Koninklijke Philips N.V. (AMS:PHIA)

CMD 2018

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Nov 8, 2018

Good morning, ladies and gentlemen, and welcome to the Royal Philips Capital Markets Day here at our headquarter in Amsterdam. Also very well, warm welcome for the people that watched us via the live webcast. We have an exciting day ahead of us, where we will go through our strategy, our performance and our value creation journey. Before I go to the agenda, I want to draw your attention to the following slide, which is our safe harbor statement, should come up right now, and you will find this statement as well in your booklets in front of you. Going through the agenda. We will start today with a presentation from Frans van Houten, CEO of Royal Philips, who will talk about delivering performance and further unlocking our potential. Immediately after that, Abhijit Batasharia, our CFO, will talk about driving performance linked to the strategic elements that Frans will talk about. After that, we will have a Q and A with both Frans and Abhijit here on stage and after we will go for a lunch that will last until around 2 p. M. Central European Time, 8 a. M. Eastern Time, and then we will reconvene here in the room. Then we will start to talk about the 3 business segments. And after, we talk as well about our Greater China market. Rob Cassella will kick off with a presentation on D and T, our Diagnosis and Treatment segment, where we will he will talk about how we will continue the momentum in this business. Afterwards, Carla Krivert, Chief Business Leader for Connected Care and Health Informatics, will talk about how we are further winning in Connected Care and Health Informatics. This will be followed by Roy Jacobs, our recently appointed business leader for the Personal Health segment, who will talk about how we will build further growth in this segment. We will conclude these preliminary presentations with a presentation from Andy Ho, who is our Chief Market Leader for Greater China, and he will talk about how we continue to drive profitable growth in Greater China. Afterwards, the 4 preceding presenters will come back on stage here together with Frans and Abhijit, and then we will have our last plenary Q and A on stage here. That will also conclude the live webcast, because afterwards we will go in 4 breakout business Zooms, where we will dive deeper into 4 selected businesses to bring the strategy to life and also to demonstrate some of our new recent innovations. We will get back to this room here at 6 p. M. Local time, where Frans will do a wrap up. And then afterwards, with most of you, yes, we're happy to welcome you for a management dinner at a very special location, the Rijksmuseum here in the center of the city. With that, we will show a short video. And after, Frans van Houten will take the stage to start the presentation. Thank you. All around the world, the combination of growing, aging populations and the increase in chronic illnesses has created a pressing need for more efficient, effective and sustainable models of care while at the same time improving access. At Philips, we're driving the digital health revolution to unlock the value of seamless precision care, helping people look after their health at every stage of life. Applying our extensive consumer insights, we develop locally relevant connected solutions that support healthier lifestyles and help people to live well with chronic disease. In the hospital setting, we're teaming up with health care providers in long term strategic partnerships to innovate and transform care. By listening closely to our customers' needs, we're able to co create solutions that drive improved patient outcomes, cost productivity and staff experience. Our solutions apply the power of clinical informatics and predictive analytics at the point of care, supporting first time right diagnosis as well as effective treatment that's precise and minimally invasive. In this way, are enabling our customers to realize gains and efficiencies that will help them deliver better outcomes at lower cost and a better experience for patients and caregivers, taking us closer to our goal of improving the lives of 3,000,000,000 people a year by 2025. There's always a way to make life better. Innovation and you, Philips. Good morning, ladies and gentlemen. It's a great pleasure to receive you here at the Philips headquarters in Amsterdam, and also welcome to everybody in the webcast. Actually, it feels very good to have you here in our own home, and I hope you also get a taste of the atmosphere and how we all work together here. Without further ado, I would like to introduce you to the management team. The management team here that is welcoming you together with me, Abhijit, of course, Rob Cassella, Carla, Roy as the 3 business segment leaders Andy Ho, this year, we invited him to represent China. Last year, if you recall, we spoke about North America. And also Jeroen Tas is joining us here today. And of course, many other executive members of Philips will interact with you through the Zooms and also with the dinner tonight. I think you will have a good chance to interact with people live and get a taste of how we look at the business and how we are evolving the business. The key messages that I would like to share with you today are, 1st of all, continuing to emphasize the massive transformation that we have made away from a diversified industrial conglomerate into a focused health tech leader. We deliver innovations through a deep commitment on R and D as well as deep insights from hospitals, clinicians and consumers and making innovations meaningful to deliver on the quadruple aim. We have a plan that is, you could say, largely the same as what we shared with you previously to drive more value out of what we have by emphasizing of operational excellence, productivity, better customer service and intimacy, and that drives a lot of value. Moreover, the categories that we have, have a lot of growth potential. So by just growing the core, for example, through geographical expansion, bringing these innovations to more countries, but also by deepening our customer relationships, we can take a bigger share of the wallet of our customer. And thirdly, we are making this pivot from being a product company to a solutions company as we think that smart suites of systems, software, services and devices together deliver a superior experience for our customers. And therefore, it's no longer a price game, but it becomes really a value creation game for our customers in which we participate. We will go extensively in these three important drivers. As we execute on that plan, we will deliver a much improved results. Now many of you have asked, does your productivity plan finish in 2019? Or is there more to come? And I'm happy to announce to you that, yes, there is another year that we now have added to the program. Moreover, also to deal with any headwinds that we may encounter, we have also raised the plan overall. So we have raised it by €600,000,000 Basically, to make it simple, we'll do €500,000,000 next year and €500,000,000 in 2020. This enables us altogether to reaffirm our commitment to grow Philips by 4% to 6% organically. We continue to have the ambition to gradually raise the growth profile into the higher bandwidths of this 4% to 6% guidance. We will talk about that in more detail. We will continue to annually improve the profitability by around 100 basis points, and we are happy to inform you that we have a plan to deliver a free cash flow above €1,500,000,000 in 2020. So also there, it is an increase as we become confident about our cash generating ability. Let us dive a bit deeper into the Phillips story. Today, we have an undivided attention and commitment to our purpose to improve people's health through innovation. This change from doing a lot in a more shallow way to really being deeply committed to health and health care is paying off handsomely for us in terms of customer recognition, in terms of talent, who wants to join our journey and purpose. And going deep feels really good as the company progresses. Many of you will remember, however, where we come from. And for those of you who are new to Philips, I think it is valuable to just pause for a moment and reflect on where we come from. When I joined as CEO in 2011, half of Philips was in television and lighting, and we have divested that. The remaining half today has a much better growth profile and a much better profitability profile. And you can see here how the profitability has gone up in the last 7 years and how the growth profile has improved. Doing these divestments was not necessarily easy, but we have executed that well. Moreover, we have started to do some acquisitions in order to deepen our commitment to the health technology space. The journey does not stop here because we are, of course, very much aware that with this changed imposition, we are having a different peer group. We are now comparing ourselves much more to the medtech world. And then, of course, we are only somewhere in the middle of that pack. And by no means, from a profitability point of view, can we say that the journey is finished. And that, of course, correlates to this commitment to every year improve profitability going forward. Within our purpose of improving health, we have taken this strategy to look at health as a continuum. We are all aware of the challenge of how does the world cope with the cost of health care. And there is a trend to keep people out of hospitals, to have more outpatient care, more home care. Philips is well positioned across this so called continuum of care. We offer connected products and services to keep people healthy, to prevent disease. We have a deep bench on delivering precision diagnosis by a combination of modalities and clinical informatics. We have a strong proposition around minimally invasive therapies. We support people with a chronic disease at home. Moreover, I mentioned that we look at integrated care going beyond the product. And at the bottom, we emphasize that we are connecting patients and care providers in a more effective way, in a more coordinated way with less waste by leveraging data, by leveraging informatics, and that will result in better outcomes for patients but also less cost for society. This strategy resonates well with our customers. They are all grappling with this. Many providers ask us, help us keep people out of the hospital as reimbursement schemes are more going to be capitated or even and move away from volume, People struggle with that new conundrum. And then there is Philips. We understand how you connect with patients wherever they are. In fact, it is important to realize that wherever you go in the world, hospital providers, payers and governments talk about value based health care: how to improve health outcomes for people, for populations improving the patient experience improving staff satisfaction reduce stress with care providers and lower the cost of care. We have decided in Philips that every innovation has to deliver on the quadruple aim. We need to be able to demonstrate how we contribute to these four goals that are noticeable from the United States to Europe to China. It is all the same, right? And by embracing health economics as a filter to judge innovation on, we come with more meaningful innovation. As you will see today, we have embedded this logic in our value propositions. All our people talk about it, and that is what the C suite of hospitals want to hear. But also consumers, they look for value and impact to their lives. Within this strategy, we are fortunate to have many strong categories already. Over 60% of our portfolio enjoys leadership positions, And you can read here for yourself how rich that portfolio is across the categories, across the segments. With these leadership positions, we can build out our strengths in a market that is growing and attractive. We see the market for health technology growing because of, 1st of all, a growing population and more people wanting to get access to care, especially in emerging markets. An aging population, not only in the Western societies, also in China, that is a big issue. There is a rising burden of chronic and lifestyle diseases, and overall, societies spend more money on health care, whether they like it or not. This is still going up. The market is also changing from some other dimensions, and it is important that we have that on our radar screen. First of all, the digital revolution is uprooting the way people connect to their care provider. With increased co payments, consumers are becoming much more involved in their own health decisions. Digital technology enables precision care. Augmented with artificial intelligence, informatics, we can come to a personalization of care. It's a dramatic change for a world of health care that has been relatively conservative. We see also that the health care world is consolidating, whether that's in providers or payers or even some of the, for example, the pharmacies and the drugstores who are finding new ways to interact with patients who look for care. That world, as it shifts, of course, has an implication for us as well. And with reimbursements shifting, we see also care shifting out of the hospital. In fact, the proportion of care delivered in a hospital has been trending down already for several years, and we expect that trend to continue. I mentioned that innovation is at the core of the Philips DNA. We have a deep commitment to innovation. Some of you asked, of course, whether 10% is the right amount, but it is what helps us differentiate and create value propositions that really matter. Anticipating this shift to more informatics and data science and AI, we have already over 60% of our R and D professionals in software and data science. We work together with clinical institutions, key opinion leaders in order to have the right relevant knowledge around the medical processes and how to embed that into our value propositions. Part of our R and D is, of course, to sustain our existing businesses, but part of that R and D is also to create new businesses. We have a sizable commitment to seed new businesses, such as in digital pathology, in neurology, in medical wearables, in the IT, medical cloud infrastructure, which we call HealthSuite and many, many other areas that are exciting, that position us well for long term sustainable growth as a company. Many of these new businesses are only now coming to the market and start to contributing revenue growth. And of course, as they do that, they will also reduce the burden on the P and L and help us achieve our 100 basis points improvement. On the right hand side of this page, we have highlighted a few data points. I know that it's important for you to know how much of revenue comes from products that were launched in the last 3 years. At Philips, that is well over 50%. Moreover, this commitment to innovation is helping us drive higher order growth. Already for the last 4 or 5 quarters, we have seen a step up in order growth. We have had double digit order growth in the last 12 months. I know that begs then the next question, how is that coming to revenue, and we will come to that. But I must say it is a good place to be to see this much demand for our innovations. And consequently, we see our market shares, especially in Health Systems, edging up as we go. Moreover, innovations command better pricing. And we see that our gross margins have been expanding for the last 3 years, and we believe that, that is a trend that we would like to continue. Nevertheless, as €1,800,000,000 R and D is a lot of money, we are driving R and D productivity, and we see that we can improve that also over the next few years. Let us now go a bit deeper into our midterm plan to unlock the value that we are all after. We have 3 main drivers for growth and profit enhancement. These are the same as last year, and we are making progress on all of them. Still, I think it is important that we talk through all eight aspects of these three drivers. Let us start by the customer. We can still raise customer experience, deepen that engagement. We are working on quality, as you know. We are working on productivity, but we are also transforming Philips into a completely digitally organized company where we apply robotics and so on and so on. I will come back to that. The second driver is boost growth. We have great product categories that have more growth potential where we capture that through geographical expansion, but also by deepening our access with existing customers and go to a higher share of wallet. Much of our innovation is geared to go beyond the product and to deliver a suite of systems, devices, software and services that together tackle these quadruple aim challenges that our customers have. And where we cannot do it organically, we will partner or we also look for selected M and A. This is the recipe that we all embrace in Philips. It is applicable to all businesses and markets, and I think it is worthwhile to go a bit deeper into this recipe. Let us start by the first driver of improving customer experience and quality and productivity. We continue to make progress with regard to our quality management system and regulatory compliance. I can tell you that we are on schedule with our plan with regards to the consent decree. We have ongoing inspections, and there's no, let's say, new findings that we are very worried about, yet we are very vigilant to continue to push the envelope on making sure that we strengthen our quality management systems. Additionally, of course, we have the European Device Regulation that will come into effect and that especially next year will take an extra investment with regards to changing our IT systems in order to cater for the heightened demand in responsiveness and timeliness of complaint handling and so on and so on. And we will come back on that as well. Already shared with you is we are expanding the productivity program from €1,200,000,000 to €1,800,000,000 Abhijit will talk more about that, so let me for now move on. Already some years ago, we deeply embedded lean and continuous improvements throughout Philips. This is not new. But boy, are we seeing the benefits now as it is here at all levels in the organization. Wherever you come, you see daily management boards, you see problem solving, you see kaizens, you see teams engaging in daily and continuous improvement. And this engine starts running more and more by itself, and that is really rewarding. With regards to the supply chain, you are aware of our plan to reduce the amount of factories that we have and have bigger, better factories that have more scale, higher quality professionals, but also reduced footprint. And I think also on that point, Abhijit will come back to you. So this altogether makes up the Philips business system. It's a concept that we have taken lessons also from other companies that we admire, and we have taken these best practices into Philips. I mentioned to you that we are also changing the gut of Philips, Becoming a digital company so that we can capture the opportunities in the world means that we are changing our products to become connected so that we can, for example, remotely service them. We are connecting ourselves to our customers and consumers. Then we can leverage the data, the data on our products but also the data on our customers. The IT systems of Philips are all being overhauled to become cloud based, the latest version of standardized SAP and so on. And of course, we are raising the talent base in R and D, already told to you, but also in marketing, also in how we adapt and adopt robotics in, for example, finance and accounting processes. And so it is it's a big and impactful digital transformation that affects every part of the company. At the right hand side, you see a few exciting examples of what it results into. Our ability to connect to sleep apnea patients with over 1,500,000 patients connected to our cloud and over 8,000,000 of these patients from which we get the data