Annual Report2015
Sustainability selection
Creating twocompanies witha bright future
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contents below. The contents of this file are qualified in their entirety
by reference to the printed version of the Philips Annual Report 2015.
The information in this PDF has been derived from the audited
financial statements 2015 of Koninklijke Philips N.V.
KPMG has issued unqualified auditors reports on these financial
statements.
2 This is the sustainability selection from the Annual Report 2015
ContentsIFRS basis of presentationThe financial information included in this document is based on IFRS, asexplained in note 1, Significant accounting policies, of this report, unlessotherwise indicated.
Dutch Financial Markets Supervision ActThis document comprises regulated information within the meaning of theDutch Financial Markets Supervision Act (Wet op het Financieel Toezicht).
Statutory financial statements and management reportThe chapters Group financial statements and Company financialstatements contain the statutory financial statements of the Company. Theintroduction to the chapter Group financial statements sets out which partsof this Annual Report form the Management report within the meaning ofSection 2:391 of the Dutch Civil Code (and related Decrees).
Significant developmentsIn September 2014, Philips announced its plan to sharpen its strategic focusby establishing two stand-alone companies focused on the HealthTech andLighting opportunities respectively. We have established a stand-alonestructure for Philips Lighting within the Philips Group effective February 1,2016. We expect to be able to announce the separation of the Lightingbusiness in the first half of 2016, subject to market conditions and otherrelevant circumstances. As previously stated, we are reviewing all strategicoptions for Philips Lighting, including an initial public offering and a privatesale.
It should however be noted that the completion of the separation couldtake more time than originally planned or anticipated and that there is nocertainty as to the method or timing of the separation of the Lightingbusiness, which may expose Philips to risks of additional cost and otheradverse consequences. For further information on specific risks involved inthe separation please refer to chapter 7, Risk management, of this AnnualReport.
The separation impacts all businesses and markets as well as all supportingfunctions and all assets and liabilities of the Group. With effect from Q12016 onwards Philips plans to report and discuss its financial performanceon the basis of different reportable segments than the sectors currentlypresented and discussed in this Annual Report. For more details on thenew segment reporting in 2016 and onwards, please refer to theintroduction of chapter 6, Sector performance, of this Annual Report.
As announced on January 22, 2016, the agreement pursuant to which theconsortium led by GO Scale Capital would acquire an 80.1% interest in thecombined businesses of Lumileds and Automotive, has been terminated.Philips is now actively engaging with other parties that have expressed aninterest in the businesses and will continue to report the Lumileds andAutomotive businesses as discontinued operations (see note 3,Discontinued operations and other assets classified as held for sale).
Further updates will be provided in the course of 2016.
Philips ArenaVision LED is the worlds first LED pitchlighting to meet the stringent requirements ofinternational television broadcasters and sportsfederations, ensuring a fantastic match experience, bothfor the fans in the stadium and those watching at home.
Increasingly, Philips is teaming up with hospital andhealth systems to understand their needs, provideintegrated solutions, and engage in multi-yearcooperation to drive improvements in terms of patientoutcomes, quality of care delivery and cost productivity.
Grey text indicates parts not included in this selection from
the Philips Annual Report 2015.
