Philips Annual Report 2009 Full Version

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Full Version of the 2009 Philips Annual Report.

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annual report 2009 financial social and environmental performance staying focused acting decisively

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contents performance highlights president s message 1 1.1 1.2 1.3 4 6 11 11 12 14 15 15 19 23 27 31 35 39 39 42 45 48 51 54 57 58 68 74 80 81 82 82 84 89 95 100 103 103 103 106 107 108 110 111 ifrs basis of presentation philips moved to international financial reporting standards ifrs as its sole accounting standard from january 1 2009 onwards the use of us gaap has been discontinued per the same date the financial information included in this document is based on ifrs unless otherwise indicated forward-looking statements please refer to chapter 17 forward-looking statements and other information of this annual report for more information about forwardlooking statements third-party market share data fair value information ifrs basis of preparation use of non-gaap information statutory financial statements and management report and reclassifications dutch financial markets supervision act this document comprises regulated information within the meaning of the dutch financial markets supervision act wet op het financieel toezicht statutory financial statements and management report the chapters group financial statements and company financial statements contain the statutory financial statements of the company the introduction to the chapter group financial statements sets out which parts of this annual report form the management report within the meaning of section 2:391 of the dutch civil code and related decrees 7 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 investor information the philips investment proposition the year 2009 share information risk management performance in relation to market indices philips acquisitions financial calendar five-year overview 120 120 121 123 124 125 126 126 127 130 130 132 133 134 134 136 137 141 143 143 143 145 147 148 149 who we are our company our strategic focus our ambitions 2 2.1 2.2 2.3 2.4 2.5 2.6 our strategy in action professional healthcare home healthcare healthy life personal care home living interactive living home lighting professional lighting 8 8.1 8.2 8.3 our leadership board of management group management committee supervisory board 9 9.1 9.2 9.3 9.4 supervisory board report introduction corporate governance and nomination and selection committee report report of the remuneration committee report of the audit committee 3 3.1 3.2 3.3 3.4 3.5 3.6 our planet our partners our people climate change our environmental footprint partnerships for progress supplier sustainability working at philips working in our communities 10 10.1 10.2 10.3 10.4 10.5 10.6 corporate governance corporate governance of the philips group board of management supervisory board general meeting of shareholders logistics of the general meeting of shareholders investor relations 4 4.1 4.2 4.3 4.4 4.5 our group performance management discussion and analysis liquidity and capital resources sustainability proposed distribution to shareholders outlook 5 5.1 5.2 5.3 5.4 5.5 our sector performance our structure healthcare consumer lifestyle lighting group management services 6 6.1 6.2 6.3 6.4 6.5 6.6 6.7 risk management introduction our approach to risk management and business control risk categories and factors strategic risks operational risks compliance risks financial risks 2 philips annual report 2009

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11 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 11.10 11.11 11.12 group financial statements introduction management s report on internal control reports of the independent auditor auditors report on internal control consolidated statements of income consolidated statements of comprehensive income consolidated balance sheets consolidated statements of cash flows consolidated statements of changes in equity information by sector and main country significant accounting policies notes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 153 153 153 154 154 155 157 158 160 162 163 166 172 172 172 177 178 179 181 183 183 183 183 184 184 185 186 187 188 188 189 193 193 194 194 194 195 197 197 198 198 198 198 200 206 207 207 208 12 12.1 12.2 12.3 12.4 12.5 company financial statements balance sheets statements of income statements of equity introduction notes abcdefghijkl 209 209 210 210 211 212 212 212 212 212 212 213 213 214 214 214 214 214 214 215 215 218 218 222 224 226 227 234 239 241 242 discontinued operations acquisitions and divestments income from operations financial income and expenses income taxes investments in equity-accounted investees receivables inventories other current assets other non-current financial assets non-current receivables other non-current assets property plant and equipment intangible assets excluding goodwill goodwill accrued liabilities provisions pensions and other postretirement benefits other current liabilities short-term debt long-term debt other non-current liabilities contractual obligations contingent liabilities stockholders equity cash from used for derivatives and securities proceeds from other non-current financial assets assets in lieu of cash from sale of businesses related-party transactions share-based compensation information on remuneration fair value of financial assets and liabilities other financial instruments subsequent events receivables investments in affiliated companies other non-current financial assets other current liabilities short-term debt long-term debt stockholders equity net income employees obligations not appearing in the balance sheet audit fees subsequent events 12.6 auditor s report company 13 13.1 13.2 13.3 13.4 13.5 13.6 13.7 sustainability performance approach to sustainability reporting economic indicators environmental indicators social indicators supplier indicators independent assurance report global reporting initiative gri table 14 15 16 17 reconciliation of non-gaap information investor contact definitions and abbreviations forward-looking statements and other information 11.13 auditor s report group philips annual report 2009 3

