Philips 2015 Annual Report Download - page 63

Sector performance 6.4.1
Annual Report 2015 63
breakthrough innovation, improving innovation
competencies, and strengthening the position of
Philips as an innovation leader.
Pensions
Pensions manage and oversee post-employment
benets of all Philips employees.
Service Units and Other
Service Units and Other provide shared functional
services to businesses in areas such as IT, Real Estate
and Accounting, thereby helping to drive global cost
eciencies.
6.4.2 2015 nancial performance
Philips Innovation, Group & Services
Key data in millions of EUR unless otherwise stated
2013 - 2015
2013 2014 2015
Sales 665 605 574
Sales growth
% increase (decrease), nominal 6% (9)% (5)%
% increase (decrease),
comparable1) 0% (12)% 5%
EBITA of:
Group Innovation (134) (197) (222)
IP Royalties 312 299 284
Group and regional costs (175) (205) (569)
Accelerate! investment (137) (131) (113)
Pensions (41) (12) (355)
Service units and other (124) (415) 56
EBITA 1) (299) (661) (919)
EBIT (302) (675) (934)
Net operating capital (NOC)1) (2,922) (3,718) (3,382)
Cash ows before nancing
activities1) (2,140) (1,586) (2,086)
Employees (in FTEs) 12,703 13,853 14,233
1) For a reconciliation to the most directly comparable GAAP measures,
see chapter 15, Reconciliation of non-GAAP information, of this Annual
Report
In 2015, sales amounted to EUR 574 million, and were
mainly related to IP Royalties. Sales were EUR 31 million
lower than in 2014, mainly due to the divestment of the
OEM remote control business, partly oset by higher
sales at Philips’ emerging businesses such as Digital
Pathology and Photonics.
EBITA amounted to a net cost of EUR 919 million,
compared to EUR 661 million in 2014. EBITA in 2015
included a EUR 20 million net release of restructuring
charges, compared to EUR 113 million restructuring
charges in 2014. EBITA in 2015 also included charges of
EUR 183 million related to the separation of the Lighting
business, EUR 345 million mainly related to settlements
for pension de-risking, and a EUR 37 million gain related
to the sale of real estate assets. EBITA in 2014 included
EUR 244 million of charges related to the CRT
settlement and a EUR 27 million past-service pension
cost gain.
EBITA at Group Innovation was a EUR 25 million higher
net cost than in 2014, mainly due to higher investments
in emerging business areas.
EBITA at Group and Regional costs were EUR 364
million lower than in 2014, reecting EUR 183 million
related to the separation of the Lighting business and
higher charges mainly related to information security
and Quality & Regulatory.
Accelerate! investments amounted to EUR 113 million in
2015 and included investments in IT infrastructure,
internal departments and external consultancy
dedicated to the Accelerate! program.
EBITA at Pensions amounted to a net cost of EUR 355
million and represents costs related to deferred
pensioners covered by company plans. 2015 included
charges of EUR 345 million related to pension de-
risking settlements.
EBITA at Service Units and Other increased from a loss
of EUR 415 million in 2014 to a gain of EUR 56 million in
2015. The increase of EUR 471 million was largely due
to lower restructuring costs and CRT antitrust litigation
charges reported in 2014.
Net operating capital improved to negative EUR 3.4
billion, mainly due to a decrease in provisions.
Cash ows before nancing activities decreased from
an outow of EUR 1,586 million in 2014 to an outow of
EUR 2,086 million.
6.4.3 2016 and beyond
From an external nancial reporting perspective, it
should be noted that Royal Philips will introduce new
segment reporting from Q1 2016 onwards. The current
Innovation, Group & Services will be split and allocated
to the segments of Royal Philips and Philips Lighting.
The remaining unallocated corporate items will contain
certain legacy items and separation costs. For more
details on the new segment reporting in 2016 and
onwards, please refer to the introduction of chapter 6,
Sector performance, of this Annual Report.
Further updates will be provided in the course of 2016.