Accelerating Healthcare. Abhijit Bhattacharya Chief Financial Officer Philips Healthcare

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1 Accelerating Healthcare Abhijit Bhattacharya Chief Financial Officer Philips Healthcare

2 Important information Forward-looking statements This document and the related oral presentation, including responses to questions following the presentation, contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forwardlooking statements include statements made about our strategy, estimates of sales growth, future EBITA and future developments in our organic business. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements. These factors include, but are not limited to, domestic and global economic and business conditions, developments within the euro zone, the successful implementation of our strategy and our ability to realize the benefits of this strategy, our ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs and actuarial assumptions, raw materials and employee costs, our ability to identify and complete successful acquisitions and to integrate those acquisitions into our business, our ability to successfully exit certain businesses or restructure our operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition. As a result, Philips actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see the Risk management chapter included in our Annual Report 203. Third-party market share data Statements regarding market share, including those regarding Philips competitive position, contained in this document are based on outside sources such as specialized research institutes, industry and dealer panels in combination with management estimates. Where information is not yet available to Philips, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated. Use of non-gaap Information In presenting and discussing the Philips Group financial position, operating results and cash flows, management uses certain non-gaap financial measures. These non- GAAP financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used in conjunction with the most directly comparable IFRS measures. A reconciliation of such measures to the most directly comparable IFRS measures is contained in our Annual Report 203. Further information on non-gaap measures can be found in our Annual Report 203. Use of fair-value measurements In presenting the Philips Group s financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When quoted prices or observable market data are not readily available, fair values are estimated using appropriate valuation models and unobservable inputs. Such fair value estimates require management to make significant assumptions with respect to future developments, which are inherently uncertain and may therefore deviate from actual developments. Critical assumptions used are disclosed in our Annual Report 203. Independent valuations may have been obtained to support management s determination of fair values. All amounts in millions of euro s unless otherwise stated; data included are unaudited. Financial reporting is in accordance with the accounting policies as stated in the Annual Report 203, unless otherwise stated. 2

3 Agenda. Our strategy is aligned to industry mega trends 2. Delivery of Healthcare solutions key to our future 3. Our self help is a strong driver of financial performance 4. Key takeaways 3

4 The Philips Business System, our repeatable system to unlock and deliver value Philips Group Strategy Manage our portfolio with granular value creation plans and resource allocation Philips Capabilities, Assets and Positions Leverage our unique strengths and assets to drive global scale and local relevance across our portfolio Philips Excellence Be a learning organization that delivers with speed and excellence to our customers, applying a growth and performance culture Philips Path-to-Value Create value to our customers and shareholders in a repeatable manner 4

5 Mega trends create great opportunities for profitable growth Mega Trends Growing and aging population with more chronic diseases Growing demand for integral value-based healthcare solutions Sizeable Opportunities Around 65% of deaths globally are due to chronic and non-communicable diseases World s population of people 60 years+ doubled since 980; forecast to reach 2 billion by 2050 Our Business Domains Imaging systems for diagnostics and therapy Patient care for hospital and home Clinical Informatics & consulting services 5 Sources: World health organization, Agriculture and Agri-food Canada, OECD observer

6 Philips Healthcare What we do. Where we are. Philips Healthcare Businesses Geographies Imaging Systems Home Healthcare Solutions Patient Care & Clinical Informatics Customer Services Western Europe North America Other Mature Geographies Growth Geographies 2 36% 4% 23% 27% 2% 42% 2% 25% 9.6 Billion sales in ,000+ People employed worldwide in 00 countries 8% of sales invested in R&D in Products & services offered in over 00 countries 6 Based on sales last 2 months March Growth geographies are all geographies excluding USA, Canada, Western Europe, Australia, New Zealand, South Korea, Japan and Israel

