Quarterly Report • Oct 19, 2017
Quarterly Report
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October 19, 2017
Eindhoven, the Netherlands – Philips Lighting (Euronext: LIGHT), the world leader in lighting, today announced the company's third quarter results 2017. "In line with our objectives, Philips Lighting returned to comparable sales growth in the quarter. For the first time in our transformation, the growth of LED and connected lighting systems & services more than offset the decline of our conventional business," said CEO Eric Rondolat. "At the same time, we continued to improve our profitability, with LED and connected lighting systems & services being substantial contributors. This demonstrates the successful execution of our strategy as we remain on track to reach our outlook for 2017."
Achieving positive comparable sales growth in the third quarter is an important step in the improvement of the growth profile of the company. We are on track to improve our Adjusted EBITA margin by 50-100 basis points for the full year, excluding a EUR 15 million real estate gain in the second quarter. In addition, we expect a strong free cash flow in the fourth quarter based on a substantial reduction in inventories.
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.
| Third quarter | First nine months | |||||
|---|---|---|---|---|---|---|
| 2016 | 2017 | change | in € million, except percentages | 2016 | 2017 | change |
| 1,745 | 1,684 | -3.5% | Sales | 5,181 | 5,073 | -2.1% |
| 1.3% | Comparable sales growth | -0.4% | ||||
| -3.5% | Effects of currency movements | -0.5% | ||||
| -1.3% | Consolidation and other changes | -1.1% | ||||
| 692 | 674 | -2.7% | Adjusted gross margin | 2,019 | 2,021 | 0.1% |
| 39.7% | 40.0% | Adj. gross margin (as % of sales) | 39.0% | 39.8% | ||
| -467 | -437 | Adj. SG&A expenses | -1,410 | -1,386 | ||
| -81 | -85 | Adj. R&D expenses | -254 | -254 | ||
| -548 | -522 | 4.7% | Adj. indirect costs | -1,664 | -1,640 | 1.4% |
| 31.4% | 31.0% | Adj. indirect costs (as % of sales) | 32.1% | 32.3% | ||
| 175 | 176 | 0.7% | Adjusted EBITA | 457 | 492 | 7.7% |
| 10.0% | 10.5% | Adjusted EBITA margin (%) | 8.8% | 9.7% | ||
| -55 | 14 | Adjusted items | -114 | -40 | ||
| 120 | 191 | 59.0% | EBITA | 343 | 452 | 31.8% |
| 93 | 161 | 73.0% | Income from operations (EBIT) | 260 | 367 | 41.0% |
| -12 | -10 | Net financial income/expense | -55 | -32 | ||
| -30 | -42 | Income tax expense | -84 | -91 | ||
| 51 | 110 | 114.8% | Net income | 122 | 244 | 99.7% |
| 164 | -5 | Free cash flow | 146 | -30 | ||
| 0.37 | 0.80 | Basic EPS (€) | 0.83 | 1.74 | ||
| 34,251 | 33,422 | 461010 | Employees (FTE) | 34,251 | 33,422 |
Sales amounted to EUR 1,684 million. On a comparable basis, the increase was 1.3%, driven by significant growth in LED, Professional and Home. Europe delivered robust growth, while the Americas continued to experience softer market conditions. Markets in the Middle East & Turkey, most notably Saudi Arabia, continued to be challenging. Solid performance in business groups LED, Professional and Home drove total LED-based sales growth of 22%. Total LED-based sales now represent 68% of total sales compared to 56% in the same quarter last year. As a percentage of sales, the adjusted gross margin improved by 30 basis points to 40.0%, largely driven by procurement savings and increased productivity, partly offset by price erosion. Adjusted indirect costs as a percentage ofsales decreased by 40 basis points to 31.0%. Adjusted EBITA increased to EUR 176 million, resulting in a 50 basis point improvement of the Adjusted EBITA margin to 10.5%. Restructuring and incidental items had a positive impact of EUR 14 million. Restructuring costs were EUR 9 million, while incidental items mainly related to a real estate gain of EUR 21 million in Lamps. Net income increased from EUR 51 million to EUR 110 million. Free cash flow amounted to EUR -5 million which included a contribution to the US pension fund of EUR 42 million (USD 50 million) and proceeds related to the sale of real estate of EUR 21 million. Working capital increased as inventories increased in Home in anticipation of the high season, whereas inventories increased in several geographies where sales were softer than anticipated.