on a regular basis so that we can give them coaching on their sleep therapeutic adherence, but we can also demonstrate that to payers and providers. Another exciting example is how we have used gamification to engage And one of the new innovations coming to the market is digital pathology, where there are not enough pathologists in the world and the ability then to leverage pathologists wherever they are and have a network pathology practice is very exciting to the professional pathologists. All of that, of course, can only be done if both your enterprise and your product architecture is fully digital. And we have taken the Philips HealthSuite platform as our backbone to connect everything. The second driver in category is, of course, driving growth. Building on that foundation that I just spoke about, bringing innovations to more markets, A great example of replicating proven propositions in other geographies is the innovation of OneBlade. OneBlade developed for young males that don't shave every day from 0 to close to €200,000,000 in just a few years. This year, we have added another 10 countries to that franchise, and we expect this growth engine to contribute continued to give. Sleep and Respiratory Care, still highly undiagnosed in most parts of the world. Let's face it, today it's mostly a Western market business, and we see double digit growth in, for example, China, India, Brazil and many other countries. In the middle, acknowledging that we had some weaknesses, we are strengthening our go to market to become more consistent. I always challenge my own people to say if we can have a market share in diagnostic imaging in Germany well into the '20s, why is that not the case in the United States? So we started on a strong program to capture share in North America, and that is working, And it is one of the contributors to this higher order growth that we have been reporting for the last four quarters. But it's not only happening in North America. We see this happening across the world, and it is really encouraging to see how we can capture share from our main competitors, whereby one is more vulnerable than the other, I should add. And then finally, the Philips global footprint can be leveraged for acquisitions. We acquired Volcano and then later on SpectroNetix. Together, in the Philips business system, they can supply products to all customers all across the world. That's working well, and we see double digit growth in the last 12 months from Q3. We expect to be able to continue to leverage this as we go forward. I've also spoken about deepening the customer relationship. And as we do that, that we can capture a higher share of wallet. This is perhaps a somewhat busy slide, but we felt it's important to talk about how that works. We agree common goals. We agree a common governance around the challenges that a customer has. We agree on outcome based parameters that we jointly strive for. The focus then is no longer on the price of the product, but rather on the big goal that we want to achieve together. We get a much deeper relationship with customers through this methodology as we cocreate solutions, and then we get rewarded by more business. We have seen customers where we start with a long term strategic partnership in imaging and then it expands into other areas. Or it starts with patient care and patient monitoring and it expands in other areas. So it is also giving us a multiyear recurring revenue stream, a much deeper and sticky relationship. Some examples of what we added in the last few months: Banner Health and NSW in Australia, the Dallas Children's Centre and perhaps Tong in Cheek, a nice example, winning the City Clinic in Munich was once again something that we feel proud of. Overall, this year, the ticker stands at 160 large scale partnerships, growing every year. And just to share with you, we are currently working on an opportunity funnel of another 350 hospital chains that are looking for this kind of a strategic partnership. Couple these deep partnership relationships with our effort around solutions because basically that goes hand in hand where we deliver more integrated solutions for seamless care, delivering on the quadruple aim, and we get actually to double digit growth through this strategy. Some years ago, we were well below 30%. Now we are already seeing that 32% of revenue falls under this header of solutions business with recurring revenue streams and so on. Specific target areas are precision diagnosis, the minimally invasive therapies, sleep and respiratory care, connected patient care, including how do you get patients out of the hospital in a better way. We leverage there the systems, the smart devices, the services, but also informatics and more and more the data play of machine learning and artificial intelligence. And maybe the best way to bring this to life is through an example. The example that I brought for you here and that you will also hear about this afternoon in the Zoom sessions is what we call the Guardian Early Warning system. Now imagine patients being in an ICU, an intensive care setting. Such a bed is very expensive. So what hospitals would like to do is move these patients into the general ward. Caregivers are worried about that because at the general ward, things go wrong. The patient staff ratio is much higher. There's only a few caregivers for maybe 15 patients. Therefore, patients stay in that expensive ICU. We go to the hospital and say, Let us help you move these patients to the general ward, where your cost per patient is a lot lower. The early warning system helps you, through predictive analytics discover which patient is trending well and which patient may need additional support. Therefore, in a timely way, 6 hours in advance, we can predict cardiac arrest, for example, we can make sure that those patients get the support they need. The results are overwhelmingly positive. You can see it here at the right hand side in how this Guardian Early Warning System through clinical evidence, has a massive impact on health outcomes, on the reduction of cost of care, while making staff less stressed and patients much more at ease and feeling being cared for. So this is growing at the moment very rapidly, especially in North America, but we see it coming picking up in other regions as well. So it's a nice example on how an integrated approach delivers better on the quadruple N. And I can tell you it's no longer about price if you offer something like this. Solutions are done through our own R and D, but also together with partners. And where necessary, we then would like to do an acquisition in order to complement our portfolio. And the example here is about Image Guided Therapy, where we were already a leader in the systems side. But the systems side comes with the handicap of only doing a capital equipment sale once every 10 years. Whereas if you want to deliver on quadruple aim, then you need to be there all the time. You need to optimize the procedure. And by expanding into devices, combining that with systems and software, we are actually able to innovate the procedure, doing procedures more efficiently, doing more patients during the day, making sure that they are treated first time right. This strategy is resonating tremendously, has resulted in an overall step up of market share also in our market leading systems business. The Azurion platform has resulted in a 300 basis points market share gain. The acquisitions are synergistic with our systems approach. And our KOLs tell us time and again how much they like our approach. And of course, then the financial results at the bottom of the page speak for themselves. When you run a big company, especially when you want to change a company, the culture of the company is tremendously important. So let us also for a moment dwell on more the soft side of what makes a company successful. It's not only dollars. It's not only headcounts and numbers. It is very much the leadership and how everybody goes into the job every day. And sometimes we joke, culture is what happens when you don't look, right? And we have been on a leadership transformation journey for the last few years. This year, we took 60 leaders into a somewhat frugal off-site, as you can see here, in order to get much deeper into what drives us, what is required from all of us, how do we get to success, give each other feedback to say, I need this from you, what do you need from me, and have the difficult conversations, but also cementing that deep commitment to a joint purpose and journey where to go from good to great, you have to be prepared to challenge the as is and make changes. When we have done this because we have done this, the commitment that we have seen has been tremendously growing. I'm sure that if you ask some of my staff members here today, they will tell you about it. I also would like to talk briefly about how we do business because increasingly, companies are judged on their role in society. At Philips, we have taken a multi stakeholder approach for many years already. And our sustainability programs are not CSR programs. They are deeply embedded in how we do business. And as a consequence, we can say that we will be carbon neutral in our operations by 2020. We are almost there. We have embraced circularity as a way to take back products and to recoup the value and to recoup the scarce material to avoid that they go to the landfill. But actually, closing the loop is good business because I don't want our medical equipment to fall in the hands of third parties who then cannibalize the systems and destroy my spare parts business. So it is actually it makes eminent sense to do this and to close that loop for 100%, which we have committed to do. We are working on expanding access to care. We measure how many lives Philips touches. And one nice example is how we are pioneering primary care clinics in Africa. And by bundling solutions, actually the price tag of such a primary care center makes it also worthwhile for us to go after it because now it is it's a bigger project. And then finally, we are committed to the World Economic Forum Compact for responsive and responsible leadership. Let me come back to our value creation road map. This is an update of our segment performance trajectory. There are some changes on this page versus last year. Unsurprisingly, I suppose, we are raising the outlook for our Diagnosis and Treatment business. We have had a lot of success in rising order growth in that business. And therefore, from a lowtomidsingledigit growth, we are now projecting a 5% to 7% sustainable growth rate for the coming years, while maintaining the margin target of 14% to 16%. On Connected Care and Health Informatics, whilst we are extremely optimistic about the long term realistically and acknowledging that this year the growth rate was quite modest, we have said next year we will first get into the 3% -plus growth rate, and then we are confident that by 2020, we can get to the high end of this bandwidth. So no change in, let's say, future confidence in this business, but realistically, we need to first build this growth path. And the good message here is that our order growth has already been rising this year, So we are looking at a good order book to actually deliver this next year. And then on Personal Health, something that also has your attention. Yes, this year has been a slower year, and we will not hit this 5% to 7% this year. Abhijit will also speak about that. But we are very confident that next year we can, right? So we have made this target a bit more precise versus last year, also out of conviction that from next year onwards, this 5% to 7% is achievable. And the margin target also here is unchanged. We spoke in the Q3 about headwinds. I think it's a matter of maturity that we just are open about that. The headwinds that we identified are trade tariffs, which we estimate next year at a net €60,000,000 We also have these EU MDR investments in primarily adapting IT systems to have this higher granularity in reporting as is required and some current emerging market volatility. The measures are already underway, adjusting supplier base so that we can change, let's say, the supply origin so that we avoid duties. Reconfiguring the supply chain is possible and enabled by our supply chain strategy of having multi modality factories. That can mean that we bring some China sourcing out of China, but also that we bring some exports from the United States to China and do that in a different way. Of course, we will deal with currency through pricing. That just has a little time lag effect, but is happening. And then productivity programs, as we raised it from the €1,200,000,000 to the €1,800,000,000 will create ample of countermeasure to deal with these headwinds. So we are working on it. It's fully embedded in our plans, and we overall don't change our guidance as we deal with these headwinds. So then in summary, these are our targets: the revenue growth, 4% to 6% the margin expansion stays at 100 basis points annually. The cash flow generation is up to above €1,500,000,000 by 2020, and the organic ROIC will be in the mid- to high teens continuously. Also after 2020, we will further drive improvements. So journey of Philips will not stop in 2020. So with that, I would like to hand over to Abhijit and continue the detailed explanations of our story. Thank you, Frans. Hi, good morning, everybody here in Amsterdam. Good morning and good afternoon to everybody on the webcast, maybe very early morning in the U. S. Glad to have you here in Amsterdam. What I'm going to talk to you about is our performance trajectory, how we've performed so far and the way forward and maybe a bit of underpinning on how we plan to drive the improvements going forward. If you see the sales and the targets we set in 2016, they were for a fairly long period of time, from 2016 to 2020. We have been in the bandwidth of growth as well as for the profitability improvement. Frans mentioned earlier, we have increased our productivity numbers for next year and the year after because we will need that to combat some of the headwinds that we see coming our way. We see also that with the improvement of profitability towards the latter half of the decade. So in 2020, we will also be able to up our cash flow. And then if I will show you a picture on how we've allocated our capital over the last few years to show that it's been balanced between M and A, CapEx as well as return to shareholders. So first, let me start with the order intake growth. I think here is the most promising part because we are in double territory not only for this year, but also for the last 12 months. And we see that momentum being strong. You see that especially in diagnosis and treatment where we are 14% up. CC and HI momentum is increasing, but we've had a period of low order intake and that's why you see the sales growth being a bit disappointing as Frans mentioned. If you see our comparable sales growth, we were at the 5% a couple of years back, but if you link it to the lower order intake in 2016, you see that, that had a bit of a lag effect and therefore gives us fair amount of confidence going into the last 2 years, that's 2019 2020 that we will be moving more to the middle of the range than at the lower end of the range. Our growth geography growth continue to remain very strong, so China, India, Brazil, Russia, etcetera. And we expect, especially in the health systems part, stronger growth in North America to drive growth going forward. A bit on the targets for each of the clusters. You see really now for diagnosis and treatment, the growth profile changing. So you see for the last 12 months at 7%. If you look at year to date, we are closer to the we are actually above the 8%. And the good news here is that in all the categories we are driving not only sales growth, but order intake growth. So in ultrasound, where we have a very strong position in cardiovascular, we said we were going to make investments in OBGYN, drive point of care and general imaging, we are getting very, very strong order intake growth there. So that's driving a very profitable part of the portfolio. In Image Guided Therapy, again, very, very strong traction both in the system. So Azurion is doing phenomenally well and you will see in the Zoom later when Bert Vanmout talks about how the system is doing with some customers speaking as well. Double digit order intake growth, double digit sales growth and also helping to improve margins. And then Diagnostic Imaging, where we told you that 70% of the portfolio was renewed. We see also in the marketplace very, very strong traction across the portfolio. Quite some new innovation coming there Kees Westhoff will speak to it later today, especially in the MR area where we have the new magnets, which we call the blue seal magnet, which has dramatically reduced the consumption of helium. So we will use 99.5% less helium than what is currently being used. So good innovations, which we will talk about later today. In Connected Care and Health Informatics, especially in patient monitoring, which is 60% of the business, growth there has been slow. Market growth has been slow. We are gaining market share. We have a strong market share there well above the 40%, above the 50% in the U. S, But being such a big part of the business and the fact that the market is a bit slower this year, the overall growth for Connected Care is lower. However, as Frans mentioned, we still expect next year to be in the 3% to 6% range. On Personal Care Personal Health, sorry, this year after I think if I look back to 2010 to 2017, we've always been in the 5% to 10% growth range. So if you look at a longer trajectory, this year we've had a couple of hiccups in the 1st couple of quarters. So therefore, just mathematically, it will be difficult to get into the 5% to 7% range. So we will be in the 3% to 4% range. But again, as Roy will show you later, quite some plans to get back into the 5% to 7% growth range because we are pretty confident on that. If I move forward, in 2016, we said we are going to improve our profitability trajectory over a long period of time. And I think we had said it at that time as well, it is not possible to be precisely 100 basis points every year, although we've done a pretty good job at it so far. So if you look here from 10 to 11 to 12, last 12 months at 12.8, percent. From 2015 onwards, I think from quarter to every single quarter, we have had year on year improvements, sometimes more than the 100 basis points, sometimes a bit less. But this is over a period of time and even going till 2020, it's not going to be precisely a 100 basis points every quarter, but directionally we are so far delivering and we have high confidence that we continue to grow on that range. A big driver in the margin improvement has been the improvement in the gross margins. I think that is critical for us because you see that over a period from 2015 to now close to 400 basis points improvement in margins. So the money that we put into innovation drives actually better value propositions, which are actually helping us to manage price erosion better, get better price realization from the market and of course, the move to solutions is also helping this overall improvement. So gross margin trends very good despite the headwinds that have come in terms of material prices and other stuff that we've spoken about. Frans talked about the increased headwinds and I will talk to you a little bit on what we are doing to mitigate that in fair amount of detail. But a few things, So supply chain mitigation, so when there are duty tariffs, we have to move from where we source some of our products to some countries Because we were already rationalizing our footprint in manufacturing, that gave us a bit of a head start. So we are more flexible than we were 2 years ago. Price actions that we have to take, especially when you have to respond to currency drops like we've had in Turkey or in Russia or in LatAm. And then we have upped our productivity program to combat that so that we can keep driving