Fourth-quarter highlights
Comparable sales in growth geographies up 15%
EBITA amounted to EUR 884 million, or 13.0% of sales, compared to a loss of EUR 50 million in Q4 2012
EBITA excluding restructuring and other charges increased to EUR 915 million, or 13.5% of sales, compared to EUR 765 million, or 11.3% of sales, in Q4 2012
Net income amounted to EUR 412 million
Free cash flow of EUR 608 million
Full-year highlights
Full-year comparable sales increased 3% to EUR 23.3 billion
Full-year EBITA increased to EUR 2.5 billion, or 10.5% of sales, compared to EUR 1.1 billion, or 4.7% of sales, in 2012
Return on invested capital was 15.3% for the year
Proposal to increase dividend to EUR 0.80 per share
Frans van Houten, CEO:
The fourth quarter of 2013 was another good quarter for Philips, despite the challenging economic environment and ongoing currency headwinds. In the quarter, Lighting and Consumer Lifestyle both delivered strong comparable sales growth of 8%. At Healthcare, comparable sales increased by 4%, while order intake declined 1% as a result of weak markets in US and Europe. The operational profitability of all sectors improved substantially, driven by good sales growth, gross margin expansion of 2 percentage points and the productivity gains, all coming from the Accelerate! program.
We achieved the mid-term financial targets we had set in 2011, thanks to the hard work of our employees. We delivered a compound annual growth rate for comparable sales over the period 2012-2013 of 4.5%, compared to our target of 4-6%, and did so in a lower GDP growth environment than originally anticipated. Our reported EBITA as a percentage of sales was 10.5%, within our target range of 10-12%, which we achieved despite currency headwinds and changed pension accounting. We also significantly improved our return on invested capital to 15.3%, above the target range of 12-14%.
We are making excellent progress on our Accelerate! journey. We continue to invest in growth opportunities and the Philips brand. Our overhead cost reduction program has resulted in EUR 1 billion of total gross savings to date. We reduced our inventory as a percentage of sales by 260 basis points from 2011 to 2013. Through our Design for Excellence (DfX) program we remain focused on improving gross margins. These ongoing initiatives, as well as the launch of our new brand campaign and our focus on innovation, continue to make Philips a better and more competitive company.
We introduced the EPIQ Ultrasound system, the Vereos digital PET/CT system and the IQon Spectral CT system, which we expect will have a positive effect on future orders for our health care business. Building on our consumer portfolio of locally relevant innovations, we experienced strong growth in China as well as in Europe, driven by higher demand for our home appliances, among which the air purifier and air fryer. As the leading professional lighting solutions and services provider, Philips won a 10-year contract to deliver and service an integrated digital lighting system with 13,000 connected LED fixtures and adaptive energy management controls for parking garages in Washington, DC. We also won a major order to renovate most of Buenos Aires 125,000 street lights with the CityTouch connected LED system. Our new innovation received a record 100-plus design awards in 2013.
Achieving the 2013 financial targets was an important milestone and we have now set our sights on reaching our 2016 targets. We are confident in our ability to further improve our performance by continuing the strong focus on our Accelerate! transformation program. Looking at 2014, we remain cautious because of ongoing macro-economic uncertainties, currency headwinds and softer order intake in Q4 2013. Therefore, we expect that 2014 will be a modest step towards our 2016 targets, also taking into account restructuring to drive the new productivity targets and investments in additional growth initiatives.
Q4 financials: comparable sales and operational results improve across all sectors
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Fourth-quarter highlights
