2019annual results

Innovating with purpose

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Message from the CEO

Philips continues to make progress to unlock its full potential as a leader in health technology. Our innovations are driving better health outcomes and increased healthcare productivity, while offering a better experience for consumers, patients and healthcare professionals.
Frans van Houten
CEO Royal Philips

Dear Stakeholder,

In 2019, we continued our transformation as a focused leader in health technology, pursuing our vision of making the world healthier and more sustainable through innovation. I am pleased with the resilience of our businesses as we recorded 4.5% growth while addressing significant headwinds. We made good progress against our strategic imperatives – driving customer centricity and operational excellence, focusing on quality, growing our core businesses, and pivoting to become a solutions company. Our purpose is clear, and so is our firm belief in our potential to grow and create more value, while doing so in a sustainable manner. Reflecting our confidence in the road ahead and the importance we attach to dividend stability, we propose to maintain the dividend at EUR 0.85 per share.

Innovating with purpose

Time and again, customers tell us they like our strategy and the comprehensive view we take of healthcare along the health continuum – delivering innovations for consumer health, precision diagnosis, image-guided therapy, hospital and home care, leveraging informatics and artificial intelligence. They are keen to engage with Philips for innovations that can help them deliver on the Quadruple Aim – better health outcomes, improved patient and staff experience, and lower cost of care. This is reflected in the sustained growth in the number of long-term strategic partnerships we have signed, e.g. with Inspira Health (USA) and Klinikum Stuttgart (Germany), with solutions and recurring revenues now accounting for over one third of total revenues. There is also substantial interest in how we can contribute to care outside the hospital setting – through solutions that support healthy living, prevention and home care.

Aging populations and the growing incidence of chronic disease, coupled with resource constraints, are necessitating a shift from a volume-based approach towards value-based healthcare models, including care outside of the hospital. I firmly believe that innovative health technology – a growing market with scope for margin expansion, in which Philips has strong positions – will help address these challenges, providing better outcomes and productivity gains, as well as extending access to care to those in need.

Our goal of improving the lives of 3 billion people a year by 2030, including 400 million in underserved healthcare communities, infuses our innovation drive with true purpose, as we strive to make the world healthier and more sustainable, in line with 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).

Innovating with purpose in mind helps us to create more value for our customers and society – by developing truly relevant solutions. Helping people to stay healthy and prevent disease. Giving clinicians the AI-assisted tools to make precision diagnoses and deliver personalized, minimally invasive treatment. Orchestrating and delivering care outside the hospital, in lower-cost care settings. Helping people to recover, or live with chronic disease, at home in the community. All supported by a seamless flow of data enabled by connected care and health informatics solutions.

Increasingly, AI will enhance the quality and efficiency of care, providing clinical decision support, helping clinical staff to spot emerging risks, and freeing up valuable time for healthcare professionals to focus on their patients. We work with clinical partners around the world to develop AI-enabled solutions, like our IntelliSpace AI Workflow Suite, that are secure, firmly grounded in scientific research, and rigorously validated in clinical practice.

In the consumer domain too, connected personal health solutions like our Philips Sonicare Teledentistry service help people to manage their health with actionable insights, coaching, and where needed, support from care professionals.

Determined to deliver the full benefits of data-enabled care, we have significantly stepped up our activities in informatics and data science in recent years. Today, around one in two Philips R&D professionals is active in these fields, and most of our acquisitions since 2015 have been designed to strengthen our informatics capabilities.

As a purpose-led innovation company, we have made sustainability a cornerstone of the way we do business, as recognized once again in the global 2019 Dow Jones Sustainability Indices (DJSI) list. Increasingly, our customers ask us to help them tackle their sustainability challenges; we believe that, more and more, this will become a competitive differentiator. In 2019, we took another step closer to becoming carbon-neutral in our own operations by the end of 2020, with both our US and Dutch facilities now 100%-powered by renewable energy. We also issued our first Green Innovation Bond under the Philips Green & Sustainability Innovation Bond Framework developed together with Rabobank; the proceeds will be used to help finance our expenditures on green innovation, the transition to the circular economy with zero waste to landfill, and becoming carbon-neutral in our operations.

