Financial Update. Paul Verhagen Chief Financial Officer

Transcription

1 Financial Update Paul Verhagen Chief Financial Officer

2 Key Takeaways Increased focus on growth with a step up in Advertising and Promotion investments, in particular in Emerging markets Continuation of our Earn to Invest program to manage margin and cost and reinvest savings in growth Improved management decision support tool that enables increased empowerment in markets to drive growth and profitability We continue to deliver strong ROIC 2

3 We have acted fast in the downturn and are benefiting from improved gross margin and lower cost base supporting year on year EBITA margin improvement Lower break-even point driving adjusted EBITA improvement Mln 3,000 30% Year to date Q3 adjusted EBITA is 8.6% of sales vs. 3.5% in ,000 1,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 20% 10% 0% -10% -20% -30% Year to date adjusted EBITA improvement is partially driven by favorable phasing of license income in H1 License income will continue to gradually trend down in the coming years Sales Adjusted EBITA as % of Sales Comparable sales growth 3

4 We have successfully managed high margin businesses for growth, and managed profitability in AVM and Accessories Year-on-year improvement in TV but not meeting breakeven target Adjusted EBITA, comparable sales growth and EBITA % Size of bubble represents EBITA* Outlook 2010 Health & Wellness Size of bubble represents EBITA* 2009 Audio Video & Multimedia Accessories Personal Care Domestic Appliances TV Comparable Sales Growth % * Adjusted EBITA/EBITA % excludes restructuring and acquisition related charges. Adjusted EBITA* % 4

5 Strong growth in Emerging markets is accretive to our overall margin Adjusted EBITA, comparable sales growth and EBITA % Size of bubble represents EBITA Outlook 2010 Size of bubble represents EBITA 2009 WE&NA Emerging Comparable Sales Growth % Adjusted EBITA* % * Adjusted EBITA/EBITA % excludes restructuring and acquisition related charges. 5

6 We continue to manage costs via our Earn 2 Invest Program and reinvest savings to drive growth Via Earn 2 Invest (E2I), our ongoing business improvement program E2I 2007 Started within DAP Functional costs / External benchmarking Fully delivered on cost savings targets A&P % of sales index E2I 2008 Focus on DAP/CE synergies Functional costs / External benchmarking E2I 2009 Focus on cost of organization, CoGS, margin to manage downturn E2I 2010 Productivity improvement Advertising &Promotions Effectiveness Value engineering Pricing Outlook 6

7 Actions taken to structurally reduce costs are paying off Restructuring charges/savings Mln Positive and structural impact on our business Approximately 60% of restructuring costs related to TV to structurally reduce the cost base Remaining restructuring focused on simplifying and delayering the organization after merge of CE/DAP Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Q4 Majority of the charges have been converted in annual savings Savings Charges Cumulative savings Cumulative charges Restructuring on average less than 0.5% of sales in the coming years 7

8 We continue to manage and improve gross margin as % of sales in order to fund investments in growth Gross margin as % of sales index Actions Ongoing improvement in business, product and customer mix Optimization of sales price management Reduction in Bill of Material Value engineering initiatives to reduce costs and improve value to consumer Productivity improvements in manufacturing base Outlook Increased Advertising investments 8

9 To drive growth Advertising and Promotion investments will be increased with a focus on high margin business and emerging markets A&P high margin vs. Others Abs Index A&P Emerging vs. total CL Abs Index High Margin Others Emerging CL Outlook Outlook 9

10 Working capital is strictly managed and remains negative in most quarters. Higher stocks in TV offset ongoing improvements in Working Capital management Working capital (EUR million) and working capital as % of sales Q109 Q209 Q309 Q409 Q110 Q210 Q310 Outlook Q410 Effective DSO reduces credit and from risk 45 management days 37 days Overdues Receivables reduce days from sales 17% reduced - 8% by 7 days Increased Overdues usage by customers of Supplier reduced Financing by ~4% Increased usage of Supplier Financing Payment Payment Terms Terms improve improve by 11 by days 7 days to 76 days Excluding vs. year TV end stock 2008measured in days future Excess sales stock in line reduce with last by 20% year. 10

11 Consumer Lifestyle continues to deliver a strong ROIC Five quarter average net operating capital (EUR million) and return on invested capital (ROIC) Net Operating Capital (5 Quarter Average) ROIC % CL Outlook 2010 Note: Philips calculates ROIC % as EBIAT/ NOC. ROIC % is based on LTM EBIAT and average NOC over the last 5 quarters. Reported Income Tax used to calculate EBIAT 11

12 VIPP is our improved management decision support system with granular insight into integral performance per Business, Market and Customer down to product level VIPP enables portfolio management based on improved transparency into integral results VIPP enables increased empowerment of local teams to take decisions faster VIPP supports global and local customer mix management VIPP will facilitate scenario based analysis to maximize profitable growth 12

13 We have embarked on a journey to install an ROI culture for continuously increasing Advertising and Promotional investments Get on par with best in class players Become best in class A-Effectiveness Trade Spend Stabilize and Embed the Organization DNA Budget Setting Approach Excellence Support Tools 13

14 We are stepping up advertising investment behind more effective campaigns Sonicare Switch campaign Integrated campaign pretested via Ipsos on 6 touchpoints (TVC, print ad, advertorial, banners, in store and Facebook) Positive reach of consumers and response to the message + 56% more consumers prefer Philips Sonicare to other brands after seeing the advertising + 68% more consumer willing to purchase Philips Sonicare after seeing the advertising Sensotouch 3D campaign Integrated campaign Pretested via Ipsos on 6 touchpoints (TVC, banners, print, outdoor, in store, website) Response to the campaign approach is very positive: + 70% more consumers would consider purchasing a Philips SensoTouch after seeing the advertising + 93% more consumers prefer Philips Sensotouch 3D to other brands after seeing the campaign 14

15 Key Takeaways Increased focus on growth with a step up in Advertising and Promotion investments, in particular in Emerging markets Continuation of our Earn to Invest program to manage margin and cost and reinvest savings in growth Improved management decision support tool that enables increased empowerment in markets to drive growth and profitability We continue to deliver strong ROIC 1

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