Q2 2020results

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Message from the CEO

“As the global societal and economic impact of the COVID-19 outbreak intensified in the second quarter of 2020, we continued to focus on our triple duty of care: meeting critical customer needs, safeguarding the health and safety of our employees, and ensuring business continuity. In close collaboration with our suppliers and partners, we have steeply ramped up the production volumes of acute care products and solutions to help diagnose, treat, monitor and manage COVID-19 patients. Our field service engineers have been supporting healthcare providers around the world throughout these testing times. Under the circumstances, I am pleased at the way we have performed and I am grateful and proud of how all our employees have stepped up.

In the quarter, Philips' sales declined 6% on a comparable basis and we delivered an Adjusted EBITA margin of 9.5%. Comparable order intake grew a further 27% on the back of double-digit growth in the previous quarter, driven by CT imaging systems, hospital ventilators and patient monitors. As anticipated, COVID-19 caused a steep decrease in consumer demand and postponement of installations in hospitals, as well as elective procedures, resulting in a 19% comparable sales decrease for our Personal Health businesses and a 9% decline for our Diagnosis & Treatment businesses. This was partly offset by a strong 14% comparable sales growth for our Connected Care businesses.

We expect to return to growth and improved profitability for the Group in the second half of the year, assuming we can convert our existing order book for the Diagnosis & Treatment and Connected Care businesses, elective procedures normalize, and consumer demand gradually improves. Consequently, for the full year 2020 we continue to aim for a modest comparable sales growth and Adjusted EBITA margin improvement.

Looking ahead, our mission is more relevant than ever. Our strategy to transform the delivery of care along the health continuum, leveraging informatics and remote care capabilities, along with our innovative systems and services, has been validated during this crisis. I am convinced that Philips is well positioned to serve the current and future needs of hospitals and health systems.”

Frans van Houten
Chief Executive Officer

Our strategic focus

Innovating with purpose

As a company striving for leadership in health technology, we believe that innovation can improve people's health and healthcare outcomes, as well as making care more accessible and affordable. At Philips, it is our goal to improve the lives of 3 billion people a year by 2030, including 400 million in underserved healthcare communities. Guided by our vision of making the world healthier and more sustainable through innovation, it is our strategy to lead with innovative solutions in key markets along the health continuum – helping our customers deliver on the Quadruple Aim (better health outcomes, a better experience for patients and staff, lower cost of care) and helping people take better care of their health at every stage of life.

We seek to act responsibly and sustainably, leveraging our resources to maximize value creation for all stakeholders. Reflecting our commitment to UN Sustainable Development Goals 3 (Ensure healthy lives and promote well-being for all at all ages), 12 (Ensure sustainable consumption and production patterns) and 13 (Take urgent action to combat climate change and its impacts), we continue to embed sustainability deeper in the way we do business, with specific focus on access to care, circular economy and climate action.

LumifyDreamwear

How we see healthcare

We visualize healthcare as a continuum, since it puts people at the center and builds on the notion of care pathways. Believing that healthcare should be seamless, efficient and effective, we ‘join up the dots’ for our customers and consumers, supporting the flow of data needed to care for people in real time, wherever they are. Data and informatics will play an ever-increasing role in helping people to live healthily and cope with disease, and in enabling care providers to meet people’s needs, deliver better outcomes and improve productivity.

We see significant value in integrated healthcare, applying the power of predictive data analytics and artificial intelligence at the point of care, while at the same time improving the delivery of care across the health continuum – optimizing workflows, enhancing capacity utilization and leveraging primary and secondary prevention and population health management programs.

Roadmap to win

Addressing our customers’ healthcare challenges

For consumers, we develop connected solutions that support healthier lifestyles, prevent or treat disease, and help people to live well with chronic illness, also in the home and community settings. As well as leveraging retail trade models, we will increasingly deliver products and services direct to consumers, supporting longer-term relationships to maximize the benefit consumers can derive from our solutions.

In hospitals, we are teaming up with healthcare providers in long-term strategic partnerships to innovate and transform the way care is delivered. We listen closely to our customers’ needs and together we co-create solutions – packaged combinations of systems, smart devices, software and services, as well as consumables – that help our customers to deliver on the Quadruple Aim of value-based care.

