Slide 1: Q4 & Full Year 2018 results
Q4 & Full Year 2018 results February 1, 2019
Slide 2: 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
Slide 3: Content
Content Welcome & introduction by Eric Rondolat Financial performance for Q4 18 by Stéphane Rougeot FY 18 highlights by Eric Rondolat Outlook & conclusion by Eric Rondolat Q&A 3
Slide 4: Welcome & introduction
Welcome & introduction • LED-based sales grew by 2.5% in FY 18 on a comparable basis to 71% of sales • Signify’s installed base of connected light points increased from 30m at YE17 to 44m at YE18 % • • Adj. EBITA margin improved by 50 bps to 10.1%, including a currency impact of -50bps Adj. indirect
Slide 5: Our transformation journey has made Signify the leading company in the new era of the Lighting industry
Our transformation journey has made Signify the leading company in the new era of the Lighting industry Growing profit engines Cash engine LED Professional Home Lamps • We have been building a new worldwide leader focusing on our growing profit engines, in line with our • We are increasing our strat
Slide 6: Content
Content Welcome & introduction by Eric Rondolat Financial performance for Q4 18 by Stéphane Rougeot FY 18 highlights by Eric Rondolat Outlook & conclusion by Eric Rondolat Q&A 6
Slide 7: Growing profit engines: Adjusted EBITA margin improved by 140 bps
Growing profit engines: Adjusted EBITA margin improved by 140 bps Adjusted EBITA Adjusted Q4 18 CSG % vs LY (EURm) vs LY (bps) (EURm) EBITA % LED 0.2% 69 +21 14.4% +460 Professional -6.9% 85 -9 12.0% -10 Home -2.6% 16 -2 8.9% -60 Total -4.0% 170 +11 12.4% +140 7
Slide 8: LED Adjusted EBITA margin increased by 460 bps, mainly as a result of indirect cost savings
LED Adjusted EBITA margin increased by 460 bps, mainly as a result of indirect cost savings Sales (in EURm) & comparable sales growth (in %) Key observations for Q4 18 • Comparable sales growth increased by 0.2%. An 5.1% improvement on a sequential basis due to LED lamps 3.6% 0.0% -1.9% 0.2% 492 444
Slide 9: LED business highlights
LED business highlights Expanded glass filament Private label wins Launched TrustSight G3 Launched connected decorative range emergency driver in EvoKit Europe • Uses 80% less energy • 24 tenders won in 2018 • Self-contained solution • Provides cost-effective than traditional bulbs solution for reno
Slide 10: Professional Adjusted EBITA margin solid at 12.0%
Professional Adjusted EBITA margin solid at 12.0% as continued indirect cost savings largely offset the impact from lower sales volumes Sales (in EURm) & comparable sales growth (in %) Key observations for Q4 18 10.4% 3.6% • CSG of -6.9%, on the back of a high comparison base 3.2% 0.4% which reflect
Slide 11: Professional business highlights
Professional business highlights To illuminate Shanghai’s To illuminate up to 15 of Installed architectural Installed Horti LED buildings, bridges and London’s iconic bridges lighting on façade of lighting at French rivers by 2022 Beijing’s WTC tower cucumber growers • Installed more than • To insta
Slide 12: Home's sales performance reflects a high comparison base; profitability is now back on track
Home’s sales performance reflects a high comparison base; profitability is now back on track Sales (in EURm) & comparable sales growth (in %) Key observations for Q4 18 53.9% • CSG of -2.6%, due to a high comparison base as US retail partners built up inventories in H2 17 -2.6% -1.4% -6.4% -5.9% 186
Slide 13: Home business highlights