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performance highlights performance highlights all amounts in millions of euros unless otherwise stated 2007 sales ebita1 as a of sales ebit as a of sales net income loss per common share in euros basic diluted net operating capital free cash flows1 stockholders equity employees at december 312 1 comparable sales growth by market cluster1 as a 15 10 5 0 4.5 1.8 11.7 6.4 6.5 6.3 4.9 -philips group emerging markets mature markets 10.2 3.5 2.8 financial table 5 2.7 5.4 10.8 11.4 11.7 2005 2006 2007 2008 2009 2008 26,385 744 2.8 54 0.2 92 2009 23,189 1,050 4.5 614 2.6 424 10 15 26,793 2,094 7.8 1,867 7.0 4,880 comparable sales growth by operating sector1 as a 10 4 2 2.7 7.8 8.2 3.7 5.6 4.7 8.8 6.3 3.5 4.5 -2005 2006 2007 2008 2009 6.5 3.1 4.49 4.43 1 0.09 0.09 14,069 773 15,544 121,398 0.46 0.46 8 8.9 14 12.6 16.5 healthcare consumer lifestyle lighting 10,802 824 21,741 123,801 12,649 863 14,595 115,924 20 sales per sector in mature markets3 in billions of euros -healthcare consumer lifestyle lighting gm&s 20 18.0 3.3 8.2 10 6.4 1.4 8.5 18.8 3.7 1.1 8.7 18.8 4.1 0.5 18.4 5.0 0.3 6.7 16.3 4.3 0.2 5.4 2 3 4 for a reconciliation to the most directly comparable gaap measures see the chapter reconciliation of non-gaap information includes discontinued operations 5,703 at december 31 2007 comprises of western europe north america japan korea israel australia and new zealand comprises of asia pacific excluding japan korea australia and new zealand latin america central eastern europe middle east excluding israel and africa 15 5 5.1 5.5 5.5 6.4 0 2005 2006 2007 2008 2009 equity and ebita per common share1 in euros 25 20 15 10 5 0 2005 2006 2007 -stockholders equity per common share basic sales per sector in emerging markets4 in billions of euros ebita per common share diluted 0.75 16.84 1.13 15.74 -healthcare consumer lifestyle lighting gm&s 10 8 6 4 2 0 0.9 2005 1.1 2006 1.1 2007 1.2 2008 1.5 2009 7.4 1.6 4.3 0.6 4.4 7.9 2.0 0.4 4.5 8.0 2.2 0.2 8.0 2.4 6.9 0.2 2.2 0.1 3.1 1.29 20.87 1.52 14.25 1.91 20.41 5 4 3 2 1 0 2008 2009 4.2 4 philips annual report 2009

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performance highlights net income loss in millions of euros 6,000 5,000 4,000 3,000 2,000 1,000 0 1,000 2005 2006 2007 14.1 3,592 19.3 5,157 18.2 4,880 -in value as a of sales 24 20 16 12 8 1.8 424 92 0.3 2008 2009 4 0 4 net promoter score of businesses with co leadership scores 75 60 50 50 51 25 0 2007 2008 2009 ebit and ebita1 in millions of euros 2,500 2,000 1,500 1,000 500 0 2005 2006 7.5 1,899 1,810 89 -ebit ebita ebita as a of sales 7.8 2,094 227 1,867 4.5 1,050 436 employee engagement index favorable 75 64 69 68 20 16 5.7 1,528 1,336 192 50 12 8 4 614 0 0 2007 2008 2009 2009 2.8 744 690 54 2007 2008 25 operating cash flows in millions of euros -net capital expenditures free cash flows -operating cash flows free cash flows as a of sales 1 sales of green products as a of total sales 35 30 25 20 15 10 5 0 2007 2008 2009 20 23 31 2,500 2,000 1,500 1,000 500 0 500 1,000 1,500 2005 746 987 348 1.3 2006 2.6 661 1,407 639 3.1 824 1,752 2.9 773 1,648 20 3.7 863 1,545 16 12 8 4 0 682 4 8 12 928 875 2007 2008 2009 net debt cash to group equity1 in billions of euros 25 20 15 10 5 0 5 10 2005 ratio 4 104 2006 9 109 0.6 17.5 23.2 -net debt cash group equity 21.9 15.6 14.6 operational carbon footprint in millions of tons co2-equivalent 2.5 2.1 2.0 1.5 2.1 1.9 0.6 2.0 5.2 2007 31 131 2008 4 96 2009 1 101 0.1 1.0 0.5 0 2007 2008 2009 philips annual report 2009 5

