Royal Philips Electronics
Frans van Houten, CEO
EPG Spring Conference, Florida
May 22nd, 2012
1
Agenda
Our Path to Value
Accelerate! at work
Key takeaways
2
Our portfolio is focused on growing markets
Demand for
affordable healthcare
% of Sales: 40%
Need for energy
efficient solutions
35%
Desire for increased
personal well-being
25%
3
Building on our strong fundamentals
Innovation capabilities
•
Technology, know-how, strong IP positions (53,000
registered patents)
Philips brand
•
World’s 41st most valuable brand 2011: USD 8.7 billion
•
Loyal customer base in 100+ countries
•
1/3 of group revenues from growth geographies
•
Employee Engagement Index1 exceeds high performance
benchmark value of 70%
•
Culturally diverse top-200 leadership team
•
Global market leader in Lighting; Top 3 Healthcare player; Leading
Consumer Lifestyle brands (e.g. Philips Sonicare, Avent, Saeco)
•
A3 rating by Moody’s and A- by Standard & Poor’s
Global footprint
People
Domain leadership
Solid balance sheet
1
Based on annual Philips’ Employee Engagement Survey
4
Our Path to Value
Growth
Value
2011
Current
Performance
Box
ROIC
Laying the foundation to
improve performance
Growth
…2013
Midterm
Performance
Box
4-6% CSG2
10-12% EBITA
12-14% ROIC
ROIC
Transform Philips through
Accelerate!
• Accelerate! Healthcare
• Executive Committee
• Restoring Lighting profit, LED transformation
• Growth investments
• Reshaping Consumer Lifestyle portfolio
• Philips Business System
• EUR 800 million cost reduction program
• BMC1 performance management
• Value delivery from past acquisitions
• Share buy back
• Next value creation steps beyond 2013
• TV Joint Venture
• Improving Lighting performance
1
2
BMC = Business Market Combination
Assuming 3 to 4% real GDP growth
5
Executive Committee
Frans van Houten
CEO
Deborah DiSanzo
CEO Healthcare
Ron Wirahadiraksa
CFO
Pieter Nota
CEO Consumer Lifestyle
Carole Wainaina
Chief HR Officer
Eric Rondolat
CEO Lighting
Ronald de Jong
Chief Market Leader
Jim Andrew
Chief Strategy & Innovation
Officer
Patrick Kung
CEO Greater China
Eric Coutinho
Chief Legal Officer
6
Accelerate! to unlock our full potential
Changing the way we work at Philips
Customer Centricity
Strong customer centricity and entrepreneurship in our
markets
Resource to win
Clear strategies which are resourced to win and agreed
between businesses and markets
End2end
Innovating with higher speed and excellence to outpace
competition through effective end2end customer value chains
Culture
A new growth and performance culture to become a more
agile and market oriented growth company
Operating model
Developing a simplified operating model to enable markets
and businesses: reduced overhead costs
7
Examples of granular performance management
Sector A
Product categories
B1
B2
Sector B
B3
B4
B5
B
Market 1
Market 2
Market 3
Market 4
Market 5
Market 6
Example improvement actions in 2011
Market 7
Market 8
Market 9
Total
BMC1’s
• Around 2/3 of
in Consumer Lifestyle
have grown market share in the last year
• All market leaders now appointed with
> 50% uplift in seniority
• 5 pilot projects started to improve the
End2End efficacy
• More than a third of top 200 managers have
been replaced or reassigned
• Initiated behavioral change programs and
aligned incentive system with midterm
targets
1
BMC = Business Market Combination
• Improving on locally relevant
portfolio and time to market
≥1% above target
On (or no) target
≥1% below target
No position
Ultrasound ClearVue
30% faster time
to market
compared to
the past
LED Lighting
More than 200
LED based
product launches
in 2011
Airfloss
Launch
advanced by 6
months
Rice Cooker
Developed
in 4 months
by leveraging
the Povos acquisition
8
EUR 800 million cost reduction program - Results
First savings achieved in Q4 2011
Approximately a quarter of the targeted 4,500
headcount reduction completed by Q1 2012
Actuals
Cumulative gross savings
EUR million
TOTAL
2011
Q1 2012
25
62
4,500
Q4 2011
Q1 2012
Restructuring costs
EUR million
2011
Q1 2012
TOTAL
(37)
(9)
1,190
Investments
EUR million
2011
Q1 2012
TOTAL
(37)
(26)
Plan
Actuals
9
Lighting: Restoring performance
• Investments in growth and transformation
resulted in strong top line growth, and leading
position in LED solutions
• Organization structure in Lighting streamlined:
–
–
–
–
From 6 to 5 Business Groups
Regional structure simplified
End2End value chain re-established
Significant cost reduction
• Performance management re-established
• Operational issues in Consumer Luminaires
addressed. Performance improvement expected
in second half of 2012
• New management team in Lumileds hits the
ground running to address performance issues
in the business
Unique value propositions
10
Our Path to Value
Value
2011
Growth
Current
Performance
Box
ROIC
Laying the foundation to
improve performance







1
2
Growth
…2013
Midterm
Performance
Box
4-6% CSG2
10-12% EBITA
12-14% ROIC
ROIC
Transform Philips through
Accelerate!
• Accelerate! Healthcare
• Executive Committee
• Restoring Lighting profit, LED transformation
• Growth investments
• Reshaping Consumer Lifestyle portfolio
• Philips Business System
• EUR 800 million cost reduction program
• BMC1 performance management
• Value delivery from past acquisitions
• Share buy back
• Next value creation steps beyond 2013
• TV Joint Venture
• Improving Lighting performance
BMC = Business Market Combination
Assuming 3 to 4% real GDP growth
11
A history of sustainable dividend growth
EUR cents per share
0.75
0.70
0.70
0.75
0.70
0.60
0.44
0.40
0.36
0.36
0.36
0.36
0.30
0.23
0.18
0.25
0.18
0.14
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
“We are committed to a stable dividend policy with a 40%
to 50% pay-out of continuing net income.”
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Key takeaways
• Building upon a focused portfolio, with
strong potential in growth and mature
geographies
• In 2011 we laid the foundation to improve
performance on our Path to Value
• First quarter of 2012 is a step in the right
direction
• Accelerate! is working and will drive
structural change in Philips over the next
years
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