2020annual results

Innovating to address global health challenges

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Message from the CEO

Faced with the COVID-19 pandemic, Philips demonstrated strength and agility, working intensely together with healthcare providers to cope with the challenges for both acute and regular healthcare. At the same time we continued to support people with their personal health. More than ever, we have the potential to accelerate the transformation of healthcare with our innovative solutions.
Frans van Houten
CEO Royal Philips

Dear Stakeholder,

In 2020, Philips again demonstrated its relevance in bringing meaningful innovation to improve people’s health and well-being, as we responded to the COVID-19 pandemic. As a company, we continue to focus on delivering against our triple duty of care – meeting critical customer needs, safeguarding the health and safety of our employees, and ensuring business continuity.

Our employees displayed flexibility and resourcefulness as we more than quadrupled output of acute care equipment and solutions to help frontline healthcare workers diagnose, treat, monitor and manage COVID-19 patients. We significantly increased production of critical care ventilators, provided ICU monitoring & analytics solutions, and rolled out telehealth solutions to relieve the pressure on scarce resources. And our field service engineers worked round the clock to support healthcare providers in their hour of need.

In parallel, we continued to support health systems with the delivery of regular care, entering into multiple long-term strategic partnerships – all featuring result-oriented business models – to transform healthcare by enhancing patient care and improving productivity. We also found new ways to serve consumers seeking to live a healthy life, prevent disease and proactively manage their own health. In total, our products and solutions improved the lives of 1.75 billion people in 2020, including 207 million people in underserved communities.

Overall, our company performance proved resilient. While some of our businesses were affected by lower demand, others were able to significantly increase deliveries. I would like to express my admiration and gratitude for the way in which the extended Philips family – our employees, our suppliers and partners, the Philips Foundation – pulled together with our customers to address the impact of the pandemic.

Affirmation of our strategy

The developments of the past year validate our strategy to innovate the provision of care along the health continuum – putting the patient at the center, improving diagnosis and treatment pathways, enabling the integration of care across care settings, and increasing care provider productivity. At the same time, we help consumers to live healthier lifestyles and to cope with chronic disease. Increasingly, we are able to connect home and hospital care through telehealth platforms. This approach is resonating more strongly than ever.

Customers appreciate the comprehensive and strategic view we take of the future of health and healthcare. They want innovative solutions – smart combinations of systems, devices, informatics, data and services – that can help them deliver on the Quadruple Aim of better health outcomes, improved patient experience, improved staff experience, and lower cost of care. Given the learnings from COVID-19, they are especially keen to discover how we can support care outside the hospital.

In recent years, we have invested significantly in data science, informatics and cloud technology to enable the delivery of integrated solutions across the health continuum, and across care settings. These investments are now paying off, with a rapid increase in adoption of, for example, e-ICU and telehealth solutions that facilitate collaboration between health professionals and patient engagement.

Designed to address customer needs, our health technology innovations – supporting personal health, precision diagnosis, image-guided therapies and connected care, and leveraging the power of data and informatics – continue to generate a growing proportion of solutions-based sales and recurring revenues, which now stand at around 37% of total sales.

Innovating to address global health challenges

In healthcare the world over, we are seeing an increased focus on productivity and outcome-based models, as well as care outside the hospital. COVID-19 has accelerated the digitalization of care and the adoption of telehealth. This shift is being reinforced by global trends such as aging populations, the rise of chronic diseases, and resource constraints.

Innovative health technology can help health systems address these challenges, as well as extend access to care to those in need. The HealthTech market is a very attractive and sizable one, with considerable growth and margin potential, and Philips already holds strong leadership positions in over 65% of our portfolio.

Inspired by our purpose to improve people’s health and well-being, we invest almost 10% of revenue in Research & Development to innovate solutions that make a difference to our customers and society at large. Helping people to stay healthy and prevent disease, for instance through our expanding teledentistry services. Giving clinicians AI-assisted tools like our new Radiology Workflow Suite that help them make precision diagnoses and select the best care pathway. Helping surgeons deliver personalized, minimally invasive treatment with solutions like our constantly evolving Azurion image-guided therapy platform. And outside the hospital – orchestrating and delivering care in lower-cost care settings, helping people to recover, or live with chronic disease, at home.

All of these require a seamless flow of data, which is enabled by our highly secure connected care solutions, such as our IntelliVue MX750/MX850 patient monitors for the ICU. To unlock the full benefits of data-enabled care, we continue to expand our capabilities in informatics and data science, with around half of our R&D professionals working in these areas.

Doing business responsibly and sustainably

In 2020, we underscored our determination to lead by example by renewing our purpose – to improve people’s health and well-being through meaningful innovation, with the aim of improving 2 billion lives per year by 2025, including 300 million in underserved communities, rising to 2.5 billion and 400 million respectively by 2030.