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president s message president s message 23.2 billion sales 41 increase in ebita 60 co leadership net promoter score 2009 was all about staying focused and acting decisively as a result of the swift action we took the philips of 2010 is clearly a more agile better company than the one that went into 2009 gerard kleisterlee president 6 philips annual report 2009

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president s message dear stakeholder looking back at what was a testing year for philips i am very pleased with the progress we made in 2009 in the most challenging economic environment in decades we acted swiftly and decisively to adjust our cost structure and working capital to market conditions ­ while continuing to invest in our future we did this to make sure we emerge from the recession as a stronger company well positioned to capitalize on future economic growth the effects of our actions became increasingly visible in our earnings our cash flow performance and our stronger position with customers especially in the second half of the year philips today is a simpler more agile company compared to previous downturns our new health and well-being portfolio proved its intrinsic quality and increased resilience through sustained profitability for the full year comparable sales were down 11 on 2008 while healthcare revenues were almost on par with 2008 consumer lifestyle saw the biggest drop in sales due to a very weak consumer market and active portfolio pruning lighting rebounded strongly in the course of the year though it continued to feel the impact of the ongoing decline in commercial construction emerging markets accounted for a steady 30 of revenues with strong growth at healthcare offsetting declines at consumer lifestyle ebita as a percentage of sales rose from 2.8 to 4.5 our performance in the second half of the year reflected our proactive cost management and strong fundamentals delivering an adjusted profitability of 9.9 for that period and a record 12.3 for a fourth quarter we tackled the recession without sacrificing our longerterm strategic ambitions we continued to invest in marketing and innovation and to reallocate resources to emerging markets and high-margin sustainable growth initiatives while maintaining a strong balance sheet supported by robust operating cash flows examples include our acquisition of coffee-machine maker saeco and the expansion of our philips-branded stores for consumer lighting in china and india as a responsible corporate citizen committed to helping build a sustainable society we continued to drive the implementation of our ecovision programs green products generated 31 of total sales up from 23 in 2008 and our investment in green innovations is ahead of target to reach a cumulative eur 1 billion by 2012 as a sign of confidence in our future we are proposing to the upcoming general meeting of shareholders to maintain this year s dividend at eur 0.70 per common share in cash or stock ­ resulting in a yield as of december 31 2009 of 3.4 for shareholders dividend per common share in euros 0.8 0.70 0.6 0.44 0.4 0.60 0.70 0.70 0.2 0 2006 1 2007 2008 2009 20101 subject to approval by the 2010 annual general meeting of shareholders how did we do against our management agenda 2009 drive performance relentlessly manage cash on the back of improved operating performance and strongly reduced working capital we improved free cash flow to 3.7 of sales more than offsetting the eur 485 million cash-out for the final settlement of asbestos claims proactively align cost structure with market conditions and increase productivity we took swift action to adjust our cost structure to lower revenues we substantially reduced our fixed costs through decisive but responsible actions to optimize our industrial footprint and organizational structure and we tightly managed our discretionary expenses in 2009 in spite of 11 lower revenues overall productivity improved by 5.6 driven by the positive effect of our ongoing efficiency programs in all sectors the restructuring and change programs across our sectors have put us in a stronger position and we will continue to drive productivity improvement going forward manage risks and opportunities in a balanced way to strengthen our market positions in the face of the ongoing uncertainty we focused on cash flow and profitability when making decisions regarding mix and pricing nevertheless we broadly managed to maintain our shares in the market with gains for healthcare and lighting in emerging markets philips annual report 2009 7