7 Healthcare constitutes an important part of the Philips Group Last twelve months Sales Adjusted EBITA Net Operating Capital 00% = EUR 22.4B 00% = EUR 2.7B, 2 00% = EUR 3.2B Consumer Lifestyle 2% Healthcare Consumer Lifestyle 9% Consumer Lifestyle 0% 42% 52% 56% Lighting 37% Lighting 29% Lighting 34% Healthcare Healthcare 7 Excluding Central sector (IG&S) 2 EBITA adjustments based on the following gains/ charges: for Healthcare EUR 63M, Consumer Lifestyle EUR (2)M and Lighting EUR (04)M

8 Agenda. Our strategy is aligned to industry mega trends 2. Delivery of Healthcare solutions key to our future 3. Our self help is a strong driver of financial performance 4. Key takeaways 8

9 Philips Healthcare Guiding Statement We are dedicated to creating the future of health care and saving lives. We develop innovative solutions across the continuum of care in partnership with clinicians and our customers to improve patient outcomes, provide better value and expand access to care. 9

10 Redefining the delivery of care as a solutions partner Alliance with Georgia Regents Medical Center for a first-of-its-kind healthcare delivery model in the United States 5-year alliance with sales value of more than $300 million Teaming up Healthcare and Lighting to win a major customer End2End: Solutions, services, clinical education, consulting, roadmap, operational efficiency Philips will provide consulting services to streamline planning, maintenance and education across GRMC sites Alliance includes full breadth of our solutions under a single, consistent payment structure 0

11 Redefining the delivery of care as a solutions partner Partnering with the Stockholm County and Karolinska University Hospital to meet future demands of healthcare Karolinska will develop new care pathways by integrating patient care, clinical research and education Philips will provide access to state-of-the-art imaging systems equipment and services for 4 years for 600-bed new hospital site to be opened in late 206, at predictable costs Managed equipment services include the procurement, system integration and maintenance, including those of other vendors, to ensure optimal delivery of care Strong focus on innovation, education and collaboration, including establishment of a research and innovation hub

12 Leadership positions and customer satisfaction rates Imaging Systems # Interventional X-Ray cardiovascular Patient Care and Clinical Informatics # Patient monitoring Home Healthcare Solutions # Sleep therapy # Image-Guided interventions # AEDs # Respiratory care # 2 # # # Ultrasound worldwide Overall Best in KLAS performance leader in Imaging Overall system performance IMV ServiceTrak NPS IntelliSpace Portal Advanced Visualization KLAS Category Leader # # # # Digital telemetry Non-invasive ventilation Cardiology Imaging North America NPS Patient Monitoring - North America, UK, Germany and India # # Home monitoring telecare North America NPS Lifeline and Home Oxygen Ventilation North America # CT, MR Ingenia, and Ultrasound iu22 Best in KLAS Product Awards # Frost & Sullivan APAC and India Medical Imaging Company of the year Market position Customer satisfaction 2 Sources: COCIR, NEMA, Market Intelligence Estimate, IMV rated ServiceTrak, Frost and Sullivan, Business group market insights, InMedica Global Patient Monitoring study 203, MRG Global Ventilator study 203, MRG Global Healthcare Informatics 203. IDR: # for China, France, Germany, UK and US combined

13 Agenda. Our strategy is aligned to industry mega trends 2. Delivery of Healthcare solutions key to our future 3. Our self help is a strong driver of financial performance 4. Key takeaways 3

14 Accelerate! drives operational excellence, agility and customer centricity across Healthcare Customer centricity Resource to win End2End Culture Operating model Overhauled our Go-to-Market model in the US focusing on the largest opportunities, with significant investments in supporting infrastructure Upgrading our marketing capabilities Innovation investments in Hospital to Home, Image-Guided Intervention & Therapy, Informatics Solutions & Systems, Value Segment, and Consulting Market investments in China, Latin America, India, and ASEAN Three-fold increase in total revenue covered by End2End programs with 40% of revenues to be covered by 204 Improve time-to-market of new solutions supported by clinical evidence Culture champions team focused creating a growth and performance culture around customer centricity, innovation, inspiration, and operational excellence Healthcare leaders trained in Accelerate Leadership Program Simplified organization, increasing spans of control and removing two layers Improve sales force productivity with Sales Support Centers, Customer Relationship Management system, and digital tools 4

