Why invest in Philips?

Philips is committed to driving progressive value creation through a strategy of focused organic growth, scalable patient- and people-centric innovation, and focus on reliable execution – creating value with sustainable impact.

Operating in attractive health technology segments

Operating in attractive health technology segments

We operate in growing market segments, where attractive margins provide a foundation for sustainable value creation.

The addressable market is expected to grow at 3-6% over the 2022-2025 period, with mid-to-high-teens margins.

The health technology market is going through fundamental shifts that are driving growth, and we are well-positioned to capture the opportunities arising from these changes. Around the world, the population is aging, demand for care is growing, healthcare costs are increasing, and there are massive staff shortages. This is fueling demand for better outcomes, increased productivity, care outside the hospital, and actionable insights from the growing pools of health data. We also see increasing consumer demand in the area of health and care.

Philips has significant strengths to build on. We have leading innovations in hardware, software and services supporting care in the hospital and in the home. With more than 300 long-term partnerships, we are the preferred strategic and innovation partner for many customers. And ~40% of our revenue is recurring.
Driving focused organic growth and margin expansion

Driving focused organic growth and margin expansion

We will leverage attractive leadership positions to drive growth, scale our Enterprise Informatics business to unlock insights, and drive operational excellence and services in Diagnostic Imaging.

Leveraging attractive leadership positions to drive growth

Going forward, we will concentrate resources in areas – Image Guided Therapy, Monitoring, Ultrasound, and Personal Health – where we have strong #1 or #2 positions and can accelerate growth and expand margins more quickly. Approximately 70% of our sales are generated by businesses with such leadership positions.

Image Guided Therapy

#1 in systems and devices

Monitoring

#1 in hospitals

#1 in ambulatory

Ultrasound

#1 in cardiac

Personal Health

#1 male grooming

#2 oral health care

#2 infant feeding

Scaling Enterprise Informatics to unlock insight

We help our customers to unlock actionable insights from pools of medical imaging data, patient monitoring data and even third-party systems. With the creation of our end-to-end Enterprise Informatics business, the largest multi-vendor enterprise informatics business in the industry, we can scale our platforms such as remote radiology, remote pathology and remote nursing. We project this business will achieve €1.5 billion revenue by 2025 – with a growth rate roughly double that of Philips itself.

Driving operational excellence and services in Diagnostic Imaging

In Diagnostic Imaging, we will drive better margins through operational excellence. Differentiating innovation, supply chain improvements to reduce lead times, and conversion of our strong order book, as well as increased services pull-through.
Delivering focused, scalable innovation
Delivering focused, scalable innovation
Innovation is Philips’ core strength and core differentiator. Recent industry trends have accelerated the technology adoption lifecycle within healthcare. We are embracing these trends and shifting our innovation to a more patient- and people-centric model driven by the businesses and closer to our customers. We will deploy ~90% of our R&D talent directly in the businesses, up from ~70% previously.

Resourcing to scale high-impact innovations

At approximately 9% of sales, we continue to have industry-leading R&D spend, but through our new model, we are focusing our efforts and resources on a smaller number of projects offering greater scale and impact on patient outcomes and care providers’ clinical, operational and sustainability challenges. Patient safety is at the core of innovation design.

Flagship innovations across our portfolio will drive growth

November 27, 2023

Philips improves workflow and efficiency with next generation ultrasound systems EPIQ Elite and Affiniti at #RSNA23

November 26, 2023

Philips showcases world’s first mobile MRI system with helium-free operations at #RSNA23

November 26, 2023

Philips launches new-AI enabled innovations at #RSNA23 that free up healthcare providers to focus on patient care
Execution with decisive action as key value driver

Execution with decisive action as key value driver

Enabled by a culture of accountability and strong health technology capabilities, we see effective execution with decisive action as the key value driver. We focus on three priorities:

Resolving the Respironics recall remains our highest priority. Click here to read more.
Path to value creation supported by balanced capital allocation

Path to value creation supported by balanced capital allocation

Our strategy, innovation and execution plan will progressively create value with sustainable impact. We will drive growth, margin and free-cash-flow improvement over the 2023 - 2025 period through simplification, implementation of the strategy, and increasing our innovation impact. We target to reach our full potential beyond 2025.

Strong full-year 2023 results driven by solid execution of the plan to create value with sustainable impact

Confident in delivering the plan for 2023-2025 with further performance improvement in 2024

Margin increase from productivity, pricing & supply chain improvements — cumulative drivers 2023-2025

Improvement in profit trajectory will, to a large extent, be driven by productivity initiatives delivering EUR 2 billion savings in the 2023-2025 period. Approximately €1 billion savings will come from operating model simplification. Procurement savings will deliver between €550-600 million, and a string of other productivity measures, including S&RC rightsizing, will deliver €400-450 million.