the 100 basis points roughly per year. If you look at the margin expansion again from 2015, so it's not a question of 1 quarter or 2 quarters, You see that happening across all our businesses. It's not that one particular business has made an improvement and the others have not. You see for Diagnosis and Treatment, we've gone from 8 to 11 in the 4 year period. Similarly, for Connected Care and Health Informatics, we have moved from 9% this year because of the low growth rate. It's a bit of a stutter in terms of the year on year improvement, but this is a high gross margin business. So the moment we are able to get back to growth, the fall through to the bottom line is very, very good. So that is why we are confident also in maintaining the margin targets, although we've taken growth a little bit down. And Personal Care already is in the range of 17% to 20%. So and you see that also going from 14% to 17% over a 4 year period. Now on the productivity program, we are so far a bit ahead. So we had said €400,000,000 a year. We are, I think, at about slightly above the €800,000,000 already by the third quarter. So we expect to get a little over the €800,000,000 this year, which takes then if you add the €500,000,000 for next year, that will take us slightly above the €1,300,000,000 and then around the €1,800,000,000 for 2020. We had spoken to you about a few levers that we will be pulling on to drive this productivity. And the first was the industrial footprint rationalization. We had talked about a 40% reduction in our footprint. Happy to report that by the end of this year, we would have done more than half of it, so thirteen out of the 20 sites that we had planned to reduce would have been completed by the end of this year and the balance will happen next year. So if you look at the bars that go up, the footprint manufacturing productivity actually starts becoming bigger and bigger as we clean up the footprint. Similarly, in the overhead cost reduction, we are getting very good traction with the setting up of our global business services. So that was something we didn't have couple of years ago. We are now with 1700 people already in our 6 locations around the world and climbing. By the end of next year, we will be around the 3,000 and the year after at 5,000. So it's important to understand that we carry a lot of these double costs in the P and L today, which once we are done with the transformation, those costs will drop off. So we have today the sending units as well as the receiving unit cost and those costs are carried and not adjusted out of the P and L today. So they are sitting in our cost base. I think one of our most exciting transformation projects is around the marketing transformation, where we have looked at the spend that we have. We spend about €1,300,000,000 a year And what we want to do is to double our customer facing spend. So we have a large part which we spend on promotions. We have a fairly significant part where we have cost of organization. We are going to streamline that and although we keep the 1.3 the same, the amount of money that is customer facing to drive growth will improve from 2019 onwards. So that is a big step. We also spoke to you a couple of years ago on the IT footprint and the rationalization. I have the next slide, which will tell us a little bit more on that. And Frans mentioned on the R and D productivity, which is not cutting R and D programs, but looking at the number of layers of, let's say, managers that sit on top so that we can thin that down and drive productivity as we drive top line. Procurement, our DFX program, as you see, continues to deliver. We will be close to the €850,000,000 mark by 2020. But there are some tougher market conditions that we are dealing with. The price of helium has gone up tremendously. That gives a headwind there, some other material prices which are tightening as a result of which we are, let's say, going to compensate on the other measures we are taking. The result of this and also because of the tariffs, so the tariffs also from the 2nd tier suppliers to us, we have to pass some of it on, but some of it we have to compensate. So the result of this is that we had initially planned that since most of our footprint activity will be done by 2019, that restructuring costs in 2020 would come down. We extend that by a year because with the big push in GBS, we will need to remain around the 90 bps to 100 bps for a year longer and then come down from 2021. That's simply what we need to do to combat the additional headwinds that we are facing now. On our digital footprint, we started with a footprint of 49 instances of SAP. We said we would go down in a couple of years to 6. We are actually well on track to do that. By the end of this year, we would have been less than half. Our rollouts have been pretty steep. So the new IT that is being rolled out, we had these are not separate instances, but across the world, we had 6 in 2 years ago, 12 last year, 50 this year and these rollout costs sit in our P and L today as we speak. So I think it's important to understand that we are performing and transforming at the same time, which therefore carries a certain additional cost which sits in our P and L. Once we are done with this, we'll drive further margin improvement. I think the other important thing here is, of course, we now get a much more state of the art IT infrastructure with cloud applications that help our sales force to sell better, get real time information on the ground. But most importantly, for our B2B businesses, by the end of this year, we will have all our B2B businesses on 1 kernel. By the middle of next year, we will have all the B2C on 1 kernel. And if you club that with the work that we are doing in the back office in Global Business Services, where you can standardize the process flows, which are different across the world, that's where you can drive further efficiency that has given us the confidence to raise our productivity targets. While we do this, we also drastically reduce the number of IT applications we have. So not only are we rolling out, but as we roll out, the important thing is to shut down the older applications. We are close to 1,000 by the end of this year from when we started, so we are really cleaning that part of our backbone. So let me come now to how we have driven the performance improvement so far. As I said, from 2015, every quarter we have been driving this. We said in 2016 that we would get about 100 bps on volume, 190 bps on gross margin, 50 bps on overhead reduction that you see on the top line here. We anticipated price erosion of 130 bps and inflation of 110 bps. This bar shows you from 2017, 12 months prior to 2018, last 12 months. And you see we've been very close. We've had a bit of headwinds around the FX. And if you add 2017 to this, the full year 2017, you will find that we have done more or less exactly as we had planned to. Going forward, however, this mix will change a little bit because, as we said, the pressure on the material prices will go up. So we expect volume to still be around the 100 basis points, but on gross margin with tariffs and other costs, we expect that to come from 1.9 to 1.6. We will compensate that partly in pricing. So you see we take the price erosion down and we've taken the overhead cost savings up. So this is how we expect for the next 2 years the bridge to develop, not a big change, but a small important change as the gross margin development may tend to be slightly different than what we have shown so far. Let me then go to the balance sheet. A few things that we've done, one is we've down 45% to what they were a couple of years ago. So I think that is good. We've significantly restructured our debt, redeeming more than GBP 2,500,000,000 of high interest debt, which we've replaced by debt, which is actually very cheap. On the pension front, in 2014, before we separated, we were a €25,000,000,000 company with pension DBO liabilities of €27,000,000,000 That is dramatically changed now. It's down to less than 3. That has a significant impact on our pension costs. Our pension costs are down both if you look at the interest line as well as the service cost by €50,000,000 in this period. Our unfunded status is very low now, it's about €820,000,000 half of that is in Germany, where you cannot fund it. So we believe now that the pension situation is also very well under control. Let me touch a bit on working capital. So the efforts that we put in to lean out our supply chain, focus on our aging inventory, reducing the number of stock points, we will reduce by 20 19 compared to 2016, 40% of the number of stock points that we had. So that significantly reduces and improves our good flow movement. As well as we work with our suppliers through some creative financing solutions to help them also and increase our payment terms. All this you see has resulted in roughly 100 bps reduction in our working capital every year. We also have brought down significantly our inventory and let me currently this year, I think Q2 and Q3 was the first time in 3 years it went up a little bit and that is very much due to the tariff impact and the industrial certain inventories And similarly, when duties were coming into effect, we needed to ship certain extra amounts to China and in the U. S. To help us mitigate some of the duty impacts. And looking forward, in terms of our free cash flow conversion, far, we have been actually above the 100,000,000,000. That is not a long term sustainable plan, of course, because we've done big reductions in our working capital. But we expect going forward to be up between the €90,000,000 and the €100,000,000 So still a very, very good free cash flow conversion and that is what takes us into 2020 where we believe that we can go above the €1,500,000,000 because the profitability by then on a much bigger company would have improved and since we would have been done with most of our restructuring, we believe that that's when we will see a step up in free cash flow generation. Let me touch quickly on our capital allocation. So we had set out a target of being in the mid to high teens for our organic ROIC. We are very much in that range. On M and A, we had a relatively quiet period from 2011 to 2014. We did Volcano in 2015, Fairly Quiet in 2016. 2017, we did a few, the big one being Spectranetics and this year, the medium sized one being EPD. In terms of dividend, we have said we have a stable to increasing dividend policy. So you see over the period, we have consistently increased our dividend as well as done share buybacks. So if you look at a 5 year period and I just had a look the other day, we have spent about a third of our capital in terms of M and A. We have about a third of our capital in CapEx and about a third of our capital in return to shareholders if you add the dividend and the share buybacks that we've done. And we expect roughly this balance going forward as well. What has that resulted in? I think in total shareholder returns, if you look back since 2016, since we separated with lighting compared to the Eurostoxx15 as well as our peer group, we have done reasonably well. So we expect, let's say, going forward, if we keep on the performance trajectory that we will do well. There was also a lot of requests from you to come out with a metric regarding EPS and adjusted EPS. So we will do that. This gives you the details from 2015 to 2017. We've tried to keep the definition very simple. So whatever is adjusted out of adjusted EBITDA is the only adjustments that we will take for adjusted EBITDA sorry, for adjusted EPS. The only addition to that is if there are one off liability management costs that we do for financial income and expense, which comes below. So it's a fairly simple one we have put out and any one off tax impacts like we had in the U. S, for example. So we will circulate the full table on the reconciliations and how it's done and going forward every quarter we will publish this number. So let me end by reiterating what Frans just said and hopefully, the gist of what I have been covering so far. We will we have been delivering on these targets for the last 3 to 4 years. We see a path to get there, although there are some headwinds which we have to mitigate. So it may not be always a straight line, but a bit bumpy, but we will get there. And 2020 is not the end of the story because let's say by then since most of the restructuring and the transformation would have been completed, then it gives us a highway to further growth and value creation. So with that, if I can invite Frans to join and then we are going to take questions from you. In a bird's eye, this is our introduction. So what is on your mind? Who would like to ask just the first question? Thank you. It's Patrick from Bank of America. I have 2, please. The first would be, I noticed on the slide that the ever so slightly the price mix had got a little bit better than you expected and there's been some commentary from P and G as well that they're stepping back a little bit from aggressive pricing. Is this what's given you the confidence to allocate more of your marketing spend to direct to customers as opposed to promotions because that's a big change in that? So that's the first question. The second part is you obviously still own about 18% of SignifAI. And I'm just curious, are you waiting for something specific to happen? Or when can we expect to have that just cleaned up and done with, I guess? Okay. Let's first take the first one. I would say these two things are unrelated. So the marketing it's not linked, okay? We have just realized that traditional marketing through retail and push only gets you so much preference. And moreover, when we pull up the net and look at all the creations that we do, do we really activate all of them? In other words, there is waste, right? So we have said we market. And what we spend in the market, we want to spend more on really driving preference and engagement. That is also then in line with the trends that we see that we can go more direct to consumer and also build more recurring revenue streams such as brush heads and blades and consumables. So we see it also as a strategic enabler for the future. And yes, it will help the price gain. I was also encouraged to read that commentary, Patrick. And I think generally speaking, with some material prices going up, I think we will see an upward push on pricing across the world. Also, the price ratio will be affected by us increasing prices in emerging markets for currency. So in that context respect, 1.1% or maybe even 1% would be more realistic. Anyway, that's the direction. Now on SignifAI, we are committed to selling down, and we were progressing nicely until Q1. And then we paused for obvious reasons. This it's still on our mind to sell down, but we are not in a hurry. So in due course, we will let you know when we do so. And yes, we also look, of course, carefully at what the share price of SignifAI is doing. Okay? Where do we go? Here, Veronika, maybe? Thank you very much. Veronika Dibeva from Goldman Sachs. I have two questions, please. The first one is on the D and T targets, and it's great to see you raise the revenue target given how well the business is performing. I'm curious why you haven't raised the margin target. And I guess is the way to think about it that you were before tracking to the lower band of it and now you're tracking to the upper end of the 14% to 16%. So if you can comment on that, that would be helpful. And the second thing, thank you Abhijit for the cash allocation framework. How are you thinking about target leverage that's reasonable for the business going forward? Thanks. Yes. Look, when you have a margin target, you're always looking at your organic improvement and also the investments that you make for the longer term. Also in this case, we have allowed ourselves some extra room for investments in the longer term, right? So rather than just saying everything will then be a reset on targets, we said there's so much opportunity in precision diagnosis. The radiology solutions appeal to our customers. We are developing more and more algorithms and AI apps. So we've also stepped that up a little bit, which you could say takes a little bit of that upward pressure out. Maybe anything else that you want to mention? No. I think look, we've given the bandwidth of 14 to 16. We didn't say last time we would be at the lower end. We are not saying now that we are going to be at the higher end. The additional growth gives us a better chance, but don't forget that we are coming from 8.5% to 14% to 16%. That's a doubling of profitability in 4 to 5 years. So I think if we get into that range, we would have done well and then post, let's say, most of the transformation, we would keep moving it up. Your second question was yes, the target leverage remains the same. Actually, we had said gross debt to the gross debt to EBITDA would be 1.5 and net debt, we said, would be around 1. There could be a couple of quarters when we are a bit lazy, which would be maybe a bit below. So far, we have been exactly in that bandwidth, but we are not in a rush to spend that money just because we are not in that ratio. So couple of quarters left or right, but directionally between 1% and 1.5% is what we've said. Lazy, no? Yes. That's the Question over there. A lazy balance sheet. I don't associate the word lazy. I had some questions on R and D and then a bit on the EU MDR. So on the R and D side, I guess you've been very good at kind of driving innovation in the consumer side of the business. But arguably, on the therapeutic side, it's been more acquisitions, I guess, driving portfolio breadth and gross margin improvement. So I'm just wondering when we should see the high R and D spend come through to kind of product launches on the therapeutic side. I don't know if there's any specifics you want to call out. Also on R and D, I mean, there's been some talk recently of Amazon struggling to hire enough people on AI and tech side. And you mentioned CCHI is going to be a big part of the business in future. So how is a business like Philips able to hire the right people there? And then lastly on the EU NDR, I'm just wondering if you could be a bit more granular on what the spend is there, how much relates to documenting R and D, how much is post market surveillance and how much is manufacturing documentation and regulation? Just to appreciate a bit more color. This afternoon, we have a Zoom session with Bert van Mers on image guided therapy, and I think that would be a good moment to ask what is in the pipeline. The Azurion launch was a very, very big effort for us. And in fact, that commitment and the extension of that platform is still going on, right? So it is not that it's done and now suddenly all the R and D is freed up. So there's that is our big innovation. But I think it's better to let Bernd speak about it this afternoon. Yes, it's an interesting question. How do you get your talent? On the one hand, we compete for the same talent, right, also in big places like Cambridge or India, Bangalore and so on. But what really helps us is the clarity of our purpose. And we have seen quite a lot of millennials but also data scientists who say, I'd rather apply my knowledge to saving lives, improving lives, being part of a health care company rather than fashion companies or anything else. So far, this has been working well for us. I do see that markets are a bit tighter, right? So we do have if you look at our website, we have quite some vacancies in very specific areas. But I don't flag it as a concern. So, so far, we continue to be able to attract the talent. Now then on the EU MDR, let me say that the total cost of the EU MDR program is much higher than what we shared, okay? But some of it is kind of in the operation, what R and D people need to do or operations people need to do or what we need to do in the market. So here, we have distinguished what we could say is, yes, truly onetime and more infrastructural. Or I don't know whether you have an exact Yes. No, I think the IT systems