Signify reports full year sales of EUR 6.4 billion, improvement in operational profitability by 50 bps to 10.1% and free cash flow of EUR 306 million

Press Release

February 1, 2019

Signify reports full year sales of EUR 6.4 billion, improvement in operational profitability by 50 bps to 10.1% and free cash flow of EUR 306 million

Full year 2018¹

• Signify's installed base of connected light points increased from 30 million at YE 17 to 44 million at YE 18
• LED-based sales grew by 2.5% on a comparable basis to 71% of sales (FY 17: 65%); CSG total Signify -4.4%
• Adj. indirect costs down EUR 224 million on a currency comparable basis, a reduction of 10%, or 180 bps of sales
• Adj. EBITA margin improved by 50 bps to 10.1%, despite a negative currency impact of -50 bps
• Net income of EUR 261 million (FY 17: EUR 281 million including net real estate gains of EUR 52 million)
• Working capital improved by 20 bps to 8.4% of sales
• Free cash flow of EUR 306 million (FY 17: EUR 403 million, which included EUR 56 million real estate proceeds and EUR 40 million lower restructuring cash-out)

Fourth quarter 2018¹

• LED-based sales grew by 0.2% on a comparable basis; CSG total Signify -7.3% (Q4 17: 3.0%)
• Adj. indirect costs down EUR 83 million on a currency comparable basis, a reduction of 15%, or 250 bps of sales
• Adj. EBITA margin improved by 150 bps to 12.4%, despite a negative currency impact of -50 bps
• Net income improved to EUR 119 million compared with EUR 38 million last year
• Free cash flow of EUR 279 million (Q4 17: EUR 434 million)

       
Shareholder returns

• In 2018, EUR 462 million of capital was returned through share repurchases and ordinary dividends
• Propose to pay a cash dividend of EUR 1.30 per share over 2018, an increase of 4% and a pay-out ratio of 46%
• Signify will have returned EUR 1.1 billion to shareholders since IPO, including 2018 dividend

Eindhoven, the Netherlands - Signify (Euronext: LIGHT), the world leader in lighting, today announced the company's fourth quarter and full-year results 2018. "We continued to make solid progress with our simplification and cost reduction actions in 2018, resulting in a substantial increase in profitability and strong free cash flow delivery. In line with our strategy, our growing profit engines - LED, Professional and Home - have strongly contributed to these improvements and our LED-based sales have grown by 2.5%, now representing 71% of total revenues," said CEO Eric Rondolat. "While market conditions are challenging, we continue to focus on new growth platforms to strengthen our market leadership and progressively improve our growth profile. With our proposal to increase our dividend to EUR 1.30 per share, we will have returned more than EUR 1 billion to shareholders over the last three years. Looking forward, I'm confident we have built a solid foundation to deliver in 2019 on the mid-term targets set at the time of the IPO."


Outlook

In 2019, our growing profit engines (LED, Professional and Home combined) are expected to deliver a comparable sales growth 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 reach an Adjusted EBITA margin in 2019 within the range of 11 to 13% set at the time of the IPO in May 2016. We expect free cash flow in 2019 to be above 5% of sales.
  
Financial review

Changes to financial reporting
Since the first quarter of 2018, Signify reports and discusses its financial performance based on the portfolio changes that were announced in the first quarter of 2018. In March 2018, the company provided an update to show the effect of changes to the business portfolio as well as changes to the allocation methods of centrally-managed costs and to the threshold for other incidental items as adjusting items when presenting certain non-IFRS measures such as Adjusted EBITA. More details can be found on page 12 in the full and original version of the press release.

¹This press release contains certain non-IFRS financial measures and ratios, such as comparable sales growth, EBITA, adjusted EBITA and free cash flow, and related ratios, which are not recognized measures of financial performance or liquidity under IFRS. For a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures, see appendix B, Reconciliation of non-IFRS financial measures, of this press release.

For the full and original version of the press release click here.
For the presentaton click here.


Conference call and audio webcast
Eric Rondolat (CEO) and Stéphane Rougeot (CFO) will host a conference call for analysts and institutional investors at 9:00 a.m. CET to discuss fourth quarter and full year results. A live audio webcast of the conference call will be available via the Signify Investor Relations website.

