The Philips investment proposition

Our strategy

Philips is a leading company in health and well-being. Our business portfolio is well positioned in highly attractive markets and geographies to capitalize on global trends. The large majority of Philips businesses have the right fundamentals for profitable organic growth. Currently a growing share of one-third of group revenue is generated in growth geographies.

 

The Accelerate! program is a comprehensive performance improvement and change program, and is being implemented across the organization to realize the value potential 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. Initiatives include a EUR 800 million cost reduction program which is expected to be completed by the year 2014.

 

We believe that the following growth drivers:

  • Accessible Healthcare: driven by population growth, aging, and higher healthcare aspirations
  • Consumer focus on health and well-being: led by increased prosperity and changing lifestyles
  • Energy-efficient lighting solutions: enabled by a massive shift from conventional to digital, dynamic lighting
  • Expanding growth geographies: growing in relative importance in the world economy
  • Sustainability: the fundamental need to reduce our environmental footprint, which will enhance the drive for energy efficiency

 

will enable Philips to achieve its growth and profitability ambitions.

 

Our leading and focused portfolio is aligned to these global trends, as evidenced by:

 

Our Healthcare business, which is a world leader in many areas including cardiovascular X-ray, patient monitoring and home healthcare, which we see playing 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, and mother and childcare. 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 meaningful innovation to our customers.

Progress on our path to value by 2013

Mid-term performance goals have been established:

  • Sales growth 4-6%, assuming real GDP growth of 3-4% per annum
  • Reported EBITA margins 10-12% of sales, of which:
    • Healthcare 15-17%
    • Consumer Lifestyle (excluding unrelated licenses) 8-10%
    • Lighting 8-10%
  • Return On Invested Capital 12-14%

 

A EUR 2 billion share buy-back program was launched per July 18th 2011, reflecting our confidence to step up profitable growth.

Sustainability

We seek to make constant progress in the sustainability of our business. A clear example of how we are driving business growth through sustainability is evidenced by the achievement of most of our EcoVision4 objectives, well ahead of schedule. Based on this we have further enhanced our objectives by launching our EcoVision5 program.

Success of our EcoVision4 program

Targets over the period 2007 - 2012:

  • Generate 30% of total revenues from Green Products
  • Double investment in Green Innovations to a cumulative EUR 1 billion
  • Improve our operational energy efficiency by 25% and reduce CO2 emissions by 25%, all compared with the base year of 2007

 

In 2009 we achieved the Green Product sales target three years ahead of schedule, with 31% of total sales from Green Products. Subsequently, we increased the target to 50% in 2015. Green Product sales increased further in 2011 to 39%. In 2011 our cumulative investment in Green Innovations was EUR 470 million, with a very strong contribution from Lighting in particular. Our operational energy efficiency and carbon footprint reduction are on track to reach the third target as planned in 2012.

Launch of our EcoVision5 program

In 2010, 'Lead in Sustainability' became one of our key objectives, driven by the launch of the EcoVision5 program, comprising of the following leadership KPIs:

  • Bringing care to people. Target: 500 million lives touched by 2015
  • Improving energy efficiency of Philips products. Target: 50% improvement by 2015 (for the average total product portfolio) compared to 2009
  • Closing the materials loop. Target: double global collection and recycling and the amount of recycled materials in products by 2015 compared to 2009