Philips Healthcare Financial Update. Ingo Bank, CFO Philips Healthcare

Transcription

1 Philips Healthcare Financial Update Ingo Bank, CFO Philips Healthcare

2 Key takeaways Growth outlook: Slow start into first half of 2013 Solid outlook for growth geographies North America market challenging Margin improvement and growth to further drive ROIC We are on track to meet our 2013 targets 2

3 Solid growth trajectory for both revenues and order intake Currency comparable equipment order intake Comparable sales growth 3% 9% 3% 5% 6% 4% 5% 6% -3% -6% FY 2008 FY2009 FY 2010 FY 2011 FY FY 2008 FY2009 FY 2010 FY 2011 FY 3

4 Order book continues to build, challenges in the US Indexed Equipment Order Book Development Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Order book now 25% above 2008 levels Order book continued to grow in despite ongoing market headwinds in North America and Europe Innovations and strong market positions driving growth Q4 overall order book growth slowing down, mainly due to challenges in US market Q = 100%; currency comparable 4

5 Strong market positions in growth and mature geographies Philips Healthcare growing at +8% CAGR nominal In billion In billion In billion In billion 3,0 2,0 1,0 0,0 3,0 2,0 1,0 0,0 2,0 1,0 0,0 6,0 4,0 2,0 0, % 0% +18% +5% Growth markets Western Europe Other mature markets North America China, LatAm and other growth geographies delivering strong top line growth reflecting solid market positions and ongoing investments Growth geographies share of total revenue now 24% Western Europe stable despite ongoing difficult market circumstances North America growing in an environment of policy changes and uncertainties 1 percentages are the CAGR s (Compound Annual Growth Rates) realized from 2009 to for Philips Healthcare 5

6 Market uncertainties in North America affecting growth Currency comparable equipment order intake 11% 5% 5% Strong revenue growth in the first half of from solid order book -19% FY 2009 FY 2010 FY % FY Q1-3% Q2-5% Q3-4% Q4 Order intake started to decline from Q2 as market uncertainties around health care reform and fiscal cliff slowed down capital spending Comparable sales growth 7% 4% 2% 0% 7% 3% Slow start in 2013 expected, given declining order intake in the last quarters of -3% -9% FY 2009 FY 2010 FY 2011 FY Q1 Q2 Q3 Q4 6

7 Health care market developments in the US Short Term Economic uncertainties Medical Device Excise Tax CB2 in HHS Capital spending hospitals Sequestration Fiscal Cliff (utilization) Imaging Systems Patient Care & Clinical Informatics Home Healthcare Systems unfavorable unfavorable unfavorable unfavorable N.A. unfavorable unfavorable N.A. positive N.A. N.A. Medical Device Excise Tax CB2 in HHS 1 Capital spending Sequestration Fiscal Cliff (utilization) Applies to ~55% of our US sales; impact largely mitigated through cost and value chain measures Impacts ~ 7% of our global HHS business, ~1% of the total global Healthcare revenue Expected to be flat to low single digit growth; continued focus on IT upgrades; beneficial to PCCI Includes 2% reduction in Medicare payments; Medicaid exempt; maximum impact on growth very minor with around ~3bps Increased utilization assumption for advanced imaging in non-hospital settings; impact negligible 1 Competitive Bidding Round 2 in Home Healthcare Solutions 7

8 Health care market developments in the US Mid to Long-Term Health care demographics Aging of equipment base Health care reform Meaningful use Improved care at lower cost Imaging Systems positive positive positive positive positive positive Patient Care & Clinical Informatics positive positive positive Home Healthcare Systems positive N.A. positive Health care reform (Affordable Care Act) Meaningful use Improved quality of care at lower cost 30 million additional patients into the health care system Payments linked to quality improvements and lower integral patient cost vs current Fee for Service model Incentivizes more cost efficient care settings: Hospital-to-Home Overall, beneficial to Philips Healthcare Favorable to our PCCI business Reimbursement changes will increase need for solutions and consulting services; positive impact for our PCCI and HHS business; increased need for value offerings in Imaging Systems 8