| Third quarter | First nine months | |||||
|---|---|---|---|---|---|---|
| 2016 | 2017 | change | in € million, unless otherwise indicated | 2016 | 2017 | change |
| 570 | 423 | -25.8% | Sales | 1,757 | 1,378 | -21.6% |
| -20.2% | Comparable sales growth (%) | -18.7% | ||||
| 120 | 85 | -29.4% | Adjusted EBITA | 362 | 294 | -18.8% |
| 21.1% | 20.0% | Adjusted EBITA margin (%) | 20.6% | 21.3% | ||
| 110 | 107 | EBITA | 342 | 317 | ||
| 110 | 107 | Income from operations (EBIT) | 340 | 316 |
Sales amounted to EUR 423 million, a comparable decline of 20.2%, which partly reflects a high base of comparison in the third quarter of 2016. Adjusted EBITA decreased to EUR 85 million, due to the sales decline, partly offset by procurement and productivity savings. The Adjusted EBITA margin remained robust at 20.0%. Reported EBITA included a real estate gain of EUR 21 million in the third quarter.
| Third quarter | First nine months | ||||||
|---|---|---|---|---|---|---|---|
| 2016 | 2017 | change | in € million, unless otherwise indicated | 2016 | 2017 | change | |
| 377 | 416 | 10.4% | Sales | 1,078 | 1,264 | 17.2% | |
| 14.3% Comparable sales growth (%) |
17.2% | ||||||
| 40 | 45 | 11.5% | Adjusted EBITA | 89 | 129 | 44.5% | |
| 10.6% | 10.7% | Adjusted EBITA margin (%) | 8.3% | 10.2% | |||
| 40 | 44 | EBITA | 88 | 125 | |||
| 39 | 43 | Income from operations (EBIT) | 85 | 122 |
Sales increased by 14.3% to EUR 416 million, on a comparable basis, driven by significant volume growth, partly offset by lower selling prices and stronger growth in more affordable products. Growth was primarily driven by LED lamps, while growth in LED electronics slowed down. All regions contributed to growth, although countries with high LED penetration rates showed lower growth. The Adjusted EBITA increased to EUR 45 million, driven by operational leverage and procurement savings, offsetting price reductions and mix impact. Adjusted EBITA margin increased by 10 basis points to 10.7%.
| Third quarter | First nine months | |||||
|---|---|---|---|---|---|---|
| 2016 | 2017 | change | in € million, unless otherwise indicated | 2016 | 2017 | change |
| 664 | 685 | 3.2% | Sales | 1,949 | 1,974 | 1.3% |
| 7.0% | Comparable sales growth (%) | 2.2% | ||||
| 42 | 69 | 64.5% | Adjusted EBITA | 94 | 130 | 38.1% |
| 6.3% | 10.1% | Adjusted EBITA margin (%) | 4.8% | 6.6% | ||
| 1 | 60 | EBITA 47 |
93 | |||
| -24 | 35 | Income from operations (EBIT) | 17 |
Sales amounted to EUR 685 million, an increase of 7.0% on a comparable basis. Europe and the Rest of the World remained strong, while market conditions in the United States continued to be soft, particularly for small- to medium-sized projects. Market conditions in Saudi Arabia continued to be challenging, negatively impacting comparable sales growth by 300 basis points. Adjusted EBITA increased by 64.5% to EUR 69 million. The Adjusted EBITA margin increased by 380 basis points to 10.1%, mainly driven by operational leverage, mix improvements and cost reductions.
| Third quarter | First nine months | ||||||
|---|---|---|---|---|---|---|---|
| 2016 | 2017 | change | in € million, unless otherwise indicated | 2016 | 2017 | change | |
| 130 | 158 | 21.6% | Sales | 381 | 453 | 18.8% | |
| 28.1% | Comparable sales growth (%) | ||||||
| -1 | 2 | 324.5% | Adjusted EBITA | -23 | 16 | 170.0% | |
| -0.8% | 1.4% | Adjusted EBITA margin (%) | -6.0% | 3.6% | |||
| 1 | 3 | EBITA | -45 | 13 | |||
| 0 | -1 | Income from operations (EBIT) | -48 | 9 |
Sales amounted to EUR 158 million, an increase of 28.1% on a comparable basis, mainly driven by significant growth in Home Systems, and solid growth in all regions. Home Systems continued to invest in innovation, marketing and supply chain, to support future growth. Adjusted EBITA increased to EUR 2 million, improving the Adjusted EBITA margin by 220 basis points to 1.4%, driven by operational leverage and a continued focus on product cost innovation.
