Accelerate! journey continues

Path to Value

In 2011 we embarked upon our multi-year Accelerate! journey of change and performance improvement. This program is made up of five streams intended to:

  • make us more customer-focused
  • resource our business/market combinations to win
  • create lean end-to-end customer value chains
  • implement a simpler, standardized operating model
  • drive a growth and performance culture

Designed to transform Philips into a truly agile and entrepreneurial company, Accelerate! is all about delivering meaningful innovation to our customers in local markets – and doing so in a fast and efficient way.

We are now in the fourth year of this transformation process, and our Path to Value is clearly mapped out:

Philips Group
Path to Value
Accelerate!
2011
2016
Transform to address underperformance
  • Turnaround or exit underperforming businesses
  • Productivity and margin improvements
  • Rebuild culture, processes, systems and capabilities
  • Implement the Philips Business System
Expand global leadership positions
  • Invest to strengthen our core businesses
  • Resource allocation to right businesses and geographies
Initiate new growth engines
  • Invest in adjacencies
  • Seed emerging business areas
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To achieve our value creation goal, we have set ourselves targets to be realized by the end of 2016. These indicate the value we create, as measured by sales growth, profitability and our use of capital.

Group financial targets for 2016

  • Comparable sales growth 4-6%
  • Reported EBITA margin 11-12%
  • Return on invested capital >14%

As of year-end 2014 we are tracking 1 percentage point behind on the path to achieving each of these targets. We are convinced that this does not change our longer-term performance potential, considering the attractiveness of the Lighting Solutions and HealthTech markets and our competitive position. Later in 2015, as we progress with the separation of the Lighting business from the Philips Group and the re-allocation of IG&S, we will update the market about the integral performance targets for each of the two operating companies.

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Comparable sales exclude the effect of currency movements and acquisitions and divestments (changes in consolidation). Philips believes that comparable sales information enhances understanding of sales performance.

SF6 (Sulfur hexafluoride) is used in the electrical industry as a gaseous dielectric medium.

Earnings before interest, tax and amortization (EBITA) represents income from continuing operations excluding results attributable to non-controlling interest holders, results relating to investments in associates, income taxes, financial income and expenses, amortization and impairment on intangible assets (excluding software and capitalized development expenses). Philips believes that EBITA information makes the underlying performance of its businesses more transparent by factoring out the amortization of these intangible assets, which arises when acquisitions are consolidated. In our Annual Report on form 20-F this definition is referred to as Adjusted IFO.