Koninklijke Philips N.v. · EURONEXT:PHIA
Koninklijke Philips — Investor Day (2017)
44 slides from Koninklijke Philips's investor day presentation, 2017
Slide 1: Company update and performance roadmap
Company update and performance roadmap Frans van Houten CEO Royal Philips Abhijit Bhattacharya CFO Royal Philips
Slide 2: Management team present today
Present today Management team present today CEO / CFO Segment Leaders Market Leaders Function Leaders CEO Personal Health Global Markets1 Innovation & Frans van Houten Egbert van Acht Henk de Jong Strategy Jeroen Tas Operations Sophie Bechu Diagnosis & North America Treatment Brent Shafer Robert Cas
Slide 3: Key takeaways
Key takeaways • Philips has transformed into a focused global HealthTech leader – We operate in attractive, high-margin growth markets – Our deep clinical expertise and consumer insights differentiate us – Our innovations enable meaningful organic growth • We create value for customers and sharehold
Slide 4: At Philips, we strive to make the world healthier and more sustainable through innovation
At Philips, we strive to make the world healthier and more sustainable through innovation 4
Slide 5: We have transformed into a focused HealthTech leader
We have transformed into a focused HealthTech leader Acquisitions + Volcano + Spectranetics 2011 2012 2013 2014 2015 2016 2017 - Lifestyle - Lumileds/Automotive Divestments - TV - Lighting (IPO) Entertainment - Lighting3 21% 11.7% 30% 41% 38% 4.7% FY 20111 LTM Q3 2% 10% 4% 12% 2017 17% 19% CSG Adj.E
Slide 6: Transformation driving improved performance and shareholder value
Transformation driving improved performance and shareholder value Accelerate! transformation program Creating value ~12.0% • Portfolio management 10.0% 11.0% • Customer centricity 5% 4-6% 4.7% 4% • Resourced to win key battles 2% • Significant changes in culture and talent 1 2 2011 2015 2016 2017E 2
Slide 7: Path to value: 2017-2020
Path to value: 2017-2020 2017-2020 annual targets Financial performance and outlook EUR billion unless state otherwise 4-6% CAGR Revenue growth 4-6% comparable sales growth rate 4% CAGR2 >20 ~18 17 On average 100 bps Adj. EBITA Margin expansion Sales1 margin improvement 2016 2017E 2020E Increased ca
Slide 8: Our ~EUR 18 billion differentiated portfolio meets growing global health needs
Our ~EUR 18 billion differentiated portfolio meets growing global health needs Sales split by segment1 Sales split by geography Diagnosis & Treatment North America 10% Enabling efficient, first-time-right diagnosis as Western Europe 36% well as precision devices and therapies through 2 LTM Q3 38% di
Slide 9: Our strong portfolio has >60% of sales from leadership positions in core businesses
Our strong portfolio has >60% of sales from leadership positions in core businesses1 Key businesses and leadership positions Diagnostic Imaging Ultrasound Image-Guided Therapy Systems Image-Guided Therapy Devices Global Top 3 Global Leader Global Leader Global Leader Diagnosis & Treatment Patient Mo
Slide 10: Our markets have sustained growth and attractive profit margins
Our markets have sustained growth and attractive profit margins Market trends Markets increasing across segments1 EUR billion Population growth, aging, rise in chronic diseases ~190-195 Consumerization of healthcare Market growth 62-63 (2017–2020) ~149 Shift to outcome focused, Mid-single-digit valu
Slide 11: Health continuum drives our strategy
Health continuum drives our strategy Driving better outcomes for people and higher productivity for care providers Healthy living Prevention Diagnosis Treatment Home care Care pathways for Cardiology, Oncology, Respiratory, Pregnancy & Parenting, etc. Personalization of care Industrialization of car
Slide 12: With global reach, deep insights and leading innovations, we are uniquely positioned
With global reach, deep insights and leading innovations, we are uniquely positioned in the “last yard” to consumers & care providers Healthy living Prevention Diagnosis Treatment Home care Connected products and services Integrated modalities and clinical Real-time guidance and Connected therapeuti
Slide 13: Innovation drives our growth and improves margins
Innovation drives our growth and improves margins Commitment towards innovation New product sales1: • Annual R&D spend: ~EUR 1.7 billion (EUR Businesses • Diagnosis & Treatment: ~40% ~300 million on breakthrough innovations) growth • Connected Care & Health Informatics: ~50% • Strong IP portfolio: 5
Slide 14: Philips attracts top talent, customers and clinical partnerships
Philips attracts top talent, customers and clinical partnerships Internationally acclaimed + Worldwide talent + Robust customer base + Global clinical collaborations Providers Largest EU patent 67,000+ applicant Top 20 employees US hospitals1 choose Philips (2016, 2017) 120+ #1 Recommended by US Den
Slide 15: We are recognized for our commitment to sustainability