How we performed in 2019

Our financial performance in 2019 was robust, despite a profitability improvement that was below our plan. 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. was well within our target bandwidth, driven by innovative products and solutions across our businesses and strong revenue increases in our growth geographies. Profitability improved, though well short of the 100 basis points of the past three years, impacted by tariff headwinds, the underperformance of Connected Care, a decline in license income, and investments in growth. We ended the year with a comparable order intake**Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information. that grew a further 3%, on the back of strong 10% growth in 2018, and delivered a 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 over EUR 1 billion. Last but not least, our share price rose 41% in the course of 2019 to a 19-year high, outpacing many of our key peers and reflecting investor confidence in our strategy and portfolio of innovative health technology solutions.

Our Diagnosis & Treatment businesses performed well, with improved revenue and earnings, supported by a strong flow of innovations designed to help clinicians deliver a precision diagnosis and targeted therapies. In Diagnostic Imaging we finalized the revamp of our CT and MR portfolios, including the introduction of an industry-first ‘Tube for Life’ guarantee with our Incisive CT imaging platform. In Image-Guided Therapy, 2019 saw the landmark one-millionth procedure performed with our Azurion platform. And we continued to add depth and reach to the Azurion success story, with the launch of innovations like FlexArm, for optimal visualization across the whole patient, IntraSight for seamless integration of our smart catheters in the platform, and regulatory clearance to launch Azurion in China. We are particularly pleased by the continued strong performance of our smart catheter portfolio. We also have high expectations of innovations in the areas of precision diagnosis solutions and enterprise diagnostic informatics, the latter strengthened by the recent acquisition of Carestream Health’s Healthcare Information Systems business.

Our Connected Care businesses had a challenging year, even as we retained market share. The businesses posted modest growth, though profitability decreased. The fundamentals remain solid – our Connected Care businesses have leading market positions and good scope for margin expansion. We have taken decisive actions and expect these to gradually become visible in performance in the course of 2020. In January 2020, I appointed Roy Jakobs as the new leader of the Connected Care businesses to further drive the turnaround. Several new innovations – such as the next-generation IntelliVue MX750 and MX850 patient monitors, our expanded SmartSleep solutions, the latest iteration of our IntelliSpace Enterprise Edition healthcare informatics platform, and our HealthSuite digital ecosystem – will support accelerated growth, while stronger execution will help improve value creation.

Personal Health rebounded well from a slower 2018 with higher revenue and earnings, driven largely by the performance of our Oral Healthcare and Personal Care businesses on the back of portfolio extension and increased market penetration. We are now reviewing options for future ownership of the Domestic Appliances business. Our Personal Health businesses that are focused on oral care, personal care and mother & child care will therefore continue to play an important role in our health continuum approach, through connected products and services that support people’s health and well-being.

Transforming to win

In the face of considerable geopolitical and macroeconomic uncertainty, with strong tariff headwinds, we continue to look first and foremost to improve operational excellence. We remain firmly focused on meeting our customers’ needs, while at the same time taking action to innovate compelling solutions, improve the supply chain and boost productivity.

As we step up our transformation, we continue to be guided by our three-pronged strategic roadmap: Better serve customers and improve quality; Boost growth in core business; Win with solutions along the health continuum. We are making steady progress on our commitment to quality and operational excellence, as demonstrated by improving quality indicators, customer Net Promoter Scores and lower waste. The standardization and digitalization of internal processes, levering the Philips Integrated IT landscape, is leading to higher productivity and agility. Our continued focus on boosting growth in the core has delivered market share expansion in the Diagnosis & Treatment segment in particular. Revenues from solutions, long-term contracts and service business models – including new business models, such as software-as-a-service, pay-per-user and technology managed services – now stand at over one third of sales.

Acquisitions have played an important role complementing our organic growth, and we are pleased with the performance of most of these, for example in the area of Image Guided Therapy, where we are now able to ‘innovate the procedure’ with solutions consisting of combinations of systems, smart devices, software and services, as opposed to being restricted to capital equipment only. With the planned divestiture of the Domestic Appliances business, we are completing the strategic pivot to a health technology-focused portfolio. Domestic Appliances is a strong business that has made a good contribution to Philips, but is not a strategic fit for our future as a health technology leader.