SonicareTelehealth eICUDiagnostic Imaging

More and more, we are partnering with our customers in new business models, no longer selling products in a transactional manner but engaging in long-term strategic partnerships, where we take co-responsibility for our customers’ key performance indicators. The combination of compelling solutions and consultative partnership contracts, including services, drives above-group-average growth rates, as well as a higher proportion of recurring revenues. We are embedding AI and data science in our propositions to unlock the value of data in the operational and clinical aspects of care processes.

With our global reach, deep clinical and technological insights and innovative strength, we are uniquely positioned in ‘the last yard’ to consumers and care providers, delivering:

  • connected products and services supporting the health and well-being of people
  • integrated modalities and clinical informatics to deliver precision diagnosis
  • real-time guidance and smart devices for minimally invasive interventions
  • connected products and services for chronic care.

Underpinning these, and spanning the health continuum, our connected care solutions enable us to:

  • connect patients and providers for more effective, coordinated, personalized care
  • manage population health, leveraging real-time patient data and clinical analytics.
Digital pathologyAzurionDallas Childrens Hospital

Our key strategic imperatives and value creation objectives

Our transformation into a focused leader in health technology – shifting from products to solutions and building long-term relationships with our customers – is absolutely critical for Philips’ future. Our strategic roadmap is our guide on this multi-year journey.

Roadmap to win

Over the last four years, our strategic roadmap has proven itself through the customers we have gained and the significant value we have created.

For the outlook on 2020, please refer to Message from the CEO.

We will continue to deliver meaningful employment and engagement in the communities where we operate, while doing business in a sustainable manner.

COVID-19 response and other developments

Philips’ ongoing focus on innovation and strategic partnerships resulted in the following key developments in the quarter.

Strategic partnerships

Partnerships enhancing care and productivity

Highlighting its strength in strategic partnerships to enhance patient care and improve care provider productivity, Philips signed 14 new agreements in the quarter. For example, Philips and the US Department of Veterans Affairs entered a 10-year agreement to expand their tele-critical care program, creating the world’s largest system to provide veterans with remote access to intensive care expertise, regardless of their location. In the Netherlands, Philips and Flevo Hospital signed a 10-year strategic partnership agreement to support precision diagnosis and optimize workflows and patient pathways, while driving efficiencies and cost optimization.
Discover more (US Department of Veterans Affairs)
Discover more (Flevo Hospital)
Ventilators

Ramping up critical care ventilator production

In collaboration with its partners and suppliers, Philips tripled the production of its hospital ventilators in the quarter and is on track to achieve the planned four-fold increase to 4,000 units per week in July 2020, supporting the treatment of COVID-19 patients in the most affected regions around the world.
Discover more
Monitoring

New monitoring solutions

Philips launched several new monitoring solutions for the Intensive Care Unit (ICU), the general ward and the home that feature remote monitoring capabilities and advanced analytics. These include Philips’ IntelliVue Patient Monitors MX750/MX850 for the ICU, Philips’ Biosensor BX100 for early patient deterioration detection in the general ward, and in collaboration with BioIntelliSense, the BioSticker medical device to help monitor at-risk patients from the hospital to the home.
Discover more (Philips Biosensor BX100)
Discover more (BioIntelliSense)
Virtual care

Helping improve acute care outcomes

University of Kentucky HealthCare teamed up with Philips to implement the company’s tele-ICU technology to enhance patient care and improve utilization and patient flows across 160 ICU beds at the academic medical center’s two hospitals. Leveraging Philips’ acute telehealth platform, eCareManager, UK HealthCare is implementing the state’s first centralized virtual care model to help nurses detect risk of patient deterioration, so they can intervene earlier and help improve care outcomes.
Discover more
portable ultrasound

Clearance for ultrasound solutions

Philips received an industry-first 510(k) clearance from the FDA to market a wide range of its ultrasound solutions – including CX50 and Lumify – for the management of COVID-19-related lung and cardiac complications. Portable ultrasound solutions in particular have become valuable tools for clinicians treating COVID-19 patients, due to their imaging capabilities, portability and ease of disinfection.
Discover more
Acute care and imaging