We are recognized for our commitment to sustainability Focus on UN Sustainable Development Goals, in particular #3 and #121 PACE Philips commits Recognized leader Award-winning Philips holds top Philips recognized to become – Carbon transaction – scores in supplier Thought leader Industry Leader in
Slide 16: Drivers for continued growth and improved profitability
Drivers for continued growth and improved profitability 16
Slide 17: Growth and performance improvement drivers to continue delivering on our targets
Growth and performance improvement drivers to continue delivering on our targets Focus on Driven by Resulting in 1 Capture geographic growth opportunities Revenue growth Growth in core 2 Pivot to consultative customer partnerships and business models businesses 3 Drive innovative value-added, integr
Slide 18: Capture geographic growth opportunities
1 Growth in core businesses Capture geographic growth opportunities Example: Greater China growing to ~EUR 3 billion in revenue by 20201 Strong platform to driving high growth • Brand and innovation leadership2 • ‘China Digital Innovation Hub’ creating local solutions Annual mid-to-high- • Strong lo
Slide 19: Pivot to consultative customer partnerships and business models: enable value-based care
2 Growth in core businesses Pivot to consultative customer partnerships and business models: enable value-based care Common goals, joint commitment Predictability, recurring revenues Customer Outcomes-focused, shared responsibility Continuous improvement, innovate for the future Creating a leading C
Slide 20: Innovative value-added, integrated solutions
3 Growth in core businesses Innovative value-added, integrated solutions Developed to better meet customer needs and capture greater value Packaged suite of systems, smart devices, software and services Image-Guided + + + Therapy solutions Image-Guided Therapy Disease-specific Cath lab management, s
Slide 21: Solutions and partnership approach is working well
2 Solutions and partnership approach is working well Growth in core businesses 3 High growth with accretive margins, recurring revenue models Solutions revenues: double-digit growth Expand large enterprise long-term partnership deals % of total revenue Number of signed deals (cumulative) >80 Best pr
Slide 22: Portfolio extensions through disciplined M&A
4 Growth in Portfolio extensions through disciplined M&A adjacencies Strategic objectives Highlights on progress to date • Expand leadership positions • Acquire synergistic businesses, technologies, channels or expand geographic reach Sales growth: Flat sales growth (2014) to double-digit sales gr
Slide 23: Portfolio extensions through organic investments and partnerships
4 Growth in Portfolio extensions through organic investments and adjacencies partnerships Organic growth investments Partnership extensions • Medical-grade wearables Wearable biosensor for real-time Ultrasound-guided regional monitoring anesthesia and vascular access • Digital Pathology Global marke
Slide 24: Continue to lead the digital transformation
5 Customer and operational Continue to lead the digital transformation excellence Transition from transactional to relational customer engagement Digital health propositions Digital marketing and sales Unlock new revenues and business models Attract and retain consumers Expand reach Connected Consum
Slide 25: Unlocking the full value of digital
5 Customer and operational Unlocking the full value of digital excellence New recurring revenue streams and enhanced customer loyalty Connected data Digital services High value consumer and professional propositions Devices (IoT) Avent uGrow Medical-grade Apps parenting >15M parents Vital sign
Slide 26: Improve customer experience, operational excellence and productivity
6 Customer and operational Improve customer experience, operational excellence excellence and productivity • Customer-centric innovations: ― Design-driven, customer co-creation Healthcare design award Customer ― Our metrics aligned to customer metrics #1 USA ServiceTrak rankings experience across im
Slide 27: Commitment to Quality and Regulatory compliance
6 Customer and operational Commitment to Quality and Regulatory compliance excellence Significant investments are showing results • Agreement with the US government on a consent decree Dealing with past ― Fully prepared to fulfill the terms of the decree findings ― Focusing primarily on defibrillato
Slide 28: Building upon our momentum to reach EUR 20 billion sales with significant return improvements
Building upon our momentum to reach EUR 20 billion1 sales with significant return improvements Focus on 2017-2020 annual targets Sales EUR billion Growth in core 4-6% CAGR 4-6% comparable sales growth rate businesses 4% CAGR2 >20 18 17 15 On average 100bps Adj. EBITA margin improvement annually Grow
Slide 29: Driving performance improvement
Driving performance improvement
Slide 30: Key takeaways