Adjusted EBITA amounted to EUR -24 million in the quarter (Q3 2016: EUR -26 million). Adjusted EBITA in Other represents amounts not allocated to the operating segments and is comprised of certain costs related to group enabling functions as well as central R&D activities to drive innovation. EBITA amounted to EUR -23 million (Q3 2016: EUR -32 million), including restructuring costs of EUR 1 million. Other incidental items not part of the Adjusted EBITA included a charge of EUR 3 million for separation costs and a net gain of EUR 6 million related to the release of a provision originating from the separation.
| Third quarter | First nine months | |||||||
|---|---|---|---|---|---|---|---|---|
| 2016 | 2017 | Change | CSG* | in € million, except percentages | 2016 | 2017 | change | CSG* |
| 530 | 557 | 5.0% | 5.6% | Europe | 1,575 | 1,631 | 3.6% | 4.5% |
| 560 | 514 | -8.3% | -3.2% | Americas | 1,664 | 1,587 | -4.7% | -4.7% |
| 527 | 490 | -7.1% | -0.4% | Rest of the World | 1,556 | 1,520 | -2.3% | -0.8% |
| 128 | 124 | -2.9% | 11.7% | Global businesses | 386 | 335 | -13.0% | -0.7% |
| 1,745 | 1,684 | -3.5% | 1.3% | Total | 5,181 | 5,073 | -2.1% | -0.4% |
* CSG: Comparable Sales Growth
Comparable sales in Europe increased by 5.6%, driven by solid performance in, among others, the Benelux, Germany and Iberia. In the Americas, sales declined by 3.2% on a comparable basis due to an accelerated decline in conventional lighting and softer market conditions, most notably in the United States. Comparable sales for the Rest of the World remained flat at -0.4%, with a solid performance in countries such as India, Russia and Central Asia and Greater China, offset by continued challenging market conditions in Saudi Arabia.
| in € million, unless otherwise indicated | 30 Sep '16 | 31 Dec '16 | 30 Jun '17 | 30 Sep '17 |
|---|---|---|---|---|
| Inventories | 999 | 886 | 1,082 | 1,137 |
| Receivables | 1,485 | 1,600 | 1,410 | 1,447 |
| Accounts and notes payable | -935 | -1,024 | -1,035 | -1,015 |
| Accrued liabilities | -471 | -502 | -434 | -452 |
| Other | -269 | -298 | -254 | -280 |
| Working capital | 809 | 662 | 769 | 837 |
| As % of LTM* sales | 11.2% | 9.3% | 10.9% | 11.9% |
* LTM: Last Twelve Months 7,008
Working capital increased year-on-year by EUR 28 million to EUR 837 million. Working capital represents 11.9% of sales, compared to 11.2% at the end of September 2016. Working capital increased as inventories increased in Home in anticipation of the high season, whereas in several geographies inventories increased as sales were softer than anticipated.
| Third quarter | First nine months | |||
|---|---|---|---|---|
| 2016 | 2017 | in € million | 2016 | 2017 |
| 93 | 161 | Income from operations (EBIT) | 260 | 367 |
| 72 | 67 | Depreciation and amortization | 216 | 197 |
| 87 | -107 | Change in working capital | -51 | -292 |
| -21 | 3 | Net capex | -61 | -9 |
| 7 | -76 | Change in provisions | -51 | -123 |
| -14 | -4 | Interest paid | -21 | -11 |
| -36 | -29 | Income taxes paid | -73 | -84 |
| -24 | -21 | Other | -73 | -77 |
| 164 | -5 | Free cash flow | 146 | -30 |
Free cash flow decreased to EUR -5 million this quarter from EUR 164 million in the same period last year. This is mainly driven by the changes in working capital in both quarters. This quarter, working capital increased as an improvement in the company's growth profile and a build-up in Home ahead of the high season in the fourth quarter led to higher inventories. In addition, inventories increased in several geographies where sales were softer than anticipated. In the same period last year, working capital was lowered as the company still experienced negative growth. Free cash flow includes a contribution of EUR 42 million (USD 50 million) to the company's pension fund in the US to reduce liabilities and to lower future interest expenses which was partly offset by proceeds related to sale of real estate of EUR 21 million. Free cash flow included a restructuring payout of EUR 22 million (Q3 2016: EUR 23 million) and separation costs of EUR 8 million (Q3 2016: EUR 19 million).