To get the best out of our people and make sure our organization is set up to deliver for our customers and realize our vision, we overhauled our operating model – the Philips Business System (PBS) – in 2019. The renewed PBS touches every aspect of our business and will make Philips a simpler, faster, customer-focused solutions company – a learning organization that aspires to the highest standards of quality in everything we do. Driving a customer-focused culture, where people take ownership and collaborate to deliver with quality, speed and agility, embracing Lean and continuous improvement, is an essential ingredient of the PBS.

Outlook 2020 and beyond

Looking ahead at 2020, we continue to see geopolitical and economic risks. We aim for 4-6% 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 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 around 100 basis points, with a performance momentum that is expected to improve in the course of the year. During 2020 we will issue guidance for the next medium-term period, when we expect to continue to gradually step up growth and expand margins and cash generation as we execute our strategy.

In conclusion

I wish to thank our customers, shareholders and other stakeholders for the support they continue to give to Philips. I would also like to thank our employees for their engagement, perseverance and hard work over the past year.

Energized by our purpose, I remain confident in our ability to perform while we transform – delivering innovative, sustainable solutions that meet the needs of our customers and consumers, at the same time laying a rock-solid foundation for an even brighter future as a leader in health technology.

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 2.5 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.

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

Philips provides new financial targets for the 2021–2025 period

At the company’s Capital Markets Day with investors and financial analysts on November 6, 2020, Philips will provide further details of its strategic plan and performance trajectory for the 2021–2025 period.

“We are excited to continue our journey to create further value by improving growth and profitability, while recognizing that we are in very uncertain times, and with the assumption that the world economy will return to growth next year,” said Frans van Houten. “The new targets are underpinned by our strategic imperatives to further improve customer and operational excellence, boost growth in our core businesses through geographical expansion and more customer partnerships, and win with innovative solutions along the health continuum. Our strategy to transform care along the health continuum – from healthy living and prevention to diagnosis and treatment, telehealth and home care – strongly resonates with customers and has been further validated during the COVID-19 pandemic.”

Philips’ targets for accelerated growth, higher profitability and improved cash flow for the 2021–2025 period are1:

  • An acceleration of the average annual comparable sales growth to 5-6%, with all business segments within this range. For 2021, Philips’ current view is that Group comparable sales will deliver low-single-digit growth, driven by solid growth in Diagnosis & Treatment and Personal Health, partly offset by lower Connected Care sales;
  • An Adjusted EBITA margin improvement of 60-80 basis points on average annually from 2021, reaching the high teens for the Group by 20252;
  • Free cash flow of around EUR 2 billion by 2025.
  • Organic Return on Invested Capital (ROIC) of mid-to-high teens by 2025.
1The new targets exclude the Domestic Appliances business. As announced in January 2020, the Domestic Appliances business is being separated from Philips, a process that is expected to be completed in the third quarter of 2021.2The Diagnosis & Treatment business segment is expected to reach 15-17% Adjusted EBITA margin by 2025, the Connected Care segment is expected to reach 17-19%, and the Personal Health business segment is expected to reach 19-20%.

Partnering with customers around the world

Below you will find just a few of the long-term partnerships we entered into with healthcare providers around the world in 2019. Under these agreements, we will deliver innovative solutions to help our customers address the Quadruple Aim of better health outcomes, improved patient and staff experience, and lower cost of care.

North America

Inspira Health

New Jersey, USA

We have entered into a strategic 5-year partnership agreement with Inspira Health to standardize patient monitoring and drive innovation in diagnostic imaging solutions in order to enhance patient care and improve clinical workflow performance. The contract also includes training and services that will maximize Inspira’s operational efficiency.

Read more

Regional Medical Center

South Carolina, USA

In December, we announced a strategic 5-year partnership agreement with the Regional Medical Center (RMC) to deliver innovative diagnostic imaging solutions for residents of four rural counties. The partnership will also support the expansion of the region’s only stand-alone community hospital, help RMC to standardize its imaging platforms and better integrate workflows and information.