15 Accelerate! is improving the way we do business Operational excellence: Magnetic Resonance By redesigning and harmonizing End2End processes across the equipment installation value chain: Reduced the installation time of Magnetic Resonance products by 0% and cost by 5%. Reduced damaged and missing installation parts by 25% resulting in better customer service levels. Customer value chain: Imaging Systems North America To enable us to tailor propositions to different decision makers in the customer landscape, we improved the entire customer value chain of our Interventional X-ray business in North America. This resulted in full product-service solutions that maximize customer value, thereby increasing our win rate by 6% in selected accounts. Lean order processing: Japan By mapping and harmonizing its Market to Order processes through Lean methodology, Philips Healthcare Japan has improved service levels to customers. The time for processing orders improved by 50%, resulting in faster response time. 95% of orders processed within 8 hrs. Customer centric innovation: EPIQ Ultrasound Cooperating closely with radiologists, echocardiographers, and gynecologists Philips developed EPIQ, a new era in advanced Ultrasound. EPIQ eases traditional compromises in Ultrasound imaging while improving clinical confidence. It combines high image quality with a new user interface, facilitating better workflow and patient throughput. EPIQ pioneers Anatomical Intelligence leading to faster and better reproducible Ultrasound exams. 5

16 Growth Growth Value Growth Accelerate! is changing Healthcare top to bottom Accelerating performance improvement Performance Performance Box Box Invested in Industrial footprint in growth geographies Strong OIT and sales growth Successful market launches Investments in R&D and growth geographies Industrial footprint in growth geographies Strategies to address market headwinds in Southern Europe and Japan BMC performance management Performance Box Reduced overhead and complexity ROIC BMC performance Accelerating management performance implemented Laying the foundation to improvement Gained share, extended leadership in Patient Care and Clinical Informatics improve performance Operational excellence through Operating margins & Inventory management improved Accelerate! ROIC Return on investment on growth and innovation investments Reduced overhead, cost of complexity Leveraged industrial footprint in growth geographies Gained share, extended leadership in Patient Care and Clinical Informatics International growth and improved patient interface market position in Home Healthcare Solutions ROIC Transform Philips through Accelerate! Value delivery from past acquisitions Upgraded marketing capabilities Sales force productivity Improved patient interface market position in the Sleep business Upgraded marketing capabilities Culture change gaining strong traction Philips Business System being implemented Created performance and growth culture Increase value segment portfolio in Imaging Continue to close gap in co-leadership in Imaging Consulting services business 6 BMC = Business Market Combination

17 Philips Healthcare has made steady progress since 20, but there is much more to come 7 Including restructuring and acquisition-related charges 2 SG&A = Selling, General & Administrative Expense Note Financials in 20 and 202 revised for the adoption of IAS9R

18 Solid improvement in ROIC Margin expansion and NOC management driving 300bps y-o-y improvement in Philips calculates ROIC % as: EBIAT / NOC; 20 ROIC has been adjusted to exclude the impairment of goodwill charge taken in 20

19 Next steps on our Path-to-Value Initiate new growth engines Healthcare Transformation Services Hospital to Home Digital health platform What else can we provide the 80-year-old woman living in her home? Expand global leadership positions Across the continuum of care Ubiquitous monitoring Ultrasound everywhere Sleep and breathe better Expand value solutions Image-guided interventional therapy (IGIT) Transform to become an Excellent company Compliance Improve quality everywhere with Philips Excellence Close the profitability gap to competitors Accelerate! & implement the PBS 9

20 Agenda. Our strategy is aligned to industry mega trends 2. Delivery of Healthcare solutions key to our future 3. Our self help is a strong driver of financial performance 4. Key takeaways 20

21 Key takeaways Health care industry is dynamic, changing, and profitable We made good progress on performance improvements in 203 Accelerate! continues to unlock significant value, with the 206 targets as the next step on our path to value, and more to come thereafter Our cultural change is making us more customer centric, agile and entrepreneurial, while embedding integrity in everything we do While 204 is a challenging year, we are making good progress towards reaching our 206 targets 2

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