a little bit of thought actually as to how and when that business will start to contribute to revenues and profitability for the company. Thank you.

Yeah. Hi, Scott. Yeah, let me once again reiterate that the product portfolio of Diagnosis & Treatment was renewed to about 60% of the total portfolio. And even this first half, we introduced several new products, such as, for example, the new MR systems that have 50% lower scanning time or shorter scanning time, which is a great productivity driver for hospitals. We expect the order – we expect the order growth to sustain. I pointed to the question of Yi already that the MAT order growth was 11%. We expect this momentum to continue. On your question of EPD, we will, obviously, invest in this business in order to get the products to the market. Currently, we already have the CE Mark. We are anticipating the FDA mark also. Next year, it will already have positive revenue to Philips, but still a modest operating loss that will be absorbed within the D&T business. And then, let's say, towards 2021, we expect a positive profit contribution and we, of course, throughout the period expect a very high growth rate. We think that EPD has the opportunity to become the new standard of care for ablation or for electrophysiology, an area that really needs a strong innovative disruption. The EPD technology does not only provide a much better navigation while doing the ablation procedure, by having real time visibility off the anatomy of the heart, but also the ability to validate whether the ablation was first time right, successful, which is very important because, today, often a patient that is ablated needs to come back one or two times to treat the spots that were ineffective. So, we think that, overall, also from the point of view of insurance companies that this will be highly preferred standard of care, which, of course, needs to be proven in the next two, three years, but then it will be a very profitable franchise.

Thank you. Just a quick clarification. I haven't seen any financial accounts from EPD. So, could you just give us a rough indication of what revenue would be realistic to assume for next year? Is this sort of €30 million, €40 million or so or could it be higher? And lastly, can you just confirm that your transfer of production from Cleveland is still targeted for the second half of the year and that you still expect to resume shipments of the AEDs into North America in the back half too?

Well, on the EPD, this is a very small company today, which then already gives you a view on the size of the revenue. It's a new innovation that is in startup, so we expect rapid growth, but from a low base. Let's say, the progression of the diagnostic imaging business is going well. We are progressing on Cleveland as per plan. We also expect that the R&D activities will move to downtown Cleveland and the remaining facility will focus on customer service only. And all of this is expected to happen by the end of the year.

Thanks very much.

You're welcome.

The next question is from Ed Ridley-Day from Redburn. Please state your question, sir.

Hi. Good morning. Thank you. Firstly, on CT, I think you've given us some nice detail in terms of your product growth there. Can you give us a little bit of idea about how much quicker than the market you feel you are now growing in CT? That'll be my first question.

Well, maybe you give us your second question while we lookup that detail and come back to you.

Great, thanks. The other one would be on monitoring. Apart from one or two strong quarters last year – you've, obviously, got a great position in monitoring in the hospital, but you do you appear to be the growing slower than the overall market. So, give us a bit more color about why that is and how you can turn that around. Clearly, you've got – I know your agreement with Masimo, you have taken some initiatives. But what has been the sort of operational issue there and how can you get back to a market which is going to continue to grow very strongly?

On monitoring, we have seen a quite order growth over the last 12 months. Orders tend to become bigger and more lumpy. And this relates to the fact that monitoring solutions become enterprise solutions, which also means that the CIO of the hospital is much more involved than in the past. I don't see any impediment to this business. We are market leader. We are outgrowing competition, especially in the market segments where hospitals see the value of these AI-driven analytics, forecasting of what will happen to patients in markets where there is shortage of staff, which applies to North America, applies to Europe, increasingly to Asia. The only market that is still quite price-driven is China, but it is not affecting our business outlook at all. So, overall, high confidence in the monitoring business. It's just that it's a bit lumpy and we will come back to nice growth rates there. CT, high single-digit growth in the quarter, which we believe is a lot faster than market growth. We are clawing back market share. Of course, that was always the intent. By the way, the same message applies to all of diagnostic imaging where we believe we are significantly outgrowing competition. Of course, we did the comparison to the company that announced last Friday. And we believe actually that our order growth is at least twice as high as theirs. So, we are quite happy with our product and team performance. And I think our hospitals are recognizing that we are competitive. Maybe I can also underline that we are proud of winning orders in Munich with the Munich City Hospital as well as in Cologne.

Great. No, thank you for the additional color.

Sure, anytime.

The next question comes from Max Yates from Credit Suisse. Please state your question.

Thank you. My first question would just be around the D&T margin expansion. Could you talk a little bit about the subsegments within that division and whether for the 180 bps margin expansion, one of the subsegments was the key driver or whether it was sort of fairly broad-based across image-guided therapy, diagnostic imaging and ultrasound?