that we need to put in for the extended reporting requirements, that's just a one time expense. There are a lot of work that have to be done on the technical files to get the data in the way that it needs to be presented for recertification, that's a one time cost. So it's just 2 big buckets and overall, UMDR will result in a higher cost structure. That's just something we have to absorb as part of doing business in this regulated environment. We will also prune some of the product portfolio because to recertify products under EU MDR, sometimes you also need new clinical evidence. Now we have a lot of clinical evidence, but it is not always in the format that the European Commission wants to see it. And then for some products, we say it's not worth it to do it, and then we prune the portfolio, which, frankly speaking, is a good exercise anyway to do. Okay? Jir, and then we go to Danny afterwards. Oh, yes, I didn't see. Thank you. It's Max from Credit Suisse. Just the first question would be around these additional costs. I'm just trying to understand. So when you talk about the net cost impact, is that after the benefits of productivity savings? So are you for the tariffs? So because if we look at the tariff cost, the MDR cost, it's about GBP 100,000,000, it's about 50 bps of margin. Is that after those? Yes. So I think you should look at it separately. So the tariff cost is after mitigation in terms of supply chain mitigations moving supply sources to different parts of the world. So that's not net of the productivity. Net of the productivity, the cost that is going to sit on the P and L and the additional productivity will compensate some of this cost. But the GBP 60,000,000 is the cost that is going to sit on the P and L and the productivity will have to compensate for it. But the MDR is much higher. The EU MDR cost That is massive cost. The learning cost is part of the normal P and L. The onetime cost is what we've called out the 45,000,000. Okay. And maybe just then on the phasing of that through 2019, will you have to take a lot of that cost? The €45,000,000 is almost entirely in 2019. But upfront in 2019, I. E. First half or will it be No, no, it's through the year. Okay. And just second question on sort of Personal Health. Obviously, you're calling from an for an acceleration. Maybe while we were on phasing, it's maybe good to realize that some of the mitigation of headwinds still need to be executed in the first half, right? And therefore, the full mitigation benefit comes more in the second half. So that is important to realize. And then just maybe on sort of Personal Health, and I appreciate we'll probably touch on this in the afternoon, but just you seem very, very confident that sort of you're going to do 5 to 7 accelerate next year. What is it you're really seeing that gives you the confidence? Because obviously, there's a lot of uncertainty out there in various end markets. So what are the 1 or 2 things you'd really call out? Well, the new product introductions give us confidence on a year on year comparable basis. Secondly, supply chain issues would not reoccur. Some easing of the, let's say, aggressiveness on pricing. Maybe anything Yes. I think those are the 3 big ones. But also, if you look at our ratings and reviews for all our new product launches, they come in very, very high. And as we then phase out the older program the older product portfolio, the preference for us is really going up. So we see that actually quarter on quarter, both on brand preference as well as on product preference that gives us the confidence that we will continue to grow. Okay. We had Yi sorry, Danny. Lady first. Thank you very much. Just two questions. So it's good to see that you're able to get additional productivity savings out, but that doesn't seem to come through in the margin. Can we understand that to pay for the FX headwind and the various impacts you have from, for example, tariffs? And then secondly, for the CC and HI business, you seem to have nudged down your expectations for that, but the margin guidance has remained the same. If you could put some color around that, that would be helpful. Yes. When you say that it doesn't seem to compensate, I would beg to differ because we've said we will deliver the 100 basis points, which basically means that we will compensate for the headwinds. Now if there is a massive currency drop in 1 quarter, within the quarter to compensate is close to impossible. So it takes a bit longer to do. The impact on duties and reshuffling the supply chain, you can't do that in a quarter. So therefore, we say don't I mean, there is, like I said, from 2015 onwards, every quarter an improvement, sometimes a bit bigger and sometimes a bit smaller. And similarly for next year, we expect, let's say, a lot of these improvements to kick in fully, therefore the second half of the year will be stronger in terms of profit improvement than the first. So you have to look at it at a in a close to It's close to impossible to mitigate a headwind that comes in a quarter within the quarter. I was actually thinking about the CHF 200,000,000 of extra cost savings that you have put up. And if I look at your margin guidance for 2020, you've put around 15 percent for that. Previously, it was 14% to 16%. So given that some of the businesses have been performing actually a fair bit better than expected when you initially issue that 14% to 16% guidance, one would have expected the GBP 200,000,000 of additional savings, which is worth about 100 basis points to somewhat to hopefully land you in the upper end of that 14% to 16% range? We are not changing the guidance that we've given. I mean, there are like we said, in Q1 this year, when we did well, everybody said, hey, you can do much better. When you look at a longer period of time, there are headwinds that come at different points in time and there are countermeasures that we take over that period of time. And when you look at a 3 to 4 year horizon moving from a 9%, 10% business to a 15% business, I think is a big step. And if we are able to do a bit better, great. If not, we will be in and around that range. Some cushion is also not a bad thing to have as we've learned. All right, Denny here in the front row. Sorry, CCHI? Yes. CCHI, look, we have strong confidence in the margin of that business. It's like I said, it's a high gross margin business. There is a lot of productivity which is being driven in CCHI. So even with the lower growth, we are very confident. What we can add to that is that we've always said in CCHI, we make significant investments in new innovation, right? And that brings down what is a very high margin, gross margin business. Now as we bring some of those innovations to market, they will turn from a drag into a tailwind, also supporting the higher growth. For example, we see a lot of traction with customers on building command centers, building telehealth centers. That is some of the areas where we have been investing in, right? So and that is also then underpinning the confidence that we see the order and revenues go up. So it goes hand in hand. But the gross margin of that business inherently is very strong. Here front row, Denis, I'll try to pass it to you. Yes. Hi. Good morning. Three questions, 2 small ones and one somewhat of a portfolio. First question is about FX. You give some you have a bit of negative headwind on emerging market currencies. But could you update us on how the U. S. Dollar will impact next year? Because we all know Cleveland has reduced a bit. And we also know that, especially half year twenty nineteen, the euro dollar will be about 6% positive for euro. So in respect to the past, will you now benefit a bit on currency? So that's the first question. 2nd question is about trade tariffs, but then mainly on is it true that it could be also explained as a bit of a positive given that we hear from some U. S. Companies that they feel that they're being sort of negatively treated in some tenders in competing, especially in Asia, because it is being perceived as a sort of U. S.-invoiced measure. So and also you yourself mentioned somewhat weaker of your 2 competitors. So how about the competitive position regarding that item? And last question is a more philosophical one, but it's, I think, also important for us as investors. If you look at your margin currently at Personal Health and also your margins at, let's say, the Healthtech part of Philips, also the growth rates and also the R and D expenditures and also, hence, mathematically, your cash conversion and also your free cash flow and return on invested capital. On Personal Health, I think it's about cash conversion of 80% and ROIC of maybe 25% to 30%, whereas in your Healthtech business, your cash conversion is maybe €55,000,000 or €60,000,000 Also a bit lower growth, a much lower return on invested capital. So I, as an investor, always ask why aren't you growing your personal health more? Because every euro you are being able Understood. I think we get the question. That's the question. But also in respect to that, personal health could offer you a benefit because if you carve out part of your Personal Health, maybe monetizing your stake in Personal Health, you could use that as fueling the growth in digital health and tech because you're a bit way ahead of your 2 strongest competitors. And also for the sake of time, okay? So if you take the ForEx Yes. So if you look at the ForEx, in terms of euro dollar, our footprint is fairly balanced and we have a hedging policy that for, let's say, more developed market currencies, we have a hedging strategy that keeps us close to neutral. There could be a bit of movement once in a while. For emerging market currencies, the cost of carry is just too heavy for you to hedge. So the way you react is by pricing and therefore and also the way we fund those markets, right? So we have funded those markets in local currency. Therefore, you don't have a big hit in the funding structure. But in the absolute business, you have a 30% hit in the Turkish lira, demand drops for a while, you then do price increases that gets absorbed in the system and then you pick back up. We had to do, I think, 6 price increases in Argentina this year. That's how you react. So I think we and if you compare the FX hits that we've had to what our competitors have given, it's been a fraction of what, let's say, other companies in the industry have been. So we think we are fairly well managed there. Okay. On your second question, let me first say that my remark on the competitor was unrelated to trade wars. It's just that, that competitor is now faced with what we were faced with 8 years ago. So that creates some turmoil, and therefore, we can try to benefit from it. Your question on the geopolitical side is interesting. I must say, China has avoided to play the consumer sentiment card, right? And so far, it has not been played up as it's the clash of 2 nations, and I can only applaud them for that. That may change in the future. I don't know. So far, we have not seen any effect of, let's say, companies exploiting a geopolitical positioning. So and I also think it's not our task or role to do that. I think we should stay very calm because after all, we are onethree American, right? We are onethree European, right? So we are Switzerland in that sense. Okay. The last part on the portfolio? Because Yes, the portfolio, look, of course, we benefit if we grow Personal Health as fast as possible. So that's also the mission for Roy, right? And he's going to tell us after lunch how we are going to do it, right? Because that you're right, it helps the overall portfolio. All right. Last question. Last question. So we do one more. All the way in the back. Thank you. Paul McCarthy with Streat Global Advisors. A quick question on your ROIC outlook. I guess I can understand why given asset prices your ROIC inclusive of M and A might, I guess, come down over the years. But your guidance looks for mid to high single digit ROIC. I guess you've already done 17% or so. Then when I look at your outlook for top line growth for margin expansion and couple that with the I guess the slimming down the manufacturing footprint and the progress in working capital, it would look organically to signal an improving ROIC outlook. Can you maybe comment on the puts and takes for your I guess the wide range you have for organic ROIC? Yes. So the ROIC guidance is not mid to high, it's actually mid to high teens. So it's let's say 14 to 19. We are now at the higher end of that. We are closer to the 17. Our WACC is at 7 and thereabouts. So I think we are significantly above the WACC. The reason why we took organic ROIC at that point of time was you don't know what you're going to do with M and A going forward. So therefore, you keep have to adjust it. Given the improvement in working capital, yes, we see room to go at the higher end of that guidance for sure in the coming 2 years. But 2020 is just 2 years away. So if we make a leap from 2017 to the 2019 in 2 years, that will still be a very good improvement in the return on invested capital. I guess, your low end of range is mid single digit. You're already at high single digit. So what are the It's not single digit. That's the WACC. That's the WACC. The ROIC target is teens. So it's not low single digit at all. Right, but you're 17 now. Yes, yes. So that's not single digit, that's teens, 17. Okay. Yes, sorry. Maybe we can take that offline. All right. We are at the beginning of the lunch break. So could you explain the logistics? Correct. Currently a 1 hour break. The lunch will be served there right next to us. And we will reconvene here and also resume the webcast at 2 p. M. Thank you. Thank you very much. Thanks. So welcome back, and we will now start our second part of the plenary sessions. And I would like to ask Rob Casella, Chief Business Leader of Diagnose and Treatment, to resume. Thank you. Thank you. Sure. Well, hello and good afternoon. I hope everybody had a great lunch. You're going to be totally stimulated by the diagnosis and treatment update. I want to start by saying, Franz mentioned a comment about and showed some detail on the quadruple aim. And I don't want to pass by that without really emphasizing that everything that you're going to see in diagnosis and treatment and for that matter, our other businesses are really focusing on delivering better outcomes, lowering the cost of care delivery, taking a lot of the burden away from the staff and enhancing of course the patient experience. So when you think about our businesses, a lot of what you'll see today is really emphasizing that our product roadmaps, our go to market and so on and so forth. So we're gaining traction with a new and differentiated solutions portfolio of products, smart devices, software and services. If we think about each of the individual businesses a little bit, Image Guided Therapy in addition to systems, our device business of course is growing in their leadership position in cardiovascular. And we're broadening that portfolio with applications, other devices and the like. Ultrasound, we talked about over the last few years about maintaining our strength and leadership in cardiovascular, but also broadening into areas like OBGYN, GI and point of care. In fact, if you think of the GI market, it's twice as big as the cardiovascular market. And similarly, the OBGYN market is about the same size. So we have great opportunity with very similar product, this may be different software applications, different probe geometry and things like that to be very successful and we're getting great traction in that area and we'll talk about that in a little bit. And then finally, diagnostic imaging, we're gaining market share and we're delivering on our productivity targets and we're really improving our profitability. That was really a matter of strengthening the core and really getting back to delivering product that we were all proud of and we're going to chat about that a little bit later as well. And then finally, in our we're investing heavily in our solutions businesses and the ones that are part of diagnosis and treatment are radiology, cardiology and oncology. And in radiology, it's really about operational performance. We're trying to help you run a better department. In cardiology, we want to help you run a better cath lab, but we also want to help you set it up. We want to show you how to run an office based lab, provide a lot of equipment insight and device insight. And then finally, in oncology, we are trying to automate the process in radiation oncology that's very cumbersome about treatment planning and providing tools, software for accelerating the whole image to plan process. So we won't deliver the energy, but we'll help you accelerate the process of getting that patient ready for a radiation therapy procedure. In addition to that, this is also the business that incorporates our oncology informatics platform as well as our pathology. What we intend to do with these businesses is really solve problems for customers and it's been a great door opener for us in terms of gaining access to accounts that otherwise we might have struggled with. So we as Frans and Abhijit had indicated earlier, we've raised our revenue targets, so a range of 5% to 7%. We're holding our EBITDA margin at 14% to 16% by 2020. I'm going to talk a little bit about each of the businesses just from a size and scale perspective. The interventional or image guided therapy business is about €2,000,000,000 ultrasound about €1,500,000,000 and DI about €3,400,000,000 All of these businesses have some very special aspects in terms of their market positioning. In Image Guided Therapy, we are number 1 in cath labs and we're also the number 1 player in IVUS intravascular ultrasound as well as physiology. In ultrasound, we're the number 1 player in cardiovascular as I said it a little while ago, and we're becoming a number 2 player globally in all the other segments. And in diagnostic imaging, we're a global number 3 player with a very keen eye on number 2 and really fighting every day to make that happen. All of these businesses are tied together with a very deep informatics platform. So it really functions as the glue, makes images available from a distributed perspective, has a heavy content of AI, it brings workflow confidence and it also really is the way that we could affect where we think this business is going in the future, which is maybe virtual radiology in many respects. Beyond that, 40% of our revenues are recurring and are made up of services, devices and software. I'll spend some time on each of the individual businesses. So with image guided therapy gaining strong traction with our portfolio of very unique systems and complemented by a growing device portfolio. So if we think about systems, we have a greater than 40% market share in Cath Labs and we're gaining additional share with the strength of our Azurion platform and new applications that we're bringing to market. We gained 300 market share points with Azurian and we're experiencing and enjoying double digit order growth for the last 12 months. So we're very happy about the progress in that business. We're on track to improve our profitability on the device side and we will be at double digit profitability in that business this year. If we think about going forward, we have high single digit growth in our sales and we're achieving our profitability targets for 2020, which will be in the high teens. So we're very happy with the progress that that business is making overall. A little bit more about the technology and some of the products that we brought to bear. So Azurion was really great image quality, phenomenal workflow and really an ease of use that allows the cath lab operator to do a really 20% more patients in the course of a day. So phenomenal product, really achieving everything that the quadruple aim intends to do. You recognize that we acquired a company called EPD, which is very unique dielectric imaging that's targeting the mapping and treatment of atrial fibrillation. So it opens