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president s message at healthcare we strengthened our position in imageguided intervention with the acquisition of traxtal at consumer lifestyle we extended our leadership in the market for coffee appliances into the high-growth highmargin espresso machine segment with the acquisition of italian manufacturer saeco and at lighting we further reinforced our position across the solid-state lighting value chain for instance through the acquisition of lighting controls companies dynalite and teletrol accelerate change oriented culture that encourages employees to strive for results not just in their own area but for philips as a whole accelerate sector transformation programs in view of macro-economic developments we accelerated planned initiatives to increase organizational effectiveness lower our fixed and discretionary cost base and simplify our structure within healthcare we focused on de-layering our management structure to increase our speed of execution and lower operating costs we effected further changes in consumer lifestyle in our drive for strong market-focused execution and within lighting we organized our sales force along channels and applications while continuing to reduce our fixed cost base through various restructuring projects implement strategy organize around customers and markets thereby improving net promoter score in today s highly competitive business environment customer intimacy and flexibility are essential and we are continually adapting our organization to the changing needs of the marketplace ­ in both mature and emerging economies in 2009 this translated to a 9 improvement in our net promoter score to 60 co leadership up from 51 last year net promoter score of businesses with co leadership scores 75 60 50 50 51 further build the brand in the health and well-being space we continue to invest heavily in our key differentiators ­ our brand and our end-user-driven innovation and design in 2009 we again improved our position in the annual interbrand ranking of the top-100 global brands rising to 42nd place this clearly demonstrates we are translating our brand promise of sense and simplicity into a positive customer experience designed around their needs philips brand value1 in billions of usd 25 10 0 2007 2008 2009 6 8 6.7 5.9 7.7 8.3 8.1 increase employee engagement to high-performance level and implement `leading to win compared to 2008 our employee engagement index fell one point to 68 two points short of our highperformance target of 70 though disappointed by this slight decline it is encouraging to see that our engagement levels remain high despite such difficult times and have indeed improved in several of our businesses in fact the participation rate increased to 91 the employee engagement survey is a key element of `leading to win the new way our people are evaluated and rewarded at year-end which we drove deeper into the organization in 2009 employees are no longer assessed solely on what they achieve results but also on how they achieve it behavior `leading to win is designed to develop a strong customer and performance 4 2 0 2005 1 2006 2007 2008 2009 according to interbrand continue to re-allocate resources to growth opportunities and emerging markets including selective mergers and acquisitions despite the recession we sustained our investment in growth in 2009 one of our key endeavors was to step up our resource investment in emerging markets so that we are even better placed to meet the needs of local people ­ and to develop solutions for these countries that can also transfer to more mature markets throughout the rest of the world 8 philips annual report 2009

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president s message we acquired a number of strategically aligned highgrowth businesses in 2009 as outlined above these included coffee machine maker saeco healthcare company traxtal in the growth area of image-guided intervention and therapy and dynalite and teletron two specialists in lighting controls ­ technology that is key to the unfolding led lighting revolution increase revenue derived from leadership positions in spite of worldwide market downturns some 60 of our revenue was generated by businesses with global leadership positions in 2009 management agenda 2010 our management agenda 2010 is our compass for the next year of our journey to bring sense and simplicity to health and well-being markets in the column drive performance we stress the importance of returning to growth and increasing market share at the same time we must continue to manage cost and cash aggressively as that is essential to enable healthy growth under accelerate change we have made the empowerment of our people in local markets and customer-facing staff a key priority so that we can help our customers more quickly and effectively and thus gain a competitive edge increasing the number of philips promoters and driving engagement levels remain crucial objectives as well as referring to key strategic initiatives in our sectors the final column implement strategy reaffirms our vital ambition to strengthen our position in emerging markets and the importance of leveraging sustainability as an integral part of our strategy and an additional driver of growth building the leading company in health and well-being based on fundamental customer and end-user insights we integrate technology and design into people-centric solutions that deliver on our promise of sense and simplicity we believe the current economic crisis is likely to have the effect of accelerating the fundamental trends underpinning our strategy thereby intensifying demand for healthcare especially outside the hospital a healthy lifestyle and solutions with a better ecological footprint such as energy-efficient high-quality lighting with strong leadership positions in both clinical and home healthcare as well as a growing presence in emerging markets we will continue to simplify healthcare by focusing on the people in the care cycle ­ patients and care providers ­ in order to improve patient outcomes while easing the financial pressure on the healthcare system building upon market-leading positions based on differentiation and profitability rather than scale we will also continue to focus on innovative lifestyle solutions that enhance consumers sense of personal well-being where appropriate we will enter new value spaces and supported by the growing demand for energy-saving solutions and the trend toward solid-state lighting we will continue to drive the transition from lighting products to application-based solutions we have responded to the economic downturn by stepping up our efforts to become a more customerfocused agile and simpler company i remain confident we will come out of this difficult economic period as a leader in the field of health and well-being we have the strategy financial resources and human capital that are required for success clearly aspiring to improve people s health and well-being automatically implies that sustainability will remain integral to everything we do final thoughts in the current climate we cannot reliably predict future developments visibility beyond the short term remains low however we are very confident about our prospects when the economy does recover we have a portfolio of strong businesses that provide innovative simplicity-led solutions to many of the issues associated with important global trends ­ the demand for affordable healthcare the desire for personal well-being and the need for greater energy efficiency we have a solid balance sheet and a good cash position an increasingly strong brand and leading market positions especially in emerging markets as well as a committed highly motivated workforce we will continue to stay focused on cost and cash flow and to act decisively to capture growth opportunities i believe 2010 will be a year of solid progress towards our ebita profitability target of 10 or better during the past 12 months we have rigorously managed cash and cost while retaining the capability to ramp up production to meet demand when sales do rebound across our sectors we have substantially lowered our fixed costs and our break-even point at the same time we continue to invest in emerging markets and acquisitions while maintaining our spending on innovation and marketing philips annual report 2009 9