Read more

Walgreens

Illinois, USA

Philips and Walgreens have engaged in a joint effort to help consumers identify the root causes of their sleep issues by integrating the SmartSleep Analyzer tool into the Walgreens Find Care™ platform, and connecting them with Philips sleep solutions available for sale on Walgreens.com.

Read more

Europe, Middle East & Africa

Klinikum Stuttgart

Stuttgart, Germany

We have signed a comprehensive 10-year innovation partnership agreement with Klinikum Stuttgart. The agreement covers the replacement and procurement of state-of-the-art medical technology, including diagnostic imaging and intelligent informatics solutions, at Klinikum Stuttgart hospitals, together with joint development of new workflows and connected care solutions.

Read more

Rutherford Diagnostics

Guildford, UK

In May, we entered into a 10-year strategic partnership agreement with Rutherford Diagnostics. This collaboration will utilize Philips’ innovative radiology technology and Rutherford Diagnostics’ healthcare expertise to deliver and operate advanced personalized diagnostic services through a network of community diagnostic centers across England.

Read more

Centre Hospitalier Régional Universitaire de Nancy

Nancy, France

In July, we announced a 10-year enterprise informatics agreement with Centre Hospitalier Régional Universitaire de Nancy to implement Philips’ IntelliSpace Enterprise Imaging Solution, including Illumeo with adaptive intelligence. The agreement will enable CHRU de Nancy to streamline complex medical image data management across its departments in order to increase efficiency and improve patient care.

Read more

Asia

Xi’an International Medical Group

Xi’an, China

Philips signed an agreement with the Xi’an International Medical Group to deliver solutions to address clinical and research needs in cardiology, radiation oncology and critical care. With the Chinese health technology market dominated by transactional vendor relationships, this long-term strategic partnership demonstrates the potential to shift from a transactional market dynamic also in China, and our willingness to team up to create more value in healthcare.

Xiamen Cardiovascular Hospital

Xiamen, China

In July 2019, Philips completed the design direction for Xiamen Cardiovascular Hospital, and the design concept for the hospital's main lobby, emergency department, screening areas, cath labs, ICU, CCU and general ward. The result – achieved through an iterative co-creation process – is an exceptional patient experience and an efficient operational workflow.

Hong Duc General Hospital

Ho Chi Minh City, Vietnam

In April, we announced a seven-year partnership agreement with Hong Duc General Hospital covering a comprehensive turnkey solution for high-quality general healthcare services. Under this agreement, Philips will provide the newly built Hong Duc General Hospital II with the latest medical imaging, patient monitoring and healthcare IT solutions, as well as design, consulting and financing services.

Read more

Progress towards our goals

1.64billion
1.64
3
Lives improvedBased on full-year 2019 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

194million
194
400
Lives improved in underserved healthcare communitiesBased on full-year 2019 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

67%70%Sales from green products and solutions
67%
70%
13%15%Sales from circular products and solutions
13%
15%
95%100%Operations powered by renewable electricity
95%
100%
83%90%Operational waste recycled
83%
90%
54%100%Industrial sites sending zero waste to landfill
54%
100%
9%10%Reduction in water consumption from 2015 level
9%
10%
All data points refer to 2019

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)

2018 Q4

2019 Q1

2019 Q2

2019 Q3

2019 Q4

Lives improved

1.541

1.593

1.625

1.634

1.644

Lives improved in underserved healthcare communities

(in millions)

