Philips 2007 Annual Report Download - page 7

Philips Annual Report 200710
Message from the President
Dear shareholder,
2007 was a dynamic and exciting year for our company,
with good progress on many fronts. However, this did
not translate into an equally exciting share performance.
Operationally, we delivered once again on our Group
targets, with 5% comparable sales growth and
an EBITA
margin of 7.7%, thanks to good execution, a strong
innovation pipeline and a balanced portfolio that proved
its robustness in a weakening economic environment.
We continued to advance well in our drive to become a truly
market-focused, people-centric company that is geared to
creating value through sustained protable growth.
Strategically, we made signicant steps in building strong
market leadership positions across the portfolio, by
investing in high-growth high-margin businesses while
continuing to divest some low-growth low-margin
businesses, largely completing our portfolio transformation.
In particular, the announced acquisitions of Genlyte and
Respironics will boost our leadership position in Lighting
and Home Healthcare respectively.
At the same time, we also tightened the focus of our
portfolio with, among others, the sale of our mobile phone
operation, as well as the projected divestment of our set-top
box activity and our ownership interest in MedQuist.
We continued to invest in strengthening our position in
important emerging markets in Asia, Eastern Europe and
Latin America. Across our businesses, growth in emerging
markets was particularly strong in 2007, and they now
account for approximately 30% of our sales. We intend to
further expand our presence in these markets by growing
considerably faster than their respective economies.
We also continued to invest heavily in the things that
really set Philips apart – our brand and our end-user-
driven innovation and design – moving us to 38th place
in Business Week’s ranking of the world’s most innovative
companies (up from 67th place in 2006) and further
increasing our brand value by 15% (according to Interbrand).
Financially, we accelerated our disciplined redeployment
of capital with the announcement of a new EUR 5 billion
(tax-free) share repurchase plan, on the back of a change
to Dutch tax law. At the same time, we moved forward
with our program to sell down our nancial holdings,
lowering our stakes in TSMC and LG.Philips LCD. With
our capital reallocation process now largely completed,
we are well on our way to arriving at an efcient balance
sheet before the end of 2009.
In 2007 we also launched our EcoVision IV program, which
aims to double sales of our Green Products over the next
ve years to 30% of total revenues, in comparison to 15%
in 2006. And we have pledged to double investments in
green innovations to EUR 1 billion by 2012. Concentrating
on areas where we can make an impact with our capabilities
and expertise, we are focusing our sustainability efforts
on two global challenges: energy efciency and available
and affordable healthcare.
Crucially, in September we announced Vision 2010, a strategic
blueprint dening the company we want Philips to be – a
simpler, stronger company that is better placed to meet
people’s need for high-quality but affordable healthcare,
energy-efcient lighting and rewarding lifestyle experiences,
while at the same time providing signicant shareholder
value by delivering on our target to double EBITA per
share by 2010.
As stated above, good progress on many fronts,
though for you, our shareholder, only a at share price
performance, more or less in line with the market.
With that, we rank – on three-year TSR (Total Shareholder
Return) – 5th in our old peer group of 24 companies and,
for the rst time in our new peer group, 6th among 12
8 Financial highlights 10 Message from the President 16 The Philips Group 62 The Philips sectors