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president s message we have weathered the storm and prepared the ground for a future of profitable growth going forward i am convinced that relentless focus on our customers needs along with rigorous execution of our strategy will enable us to realize our ambition of becoming the leading company in health and well-being in conclusion i would like to thank our customers and suppliers for their loyalty and support in these tough economic times once again our employees ­ including those from our 2009 acquisitions ­ have responded to adversity with resilience and creative endeavor their efforts are greatly appreciated finally on behalf of the entire board of management i would like to thank our shareholders for their continuing support they can rest assured that we remain fully committed to increasing the value of their investment gerard kleisterlee president management agenda 2010 the leading company in health and well-being drive performance · drive top-line growth and market share · continue to reduce costs and improve cost agility · further increase cash by managing cash aggressively accelerate change · increase customer centricity by empowering local markets and customer facing staff · increase number of businesses with nps co leadership positions · increase employee engagement to high performance level implement strategy · increase our market position in emerging markets · drive key strategy initiatives for each sector · leverage sustainability as an integral part of our strategy 10 philips annual report 2009

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1 who we are 1 1.1 1 who we are our company our company was founded in eindhoven the netherlands in 1891 by anton and gerard philips to manufacture incandescent lamps and other electrical products ever since then our innovations have been making people s lives simpler more enjoyable and more productive we are committed to enhancing economic prosperity environmental quality and social equity wherever we operate 1998 actual sales split as a origin it services 3 business electronics 9 healthcare 7 1.1 our values our values the four ds are like a compass ­ guiding us in how we behave every day and reminding us of the attitude we should have towards our work our customers and our colleagues delight customers we anticipate and exceed customer expectation deliver great results we continually raise the bar develop people we get the best from ourselves and each other depend on each other we deliver more value by working as one philips manufacturing sites employees research laboratories semiconductors 11 components 13 consumer1 lifestyle 42 lighting 15 1 consumer lifestyle in 1998 included the former dap and consumer electronics divisions 2009 actual sales split as a 35 female 100 countries with sales and service outlets 127 production sites lighting 29 healthcare 34 7 research laboratories spread over europe north america and asia 3 incubators 35,000 registered trademarks consumer lifestyle 37 3,100 domain names 56,000 48,000 design rights patent rights philips annual report 2009 11