This is part of an enhanced, fully integrated approach to doing business responsibly and sustainably. Building on our strong heritage in environmental and social responsibility, this new framework comprises a comprehensive set of key commitments across the Environmental, Social and Governance (ESG) dimensions that guide our endeavors. I am convinced this is the best way for Philips to create superior, long-term value for our many stakeholders.

I am pleased that we have delivered on all the targets set out in our Healthy people, Sustainable planet 2016-2020 program. As a purpose-driven company, we are conscious of our responsibility towards society and of the need to continue to embed sustainability ever deeper in the way we do business. Having become carbon-neutral in our own operations in 2020, we are now extending our ambitions and working with our partners to ensure that emissions across our entire value chain are in line to limit global warming to the 1.5 °C scenario.

We received further recognition for our efforts in this area in 2020 – achieving a CDP ‘A List’ rating for the eighth consecutive year for our action on climate change, and securing the second-highest place in both the global Dow Jones Sustainability Indices (DJSI) list and The Wall Street Journal’s new ranking, 100 Most Sustainably Managed Companies in the World.

Our performance in 2020

COVID-19 impacted every part of our business in 2020. Nevertheless, despite the challenging circumstances, we were able to execute our plans and return to growth in the second half of the year. For the full year we delivered 3% comparable sales growth**Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. and a strong free cash flow**Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. of EUR 1.9 billion. Comparable order intake****Other Key Performance Indicator. For the definition and further information, refer to Other Key Performance Indicators. increased 9% and we made market share gains in a number of our health systems businesses. 

Our Diagnosis & Treatment businesses were impacted by the ongoing postponement of capital equipment installations and routine care, including elective procedures, yet continued to deliver a steady flow of innovations designed to help clinicians deliver a precision diagnosis leading to targeted therapies.

Our Connected Care businesses posted exceptional growth, fueled by COVID-19-related demand for our hospital ventilation and monitoring & analytics solutions.

Our Personal Health businesses had to contend with a steep decrease in consumer demand brought about by the onset of COVID-19, yet rebounded strongly by accelerating online growth, increasing digital engagement, entering into partnerships with leading retailers, and scaling direct-to-consumer business models.

We initiated the process to create a separate legal structure for our Domestic Appliances business within the Philips Group, and we expect to complete this process by Q3 2021.

We made several acquisitions in 2020. For instance, we expanded our image-guided therapy devices portfolio, acquiring Intact Vascular to add an industry-first implantable device to treat peripheral artery disease. We also agreed to acquire BioTelemetry (completed on February 9, 2021) and Capsule Technologies to strengthen our Connected Care segment. These acquisitions will further broaden and scale our patient care management solutions for the hospital and the home, enhance patient outcomes, streamline clinical workflows and increase productivity.

Looking ahead, we continue to see uncertainty related to the impact of COVID-19 across the world. For 2021, Philips plans to deliver low-single-digit comparable sales growth**Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information., driven by solid growth in Diagnosis & Treatment and Personal Health, partly offset by lower Connected Care sales, and an Adjusted EBITA margin**Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. improvement of 60-80 basis points.

Reflecting our confidence in the future course of the company and the importance we attach to dividend stability, we propose to maintain the dividend at EUR 0.85 per share.

Transforming to create greater value

As we continue our transformation into a customer-first solutions company, we are guided by our strategic roadmap, with its three key imperatives:

  • Further improving the customer experience and operational excellence
  • Boosting growth in the core by innovating to extend category leadership, geographic expansion, and deeper customer partnerships
  • Winning with solutions to support consumers with their personal health, and to help professional healthcare customers achieve the Quadruple Aim.

We aim to drive customer preference by getting even closer to our customers and consumers, making Philips easier to do business with, and further improving our quality, operational excellence and productivity. To do this, we are driving the digital transformation in every area of our business, leveraging our integrated IT landscape – from the way we connect and engage with our customers and consumers to seamlessly connecting our solutions, e.g. to enable remote servicing and upgrades.

In our core business we aim to drive growth through innovation by capturing geographic growth opportunities and by continuing the pivot to consultative customer partnerships and business models, which offer a deeper relationship, with recurring revenue streams.

We will also continue the shift towards integrated solutions with demonstrable clinical evidence and health economic benefits that help our customers achieve the Quadruple Aim. In doing so, we will leverage data science and AI at scale. Where appropriate, we will continue to make acquisitions and enter into partnerships to support our organic growth.

By working in accordance with the Philips Business System and executing on these imperatives with urgency and discipline, we will be able to create more value for our stakeholders – driving customer preference, sustained growth, margin expansion, increased cash flow and improved return on invested capital, while delivering on our ESG commitments.

