Philips 2011 Annual Report Download - page 7

Message from the CEO
Annual Report 2011 7
our company through this transformation and am
encouraged by the start we have made to what will be a
multi-year journey to a bright future.
Despite a challenging and volatile economic environment
and ongoing market weakness, especially in Europe,
important parts of the company performed well in 2011,
and we ended the year with strong balance sheet and cash
positions. At the same time, across the company near-
term operational issues are being tackled with vigor and
urgency. Our passion to improve and aim higher is shared
by our 120,000 employees.
At Group level, we achieved 4% comparable sales growth
– at the lower end of our mid-term performance
bandwidth, but with a strong contribution from growth
geographies (33% of sales, up from 31% in 2010) and
Green Products (39% of sales).
At 7.4% of sales, reported EBITA was below our mid-
term 2013 profitability target, primarily due to continued
pressure on gross margins, as well as higher costs and
non-recurring charges related to, for example, inventory
adjustments. Earnings were also impacted by investments
for growth – to drive market penetration and accelerate
innovation. These include an investment of some EUR 470
million in Green Innovation.
Each year we review and assess the value of past
acquisitions. Last year’s analysis found the economy posed
a higher risk, with recovery slow and uncertain. We
adjusted our business plans and discount rates
accordingly, resulting in an impairment of EUR 1.4 billion
in the second quarter.
One of the major developments in 2011 was the signing
of an agreement to transfer our Television business to a
joint venture with TPV, in which we will hold a 30% stake.
This joint venture will leverage the strengths of both
companies to improve the position of Philips Television in
the market, and will enable us to focus on expanding
leadership positions in health and well-being markets
across our three operating sectors. The deal is expected
to close at the end of the first quarter of 2012 after the
necessary merger clearance and governmental approvals
are obtained.
In 2011 we concluded a number of acquisitions, primarily
aimed at strengthening our product portfolio in growth
geographies. I would like to welcome all our new
employees from these acquisitions to Philips.
Reflecting our confidence in our plans to step up
profitability and free cash flow through organic growth
and operational excellence, we launched a EUR 2 billion
share buy-back program in the summer. This will also
improve the efficiency of our balance sheet. By the end of
the year we had completed 35% of this program, which
will run until the end of the second quarter of 2013.
As a further sign of our confidence in Philips’ future, we
are proposing to the upcoming General Meeting of
Shareholders to maintain this year’s dividend at EUR 0.75
per common share, in cash or stock – resulting in a yield
(as of December 31, 2011) of 4.6% for shareholders.
Dividend per common share
in euros
0.80
0.60
0.40
0.20
0
0.70
2008
0.70
2009
0.70
2010
0.75
2011
0.75
20121)
1) Subject to approval by the 2012 Annual General Meeting of Shareholders
Accelerate! – the journey to unlock our full
potential
For the past 120 years our meaningful innovations have
improved the quality of life for millions, creating a strong
and trusted Philips brand with market access all over the
world. But with lack of consistent growth in recent years,
and lean, agile new competitors winning over customers,
it was clear that we urgently needed to speed up in order
to improve our performance and competitiveness.
To this end, in the second quarter of 2011 we launched
our Accelerate! program – the first step on our journey
to unlock our full potential and seed the ground for our
future success. Accelerate! aims to significantly boost
profitable growth by stepping up meaningful innovation
and competitiveness, expanding margins, driving
productivity and reducing complexity and working capital.
It is designed to ensure that we empower and strengthen
our customer-facing teams to win profitable market
share, that we reduce complexity costs and deliver our
innovations faster and more efficiently along the end-to-
end chain to the customer, that we drive performance
with transparency and accountability for granular
business/market plans. And that we carry through our