Slide 1: Philips Lighting reports first quarter sales of EUR 1.5bn and operational profitability of 7%
Philips Lighting reports first quarter sales of EUR 1.5bn and operational profitability of 7% First quarter 2018 results Analyst & Investor presentation April 26, 2018
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: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook & Conclusion by Eric Rondolat Q&A
Slide 4: First quarter sales of EUR 1.5bn and operational profitability of 7%
First quarter sales of EUR 1.5bn and operational profitability of 7% Sales (in EURm) & comparable sales growth (in %) Key observations for 1Q18 3.0% • Soft start mainly due to weak performance in Home, 1.3% most notably in the US -0.8% -1.8% -3.5% • Lamps, LED and Prof delivered solid performances •
Slide 5: Lamps, LED and Professional improved their Adjusted EBITA margin, Home had a weak performance
Lamps, LED and Professional improved their Adjusted EBITA margin, Home had a weak performance Adjusted Adjusted 1Q18 CSG % vs LY (EURm) vs LY (bps) EBITA (EURm) EBITA % Lamps -17.6% 78 -22 21.2% +80 LED 3.6% 43 +3 9.6% +110 Professional 3.2% 31 +18 5.2% +310 Home -6.4% -21 -22 -23.1% -2,360 Philips
Slide 6: Lamps improved its Adjusted EBITA margin by 80 bps
Lamps improved its Adjusted EBITA margin by 80 bps driven by procurement savings, productivity and lower indirect costs Sales (in EURm) & comparable sales growth (in %) Key observations for 1Q18 • Comparable sales declined by 17.6% -18.1% -18.6% -18.7% -17.6% • Continued market share gains -20.7% 49
Slide 7: LED improved its Adjusted EBITA margin by 110 bps
LED improved its Adjusted EBITA margin by 110 bps helped by lower price erosion, mix improvement and lower indirect costs Sales (in EURm) & comparable sales growth (in %) Key observations for 1Q18 • CSG of 3.6% on the back of a high comparison base 15.2% 19.6% • Growth in LED lamps remained robust,
Slide 8: Professional Adjusted EBITA margin improved by 310 bps
Professional Adjusted EBITA margin improved by 310 bps, mainly driven by operational leverage, footprint rationalization and lower indirect costs Sales (in EURm) & comparable sales growth (in %) Key observations for 1Q18 13.7% • CSG of 3.2%; performance in Europe and the Rest of the 9.6% 5.4% World
Slide 9: Home reported a loss due to lower sales and investments in growth since 1Q17
Home reported a loss due to lower sales and investments in growth since 1Q17 Sales (in EURm) & comparable sales growth (in %) Key observations for 1Q18 53.9% • CSG of -6.4% 45.1% • Lower than expected sales at our trade partners in the 32.7% 25.3% 4th quarter, most notably in the US • Resulted in lo
Slide 10: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook & Conclusion by Eric Rondolat Q&A
Slide 11: Adjusted EBITA margin reduction due to lower gross margin, partly offset by lower indirect costs
Adjusted EBITA margin reduction due to lower gross margin, partly offset by lower indirect costs Adjusted EBITA (in EURm) as % of sales 7.5% -50 bps 7.0% Gross margin -110 bps 127 4 (84) 38 (13) (0) 106 34 1Q17 Volume / Mix Price CoGS Indirect Costs Currency OBI 1Q18 11
Slide 12: Adjusted indirect cost base decreased by 13%
Adjusted indirect cost base decreased by 13% 33.8% -60 bps 33.2% Key observations as % of sales • Indirect cost reduction of EUR 38m In EURm 570 -38 • Positive currency impact of EUR 35m Adj. R&D 88 -35 498 • Executing multi-year transformation initiatives to simplify the organization to: 81 • Impro
Slide 13: Working capital as % of sales decreased by 110 basis points y-o-y to 9%
Working capital as % of sales decreased by 110 basis points y-o-y to 9% driven by lower receivables Working capital1 (in EURm & as % of sales) Inventories (in EURm & as % of sales) 12.5% 11.2% 15.3% 16.2% 13.3% 14.1% 8.6% 9.0% 789 879 597 612 -110 bps 1,082 1,137 924 957 +30 bps 2Q17 3Q17 4Q17 1Q18
Slide 14: Net debt increased by EUR 68m
Net debt increased by EUR 68m In EURm 435 71 10 367 40 3 97 21 5 41 FCF: EUR -6m Net debt EBITDA Change in Net capex Change in Interest & Tax Other Share Other Net debt end of 4Q17 working provisions FCF items repurchases end of 1Q18 capital 14 *Other includes part of the proceeds from derivatives,
Slide 15: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook & Conclusion by Eric Rondolat Q&A
Slide 16: Aim to deliver positive CSG, improve our Adjusted EBITA margin and expect to generate solid FCF in 2018
Aim to deliver positive CSG, improve our Adjusted EBITA margin and expect to generate solid FCF in 2018 • Aim to deliver positive comparable sales growth for the full year, on the basis of a strong second half • Aim to improve our Adjusted EBITA margin from 9.6% to 10.0-10.5%; we will continue to %
Slide 17: Lighting
Lighting
Slide 18: Currency movements had a negative impact on sales and Adjusted EBITA
Currency movements had a negative impact on sales and Adjusted EBITA 1Q18 Sales FX Footprint (% of total) Key observations • Currency movements had a negative impact on sales and on Adjusted EBITA • Sales impact from currencies of EUR -121m, mainly Other EUR Currencies 32% from the US dollar 36% • A
Slide 19: Net income of EUR 20m due to lower operational profitability, higher restructuring costs
Net income of EUR 20m due to lower operational profitability, higher restructuring costs and a real estate gain in 1Q17 From Adjusted EBITA to net income (in EURm) Key observations 1Q17 1Q18 Adjusted EBITA 127 106 - Restructuring -10 -39 - Acquisition related charges 0 0 1 - Other incidental items 6
Slide 20: Free Cash Flow of EUR -6m
Free Cash Flow of EUR -6m Free cash flow (in EURm) Key observations 1Q17 1Q18 • Free cash flow of EUR -6m compared with EUR 2m in Income from operations 94 39 1Q17. Excluding the proceeds of a real estate sale of EUR Depreciation and amortization 66 58 19m in 1Q17, FCF improved compared with last ye