Slide 1: Signify reports Q2 18 sales of EUR 1.5bn, operational profitability of 8.4%
Signify reports Q2 18 sales of EUR 1.5bn, operational profitability of 8.4% July 27, 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: Second quarter sales of EUR 1.5bn and operational profitability of 8.4%
Second quarter sales of EUR 1.5bn and operational profitability of 8.4% Sales (in EURm) & comparable sales growth (in %) Key observations for 2Q18 • CSG decreased by 3.4% due to: 1.3% 3.0% -1.8% -3.4% • Weak performance in Home -3.5% • Challenging market and competitive dynamics • Global scarcity in
Slide 5: Lamps, LED and Professional improved their Adjusted EBITA margin
Lamps, LED and Professional improved their Adjusted EBITA margin Adjusted Adjusted 2Q18 CSG % vs LY (EURm) vs LY (bps) EBITA (EURm) EBITA % Lamps -16.4% 74 -19 21.2% +50 LED 0.0% 47 -3 10.6% +10 Professional 3.6% 55 +3 8.4% +70 Home -5.9% -25 -19 -27.9% -2,190 Signify -3.4% 130* -29* 8.4% -100* *Adj
Slide 6: Lamps Adjusted EBITA margin improved by 50 bps
Lamps Adjusted EBITA margin improved by 50 bps driven by lower indirect costs, ongoing procurement savings and increased productivity Sales (in EURm) & comparable sales growth (in %) Key observations for 2Q18 -16.4% • Comparable sales decreased by 16.4% -17.6% -18.6% -18.7% -20.7% • Continued market
Slide 7: LED Adjusted EBITA margin improved by 10 bps
LED Adjusted EBITA margin improved by 10 bps driven by procurement savings and lower indirect costs, partly offset by price erosion and FX effects Sales (in EURm) & comparable sales growth (in %) Key observations for 2Q18 • Flat comparable sales growth on the back of a high 19.6% comparison base and
Slide 8: LED business highlights
LED business highlights Philips MyCare LED T-Bulb launch in Private label wins Universal T-LED Sensor ready launch in Asia India launch in Europe electronics • Designed with • The Indian • 15 tenders won • Makes installing • 180W outdoor patented Interlaced customer prefers a year to date tubes as e
Slide 9: Professional Adjusted EBITA margin improved by 70 bps
Professional Adjusted EBITA margin improved by 70 bps, mainly driven by lower indirect costs, partly offset by a more challenging pricing environment Sales (in EURm) & comparable sales growth (in %) Key observations for 2Q18 13.7% 9.6% • CSG of 3.6%, with a robust performance in Europe and 5.4% 4.2%
Slide 10: Professional business highlights
Professional business highlights Interact Landmark win in World’s largest Launch of Interact Pro Acquisition of lighting Ningbo, China horticulture LED project company LiteMagic • Façade of 37 buildings lit • Philips GreenPower LED • Intuitive dashboard and • Expands our high-end with Philips Color
Slide 11: Home impacted by protracted effects of high inventory levels in US retail
Home impacted by protracted effects of high inventory levels in US retail at the end of 2017, which have now returned to more normalized levels Sales (in EURm) & comparable sales growth (in %) Key observations for 2Q18 45.1% 53.9% • CSG of -5.9%, reflecting • Protracted effects of high inventory lev
Slide 12: Home business highlights
Home business highlights Philips Hue Outdoor Philips Hue App 3.0 Philips Hue Sync Geographical and launch in US and Europe channel expansion • Extends Hue features • Introduces new features • Enhances spatial • Introduced Philips Hue in and functionality to any and enhances existing immersion of gam
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 reduction due to lower gross margin and FX
Adjusted EBITA margin reduction due to lower gross margin and FX, partly offset by lower indirect costs Adjusted EBITA (in EURm) as % of sales 9.4% -100 bps 8.4% Gross margin -200 bps 159 5 -94 46 -22 -3 130 38 Q2 2017 Volume / Mix Price CoGS Indirect Costs Currency Other Q2 2018 14
Slide 15: Adjusted currency comparable indirect costs decreased by 8%