Key takeaways • We are delivering on our objectives of 4-6% organic growth and on average 100bps Adj. EBITA margin improvement annually • Our productivity programs are on track to deliver EUR 1.2 billion savings by 2019 • Strong Balance Sheet management has significantly improved working capital, ca
Slide 31: Delivering 4-6% Comparable Sales Growth
Delivering 4-6% Comparable Sales Growth Comparable Sales Growth % 1 Order Intake Growth % 1 Last twelve months Quarterly 8% 8% 5% 4% 4% 4% 4% 5% 0% 2% Q316 Q416 Q117 Q217 Q317 Q316 Q416 Q117 Q217 Q317 • Growth driven by: • Quarter-end order book is a leading indicator for – Innovation: new products
Slide 32: Delivering ~100 bps Adj. EBITA margin improvement
Delivering ~100 bps Adj. EBITA margin improvement Adj. EBITA and EBITDA % 1,2 Last twelve months • 130 bps year-on-year profitability improvement 15.2% 15.5% 15.0% 15.1% driven by: 14.5% Organic growth investments 12.9% 13.1% 13.3% 12.8% 12.2% EUR 1.2 billion productivity program • We invest aro
Slide 33: Personal Health consistently improving performance
Personal Health consistently improving performance Delivering above-market growth Comparable Sales Growth % Last twelve months • Improved performance driven by: – Innovative new product introductions 7% 7% 6% 6% 6% – Geographic expansion Q316 Q416 Q117 Q217 Q317 – High-impact consumer marketing prog
Slide 34: Driving operational excellence in Diagnosis & Treatment
Driving operational excellence in Diagnosis & Treatment Leading performance in Ultrasound and IGT, DI focus on profitability improvement Comparable Sales Growth % Last twelve months • 6.5% YTD order intake supports performance improvement 4% 4% • New product introductions and productivity measures w
Slide 35: Growth accelerating in Connected Care & Health Informatics
Growth accelerating in Connected Care & Health Informatics Investing to support transition to value-based care Comparable Sales Growth % • Returning to strong growth is due as new product launches Last twelve months make impact, and strong order book converts to revenue • Further performance improve
Slide 36: Productivity initiatives of EUR 1.2 billion to drive ~100 basis points annual improvement until 2020
Productivity initiatives of EUR 1.2 billion to drive ~100 basis points ~1.9 annual improvement until 2020 Adj. EBITA % 1 Adj. EBITA step-up drivers YTD Q3 2017 0.5 (0.9) Volume Gross margin 1.7 - Geographic expansion - Procurement (1.2) - New product introduction - Manufacturing productivity 0.9 - S
Slide 37: Productivity initiatives on track to deliver EUR 1.2 billion savings
Productivity initiatives on track to deliver EUR 1.2 billion1 savings Adj. Gross Margin improved by 160 bps over the last twelve months 2017–2019 targets YTD Q3 2017 Procurement savings Driven by DfX program: End-to-end approach to product creation, EUR 700 million with one integrated procurement
Slide 38: Strong actions to improve working capital
Strong actions to improve working capital Significant improvement in inventories, overdue receivables and working capital Inventory % 1 Working Capital % 1,2 - 290 bps - 280 bps - 240 bps - 170 bps - 160 bps - 260 bps 17.9 15.0 17.2 14.4 17.3 14.9 14.7 14.4 10.7 9.0 11.4 9.8 12.2 9.6 9.9 9.4 201 5 2
Slide 39: Ongoing actions to drive balance sheet efficiency and improve cash conversion
Ongoing actions to drive balance sheet efficiency and improve cash conversion Pension Defined Benefit Obligation Interest costs on debt & borrowings Adj. Free Cash Flow Conversion 1 EUR billion EUR million EUR billion 124% 115% 103% 27.1 287 1.4 ~180 1.1 0.8 ~3.1 2014 2017E 2016 2017E 2015 2016 LTM
Slide 40: Disciplined capital allocation policy
Disciplined capital allocation policy Attractive shareholder returns balanced with investments for growth Total shareholder returns since 2016 1,2 • Continue to invest in high ROIC organic growth opportunities • Disciplined but more active approach to M&A, while continuing to adhere to strict return
Slide 41: Disciplined capital allocation policy
Disciplined capital allocation policy Proven track record Dividends Share buyback EUR per share EUR billion 0.80 0.75 0.70 2.0 1.5 1.5 2008 - 2010 2011 - 2013 2014 - 2016 2011 - 2013 2013 - 2016 2017 - 2019 Merger & Acquisitions 1 Return on Invested Capital EUR billion ~2.3 15.9% 15.4% 14.7% 12.5% 1
Slide 42: Building upon our momentum to reach EUR 20 billion sales with significant return improvements
Building upon our momentum to reach EUR 20 billion1 sales with significant return improvements Focus on 2017-2020 annual targets Sales EUR billion Growth in core 4-6% CAGR 4-6% comparable sales growth rate businesses 4% CAGR2 >20 18 17 15 On average 100bps Adj. EBITA margin improvement annually Grow
Slide 43: Key takeaways
Key takeaways • Philips has transformed into a focused global HealthTech leader – We operate in attractive, high-margin growth markets – Our deep clinical expertise and consumer insights differentiate us – Our innovations enable meaningful organic growth • We create value for customers and sharehold
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