Q4 2020results

 

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Message from the CEO

“Against the backdrop of the ongoing COVID-19 pandemic, we continued to support healthcare providers and medical staff with the provision of both acute COVID-19 care and regular healthcare. In the quarter, Philips entered into 25 new long-term strategic partnerships with hospitals in the US, Europe and Asia, to help them achieve their clinical and operational goals with our integrated solutions. We also supported consumers in their homes with telehealth solutions such as tele-dentistry services and remote monitoring.

I am pleased that, as a result of these efforts, in the quarter we recorded 7% comparable sales growth for the Group and 7% comparable order intake growth. The Adjusted EBITA margin improved by 110 basis points, and we delivered a strong free cash flow of EUR 1,055 million.

We launched several new products and solutions in the quarter, including the Philips Shaver Series 1000 that specifically addresses the personal care needs of young men in China. We also introduced our next-generation IntelliSpace Portal advanced visualization workspace with AI capabilities to support a precision diagnosis. To expand our Connected Care solutions, we signed agreements to acquire BioTelemetry and Capsule Technologies. These acquisitions will further broaden and scale Philips’ patient care management solutions for the hospital and the home to enhance patient outcomes, streamline clinical workflows and increase productivity. We target significant revenue synergies, and these businesses will be accretive to Philips' sales growth and Adjusted EBITA margin in 2021. This is another important step in our strategy to become a leading solutions provider.

As a result of our stronger performance in the second half of the year, following a challenging first half due to the impact of COVID-19, our performance was resilient. For the full year 2020 we delivered 3% comparable sales growth, an Adjusted EBITA margin of 13.2% and a strong free cash flow of EUR 1.9 billion. Moreover, driven by 9% comparable order intake growth, we continued to gain market share in our healthcare businesses, and ended the year with a strong order book.

I am very grateful and proud of the commitment, resourcefulness and hard work of our more than 80,000 employees in 2020. Through our efforts, we were able to deliver against our triple duty of care – meeting critical customer needs, safeguarding the health and safety of our employees, and ensuring business continuity.

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, driven by solid growth in Diagnosis & Treatment and Personal Health, partly offset by lower Connected Care sales, and an Adjusted EBITA margin improvement of 60-80 basis points.”

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

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 provided 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 are11The 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.:

  • 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 202522The 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%.;
  • Free cash flow of around EUR 2 billion by 2025;
  • Organic Return on Invested Capital (ROIC) of mid-to-high teens by 2025.

COVID-19 response and other developments

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

Lives improved

Increase in lives improved

In 2020, Philips’ products and solutions improved the lives of 1.75 billion people, compared to 1.64 billion in 2019. This figure includes 207 million people in underserved communities, compared to 194 million in 2019. In addition, Philips was once again recognized in 2020 for its sustainability performance in the 2020 Dow Jones Sustainability Indices and CDP's Climate Change A-list.
Long-term strategic partnerships

Multiple new long-term strategic partnerships

Philips signed 25 new long-term strategic partnerships in the quarter, including a 5-year technology and innovation partnership with Rennes University Hospital, one of the top 10 hospitals in France, with four sites and more than 1,800 beds. Philips will deliver integrated solutions to support a precision diagnosis, image-guided therapies, and patient monitoring and management. This includes consultancy services to help optimize the hospital’s clinical pathways.
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Respiratory care

Extending our home care solutions

Expanding its range of patient-centric solutions for the home, Philips launched the BiPAP A40 EFL non-invasive ventilator. With this introduction, Philips is extending its respiratory care solutions with a new ventilation therapy feature to treat COPD patients with expiratory flow limitation (EFL) with targeted therapy to reduce symptoms and increase their comfort while sleeping.
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Enterprise imaging solutions

