2016 annual results

Amsterdam, February 21, 2017

A focused leader in health technology

  • Sales rose to EUR 17.4 billion, a nominal increase of 4%, in our HealthTech portfolio. On a comparable basis sales increased by 5% in our HealthTech portfolio, which combines our Personal Health businesses, Diagnosis & Treatment businesses, Connected Care & Health Informatics businesses, HealthTech Other and Legacy Items. Lighting posted a 5% decline on a nominal basis and a 2% decline on a comparable basis. Overall, Group sales increased by 1% on a nominal basis and 3% on a comparable basis, to EUR 24.5 billion.
  • Our Personal Health businesses' sales increased to EUR 7,099 million, an increase of 5% on a nominal basis. The 7% growth on a comparable basis was driven by double-digit growth in Health & Wellness and mid-single-digit growth in Personal Care, Sleep & Respiratory Care and Domestic Appliances.
  • Our Diagnosis & Treatment businesses' sales amounted to EUR 6,686 million, an increase of 3% on a nominal basis. The 4% growth on a comparable basis was driven by double-digit growth in Image-Guided Therapy and low-single-digit growth in Diagnostic Imaging, while Ultrasound was in line with 2015.
  • Our Connected Care & Health Informatics businesses' sales rose to EUR 3,158 million, an increase of 5% on a nominal basis. The 4% growth on a comparable basis was driven by mid-single-digit growth in Patient Care & Monitoring Solutions and low-single-digit growth in Healthcare Informatics, Solutions & Services, partly offset by a low-single-digit decline in Population Health Management.
  • Lighting's operational performance continued to improve year-on-year. Sales in 2016 were EUR 7,094 million. Comparable sales reflected double-digit growth in LED and Home, which was more than offset by a double-digit decline in Lamps and a low-single-digit decline in Professional.
  • In line with our mission to improve people’s lives, we have embedded sustainability at the heart of our business processes, and Green Revenues, including products and solutions sales, increased to 64% of total revenues in 2016. In recognition of our sustainability achievements, Philips was named industry group leader in the Capital Goods category in the 2016 Dow Jones Sustainability Index.
  • Net income amounted to EUR 1.5 billion and increased by EUR 832 million compared to 2015, driven by improved performance in the HealthTech portfolio and in Lighting as well as the Funai arbitration award, partly offset by higher financial expenses and tax charges. Net income is not allocated to segments as certain income and expense line items are monitored on a centralized basis.
  • EBITA totaled EUR 2.2 billion, compared to EUR 1.4 billion a year earlier. Our three cost savings programs all delivered ahead of plan in 2016. We achieved EUR 269 million of gross savings in overhead costs, EUR 418 million of gross savings in procurement, and our End2End process improvement program delivered productivity savings of EUR 204 million.
  • Net cash provided by operating activities increased from EUR 1.2 billion in 2015 to EUR 1.9 billion, mainly due to higher earnings and lower outflows related to pension de-risking settlements, partly offset by a EUR 280 million outflow related to the Masimo agreements and a EUR 91 million premium payment related to the October 2016 bond redemption.
  • As of October 20, 2016, Philips had completed the 3-year EUR 1.5 billion share buy-back program. During the year Philips returned EUR 868 million in dividends and shares repurchase.
  • Philips achieved the status of Industry Group leader (the highest position) in the Capital Goods category of the 2016 Dow Jones Sustainability Index (DJSI), with an overall score of 92 points out of 100
  • 5% reduction in carbon footprint
  • In our new five-year sustainability program, ‘Healthy people, sustainable planet’, the Lives Improved target for 2020 has been set at 2.5 billion people a year(includes the contribution of Lighting)
  • Green Revenues 64.1% of total sales
  • Health & Safety– Total Recordable Cases (TRC) 0.41 per 100 FTE
  • Continuing efforts to reduce air travel by improving and stimulating video conferencing
  • In December 2016, the Los Mirasoles wind farm became operational, powering our US operations with 100% renewable electricity
  • In line with our strategy of building multi-year strategic partnerships, Philips signed a 15-year, USD 90 million agreement with San Francisco Bay-based Marin General Hospital. It includes a managed services agreement for imaging systems, patient monitoring and clinical informatics solutions.
  • Philips and Allianz Worldwide Partners entered a partnership focusing on connected health solutions and services in Germany. The Personal Health programs are designed to motivate people to make healthy choices in their lifestyle. They include a combination of connected health measurement devices, app-based health programs and personal coaching.
  • Philips rose to first place in the European Patent Office’s 2015 ranking of patent applicants for patents filed at the EPO. In addition, the company ranked first in three of the ten leading fields of technology: Medical Technology; Electrical machinery, apparatus, energy; and Measurement.
  • Philips’ design excellence was recognized with 37 prestigious Red Dot awards, including two ‘Red Dot: Best of the Best’ awards for the IconiQ Special Edition Shaver and Lumify Ultra-Mobile Ultrasound Solution. The Red Dot Awards are one of the largest and most recognized product design competitions in the world.