Flexible critical care capacity

Supporting the increased demand for flexible ICU capacity, Philips introduced its new mobile ICUs in India. The ICUs can be furnished with a range of medical equipment, including ventilators, defibrillators, and patient monitoring. In the Philippines, Philips introduced a modular diagnostic imaging cabin with a CT or diagnostic X-ray system for rapid deployment.
Discover more (India)
Discover more (Philippines)
Teledentistry

New teledentistry collaboration

Complementing Philips Sonicare’s existing teledentistry services for patients, Philips and dental technology company Toothpic announced a new teledentistry platform for dental professionals. The multi-service platform provides a tool to build direct patient engagement, acquisition and retention while improving office efficiency, in-chair time and remote care.
Discover more

Progress towards our goals

1.65billion
1.65
3
Lives improvedBased on Q2 2020 data

At Philips, we are striving to make the world healthier and more sustainable through innovation, with the goal of improving the lives of 3 billion people a year by 2030.

To ensure we remain on track to achieve this goal, we have developed a model, audited externally, that tells us how many lives have been improved by our products and solutions in a given year.

Download our methodology

Read more about our vision

192 million
192
400
Lives improved in underserved healthcare communitiesBased on Q2 2020 data

As part of our goal to improve the lives of 3 billion people a year by 2030, we have committed to improving access to care in underserved healthcare communities for 400 million people a year.

We are expanding access to care by:

  • working within an ecosystem of strong collaborators
  • driving digital and technological innovation across the health continuum
  • developing new business models
  • partnering to develop effective financing solutions.
Download our methodology

Read more about our vision

66%70% Sales from green products and solutions
66%
70%
13%15% Sales from circular products and solutions
13%
15%
95%100% Operations powered by renewable electricity
95%
100%
85%90% Operational waste recycled
85%
90%
67%100% Industrial sites sending zero waste to landfill
67%
100%
29%10% Reduction in water consumption from 2015 level
29%
10%
All data points refer to Q2 2020

Sustainable use of materials and energy

Reflecting our commitment to SDG 12 ( Sustainable consumption and production ) and SDG 13 ( Climate action ), we have set specific targets – to be achieved by 2020 – to reduce our environmental impact and help fight climate change. Here you can see how we’re progressing towards our goals.

Our sustainability program

Sustainability highlights

Lives improved trend line

Lives improved

(in millions)

2019 Q2

2019 Q3

2019 Q4

2020 Q1

2020 Q2

1.591

1.611

1.640

1.640

1.649

Lives improved in underserved healthcare communities

(in millions)

2019 Q2

2019 Q3

2019 Q4

2019 Q1

2020 Q2

180

183

190

190

192

Results by region and market

Total population 367million
342million
Lives improved1% compared to Q2 2019
Philips presence
Based on Q2 2020 data
Sales
1,604million EUR
Employees
21,508
Male*
63%
Female*
37%
Manufacturing sites
11
R&D centers
14
*Based on 2019 data
Total population 2,178million
452million
Lives improved3% compared to Q2 2019
Philips presence
Based on Q2 2020 data
Sales
1,298million EUR
Employees
26,671
Male*
65%
Female*
35%
Manufacturing sites
10
R&D centers
15
*Based on 2019 data
Lives improved by market
Compared to Q2 2019
Africa
32million4%
Benelux
26million1%
Central & Eastern Europe
80million2%
Germany, Austria & Switzerland
81million2%
France
45million0%
Iberia
30million2%
Italy, Israel & Greece
36million3%
Middle East & Turkey
69million9%
Nordics
18million5%
United Kingdom & Ireland
35million4%
Total population 4,331million
758million
Lives improved6% compared to Q2 2019
Philips presence
Based on Q2 2020 data
Sales
1,333million EUR
Employees
26,665
Male*
58%
Female*
42%
Manufacturing sites
9
R&D centers
12
*Based on 2019 data
Lives improved by market
Compared to Q2 2019
ASEAN & Pacific
161million9%
Greater China
429million5%
Indian Subcontinent
81million6%
Japan
43million3%
Russia & Central Asia
44million6%
Total population 631million
98million
Lives improved-4% compared to Q2 2019
Philips presence
Based on Q2 2020 data
Sales
160million EUR
Employees
5,676
Male*
55%
Female*
45%
Manufacturing sites
3
R&D centers
2
*Based on 2019 data

Making the world healthier and more sustainable

In Q2 2020, we made further advances in the focal areas of our ‘Healthy people, Sustainable planet’ program – access to care, circular economy and climate action – taking us closer to our goal of improving the lives of 3 billion people a year by 2030, including 400 million in underserved healthcare communities.