2018 Q4

2019 Q1

2019 Q2

2019 Q3

2019 Q4

Lives improved

175

187

189

190

194

Results by region and market

Total population 367 million
344 million
Lives improved5%compared to 2018
Philips presence
Based on full-year 2019 data
Sales
6,951 million EUR
Employees
21,483
Male
63%
Female
37%
Manufacturing sites
13
R&D centers
18
Total population 2,263 million
452 million
Lives improved6%compared to 2018
Philips presence
Based on full-year 2019 data
Sales
5,542 million EUR
Employees
27,097
Male
65%
Female
35%
Manufacturing sites
10
R&D centers
19
Lives improved by market
Compared to 2018
Africa
33million11%
Benelux
27million3%
Central & Eastern Europe
80million3%
Germany, Austria & Switzerland
81million3%
France
45million1%
Iberia
30million7%
Italy, Israel & Greece
35million9%
Middle East & Turkey
69million16%
Nordics
18million7%
United Kingdom & Ireland
35million1%
Total population 4,360 million
749 million
Lives improved9%compared to 2018
Philips presence
Based on full-year 2019 data
Sales
6,274 million EUR
Employees
26,796
Male
58%
Female
42%
Manufacturing sites
9
R&D centers
12
Lives improved by market
Compared to 2018
ASEAN & Pacific
158million18%
Greater China
426million7%
Indian Subcontinent
79million7%
Japan
42million4%
Russia & Central Asia
43million11%
Total population 645 million
99 million
Lives improved-2%compared to 2018
Philips presence
Based on full-year 2019 data
Sales
715 million EUR
Employees
5,119
Male
55%
Female
45%
Manufacturing sites
3
R&D centers
2

Making the world healthier and more sustainable

In 2019, 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.

We progressed on our vision to make the world healthier and more sustainable as Lives Improved increased to 1.64 billion; our efforts to improve access to care for underserved healthcare communities resulted in 194 million lives improved in 2019.

Access to care

  • Philips has signed a new partnership agreement with the Republic of the Congo’s Ministry of Health & Population and the United Nations Population Fund to reduce maternal and newborn mortality. The three partners will work together to develop a large-scale Emergency Obstetric and Newborn Care (EmONC) program that will reach more than 500,000 women and 70,000 newborns, improving access to high-quality and affordable maternal, neonatal and child healthcare.
  • Philips has teamed up with non-profit organization PURE (Point-of-care Ultrasound in Resource-limited Environments), on a pioneering tele-ultrasound program linking specialists around the globe with physicians in Rwanda.
  • Philips entered into a partnership with MedShare, a global humanitarian aid organization based in Atlanta, US, to deliver state-of-the-art maternal and neonatal medical equipment to medically underserved communities around the world.

Circular economy

  • Revenues from Circular Products and Solutions increased to 13% (12% in 2018).
  • At the CleanMed conference in Nashville, USA, Philips supported US hospitals, health systems and suppliers in co-creating circular economy initiatives. CleanMed is the world’s largest conference on sustainability in healthcare.

Climate action

  • With the opening of Windpark Krammer, Philips’ Netherlands-based operations are now 100%-powered by renewable electricity. Combined with the 100% target already achieved in the US, Philips is now firmly on course to achieve global carbon neutrality next year, delivering on its commitment to the UN Sustainable Development Goal on climate change.
  • For the seventh 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 67% of total revenues (64% in 2018).
  • Philips has once again been recognized as one of the top companies for sustainability performance in the global 2019 Dow Jones Sustainability Indices (DJSI) list. Philips scored 82 out of 100 points in the DJSI Health Care Equipment & Services industry group, further improving on its 2018 score to achieve the #2 ranking in 2019.Read more
  • Philips issued its first Green Innovation Bond under the Philips Green & Sustainability Innovation Bond Framework developed together with Rabobank. The proceeds of this bond will be used as an alternative means to finance our expenditures on green innovation, the transition to the circular economy, and becoming carbon-neutral.Read more

How we create value for our stakeholders

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

In 2019 we updated our operating model, the Philips Business System (PBS). With its six interconnected elements, the PBS defines how we work together effectively to achieve our company objectives.

  • 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.

And this is where the wheel gets going. The better we perform, the more we grow, the more we can re-invest in new business opportunities, and the more value we deliver to our customers, shareholders, and other stakeholders.

Human
We employ diverse and talented people and give them the skills and training they need to ensure their effectiveness and their personal development and employability.
Intellectual
We apply our innovation and design expertise to create new products and solutions that meet local customer needs.
Financial
We generate the funds we need through our business operations and where appropriate raise additional financing from capital providers.
Manufacturing
We apply Lean techniques to our manufacturing processes to produce high-quality products. We manage our supply chain in a responsible way.
Natural
We are a responsible company and aim to minimize the environmental impact of our supply chain, our operations, and also our products and solutions.
Social
We contribute to our customers and society through our products and solutions, our tax payments, the products and services we buy, and our investments in local communities.