Yeah. Hi, Max. I would say it's across all the three subsegments. More or less.

Okay.

Maybe the drivers are slightly different. So, if you look at DI, there we have a big productivity program which is helping to drive it, whereas in ultrasound and in IGT, these are high-margin businesses which get tremendous operating leverage for this rapid growth. So, DI is a combination of growth plus productivity. There is productivity in the others, but maybe a tad less, and those are high-margin businesses which are driving improvement in profitability through the operating leverage that we get, if that gives you a little more color.

In any case, let me underline, Max, that we are keenly aware of, let's say, the comparative difference in profitability versus our two main competitors. And let's say, D&T is also designed to expand profit faster than the average of Philips, right, in order to get closer – to closing that gap over the next years.

Okay. Just the follow-up would be on Personal Health. So, when you've talk about the inventory rebalancing, are you sort of relatively confident that you haven't lost market share with the distributors and this is just the fact that they took on too much inventory or do you think there have been instances across the Chinese end market or the Chinese market where you may have lost some share? And, I guess, linked to that, have you adjusted your pricing at all to reflect any moves in the currency there that may have potentially impacted this?

No. Widely across the portfolio, we are not – we don't see shifts in market share. An individual category can always fluctuate through the year, depending on how, let's say, competitors come up with products. But we feel very confident about our brand strength in China and about our position with the online distribution. We think that all the plans are in place for a stronger second half year. And then, on the question of currency, maybe, Abhijit, you would like to answer it.

Yeah. No, no, we have not made any price adjustments. A large part of our sales in China are also produced in China. We had actually taken quite some actions few quarters ago to renegotiate a lot of Chinese purchases which we did in US dollars, which caused a currency fluctuation to basically Chinese purchases in renminbi, so that we match our end exposures to sales. So, I think all that is giving us the benefits now. So, if you look at, let's say, the currency impact of some of the other competitors versus us, we are, I think, on the much better side.

Okay. Maybe just sort of a one-word answer, just on Connected Care, you mentioned there were a couple of one-offs in the margin. Would you just be able to give us how much in basis points that impacted the margin in the quarter?

It was actually very small in terms of amount, but it was actually a small release last year and a small booking this year. So, that affects roughly 60 basis points. So, if you take that out, it would have been – so, it's not in the millions, it's probably less than €5 million, but it would have got us 100 bps in CCHI without those.

Okay, perfect. Thank you.

Our next question comes from Daniel Wendorff from Commerzbank. Please state your question, sir.

Yeah, thanks for taking my question. It's on the Diagnosis & Treatment division. Again, if I look at the order intake growth and the sales growth in the quarter, can you potentially dissect this into what is coming from market growth and what is coming from your new product introductions and what is maybe coming from better operational or even a better regional set up? That would be my first question. And the second question is also a follow-up on the margin development in the Diagnosis & Treatment division. Given that you expect order intake to stay in this region and the consequence on sales is the 180 basis point margin improvement year-on-year in the second quarter, also a good hint for what is going to happen in the second half? Thank you.

Yes, Daniel. We estimate market growth to be in the low to mid-single digit. And we are basically growing almost twice as fast as the market across the D&T segments. I think earlier questions during this call with regards to margin development in D&T, I answered that D&T should expand profitability faster than the other two segments, given the plan to bring diagnostic imaging into double-digit profitability and to close the gap for image-guided therapy toward the competitors. And, of course, with strong order and revenue growth, we should also expect margin development to continue to be strong.

Okay, thank you.

The next question comes from Wim Gille from ABN AMRO Bank. Please state your question.

Yes, good morning. I've got a question on the depreciation and amortization because that increased quite a bit and expected to go into consensus expectations and then, in particular, the depreciation and amortization in the Other segment. So, can you give me a bit of feeling where it is coming from and whether or not this is sticky or a temporary item?

Yeah. Wim, hi. This is Abhijit. It's a one-off. It's related to an acquisition made a long time ago where it was the Povos acquisition that we made. We have moved, let's say, all the platforms and the manufacturing the product range now to Philips and there was, let's say, a certain residual capitalized goodwill which we took off because we have now given that brand to somebody else in China and therefore we'll get a brand license fee for that. But it's a one-off.

All right. Thank you. And then, my follow-up would be on IFRS 16. You indicated in the appendix that you expect the impact on the debt – or you're still working out kind of what the impact of IFRS 16 is going to be, but you do give a feeling about the increase on that debt to be about €745 million in discounted [ph]. You also give us a feeling where you expect the EBITDA to end up roughly speaking.

Yeah. We are still working on that. So, we will come back to you in the coming quarters on that, Wim, because there are quite a few moving parts and we need to get, let's say, a good idea on that, work it with the auditors before we give something externally.