Home business highlights Extended Philips Hue Added Philips Hue and Updated Hue Power-on Added RunLessWire to Outdoor range Google Assistant sleep Behavior in app the Friends of Hue and wake up feature program • Added sensor, wall- • Brings voice commands • Saves bulb’s last setting • Adds more swit
Slide 14: Cash engine: Lamps maintained free cash flow at 22% of sales
Cash engine: Lamps maintained free cash flow at 22% of sales Lamps Free Cash Flow bridge* (in EURm) Key observations 438 • Our cash engine continued to deliver on its “last man 22% of sales standing” strategy 32 4 • Further market share gains 94 308 • FCF of EUR 308m in FY 18 • FCF as % of sales rem
Slide 15: Signify Adj. EBITA margin: improvement driven by indirect cost reductions
Signify Adj. EBITA margin: improvement driven by indirect cost reductions Adjusted EBITA (in EURm) as % of sales 10.9% +150 bps 12.4% Gross margin -120 bps 83 (12) 207 (44) (1) 214 (78) 58 Q4 17 Volume / Mix Price CoGS Indirect Costs Currency Other Q4 18 15
Slide 16: Working capital as % of sales decreased by 20 basis points y-o-y to 8.4%
Working capital as % of sales decreased by 20 basis points y-o-y to 8.4% driven by lower receivables Working capital1 (in EURm & as % of sales) Inventories (in EURm & as % of sales) 10.5% 10.1% 15.3% 15.2% 9.0% 14.1% 13.8% 8.4% 612 694 659 536 957 1.009 994 878 -20 bps + 50 bps 1Q18 2Q18 3Q18 4Q18 1
Slide 17: Net debt decreased by EUR 148m
Net debt decreased by EUR 148m, mainly due to solid FCF generation partly used to complete the share repurchase program In EURm 737 231 589 6 125 11 29 147 14 45 FCF: EUR +279m Net debt EBITDA Change in Net capex Change in Interest & Tax Other Share Other** Net debt end of Q3 18 working provisions F
Slide 18: Content
Content Welcome & introduction by Eric Rondolat Financial performance for Q4 18 by Stéphane Rougeot FY 18 highlights by Eric Rondolat Outlook & conclusion by Eric Rondolat Q&A 18
Slide 19: Growing profit engines drive profitable growth as we move to LED, connected systems and services
Growing profit engines drive profitable growth as we move to LED, connected systems and services CSG (%) Adj. EBITA margin (%) Free Cash Flow* (in EUR m) LED, Professional & Home LED, Professional & Home LED, Professional & Home 10.1% 370 8.3% 8.6% 353 47 5.4% 5.4% 20 10 -0.4% 2016 2017 2018 2016 20
Slide 20: Continue to invest in new growth platforms
Continue to invest in new growth platforms Horticulture Solar LiFi • Growers benefit from customer- • More than 1 billion people do not • Extra layer of security thanks to line- centric approach, and market have access to electricity grid of-sight leading products and light recipes • Solar is safe a
Slide 21: Market dynamics impacted top-line in FY18, solid improvements in margins
Market dynamics impacted top-line in FY18, solid improvements in margins Growing profit engines Cash engine LED CSG & Adj. EBITA margin (%) Professional CSG & Adj. EBITA margin (%) Home CSG & Adj. EBITA margin (%) Lamps FCF (in EUR m) CSG 12.8% 0.4% CSG 4.1% -0.4% CSG 41.1% -3.8% 438 2.3% 9.5% 308 1
Slide 22: Currency comparable adjusted indirect costs decreased by 10% in FY18
Currency comparable adjusted indirect costs decreased by 10% in FY18 Adj. indirect cost savings per quarter (in EUR m) Key observations • EUR 224m saved in FY18, down 10%, or 180 89 31.5% bps of sales, excl. FX 6 73 71 65 • Progress made in 2018: 29.8% 7 35 25 • Reduced non-manufacturing workforce b
Slide 23: Our 2018 results: Sustainable operations
Our 2018 results 2018 result Achievement 2020 target Sustainable revenues 79.0% Increasing energy 80% Sustainable revenues efficiency of portfolio 1.7 billion LED lamps & 87% of our commitment (cumulative >2 billion luminaires delivered completed from 2015) 49% decrease vs 2017 Carbon footprint Net
