2012 05 22 vanhouten epg florida
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Royal Philips Electronics
Frans van Houten, CEO
1
EPG Spring Conference, Florida
May 22nd, 2012
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Our Path to Value
Accelerate! at work
Key takeaways
2
Agenda
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Our portfolio is focused on growing markets
3
Demand for
affordable healthcare
Need for energy
efficient solutions
Desire for increased
personal well-being
% of Sales: 40% 35% 25%
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Worlds 41st most valuable brand 2011: USD 8.7 billion
Building on our strong fundamentals
Employee Engagement Index1 exceeds high performancebenchmark value of 70%
Culturally diverse top-200 leadership team
Global market leader in Lighting; Top 3 Healthcare player; LeadingConsumer Lifestyle brands (e.g. Philips Sonicare, Avent, Saeco)
1 Based on annual Philips Employee Engagement Survey
Technology, know-how, strong IP positions (53,000registered patents)
A3 rating by Moodys and A- by Standard & Poors
Loyal customer base in 100+ countries
1/3 of group revenues from growth geographies
Philips brand
People
Domain leadership
Innovation capabilities
Solid balance sheet
Global footprint
4
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Our Path to Value
2013
2011 MidtermPerformance
Box
Executive Committee
Growth investments
Philips Business System BMC1 performance management
Share buy back
TV Joint Venture
Improving Lighting performance
Value
ROIC
Current
Performance
BoxGrowth
ROIC
Laying the foundation to
improve performance
Transform Philips throughAccelerate!
Accelerate! Healthcare
Restoring Lighting profit, LED transformation
Reshaping Consumer Lifestyle portfolio
EUR 800 million cost reduction program Value delivery from past acquisitions
Next value creation steps beyond 2013
Growth
5
4-6% CSG2
10-12% EBITA12-14% ROIC
1 BMC = Business Market Combination2Assuming 3 to 4% real GDP growth
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Executive Committee
Frans van Houten
CEO
Deborah DiSanzo
CEO Healthcare
Ron Wirahadiraksa
CFO
Ronald de Jong
Chief Market Leader
Patrick Kung
CEO Greater China
Jim Andrew
Chief Strategy & Innovation
Officer
Eric RondolatCEO Lighting
Carole WainainaChief HR Officer
Eric Coutinho
Chief Legal Officer
Pieter Nota
CEO Consumer Lifestyle
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Accelerate!to unlock our full potential
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Changing the way we work at Philips
A new growth and performance culture to become a moreagile and market oriented growth company
Strongcustomer centricity
and entrepreneurship in our
markets
Innovating with higher speed and excellence to outpace
competition through effective end2end customer value chains
Developing a simplified operating model to enable marketsand businesses: reduced overhead costs
Clear strategies which are resourced to win and agreedbetween businesses and markets
Culture
Customer Centricity
End2end
Operating model
Resource to win
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81 BMC = Business Market Combination
Example improvement actions in 2011
Improving on locally relevant
portfolio and time to market
Around 2/3 of BMC1s 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
Airfloss
Launch
advanced by 6
months
Rice Cooker
Developed
in 4 months
by leveraging
the Povos acquisition
Ultrasound ClearVue
30% faster time
to market
compared to
the past
LED Lighting
More than 200
LED based
product launches
in 2011
Examples of granular performance managementSector A Sector B
Market 9
Market 1
B1 B2 B4 B5 BProduct categories
Total
B3
1% above target
On (or no) target
1% below target
No position
Market 2
Market 3
Market 4
Market 5
Market 6
Market 7
Market 8
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Q4 2011
Q1 2012
Approximately a quarter of the targeted 4,500
headcount reduction completed by Q1 2012
Plan Actuals
4,500
1,190
EUR 800 million cost reduction program - Results
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Actuals
Cumulative gross savings
EUR million 2011 Q1 2012
TOTAL 25 62
Restructuring costs
EUR million 2011 Q1 2012
TOTAL (37) (9)
Investments
EUR million 2011 Q1 2012
TOTAL (37) (26)
First savings achieved in Q4 2011
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Investments in growth and transformationresulted 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 Luminairesaddressed. Performance improvement expected
in second half of 2012
New management team in Lumileds hits theground running to address performance issuesin the business
Lighting: Restoring performance
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Unique value propositions
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0.14
0.18 0.18
0.230.25
0.30
0.36 0.36 0.36 0.360.40
0.44
0.60
0.70 0.70 0.70
0.75 0.75
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
A history of sustainable dividend growth
We are committed to a stable dividend policy with a 40%
to 50% pay-out of continuing net income.
12
EUR cents per share
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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 nextyears
Key takeaways
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