Accelerating Healthcare

Transcription

1 Accelerating Healthcare Ingo Bank, CFO Philips Healthcare Name Jefferies Global Healthcare Conference, New York June 4 th, 203

2 Important information Forward-looking statements This document and the related oral presentation, including responses to questions following the presentation contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forward-looking statements include statements made about our strategy, estimates of sales growth, future EBITA and future developments in our organic business. By their nature, these statements involve risk and uncertainty 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, domestic and global economic and business conditions, developments within the euro zone, the successful implementation of our strategy and our ability to realize the benefits of this strategy, our ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs and actuarial assumptions, raw materials and employee costs, our ability to identify and complete successful acquisitions and to integrate those acquisitions into our business, our ability to successfully exit certain businesses or restructure our operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition. As a result, Philips actual future results may differ materially from the plans, goals and expectations set forth in such forwardlooking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see the Risk management chapter included in our Annual Report 202. Third-party market share data Statements regarding market share, including those regarding Philips competitive position, contained in this document are based on outside sources such as specialized research institutes, industry and dealer panels in combination with management estimates. Where information is not yet available to Philips, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated. Use of non-gaap Information In presenting and discussing the Philips Group s financial position, operating results and cash flows, management uses certain non-gaap financial measures. These non-gaap financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used in conjunction with the most directly comparable IFRS measures. A reconciliation of such measures to the most directly comparable IFRS measures is contained in our Annual Report 202. Further information on non-gaap measures can be found in our Annual Report 202. Use of fair-value measurements In presenting the Philips Group s financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When quoted prices do not exist, we estimated the fair values using appropriate valuation models, and when observable market data are not available, we used unobservable inputs. They require management to make significant assumptions with respect to future developments, which are inherently uncertain and may therefore deviate from actual developments. Critical assumptions used are disclosed in our 202 financial statements. Independent valuations may have been obtained to support management s determination of fair values. All amounts in millions of euro s unless otherwise stated; data included are unaudited. Financial reporting is in accordance with IFRS, unless otherwise stated. 2

3 Key takeaways We are driving profitable growth and delivering on our commitments Health care industry is dynamic, growing, and profitable Health care systems are transforming and our innovations address the trends Accelerate! is driving customer centricity, operational excellence, and a growth and performance culture While we are facing increasing headwinds, we remain committed to reach our financial targets this year 3

4 Health care industry dynamics will drive demand Sharp rise in incidence of chronic disease and non-communicable lifestyle diseases Globally, 36 million of the 57 million deaths due to chronic and noncommunicable disease Approximately 80% of non-communicable disease deaths 29 million occur in growth geographies An aging population World s population of people 60 years+ has doubled since 980 and is forecast to reach 2 billion by 2050 Access to care and clinician shortage Recognized as one of the main obstacles to delivery of effective health services Causes of death globally (2008) World population age 60+ (Millions) Deaths from all other causes 2 million 36 million 80% Deaths from chronic Growth and non-communicable Geographies diseases occur in growth geographies (Est.) Source: World Health Organization data and statistics and 4

5 Transforming healthcare landscape provides opportunity for innovation Innovative, minimally invasive therapies Enables shorter lengths of stay, faster recovery, improved outcomes, and lower cost treatment Data, information, and connected solutions across the care continuum Bring together solutions across the ecosystem to help diagnose disease, improve adherence to protocols, and improve clinical outcomes Improve quality of care at a lower cost Consulting solutions with value products improve clinical workflow, improve health system effectiveness, and lower costs Extending into lower cost settings including the home Lower risk of hospital-borne illness, patients comfortable at home, reducing the cost of care Wellness and preventive care Empower individuals to take care of their health and help people stay healthy 5

6 Philips Healthcare Guiding Statement We are dedicated to creating the future of health care and saving lives. We develop innovative solutions across the continuum of care in partnership with clinicians and our customers to improve patient outcomes, provide better value and expand access to care. 6

7 Strong market and satisfaction leadership positions Imaging Systems # # #2 # # # # # Interventional X-Ray cardiovascular Image-Guided interventions Ultrasound worldwide Overall system performance IMV ServiceTrak CT MDBuyline MR Ingenia and Ultrasound iu22 Best in KLAS NPS Interventional X-Ray-India, North America, Japan, and China NPS Ultrasound-North America, United Kingdom, and China Patient Care and Clinical Informatics Patient monitoring AEDs Digital telemetry Non-invasive ventilation Enterprise Imaging North America and LatAm Cardiology Imaging North America Clinical Informatics Brazil NPS Patient Monitoring-North America, United Kingdom, Germany, China, and India NPS PCCI-global Source: National benchmarks, COCIR, NEMA, GSS Market Intelligence Estimate, IMV rated ServiceTrak, Frost and Sullivan, HHS TBS, PCCI market insight. Market Size data excludes Customer Service # # # # # # # # # Home Healthcare Solutions # # # Sleep therapy Respiratory care Home monitoring telecare North America = Market position = Customer satisfaction 7