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1 who we are 1.2 1.2 1.2 our strategic focus philips is a global company which delivers meaningful innovations that improve people s health and well-being our health and well-being focus extends beyond our products and services to include the way we work engaging our employees focusing our social investment in communities on education in energy efficiency and healthy lifestyles reducing the environmental impact of our products and processes and driving sustainability throughout our supply chain our health and well-being offering is powered by our three sectors healthcare consumer lifestyle and lighting we have a long-established presence strong brand equity and large workforce in the emerging economies this gives us the home-grown insights needed to produce sustainable solutions that meet the needs of local people we already realize one-third of our sales in the emerging markets and this figure could conceivably rise to around 50 by the middle of this decade in order to capture the growth opportunities that are available we continue to invest in building our local organizations competencies and resources in these markets the current economic crisis is likely to have the effect of accelerating the fundamental trends outlined above increasing demand for healthcare especially outside the hospital a healthy lifestyle and energy-efficient highquality lighting building the leading company in health and well-being delivering on our promise of sense and simplicity our sectors deliver solutions that create value for our customers ­ healthcare and lighting professionals and endconsumers people-focused healthcare simplified meeting people s needs with sense and simplicity people s needs form the starting point for everything we do by tracking trends in society and obtaining fundamental insights into the issues people face in their daily lives we are able to identify opportunities for innovative solutions that meet their needs and aspirations our sense and simplicity brand promise expresses a commitment to put people at the center of our thinking to eliminate unnecessary complexity and to deliver the meaningful benefits of technology our adoption of net promoter score nps which measures people s willingness to recommend a company/product to a friend or colleague shows how we are doing in this respect in healthcare we are building businesses with strong leadership positions in both professional and home healthcare as well as a growing presence in emerging markets we simplify healthcare by focusing on the people in the care cycle ­ patients and care providers ­ rather than technologies or products by combining human insights and clinical expertise we deliver innovative solutions that help improve patient outcomes while lowering the financial burden on the healthcare system enabling people to enjoy a healthy lifestyle capturing value in mature and emerging markets despite the global financial and economic crisis we still see enormous potential in both mature and emerging markets and we apply our competence in marketing design and innovation to capture value from major economic social and demographic trends these include the need of a growing and longer-living population for more and affordable healthcare the demand for energy-efficient solutions to help combat climate change and promote sustainable development the emergence of empowered consumers with high health and well-being aspirations and last but not least the growing importance of emerging markets in the world economy the pursuit of personal well-being is a universal trend equally relevant in mature and emerging markets with a strong market-driven insight-led culture coupled with technological expertise and excellent design consumer lifestyle focuses on innovative lifestyle solutions that enhance consumers sense of personal well-being with simplicity providing our competitive edge we continue to build upon existing market-leading positions based on differentiation and profitability rather than scale as well as entering new value spaces simply enhancing life with light supported by the growing demand for energy-saving solutions and the structural shift toward solid-state lighting our lighting sector is strengthening its global leadership in fast-growing areas such as leds and energyefficient lighting by driving the transition from products 12 philips annual report 2009

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1 who we are 1.2 1.2 and components to life-enhancing applications and solutions our strong ip position across the led value chain will further reinforce this leadership one philips focus on health and well-being synergies across the portfolio one mission improving people s lives · increase our market position in emerging markets · drive key strategy initiatives for each sector move towards leadership position in imaging grow home healthcare grow health wellness manage tv to profitability become the lighting solutions leader in outdoor grow consumer luminaires optimize the lamps lifecycle · leverage sustainability as an integral part of our strategy one promise sense and simplicity achieving our objectives our goals have become even more challenging with the economic downturn we intend to realize our ambitions by continuing to focus relentlessly on people s needs and aspirations this means · creating meaningful innovations based on validated user insights · developing and maintaining strong relationships with our customers · nurturing talent and unlocking the full potential of our own highly engaged philips people as measured by our employee engagement index any strategy is only as good as its execution we believe that if we maintain our focus and continue to execute swiftly and decisively we will succeed in making philips the leading company in health and well-being one company common end-user-driven innovation process strong global brand channel access and global presence engaged workforce technology know-how and strong ip positions economies of scale e.g shared service centers me e ho lthcar a he prof hea essio lthc na are l healthcare professional lighting li healthy fe personal care es t yl h o te m e ra liv c ti ve ing livin g e me h o ti n g gh li strategic priorities we have simplified our organization tightened our focus and defined six platforms ­ professional healthcare home healthcare healthy life personal care home living interactive living home lighting and professional lighting ­ all with drivers for growth together these six platforms create a coherent portfolio we see many opportunities to leverage capabilities and synergies across the platforms as they are united in different combinations by customer segments channels key processes and capabilities and technology platforms for the coming period we have set the following strategic priorities ig h l ti n g co nsu m e rl in if philips annual report 2009 13

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1 who we are 1.3 1.3 1.3 our ambitions our financial targets · comparable sales growth well in excess of global gdp · group ebita margin 10 or more · sector ebita targets healthcare 15-17 consumer lifestyle 8-10 lighting 12-14 · return on invested capital 12-13 our ecovision4 targets over the period 2007 2012 · double revenues from green products to 30 of total sales · double investment in green innovations to a cumulative eur 1 billion · improve our operational energy efficiency by 25 and reduce co2 emissions by 25 14 philips annual report 2009

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2 our strategy in action 2 2.1 2 our strategy in action professional healthcare 2.1 global demographic and environmental trends such as aging populations and the spread of chronic diseases like obesity and diabetes to the developing world will require a fundamental shift in the way healthcare is provided in the professional domain we are driven to improve the way both patients and professionals experience healthcare to improve clinical outcomes and to enable the delivery of quality healthcare at lower cost by focusing on the range of medical issues associated with oncology cardiology and women s health we can deliver better more differentiated solutions that are more clinically relevant philips annual report 2009 15

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