Philips 2004 Annual Report Download - page 9

Results from unconsolidated companies rose to EUR 1,422 million,
driven by improved performance by TSMC and our LCD venture
LG.Philips LCD. Thanks to its successful IPO, the latter company
now has direct access to the capital markets. We also took steps
to dispose of some more of our financial holdings. Altogether, this
resulted in Group net income of EUR 2,836 million, or EUR 2.22
per share. Cash flow from operating activities was strong at
EUR 2,697 million. On a net basis, the Company is now virtually
debt-free, which will allow us to pursue our growth plans while
also returning cash to you in the form of a higher dividend.
Fulfilling our commitments
In my message to you last year, we committed to the following
management agenda for 2004:
GTo achieve 14% EBITA at Medical Systems in 2004
GTo implement CE’s renewal program to achieve 4 – 4.5%
operating margin by the end of 2005
GTo accelerate profitable growth through the sustained
transformation of Philips into a market-driven organization
GTo increase the number of product leadership positions and the
rate of innovation across the Group
GTo continue to focus on reducing indirect costs to achieve
additional savings of EUR 250 million.
I would now like to review these commitments and discuss how
we performed.
14% EBITA at Medical Systems
I am very proud to report that we met our target of 14% EBITA.
Actually we surpassed it, achieving 14.4% excluding the
Volumetrics settlement. The management team at Medical
Systems has successfully completed the integration of our recent
acquisitions and has been able to create a strong platform for
future growth. I am particularly pleased about our strong order
book, up 16% year-on-year, driven by our innovative product
portfolio. The operational start of our Philips-Neusoft venture in
China in September 2004 should significantly strengthen our
position in Asia and emerging markets.
We are eager to see the problems at MedQuist being resolved and
will do whatever we can to support that.
Consumer Electronics’ Business Renewal Program
Consumer Electronics has been making significant advances in
many areas. Its Business Renewal Program is ahead of schedule and
delivering more than the expected cost savings. We have acquired
Gemini’s accessories business, a high-margin activity with
significant scope for expansion globally. And we are divesting our
OEM monitor business and our industrial and R&D operations for
monitors and entry-level Flat TVs to TPV of Taiwan, creating a
more competitive cost base for our branded activities. Overall,
market conditions remain challenging for the industry. Thanks to
strong past-use license income, Consumer Electronics was able to
compensate for its restructuring costs and low product margins,
achieving an integral operating margin of 3.6%.
8Philips Annual Report 2004
Message from the President