In conclusion

Once again, I would like to thank our customers, suppliers and partners for working together with Philips in the fight against coronavirus. I also want to express my gratitude to our employees for their commitment, resourcefulness and hard work in difficult circumstances. And I wish to thank our shareholders for the confidence they continue to show in Philips.

Our strategic focus and commitment to improvement remain undiminished. Energized by our purpose and buoyed by the resilience and agility I have seen over the past year, I am confident in Philips’ ability to maintain our transformation momentum, truly impact global health challenges through innovation, and deliver sustained value for our many, diverse stakeholders.

Frans van Houten
Chief Executive Officer

Our strategic focus

Driven by purpose

At Philips, our purpose to improve people’s health and well-being through meaningful innovation is at the heart of everything we do. Never has this central tenet been more important than it is now, in these challenging times. 

As a leading health technology company, we believe that innovation can improve people's health and healthcare outcomes, as well as making care more accessible and affordable. In concrete terms, we aim to improve the lives of 2 billion people a year by 2025, including 300 million in underserved communities, rising to 2.5 billion and 400 million respectively by 2030.

Guided by this purpose, it is our strategy to lead with innovative solutions that combine systems, smart devices, informatics and services, and leverage big data – helping our customers deliver on the Quadruple Aim (better health outcomes, improved patient experience, improved staff experience, lower cost of care) and helping people to take better care of their health at every stage of life. 

We strive to deliver superior, long-term value to our customers and shareholders, while acting responsibly towards our planet and society, in partnership with our stakeholders.

We aim to grow Philips responsibly and sustainably. To this end, we have deployed a comprehensive set of commitments across all the Environmental, Social and Governance (ESG) dimensions that guide the execution of our strategy and support our contribution 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). 

Our view on healthcare

Health technology is a large market, which is expected to grow by around 4% each year**Philips-defined 2020-2025 addressable markets, excluding the Domestic Appliances business. Besides the natural drivers of growth – aging populations, the rise of chronic diseases, increased spending on healthcare in emerging markets – we believe that health technology will be a major growth driver in the years to come. 

At Philips, we see healthcare as a continuum, since it puts people’s health journeys front and center and builds upon the idea of integrated care pathways. Believing that healthcare should, and can, be seamless, efficient and effective, we strive to ‘connect the dots’ for our customers and consumers, supporting the flow of data needed to care for people in real time, wherever they are. 

Roadmap to win

Going forward, the digitalization of healthcare and – accelerated by COVID-19 – the more widespread adoption of telehealth will play an increasing role in helping people to live healthily and cope with disease, and in enabling care providers to meet people’s health needs, deliver better outcomes and improve productivity.

Helping our customers address their healthcare challenges

In the consumer domain, we develop innovative solutions that support healthier lifestyles, prevent disease, and help people to live well with chronic illness, also in the home and community settings. 

In addition to leveraging retail trade partnerships and new business models, we are accelerating growth through online channels, delivering products and services direct to consumers, and supporting longer-term relationships to maximize the benefit consumers can derive from our solutions. 

In clinics and hospitals, we are teaming up with healthcare providers to innovate and transform the way care is delivered. We listen closely to our customers’ needs and together we co-create solutions that help our customers improve outcomes, patient and staff experience and productivity, and so deliver on the Quadruple Aim of value-based care. 

Increasingly, we are working together with our health systems customers in novel business models, including outcome-oriented payment models, that align their interests and ours in long-term partnerships. The combination of compelling solutions and consultative partnership contracts, including a broad range of professional services, drives growth rates above the group average, as well as a higher proportion of recurring revenues. 

We are embedding AI and data science in our propositions – for instance, applying the power of predictive data analytics and artificial intelligence at the point of care – to leverage the value of data in the clinical and operational domains, aiding clinical decision making and improving the quality and efficiency of healthcare services.

With our global reach, market leadership positions, deep clinical and technological insights, and innovation capability, we are strongly placed to create further value in a changing healthcare world through our propositions in:

Personal Health

Delivering solutions that enable healthier lifestyles, personal hygiene and living with chronic disease.

Diagnosis & Treatment
  • Precision Diagnosis – providing smart, connected systems, optimized workflows, and integrated diagnostic insights, leading to clear care pathways and predictable outcomes
  • Image Guided Therapy – innovating minimally invasive procedures in a growing number of therapeutic areas, with significantly better outcomes and productivity
Connected Care

Driving better care management by seamlessly connecting patients and caregivers from the hospital to the home.

Our key strategic imperatives and value creation objectives

Our roadmap – with its three strategic imperatives – is our guide as we continue our transformation journey to attain HealthTech industry leadership and drive value creation.

