Philips 2007 Annual Report Download - page 9

companies. Our ambition and your expectation are clearly
higher, and so with our agenda for 2008 we will drive even
more relentlessly for value creation and delivery.
Performance against targets
As I do every year, I would also like to update you on
how we did on the things we had set out to do as part
of our 2007 Management Agenda.
Maintain annual average sales growth of 5-6% and achieve
above 7.5% EBITA
I am glad to say we achieved our Group targets of 5-6%
annual average sales growth and EBITA above 7.5%.
At 5%, comparable sales growth was at the low end
of the bandwidth as particularly high growth at DAP and
solid growth at Lighting were offset by a at performance
at Consumer Electronics, caused by a loss of market
share in the rst half of the year at Connected Displays
– a highly competitive business that we continue to
manage for protability – while Medical Systems’ sales
growth was hampered by a declining US imaging market,
triggered by the Decit Reduction Act.
At 7.7% of sales, our EBITA margin is the highest in
recent years, up from 5.2% in 2006 – an excellent
starting position towards our 2010 targets. Operationally,
we executed very well in our DAP and Lighting businesses,
which achieved EBITA margins of 17.6% and 11.9%
respectively, even though Lighting was hampered by the
sharp decline in the very protable UHP business and
the closure of our LCD backlighting activity. However,
we had some issues at Consumer Electronics, especially
Connected Displays, with losses in the US for the whole
year. Despite this, Consumer Electronics managed to
exceed its target of 3% EBITA margin. At Medical Systems
we were impacted by the slowdown of the US imaging
market. The shortfall in the US could not be compensated
entirely by a good operational performance of the non-
imaging businesses and in the rest of the world, which
resulted in slight under-performance against margin
targets, EBITA remaining virtually stable at 13.5%.
Delivering on our 2007 objectives puts us in a good
starting position to meet the more ambitious medium-
term targets set as part of Vision 2010, especially as this
portfolio of activities has shown resilience in earlier
periods of economic downturn.
Continue to redeploy capital in a disciplined way through
value-creating acquisitions, share buy-backs and dividends
In 2007 we continued to further strengthen our key
businesses and create true market leadership positions
by means of both small ‘ll-in’ and larger ‘platform’
acquisitions – all high-growth high-margin businesses.
Besides our acquisition drive, which resulted in 2007
in a total cash-out of EUR 1.5 billion, we continued our
policy of repurchasing shares, buying back some EUR 1.6
billion worth of shares, of which EUR 0.8 million for
cancellation. Unfortunately the buy-back through the
so-called ‘second trading line’ brought us only about
half of the EUR 1.6 billion we had targeted. However,
on the back of a change to Dutch tax law, we were able,
in December, to announce a new EUR 5 billion buy-back
plan, through which we will more than catch up on
our target.
With our year-end announcements of the Respironics
acquisition and our latest share buy-back plan, we passed
the EUR 10 billion mark twice – for closed and announced
acquisitions, as well as for the total of realized and intended
share buy-backs. In total we have re-allocated over
EUR 20 billion of capital since 2005, largely completing
our capital re-allocation program and putting us well
on track to deliver, as promised, an efcient balance
sheet before the end of 2009.
With our strong focus on economic value added as well
as return on invested capital, our projections show that
Philips Annual Report 200712
8 Financial highlights 10 Message from the President 16 The Philips Group 62 The Philips sectors