| in € million | 30 Sep '16 | 31 Dec '16 | 30 Jun '17 | 30 Sep '17 |
|---|---|---|---|---|
| Short-term debt | 151 | 155 | 123 | 139 |
| Short-term loans payable to Royal Philips | - | 2 | - | - |
| Long-term debt | 1,194 | 1,224 | 1,186 | 1,176 |
| Gross debt | 1,345 | 1,381 | 1,309 | 1,314 |
| Short-term loans receivable from Royal Philips | 30 | - | - | - |
| Cash and cash equivalents | 701 | 1,040 | 612 | 605 |
| Net debt | 614 | 341 | 697 | 709 |
Net debt amounted to EUR 709 million, an increase of EUR 12 million compared to the end of June 2017. Total equity increased to EUR 2,432 million at the end of the third quarter (30 June 2017: EUR 2,396 million), as a result of an increase in net income, partly offset by currency translation differences and the purchase of sharesto cover obligations arising from the company's long-term incentive performance share plan and other employee share plans. Total equity minus net debt amounted to EUR 1,723 million.
Appendix A – Financial Statement Information Appendix B – Reconciliation of non-IFRS Financial Measures Appendix C – Financial Glossary
***
Eric Rondolat (CEO) and Stéphane Rougeot (CFO) will host a conference call for analysts and institutional investors at 10:00 a.m. CET to discuss third quarter results. A live audio webcast of the conference call will be available via the Philips Lighting Investor Relations website.
Robin Jansen Tel: +31 6 1594 4569 E-mail: [email protected]
Elco van Groningen Tel: +31 6 1086 5519 E-mail: [email protected]
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 2016 sales of EUR 7.1 billion, we have approximately 34,000 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.
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.
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.
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.
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.
This press release contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.
in millions of EUR unless otherwise stated
| Q3 | January to September | |||||
|---|---|---|---|---|---|---|
| 2016 | 2017 | 2016 | 2017 | |||
| Sales | 1,745 | 1,684 | 5,181 | 5,073 | ||
| Cost of sales | (1,097) | (1,015) | (3,227) | (3,063) | ||
| Gross margin | 648 | 669 | 1,954 | 2,010 | ||
| Selling expenses | (423) | (405) | (1,282) | (1,284) | ||
| Research and development expenses | (86) | (85) | (266) | (264) | ||
| General and administrative expenses | (63) | (43) | (178) | (151) | ||
| Impairment of goodwill | - | (1) | (2) | (1) | ||
| Other business income | 21 | 31 | 45 | 65 | ||
| Other business expenses | (4) | (6) | (11) | (10) | ||
| Income from operations | 93 | 161 | 260 | 367 | ||
| Financial income | 2 | 2 | 6 | 6 | ||
| Financial expenses | (14) | (12) | (61) | (38) | ||
| Results relating to investments in associates | - | - | 1 | - | ||
| Income before taxes | 81 | 151 | 206 | 335 | ||
| Income tax expense | (30) | (42) | (84) | (91) | ||
| Net income | 51 | 110 | 122 | 244 | ||
| Attribution of net income for the period: | ||||||
| Net income attributable to shareholders of Philips Lighting N.V. |
55 | 113 | 125 | 251 | ||
| Net income attributable to non-controlling interests | (4) | (3) | (3) | (8) |
in millions of EUR unless otherwise stated
| Q3 | January to September | ||||
|---|---|---|---|---|---|
| 2016 | 2017 | 2016 | 2017 | ||
| Net income for the period | 51 | 110 | 122 | 244 | |
| Pensions and other post-employment plans: | |||||
| Remeasurements | - | (1) | - | (1) | |
| Income tax effect on remeasurements | - | - | - | - | |