Adjusted currency comparable indirect costs decreased by 8% Key observations as % of sales 32.3% -120 bps 31.1% In EURm • Indirect cost reduction of EUR 46m 549 Adj. R&D -46 • Positive currency impact of EUR 25m 85 478 -25 • Executing multi-year transformation initiatives 73 to simplify the organiza
Slide 16: Benefits of our transformation initiatives already coming through in H1
Benefits of our transformation initiatives already coming through in H1 Actions underway to drive benefits across multiple levers Levers Progress made in H1 2018 Actions in H2 2018 Organization delayering, headcount reductions targeting Execution of headcount reduction already engaged; Continued Org
Slide 17: Working capital as % of sales decreased by 70 basis points y-o-y to 10.5%
Working capital as % of sales decreased by 70 basis points y-o-y to 10.5% driven by lower receivables Working capital1 (in EURm & as % of sales) Inventories (in EURm & as % of sales) 14.1% 12.5% 13.3% 16.2% 15.3% 10.5% 8.6% 9.0% -70 bps 1,137 924 957 1,009 0 bps 879 597 612 694 3Q17 4Q17 1Q18 2Q18 3
Slide 18: Net debt increased by EUR 253m, mainly due to dividend distribution
Net debt increased by EUR 253m, mainly due to dividend distribution In EURm 688 17 171 33 435 28 1 9 112 22 84 FCF: EUR -31m Net debt EBITDA Change in Net capex Change in Interest & Tax Other Share Dividend Other** Net debt end of 1Q18 working provisions FCF items repurchases* end of 2Q18 capital *S
Slide 19: Capital allocation policy
Capital allocation policy Cash available Cash available & uses in 2017 and 2018 (in EURm) • Continued free cash flow generation • Managing our financial ratios to maintain a 504 financing structure compatible with an 464 investment-grade profile 403 Cash uses 229 272 • Dividend of EUR 171m – paid on
Slide 20: Content
Content Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook and conclusion by Eric Rondolat Q&A 20
Slide 21: Almost 70% of sales is LED-based and growing by 5.3%
Almost 70% of sales is LED-based and growing by 5.3% LED-based sales continue to grow by CAGR of 24% LED-based sales of EUR 2.1bn in H1 18, CSG of 5.3% (in % of total sales) LED Home 8% 69% (CSG -0.5%) 65% 55% BG LED 43% 42% (CSG 1.8%) 34% 26% LED Professional 50% (CSG 9.8%) 2013 2014 2015 2016 2017
Slide 22: Solid progress made in H1 2018 on reducing our cost base and increasing FCF generation
Solid progress made in H1 2018 on reducing our cost base and increasing our FCF generation Adjusted indirect costs Adjusted EBITA Free Cash Flow (in EURm and % of sales) (in EURm and % of sales) (In EURm) 33.0% 32.5% 8.4% 32.1% -18 7.8% 7.7% -37 -62* 1,116 1,119 976 269 286 235 H1 2016 H1 2017 H1 20
Slide 23: Outlook 2018
Outlook 2018 Given the slow start to the year in Home, more challenging market and competitive dynamics in some geographies, as well as global scarcity in certain electronic components, Signify has decided to revise its sales outlook for 2018 • Expect CSG in the second half to improve compared to th
Slide 24: Q&A
Q&A 24
Slide 25: Currency movements had a negative impact on sales and Adjusted EBITA
Currency movements had a negative impact on sales and Adjusted EBITA 2Q18 Sales FX Footprint (% of total) Key observations • Currency movements had a negative impact on sales and on Adjusted EBITA EUR Other 30% • Sales impact from currencies of EUR -95m, Currencies 36% mainly from the US dollar • Ad
Slide 26: Net income of EUR 29m due to lower operational profitability and a real estate gain in 2Q17
Net income of EUR 29m due to lower operational profitability and a real estate gain in 2Q17 From Adjusted EBITA to net income (in EURm) Key observations 2Q17 2Q18 Adjusted EBITA 159 130 - Restructuring -30 -35 - Acquisition related charges 0 0 1 - Other incidental items 10 -17 1 Real estate gain of
Slide 27: Free Cash Flow of EUR -31m
Free Cash Flow of EUR -31m Free cash flow (in EURm) Key observations 2Q17 2Q18 • Free cash flow of EUR -31m compared with EUR -44m, Income from operations 111 54 excluding real estate proceeds of EUR 17m in 2Q17 Depreciation and amortization 65 58 Additions to (releases of) provisions 49 53 • Cash o
Slide 28: Sianty
Sianty