Roadmap to win

Underpinned by these strategic imperatives, and assuming the world economy will return to growth in 2021, Philips’ targets for accelerated growth, higher profitability and improved cash flow for the 2021–2025 period are: 

  • An acceleration of the average annual Group comparable sales growth****Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. to 5-6%, with all business segments within this range. For 2021, Philips aims to deliver low-single-digit Group comparable sales growth****Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information., driven by solid growth in Diagnosis & Treatment and Personal Health, partly offset by lower Connected Care sales. 
  • An Adjusted EBITA****Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. margin improvement of 60-80 basis points on average annually from 2021, with a target of the high teens for the Group by 2025; Diagnosis & Treatment is targeted to reach 15-17% Adjusted EBITA****Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. margin by 2025, Connected Care 17-19%, and Personal Health 19-20%. 
  • Free cash flow****Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. above EUR 2 billion by 2025. 
  • Organic Return on Invested Capital (ROIC)****Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. of mid-to-high teens by 2025.

The new targets exclude the Domestic Appliances business. As announced in January 2020, Philips is reviewing options for future ownership of its Domestic Appliances business. Philips has started the process of creating a separate legal structure for this business within the Philips Group, which is expected to be completed in the third quarter of 2021.

*)  Philips-defined 2020-2025 addressable markets, excluding the Domestic Appliances business
**) Non-IFRS financial measure.

Partnering with customers around the world

Below you will find just a few of the long-term partnerships Philips entered into around the world in 2020 to enhance patient care and improve care provider productivity. Under these agreements, we will deliver innovative solutions to help our customers address the Quadruple Aim of better health outcomes, improved patient experience, improved staff experience, and lower cost of care.

North America

US Department of Veterans Affairs

USA

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.

Read more

University of Kentucky HealthCare

USA

University of Kentucky HealthCare teamed up with Philips to implement our 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.

Read more

SimonMed Imaging

USA

SimonMed Imaging – one of the largest outpatient medical imaging providers in the US – is partnering with Philips to deploy its most advanced 3T MRI technology, including software and services, at their outpatient practices to enhance diagnoses, from brain injuries, liver and cardiac disease to orthopedic injuries.

Read more

Europe, Middle East & Africa

Paracelsus Clinics

Germany

Philips entered into an 8-year strategic partnership Paracelsus Clinics, offering solutions that maximize the availability of imaging systems and leverage digitalization and process optimization to realize quality and efficiency improvements.

Read more

Marienhospital Stuttgart

Germany

Philips signed a 10-year strategic partnership with Marienhospital Stuttgart to deploy our digital healthcare solutions across multiple departments to improve patient care and efficiency. The project will include renewal and ongoing development of the hospital’s diagnostic imaging equipment and associated IT systems, digitization of its pathology department, and enhancement of the hospital’s emergency medicine capabilities.

Read more

Flevo Hospital

Almere, 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.

Read more

Asia

First Affiliated Hospital of Zhejiang University

Zhejiang, China

Philips signed a multi-year contract with the First Affiliated Hospital of Zhejiang University, one of China's leading hospitals, to support its expansion and upgrading. Combining clinical, research and education, this deal includes Ultrasound, Image Guided Therapy and Monitoring Analytics & Therapeutic Care solutions.

Mandaya Royal Hospital Puri

Tangerang, Indonesia

Philips signed a seven-year strategic partnership agreement with Mandaya Royal Hospital Puri. The turnkey solution includes the next-generation Azurion image-guided therapy system, the Ingenia Ambition MR, and the detector-based IQon Spectral CT, as well as the latest innovations in connected care and informatics.

Read more

Buon Ma Thuot University

Vietnam

Philips and Buon Ma Thuot University signed a multi-year strategic partnership agreement on a turn-key smart hospital solution to deliver high-quality healthcare services to Dak Lak and surrounding areas, reducing the need for residents to travel to large cities for healthcare services.

Progress towards our goals

1.75billion
1.75
2.5
Lives improvedBased on full-year 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 2.5 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

207million
207
400
Lives improved in underserved healthcare communitiesBased on full-year 2020 data

As part of our goal to improve the lives of 2.5 billion people a year by 2030, we have committed to improving access to care in underserved 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.

Lives improved trend line

Lives improved

(in millions)
 2019 Q42020 Q12020 Q22020 Q32020 Q4
Lives improved1,6401,6981,7101,7321,751

Lives improved in underserved healthcare communities

(in millions)
 2019 Q42020 Q12020 Q22020 Q32020 Q4
Lives improved195198201204207
71%70%Sales from green products and solutions
71%
70%
15%15%Sales from circular products and solutions
15%
15%
100%100%Operations powered by renewable electricity
100%
100%
90%90%Operational waste recycled
90%
90%
100%100%Industrial sites sending zero waste to landfill
100%
100%
20%10%Reduction in water consumption from 2015 level
20%
10%
All data points refer to 2020

Sustainable use of materials and energy

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

Read more about our sustainability program

Making the world healthier and more sustainable

In 2020, we successfully completed our Healthy people, Sustainable planet 2016-2020 program, with its focus on access to care, circular economy and climate action, taking us closer to our goal of improving the lives of 2.5 billion people a year by 2030, including 400 million in underserved communities.