| Total of items that will not be reclassified to profit or loss |
- | (1) | - | (1) | |
| Currency translation differences: | |||||
| Net current period change, before tax | (34) | (64) | (69) | (240) | |
| Income tax effect | - | - | - | - | |
| Cash flow hedges: | |||||
| Net current period change, before tax | 1 | - | 1 | (16) | |
| Income tax effect | - | - | - | 3 | |
| Total of items that are or may be reclassified to profit or loss |
(33) | (64) | (68) | (253) | |
| Other comprehensive income (loss) | (33) | (65) | (68) | (254) | |
| Total comprehensive income (loss) | 18 | 45 | 54 | (10) | |
| Total comprehensive income (loss) attributable to: | |||||
| Shareholders of Philips Lighting N.V. | 23 | 51 | 60 | 8 | |
| Non-controlling interests | (5) | (6) | (6) | (18) |
in millions of EUR unless otherwise stated
| December | September | |
|---|---|---|
| 31, 2016 | 30, 2017 | |
| Non-current assets | ||
| Property, plant and equipment | 566 | 498 |
| Goodwill | 1,899 | 1,723 |
| Intangible assets, excluding goodwill | 768 | 621 |
| Non-current receivables | 25 | 49 |
| Investments in associates | 26 | 19 |
| Other non-current financial assets | 11 | 13 |
| Deferred tax assets | 472 | 490 |
| Other non-current assets | 28 | 25 |
| Total non-current assets | 3,795 | 3,439 |
| Current assets | ||
| Inventories | 886 | 1,137 |
| Other current assets | 52 | 117 |
| Derivative financial assets | 29 | 8 |
| Income tax receivable | 50 | 52 |
| Receivables | 1,600 | 1,447 |
| Assets classified as held for sale | 3 | 10 |
| Cash and cash equivalents | 1,040 | 605 |
| Total current assets | 3,660 | 3,377 |
| Total assets | 7,455 | 6,816 |
| Equity | 2,704 | 2,347 |
| Shareholders' equity | 104 | 85 |
| Non-controlling interest Total equity |
2,808 | 2,432 |
| Non-current liabilities | ||
| Long-term debt | 1,224 | 1,176 |
| Long-term provisions | 881 | 775 |
| Deferred tax liabilities | 35 | 32 |
| Other non-current liabilities | 150 | 155 |
| Total non-current liabilities | 2,290 | 2,137 |
| Current liabilities | ||
| Short-term debt | 157 | 139 |
| Derivative financial liabilities | 26 | 13 |
| Income tax payable | 57 | 94 |
| Account and notes payable | 1,024 | 1,015 |
| Accrued liabilities | 502 | 452 |
| Short-term provisions | 244 | 181 |
| Liabilities directly associated with assets classified held for sale | 1 | 1 |
| Other current liabilities | 346 | 350 |
| Total current liabilities | 2,357 | 2,246 |
| Total liabilities and total equity | 7,455 | 6,816 |
| Third quarter | ||||||||
|---|---|---|---|---|---|---|---|---|
| comparable growth |
currency effects |
consolidation and other changes |
||||||
| 2017 vs 2016 | ||||||||
| Lamps | -20.2 | -2.9 | -2.7 | -25.8 | ||||
| LED | 14.3 | -4.2 | 0.3 | 10.4 | ||||
| Professional | 7.0 | -3.6 | -0.2 | 3.2 | ||||
| Home | 28.1 | -3.7 | -2.8 | 21.6 | ||||
| Other | -65.7 | -7.1 | 0.0 | -72.8 | ||||
| Total | 1.3 | -3.5 | -1.3 | -3.5 |
| January to September | ||||||
|---|---|---|---|---|---|---|
| comparable growth |
currency effects |
nominal growth |
||||
| 2017 vs 2016 | ||||||
| Lamps | -18.7 | -0.3 | -2.5 | -21.6 | ||
| LED | 17.2 | -0.4 | 0.4 | 17.2 | ||
| Professional | 2.2 | -0.8 | -0.1 | 1.3 | ||
| Home | 21.4 | -0.6 | -2.0 | 18.8 | ||
| Other | -70.6 | -1.5 | 0.0 | -72.1 | ||
| Total | -0.4 | -0.5 | -1.1 | -2.1 |
| Third quarter | ||||
|---|---|---|---|---|
| consolidation comparable currency nominal and other growth effects growth changes |
||||
| 2017 vs 2016 | ||||
| Europe | 5.6 | -0.5 | -0.1 | 5.0 |
| Americas | -3.2 | -4.8 | -0.3 | -8.3 |