All right. That's fair. Thank you very much.

Thanks.

We have a follow-up question from Mr. Ian Douglas-Pennant from UBS. Please state your question.

Hi, yes. Thank you. It seems like, from looking at your competitors' numbers and yours, that the imaging market has accelerated in the last year or so. But I've never heard a convincing explanation as to why that's the case. Do you have one please?

Yeah. I would agree with you that it has accelerated somewhat because both in Europe and the United States, two, three years ago, we were looking at low single-digit. In relation to, I think, Daniel's question, I said we have been outgrowing the market by almost a factor of 2. Then given our growth, that would imply that the imaging market would be growing at the higher end of the guidance, the market expectation of low-to-mid single-digits. So, let's assume then that the imaging market currently is growing around 4% or so. That indeed would be an acceleration over where the market was two to three years ago. I daresay there are two potential explanations. One is that the installed base is really old and, therefore, it needs to be replaced. And we have, also ourselves, active installed base upgrade programs. I can only imagine that our competitors do the same. Secondly, many of the hospitals in North America have been so busy with consolidation and some of their CapEx was going to IT systems. I think we are seeing that the – let's say, the EHR market is slowing a bit, right? The electronic health record market is slowing a bit. And there's more capital available now for imaging. Moreover, then, finally – but that explains why we are growing faster than the competition, that our innovations are in hot demand across the three subsegments in D&T and that explains why we are growing faster than competition.

Thank you.

We have a follow-up question from Ms. Yi-Dan Wang from Deutsche Bank. Please state your question.

Yeah, thank you very much. So, I'm not surprised that you commented CT was growing at high single-digit given that diagnostic imaging, I think, you reported around mid-single digit. So, could you also give us the growth rate for MR and digital x-ray and provide some color on the reason for the numbers there? And then, secondly, for ultrasound, I think point-of-care, you're mentioning, again as a highlight, versus the gynecology which was known to be a driver for it. So, in terms of ultrasound, can you also give us some sense of how the existing business is doing versus point-of-care and gynecology and relative contributions of those businesses to ultrasound, would also be helpful for putting those comments into context?

Shall we send you a whole Excel table?

That will be perfect. That will be perfect. But some nice comments will be helpful. Thank you.

All right. All right. Let me give it a try. First of all, on ultrasound, please realize that our cardiac ultrasound is a very big market and our position in general imaging, point-of-care, OB/GYN is a much smaller business, right? Therefore, even with a very nice high growth in OB/GYN and point-of-care, we would never hit the overall growth numbers in ultrasound if cardiac imaging would not be very successful. So, let me assure you that cardiac imaging is also good growth. And then, the icing on the cake is the very high growth in OB/GYN and GI. I look now at my colleagues to what extent to give [indiscernible].

We anyway give far more than a lot of others. I think when we said CT sales were at the high single-digit and overall is at mid single-digit, the gap is a couple of percent. So, 7%, 8%, 9% is high single-digit. That's where you see CT at around 7% and the others are a tad lower. So, overall, it's still at the higher end of the mid single-digit, but with CT being a little bit higher than the rest.

Also there, I think it's helpful to know that our MR business is far larger that the CT business and that, of course, in a weighted average, even if CT is a lot higher than MR, it's still growing. Otherwise, we don't get to that number.

Exactly. And the innovation that Frans spoke about in the new launches in MR, that gives us a position where we have an almost complete new range in MR now. And with this kind of 50% faster scanning than the older range, we expect there to get really good momentum going forward in the coming quarters as well.

Okay, thank you very much.

[Operator Instructions]. We will now take our next question from Julien Dormois from Exane BNP Paribas. Please go ahead.

Yeah. Hi. Good morning, gentlemen. Thanks for taking my question. It's just a housekeeping one. Can you just remind us how much of your Personal Health sales are made in China, just to assess the sensitivity of the rebound in H2?

Something that we need to look up.

I'll ask Pim to give you a call, Julian, and give you that information. Take it offline.

Okay, thank you.

But the rebound of the second half is less to do with where production is. It has more to do fundamentally with the new product launches and the momentum we expect from that.

All right.

Okay.

Thank you, Mr. van Houten and Mr. Bhattacharya. That was the last question. There are no further questions. Please continue.

Okay. Well, I appreciate everybody dialing in. Let me reiterate once again. Solid quarter. Still some work to do. High order growth. This is very encouraging. We maintain our expectations for a stronger second half year. And, overall, we are absolutely confident about our ability to deliver that. Thank you.

This concludes the Royal Philips second quarter 2018 results conference call on Monday, the 23rd of July, 2018. Thank you for your participation. You may now disconnect.