the door for us in the mapping part of this business and in the diagnostic part to really have access to the electrophysiology market, which thus far other than imaging, we have not been a strong part of. So we're very excited about that. It's very unique in terms of its approach. Finally, you probably read about IFR as being a certainly less costly, more comfortable for the patient alternative to FFR and that's unique to us. So we're very proud of that and we obviously think that's a further differentiator. So ultrasound, we chatted about it earlier. We're expanding our leadership in the cardiovascular area. We're driving additional applications. We're doing a tremendous amount around workflow, obviously great image quality and so on and so forth. In the OBGYN space, we've now completed and we'll continue to invest, but completed a significant round of advanced applications in women's health. So primarily in the obstetrics area, but we are moving into gynecology as well. So a lot of effort is going into that. Here again, double digit order growth on a last 12 months basis. We're gaining market share as a result of our strength in cardiovascular and moving into GI and OBGYN. And we're really maintaining our market leading margins in that business. A little bit about some interesting technology applications. So we with the introduction of TomTec, we are building advanced applications around the strength of both our Epic and our Affinity platforms and this is about better image quality, better disease characterization and improved workflow. What you see in the center is really an ultrasound image, which is phenomenal, and that's a heart valve and it's our photo realistic imaging capabilities that we are now able to deliver. So from a treatment planning point of view and from a diagnostic point of view, it's an extraordinary benefit. I hope everybody recognizes that as a beautiful image from an ultrasound machine. Portable ultrasound, we think the point of care market is huge. We believe that our LUMIFY product brings superior image quality to a really a smartphone or a tablet. So really used in multiple applications of either sports medicine, emergency medicine, you name it. And we believe that's a very, very fast growing market that we are investing in because we think it is yet the next phase of how ultrasound becomes a ubiquitous technology in healthcare. Diagnostic Imaging, again gaining market share, improving profitability. Our strategy is delivering value and we're doing that by innovation and we're doing that by being much more customer centric and really driving productivity. So we spent a lot of time investing in advanced solutions for precision diagnostics. So the ability to combine different technologies in order to get a first time right diagnosis, using much more of our IntelliSpace as a way of creating an AI platform for precision diagnostics as well. 70% of that portfolio is new and deeply integrated with informatics, deeply integrated with things like our Performance Bridge Radiology Solutions product. 120 basis points of market share gain here too, double digit order growth in DI over the last 12 months. So phenomenal progress in terms of an uptick in the market, acceptance of our product portfolio. Interesting things and we won't cover all of these, but some new features, Compressed SENSE is on our MRI platforms, both new products and backwards compatible, and it is a software technology that allows us to reduce the scan times significantly by 50%. So if you think about workflow in a very challenging modality, this has been received extraordinarily well in the marketplace. In addition to that, right below it, something that we think is very unique and it is unique to the market, we've introduced our Blue Seal magnet and that is a magnet that has a fraction of the amount of helium as a standard magnet. You heard Abhishek talk about 99.5 Helium creates a maintenance issue and it creates is that helium creates a maintenance issue and it creates a significant downtime issue, not to mention an extraordinarily high cost. This is a sealed magnet. There is no maintenance on it relative to helium. Instead of days of being able to take the magnet down and bringing it back up, it's hours. So and we are the only people in the industry that have this. So we have a 1.5 Tesla that's been introduced under development as a 3.0. So we think that's a very, very important new addition and that is just coming out this year for 'nineteen. Another interesting technology is our Icon product. And the reason why I bring it up is that that's a product again, if we think about the quadruple aim, it allows us through our proprietary spectral imaging to do dual energy always, meaning that we don't have to select pre the exam, a decision about whether we use multiple energy levels on that patient. It always takes multiple energy levels. So what that means is that we get much better imaging, much better disease quantification in areas where that patient would have had to have been called back if we in fact needed a low energy level image or we would have had to done a rescan. So what we're what we've tried to do with this product in addition to it being terrific image quality is again take costs out of the system by limiting the number of scans, making the patient experience better, delivering on the quadruple aim. So every one of these and as I said, I won't talk about it, but every one of these products really enables that. A little bit about IntelliSpace and I'll sum it up with less clicks, less time. What we've done with IntelliSpace through a lot of hard work and collaboration between that business and DI particularly is that the right image acquisition with intelligent support, so help the technologists get a better image. So to remove some error, lack of standardization, right image interpretation when informatics help diagnose the image more appropriately, help to interrogate the data. And then finally, the operational insights let me be more efficient, help the radiologists to be more efficient, help the department to run more efficiently. So what IntelliSpace does is it's a great way for we to drive home all the power of the modalities with a visualization and display technology that has a lot of power that's already built into it for advanced applications, artificial intelligence and so on and so forth. A new business for us, but a very important one is digital pathology. So very aligned with imaging, a visual diagnostic, slide based, of course, but we're having a great success with our digital pathology systems and what that consists of today is a slide digitizer as well as a visualization element. Only FDA approved system in the market today for that and that is really being used not just to digitize and have an electronic image capability of pathology, but also to do expert sharing and consultation, namely telepathology, so plays very consistent with exactly where the image market is going or the imaging market is going. So teleradiology, telepathology, what we're trying to do is really bring medicine to a higher standard irrespective of wherever the site of care is. So whether you're down the street or around the block in the next state or in a resource scarce part of the world through IntelliSpace, we can move images from a site of acquisition to where there are appropriately skilled higher competency levels of professionals that can then interpret those images. The next phase of that is computational pathology, where we bring more of the power of intelligence, artificial intelligence and deep learning to interrogating these slides and making determinations about tissue characterizations. The extent of the density of the tumor, the extent of how clean the margins were on the tumor, all of those sorts of things can be done, but now with something that brings artificial intelligence to the pathologists. That is under development, we'll continue to focus in those areas, but it's a very it will be a very powerful tool, but it will also be an accuracy and workflow benefit to the hospital, to the lab or otherwise. We talked a little bit about our precision diagnostic platform and what we're doing here is really it's the culmination of all the things that we've just talked about. It's taking pathology and whatever the phenotypical information is from a slide, comparing that to all the morphology that we get out of radiology and we're running sequencing information and we're determining what types of disease are best treated with this sort of treatment mechanism or this imaging protocol or this radiation therapy protocol. So what we're ultimately doing is again delivering on the quadruple aim, but we're trying to extract data and from that data create the knowledge and the wisdom to pick the right treatment for the right patient at the right time. And this is a platform product that takes many different forms. It could be as simple as using a biomarker and imaging an ultrasound to make a determination about the extent of liver disease. So very practical, something that we're all faced with today. But in addition to that, it can certainly make a determination of the informatics platform, It is built on an informatics platform. It has a tremendous amount of artificial intelligence in it and it is under development. We currently sell this product, but we sell it in different levels of sophistication. But ultimately, it is where we believe that precision diagnostics and then precision medicine will go. I wanted to run a video, and I wanted to share a customer experience with you on some of the things that we're doing with precision diagnosis. Radiology is moving from a revenue center to a cost center on the business side, while still being required to provide excellent clinical service and supporting our physicians and ultimately our patients. In my department, as technology rapidly advances, we're generating so much data. We used to have just 30 images in a study and now we have 3,000 images in a study. We would not be able to consider a seamless healthcare environment without strong informatics. Our technology that we've co developed with Philips is renowned and is a catalyst for us to move to value based care. In October of 20 department. Radiologists and other physicians will be able to go online and look at images together. We'll be able to point out abnormalities and see them in real time together and have a discussion and dialogue diagnostic center for patient care. This could be a revolution for healthcare as we go forward. The University of Vermont Health Network and Phillips have established a long term strategic partnership. It's not just a business transaction. It's a transaction of trust, transparency and caring. Vermont is moving quite rapidly into population health. We're able to offer the latest and the greatest, the best, most sophisticated imaging equipment in the machine. And it's pretty rare to find that in an industry partner. And it's a breath of fresh air. That's great. I have to say that Doctor. Distigler is just a great ally and partner of ours and that we love the things that she's doing. So just to conclude, I want to reiterate that diagnosis and treatment is all about the quadruple aim and hopefully you've seen how we're trying to deliver on that with these businesses and hear a little bit from even a customer in that respect. We're gaining strong traction. Our portfolio is differentiated. We believe that we're delivering on solutions and we believe that we're now delivering a portfolio of products that is truly resonating with our customer. We have a long way to go, but we're on the journey. Again, we're going to raise our we raised our revenue targets 5% to 7% sales growth and 14% to 16% EBITDA by 2020. And with that, it's my pleasure to introduce Carla Couritt, who runs our Connected Care and Health Informatics business. Thank you, Bob. Sure. Good afternoon. It's great to be here, and thank you for listening to the exciting Connected Care and Health Informatics story. Connected Care and Health Informatics is a critical role for our customers. Why? Because we are helping them to deliver on the quadruple aims Frans and Rob just referred to. We have strong differentiating solution, putting us ahead of competition. We are enabling superior data driven clinical decisions at the bed sites, So our customers don't have to dig into the EMR and do large analytics. They have it right there on the monitors at the point of care. We are helping them to improve staff and equipment productivity and focus on customer satisfactions, their patience and engagement. So we have a very patient centric model. Last but not least, we are helping them to reduce retention, which is very important in times where churn rate of hospital professionals is very high and is increasing. We are targeting to deliver 3% to 6 percent organic revenue growth and adjusted EBITA margin of 14% to 16% by 2020 by leveraging our strong positions, but also investing in health informatics and population health Monitoring Analytics, €1,900,000,000 50% market share in the U. S, more than 40% internationally. And we are growing, and we are gaining market share in that business. Therapeutic Care, we are the leader in noninvasive ventilation. I'm very excited that we are entering the invasive ventilation market with a great product in 2019. We are number 1 in AEDs. And in Health Informatics, we are investing in a business which is supporting all businesses in Philips. We are number 1 in cardiology, radiology in the United States and the number one EMR player in LatAm. And we are growing that business with a great proposition called Tasi rapidly in Europe and Asia. Population Health Management, emerging business. We are the leader in personal emergency response in the United States. And after acquiring Vital Health in 2017, we have the leading patient engagement platform. Also important to notice that already today, 40% comes from recurring revenue from services, from consumables, from software, which is also a very profitable business. We are regaining growth and strengthening our operational performance as we speak. The revenue growth has been slower beginning of the year because end of 2017, we saw a slow order intake, mainly in the United States where there was some political insecurity for investment, and you've seen it for many big IT installations in the market. So the market was basically flat. And with 50% market share, we saw that. That has picked up very nicely recently. But we also have to note that there's a lengthening cycle from order intake to sales with the shift from equipment to service business models. And we saw the impact as expected from the constant degree for our ECR business. Why are we committing to 3% to 6% growth? Because we are expanding, especially in the growing areas of EICU, a hub and spoke model for the ICU, I will come back to. And the command centers, where hospitals more and more ask for a centralized IT system, improving the operations, but also the clinical workflow. We are driving Services and Consumables. And I'm very happy to say that we are gaining market share. We have mid single digit order intake growth and double digit order intake growth for services. Most importantly, we are really at the core of what the customers are asking for. And you look at the picture here of the classical C suite of a hospital. The CEO is asking for quadruple aim models for value based health care and ways to transform his organization to achieve these targets. The CIO is concerned about data security, and I'm happy to say that Philips has a leading position there. Situations like Monacry are sad, but for us, it was good business because customers came back and say, hey, we want to work with a customer with a provider, sorry, who is leading in data security. And they are concerned about interoperability, and we are investing in that area. We have open systems. We bought Forecare that is enabling interoperability and are leading in that area. The medical C suite, so the Chief Nursing Officer and the Chief Medical Officer, They're all about patient satisfaction, and that is getting more and more transparent with all the rankings, but also staff retention and the patient flow, the patient pathway between the hospital and the home and back. And the CFO is looking for ways to reduce costs, but also to find the new business models, which are shifting from fees for equipment to fees to service to eventually fees to outcome. All of that coming together in the quadruple aim and the C suite who is really making the decision for our businesses are asking for proof points how we are supporting them to achieve these aims. How are we doing that? We've always been the company who's great in collecting data. But we get the feedback from our customers. As one of them put it nicely, we are drowning in data and we are starving for wisdom. So data alone, big data alone is not the name of the game. It's about organizing it in a smart way, make it context specific and predictive. So if you look, for example, at a heart failure rate, that is very different if you're talking about a chronic heart failure patient versus an elderly patient coming from the OR or a child. You have to put it in the context in this situation and get the predictive insights out of it, plan the interactions and the clinical pathway accordingly and act in an integrated way between the caregivers because lots of the inefficiency of the health care system is happening in the interfaces between various caregivers inside the hospital, but also outside the hospital. All of that is based on advanced analytics, AI, where we have a leading position and can really make it practical in this workflow. This is the slide you've seen before from Frans. And he mentioned that actually the general care is a very risky area because the caregiver patient ratio is so high. There's a second reason why this is a critical area and that is there's no constant monitoring. We now introduced last year, we shared that with you the patches, the connected sensors, where there is continuous And with that combination, you can really predict like a cardiac event 6 to 8 hours before it happens. So lots of cost savings for the hospital because you're keeping patients out of the expensive ICU. But also, when I go to customers and show them mortality rate reduction of 66%, it's very hard for them to say no to that. Even though it is a new business model, they're excited about that opportunity. That's what they are all about. And that is what's being published increasingly. So also commercially for us, it's a great business, a true global hospital issue, a market estimated €3,000,000,000 just from missed deterioration in the general ward and a changing patient population. So more and more sicker patients coming earlier to the general ward because the hospitals are struggling to get the patients out of the ICU earlier and earlier, more chronic patients, more core mobilities, more elderly patients. So the pressure is increasing. The cost pressure is increasing as well. And they want to deliver on the quadruple aim, and this is a great solution to do so. We started with basically no business end of 2016. We are now in 19 markets, business close to EUR 100,000,000 growing rapidly and a huge opportunity. We are the market leader in the ICU. We are going to be the one who's leading in these lower acuity areas, 1st in the general ward, but also in the emergency department all the way to the home. And this way of thinking is also changing our business models. Give you example up here from Jackson Memorial. Frans mentioned another one with Dallas Children, where we have these long term strategic partnerships, up here 11 years, close to 3,000,000 patients being monitored. And our customers are stepping away from the equipment only. But they say, Philips, you take care of the equipment. You take care of the solutions, of the services, of the software, of the intelligence behind it. All I want to see is a standardized care delivery across my entire enterprise and a fixed fee per patient. For us, it's