1 Performance highlights 3
2 Message from the CEO 5
3 Philips in 2015 at a glance 8
4 Our strategic focus 94.1 Addressing global challenges 94.2 How we create value 114.3 Accelerate! journey continues 134.4 Lives improved 144.5 Global presence 144.6 Our strategy in action 15
5 Group performance 225.1 Financial performance 225.2 Social performance 225.3 Environmental performance 275.4 Proposed distribution to shareholders 335.5 Outlook 33
6 Sector performance -
7 Risk management -
8 Management -
9 Supervisory Board -
10 Supervisory Board report -
11 Corporate governance -
12 Group financial statements -
13 Company financial statements -
14 Sustainability statements 3414.1 Economic indicators 4014.2 Social statements 4014.3 Environmental statements 5214.4 Independent Auditors Assurance Report 5714.5 Global Reporting Initiative (GRI) table 4.0 58
15 Reconciliation of non-GAAP information -
16 Five-year overview -
17 Investor Relations -
18 Definitions and abbreviations 69
19 Forward-looking statements and otherinformation
71
Performance highlights 1
This is the sustainability selection from the Annual Report 2015 3
1 Performance highlights
Philips GroupKey data in millions of EUR unless otherwise stated2014 - 2015
2014 2015
Sales 21,391 24,244
Comparable sales growth (1)% 2%
EBITA 821 1,372
as a % of sales 3.8% 5.7%
EBIT 486 992
as a % of sales 2.3% 4.1%
Net income 411 659
Net income attributable to shareholdersper common share in EUR:
basic 0.45 0.70
diluted 0.45 0.70
Net operating capital 8,838 11,096
Free cash flow 497 325
Shareholders equity 10,867 11,662
Employees at December 31 113,678 112,959
continuing operations 105,365 104,204
discontinued operations 8,313 8,755
Philips GroupLives improved in billions
0.3by Philipswell-beingproducts
0.88by Philips
care products
1.7by Philips
Green Products
Total: 2.0 billion (double counts eliminated)
Double countsConceptual drawing, areas do not reflect actual proportions
Performance in millions of EUR unless otherwise stated2014 - 2015
Group Healthcare Consumer Lifestyle Lighting
2014 2015 2014 2015 2014 2015 2014 2015
Sales 21,391 24,244 13% 9,186 10,912 19% 4,731 5,347 13% 6,869 7,411 8%
Green Productsales 11,065 13,014 18% 3,508 4,580 31% 2,605 3,091 19% 4,952 5,343 8%
Sales in maturegeographies1) 14,004 15,836 13% 6,890 8,207 19% 2,508 2,784 11% 4,182 4,425 6%
Sales in growthgeographies1) 7,387 8,408 14% 2,296 2,705 18% 2,223 2,563 15% 2,687 2,986 11%
EBITA 821 1,372 67% 616 1,024 66% 573 673 17% 293 594 103%
Net operatingcapital 8,838 11,096 26% 7,565 9,212 22% 1,353 1,453 7% 3,638 3,813 5%
1) For a definition of mature and growth geographies see chapter 18, Definitions and abbreviations, of this Annual Report
Philips GroupFree cash flow in millions of EUR2011 - 2015
610
(663)
(53)
11
1,886
(241)
1,645
12
912
(830)
82
13
1,303
(806)
497
14
1,167Operating cash flows
(842) Net capital expenditures
325 Free cash flow
15
Philips GroupComparable sales growth by geographic cluster1) in %2013 - 2015
(0.3)
13
(1.3)
14
1.5
15
mature geographies
8.9
13
0
14
3.5
15
growth geographies
2.7
13
(0.9)
14
2.2
15
Philips Group
1) For a reconciliation to the most directly comparable GAAP measures,see chapter 15, Reconciliation of non-GAAP information, of this AnnualReport
Performance highlights 1
4 This is the sustainability selection from the Annual Report 2015
Philips GroupEBIT and EBITA1) in millions of EUR2011 - 2015
1,876
(542)
1,334
11
411
592
1,003
12
421
1,855
2,276
13
335
486
821
14
380 Amortization and impairmentin value
992 EBIT in value
1,372 EBITA in value
15
6.7% 4.5%10.4%
3.8% 5.7% EBITA as a % of sales
1) For a reconciliation to the most directly comparable GAAP measures,see chapter 15, Reconciliation of non-GAAP information, of this AnnualReport
Philips GroupGreen Product sales per sector in millions of EUR2011 - 2015
2,663
1,101
3,955
7,719
11
3,610
1,619
5,056
10,285
12
3,690
2,270
5,037
10,997
13
3,508
2,605
4,952
11,065
14
4,580 Healthcare
3,091 Consumer Lifestyle
5,343 Lighting
13,014
15
38.8%46.3% 50.0%
51.7% 53.7% As a % of sales
Philips GroupBrand value1) in billions of USD2011 - 2015
8.7
11
9.0
12
9.8
13
10.3
14
10.9
15
1) As measured by Interbrand
Philips GroupResearch and development expenses in millions of EUR2011 - 2015
1,180
363
1,543
11
1,271
453
1,724
12
1,254
405
1,659
13
1,172
463
1,635
14
1,432 Other Innovation
495 Green Innovation
1,927 Research and developmentexpenses
15
7.7% 7.8% 7.5% 7.6%7.9% As a % of sales
Philips GroupOperational carbon footprint in kilotonnes CO2-equivalent2011 - 2015
903
24