Capital input

The six forms of capital (resources and relationships) that Philips draws upon for its business activities; all data refer to 2019

Human

  • Employees 80,495, 120 nationalities, 38% female
  • Philips University 5,324 courses, 966,813 hours, 683,336 training completions
  • 32,650 employees in growth geographies
  • Focus on Inclusion & Diversity

Intellectual

  • Invested in R&D EUR 1.88 billion (Green Innovation EUR 235 million)
  • Employees in R&D 12,287 across the globe including growth geographies

Financial

  • Equity EUR 12.6 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 4.0 billion

Manufacturing

  • Employees in production 35,640
  • Manufacturing sites 35, cost of materials used EUR 5.3 billion
  • Total assets EUR 27.0 billion
  • Capital expenditure EUR 518 million

Natural

  • Energy used in manufacturing 1,400 terajoules
  • Water used 890,000 m3
  • Recycled plastics in our products 1,904 tonnes
  • Pledge to take back all medical equipment by 2025

Social

  • Philips Foundation
  • Stakeholder engagement
  • Volunteering policy
Interactive Graphs using key data from the Philips Annual Report 2017
Value outcomes

Value outcomes

Output

The result of the application of the six forms of capital to Philips’ business activities and processes as shaped by the Philips Business System; all data refer to 2019

Human

  • Employee Engagement Index 74% favorable
  • Sales per employee EUR 242,027
  • Safety 224 Total Recordable Cases

Intellectual

  • New patent filings 1,015
  • Royalties EUR 381 million
  • 148 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. 4.5%
  • 67% 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 1.1 billion

Manufacturing

  • EUR 14.8 billion revenues from goods sold

Natural

  • 13% revenues from circular propositions
  • Net CO2 emissions down to 266 kilotonnes
  • 265,000 tonnes (estimated) materials used to put products on the market
  • Waste up to 26.4 kilotonnes, of which 83% recycled
  • 19 'zero waste to landfill' sites

Social

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

Societal impact

Impact

The societal impact of Philips though its supply chain, its operations, and its products and solutions; all data refer to 2019

Human

  • Employee benefit expenses EUR 6,307 million, Living Wage analysis completed
  • Appointed 74% of our senior positions from internal sources
  • 24% of Leadership positions held by women

Intellectual

  • Around 53% of revenues from new products and solutions introduced in the last three years
  • Over 60% of sales from leadership positions

Financial

  • Market capitalization EUR 38.8 billion at year-end
  • Long-term credit rating A- (Fitch), Baa1 (Moody's), BBB+ (Standard & Poor's)
  • Dividend EUR 775 million

Manufacturing

  • 95% electricity from renewable sources
  • 286,000 employees impacted at suppliers participating in the 'Beyond Auditing' program

Natural

  • Environmental impact of Philips operations down to EUR 154 million
  • First health technology company to have its CO2 reductions assessed and approved by the Science Based Targets initiative

Social

  • 1.64 billion Lives Improved, of which 194 million in underserved healthcare communities
  • Total tax contribution EUR 3.1 billion (taxes paid)
  • Income tax expense EUR 337 million; the effective income tax rate is 22%

Interactive charts and historical data

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

[maintitle]

2017

2018

2019

Net cash provided by operating activities

1,870

1,780

2,031

Net capital expenditures

(685)

(796)

(978)

Free cash flows

1,185

984

1,053

[maintitle]

2015

2016

2017

2018

2019

Sales

16,806

17,422

17,780

18,121

19,482

Income from operations

658

1,464

1,517

1,719

1,644

Adjusted EBITA

1,688

1,921

2,153

2,366

2,563

Income (loss) from continuing operations

160

830

1,028

1,310

1,192

Net income (loss)

638

1,490

1,870

1,097

1,167

[maintitle]

2015

2016

2017

2018

2019

Income from operations (as a % of sales)

3.9%

8.4%

8.5%

9.5%

8.4%

Adjusted EBITA (as a % of sales)

10%

11%

12.10%

13.10%

13.20%

[maintitle]