Access to care

  • At the 75th anniversary of the United Nations General Assembly, Philips underlined its commitment to actively engage and partner with stakeholders and other companies to help achieve UN Sustainable Development Goals 3, 12 and 13.
  • In an example of ecosystem collaboration and technology improving access and quality of care, Philips’ Connected Primary Care Solutions team in Kenya collaborated with Amref University and Philips Foundation to strengthen caregiver capacity by training midwives on the use of the Philips Lumify handheld ultrasound device.
  • Philips launched an innovative tele-ultrasound collaboration solution powered by Reacts technology to 16 customers in the US and Canada. Verified by a clinical study in rural New Mexico, this solution allowed routine exams on patients of a perinatal clinic to be performed remotely, improving access to care by avoiding travel of up to 100 km for an economically underprivileged population.

Circular economy

  • Revenues from Circular Products and Solutions increased to 15% (13% in 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 set an environmental milestone with the launch of the Viva Café Eco coffee machine, our first product to have all the visible plastic parts and non-food-contact parts made from recycled materials.

Climate action

  • Philips, Heineken, Signify and Nouryon formed a consortium and closed the first pan-European virtual Power Purchase Agreement to source renewable electricity from the Mutkalampi windfarm in Finland, which will become operational in 2023.
  • For the eighth year running, Philips has been placed on the CDP Climate Change A List. We have been recognized for our actions during the last reporting year to reduce emissions, mitigate climate risks and develop the low-carbon economy. Read more 

Other highlights

  • Revenues from Green Products and Solutions advanced to 71% of total revenues (67% in 2019).
  • Philips continued its top ranking in the Dow Jones Sustainability Indices as it received the maximum scores (100/100) in several categories, including health outcome contribution, environmental reporting, climate strategy, and social reporting categories. Read more
  • The Wall Street Journal (WSJ) announced Philips as the world’s second most sustainably managed company. Its listing of ‘The 100 Most Sustainably Managed Companies in the World‘ was compiled from a survey of more than 5,500 publicly traded businesses, based on various sustainability metrics and an analysis of media coverage. Read more

Philips' ESG performance at a glance

The dashboard below shows how Philips performed in 2020 on the 21 Core metrics of the WEF ESG reporting framework, mapped across the three dimensions of our ESG commitments, as well as a number of additional metrics that we consider fundamental to the strategy and operation of our business.

Environmental

  • Green House Gas (GHG) emissions100% electricity from renewable sources0 kilotonnes CO2-equivalent (net operational carbon footprint)
  • TCFD implementationDeveloped 2 and 4 °C global warming scenarios and assessed their impact on our supply chain, Philips and customers
    Disclosed in separate report
  • Land use and ecological sensitivity0.5 kilotonnes waste sent to landfill32/32 sites Zero Waste to Landfill
  • Water consumption and withdrawal in water-stressed areas777,476 m3 total water intake276,615 m3 in water-stressed areas
  • Circular revenues *15% of revenues
  • Closing the loop **Philips-specific metricClosed the loop for all large medical equipment returned to us

Social

  • Lives Improved *1.75 billion, of which 207 million in underserved communities
  • Diversity & Inclusion27% gender diversity in senior leadership positions39% gender diversity in total workforce79% Employee Engagement Score *
  • Pay equalityPhilips is conducting a pay equality analysis
    Working on recognized Certification in Gender Equality
  • Wage level6,490 million EUR employee benefit expensesPhilips pays all employees a living wage
  • Risk for incidents of child, forced or compulsory laborAddressed in Philips GBP, Supplier Sustainability Declaration and Supplier Sustainability program
  • Health & Safety0.24 Total Recordable Case rate per 100 FTEs185 Total Recordable Cases
  • Training provided835,575 training hours in Philips University763,371 training completions
  • Absolute number and rate of employment81,592 employees14% turnover
  • Supplier development program *257 companies302,000 employees impacted
  • Volunteering *75 new projects in 2020 reaching 7.5 million people

Governance

  • Setting purposePhilips’ purpose is to improve the health and well-being of people through meaningful innovation
  • Governance body compositionPhilips has a Board of Management and an independent Supervisory Board
  • Material issues impacting stakeholdersDetailed Materiality Analysis performed
  • Anti-corruption14,000 anti-bribery anti-corruption and 65,000 GBP trainings completed
  • Protected ethics advice and reporting mechanismsWhistleblower mechanism in place
  • Integrating risk and opportunity in business processesIncluded in Risk Management section
  • Economic contribution19,535 million EUR revenues758 million EUR dividend declared6.7 million EUR contribution to Philips Foundation107 million EUR government grants
  • Financial investment contribution2,682 million EUR total tangible assets802 million EUR capital expenditure
  • Total R&D expenses1.92 billion EUR invested in R&D (9.8% of revenues)
  • Total tax contribution3.38 billion EUR

How we create value for our stakeholders

Based on the International Integrated Reporting Council framework, and with the Philips Business System at the heart of our endeavors, we use various resources to create value for our stakeholders in the short, medium and long term.