Financial calendar
26 February 2019                Annual report 2018
26 April 2019                       First quarter results 2019
14 May 2019                        Annual General Meeting of Shareholders
26 July 2019                        Second quarter and half year results 2019
25 October 2019                 Third quarter results 2019

For further information, please contact:

Signify Investor Relations
Robin Jansen
Tel: +31 6 1594 4569
E-mail: robin.j.jansen@signify.com

Signify Corporate Communications
Elco van Groningen
Tel: +31 6 1086 5519
E-mail: elco.van.groningen@signify.com

About Signify
Signify (Euronext: LIGHT) is the world leader in lighting for professionals and consumers and lighting for the Internet of Things. Our Philips products, Interact connected lighting systems and data-enabled services, deliver business value and transform life in homes, buildings and public spaces. With 2018 sales of EUR 6.4 billion, we have approximately 29,000 employees and are present in over 70 countries. We unlock the extraordinary potential of light for brighter lives and a better world. We have been named Industry Leader in the Dow Jones Sustainability Index for two years in a row. News from Signify is located at the Newsroom, Twitter, LinkedIn and Instagram. Information for investors can be found on the Investor Relations page.

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 projections of Signify N.V. (the "Company", and together with its subsidiaries, the "Group"), including statements regarding strategy, estimates of sales growth and future operational results.

By their nature, these statements involve risks and uncertainties facing the Company and its Group Companies and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement as a result of risks and uncertainties. Such risks, uncertainties and other important factors include but are not limited to: adverse economic and political developments, the impacts of rapid technological change, competition in the general lighting market, development of lighting systems and services, successful implementation of business transformation programs, impact of acquisitions and other transactions, impact of the Group's operation as a separate publicly listed company, pension liabilities and costs, establishment of corporate and brand identity, adverse tax consequences from the separation from Royal Philips and exposure to international tax laws. Please see "Risk Factors and Risk Management" in Chapter 12 of the Annual Report 2017 for discussion of material risks, uncertainties and other important factors which may have a material adverse effect on the business, results of operations, financial condition and prospects of the Group. Such risks, uncertainties and other important factors should be read in conjunction with the information included in the Company's Annual Report 2017 and the semi-annual report for 2018.

Looking ahead, the Group is primarily concerned about the challenging economic conditions, currency headwinds and political uncertainties in the global and domestic markets in which it operates. Additional risks currently not known to the Group or that the Group has not considered material as of the date of this document could also prove to be important and may have a material adverse effect on the business, results of operations, financial condition and prospects of the Group or could cause the forward-looking events discussed in this document not to occur. The Group undertakes no duty to and will not necessarily update any of the forward-looking statements in light of new information or future events, except to the extent required by applicable law.

Market and Industry Information
All references to market share, market data, industry statistics and industry forecasts in this document consist of estimates compiled by industry professionals, competitors, organizations or analysts, of publicly available information or of the Group's own assessment of its sales and markets. Rankings are based on sales unless otherwise stated.

Non-IFRS Financial Measures
Certain parts of this document contain non-IFRS financial measures and ratios, such as comparable sales growth, adjusted gross margin, EBITA, adjusted EBITA, and free cash flow, and other related ratios, which are not recognized measures of financial performance or liquidity under IFRS. The non-IFRS financial measures presented are measures used by management to monitor the underlying performance of the Group's business and operations and, accordingly, they have not been audited or reviewed. Not all companies calculate non-IFRS financial measures in the same manner or on a consistent basis and these measures and ratios may not be comparable to measures used by other companies under the same or similar names. A reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures is contained in this document. For further information on non-IFRS financial measures, see "Chapter 18 Reconciliation of non-IFRS measures" in the Annual Report 2017.

Presentation
All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up to totals provided. All reported data are unaudited. Unless otherwise indicated, financial information has been prepared in accordance with the accounting policies as stated in the Annual Report 2017 and semi-annual report 2018.

Changes to financial reporting following organizational changes to further align the organizational structure with the strategy
As the market trend of both professionals and consumers switching from buying lamps and luminaires to integrated LED luminaires is accelerating, the company has decided to modify the current portfolios of its business groups. As of January 1, 2018, Signify has implemented the following changes to the following portfolios:

• Consumer and professional trade downlights, the recessed spots portfolio and the LED Light strips moved from Home and Professional to LED;
• Consumer LED functional ceiling products moved from Home to LED;
• LED battens moved from Home to Professional; and
• Consumer and professional trade LED panels moved from Home and LED to Professional.
• Next to this, the financial performance of the Ventures activities is reported in Other instead of in Professional and in Home, as these activities are managed outside of the aforementioned business groups. In addition, the switches business within Lamps has been moved to LED.

Therefore, with effect from the first quarter of 2018, Signify reports and discusses its financial performance based on the above portfolio changes. In March 2018, the company provided an update to show the effect of changes to the business portfolio as well as changes to the allocation methods of centrally-managed costs and expenses and threshold for other incidental items as adjusting items when presenting certain non-IFRS measures such as Adjusted EBITA.

In addition, the cash flow presentation has been amended to better correspond to the balance sheet and to further improve transparency on cash flow movements.

Market Abuse Regulation
This press release contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.