2015

2016

2017

2018

2019

Total assets

30,943

32,269

25,315

26,019

27,016

Total provisions and liabilities

19,218

18,817

13,292

13,902

14,391

Shareholders’ equity

11,607

12,546

11,999

12,088

12,597

Market capitalization at year-end

21,607

26,751

29,212

28,276

38,775

[maintitle]

2015

2016

2017

2018

2019

Adjusted income from continuing operations attributable to shareholders per common share (in EUR) diluted

1.08

1.24

1.54

1.76

2.02

Income from continuing operations attributable to shareholders per common share (in EUR) - diluted

0.17

0.89

1.08

1.39

1.30

Dividend distributed per common share

0.80

0.80

0.80

0.80

0.85

Share price at year-end

23.56

29.00

31.54

34.02

43.52

Price/earnings ratio

53.55

25.89

35.84

24.13

33.22

Total employees at year-end

2015

2016

2017

2018

2019

112,959

114,731

73,951

77,400

80,495

Engagement index (% positive score)

2015

2016

2017

2018

2019

71%

74%

76%

74%

74%

Female executives, in % of total

2015

2016

2017

2018

2019

Philips Group

19

18

18

19

22

Lost Workday Injuries, per 100 FTEs

2015

2016

2017

2018

2019

0.15

0.16

0.17

0.13

0.14

Total recordable cases, per 100 FTEs

2015

2016

2017

2018

2019

0.37

0.36

0.28

0.30

Fatalities

2015

2016

2017

2018

2019

Philips Group

0

0

0

0

0

Green Revenues, in million of euros

2015

2016

2017

2018

2019

Diagnosis & Treatment

4,670

4,798

5,168

5,746

6,316

Connected Care

1,258

1,442

2,036

2,330

3,091

Personal Health

3,521

3,951

3,456

3,445

3,681

Philips Group

9,449

10,191

10,660

11,521

13,088

Green Revenues, as a % of total sales

2015

2016

2017

2018

2019

Diagnosis & Treatment

67

67

70

74

74

Connected Care

32

34

47

54

66

Personal Health

66

71

61

62

63

Philips Group

56

58

60

64

67

Green Innovation, in million of euros

2015

2016

2017

2018

2019

Diagnosis & Treatment

103

133

99

101

110

Connected Care

18

38

33

36

21

Personal Health

99

96

91

86

99

Other

21

10

10

5

5

Philips Group

241

277

233

228

235

Operational Carbon Footprint, in kilotonnes CO2-equivalent

2015

2016

2017

2018

2019

Logistics

460

491

641

572

504

Business travel

152

158

145

149

153

Non-industrial operations

58

77

40

40

27

Manufacturing

87

85

55

26

22

Operational carbon footprint by Greenhouse Gas Protocol scopes, in kilotonnes CO2-equivalent

2015

2016

2017

2018

2019

Scope 1

39

42

38

40

35

Scope 2

106

121

58

25

14

Scope 3

612

649

785

721

657

Philips Group

757

812

881

786

706

Scope 2 (location based)