  • Our products and solutions improved the lives of 1.65 billion people worldwide, an increase of 60 million lives year-on-year; our efforts to improve access to care for underserved healthcare communities resulted in 192 million lives improved (180 million in Q2 2019).
  • Together with 50 global leaders, Philips CEO Frans van Houten signed a pledge to build back a better future, accelerating the transition to a circular economy — creating solutions that combine economic opportunity with benefits to wider society and the environment.
  • Philips’ Lumify app-based handheld ultrasound, which empowers healthcare professionals to get diagnostic insight at the point-of-care – whether in the emergency department of a major hospital or in a remote village – has been awarded the 2020 IEEE Spectrum Technology in the Service of Society Award, as the technology having the greatest potential to provide the most overall benefit to humankind.
  • In North America, Philips achieved a milestone as all its manufacturing sites achieved ‘zero waste to landfill’ status. 
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Key data

Sales

Philips Group

4,395million EUR
4,671million EUR in Q2 2019
-6%Nominal growth
-6%Comparable growth

Philips reporting segments

Diagnosis & Treatment

1,919million EUR
2,063million EUR in Q2 2019
-7%Nominal growth
-9%Comparable growth

Connected Care

1,322million EUR
1,161million EUR in Q2 2019
14%Nominal growth
14%Comparable growth

Personal Health

1,069million EUR
1,351million EUR in Q2 2019
-21%Nominal growth
-19%Comparable growth

Other

84million EUR
96million EUR in Q2 2019

Sales per geographic cluster

Philips Group

4,395million EUR
4,671million EUR in Q2 2019
-6%Nominal growth
-6%Comparable growth

Sales by geographic area

Western Europe

991million EUR
964million EUR in Q2 2019
3%Nominal growth
1%Comparable growth

North America

1,604million EUR
1,742million EUR in Q2 2019
-8%Nominal growth
-10%Comparable growth

Other mature geographies

439million EUR
456million EUR in Q2 2019
-4%Nominal growth
-6%Comparable growth

Growth geographies

1,362million EUR
1,509million EUR in Q2 2019
-10%Nominal growth
-6%Comparable growth

Green revenues

Philips Group

2,880million EUR
3,107million EUR in Q2 2019
-7%Nominal growth

Philips reporting segments

Diagnosis & Treatment

1,480million EUR
1,562million EUR in Q2 2019
-5%Nominal growth

Connected Care

709million EUR
682million EUR in Q2 2019
4%Nominal growth

Personal Health

690million EUR
863million EUR in Q2 2019
-20%Nominal growth

Research and development expenses

Philips Group

489million EUR
439million EUR in Q2 2019

Philips reporting segments

Diagnosis & Treatment

247million EUR
198million EUR in Q2 2019

Connected Care

119million EUR
109million EUR in Q2 2019

Personal Health

73million EUR
75million EUR in Q2 2019

Other

50million EUR
57million EUR in Q2 2019

Income from operations and Adjusted EBITA (Philips Group)

Income from operations

229million EUR
350million EUR in Q2 2019
5.2% as a percentage of sales

Adjusted EBITA

418million EUR
549million EUR in Q2 2019
9.5% as a percentage of sales

Other key data

Income from continuing operations

213million EUR
260million EUR in Q2 2019

Net income

210million EUR
246million EUR in Q2 2019

Income from continuing operations attributable to shareholders per common share - diluted

0.23EUR
0.27EUR in Q2 2019

Adjusted income from continuing operations attributable to shareholders per common share - diluted

0.35EUR
0.42EUR in Q2 2019

Lives improved (Philips Group)

Total

1.65billion

by Philips health & well-being products and solutions

1.43billion

by Philips Green Products

1.11billion

Net operational carbon footprint  (Philips Group)

266
kilotonnes CO2-equivalent*
456kilotonnes CO2-equivalent in 2018
*Based on 2019 data