| Rest of the World | -0.4 | -5.7 | -1.0 | -7.1 |
| Global businesses | 11.7 | -1.2 | -13.4 | -2.9 |
| Total | 1.3 | -3.5 | -1.3 | -3.5 |
| January to September | ||||
|---|---|---|---|---|
| consolidation comparable currency nominal and other growth effects growth changes |
||||
| 2017 vs 2016 | ||||
| Europe | 4.5 | -0.9 | -0.1 | 3.6 |
| Americas | -4.7 | 0.3 | -0.3 | -4.7 |
| Rest of the World | -0.8 | -1.2 | -0.3 | -2.3 |
| Global businesses | -0.7 | 0.0 | -12.4 | -13.0 |
| Total | -0.4 | -0.5 | -1.1 | -2.1 |
| Philips | ||||||
|---|---|---|---|---|---|---|
| Lighting | Lamps | LED | Professional | Home | Other | |
| July to September 2017 | ||||||
| Adjusted EBITA | 176 | 85 | 45 | 69 | 2 | (24) |
| Restructuring | (9) | 2 | (1) | (9) | - | (1) |
| Acquisition-related charges | - | - | - | - | - | - |
| Incidental items | 23 | 21 | - | - | - | 3 |
| EBITA | 191 | 107 | 44 | 60 | 3 | (23) |
| Amortization | (30) | - | (1) | (25) | (3) | - |
| Income from operations (or EBIT) | 161 | 107 | 43 | 35 | (1) | (23) |
| July to September 2016 | ||||||
| Adjusted EBITA | 175 | 120 | 40 | 42 | (1) | (26) |
| Restructuring | (49) | (10) | - | (41) | 2 | - |
| Acquisition-related charges | - | - | - | - | - | - |
| Incidental items | (6) | - | - | - | - | (6) |
| EBITA | 120 | 110 | 40 | 1 | 1 | (32) |
| Amortization | (27) | - | (1) | (25) | (1) | - |
| Income from operations (or EBIT) | 93 | 110 | 39 | (24) | - | (32) |
| Philips | ||||||
|---|---|---|---|---|---|---|
| Lighting | Lamps | LED | Professional | Home | Other | |
| January to September 2017 | ||||||
| Adjusted EBITA | 492 | 294 | 129 | 130 | 16 | (76) |
| Restructuring | (49) | 2 | (4) | (36) | (3) | (8) |
| Acquisition-related charges | - | - | - | - | - | - |
| Incidental items | 9 | 21 | - | - | - | (12) |
| EBITA | 452 | 317 | 125 | 93 | 13 | (96) |
| Amortization | (86) | (1) | (3) | (76) | (4) | (1) |
| Income from operations (or EBIT) | 367 | 316 | 122 | 17 | 9 | (97) |
| January to September 2016 | ||||||
| Adjusted EBITA | 457 | 362 | 89 | 94 | (23) | (65) |
| Restructuring | (90) | (20) | (1) | (46) | (22) | (1) |
| Acquisition-related charges | (1) | - | - | (1) | - | - |
| Incidental items | (23) | - | - | - | - | (23) |
| EBITA | 343 | 342 | 88 | 47 | (45) | (89) |
| Amortization | (83) | (2) | (3) | (75) | (3) | - |
Income from operations (or EBIT) 260 340 85 (28) (48) (89)
| July to September 2016 |
July to September 2017 |
January to September 2016 |
January to September 2017 |
|
|---|---|---|---|---|
| Sales | 1,745 | 1,684 | 5,181 | 5,073 |
| Cost of Sales | (1,097) | (1,015) | (3,227) | (3,063) |
| Gross Margin | 648 | 669 | 1,954 | 2,010 |
| Restructuring | 44 | 5 | 65 | 11 |
| Acquisition-related charges | - | - | - | - |
| Incidental items | - | - | - | - |
| Adjusted Gross Margin | 692 | 674 | 2,019 | 2,021 |
| Adjusted Gross Margin % | 39.7% | 40.0% | 39.0% | 39.8% |
| July to September 2016 |
July to September 2017 |
January to September 2016 |
January to September 2017 |
|
|---|---|---|---|---|
| Selling expenses | (423) | (405) | (1,282) | (1,284) |
| G&A expenses | (63) | (43) | (178) | (151) |
| SG&A expenses | (486) | (448) | (1,460) | (1,435) |
| Restructuring* | - | 7 | 13 | 32 |
| Acquisition-related charges | - | - | 1 | - |
| Incidental items | 19 | 3 | 36 | 16 |
| Adjusted SG&A expenses | (467) | (437) | (1,410) | (1,386) |
| Adjusted SG&A expenses % | -26.8% | -26.0% | -27.2% | -27.3% |
* This line includes impairment of acquisition related intangible assets which originate from restructuring initiatives.