As we drive our transformation to become a solutions provider to our customers and consumers, we have adopted a single standard operating model that defines how we work together effectively to achieve our company objectives – the Philips Business System (PBS). The PBS integrates key aspects of how we operate:

  • Our strategy defines our path to sustainable value creation for customers and shareholders.

  • Clear governance, roles and responsibilities empower people to collaborate and act fast.

  • Standard processes, systems and practices enable lean and agile ways of working.

  • We value and develop people and teams, rewarding them for sustainable results.

  • We live the Philips culture, which sets standards on behaviors, quality and integrity.

  • Through disciplined performance management and continuous improvement we achieve our goals.

Having a single business system increases speed and agility, and enhances standardization, quality and productivity, while driving a better, more consistent experience for our customers.

Resource inputs

The resources and relationships that Philips draws upon for its business activities

Human

  • Employees 81,592, 120-plus nationalities, 39% female
  • Philips University 5,852 courses, 835,575 hours, 763,371 training completions
  • 35,188 employees in growth geographies
  • Focus on Inclusion & Diversity

Intellectual

  • Invested in R&D EUR 1.92 billion (Green Innovation EUR 280 million)
  • Employees in R&D 11,129 across the globe including growth geographies

Financial

  • Equity EUR 11.9 billion
  • Net debt**Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. EUR 3.7 billion

Manufacturing

  • Employees in production 39,770
  • Manufacturing sites 32, cost of materials used EUR 5.2 billion
  • Total assets EUR 27.7 billion
  • Capital expenditure EUR 513 million

Natural

  • Energy used in manufacturing 1,297 terajoules
  • Water used 777,476 m3
  • Recycled plastics in our products 1,930 tonnes
  • 'Closing the loop' on all our professional medical equipment by 2025

Social

  • Philips Foundation
  • Stakeholder engagement
  • Volunteering policy
c-tile__intro-image
Value outcomes/Societal impact

Value outcomes

Output

The result of the application of the various resources to Philips’ business activities and processes as shaped by the Philips Business System

Human

  • Employee Engagement Index 79% favorable
  • Sales per employee EUR 239,423
  • Safety 185 Total Recordable Cases

Intellectual

  • New patent filings 876
  • Royalties EUR 317 million
  • 151 design awards

Financial

  • Comparable sales growth**Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. 2.5%
  • 71% Green Revenues
  • Adjusted EBITA**Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. as a % of sales 13.2%
  • Free cash flow**Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. EUR 1.9 billion

Manufacturing

  • EUR 14.7 billion revenues from goods sold

Natural

  • 15% revenues from circular propositions
  • Net CO2 emissions down to zero kilotonnes
  • 265,000 tonnes (estimated) materials used to put products on the market
  • Waste 35.5 kilotonnes, of which 90% recycled

Social

  • Brand value USD 11.7 billion (Interbrand)
  • Partnerships with UNICEF, Red Cross, Amref and Ashoka

Societal impact

Impact

The societal impact of Philips through its supply chain, its operations, and its products and solutions

Human

  • Employee benefit expenses EUR 6,490 million, all staff paid a Living Wage
  • Appointed 74% of our senior positions from internal sources
  • 27% of Leadership positions held by women

Intellectual

  • Around 60% of revenues from new products and solutions introduced in the last three years
  • Over 65% of sales from leadership positions

Financial

  • Market capitalization EUR 39.6 billion at year-end
  • Long-term credit rating A- (Fitch), Baa1 (Moody's), BBB+ (Standard & Poor's)
  • Dividend EUR 758 million

Manufacturing

  • 100% electricity from renewable sources

Natural

  • Environmental impact of Philips operations down to EUR 135 million
  • 32 'zero waste to landfill' sites
  • First health technology company to have its CO2 reductions assessed and approved by the Science Based Targets initiative

Social

  • 1.75 billion Lives Improved, of which 207 million in underserved communities
  • 302,000 employees impacted at suppliers participating in the 'Beyond Auditing' program
  • Total tax contribution EUR 3.38 billion (taxes paid/withheld)
  • Income tax expense EUR 284 million; the effective income tax rate is 19%

Interactive charts and historical data

Statement of income
Profitability
Balance sheet
Cash flow
Key figures per share
Employees
Sustainability

