Philips 2004 Annual Report Download - page 51

Medical Systems
Key data
in millions of euros 2002 2003 2004
Sales 6,844 5,990 5,884
Sales growth
% increase (decrease), nominal 42 (12) (2)
% increase, comparable 5 7 4
Income from operations 309 431 34
asa%ofsales 4.5 7.2 0.6
Net operating capital (NOC) 4,849 3,671 2,862
Employees (FTEs) 31,027 30,611 30,790
See pages 210 and 211 for a reconciliation to the most directly comparable US GAAP measures.
Sales and net operating capital
5.9
6.0
6.8
4.8
3.0
8
6
4
2
0
in billions of euros sales NOC
20042003200220012000
Income from operations
(163)
(500)
(250)
0
250
500
750
(8%)
(4%)
0%
4%
8%
12%
in millions of euros as a % of sales
20042003200220012000
431
309
169
34
Market developments
Overall, the medical markets showed modest comparable growth
of 4% in 2004, with low growth in North America and Europe and
strong growth in Asia Pacific and Latin America. Healthcare
reforms in some countries and competitive pressures are slowing
down the growth of the medical markets. Nevertheless, the
overall market is expected to continue to grow in the coming
years, fueled by an ageing world population’s greater imaging
needs, new technologies for earlier and better diagnoses, and the
replacement of invasive procedures with non- or minimally
invasive imaging procedures. Large-scale genomic and proteomic
research projects are being launched in order to enhance the
understanding of disease on a molecular level. This move toward
molecular medicine is expected to create a new dynamic in the
market in the years to come. In addition to the imaging equipment,
healthcare IT and imaging agents are becoming increasingly
important elements of the imaging industry.
Strategy
In the past years Medical Systems has created a strong
organization and achieved significant operational improvements. It
has also enhanced its offering to the market by developing
partnerships for financing (De Lage Landen in the USA, Société
Générale in a number of European countries) and for the delivery
of enterprise systems in the healthcare IT market (Epic). In
addition, it is broadening its base in China with the establishment
of the Philips-Neusoft venture.
Medical Systems’ strategy is now aimed at becoming a clinically
focused company unique in its capability to offer complete systems
for diagnosis and treatment of a variety of diseases. To realize this,
Medical Systems intends to expand its portfolio beyond its current
offering of diagnostic imaging, monitoring and medical IT.
The main areas of expansion will be focused around the care
cycles of acute care, cardiovascular disease, oncology and
neurology, and in extending care to the home. In addition, Medical
Systems will continue to invest in molecular imaging and molecular
diagnostics. In parallel to this growth and expansion, Medical
Systems will maintain its focus on innovation and operational
excellence.
Financial performance
Nominal sales growth was hampered by a lower US dollar,
resulting in a 2% decline compared to 2003. Comparable sales
increased by 4% and were especially strong in Computed
Tomography and X-ray. All regions contributed to the comparable
sales growth.
50 Philips Annual Report 2004
Operating and financial review and prospects