• Path to value • Accelerate! in Healthcare • Key takeaways
2
Sales growth continuing in 2012 supported by solid equipment order intake development Comparable sales growth1
Comparable equipment order intake growth
6%
6%
9%
5% 4% 3%
3%
4%
-3% -6% FY 2008
FY 2009
FY 2010
FY 2011
Q1 2012 LTM
FY 2008
FY 2009
FY 2010
FY 2011
Q1 2012 LTM
1 Comparable
sales growth: adjusted for currency and portfolio LTM: Last twelve months March 2012
3
Equipment order book with solid growth momentum Indexed equipment order book development 130
120
110
100
90
80
70 Q1
Q2
Q3
2008
Q1/2008 = 100%
Q4
Q1
Q2
Q3
2009
Q4
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1 2012
4
Sales growth driven by strong market positions in growth geographies and North America Growth geographies share of total revenue now 22% Comparable sales growth1 North America
Growth geographies
7%
15%
16%
FY 2011
Q1 2012 LTM
6% 8%
0% FY0% 2010
FY 2011
Q1 2012 LTM
FY 2010
Other mature markets2
Western Europe
12%
4% 8%
-2% -4%
4% FY 2010
FY 2011
Q1 2012 LTM
FY 2010
FY 2011
Q1 2012 LTM
1 Comparable 2 Other
sales growth: adjusted for currency and portfolio mature markets includes: Japan, South Korea, Australia, New Zealand, Israel
5
European business outlook continues to be challenging
Region/Market
Notes
Germany
Business climate outlook for medical equipment remains positive
Nordics
Denmark and Sweden positive, Norway negative outlook
Benelux
Procurement changes between hospitals and insurance companies cause delays in equipment purchase decisions
France
Weak economic outlook, public spending subdued
United Kingdom /Ireland
Positive signs in Q1 by government toward public health care spending, still cautious on outlook
Iberia
Most severe austerity measures in history announced by Spanish government
Italy
Significant health care public spending reductions by new government
Greece
Outlook continues to be very negative Market growth negative
Market outlook 2012
Market growth flat
Positive market growth
6
2011 EBITA reflects a step-up in investments in selling expenses, innovation and manufacturing footprint Reported EBITA EUR millions, as % of sales 13.8% 12.9%
11.0%
• Channel presence in growth geographies strengthened by increasing selling expenses by 25% • Accelerated innovation by increasing year-on-year spend by 9% • Increased investment in our manufacturing footprint in India and China impacted margins in Imaging Systems
10.8%
839
848
1,186
1,145
FY 2008
FY 2009
FY 2010
FY 2011
• Temporary increase in investments for operations to support the successful launch of an unprecedented array of new products into key markets • Lower Q4 results impact 2011 EBITA by 1% 7
Investments in longer term, structural expansion in growth geographies to generate improved returns Sales increase in growth geographies
Headcount in growth geographies Number of FTEs +23% p.a.
+13% p.a.
FY 2007
FY 2009
FY 2011
Sales and service resources: 2x
FY 2007
R&D resources: 3x
FY2009
FY 2011
Manufacturing footprint: 2.5x 8
Having invested in working capital second half 2011, now converting it back into free cash flow Improving inventory turns will provide increased cash flow Adjusted net working capital as % of LTM sales1
Free cash flow as % of reported EBITA2 121.2
99.8
99.6 88.1
76.5 12.1
12.8
12.3
75.3
12.9 54.3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2010 2011 2012 Adj. net working capital
FY 2006
As a % of LTM sales
1 Net working capital adjusted to exclude forward currency contract assets/liabilities 2 Free cash flow is defined as cash flow from operating activities minus net capital expenditures 3 LTM: Last 12 months March 2012
FY 2007
FY 2008
FCF
FY 2009
FY 2010
FY 2011
LTM 2012
FCF as % of EBITA
9
Improving our return on invested capital 80%+ of invested capital is in intangibles; margin expansion and growth are key drivers
Net operating capital
Return on invested capital
% of total 10% 2010
Other assets
2011 (1)
8%
Q1 2012, LTM, (1)
6% 4%
~20%
Tangible assets
Intangible assets 2009
2%
~80%
0%
Q1/’12, LTM (2)
Goodwill
-2% -4%
2011 (2)
(4)
Net operating capital turnover (3)
December 2011
1
ROIC is normalized for Q2/2011 impairment charges ROIC as reported 3 Net operating capital turnover calculated as sales divided by average net operating capital 4 Net operating capital turnover = 1 2
10
Improve Healthcare performance to achieve midterm target of 15% to 17% EBITA by 2013 Philips Healthcare midterm performance 9
6
Midterm financial objective (2013)
Performance Box 2013
Comparable sales growth (%)1
Reported EBITA
15% to 17%
3
0 13
15
17
19
EBITA %
1
Assuming market growth of 4 -5%, with Philips Healthcare aiming to grow stronger than the market
11
Improve Healthcare performance to achieve midterm target of 15% to 17% EBITA by 2013 17.0%
15.0% 12.9%
2011 EBITA
Growth
Operational efficiency
Overhead cost reductions
Investments
Medical device excise tax
Pensions
2013 EBITA
Accelerate! 12
Our cost innovation program as part of Accelerate! is progressing well Strategic priorities Expanding mfg. volumes in growth geographies
Low-cost country sourcing Substantial progress +800 bps
+450 bps
BOM savings Service parts cost innovation Improving productivity Growing our share of low-cost country sourcing
Percentages represent low-cost purchasing value in % of total purchasing value
Improving productivity (amount in € millions)
Mfg. cost improvement 20+% 2008
2009
2010
2011
Manufacturing costs as % of BOM costs
2012 13
Improving our operating model under Accelerate! Driving support functions toward benchmark cost levels
€ Finance transformation • Consolidate accounting and financial planning and analysis related work, into centers of expertise • Simplify, standardize, automate
World class human resources • Centralization into shared services and increased automation • Reduce overall HR cost by 20%
Rationalize real estate footprint • Fund expansion in growth geographies through consolidation of mature market real estate footprint • Reduce building footprint and real estate cost by mid-single digits
• Reduce overall finance cost by 25%
14
Significant additional cash flow potential through inventory optimization as part of Accelerate! Increasing inventory velocity will provide increased cash flow Inventory as % of Sales 20%