Slide 24: Attractive shareholder return
Attractive shareholder return 2018 dividend EUR 1.30 to be paid in 2019 Dividend 2018 (in EURm) Key observations FY 2018 • Proposed dividend increase of 4% at EUR 1.30 per share; Net income attributable to shareholders 263 pay-out ratio of 46% Restructuring costs 118 • Disciplined management of bala
Slide 25: EUR 1.1bn returned to shareholders since IPO
EUR 1.1bn returned to shareholders since IPO, incl. proposed 2018 dividend Cash available Return to shareholders since IPO (in EURm) • Continued free cash flow generation • Managing our financial ratios to maintain a financing 1,127 1,055 structure compatible with an investment-grade profile Share r
Slide 26: Our financial measures have significantly improved over the last five years
Our financial measures have significantly improved over the last five years Transition from Significantly improved Transition to an asset- Strong FCF generation conventional to LED profitability light business model Total LED sales Adjusted EBITA margin Gross capex as % of sales FCF as % of sales (a
Slide 27: Content
Content Welcome & introduction by Eric Rondolat Financial performance for Q4 18 by Stéphane Rougeot FY 18 highlights by Eric Rondolat Outlook & conclusion by Eric Rondolat Q&A 27
Slide 28: Outlook 2019
Outlook 2019 • Our growing profit engines (LED, Professional and Home combined), are expected to deliver a CSG in the range of 2 to 5% • Our cash engine, Lamps, is expected to decline at a slower pace than the market in the range of -21 to -24% on a comparable basis. • For total Signify, we aim to r
Slide 29: Signify Path to value – Targeting Adj. EBITA margin of 11-13% by 2019
Signify Path to value – Targeting Adj. EBITA margin of 11-13% by 2019 Signify +90-290 bps 11-13% 10.1% +370bps 6.4% 2013 2018 2019 Growing profit engines Cash engine LED Professional Home Lamps 11-14% 21.1% 10-12% > 16% 11.7% 9.5% 16.4% 2.2% 5-8% 2013 2018 2019 2013 2018 2019 -2.1% -8.1% -11.6% 2013
Slide 30: Q&A
Q&A 30
Slide 31: 71% of sales is LED-based and growing by 2.5% on a comparable basis
71% of sales is LED-based and growing by 2.5% on a comparable basis LED-based sales continue to grow by CAGR of 22% (in % of total sales) LED-based sales of EUR 4.5bn in FY 18, CSG of 2.5% LED Home 10% 71% (CSG 0.8%) 65% 55% BG LED 40% 43% (CSG 0.4%) 34% 26% LED Professional 50% (CSG 4.4%) 2013 2014
Slide 32: Currency movements had a negative impact on sales and Adjusted EBITA
Currency movements had a negative impact on sales and Adjusted EBITA Q4 18 Sales FX Footprint (% of total) Key observations • Currency movements negatively impacted sales and Adjusted EBITA Other EUR 32% • Sales impact of EUR -32m, mainly coming from the Currencies 36% devaluation of emerging market
Slide 33: Net income improved to EUR 119m
Net income improved to EUR 119m, mainly as a result of improved operational profitability and lower restructuring From Adjusted EBITA to net income (in EURm) Key observations Q4 17 Q4 18 Adjusted EBITA 207 214 - Restructuring -75 -27 - Acquisition related charges 0 -1 Gain of EUR 16m associated with
Slide 34: Free Cash Flow of EUR 279m
Free Cash Flow of EUR 279m Free cash flow (in EURm) Key observations 4Q17 4Q18 • Free cash flow of EUR 279m as a result of better Income from operations 75 173 working capital management throughout the year Depreciation and amortization 88 58 • In Q4 17, we started with a high level of working capit
Slide 35: Sianty
Sianty