Philips is a strong industrial company focusing on HealthTech and Lighting Solutions. Our business portfolio and domains are well positioned to capitalize on global trends that create great opportunities for profitable growth. Currently a growing share of 36% of group revenue is generated in growth geographies.
Our multi-year change and performance program Accelerate! was launched in the second half of 2011 and is being implemented across the organization to realize the value potential of our company and speed up growth. Key initiatives have been launched to implement the Philips Business System and step up resourcing for growth, granular strategy execution, value delivery to customers, and to adapt the culture and reward system. Accelerate! is working well and will continue to create significant value, with the 2016 targets as the next step on our Path- to-Value, and more to come thereafter. Initiatives include a EUR 1.8 billion cost reduction program to be completed by the year 2016, End2End productivity gains and procurement savings through Design for Excellence (DfX).
We believe that the following growth drivers will enable Philips to achieve its growth and profitability ambitions:
- Growing and aging population with more chronic diseases
- Growing demand for integral value-based healthcare solutions
- Growth geographies with growing middle class
- Rising health & well-being consciousness
- The world’s need for more light and energy efficient lighting
- Digitalization driving demand for integrated lighting solutions
Our leading portfolio and business domains play right into these global trends, as evidenced by:
Our Healthcare business is a world leader in many areas including cardiovascular X-ray, image-guided interventions, patient monitoring and home healthcare, and will play an increasingly important role in the years ahead. Equally, our Consumer Lifestyle business is built on a portfolio of leading businesses - including male shaving, oral healthcare, mother and childcare and domestic appliances. We are the world's largest Lighting company with a leading position in LED lighting solutions - the future of this industry. We will continue to leverage our brand, our rich technological heritage and our advanced insight into the needs of end-users to bring innovation that matters to our customers.
Progress on our Path-to-Value to 2016
Our mid-term 2016 financial targets are:
- Sales growth 4-6%, assuming real GDP growth of 3-4% per annum
- Reported EBITA margins 11-12% of sales, of which:
- Healthcare 16-17%1
- Consumer Lifestyle 11-13%1
- HealthTech 14-15.5%1
- Lighting Solutions 9-11%1
- Return on Invested Capital2 >14%
We launched a EUR 1.5 billion share buy-back program in October 2013 which will run in the next 2-3 years.
1 Excluding IG&S cost allocation; these targets will be updated as the separation process progresses
2 Excluding M&A impact
At Philips, we strive to make the world healthier and more sustainable through innovation. Our goal is to improve the lives of 3 billion people a year by 2025. To guide our efforts and measure our progress, we take a two-dimensional approach – social and ecological – to improving people’s lives. Products and solutions from our portfolio that directly support the curative (care) or preventive (well-being) side of people’s health, determine the contribution to the social dimension. As healthy ecosystems are also needed for people to live a healthy life, the contribution to the ecological dimension is determined by means of our Green Product portfolio, such as our energy-efficient lighting. In 2014, we improved the lives of 1.9 billion people, an increase of 200 million compared to 2013.
Success of our EcoVision program
Green Product sales increased further in 2014 to 52%, up from 50% in 2013, driven by investments in Green Innovation. In 2014, Philips already achieved the cumulative EUR 2 billion Green Innovation investment target a year ahead of schedule, as we invested some EUR 463 million in Green Innovation. Lighting continued to be the largest contributor, mainly as a result of investments in LED.
Our sustainability commitments are grouped under the label EcoVision, comprising of the following elements:
|target 2015||baseline year|
|Green Product Sales||55% of total sales|
|Lives Improved||2 billion|
|- Investments||EUR 2 billion (cumulative)||2010|
|- Energy Efficiency||50.3 Lumen/Watt (up 50%)||2009|
|- Collection & Recycling||45,000 tonnes (up 100%)||2009|
|- Recycled content||15,000 tonnes (up 100%)||2009|
|- CO2 reduction||40%||2007|
|- Health & Safety||0.26 Lost Workday|
Injury Cases per 100 FTE
|Supplier Sustainability(1)||72% compliant|
1 For more information see section 14.2.8, Supplier indicators, of the Annual Report 2014