Horizontal Analysis - Philips

COMPANY PROFILE

Philips is a diversified technology company active in the markets of healthcare, lighting and consumer well-being. The headquarters are in Amsterdam (Netherlands)

HISTORY:

Philips was founded in Eindhoven (Netherlands) in 1891 by Frederik and Gerard Philips to manufacture incandescent lamps and other electrical products.

Koninklijke Philips Electronics N.V., the company, which started as a limited partnership with the name Philips & Co. In Eindhoven, the Netherlands, in 1891, was converted into the company with limited liability N.V. Philips’ Gloeilambpenfabrieken on September 11, 1912. On May 6, 1994, the name was changed to Philips Electronics N.V., and on April 1, 1998, the name was changed to Koninklijke Philips Electronics N.V. Its shares have been listed on the Amsterdam Stock Exchange, Euronext Amsterdam, since 1912. The shares have been traded in the United States since 1962 and have been listed on the New York Stock Exchange since 1987.

The foundations of Philips were laid in 1891 when Anton and Gerard Philips established Philips & Co. in Eindhoven, the Netherlands. The company begun manufacturing carbon filament lamps and by the turn of the century, had become one of the largest producers in Europe. Stimulated by the industrial revolution in Europe, Philips first research laboratory started introducing its first innovations in the x-ray and radio technology. Over the years, the list of inventions has only been growing to include many breakthroughs that have continued to enrich people’s everyday lives.

GROUP CORE FOCUS

        Philips is a technology company with a focus on people’s health and well-being. Several trends and challenges are influencing their business activities and portfolio choices.

Global trends and challenges-their market opportunities

Healthcare

∙ Growing and aging populations

∙ Increase in patients managing chronic conditions

∙ Growth geographies wealth creating demand

∙ Lifestyle changes fueling cardiovascular illnesses and respiratory and sleeping disorders.

Consumer lifestyle

∙ Consumer focus on health and well-being

∙ Rising middle class in growth geographies

∙ Back to basics: simple propositions

∙ Trusted brands combined with locally relevant portfolio

Lighting

∙ Ongoing urbanization and globalization

∙ Increasing need for energy-efficient solutions

∙ Fast-growing global illumination market

∙ Expanding renovation market

∙ Rapid adoption of LED-based lighting solutions technology

PROFIT AND LOSSES (NET INCOME)

Consolidated Income statement

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Consolidated Income statement (2015-2017)

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Review of Income Statement for 2017:

• Sales increased by 2% in 2017 compared to 2016. Weak markets and global trade wars might be the cause for weaker sales as seen with many other competitors in the market along with Philips.
• Adjusted EBITA totaled €2.2 billion or 12.1% of sales. [(2153/17780)x100 = 12.1%] an increase of €232 million or 110 basis points as a % of sales compared to 2016.
• Net income amounted to €1.9 billion and increased by € 379 million compared to 2016, driven by improvements in operational performance, lower net financial expenses and higher discontinued operations results. This indicates a positive and promising trend.
• Net cash provided by operating activities amounted to €1.9 billion in 2017 and increased by €700 million compared to 2016. Free cash flow amounted to €1.2 billion and increased by €756 million compared to 2016. This is a positive and healthy trend.

Review of Income Statement for 2016:

• Sales rose to €17.4 billion , a nominal increase of 4% compared to 2015.
• Net income amounted to €1.5 billion and increased by €853 million compared to 2015, driven by improvements in operational performance, higher discontinued operations results.
• Adjusted EBITA totaled €1.9 billion or 11% of sales. [(1921/17422)x100 = 11%] an increase of €233 million or 100 basis points as a % of sales compared to 2015. The increase is attributable to higher volumes.
• Net cash provided by operating activities amounted to €1.2 billion in 2016 and increased by €572 million compared to 2015. Free cash flow amounted to €429 million and increased by €583 million compared to 2015.

Consolidated Balance Sheet