Philips announces €1.5bn share buyback amid efficiency drive The rejuvenation of Philips took another step on Tuesday, as the century-old Dutch electronics group announced a €1.5bn share buyback and raised nearly all of its financial targets. The announcement at a capital markets day in London showcased the turnround at the once struggling Dutch group. Since the accession of chief executive Frans van Houten in 2011, Philips has transformed itself by divesting traditional audio-visual businesses to Asian competitors and refocusing on its healthcare, lighting and home appliance divisions. Besides the €1.5bn share buyback over the next two to three years, Philips set new targets for 2016 in earnings, return on invested capital and dividends. The company expects earnings before interest, taxes, and amortisation to hit 12 to 14 per cent of sales, up from the 2013 target of 10 to 12 per cent. The target for return on invested capital rose from 12 to 14 per cent to more than 14 per cent, and the company said it would devote nearly half of new earnings growth to dividends. Mr van Houten acknowledged that the company's financial performance, while improving, is only "approaching" its targets for 2013. Excluding one-off gains, Philips" ebita ratio for the second quarter was 9.4 per cent, and the company was expected to struggle to meet its 10 per cent lower threshold for the year. "Ongoing headwinds remain a concern," said Mr van Houten. Philips has in the past been forced to revise overambitious growth expectations, particularly in the lighting division, where it is the world's largest supplier by revenues. The severe weakness of the European construction and housing markets over the past three years has hit the company especially hard. Overall, though, the announcements were a vindication of Mr van Houten's strategy. The company's lifestyle division, which includes its audio-visual products, has shrunk from 36 per cent of sales in 2011 to 20 per cent this year, while its healthcare division has grown from 34 per cent to 43 per cent. Lighting rose from 30 to 37 per cent. In healthcare, Philips has benefited from rising sales of sophisticated imaging equipment used by cutting-edge hospitals to aid doctors during operations. Meanwhile, the company has refocused on sales in emerging markets, moving the design centre for its Asian lifestyle products to China. Mr van Houten also stressed the success of the company's cost-cutting programme, dubbed "Accelerate!." The company will raise the programme's targeted reduction in top-line costs from €1.1bn to €1.5bn by 2015. In a less tangible shift, Mr van Houten also noted an continuing "culture change" at Philips, oriented towards increasing customer responsiveness and reducing time to market among other things. The majority of the company's management has been either replaced or transferred since the arrival of Mr van Houten.