9 EBITA profitability rebounded in 10.6% 10.0% Reported & Adjusted EBITA 1 EUR millions, as % of sales 14.0% 13.1% 12.2% 12.4% 13.6% 12.3% 786 1,129 1,080 1,226 FY 2009 FY 2010 FY 2011 FY EBITA Restructuring & PMI EBITA % Adj. EBITA % Key drivers influencing margin expansion in Strong growth providing operating leverage Executed restructuring program: eliminate layers and lower overheads Investments in innovation and growth geographies ongoing to maintain growth momentum Operational efficiency programs driving margin improvement Bill of Material savings Service parts cost reductions End-to-End physical distribution cost reduction Reduced non-growth and noninnovation spend by >10% 1 EBITA has been restated to account for IAS 19R Pension restatements

10 Strong inventory improvement and cash flow generation 17.0% Net inventory as % of sales Free cash flow as a % of reported EBITA 1,2 EUR billions, as % of sales EUR billions, as % of EBITA 20.0% 117% 18.3% 100% 100% 105% 17.6% 74% 16.8% 16.8% 55% FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY Inventory As % of FY sales FCF FCF as % of EBITA 320 bps y-o-y improvement: Improved our Sales & Operations planning process; business market handshakes; eliminating waste and buffers in process Increased share in vendor-managed inventory > 60% y-o-y improvement in FCF Earnings and working capital management driving highest free cash flow generation ever Earnings/FCF ratio back to targeted levels 1 Free cash flow is defined as cash flow from operating activities minus net capital expenditures 2 Free cash flow and Reported EBITA have been restated to account for IAS 19R Pension restatements from

11 Solid improvement in ROIC in Some 80%+ of invested capital is Intangibles Margin expansion and growth continue to be key drivers Return on Invested Capital 12% 10% Net Operating Capital % shown as a % of total NOC Other assets Tang. assets ~20% Growth and margin expansion driving 200bps y-o-y improvement 8% 6% 4% 2% Intangible assets Goodwill ~80% Targeting further improvements in line with mid-term performance objectives 0% ROIC December Notes: EBIAT are earnings before interest after tax; Philips calculates ROIC % as: EBIAT/NOC Reported tax used to calculate EBIAT; ROIC has been adjusted to exclude the impairment of goodwill charge taken in 2011 and the impact of IAS19R 11

12 Investing in productivity Deployment of a single valueadded layer; standardized organizational design for businesses and markets Increasing the effectiveness of Sales support functions Consolidate 40 business lines into 10 Business Innovation Units Increased span of control and eliminated two layers to improve End2End collaboration between businesses and markets Established Sales Support Centers to drive scale benefits for back office and commercial support functions Accelerated deployment of digital marketing shifting spend mix increase effectiveness of Marketing spend Industrial footprint and Overheads Portfolio decisions to address gross margins Overhead and business support functions performed at only one single value-added level Finance and HR transformation We have invested 116M in restructuring with an expected payback of ~2 years 12

13 Operational excellence will continue to drive profitability LCC MOH as a % of total MOH 1 Low-cost-country sourcing (LCC) LCC ~8% ~13% HCC 2009 Priorities Expanding manufacturing volumes in growth geographies Improving productivity Lean, End2End Service parts cost innovation Distribution costs (landed cost) Percentages represent low-cost purchasing value in % of total purchasing value Growing our share of LCC sourcing Bill of Material Savings Cost of Non-Quality 1 MOH = Manufacturing Overheads 13

14 Redirecting investments for growth Market Investments Index = Growth Mature Future Targeting investments in growth geographies such as: China LatAm India ASEAN Japan Innovation Investments Future Index = 100 Growth Initiatives Remaining R&D and key areas of innovation: Hospital to Home Image-Guided Intervention and Therapy Clinical Informatics Value segment Consulting Services 14

15 Healthcare performance on track to achieve mid-term target of 15%-17% EBITA in % 15% 12.3% EBITA 1 Lower Restructuring Growth Operational Efficiency Overhead Cost reductions Investments Med. Dev. Tax 2013 EBITA 1 EBITA has been restated to account for IAS 19R Pension restatements 15

16 Key takeaways Growth outlook: Slow start into first half of 2013 Solid outlook for growth geographies North America market challenging Margin improvement and growth to further drive ROIC We are on track to meet our 2013 targets 16

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