[maintitle]

in millions of EUR

2017

2018

2019

2020

Net cash provided by operating activities

 1,870

1,780

2,031

2,777

Net capital expenditures

 (685)

(796)

(978)

(924)

Free cash flows

 1,185

984

1,053

1,852

[maintitle]

in millions of EUR

2016

2017

2018

2019

2020

Sales

17,422

17,780

18,121

19,482

19,535

Income from operations

1,464

1,517

1,719

1,644

1,542

Adjusted EBITA

1,921

2,153

2,366

2,563

2,570

Income (loss) from continuing operations

830

1,028

1,310

1,192

1,205

Net income (loss)

1,490

1,870

1,097

1,173

1,195

[maintitle]

as a % of sales

2016

2017

2018

2019

2020

Income from operations

8.4%

8.5%

9.5%

8.4%

7.9%

Adjusted EBITA

11%

12.10%

13.10%

13.20%

13.20%

[maintitle]

in millions of EUR

2016

2017

2018

2019

2020

Total assets

32,269

25,315

26,019

27,016

27,713

Total provisions and liabilities

18,817

13,292

13,902

14,391

15,812

Shareholders’ equity

12,546

11,999

12,088

12,597

11,870

Market capitalization at year-end

26,751

29,212

28,276

38,775

39,627

[maintitle]

in EUR

2016

2017

2018

2019

2020

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

1.24

1.54

1.76

1.98

1.98

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

0.87

1.06

1.37

1.27

1.31

Dividend distributed per common share

0.80

0.80

0.80

0.85

0.85

Share price at year-end

29.00

31.54

34.02

43.52

43.78

Price/earnings ratio

25.89

35.84

24.13

33.22

33.17

Total employees at year-end

 

2016

2017

2018

2019

2020

Philips Group

114,731

73,951

77,400

80,495

81,592

Engagement index

% positive score

2016

2017

2018

2019

2020

Philips Group

74

76

74

74

79

Female executives

in % of total

2016

2017

2018

2019

2020

Philips Group

18

18

19

22

24

Lost Workday Injuries

per 100 FTEs

2016

2017

2018

2019

2020

Diagnosis & Treatment0.360.270.200.330.27
Connected Care0.140.140.130.090.11
Personal Health0.170.180.110.130.21
Other0.100.140.110.090.06
Philips Group0.160.170.130.140.13

Total recordable cases

per 100 FTEs

2016

2017

2018

2019

2020

Diagnosis & Treatment0.650.580.550.610.45
Connected Care1.010.610.350.340.31
Personal Health0.110.20.140.160.27
Other0.270.290.220.240.16
Philips Group0.370.360.280.300.24

Fatalities

 

2016

2017

2018

2019

2020

Philips Group

0

0

0

0

1

Green Revenues (in millions of EUR)

in millions of EUR

2016

2017

2018

2019

2020

Diagnosis & Treatment

4,798

5,168

5,746

6,316

6,373

Connected Care

1,442

2,036

2,330

3,091

3,586

Personal Health

3,951

3,456

3,445

3,681

3,902

Philips Group

10,191

10,660

11,521

13,088

13,861

Green Revenues (as a % of total sales)

as a % of total sales

2016

2017

2018

2019

2020

Diagnosis & Treatment

67

70

74

74

78

Connected Care

34

47

54

66

64

Personal Health

71

61

62

63

72

Philips Group

58

60

64

67

71

Green Innovation

in millions of EUR

2016

2017

2018

2019

2020

Diagnosis & Treatment

133

99

101

110

122

Connected Care

38

33

36

21

51

Personal Health

96

91

86

99

105

Other

10

10

5

5

2

Philips Group

277

233

228

235

280

Operational Carbon Footprint

in kilotonnes CO2-equivalent

2016

2017

2018

2019

2020

Logistics

491

641

572

504

429

Business travel

158

145

149

153

71

Non-industrial operations

77

40

40

27

15

Manufacturing

85

55

26

22

20

Operational carbon footprint by Greenhouse Gas Protocol scopes

in kilotonnes CO2-equivalent20162017201820192020
Scope 14238403532
Scope 2 (market based)1215825143
Scope 2 (location based)252225227203182
Scope 3649785721657500
Total (scope 1, 2 (market based), and 3)812881786706535
Emissions compensated by carbon o…ffset projects0220330440535
Net operational carbon emissions in kilotonnes8126614562660

Operational energy efficiency

in terajoules per million EUR sales20162017201820192020
Philips Group0.150.120.120.110.10