| July to September 2016 |
July to September 2017 |
January to September 2016 |
January to September 2017 |
|
|---|---|---|---|---|
| R&D expenses | (86) | (85) | (266) | (264) |
| Restructuring | 5 | 1 | 12 | 10 |
| Acquisition-related charges Incidental items |
- - |
- - |
- - |
- - |
| Adjusted R&D expenses | (81) | (85) | (254) | (254) |
| Adjusted R&D expenses % | -4.6% | -5.0% | -4.9% | -5.0% |
| Acquisition-related charges | Costs that are directly triggered by the acquisition of a company, such as transaction costs, purchase accounting related costs and integration related expenses |
|---|---|
| Adjusted EBITA | EBITA excluding restructuring costs, acquisition related charges and other incidental charges |
| Adjusted EBITA margin (%) | Adjusted EBITA divided by Sales to third parties (excluding intersegment) |
| Adjusted gross margin | Gross margin, excluding restructuring costs, acquisition-related charges and other incidental |
| Adjusted indirect costs | items attributable to cost of sales Indirect costs, excluding restructuring costs, acquisition-related charges and other incidental items attributable to indirect costs |
| Adjusted R&D expenses | Research and development expenses, excluding restructuring costs, acquisition-related charges and other incidental items attributable to research and development expenses |
| Adjusted SG&A expenses | Selling, general and administrative expenses, excluding restructuring costs, acquisition-related charges and other incidental items attributable to |
| Comparable sales growth | selling, general and administrative expenses The period-on-period growth in sales excluding the effects of currency movements and changes in consolidation and other changes |
| EBIT | Income from operations |
| EBITA | Income from operations excluding amortization and impairments of acquisition related intangible assets and goodwill |
| EBITDA | Income from operations excluding depreciation, amortization and impairments of non-financial assets |
| Effects of changes in consolidation and other changes |
In the event a business is acquired (or divested), the impact of the consolidation (or de-consolidation) on the Group's figures are included (or excluded) in the comparable figures. Other changes include regulatory changes and changes originating from |
| Effects of currency movements | new accounting standards Calculated by translating previous periods' foreign currency amounts into euro at the following periods' exchange rates in comparison to the euro as historically reported |
| Employees | Employees of Philips Lighting at period end expressed on a full-time equivalent (FTE) basis |
| Free cash flow | Net cash provided by operations minus net capital expenditures. Free cash flow includes interest paid and income taxes paid |
| Gross margin | Sales minus cost of sales |
| Incidental charges | Any item with an income statement impact (loss or gain) that is deemed to be both significant and not part of normal business activity. Other incidental |
| items may extend over several quarters within the | |
|---|---|
| same financial year | |
| Indirect costs | The sum of Selling, R&D and General and |
| administrative expenses | |
| Net capital expenditures | Additions of intangible assets, capital expenditures |
| on property, plant and equipment and proceeds | |
| from disposal of property, plant and equipment, and | |
| intangible assets | |
| Net debt | Short-term debt, short-term loans payable |
| (receivable) to Royal Philips, long-term debt minus | |
| cash and cash equivalents | |
| Net leverage ratio | The ratio of consolidated total net debt to adjusted |
| consolidated EBITDA for the purpose of calculating | |
| the facility covenant for the term loan and revolving | |
| credit facility | |
| R&D expenses | Research and development expenses |
| Restructuring costs | The estimated costs of initiated reorganizations, the |
| most significant of which have been approved by the | |
| Group, and which generally involve the realignment | |
| of certain parts of the industrial and commercial | |
| organization | |
| SG&A expenses | Selling, General and Administrative expenses |
| Working capital | The sum of Inventories, Receivables, Other current |
| assets, Derivative financial assets, Income tax | |
| receivable minus the sum of Accounts and notes | |
| payable, Accrued liabilities, Derivative financial | |
| liabilities, Income tax payable and Other current | |
| liabilities | |
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