212

252

225

227

203

Operational energy efficiency, in terajoules per million EUR sales

2015

2016

2017

2018

2019

Philips Group

0.16

0.15

0.12

0.12

0.11

Total energy consumption in manufacturing, in terajoules

2015

2016

2017

2018

2019

Diagnosis & Treatment

593

627

614

593

547

Connected Care

286

276

278

287

281

Personal Health

543

557

571

586

572

Philips Group

1,422

1,460

1,463

1,466

1,400

Water intake, in thousands of m3

2015

2016

2017

2018

2019

Diagnosis & Treatment

268

269

312

288

295

Connected Care

172

152

168

161

150

Personal Health

536

542

408

442

445

Philips Group

976

963

888

891

890

Zero waste to landfill, in Ktonnes

2015

2016

2017

2018

2019

Philips Group

3.2

2.9

2.5

1.7

1.3

Materials provided for recycling via external contractor per total waste, in %

2015

2016

2017

2018

2019

Philips Group

78

79

80

84

83

Hazardous substances emissions, in kilos

2015

2016

2017

2018

2019

Diagnosis & Treatment

604

428

743

636

104

Connected Care

124

88

49

63

46

Personal Health

691

583

625

394

378

Philips Group

1,419

1,099

1,417

1,093

528

VOC emissions, in tonnes

2015

2016

2017

2018

2019

Diagnosis & Treatment

29

35

48

44

46

Connected Care

7

5

6

6

6

Personal Health

133

89

88

78

62

Philips Group

169

129

142

128

114

ISO 14001 certification, as a % of all reporting organizations

2015

2016

2017

2018

2019

Philips Group

75

78

82

83

80

2019 annual results

Amsterdam, February 25, 2020

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Performance highlights

Sales

Philips Group

19,482million EUR
18,121  million EUR in 2018
8%Nominal growth
4.5%Comparable growth

Philips reporting segments

Diagnosis & Treatment

8,485million EUR
7,726 million EUR in 2018
10%Nominal growth
5%Comparable growth

Connected Care

4,674million EUR
4,341 million EUR in 2018
8%Nominal growth
3%Comparable growth

Personal Health

5,854million EUR
5,524 million EUR in 2018
6%Nominal growth
5%Comparable growth

Other

469million EUR
530 million EUR in 2018

Sales in mature geographies

Philips Group

12,990million EUR
12,221 million EUR in 2018
6%Nominal growth
2%Comparable growth

Philips reporting segments

Diagnosis & Treatment

5,651million EUR
5,232 million EUR in 2018
8%Nominal growth
3%Comparable growth

Connected Care

4,052million EUR
3,779 million EUR in 2018
7%Nominal growth
2%Comparable growth

Personal Health

2,974million EUR
2,795 million EUR in 2018
6%Nominal growth
4%Comparable growth

Sales by geographic area

Western Europe

4,134million EUR
3,990 million EUR in 2018
4%Nominal growth
2%Comparable growth

North America

6,951million EUR
6,338 million EUR in 2018
10%Nominal growth
4%Comparable growth

Other mature geographies

1,905million EUR
1,892 million EUR in 2018
1%Nominal growth
-3%Comparable growth

Sales in growth geographies

Philips Group

6,492million EUR
5,901 million EUR in 2018
10%Nominal growth
10%Comparable growth

Philips reporting segments

Diagnosis & Treatment

2,834million EUR
2,494 million EUR in 2018
14%Nominal growth
11%Comparable growth

Connected Care

622million EUR
562 million EUR in 2018
11%Nominal growth
9%Comparable growth

Personal Health

2,880million EUR
2,730 million EUR in 2018
6%Nominal growth
6%Comparable growth

Green revenues

Philips Group

13,088million EUR
11,521 million EUR in 2018
14%Nominal growth

Philips reporting segments

Diagnosis & Treatment

6,316million EUR
5,746 million EUR in 2018
10%Nominal growth

Connected Care

3,091million EUR
2,330 million EUR in 2018
33%Nominal growth

Personal Health

3,681million EUR
3,445 million EUR in 2018
7%Nominal growth

Research and development expenses

Philips Group

1,884million EUR
1,759 million EUR in 2018

Philips reporting segments

Diagnosis & Treatment

928million EUR
801 million EUR in 2018

Connected Care

465million EUR
424 million EUR in 2018

Personal Health

302million EUR
300 million EUR in 2018

Other

189million EUR
235 million EUR in 2018

Income from operations and Adjusted EBITA (Philips Group)

Income from operations

1,644million EUR
1,719 million EUR in 2018
8.4% as a percentage of sales

Adjusted EBITA

2,563million EUR
2,366 million EUR in 2018
13.2% as a percentage of sales

Other key data

Income from continuing operations

1,192million EUR
1,310 million EUR in 2018

Net income

1,173million EUR
1,097 million EUR in 2018

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

1.30EUR
1.39  EUR in 2018

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

2.02EUR
1.76 EUR in 2018

Lives improved  (Philips Group)

Total

1.64billion

by Philips health & well-being products and solutions

1.54billion

by Philips Green Products

1.07billion

Net operational carbon footprint (Philips Group)

266
kilotonnes CO2-equivalent
456 kilotonnes CO2-equivalent in 2018