great because we are partnering with leading institutions. We have stability in the revenues. We get all the services in and we can commercialize our new innovations like the biosensor. And I'm very convinced this is the future. We are moving away from transactional to long term partnerships, building these trustful relationships you have also seen in the movie from Rob. But we are not confined to only a hospital or a hospital system. More and more, our hospitals are consolidating. Our customers are consolidating, and they are looking for solutions to increase access of care, but also to reduce the costs without compromising on the quality of care. And the best solution for that is EICU, where you have a hub and spoke model for a big university hospital with all the clinical expertise and leveraging that across. Let's have a look. There is absolutely no way that I would have thought when I became a nurse that I could do nursing behind a camera. Hello there, how can I help you? This is Diane from the EICU lifeguard. Hi Diane. Our executives envision that any Baptist patient that's in an ICU bed, regardless of the location, will have access to the same level of critical care experts. The hurdles that we faced originally when we were contemplating the inception of the EICU were around demonstratable outcomes, increasing throughput, seeing more patients with the same amount of resources or at times even less. We've worked with Philips over years to foster new processes and new ways of taking care of patients. The question I get often is, well, you guys can't put your hands on the patients. We are able to be more patient centric because we have all of this information going from the minutia to the 30,000 foot view in a split second to make adjustments that are meaningful for patients. Is It's a hemorrhagic stroke or non hemorrhagic? Yes. Hemorrhagic stroke. Length of stay is an important metric for financial and clinical reasons. The shorter the length of stay means that the opportunity for a patient to have an untoward complication is significantly reduced. We can reduce the cost and also turn over the beds quicker so that the hospital can help more patients that are in need of ICU care. The EICU provides a wealth of data about how our system is performing and we're able to take that data and develop processes which provide the best evidence based care for our patients. You hear everyone talk about big data, big data. Yes, that's wonderful. It's great. But your experts are the ones that need to be able to execute in a meaningful way that's going to have that patient improving and walking out the door and having a better quality of life. There are many things that we'd like to use predictive analytics to predict. One of the things is the prediction of the length of stay of a patient. And this is going to improve the operational capacity and efficiency of hospitals. And I think that's good for everybody in terms of patient care and for reducing the cost of care. The partnership with Philips has been incredibly valuable for both sides, putting a number of resources behind it to not only demonstrate the value of what we do, but also show us in so many other ways in which we can innovate. So good example of value based health care and proven outcome in practice. A strong differentiator we in Philips have are our capabilities to really impact workflow from the hospital to the home. And as you can see on this slide, there is an ever increasing demand for that. 83% of the hospitals are asking for more telemedicine. 57% want to increase the access to ambulatory care. And treating patients at home is not just better in terms of clinical outcome, but also reduces costs due to higher mobility. This as such is not new. We know that since long. So what has changed? Why is population health picking up? Because reimbursement models are changing. Pressure on the health care systems are increasing everywhere globally. And more and more payers change their models. And there's a bonus in the MALOS system. The bonus is that CMS, for example, is expanding the reimbursement for remote patient monitoring. And Philips has just been named as a leader by KLAS, an independent review in remote for remote monitoring and virtual care. So more reimbursement, more money for the hospitals if they engage in that. At the same time, the bundled payment system leads to the fact that they don't get reimbursed if a patient comes back for the same cost or if a chronic patient stays long in a hospital. So the reimbursement changes are driving our business here. What is our business exactly for Population Health Management? After we acquired WellCentive Analytics Platform and Vital Health, a leading patient engagement platform, we have a great position in analytics and workflow optimization platform. It's integrated, and it works from taking a full population, let's say, of chronic heart failure patients, to really understand them, navigate and activate. And that order is important because there are many apps out there engaging a patient with a caregiver. But if you don't know what patient it is, if you don't know if the doctor is available, if you don't know the reimbursement behind it, it's of no value. You really have to get the analytics behind it and get this order straight. And we are optimizing the patient care way. And we are also helping the customers, our hospitals to get reimbursement across the entire revenue cycle by proving the effect on a certain patient population. Remote monitoring is a cornerstone of our proposition, and patient engagement is improving compliance because you get regular feedback and also motivation from the caregiver and supporting a more active mobile lifestyle, leading to better clinical and also financial outcome. We have a platform, a population health management data integration platform. And on that, applications like Care Pathway, patient engagement, revenue cycle, telemedicine, all the things I've shown before are built. And it is an open device agnostic platform. So we are partnering with lots of 3rd party providers in the industry. And that platform allows us to put propositions up there all the way from COPD to oncology in a disease specific way. 2018 has been a very good year for Population Health Management. We have been growing double digit. We have large engagement with customers like New York Presbyterian, Humana, who is a provider and a payer at the same time. And they all look for better triaging of the patients, lower costs and leveraging of remote monitoring and home care. 2019, we are going to expand our propositions further. We are already in 9 countries with Vital Health. We expand that geographically faster. And we also will bring key innovations for telemonitoring to the market. In 2020, we will breakeven. We have been investing in that business to put us in this leadership position, And we will fully leverage the benefit of this open platform. So in summary, Connected Care and Health Informatics is key for achieving the quadruple aims. And we get that feedback all the time from the customers with their changing needs, and that's very motivating. We have a strong differentiating value proposition, both for clinical but also for financial and operational outcomes, focusing on workflow optimization. And we will deliver 3% to 6% organic growth and adjusted EBITA margin organically of 14% to 16% by 2020. I'm very excited to lead this business. It's a great part of Philips, and it shows how we are leveraging our strength across the entire health continuum. And with that, I would like to hand over our newly appointed leader of our Personal Health business, Roy Jacobs, who will start with a very cool movie about personal health. Good afternoon. My name is Roy Jacobs. I'm the newly appointed leader of Personal Health. Very happy to be here with you. In my 8 years with Philips, I've been building global experience by operating out of Dubai, Shanghai, and recently I moved back to Amsterdam. I started as Chief Marketing Officer, then I moved into the market, leading Middle East and Turkey, overseeing health systems and personal health. In the last 3 years, I've been the leader of the Domestic Appliances business, taking that to growth and margin expansion. What I want to talk about today with you is about the path that we see forward for personal health, where the core is that our leading innovations enable healthy lifestyles and support living with chronic disease. We are executing on 3 core levers for driving profitable growth. The first one being growing the core, where we still see ample opportunity through geographical expansion and increased penetration. The second is unlocking value through direct digital engagement, leading to higher brand preference and more recurring revenues, getting consumers earlier into our franchise. The third one is extending the core, where with innovative solutions and new business models, we want to address unmet needs. By doing so, we are confident that we can deliver the targeted 5% to 7% range of organic growth and the 17% to 19% adjusted EBITDA margin by 2020. Let me start with setting the scene where Personal Health is playing. 1st and foremost, we're coming from a strong position. We have a brand ranked number 43, growing its brand value at over €12,000,000,000 that is giving us a very strong connect into the market. As an innovation and technology company, we keep on investing and delivering exciting innovations on the back of a great environment IP portfolio, where year to date we have again filed more than 200 patents in this domain to keep our franchise going. Thirdly, we are leading in online, having already more than 30% of our sales in the online channel, whilst at the same time, we still leverage that we are present in more than 100 countries worldwide with a strong local offline retail presence as well. Building on these unique strengths, we are addressing the market, a market where consumers are changing. Consumers are getting more interest in their health and in self management of their health. They are also looking for more premium and a better experience from brands. We see at the same time that in the industry, our retail partners are transforming into online, but also already the next step into omnichannel, because consumers are shifting their buying behavior and retailers, but also we need to shift with them, where then also the direct to consumer opportunity fits in. We have in Personal Health built strong and vibrant businesses. As on this page, you can see, 1st, Health and Wellness Business, a €1,500,000,000 business with 2 pillars and global leading positions: Oral Healthcare, with the strong Tubeless franchise, but also I will tell you about other assets that we have that we can leverage growth from And the Modern Child Care business, which has a leading position in providing solutions in that domain. Secondly, Sleep and Respiratory Care, which has a huge uptake in demand in the market, and we have a leading position both on the respiratory side as well as the sleep side. Thirdly, Personal Care business, a stronghold for years in Philips, defranchise in male grooming, where we're the leading provider of male grooming solutions, as well as in beauty applications. And then the 4th business, domestic appliances business, and of course, I'm very familiar with, where we are at €2,300,000,000 sales and we are on the continued path to deliver higher growth at higher margin. The road map that I see for us to drive higher growth and deliver on the adjusted EBITDA is built on 3 pillars. The first pillar, growing the core. And I will give you examples of how that would look like. The first one is continue our track in product innovation and product line extension. I will talk about our latest shaver innovation, the premium S9000 Prestige that we just launched. I will also talk about geographical expansion, where France already alluded to what we are doing with OneBlade, but with much more potential to come. The 2nd pillar that you see outlined here is how we want to unlock value through direct to consumer engagement. On one hand, by building on the professional recommendation that we have to develop products, but also to develop trust and inroad into market, but multiple propositions in the oral health care domain. Secondly, by actually building digital engagement platforms, where we have a great asset such as pregnancy plus where actually we pull to be mothers and families early into our franchise by addressing them and supporting them along their pregnancy journey. The 3rd pillar you see here is about extending the core with solutions and business model. I will talk to a personalized health solutions called Care Orchestrator, an excellent example of what we are doing in an innovation that actually serves not only consumers or patients in this case, but also connects to payers, to providers and to clinicians. Last that we want to talk about is also how new business models can help us to unlock growth. I will talk about Lumeya, which is a hair removal solution at a very high retail price, but actually by new business models, we can lower the threshold and get more people into this great category. Of course, this can only be delivered if we have great customer service and operational excellence, which is a procteur for us to grow overall. Let me go to the first example, the Philips S9000 Prestige. And let me show you what this beauty is about. I hope many of you have it in your pocket or at home, but I can highly recommend that this is a great shaving experience. So if you're not into it yet, please this is the moment, because this is the best ever shaver, meaning it's close to shave in the electric domain, but with a great skin comfort. It has been designed over multiple years to deliver the next revolution in premiumness. It's also tapping a great opportunity in the shaver category because where we look where the growth is, we see actually the premium segment growing at 18%, which is far beyond the average category growth of Personal Care. So it's not only the best shaver, it's also tapping in the clear distinct need of the consumer to get a more premium offering. The second example that I wanted to talk about is about geographical expansion, and I have three examples I want to share. First, OneBlade. Staying in the category of Personal Care, we saw a big need come up in the market, which the traditional electric shaver could not foresee in. It's a hybrid shaver that actually addresses the need to shave at the same time, longer hair and shorter hair. It's especially with millennials up and coming because they don't want to shave every day. So we came up with a new proposition, a hybrid proposition, which is electrical, still with a blade and recurring revenue with it. And it's really making an impact. As Frans shared, now we launched it 3 years ago, and we are on our way to the €200,000,000 We added 10 more countries this year, which we will reap the benefit from moving forward. And there are many more countries to follow. It's not only addressing a need, it's giving us recurring revenue and is expanding the growth in the Personal Care category, which also is highly profitable, as you know. Secondly, Philips Sonicare, a great asset that we have, where if you look to the globe, still so many people do not brush electronically. So we have a massive conversion opportunity, but also obligation, because this is in the best interest of the user. Not only of the user, we also see interest coming in from other players to actually tap into that, and we'll talk to you about that later. So we are, for example, on the back of our strong professional recommendation, expanding into CE, with a successful inroad into that market, but also in LATAM, Mexico, where actually we're using new channels for us there on the ground, like pharma, to really get this into the hands of our consumers. 3rd, the sleep and respiratory business. That also is a very strong opportunity. As Frans said, this is firstly known in the Western world as a challenge for people. Sleep apnea is something most people and consumers are awakening to. We need to drive awareness. That's something that we are doing in Brazil, in India, in China, but also in other markets, where you see growth rates displayed here, and we believe we can take it up further. The core is more than 80% of population does not know if they have sleep apnea that they have a problem. Respiratory Care has similar opportunities. Then the second trust, building more direct to consumer engagement. There we want to get closer to the consumer, where in a traditional model we have been selling more through partners, we also see other models how we can engage. In oral care, we want to do that together with strong professional recommendation, because that has been our strong belief, not only from a consumer, but also from the dentist side to recommend our products. We are still the most recommended toothbrush in the world, and that is growing. On the back of that, you can not only deliver a premium product, but you can also actually get a whole Dentist community helping to spread the word and actually penetrate. That is also what we're doing in other countries. And not only as I said with the toothbrush, we also have an air floss, we also have whitening, and we just launched tailored dentistry services, where actually our consumers can call up dentists for a service. We see that as a big new trend actually in consumer health, where tailored services will be a near future opportunity. The bridge to the video? Yes. Let me show you a video on how we collaborate with our professional partners. The understanding that the mouth is an organ like any other organ and that it needs care and preventive care and health is very important. I think there are some real experts here who have at their fingertips the knowledge of the literature that allows it to be discussed in the present and the future. Take the needs of patients and consumers, we take the expertise of science and we take the knowledge of DPs. And with that sweet spot, we will use to really develop those propositions, which really enable people to take care of their oral and overall health. I spoke about digital engagement platforms, a new way how to reach consumers, and how to reach consumers earlier, building stronger brand preference with them, but also a natural environment to engage. What is Pregnancy Plus? Pregnancy Plus is an app that provides you with guidance along your pregnancy. In Germany, this has a market share of 45% amongst the pregnancy population. As you can imagine, if they come back on a daily basis to get advice, it's a perfect platform to build trust, but also, of course, get them into So this is a platform we will roll out globally and where we will actually, next to the traditional franchise that we have in Modern Child Care, also engage with consumers in a direct manner. The 3rd pillar is about personalized health solutions as a new source of revenue growth, and I want to share the Philips Care Orchestrator. John will talk about it later as well in the SoC Zoom. This is a very great proposition where actually we have a care management system, not only for the patient, but also for the provider, for the payer and for the clinician. Currently, 8,500,000 users globally of this platform already, where 1,600,000 exchange on a daily basis their information on usage, their specific request for coaching or support and also the care side, where they see what their patients are doing and how they can best manage the flow. So it's a cloud based solution that enables us to directly engage with consumers in this area, both in sleep and respiratory. And again, it's a future fit area where we see ample opportunity to grow. Last but not least is different business models. We have great innovations. We also see that the level of premiumness for our innovations is going up. It also sometimes means that the price go up. So the Lumea that you see on this page is an intense pulse light hair removal solution. It's making a great inroad, and we are market leader in