Value creation in Professional Lighting SolutionsAmy Huntington, CEO Professional Lighting Solutions

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• We are leading the professional market and improving our margins

• We are geared to capture attractive growth opportunities offered by the changing landscape

• We are uniquely positioned to win as we expand our systems and services offering as well as business models

• We are rigorously executing on our strategic priorities

Key takeaways

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We are leading the professional market and improving our margins

Indexed sales2 (Philips=100) PLS¹ gross margin % development – indexed, H1'12=100

PLS¹ LED sales share vs. Market

• Leading position in Europe, Asia-Pacific3 and Latam

• #2 position in North America

• Gaining share in key growth geographies, e.g. Greater China

• Industrial footprint rationalization

• Accretive LED margin

• Portfolio rationalization

• Value engineering

• 32% sales growth in H1'13 vs. H1’12

• Geographic LED sales share:– Europe leading with 40%+– Other geographies 25%+

Competitor 1

Competitor 2

Competitor 3

0%

10%

20%

30%

40%

Q2Q1Q4Q3Q2Q1Q4Q3

20122011 2013

PhilipsMarket

#1 PLS1 player globally Leading the LED marketGross margins on positive trajectory

40%

30%

10%

0%

20%

1H20132H20121H2012

1 Philips Professional Lighting Solutions Business Group, 2 Sales in the last 4 available quarters, 3 excl. JapanSource: Philips, company financials, Philips Lighting global market study 2013

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We are geared to capture attractive growth opportunities offered by the changing landscape

• Recognized as #1 brand1

• Margin accretive

• We are leading the LED market

LEDificationcontinued adoption

Market Trends Our Positioning

• We have a strong IP portfolio: 6,000 patents2

• Building application specific architectures and roadmap

• 42% Color Kinetics sales from products launched <18 months

Digitizationmove towards systems

• Global player with integrated offer across the value chain

• Gaining traction with Services – Professional Services, Lifecycle Services, and Managed Services

ServicesCustomer needs evolving beyond products and systems products

• Preferred lighting partner – global presence, leadership positions, innovation focus, reliable partner

• Adjacencies: Somfy – Buildings light control

• Market access: CEC3 JV - Lighting systems, China

New ecosystemsemerging

1 Based on NPS as well as Heart BEAT Brand surveys in several markets, 2 Professional Lighting Solutions related IP portfolio, 3 CEC: China Electronics Corporation

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We are rigorously executing on our strategic priorities

Unlock potential in North America

Win in LED locally, by leveraging global capabilities

Extend value proposition through systems

Develop scale in services

Accelerate!

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3

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5

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Unlock potential in North AmericaSuccessfully pursuing simplification to increase agility and leverage

Portfolio management –streamlining products & brands

Industrial footprint rationalization –setting up for the future

Innovation concentration – R&D site consolidation Driving significant procurement savings

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• Simplified, best-in-class line to meet customers’ needs

• Eliminating redundancies without reducing overall offering

% BoM savings

# of factories# of brands

# of R&D sites

2014

-70%

2012

2012

-71%

2014

• Leveraging Monterrey greenfield facility

• Flexible capacity -volume and mix

• Coordination with Global teams – 60%+ platform penetration

• Faster decision making and innovation - 35% reduction in time to market

• Design for X (Design for X; X = cost, quality, manufacturing etc.) yielding 2X the historical bill-of-material (BoM) savings

• Spend coverage: 70%

2012

-24%

2014

20142012

>2x

Source: Philips internal study

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Win in LED locally, by leveraging global capabilities2

LED platform enabled sales % Example: GlobalSpace

0

20

40

60

80

100

OutdoorRetail & hospitality

OfficeIndustry

Healthcare

Q2 ’13Q1 ’10

0

20

40

60

80

100

Other growth

geographies

GreaterChina

NorthAmerica

Europe

By Segment By Geography

The power of platforms:• Faster design of new LED products – up to 50% reduced time to market

• Smarter platforms enable Intelligent Systems

• Greater purchasing power and reduction in working capital

• Re-use of internally developed LEDs, modules and drivers

• Reduced complexity

GlobalSpace example:• Developed in China meeting local

market needs

• Potential identified for other markets

• Regional specific versions developed

• Industrialized by global supply chain

Global-Local: Our LED platform penetration is increasing across each segment and geography

Local-Global: Local product concept can develop into global proposition

Source: Philips internal study

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Impactful OUTCOME Elegant EXPERIENCE

Eataly, Italy• Seamless integration of general

and architectural LED luminaires, luminous textiles and controls

• Design and Commissioning to meet specification of ambient retail and dining experience

• Continuing partnership in expansion plans

Extend value proposition through systems3

Dramatic EFFECT

Empire State Building, USA• 1,200 custom luminaires • Design, install and commission• Enhanced capability while

consuming 73% less energy• Grand debut in 2012 - Alicia

Keys simulcast

CityTouch: 190 projects in 27 countries in just 2 years

European municipality• LED luminaires and CityTouch

(optimized dimming calendars)• 70% energy consumption

reduced• 80% annual service cost

reduced• 29 tons of CO2 emission

prevented per yearSource: Philips internal study

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Develop scale in services4

1ROI = Return on Investment, 2SLA = Service Level AgreementSource: Philips internal study

Professional Services: enabling systems / other services sales

Lifecycle Services: variety of after sales service offerings

Managed Services: plan, build and operate lighting systems

US multi-site client• Energy management advisory

services and system• Audit, design, ROI1 analysis,

energy rebate administration• 250 locations installed,

300 additional planned• 30% reduction in electrical

spend; <3-year payback

Europe high-end retailer• 60+ locations• Audit, design, install, finance• 5 year warranty management,

maintenance contract and SLA2

• Fixed maintenance expense• Service contract value 40% of

the total project

Asian LED road lighting• 3 expressways• 3,000+ LED luminaires• 2,000+ poles• 100+ km cabling• 7 year maintenance contract• Learnings enable lifecycle

services in other deals

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Accelerate!Successfully leveraging Accelerate! as our transformation platform

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China facade sales targets

+235%

201520122010

-50%

20152013

# of factories

Operating model: Footprint rationalization on track

End2End: China LED Facade program on track

• Consolidate sites

• Leverage China and Mexico greenfields

• Develop flexible capacity in the industrial base – volume and mix

• I2M¹: Uni range targeting mid-tier market released (time to market reduced by 40%)

• M2O¹: Enhancing frontline competencies, further expanding the partner network

• O2C¹: Improving Customer Service level -above target for 7 months in a row

¹ I2M: Idea to Market, M2O: Market to Order, O2C: Order to CashSource: Philips internal study

Uni-Flood

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• We are leading the professional market and improving our margins

• We are geared to capture attractive growth opportunities offered by the changing landscape

• We are uniquely positioned to win as we expand our systems and services offering as well as business models

• We are rigorously executing on our strategic priorities

Key takeaways

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