Slide 1: Q3 2018 results
Q3 2018 results October 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: Content
Content Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook and conclusion by Eric Rondolat Q&A 3
Slide 4: Third quarter sales of EUR 1.6bn and operational profitability of 12.0%
Third quarter sales of EUR 1.6bn and operational profitability of 12.0% Sales (in EURm) & comparable sales growth (in %) Key observations for 3Q18 3.0% • CSG decreased by 3.2% due to: 1.3% -3.5% -3.4% -3.2% • High comparison base • Challenging market dynamics in several geographies • Total comparabl
Slide 5: Improved Adjusted EBITA margin in Lamps, LED and Professional
Improved Adjusted EBITA margin in Lamps, LED and Professional Adjusted EBITA Adjusted 3Q18 CSG % vs LY (EURm) vs LY (bps) (EURm) EBITA % Lamps -11.1% 89 +7 24.6% +490 LED -1.9% 53 +3 12.0% +130 Professional 0.4% 79 +8 11.7% +130 Home -1.4% -8 -8 -6.9% -650 Signify -3.2% 191 +15* 12.0% +150* *Adjuste
Slide 6: Lamps Adjusted EBITA margin improved by 490 bps, driven by halogen ban in Europe
Lamps Adjusted EBITA margin improved by 490 bps, driven by halogen ban in Europe and solid performance in consumer lamps and specialty lighting Sales (in EURm) & comparable sales growth (in %) Key observations for 3Q18 -11.1% • Comparable sales decreased by 11.1% -17.6% -16.4% • Benefited from: -18.
Slide 7: LED Adjusted EBITA margin improved by 130 bps, driven by procurement savings and lower indirect costs
LED Adjusted EBITA margin improved by 130 bps, driven by procurement savings and lower indirect costs Sales (in EURm) & comparable sales growth (in %) Key observations for 3Q18 • Comparable sales growth declined by 1.9% • Trend in LED electronics CSG continued to improve 13.1% 5.1% • CSG of LED lamp
Slide 8: LED business highlights
LED business highlights Launched Interact Ready Introduced the new Launch of controller for Private label wins Master Connect LEDtube CeilingSecure LED sensor-ready outdoor downlighter in India luminaires • Enables wireless • The modular design • Adds connectivity and • 18 tenders won year to integr
Slide 9: Professional Adjusted EBITA margin continued to improve with an increase of 130 bps
Professional Adjusted EBITA margin continued to improve with an increase of 130 bps, mainly driven by lower indirect costs Sales (in EURm) & comparable sales growth (in %) Key observations for 3Q18 10.4% 6.5% 3.6% • CSG of 0.4%, on the back of a high comparison base in 3.2% 0.4% Q3 2017 • Lower leve
Slide 10: Professional business highlights
Professional business highlights New Philips Greenpower Philips Color Kinetics Interact Hospitality Navigant ranks us as LED for crops that need illuminates Huê installed at Swissotel world leader in smart more light The Stamford Singapore street lighting • Will help greenhouse • The imperial city h
Slide 11: Sales performance in Home reflects a high comparison base
Sales performance in Home reflects a high comparison base; gross margin and costs are back to normalized levels Sales (in EURm) & comparable sales growth (in %) Key observations for 3Q18 45.1% 53.9% • CSG of -1.4%, due to • A high comparison base as US retail partners started to build-up inventories
Slide 12: Home business highlights
Home business highlights 6 new partners added to Expanding the Philips New Philips Hue Added Philips Hue the Friends of Hue Hue outdoor offering luminaires for the living bathroom range program with the Light Strip room • Wall switches: Busch- • The new flexible light • Philips Hue Play: • The new P
Slide 13: Content
Content Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook and conclusion by Eric Rondolat Q&A 13
Slide 14: Adjusted EBITA margin improvement mainly driven by indirect cost savings
Adjusted EBITA margin improvement mainly driven by indirect cost savings Adjusted EBITA (in EURm) as % of sales 10.5% +150 bps 12.0% Gross margin -90 bps 58 (14) 0 191 176 (1) (76) 47 Q3 2017 Volume / Mix Price CoGS Indirect Costs Currency Other Q3 2018 14
Slide 15: Fluctuations in adj. gross margin mostly driven by FX and a high comparison base
Fluctuations in adj. gross margin mostly driven by FX and a high comparison base Adj. gross margin trend over time (as % of sales) Key highlights 39.9% 40.0% • Adj. gross margin of 39.1% reduced by 90 bps mainly 39.1% due to currency effects of -50 bps and a high 38.7% 38.5% comparison base 37.9% •
Slide 16: Currency comparable adjusted indirect costs decreased by 11% in Q3
Currency comparable adjusted indirect costs decreased by 11% in Q3 Adj. indirect cost savings per quarter (in EUR m) Key observations • Currency comparable adjusted indirect costs 209 down EUR 58m 67 • YTD realized EUR 142m of cost savings on a 73 71 currency comparable basis 65 25 7 • Executing mul
Slide 17: Working capital as % of sales decreased by 240 basis points y-o-y to 10.1%
Working capital as % of sales decreased by 240 basis points y-o-y to 10.1% driven by lower receivables and inventories 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% 8.6% 13.3% -240 bps -100 bps 597 612 694 659 924 957 1.009 994 4Q
Slide 18: Net debt increased by EUR 49m, mainly due to share repurchases
Net debt increased by EUR 49m, mainly due to share repurchases In EURm 737 688 18 95 200 3 50 18 57 14 FCF: EUR +64m Net debt EBITDA Change in Net capex Change in Interest & Tax Other Share Other** Net debt end of 2Q18 working provisions FCF items repurchases* end of 3Q18 capital *Share repurchases
Slide 19: Content
Content Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook and conclusion by Eric Rondolat Q&A 19
Slide 20: Outlook 2018
Outlook 2018 • Expect our comparable sales growth in the second half of the year to be similar to the first half • Taking into account the solid progress in cost savings, we remain confident that we will be able to % improve the Adjusted EBITA margin to the lower end of the 10.0-10.5% range • Contin
Slide 21: Q&A
Q&A 21
Slide 22: Currency movements had a negative impact on sales and Adjusted EBITA
Currency movements had a negative impact on sales and Adjusted EBITA 3Q18 Sales FX Footprint (% of total) Key observations • Currency movements negatively impacted sales and Adjusted EBITA EUR Other 32% • Sales impact from currencies of EUR -35m, or -2.1%, currencies 36% mainly from emerging market
Slide 23: Net income of EUR 93m due to higher restructuring costs and a net real estate gain
Net income of EUR 93m due to higher restructuring costs and a net real estate gain of EUR 21m related to Lamps in Q3 2017 From Adjusted EBITA to net income (in EURm) Key observations 3Q17 3Q18 Adjusted EBITA 176 191 - Restructuring -9 -17 - Acquisition related charges 0 0 1 - Other incidental items
Slide 24: Free Cash Flow of EUR 64m
Free Cash Flow of EUR 64m Free cash flow (in EURm) Key observations 3Q17 3Q18 • Free cash flow of EUR 64m compared with EUR -5m, Income from operations 161 143 mainly driven by an improvement in working capital Depreciation and amortization 67 57 Additions to (releases of) provisions 22 35 • Free ca
Slide 25: Sianty
Sianty