Philips communicates “Vision 2010” strategic plan and raises profitability target
“Vision 2010” aims to fuel growth through sharpened strategies for Healthcare and Lighting and an integrated approach to Consumer Lifestyle
Philips aims to simplify organizational structure by forming three sectors - Healthcare, Lighting, and Consumer Lifestyle - as next step in evolution into a market-driven, people-centric global leader in its fields
Philips expects to more than double EBITA per share by 2010
Amsterdam, the Netherlands – Royal Philips Electronics (AEX: PHI, NYSE: PHG) today announced its next steps to grow the company further in the areas of Healthcare, Lighting and Consumer Lifestyle. These steps, part of a strategy called “Vision 2010”, aim to further position Philips as a market-driven, people-centric company with a strategy and a structure that fully reflect the needs of its customer base, while also increasing shareholder value.
“Following the successful implementation of our 2004 -2007 strategic plan, we are well on track to deliver on our objective to achieve above 7.5% EBITA in 2007. The time is right therefore to give our stakeholders a clear blueprint of what we want Philips to be in 2010,” commented Gerard Kleisterlee, Philips’ President and Chief Executive Officer.
“While our healthcare strategy is already people-centric, focusing on improving patient outcomes in specific care cycles such as cardiology, oncology and critical care from the hospital to the home, we have now developed a comprehensive consumer lifestyle strategy that takes into account the evolving needs of the modern, lifestyle oriented consumer. And as structure follows strategy, successful implementation requires a further realignment of the organization.”
Therefore Philips plans to simplify its business structure by creating three core sectors with strong single-headed management: Philips Healthcare, Philips Lighting, and Philips Consumer Lifestyle. To this end, Philips intends to integrate its current Consumer Electronics (CE) and Domestic Appliances and Personal Care (DAP) businesses into one Consumer Lifestyle sector as of January 1st, 2008, capitalizing on the success of existing integration initiatives such as the International Retail Board created three years ago. Philips will also combine Consumer Healthcare Solutions, renamed as Home Healthcare Solutions, with Philips Medical Systems, under the new name of Philips Healthcare.
Through “Vision 2010”, Philips also aims to achieve higher levels of operating profitability. By 2010, Philips expects the EBITA (earnings before interest, taxes and amortization) margin of its current businesses to exceed 10% through improved margin management, increased contribution from recent acquisitions, improvement of its product mix and the effects of the organizational simplification, estimated at EUR 150 million to EUR 200 million of cost savings. Philips also aims to deliver a minimum of 6% comparable annual average sales growth for the period 2008- 2010. As announced previously, the company intends to arrive at an efficient balance sheet by the end of 2009 through a combination of value-creating acquisitions as well as continued return of capital to shareholders. With the above revenue and EBITA margin targets, and with our continued drive towards a more efficient capital structure, Philips expects EBITA per common share to more than double by 2010 from the level expected in 2007.
As per January 1st, 2008, Steve Rusckowski, currently Chief Executive Officer of Medical Systems, will become CEO of Philips Healthcare. With effect from the same date, Rudy Provoost, currently Chief Executive Officer of CE, will move to the Philips Lighting sector, transitioning to take over as CEO from Theo van Deursen, who will retire on April 1st, 2008. Andrea Ragnetti, currently Chief Executive Officer of DAP, will become CEO of the Consumer Lifestyle sector from January 1st.
“By aligning our organization within three core sectors under strong and experienced management, I am confident that the business structure now optimally reflects our strategy, and that we are close to becoming the Philips we envisaged when we embarked on our path to transform the company in 2001”, Gerard Kleisterlee continued. “In particular, the integration of our current CE and DAP businesses into one Consumer Lifestyle sector will create a consumer solutions powerhouse closely grouped around the end-consumer, with deep consumer insight and a proven ability to develop, produce and market truly innovative products at higher levels of profitability than before. It will combine the best of both businesses, and will position Philips to reap the benefits from the growth expected in the consumer retail markets in the future.”
Financial analysts will be invited to join a telephone conference with Gerard Kleisterlee, President and Chief Executive Officer of Royal Philips Electronics, and Pierre-Jean Sivignon, Chief Financial Officer, which will be held today 10.00 AM CET. A live broadcast of this call will be made available on Philips’ Investor Relations website via this link.
A briefing for journalists with Mr. Kleisterlee and Mr. Sivignon will be held today at 12.00 PM CET. A live broadcast of this briefing will be made available on Philips’ News Center via this link.
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