Slide 1: Philips Lighting reports improvement in comparable sales growth, continued increase in profitability and free cash flow
Philips Lighting reports improvement in comparable sales growth, continued increase in profitability and free cash flow Q1 2017 Presentation April 21, 2017
Slide 2: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook & Conclusion by Eric Rondolat Q&A
Slide 3: Philips Lighting reports improvement in comparable sales growth, continued increase in operational profitability and free cash flow
Philips Lighting reports improvement in comparable sales growth, continued increase in operational profitability and free cash flow Sales (in EURm) & comparable sales growth (in %) Key observations for Q1 2017 -0.8% -1.3% -1.5% • Comparable sales growth improved vs previous quarters -3.3% -3.2% • Eu
Slide 4: Our business groups are all performing in line with their strategic objectives
Our business groups are all performing in line with their strategic objectives Q1 2017 CSG % Adjusted vs LY Adjusted vs LY EBITA (EURm) EBITA % (bps) (EURm) Lamps -17.9% 114 -11 22.9% +260 LED 16.7% 39 19 9.2% +360 Professional 2.5% 13 7 2.1% +110 Home 20.6% 3 15 2.0% +1,170 Philips Lighting -0.8% 1
Slide 5: Lamps performance reflects the success of our last man standing strategy
Lamps performance reflects the success of our last man standing strategy Sales (in EURm) & comparable sales growth (in %) Key observations for Q1 2017 -14.5% -13.3% -16.8% -18.5% -17.9% • Comparable sales decline of 17.9% 615 572 570 576 498 1Q16 2Q16 3Q16 4Q16 1Q17 Adjusted EBITA (in EURm & as % of
Slide 6: LED volumes grew significantly and margin continued to improve
LED volumes grew significantly and margin continued to improve Sales (in EURm) & comparable sales growth (in %) Key observations for Q1 2017 28.8% • Volumes were higher due to continued price erosion and 15.6% 16.7% mix impact 11.5% 11.3% • All regions contributed to growth; countries with low LED p
Slide 7: Professional continued improvement of sales and YoY margin
Professional continued improvement of sales and YoY margin Sales (in EURm) & comparable sales growth (in %) Key observations for Q1 2017 2.2% 8.4% 3.6% 3.8% • Europe and the Rest of the World showed growth 0.3% • Saudi Arabia still impacted by difficult market conditions, 3.8% 2.5% -3.8% 0.1% althou
Slide 8: Home showed a return to profitability in Q1
Home showed a return to profitability in Q1 Sales (in EURm) & comparable sales growth (in %) Key observations for Q1 2017 20.6% • Comparable sales growth of 20.6%: 14.3% • Primarily driven by the Home Systems business 10.7% 11.0% 8.8% • All market groups contributed to growth 124 127 130 178 148 1Q1
Slide 9: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook & Conclusion by Eric Rondolat Q&A
Slide 10: Increased Adjusted EBITA margin primarily driven by gross margin improvement
Increased Adjusted EBITA margin primarily driven by gross margin improvement Adjusted EBITA (in EURm) 250 as % of sales 7.1% +130 bps 8.4% Gross margin 200 + 200bps 9 142 90 0 150 9 -87 121 100 50 - 1Q16 Volume / Mix Price CoGS Indirect costs Currency 1Q17 10
Slide 11: Adjusted indirect costs increased due to additional month of brand license fee, currency impact and a pension gain from last year
Adjusted indirect costs increased due to additional month of brand license fee, currency impact and a pension gain from last year as % of sales Key observations for Q1 2017 33.0% 33.7% • Negative currency impact of EUR 8m In EURm • Pension gain of EUR 4m in Q1 2016 • Additional month of brand licens
Slide 12: Working capital as % of sales improved by 180 bps reflecting sustained improvements achieved in 2016
Working capital as % of sales improved by 180 bps reflecting sustained improvements achieved in 2016 Working capital1 (in EURm & as % of sales) Inventories (in EURm & as % of sales) 12.2% 14.1% 13.8% 13.8% 11.2% 12.5% 9.3% 9.8% 895 809 662 695 1,030 999 886 982 +20 bps 2Q16 3Q16 4Q16 1Q17 -180 bps 2
Slide 13: Net debt increase of EUR 75m driven by share repurchase
Net debt increase of EUR 75m driven by share repurchase In EURm + EUR 75m 416 5 82 341 41 31 160 36 49 1 FCF: EUR 2m Net debt EBITDA Change in Net capex Change in Interest Other Share Other Net debt end 2016 working provisions & tax FCF items repurchase end 1Q17 capital 13
Slide 14: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook & Conclusion by Eric Rondolat Q&A
Slide 15: On track to deliver our 2017 outlook
On track to deliver our 2017 outlook • Further improvement of Adjusted EBITA margin: approximately 50-100 basis points in 2017 % • In line with medium term outlook to gradually improve the Adjusted EBITA margin to 11-13% • Deliver solid free cash flow • Committed to our ambition to return to positiv
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Slide 17: Philips Lighting has sales in a wide range of currencies
Philips Lighting has sales in a wide range of currencies Q1 2017 Sales FX Footprint (% of total) Key observations • Currency movements had a positive impact on both sales Other and Adjusted EBITA in the first quarter Currencies EUR 28% • Sales impact from currencies of EUR 20m, mainly from 38% the U
Slide 18: Net income of EUR 61m driven by improved profitability and a decrease of both financial and income tax expenses
Net income of EUR 61m driven by improved profitability and a decrease of both financial and income tax expenses From Adjusted EBITA to net income (in EURm) Charges not applicable in 2016: 1Q16 1Q17 1 Adjusted EBITA 121 142 1 Brand license fee of EUR 9m in Q1 2017 - Restructuring -18 -10 Q1 2016: EUR
Slide 19: Free Cash Flow improved by EUR 80m
Free Cash Flow improved by EUR 80m Free cash flow (in EURm) Key observations 1Q16 1Q17 • Free cash flow improvement of EUR 80m: Income from operations 71 94 • Improved profitability Depreciation and amortization 76 66 • Lower cash outflow on working capital Change in working capital -102 -49 • Reduc
Slide 20: Important information
Important information Forward-Looking Statements and Risks & Uncertainties This document and the related oral presentation contain, and responses to questions following the presentation may contain, forward-looking statements that reflect the intentions, beliefs or current expectations and projectio