this segment. But it has a cost. This latest innovation costs €550 retail recommended price. That might, for some consumers, be a threshold to overcome. As a result, we also now introduced the try and buy model, where actually we lowered the threshold significantly because at 39.95 per month, you can get access to this. Actually, we see already an uptake, 25% more users that actually search on this that want to explore. And the initial benefit is not only once they explore, they get convinced and keep on using it. Secondly, you actually extract even more value because as you give it into a lease, you don't only stick to the recommended price. This is one model, but of course, you can also do it with many other products that we have. So that's the summary for Personal Health moving forward. So where we see still ample opportunity to grow. The market is growing. We have strong assets and positions. Yes, this year is not as we would like it to be, but we see great opportunity by still growing the core, where we have geographical and product line extension opportunities, by unlocking value through new models of engagement, building brand preference, getting people into franchise where we can sell, but also get into recurring revenues and extending the core with new solutions like personalized health solutions as Care Orchestrator, but also new business models to address unmet needs. And by doing so, we are confident that we will return by next year into our targeted growth trajectory of 5% to 7% and the EBITDA benefit of 17% to 19% towards 2020. Thank you so much. Let me then bridge to esteemed colleague, Andy, leader of Greater China Market, for the presentation about Greater China. Thank you. With China's economic growth, we have observed a huge market demand for health related solutions in the country. Growing desire to live better and healthier, mounting pressure from an aging population with chronic diseases, lack of experienced health care providers, unbalanced allocation of quality resources. Philips is currently on the right track of its transformation journey towards a solution provider as a true leader across the health continuum in China. Driving collaboration with local ecosystems, co creating with industry experts and authorities. Philips is also a leader in integrated solutions in the local market. Co creation with Shanghai Hospital and Stroke Center. Cloud based sleeping solutions for OSHA patients. Home Care Solutions for COPD patients, Post Acute Solutions for Cardiovascular and Stroke patients, In the future, we will remain focused on creating locally relevant solutions to contribute to the Healthy China 2,030 vision that puts people as a center. Good afternoon. My name is Andy Ho. I'm the Chief Market Leader of VectorChina. This afternoon, I'm extremely happy to have the opportunity to talk about the China growth story. As we just saw from the video, the China market is the 2nd largest in the world in terms of the health technology. It actually was significant growth potential in terms of health related products and other solutions, driven mainly by the aging problem in China as well as the rise of what we call upper middle class of consumer in China. They always like to manage their own health. I think we have created good market momentum in China. The combination of the business momentum and also market leadership in China, I believe, basically is the result of our sustained investment into this particular country. In actual fact, today, we already have our penetration into more than 600 cities in China. This is also backed up by a very strong alignment between the Health Continuum story that Frans talked about and also the China Healthy China Strategy 2,030. Basically, we have a strategy to execute in China and I believe that our strategy has been working because we have produced for the company double digit order intake growth over the last 2 years and also high single digit sales growth in year 2017. Now we are about to create a €3,000,000,000 business for Philips over the near future, But set aside the financial performance for a moment, I also believe that we are on the right track to transform ourselves to be a health technology integrated solution leader in China by partnering with the top local ecosystem partners that are all endorsed by the Chinese government. So that will be my key takeaway. Let me continue the China growth story. China has very attractive growth potential with tremendous health demand. I talk about the Healthy China 2,030 National Strategy. When I look at this strategy, basically, the Chinese government would like to kind of extend the Chinese lifespan from at age 75 years old to 79 years old. But not only that, the Chinese government would like to basically increase the quality of life for China and then by tackling the top chronic disease in the best possible way. That is a very important task. Now let me kind of frame the macro basically what I see the China economic growth. I just came back from Shanghai. I attended the what they call the CIEE, the China International Import Forum. Basically, President Xi talks about his perspective of the China growth. This year, the economic growth is probably coming down from around 6.8%, 6.9% to about 6.5%, but he had properly declared that he is so happy about this 6.5% growth. He declared that it is within the expectation and also planned by the Chinese government. Now I'm pretty sure that all of you have heard about the recent MOH Ministry of Health announcement about what they call the new medical device license plan in China. They talk about, let's say, issuing 10,000 license over the next 3 years. Basically, I believe that maybe not 100% will be materialized, but that actually represents very positive growth or very positive market opportunities for a company like Philips. Let me kind of describe how we look at the Personal Health dynamics here. I probably would not complete this story without talking about the e commerce market dynamics. Basically, China today has already over 500,000,000 online shopper, okay? When I get a reflection on what happened to the Double 11, which is coming up very soon, Many years ago, year 2009, one day online sales was around EUR 3 sorry, let me take it back, was around EUR 6,000,000. After 8 years, the same day Double 11, 2017, this number has grown from €6,000,000 to €21,000,000,000 I don't know how many times that is. To me, that also represents tremendous opportunity for any players in China. Now opportunity also represents competition into this market. Last year, there were over 400 new product categories entering into China. And when I look at roughly speaking, there are also more than 4,000 product launches in China as well. Given such competition, Philips in China has still firmly been in the market leading position in China by partnering with the top e commerce online players in China, namely, Jingdong or JD or Tmall by Alibaba. Okay. Now let me kind of describe a little bit what is happening in the professional healthcare space. China actually is a country that has a lot of people having health problem, basically a lot to do with chronic disease, cardiovascular disease and also heart related disease. As you see from the chart, almost one quarter of the Chinese adult has high blood pressure in China, not to mention 1,000,000 you see from the chart, 4,300,000 new cancer incidents every single year in China. But then when we compare the health expenditure between China and also U. S, we still see a major, major gap. Basically, the spending in China is only 1 third of the spending in U. S. That actually represents also tremendous opportunity for a company like Philips. Philips in China has been helping China to improve the quality and quality of the primary care through our technology and services to the lower tier hospital or what we call the county level hospital. We have also increased our strategic investment into the fast growth private segment. Our investment has basically used us a 3 digit growth in 2017, 7% market share gain and we have overtaken many top players in the market and we have become the number 2 player in the fast growing private segment. Now let me kind of switch gears to talk about our strong local presence in China. Everybody knows Philips is a company of longer than 100 years. In fact, Philips entered China back in 1920. And also we formed our 1st joint venture, 1985. We talked about local government engagement that has been part of our core strategy. Flip in China take localization seriously. In fact, I would describe it as we were role modeling localization or local for local in China. 6 industry footprint in China, 40% to support domestic demand and also 40% to develop local for local technology for China as well. This localization strategy has been well received and also well welcomed by the Chinese government. In fact, I believe that that has helped us to relieve part of the pressure from the trade war between U. S. And also China. The other commitment that we have really made for ourselves in China is to be locally relevant by also building a lot of local ecosystem partnership. Now I mentioned already our partnership with the top e commerce partners, JD or Tmall. We also partner with the, I call it, the government backed medical association in China. Some good example would include CCA, China Cardiology Association. Another example would include SVPC, Stroke Prevention Project Committee. We also partnered with the China Healthcare Big Data, I call it, National Teams, Digital China Health that my colleague mentioned and also CEC, China Electronics Corporation. Of course, there are also numerous co create projects with the top notch hospital. My colleague mentioned Shanghai Hospital, which is the top hospital certified being the number one advanced stroke center facility in China as well. We also partner with PKU, basically Beijing University, the number one hospital in the cardiovascular project as well. Philips also has been named as one of the top employers who can attract the top 10. In actual fact, when I look at the Greater China management team at this moment, more than 95 percent of the management team is coming from local Chinese. That signifies our local commitment and also strong local capability. Now let me spend a moment to talk about our strong leadership position driving value creation. I already talked about double digit order intake growth in the last 2 years and also high single digit sales growth in year 2017. And in actual fact, that is a result of our strong local relevance and also technology partnership. 2 third of our sales today is basically generated by, I got a market leading categories. By saying market leading, it means either number 1 or number 2. Now, we have demonstrated the fact that we have the capability to generate the profitability for our company and become the 2nd most profitable market in the world. We also have made a very conscious decision to take the profitability to reinvest into our business. One example would be, we did self optimization to create an organization called Integrated Solutions Center. That center is for us to drive the clinical and workflow solution development with also services capability as well. This organization has helped us to speed up the transformation in the health technology journey. Our Personal Health business in China continued leadership and also growth. Now I talk about the partnership in fact, our partnership with JD and also Tmall have taken our personal health business in China to be 70% online, okay? So but people may speculate there is a cap to the online business. So our next episode is really to implement what JetMark referred to as new retail, okay? And when you look at what new retail is, basically, that is implementation of the omni channel and onlineoffline strategy. Our e commerce partner, they also have very significant offline operation in China. Both of them are in fact also what we call the Internet giant in China. We are partnering with them and also leverage their big data engine to really analyze the consumer buying behavior so that we can really get into this consumer decision journey, so that we can convert the online traffic to real consumer purchase as well. Now the other thing I would like to talk about is Philips in China is also a category creator. You saw the previous story on the OXC, oral healthcare. The China story is that a couple of years ago, we created a new category called power toothbrush. We turned the manual user into, I got a power automatic user. So in about 5 years, we are able to grow this business from $25,000,000 by 10 times. The next story I would like to talk about, we are also pioneering the connected sleep solution in China. At this moment, I would like to play a video just to show how we are doing on that. In China, there are around 60,000,000 to 65,000,000 OSA patients or potential OSA patients. Many of those are undiagnosed. And then the next challenge, in fact, how can we the large landscape of China? One example that I would like to use is that in a province called Lingsha, Philips is already connecting 50 Level 1 and Level 2 hospitals to a SleepCloud with a whole bunch of experts to helping our patients. In fact, what we're trying to do is to enable the patient to be diagnosed earlier so that they can be treated earlier as well. Now, let me kind of flip to sorry, I would like to stay a moment and talk about this professional healthcare space. We are extending our market leadership by, of course, our technology leadership and also our customer centric go to market approach and also, of course, our investment into the integrated solution in China. I would like to talk a little bit about our market share, given the local competition in China. We have been gaining share in the last 2 years. CT, we gained 2.5% market share MOI, we gained 2.4% market share Inmates Guided Therapy, we gained 4.7% market share in China. I think we have a good story to tell. Not only that, we are able to create strategic long term partnership. In the side you see, one customer is called Health 100. We have signed a strategic partnership with this particular customer, who is the largest health examination center chain in China. Today, they are doing around $60,000,000 to $50,000,000 business with Philips every single year. The other strategic partnership I would like to talk about is the one in the middle called Ruichi. In about 3 years ago sorry, 3 months ago, we signed a strategic partnership with this particular customer. They are committing over US18 million dollars to us over the next 3 years. Now not only do we partner with commercial organization in China, as I mentioned, we also drive strategic partnership with the other government backed medical association in China. One example, as you see in the chart, is CCA, China Cardiology Association. We just signed a strategic partnership with CCA and also ACC, American College of Cardiology. ACC actually is running a quality control system in U. S, which will provide benchmarking report to the member of the vascular hospital. So ACC is basically helping to raise their entire quality standard in U. S. So we are partnering with CCA to replicate the exact same system onto China. This kind of technology partnership, I would believe that is a reconfirmation of Philips' capability and also contribution to China to elevate the standard of the healthcare delivery in China. So my last point I would like to make for today is our effort to scale up the integrated solution in China. I also believe that it really doesn't take rocket science for people to believe the world has Even though there is still a gap to U. S. Excelling what U. S. Is doing in terms of integrated solution strategy, but then there are many customers in China who are shifting from buying products only to an integrated solution. By integrated solution, I mean basically it's a combination of medical equipment, software, smart devices and services all combined together and also create a unique value proposition to our customer. Now as I mentioned, we set up an organization in China called Integrated Solutions Center. Basically, we come on it to take global technology every single day and also localize for China. And also, of course, we need to develop our local services delivery capability as well. And also, we are aligning our integrated solution strategy with the government agenda. In the last 2 years, the Chinese government is trying to promote the concept of stroke center and other chest pain center, in fact, as a government directive for the country to set up more than 2,000 such centers. So that's why we make a decision to partner with Shanghai Hospital, which is the most advanced stroke center in China. We are trying to improve the services to the stroke patient. Now to every single stroke patient, when the incident occurs, the most important thing is that how can we shorten what we call the door to needle time. The door to needle time is being measured by the time difference between the time the patient arrives at the hospital to the time the patient be treated. But the national or even the international guidance is that the patient has to be treated within 60 minutes. If it's longer than 60 minutes, some severe consequence may happen, right? So, by partnering with Shanghai Hospital, not only are we able to kind of integrate the advanced modality technology with the latest AI enabled neurology technology to provide the best patient outcome, but also we are able to kind of collect and manage data throughout the entire clinical pathway, so that we are able to identify where the bottleneck is, so that we can shorten the time from in the case of Shanghai Hospital from more than 2 hours before to today, FH20 1,000,000. So I think Philips is making contribution. Philips is adding value to the entire medical system. Philips actually saves life. Okay. Let me kind of summarize today's takeaway. Tremendous opportunities in China, tremendous customer demand. We are deeply rooted in China. Our strategy, perfectly aligned with what the government agenda is and basically, eventually, on a growth momentum to create a €3,000,000,000 business. And last but not least, we are on the right track to transform ourselves to be a Health Technology Integrated Solution Leader in China. Thank you. Thank you. Thank you very much, Andy. And I would like to ask the other presenters to come to the stage for our next Q and A. We'll get a couple of tables here as well. So time for Q and A again. We've given you a lot of information. Okay. We're going to try and manage. Maybe we'll start at this corner. Hi. Good afternoon. Can you hear me? Good afternoon. It's It's Michael Jungling from Morgan Stanley. I have two questions. Both questions are for Roy on Personal Health. The first question is on to achieve 5% to 7% organic sales growth per year, how often do you think you have to create new categories such as the single blade or an air fryer or a sort of air cleaning device in China? And the second question is, how much of the deceleration in organic sales growth in 2018 is driven by homemade problems versus the market decelerating in some categories? Go ahead. Okay. So on the first one Just put on the spot, go for it. No, no, sure, sure. So on the first question, so I don't so for me, if you think about the range, so market growth in domains we play on average is around the 5%. So if we do and exploit our core, we should be trending around the 5%. You need also new innovations to take you beyond, and that's what we're doing. So we have, as also Frans laid out, an innovation approach in which we invest behind the core, and we invest a part in what we call game changers or new development, new categories. So that will be a part that we will continue to invest behind. So for me, the core should be able to deliver within the bandwidth. Then to go beyond, it is fueled and supported by new innovations and new categories that you can exploit. And at the same time, we are also even in if you talk about the oral health care, for example, where it's not reinventing