Improved access to medical images and data

Highlighting the company’s strength in enterprise imaging solutions, Philips created a single system for all 12 hospitals in the Region of Southern Denmark to store, retrieve, and view radiology and nuclear medicine images and data. This unified imaging ecosystem, which comprises Philips’ Vendor-Neutral Archive and Universal Viewer, will serve all of the region’s radiologists and nuclear medicine specialists, improving collaboration and enhancing patient care.
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Remote patient monitoring

Wearable diagnostics study for COVID-19

Leveraging Philips’ remote patient monitoring capabilities, Philips and BioIntelliSense have been selected by the U.S. Department of Defense to validate BioIntelliSense’s BioSticker sensor for the early detection of COVID-19 symptoms. The validation study aims to accelerate the use of wearable diagnostics for the early identification and containment of pre-symptomatic COVID-19 cases.
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Mobile surgery solutions

Strong growth of mobile surgery solutions

Highlighting its leadership in image-guided therapy, there was strong demand for Philips’ mobile surgery solutions, including the Philips Zenition mobile C-arm platform, resulting in double-digit growth for this category during the quarter. Earlier in the year, Philips introduced several new innovations on its Zenition platform to improve the workflow of complex surgical procedures.
Radiology operations command center

Launch of Radiology Operations Command Center

Philips launched a vendor-neutral, multimodality Radiology Operations Command Center to enable real-time, remote collaboration between technologists, radiologists and imaging operations teams across multiple sites, with the aim of increasing productivity, minimizing issues with image quality, and expanding access to MR- and CT-based diagnosis.
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Progress towards our goals

1.67billion
1.75
2.5
Lives improvedBased on Q4 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

195 million
207
400
Lives improved in underserved healthcare communitiesBased on Q4 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 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
70%
70%
14%15% Sales from circular products and solutions
15%
15%
100%100% Operations powered by renewable electricity
100%
100%
85%90% Operational waste recycled
88%
90%
84%100% Industrial sites sending zero waste to landfill
100%
100%
23%10% Reduction in water consumption from 2015 level
11%
10%
All data points refer to Q4 2020

Sustainable use of materials and energy

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

Our sustainability program

Sustainability highlights

Lives improved trend line

Lives improved

(in millions)
 

2019 Q4

2020 Q1

2020 Q2

2020 Q3

2020 Q4

 1.640
1.698
1.710
1.732
1.751

Lives improved in underserved healthcare communities

(in millions)
 

2019 Q4

2020 Q1

2020 Q2

2020 Q3

2020 Q4

 195
198
201
204
207

Results by region and market

Total population 368million
354million
Lives improved3% compared to Q4 2019
Philips presence
Based on Q4 2020 data
Sales
1,971million EUR
Employees
21,126
Male*
63%
Female*
37%
Manufacturing sites
11
R&D centers
13
*Based on 2019 data
Total population 2,212million
472million
Lives improved4% compared to Q4 2019
Philips presence
Based on Q4 2020 data
Sales
2,051million EUR
Employees
26,865
Male*
65%
Female*
35%
Manufacturing sites
9
R&D centers
15
*Based on 2019 data
Lives improved by market
Compared to Q4 2019
Africa
34million1%
Benelux
27million-2%
Central & Eastern Europe
82million2%
Germany, Austria & Switzerland
83million3%
France
47million5%
Iberia
31million5%
Italy, Israel & Greece
40million14%
Middle East & Turkey
74million8%
Nordics
19million3%
United Kingdom & Ireland
36million3%
Total population 4,380million
824million
Lives improved9% compared to Q4 2019
Philips presence
Based on Q4 2020 data
Sales
1,805million EUR
Employees
27,251
Male*
58%
Female*
42%
Manufacturing sites
9
R&D centers
10
*Based on 2019 data
Lives improved by market
Compared to Q4 2019
ASEAN & Pacific
172million9%
Greater China
471million11%
Indian Subcontinent
88million10%
Japan
45million8%
Russia & Central Asia
48million11%
Total population 639million
101million
Lives improved2% compared to Q4 2019
Philips presence
Based on Q4 2020 data
Sales
175million EUR
Employees
6,350
Male*
55%
Female*
45%
Manufacturing sites
3
R&D centers
0
*Based on 2019 data

Doing business responsibly and sustainably

As a purpose-driven health technology company, we are very conscious of our responsibility towards society and of the need to continue to embed sustainability ever deeper in the way we do business – in our own operations and beyond, together with our partners. 

