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Apr. 14. 2008 / 4:00AM, PHG - Q1 2008 Royal Philips Electronics Earnings Conference Call

The results for Group Management and Services included higher costs for both pension and a number of corporate projects, aimed at future cost reduction. The full year EBITA for the total GMS sector will improve, compared to 2007, with about half of the improvement coming from the lower brand campaign spend.

As expected, our net cash positions at the end of 2007 turned to be a net debt position at the end of the first quarter, due mainly to the payment for Respironics at Genlyte, as well as continuation of our share buyback program. We required more cash from operations than in the same period last year, which included a EUR182 million positive impact from the sale of TSMC dividend stock last year.

This quarter saw higher inventory levels at Televisions and lower receivable collections in Healthcare, due to the implementation of a new IT system in North America at Philips Healthcare. Both these effects are temporary and will come back into line in the month ahead.

Our net income was broadly in line with the first quarter of 2007, after allowing for the EUR650 million, lower gain on the sale of stakes which, in Q1 last year, included the first tranche of our TSMC sales. Lower EBIT was largely offset by improved operational results at LG Displays. Note that we have seized equity accounting income from LG Displays as from the end of February this year.

Looking beyond 2008, I would like to draw your attention to our additional guidance on Vision 2010. Following the successful reallocation of the majority of our capital, we are now in a position to give further details on our sales and profitability targets for the year 2010, and our objective to more than double our EBITA per share by 2010. Additionally, we have reintroduced guidance on our return on invested capital, which we expect to reach a level 12% to 1 3% by 2010.

For the remainder of this year, there are many parts of our portfolio where we remain confident. First of all, we will continue to make good progress on our commitments to improve the margin of our TV business. Second, given order growth in the recent quarters, and particularly the last two, we expect to see ongoing improvements in the results of our Healthcare sector. Thirdly, we will intensify our already close focus on cost levels throughout the businesses. Fourthly, we will continue to work on cash flow and expect cash from operation to significantly improve in the quarters ahead. And fifth, we expect ongoing good growth in emerging markets.

These are the points on which we base our confidence that 2008 will be a year in which we will make further progress towards our Vision 2010 objectives. Let me now open your the line to your questions.


Thank you sir. (OPERATOR INSTRUCTIONS) Would you please limit yourself to one question, with a maximum of one follow up? This will give more people the opportunity to ask questions. (OPERATOR INSTRUCTIONS). There will be a short pause whilst participants register for questions. The first question comes from Mr. Nicolas Gaudois from UBS. Please state your question sir.

Nicolas Gaudois - UBS - Analyst

Yes, hi, good morning. First question will be on the Connected Display performance. Could you give us a little bit more color on what is happening outside the US TV business? Are we looking at an EBITA margin there being close to breakeven, or slightly negative? And maybe if you could comment on general trends you're seeing [within that] in Europe and emerging markets?


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