Philips Four Quarter and Annual Results 04

Group Financials have been restated as of the fourth quarter of 2014 and for prior periods to show the results of the combined businesses of Lumileds and Automotive as discontinued operations in connection with the process of attracting third-party investors.

Fourth-quarter highlights

Comparable sales declined 2%

EBITA, excluding restructuring and acquisition-related charges and other items, amounted to EUR 743 million, or 11.4% of sales, compared to 12.9% in Q4 2013

EBITA amounted to EUR 262 million, impacted by restructuring costs and other items, compared to EUR 789 million in Q4 2013

Net income amounted to EUR 134 million, compared to EUR 412 million in Q4 2013

Free cash flow improved to EUR 559 million, compared to EUR 481 million in Q4 2013

Full-year highlights

Comparable sales declined 1% to EUR 21.4 billion

EBITA, excluding restructuring and acquisition-related charges and other items, amounted to EUR 1.9 billion, or 9.0% of sales, compared to EUR 2.3 billion, or 10.5% of sales, in 2013

EBITA amounted to EUR 821 million, or 3.8% of sales, compared to EUR 2.3 billion, or 10.4% of sales, in 2013

Net income amounted to EUR 411 million, compared to EUR 1.2 billion in 2013

Free cash flow improved to EUR 497 million, compared to EUR 82 million in 2013

Return on invested capital was 4.5%, compared to 13.9% in 2013

Proposal to maintain dividend at EUR 0.80 per share

Frans van Houten, CEO:

The fourth quarter underscored a challenging 2014 for Philips. Our transformation efforts continued to show good results, even as we addressed performance issues, ongoing softness in end-markets like China and Russia, and stronger than anticipated foreign exchange impacts, particularly in emerging markets.

Healthcare was down overall, mainly caused by operational issues and soft markets. We were encouraged by market share gains in image-guided therapy and recorded strong orders in Europe and the Middle East, where we signed four multi-year solution deals. Our Cleveland factory resumed shipments to customers in January, marking an important milestone. Consumer Lifestyle performed very well in the quarter, continuing its three-year market-outperformance trend. Our Health & Wellness business delivered double-digit growth and we saw overall strong growth in EBITA.

Lighting recorded 20% sales growth in LED and expanded its margins in LED despite strong price erosion. Performance was, however, negatively impacted by results in China, Professional Lighting Solutions North America and conventional lighting. We took action to further restructure our manufacturing footprint in conventional lighting.

Update on Financial Targets

Overall, 2014 was a setback in our performance trajectory. We have been taking clear actions to drive stronger operational performance across our businesses and expect sales growth and EBITA margin improvements in 2015 and beyond. However, looking ahead, we remain cautious regarding the macroeconomic outlook and expect ongoing volatility of some of our end-markets. We also anticipate further incidental costs in 2015 and 2016, mainly in relation to restructuring and the separation.

Due to these factors, we are tracking 1 percentage point behind on the path to achieving each of our 2016 comparable sales growth, EBITA and ROIC Group targets. We are convinced that this does not change our longer-term performance potential, considering the attractiveness of the Lighting Solutions and HealthTech markets and our competitive position. Later this year, as we progress with the separation of Philips and reallocation of IG&S, we will update the market about the integral performance targets for each of the two operating companies.

Accelerate! and Separation Update

Accelerate! continues to drive improvements across the organization, resulting in increased customer centricity, enhanced customer service levels, faster time-to-market for our innovations and better cost productivity.

In Healthcare Informatics, Solutions & Services (HISS ), a new Agile software development methodology was implemented that increases the number of new software releases by four times over the year, enabling us to introduce a record number of new clinical informatics solutions in the IntelliSpace family at the Radiology Society of North America (RSNA) trade show. In Consumer Lifestyle, our deep understanding of local shopper needs allowed us to successfully launch an optimized range of male grooming products in France, meeting key price points and customer needs. This locally relevant value proposition resulted in a 2 percentage-point market share gain since launch and a record number of Philips product listings at retailer Carrefour. In Lighting, Professional Lighting Solutions enhanced its product portfolio for the indirect channel in Europe, which drove more than 60% sales growth as a result of its strong price-performance ratio, locally relevant value proposition and delivery time commitment of 5 days.

Overhead cost savings amounted to EUR 35 million for the quarter, bringing the total overhead cost savings in 2014 to EUR 284 million. The Design for Excellence (DfX) program generated EUR 123 million of incremental savings in procurement in the fourth quarter, bringing total DfX savings for 2014 to EUR 284 million. The End2End productivity program achieved incremental savings of EUR 22 million in the quarter, which brings the total End2End productivity savings to EUR 79 million for full-year 2014. Philips expects restructuring costs in 2015 of approximately EUR 250 million.

In September of last year, Philips announced its plan to separate into two standalone companies, positioning each one to better capitalize on the highly attractive HealthTech and Lighting solutions opportunities. Philips is confident in its ability to deliver additional growth and create more value thr

LINK:	http://www.newscenter.philips.com/gb_en/standard/news/press/2015/Phili...
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