a new category, but like the air fryer, it's really penetration potential that we have still massively. If you think about only 20% will be using it, then we have and we don't need to invent a new toothbrush to get them to electronic toothbrushing. So I think that is part of our innovation strategy that I would foresee, and I see ample opportunity in core to revive. Going back to your second question on what I see as kind of what is cost internally or maybe was external dynamic. I think 2018 has been a year of growth, where we see indeed some where we started the year, certainly this drop in air, and we were all living at that was unexpected because it's kind of something that's very hard to predict. It's like weather. So that's something that is a market headwind, but we also had headwinds like France alluded to Life Supply that actually we can and will fix. And that's also why I have the confidence that we can and we'll get back to that bandwidth next year because we have the visibility of part of that what we can fix ourselves, but also an air drop that we had in first half of first quarter can happen again. But we overall believe that the market is strong also next year. So just 4 weeks on the job. He's going to fix it. All right, behind you, yes. Thank you. Can I ask on the Diagnosis and Treatment business? To the non specialists, can you just help me understand a little the degree of margin difference between your business and at least the targeted margin of the Siemens equivalent imaging business? Last year, you were 10% plus margin, this year 11% plus target of 14%, 16% there, target is 20% to 22%. Just help me understand why the difference? Why? Why your margin is half those? Yes, it's a great question. So I think some of it has to do with scale, so bigger business. I also think that they're and it's no secret, I mean, they're really better market position than we in certain parts of the world. And as a result of that, I think command some better pricing. I think that if we attribute it to both scale and that market positioning, I think it represents an opportunity for us more than anything else. So sure, we're doing a bunch of stuff from a productivity perspective. We're a little we were a little bit behind in all of that because of some of the FDA woes that we had several years ago. And so much work is going into fixing the P and L from a cost structure perspective, but also from a go to market perspective, it's about growing this business and growing it more profitably. So I think it's a combination of those two things. Well, maybe to add to that, so given the scale issue, the scale difference, we will not completely close the gap, right? So we if you do it by business, ultrasound is better than our competitor in profitability. IGT, actually, the prospectus that came out from our competitor was interesting because we feel we are larger, but we have a profit cap. Now partly that is investments, but partly it's also performance improvement that we need to close, and we will close that. And then on the Diagnostic Imaging, given that we are smaller, we cannot completely close the gap, but getting to the mid to the double digit profitability is a first good step. And then from there on, we get it further. Over there. We'll take both of you, yes, one after the other. Yes, Hakkar, Wim Frieder, ABN. I got a question on CCHI. 3rd quarter was a bit of a setback both on the top line and the bottom line. You already kind of alluded on the bottom line kind of being a temporary issue, which might be fixed now with kind of political uncertainty or whatever. But also there's a shift going on to monitoring as a service. And to what extent does that impact your top line? And will it kind of prohibit you from growing towards the 3% to 7%? Monitoring as a service, 1st of all, differentiates us. And lots of the order intake good order intake growth we are seeing is being attributed to the advanced solutions we have versus competition. What is true that in these business models where you see a shift from CapEx to OpEx, revenue is delayed, right? It comes with the installation over the 10 year period. So you see a buildup of the revenue, but you have short term a gap. And that is a shift we are managing right now, and you see improved performance on the orders, revenues will follow. But monitoring as a solution is a good business model for us, also because it includes services and consumables, very profitable. But there is a delay in terms of revenue conversion or order conversion to revenue. Yes. Julien Dormois from Exane. Again, a question on CC and HI, which you placed great emphasis on the long term partnerships you signed with hospitals. You now signed like I think 300 or 400 for the past 3 years. Just curious to know how much how you book revenues? Is it on a per patient basis on whatever what's the metric that allows you to book revenues? And does that increase the level of revenues you make with those hospitals compared to what you would do just on the machine side of the equipment and service side of the story? And as a follow-up, in terms of reaccelerating growth in the business, are you still looking for the re approval or the resumption of shipments of defibrillators in the U. S? And would that mean a reacceleration or a contribution to 2019 revenues? Okay. Two different businesses. Let's start with monitoring. Monitoring as a service, Yes, a, we have a bigger business because, as I said, we are including all the innovation in it. So we are getting a bigger share of wallet from that customer than a pure monitoring tender, certainly. And there is a shift in timing, as I mentioned. The payment models vary. Right now, the vast majority is the payment for the integrated system solution, right, including equipment services over the time period. It is shifting. If you do monitoring as a service, it is per patient actually. And the future, and we see that in remote monitoring, is per outcome. But the majority is still in the more integrated system equipment side, but it is shifting. And we have the solutions to actually prove that the outcome will come because of our really positioning across the health continuum and the way we develop these innovations, putting these outcome measurements in from the very beginning at the R and D. The other question was related to the ECR business in Therapeutic Care. And yes, we are planning to resume shipment and picking up that business again. Okay. Over here, Veronika. That's great. Thank you. I have two questions. First one is on personal health for Roy. Just wondering if you can discuss the degree of confidence and visibility you have on end market demand, because we had a negative surprise in the Q2 with China. It sounds like maybe the Q4 may be not as strong as you had originally expected even 3 weeks ago. And so I'd like to understand kind of how confident you are in that end market dynamic and how much forward can you see in terms of the demand path? And I guess, what has changed versus a month ago for you and why you're maybe a little bit more cautious? And my second question is for Andy on China and the competitive environment on the medical side, on the D and T side in particular. Now that we are in a tariff war, are you seeing any changes in how you're being treated as an M and C versus some of the local players? Thank you. Roy? Yes. So maybe starting from the so I think we probably need to get accustomed to that there is a bit more volatility in the retail market. We are living now Q4. You have 11.11, which is a big event, and it's hard to predict exactly how that goes. I think that's a combination that kicks in when you look at kind of how the year trends. I think that we are weighing in. Looking forward to the fundamentals of the business, and that's what I said, we see fundamentals unchanged, where we have strong confidence in that 5 percentage growth range of the market, where we have been outgrowing the market and been growing market share as well. So, albeit it can change a bit over the quarters, it's not as predictable when it exactly will hit because consumers are just shifting, right, where first they were going to 11, 11 maybe then it's 12, 12 because there's another segment, then it's Christmas or Chinese New Year. So I think the traditional pattern that we had was quite nicely phrased around the major events, that is shifting more. And that can cause a bit of more fluctuations over the year, where the overall demand that we see has not fundamentally changed. If you take a sleep and respiratory care business, massive penetration potential that I think regardless even of this, it's a different dynamic and that will not be kind of influenced by these kind of events. So you also have in the portfolio different heartbeat. So overall, we stick to that outlook, which we are confident in. Andy? Okay. Let me try to answer that question, which is a quick question. I believe that the local competition is always there. Given the nature of the enterprises, I believe that they always have a space in China. For Philips in China, I believe that we also have to stay in course, execute our strategy. In fact, the growth momentum that we have created in the last 2, 3 years should be a case in point in terms of our execution capability and also our technology leadership in China. But I also would like to also mention a couple of other points, right? Number 1, every time we have a meeting with the Chinese government officials, we keep hearing their emphasis in terms of having a fair trading platform for the country. So on one hand, I believe that Filipe as an MNC will be and should be fairly treated. On the other hand, hopefully, this is politically correct. Basically, we also experienced some kind of inconsistency in terms of execution of the policy across the different locations and also across different timing. But the positive sign is that there are a couple of new policy or new situation coming up in the last 6 months, right? Some example would include the government is trying to upgrade or move, let's say, the value chain for the hospital, meaning asking the level 1 to become level 2, asking the level 2 to become level 3 by increasing the kind of infrastructure that they have. So that signifies, I would believe, positive demand. And secondly, in the context of your question regarding MNC, as I mentioned, I just came back from an interesting forum called the First China International Import Expo. That was a pretty high profile event, right, presidency basically personally present with more than 20, 30 country leaders. And then the sole purpose is to promote import product. And you have read from the newspaper that people are trying to signify in terms of the volume that they have signed the import product. So many of the China hospitals still feel proud of the signing volume that they have. So I remain positive about the market demand. All right. Thank you. Patrick? Perfect. I have two questions, please. Maybe firstly for Rob on the sort of big iron old school sort of imaging market. Obviously, we've seen globally quite an acceleration in that recently if you add all the players together. I'm just curious how much of you think how much do you think that's from a single market like the U. S. Or how broad based that performance has been and how sustainable it is? And then maybe for Roy on the second one. Obviously, your background, you ran the domestic appliances business, but I noticed you didn't really talk about it in the presentation. Is that a function of lack of growth opportunities? Or is that because it's quite a difficult segment to talk about given all the different pieces that you operate within that? That'd be helpful. Yes. So relative to markets like the U. S. And their stability in terms of buying patterns and how they're being impacted by external dynamics, obviously, there's a lot of headwinds as a result of things that are happening with the value based care and concerns over that. I think that what we're seeing is that obviously, there are equipment cycles in capital equipment and we are witnessing that those equipment cycles and times to turn over equipment are lengthening. So consequently, what's happening for us is that we're turning over the equipment at a faster rate as a result of offering up a value proposition that we think resonates with the customer. So all of the things that we said earlier relative to cutting costs, saving time, saving efficiencies and improving outcomes are reasons that are motivating customers to turn over equipment at a faster rate than what they normally would as a result of some of the things that they're facing from an economics perspective. Roy? Yes. On domestic appliance, no, of course, happy to talk about domestic appliances. Domestic appliances is consistent part of growth, both in terms of CSG and profitability. It's a truly global play. So therefore, in that sense, it is quite diverse, both in the categories that we have, 5 categories we're underneath, as well as serving 100 countries. So it is a quite granular development to monitor, but I can reassure you that actually it has been staying on its path. And also we project it to move forward in its steady improvement trajectory. So I think that's maybe why I've less touched upon it, but good prospects. Yes. And a question for Abhijit and a question for Rob. Just Abhijit, in the earlier presentation, you outlined obviously the manufacturing footprint reduction, your IT system reduction and you've upgraded your free cash flow expectations. One thing you haven't really elaborated on is the CapEx outlook for the business over the longer term, I would have thought, as well as working capital improvement and cash conversion, that's a big part or should be a big driver of the improvement in your free cash flow. Maybe you can provide a little bit of a road map around that. And then Rob, on DMT, a few different questions here. But in ultrasound, can you maybe just elaborate on the tie up you've announced with Hologic and how that you hope it talked about OBGYN, but how you think that will help expand that business for you? In IGT, you've talked a lot about teleradiology, but you haven't talked about necessarily robotics within the cath lab. And you have a strategic stake in a robotics company who made a presentation of a remote PCI at TCT this year. So I was wondering whether you could talk about that. And then just lastly on SpectroNetics, you've talked about the benefit of being there every day in the cath lab for system sales perhaps, but we haven't really heard about the uplift from owning the likes of Stellarex or lead management or indeed laser atherectomy devices. Can you just talk about that, please? Sure. Let me take the CapEx part. So our CapEx is around €800,000 per year. So it's sorry, €800,000,000 So it's not big for a company of our size, and we keep it roughly flat going forward. So there's not going to be an increase in the CapEx, neither a decrease. So therefore, that will not be the big swing factor for the cash flow to go up. What will happen is largely the improvement in earnings will generate the higher cash flow. Sure. So I think with respect to the first one about the relationship with Hologic in breast imaging primarily, The Tomo relationship is one where we partnered with them to have a mammography product that would be available when we had multi modality transactions, and we needed a breast care product. So they were very open to that. We certainly see it as a positive relationship for us, but I don't think it's going to be and Hologic recognizes this as well, not really But for now, we But for now, we're exercising the relationship that we have and we're also in ongoing discussions with them. On robotics, I don't think we could disagree with you and you're going to meet Bert in the Zoom for IGT later today and we can bring it up again. But we are always looking at different disease categories where robotics along with imaging will be a great combination and whether it is in spine or whether it's in different gynecologic applications or urologic applications. And on the heart side as well, but right now what we're doing is exploring where we would get the best bang for a buck from a robotics partner or robotics company. And it's much more about the disease category and the market that it represents. On the last question, what was the last question again, remind me. I'm sorry? On SpectroNetics, I think it's a brand new company to us. Clearly, the margin dynamics over a device business are going to be very attractive for us over time, but it's effectively an annuity business. So we're growing it, but that I think the overall margin impact of the significance of it is going to take some time to really see in our margin returns. But absolutely, things like Volcano and Spectranetics changed the margin dynamics dramatically of our P and L. Okay. We take a last question there in the middle. Daniel Vandorff, Commerzbank. Two questions on the D and T division, please. First one, when you think of your margin target for 2020, what does that imply for the margin in Imaging? And the second question is around the IntelliSpace platform. Is that an open platform? Do customers get this automatically when they buy an MRR for you, for example? Or is that a separately run business engine? Yes. Sure. And the first question about margin, I was just talking to Abhijit when you were asking. And I'm sorry, can you repeat the first one? Yes. So the question was, when you think of your D and T margin goal for 2020, what does that imply for your imaging margin in 2020? Sure. I mean, we think imaging benefits by several things, not the least of which being that we're growing. And as a result of that, we're certainly leveraging fixed costs and expenses. In addition to that, all the productivity things that you heard Abhijit talk about earlier with factory consolidations are all having a very specific benefit on our margin returns as a result of lowering our footprint and lowering our fixed cost structure. With respect to I'm I think you mean specifically to DI, right? So I think what we have Yes. I think what we have said last year was 200 bps improvement every year moving to double digit that remains basically the same guidance. The and with the IntelliSpace and everything that we're doing around teleradiology and the like, we offer a complete enterprise solution. But if somebody wants just visualization from us in IntelliSpace, we can provide that as well. So when we sell an MR, we bundle it with visualization, We sell CT, we do the same and there are applications that then could be used by the customer that would be specific to that modality. But if we can do, we can do a variety of different configurations in order to either satisfy the enterprise problem or requirement or that of just the specific modality in radiology. All right. I realize that there must be at least another 20 questions here in the audience. So I will discuss with Pim how we will deal with that. Thank you for that strong interest. We will now have a break. There will be Zooms that will give you other opportunities to ask questions. And then all of the Philips people will be around the entire evening. So I hope you will find the people that you want to talk to. And so if we cannot do it all plenary, apologies for that, but we also would like to stick to the schedule. Yes. Thank you, Frans. And with this, we also end our live webcast. So on behalf of the full team, thank you for joining online. We will put all the presentations this afternoon online shortly because we will all record them. And for the people in the room here, we will have another 15 minute break in the same place where the lunch was. And afterwards, there's a number on each of your batches. So maybe you questioned yourself why there's a number on my batch, but that will be for 4 groups that we will split ourselves in. The other batch, right? The other batch. It's the name batch, correct. Thank you. I saw people getting confused. Very good. Thank you very much.

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