  • Philips marked its 125th anniversary by celebrating the spirit of Frederik, Gerard and Anton Philips, the founding fathers of the Philips brand. This is characterized by an unwavering belief in the power of innovation and entrepreneurship to improve people’s lives.
  • Philips Lighting was listed and started trading on Euronext in Amsterdam under the symbol ‘LIGHT’. Following the listing of Philips Lighting, Philips retains a 71.225% stake and continues to consolidate Philips Lighting, with the aim of fully selling down over the next several years.
  • Philips launched the results of the first edition of its Future Health Index (FHI), an extensive international study which explores how countries around the world are positioned to meet long-term global health challenges through integration and connected care technologies
  • Building on its commitment to sustainability, Philips launched its new 5-year ‘Healthy people, sustainable planet’ program. With this program the company aims to improve the lives of 2.5 billion people per year, increase green revenues to 70% of sales, generate 15% of sales from circular revenues and become carbon-neutral in its operations – all by 2020.
  • Strengthening its Digital Pathology business, Philips acquired PathXL, a Northern Ireland-based innovator in digital pathology image analysis, workflow software and educational tools.
  • Philips and the Spanish hospital Campus de la Salud started the implementation of a EUR 77 million multi-year strategic partnership agreement. This deal includes Spain’s first fully digital pathology lab and Philips’ latest innovations in image-guided minimally invasive therapy and patient monitoring.
  • Philips acquired Wellcentive, a leading US-based provider of population health management software solutions. Wellcentive complements Philips’ portfolio with cloud-based IT solutions to import, aggregate and analyze clinical, claims and financial data across hospital and health systems to help care providers deliver coordinated care.
  • Philips and Qualcomm announced a strategic technology collaboration to advance personalized connected health across the health continuum. This collaboration will enable both companies to offer care providers enhanced, scalable, connected care solutions and services within a secure global ecosystem.
  • Philips became the Industry Group Leader in the Capital Goods category in the 2016 Dow Jones Sustainability Index, achieving the highest possible scores in three sections, including climate strategy and operational eco-efficiency.
  • Gavi the Vaccine Alliance and Philips plan to team up to improve immunization data quality in developing countries. Through the use of new health IT solutions, Gavi and Philips will offer interested countries their complementary expertise to help maximize immunization coverage and effectiveness by identifying children who are missing out on vaccination programs.
  • Building on its expertise in new care models based on telehealth technologies, Philips enabled Macquarie University’s MQ Health in Sydney, Australia, and Emory Healthcare in Atlanta, US, to provide continuous night-time critical care oversight to ICU patients back in Atlanta during daytime hours in Australia.
  • In the 2016 Interbrand annual ranking of the world’s most valuable brands, Philips’ ranking improved to #41 from #47, with a total estimated brand value of approximately USD 11.3 billion.
  • Philips, AkzoNobel, DSM and Google announced a new partnership to jointly buy renewable electricity to power part of their operations in the Netherlands. With this initiative the companies are contributing significantly toward delivering on the Dutch renewable energy target of 14% in 2020 that was agreed in the Dutch Energy Agreement for Sustainable Growth in 2013.
  • Philips and Masimo signed a multi-year business partnership agreement in patient monitoring and select therapy solutions. This agreement combines Masimo’s expertise in non-invasive sensor and signal processing technologies and Philips’ expertise in integrated patient monitoring and therapy solutions.
  • Philips announced the 1000th installation of its Ambient Experience solution to create a patient-friendly hospital environment. At St. Claraspital hospital in Basel, Switzerland, dynamic Lighting, video and sound create a relaxing environment during CT imaging procedures. This was also the first installation in conjunction with the IQon Spectral CT imaging system.
  • Philips received the 2016 Best in KLAS Award in Ultrasound for its full suite of advanced ultrasound solutions based on feedback from thousands of healthcare providers.
  • Philips signed an agreement to sell an 80.1% interest in Lumileds, a leading supplier of LED components and automotive Lighting, to funds managed by affiliates of Apollo Global Management. The transaction is expected to be completed in the first half of 2017, subject to customary closing conditions.
  • Philips signed a 10-year strategic partnership agreement with the Expert Group of Companies, one of Russia’s leading network of healthcare centers and clinics. As part of the agreement, Philips will equip the Group’s new clinics with healthcare solutions for high-quality diagnosis and treatment.

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