8 Progressing on our Path-to-Value Value Growth 20 Performance EBITA Setting the foundation to improve performance Strong OIT and sales growth Successful market launches Investments in R&D and growth geographies Industrial footprint in growth geographies Strategies to address market headwinds in Southern Europe and Japan Kick-off Accelerate! Growth 202 Performance EBITA Accelerating performance improvement Drive operational excellence through Accelerate! Deliver return on investment on growth and innovation investments Reduce overhead, cost of complexity Leverage industrial footprint in growth geographies Gain share, extend leadership in Patient Care and Clinical Informatics Drive international growth and improve patient interface market position in Home Healthcare Solutions Growth Performance EBITA Transform Philips through Accelerate! Value delivery from past acquisitions Upgrade marketing capabilities Improve sales force productivity Create performance and growth culture Increase value segment portfolio in Imaging Continue to close gap in co-leadership in Imaging Grow consulting services business = Areas of ongoing focus in 203 8

9 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 2,0,0 0,0 3,0 2,0,0 0,0 2,0,0 0,0 6,0 4,0 2,0 0, % 0% +8% +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 202 percentages are the CAGR s (Compound Annual Growth Rates) realized from 2009 to 202 for Philips Healthcare 9

10 EBITA profitability rebounded in % 0.0% 4.0% 3.% 2.2% 2.4% 3.6% 2.3% 3.9% 2.6% 786,29,080,226,246 FY 2009 FY 200 FY 20 FY 202 LTM March 203 EBITA Reported & Adjusted EBITA EUR millions, as % of sales Restructuring & PMI EBITA % Adj. EBITA % Key drivers influencing margin expansion in 202 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 >0% EBITA has been restated to account for IAS 9R Pension restatements 0

11 Strong inventory improvement and cash flow generation 7.0% Net inventory as % of sales Free cash flow as a % of reported EBITA,2 EUR billions, as % of sales EUR billions, as % of EBITA 20.0% 7% 3% 8.3% 05% 8.6% 00% 00% 7.6% 74% 6.8% 6.8% 55% FY 2007 FY 2008 FY 2009 FY 200 FY 20 FY 202 Q 203 Inventory As % of moving annual total sales FY 2007 FY 2008 FY 2009 FY 200 FY 20 FY 202 FCF FCF as % of EBITA LTMMarch bps y-o-y improvement in 202: 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 in 202 Earnings and working capital management driving highest free cash flow generation ever Earnings/FCF ratio back to targeted levels 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 9R Pension restatements from

12 Solid improvement in ROIC in 202 Some 80%+ of invested capital is Intangibles Margin expansion and growth continue to be key drivers Return on Invested Capital 2% 0% Net Operating Capital % shown as a % of total NOC Other assets Tang. assets ~20% Growth and margin expansion driving 200bps y-o-y improvement in 202 8% 6% 4% 2% Intangible assets Goodwill ~80% Targeting further improvements in line with mid-term performance objectives 0% Q ROIC 203 March 203 Notes: EBIAT are earnings before interest after tax; Philips calculates ROIC % as: EBIAT/NOC Quarterly ROIC % is based on LTM EBIAT and average NOC over the last 5 quarters Reported tax used to calculate EBIAT; 20 ROIC has been adjusted to exclude the impairment of goodwill charge taken in 20 and the impact of IAS9R 2

13 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 0 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 6M in restructuring with an expected payback of ~2 years 3

14 Operational excellence will continue to drive profitability LCC MOH as a % of total MOH Low-cost-country sourcing (LCC) LCC ~8% ~3% HCC 2009 Priorities 202 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 MOH = Manufacturing Overheads 4

15 Philips Healthcare Path-to-Value 7% 5% 2.3% 202 EBITA Lower Restructuring Growth Operational Efficiency Overhead Cost reductions Investments Med. Dev. Tax 203 EBITA 202 EBITA has been restated to account for IAS 9R Pension restatements 5

16 Key takeaways We are driving profitable growth and delivering on our commitments Health care industry is dynamic, growing, and profitable Health care systems are transforming and our innovations address the trends Accelerate! is driving customer centricity, operational excellence, and a growth and performance culture While we are facing increasing headwinds, we remain committed to reach our financial targets this year 6

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