Total energy consumption in manufacturing

in terajoules

2016

2017

2018

2019

2020

Diagnosis & Treatment

627

614

593

547

580

Connected Care

276

278

287

281

229

Personal Health

557

571

586

572

488

Philips Group

1,460

1,463

1,466

1,400

1,297

Water intake

in thousands of m3

2016

2017

2018

2019

2020

Diagnosis & Treatment

269

312

288

295

286

Connected Care

152

168

161

150

116

Personal Health

542

408

442

445

375

Philips Group

963

888

891

890

777

Zero waste to landfill

in Ktonnes

2016

2017

2018

2019

2020

Philips Group

2.9

2.5

1.7

1.3

0.5

Materials provided for recycling via external contractor per total waste

in %

2016

2017

2018

2019

2020

Philips Group

79

80

84

83

90

Hazardous substances emissions

 in kilos

2016

2017

2018

2019

2020

Diagnosis & Treatment

428

743

636

104

92

Connected Care

88

49

63

46

20

Personal Health

583

625

394

378

464

Philips Group

1,099

1,417

1,093

528

576

VOC emissions

in tonnes

2016

2017

2018

2019

2020

Diagnosis & Treatment

35

48

44

46

44

Connected Care

5

6

6

6

3

Personal Health

89

88

78

62

36

Philips Group

129

142

128

114

83

ISO 14001 certification

as a % of all reporting organizations

2016

2017

2018

2019

2020

Philips Group

78

82

83

80

81

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Performance highlights

Sales

Philips Group

19,535million EUR
19,482 million EUR in 2019
0%Nominal growth
3%Comparable growth

Philips reporting segments

Diagnosis & Treatment

8,175million EUR
8,485 million EUR in 2019
-4%Nominal growth
-2%Comparable growth

Connected Care

5,564million EUR
4,674 million EUR in 2019
19%Nominal growth
22%Comparable growth

Personal Health

5,407million EUR
5,854 million EUR in 2019
-8%Nominal growth
-4%Comparable growth

Other

389million EUR
469 million EUR in 2019

Sales in mature geographies

Philips Group

13,422million EUR
12,990 million EUR in 2019
3%Nominal growth
4%Comparable growth

Philips reporting segments

Diagnosis & Treatment

5,355million EUR
5,651 million EUR in 2019
-5%Nominal growth
-6%Comparable growth

Connected Care

4,724million EUR
4,052 million EUR in 2019
17%Nominal growth
19%Comparable growth

Personal Health

3,052million EUR
2,974 million EUR in 2019
3%Nominal growth
4%Comparable growth

Sales by geographic area

Western Europe

4,613million EUR
4,134 million EUR in 2019
12%Nominal growth
11%Comparable growth

North America

6,949million EUR
6,951 million EUR in 2019
0%Nominal growth
2%Comparable growth

Other mature geographies

1,860million EUR
1,905 million EUR in 2019
-2%Nominal growth
-2%Comparable growth

Sales in growth geographies

Philips Group

6,113million EUR
6,492 million EUR in 2019
-6%Nominal growth
0%Comparable growth

Philips reporting segments

Diagnosis & Treatment

2,820million EUR
2,834 million EUR in 2019
0%Nominal growth
4%Comparable growth

Connected Care

840million EUR
622 million EUR in 2019
35%Nominal growth
45%Comparable growth

Personal Health

2,355million EUR
2,880 million EUR in 2019
-18%Nominal growth
-12%Comparable growth

Green revenues

Philips Group

13,861million EUR
13,088 million EUR in 2019
6%Nominal growth

Philips reporting segments

Diagnosis & Treatment

6,373million EUR
6,316 million EUR in 2019
1%Nominal growth

Connected Care

3,586million EUR
3,091 million EUR in 2019
16%Nominal growth

Personal Health

3,902million EUR
3,681 million EUR in 2019
6%Nominal growth

Research and development expenses

Philips Group

1,915million EUR
1,884 million EUR in 2019

Philips reporting segments

Diagnosis & Treatment

891million EUR
928 million EUR in 2019

Connected Care

550million EUR
465 million EUR in 2019

Personal Health

293million EUR
302 million EUR in 2019

Other

181million EUR
189 million EUR in 2019

Income from operations and Adjusted EBITA (Philips Group)

Income from operations

1,542million EUR
1,644 million EUR in 2019
7.9% as a percentage of sales

Adjusted EBITA

2,570million EUR
2,563 million EUR in 2019
13.2% as a percentage of sales

Other key data

Income from continuing operations

1,205million EUR
1,192 million EUR in 2019

Net income

1,195million EUR
1,173 million EUR in 2019

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

1.31EUR
1.27 EUR in 2019

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

1.98EUR
1.98 EUR in 2019

Lives improved  (Philips Group)

Total

1.75billion

by Philips health & well-being products and solutions

1.53billion

by Philips Green Products

1.19billion

Net operational carbon footprint (Philips Group)

0
kilotonnes CO2-equivalent
266 kilotonnes CO2-equivalent in 2019