In 2023, total savings amounted to EUR 956 million. Operating model productivity savings amounted to EUR 496 million. Procurement savings amounted to EUR 219 million, and other productivity programs delivered savings of EUR 241 million.

Margin expansion will primarily be driven by the productivity initiatives mentioned above, pricing and supply chain improvements.

Balanced capital allocation

Progressive value creation is supported by a balanced capital allocation policy focusing on organic growth, margin and cashflow improvement . Organic growth is the main premise and priority of our value creation. We strive for dividend stability, with a pay-out ratio of 40-50% of net recurring income. M&A will be on a reduced basis, with disciplined bolt-on acquisitions in core areas, which are going to be the beachheads for growth. We have an ongoing share buyback program for €1.5 billion. Higher earnings and lower cash costs related to the Respironics recall will result in higher free cash fow. We expect the 2025 cash fow to be in the range of €1.5 billion.

Target an improvement of leverage ratio towards 1.5x EBITDA

To ensure adequate funding we have taken actions on liability management, improving the debt repayment profle for the 2024 period. Average tenor of our long-term debt is 6.8 years. Furthermore, none of our financial instruments have financial covenants, which gives us a certain operating freedom.

As a result of strong free cash flow in 2023 our leverage improved from 3.0x to 2x on a Net debt to Adjusted EBITDA basis compared to the begining to 2023.
Environmental, Social & Governance - purpose in action
Environmental, Social & Governance - purpose in action
It is our purpose to improve people’s health and well-being through meaningful innovation. 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. We are partnering with stakeholders to drive environmental, social and governance priorities and make a global impact.

Making the world healthier and more sustainable

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

We have been carbon-neutral in our operations since 2020 and are partnering with customers and suppliers on reducing emissions across the full value chain in line with the 1.5 °C target

We are a leader in sustainable innovation (Helium-free-for-life MR, etc.)

We aim to increase circular revenues from 16% of sales in 2021 to 25% of sales by 2025

ESG rankings and recognition

CDP

Carbon leadership

Philips once again ranked among the world’s top global companies for its commitment to action on climate change.

Forbes

Best place to work

In 2023, Philips was named on Forbes World’s Best Employers List, and World’s Best Employers for Diversity List, for the 4th time

CDP

Supplier development

Philips has been recognized as a supplier engagement leader by CDP for the 8th year in a row

We take a fully integrated ESG approach to doing business responsibly and sustainably

December 07, 2023

Philips’ 2023 Human Rights Report details the company’s commitment to upholding human rights and its progress over the last year.

November 30, 2023

COP28: Teaming up for sustainable and accessible healthcare with partners across the value chain

November 16, 2023

Cero Generation’s 70MW Italian agrivoltaic project goes live, backed by agreements with Philips and HEINEKEN

Do you want to learn more? Download the presentation or reach out to our Investor Relations contacts below to receive more information.

Investor presentation (1.27MB)

Why invest in Philips?

Philips is committed to driving progressive value creation through a strategy of focused organic growth, scalable patient- and people-centric innovation, and focus on reliable execution – creating value with sustainable impact.

We operate in growing market segments, where attractive margins provide a foundation for sustainable value creation.

We will leverage attractive leadership positions to drive growth, scale our Enterprise Informatics business to unlock insights, and drive operational excellence and services in Diagnostic Imaging.

Leveraging attractive leadership positions to drive growth

Image Guided Therapy

Monitoring

Ultrasound

Personal Health

Scaling Enterprise Informatics to unlock insight

Driving operational excellence and services in Diagnostic Imaging

Resourcing to scale high-impact innovations

Flagship innovations across our portfolio will drive growth

Philips improves workflow and efficiency with next generation ultrasound systems EPIQ Elite and Affiniti at #RSNA23

Philips showcases world’s first mobile MRI system with helium-free operations at #RSNA23

Philips launches new-AI enabled innovations at #RSNA23 that free up healthcare providers to focus on patient care

Enabled by a culture of accountability and strong health technology capabilities, we see effective execution with decisive action as the key value driver. We focus on three priorities:

Resolving the Respironics recall remains our highest priority. Click here to read more.

Strong full-year 2023 results driven by solid execution of the plan to create value with sustainable impact

Confident in delivering the plan for 2023-2025 with further performance improvement in 2024

Margin increase from productivity, pricing & supply chain improvements — cumulative drivers 2023-2025

Balanced capital allocation

Target an improvement of leverage ratio towards 1.5x EBITDA

Making the world healthier and more sustainable

ESG rankings and recognition

We take a fully integrated ESG approach to doing business responsibly and sustainably

Philips’ 2023 Human Rights Report details the company’s commitment to upholding human rights and its progress over the last year.

COP28: Teaming up for sustainable and accessible healthcare with partners across the value chain

Cero Generation’s 70MW Italian agrivoltaic project goes live, backed by agreements with Philips and HEINEKEN

Related pages

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