Philips Lighting reports 0.5% full year comparable sales growth, 10% operational profitability and EUR 403 million free cash flow

Press release

February 2, 2018

Philips Lighting reports 0.5% full year comparable sales growth, 10% operational profitability and EUR 403 million free cash flow

Full year 2017 highlights

• Sales of EUR 6,965 million, with an increase in comparable sales of 0.5% (2016: -2.4%)
• Total LED-based comparable sales growth of 19%, representing 65% of total sales (2016: 55%)

Adjusted EBITA of EUR 699 million (2016: EUR 645 million)

Adjusted EBITA margin improvement of 90 basis points to 10.0% (2016: 9.1%)

Net income of EUR 281 million (2016: EUR 185 million)

Free cash flow of EUR 403 million (2016: EUR 418 million)

Fourth quarter 2017 highlights

• Sales of EUR 1,892 million, with an increase in comparable sales of 3.0% (2016: -3.2%)
• Total LED-based comparable sales growth of 19%, now representing 68% of total sales (Q4 2016: 59%)
• Adjusted EBITA of EUR 207 million (Q4 2016: EUR 188 million)
• Adjusted EBITA margin improvement of 120 basis points to 10.9% (Q4 2016: 9.7%)
• Net income of EUR 38 million (Q4 2016: EUR 63 million)
• Free cash flow of EUR 434 million (Q4 2016: EUR 272 million)

Shareholder return

• In 2017, EUR 429 million was used for share repurchases and to pay dividend related to 2016
• Propose to pay a cash dividend of EUR 1.25 per share in 2018, representing an increase of 14% and a pay-out ratio of 45%
• Intention to repurchase shares for an amount of up to EUR 150 million in 2018, by participating in share disposals by its main shareholder

Eindhoven, the Netherlands - Philips Lighting (Euronext: LIGHT), the world leader in lighting, today announced the company's fourth quarter and full year results 2017. "In line with our objectives, Philips Lighting returned to comparable sales growth in 2017 driven by the growth of LED and connected lighting Systems & Services, which demonstrates the successful execution of our strategy," said CEO Eric Rondolat. "We also further increased our operational profitability with significant improvements in LED, Professional and Home and we delivered a solid free cash flow. This will enable us to continue to invest in growth opportunities, provide a return to shareholders and optimize our balance sheet. Our team remains focused on achieving our medium-term outlook." 

Financial review 

Fourth quarter				Twelve months
2016	2017	change	in € million, except percentages	2016	2017	change
		3.0%	Comparable sales growth			0.5%
		-4.6%	Effects of currency movements			-1.6%
		-0.6%	Consolidation and other changes			-1.0%
1,934	1,892	-2.2%	Sales	7,115	6,965	-2.1%
744	731	-1.8%	Adjusted gross margin	2,763	2,752	-0.4%
38.5%	38.6%		Adj. gross margin (as % of sales)	38.8%	39.5%
-507	-471		Adj. SG&A expenses	-1,917	-1,857
-86	-80		Adj. R&D expenses	-340	-334
-593	-551	7.1%	Adj. indirect costs	-2,257	-2,191	2.9%
30.7%	29.1%		Adj. indirect costs (as % of sales)	31.7%	31.5%
188	207	10.1%	Adjusted EBITA	645	699	8.4%
9.7%	10.9%		Adjusted EBITA margin (%)	9.1%	10.0%
-52	-88		Adjusted items	-166	-128
136	119	-12.2%	EBITA	479	571	19.3%
109	75	-31.6%	Income from operations (EBIT)	369	441	19.5%
-12	-12		Net financial income/expense	-67	-43
-35	-25		Income tax expense	-119	-117
63	38	-40.3%	Net income	185	281	52.0%
272	434		Free cash flow	418	403
0.43	0.30		Basic EPS (€)	1.26	2.04
34,256	32,130	461010	Employees (FTE)	34,256	32,130

Outlook

In 2018, we aim to improve our Adjusted EBITA margin to 10.0-10.5%, in line with our medium-term outlook. We will continue to focus on our cost reduction initiatives, and expect to benefit from higher savings as of the second half of 2018. We also aim to deliver positive comparable sales growth for the full year, with a soft start in the first quarter. We expect to generate solid free cash flow in 2018, which is, however, expected to be somewhat lower than the level in 2017 due to higher restructuring payments.

Financial calendar 2018

February 27, 2018	Annual report 2017
April 26, 2018	First quarter results 2018
May 15, 2018	Annual General Meeting of Shareholders
July 27, 2018	Half year results 2018
October 26, 2018	Third quarter results 2018

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

For the presentation 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 09:00 a.m. CET to discuss fourth quarter and full year results.  

For the audio webcast click here

For further information, please contact:

Philips Lighting Investor Relations
Robin Jansen
Tel: [phone]
E-mail: [e-mail]

Philips Lighting Communications
Elco van Groningen
Tel: [phone]
E-mail: [e-mail]

About Philips Lighting
Philips Lighting (Euronext: LIGHT), the world leader in lighting products, systems and services, delivers innovations that unlock business value, providing rich user experiences that help improve lives.  Serving professional and consumer markets, we lead the industry in leveraging the Internet of Things to transform homes, buildings and urban spaces.  With 2017 sales of EUR 7.0 billion, we have approximately 32,000 employees in over 70 countries.  News from Philips Lighting is located at the Newsroom, Twitter and LinkedIn. 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 Philips Lighting 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 2016 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 2016 and the semi-annual report for the first half of 2017.

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 17 Reconciliation of non-IFRS measures" in the Annual Report 2016.

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 2016.
As part of the financial reporting improvement process, the presentation of the line item "Results relating to investments in associates" was moved into the subtotal "Income before taxes" in the Condensed consolidated statements of income. This change did not impact the income of operations or financial position.

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

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Source: Philips Lighting via Globenewswire