Driving global change, with specific 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 healthcare communities.

  • Our products and solutions improved the lives of 1.75 billion people worldwide, an increase of 110 million lives year-on-year; reflecting our efforts to improve access to care, this figure includes 207 million lives improved in underserved healthcare communities, compared to 194 million in 2019.
  • Green revenues increased to 70% of sales in Q4 (67% in Q4 2019), while
    Circular revenues rose to 15% of sales (13% in Q4 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.
  • Philips achieved a CDP ‘A List’ rating for the eighth consecutive year for its action on climate change, with strong commitments and performance on cutting greenhouse gas emissions, mitigating climate risks and developing the low-carbon economy.
  • 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.
  • Philips ranked #1 in the Health Care Equipment & Services sector on Forbes’ World’s Best Employers 2020 list, recognition of our dedication to building an inclusive working environment and enabling continuous employee development.
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Key data

Sales

Philips Group

6,001million EUR
 5,958million EUR in Q4 2019
1%Nominal growth
7%Comparable growth

Philips reporting segments

Diagnosis & Treatment

2,458million EUR
 2,582million EUR in Q4 2019
-5%Nominal growth
1%Comparable growth

Connected Care

1,581million EUR
 1,354million EUR in Q4 2019
17%Nominal growth
24%Comparable growth

Personal Health

1,824million EUR
 1,850million EUR in Q4 2019
-1%Nominal growth
5%Comparable growth

Other

138million EUR
172million EUR in Q4 2019

Sales per geographic cluster

Philips Group

6,001million EUR
5,958million EUR in Q4 2019
1%Nominal growth
7%Comparable growth

Sales by geographic area

Western Europe

1,512million EUR
1,332million EUR in Q4 2019
13%Nominal growth
14%Comparable growth

North America

1,971million EUR
2,086million EUR in Q4 2019
-6%Nominal growth
1%Comparable growth

Other mature geographies

523million EUR
493million EUR in Q4 2019
6%Nominal growth
9%Comparable growth

Growth geographies

1,996million EUR
2,046million EUR in Q4 2019
-2%Nominal growth
7%Comparable growth

Green revenues

Philips Group

4,216million EUR
3,818million EUR in Q4 2019
10%Nominal growth

Philips reporting segments

Diagnosis & Treatment

1,899million EUR
1,923million EUR in Q4 2019
-1%Nominal growth

Connected Care

1,009million EUR
754million EUR in Q4 2019
34%Nominal growth

Personal Health

1,308million EUR
1,141million EUR in Q4 2019
15%Nominal growth

Research and development expenses

Philips Group

493million EUR
545million EUR in Q4 2019

Philips reporting segments

Diagnosis & Treatment

216million EUR
292million EUR in Q4 2019

Connected Care

142million EUR
112million EUR in Q4 2019

Personal Health

77million EUR
83million EUR in Q4 2019

Other

59million EUR
58million EUR in Q4 2019

Income from operations and Adjusted EBITA (Philips Group)

Income from operations

795million EUR
730million EUR in Q4 2019
13.2% as a percentage of sales

Adjusted EBITA

1,139million EUR
1,066million EUR in Q4 2019
19.0% as a percentage of sales

Other key data

Income from continuing operations

608million EUR
550million EUR in Q4 2019

Net income

607million EUR
556million EUR in Q4 2019

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

0.66EUR
0.60EUR in Q4 2019

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

0.94EUR
0.83EUR in Q4 2019

Lives improved (Philips Group)

Total*

1.75billion

*After elimination of double counts

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
266kilotonnes CO2-equivalent in 2019

Amounts may not add up due to rounding.