Press Release
July 27, 2018

Signify reports second quarter sales of EUR 1.5 billion and operational profitability of 8.4%;
Increases share repurchase program to EUR 300 million
Second quarter 20181• Sales of EUR 1,537 million; a comparable decrease of 3.4%
• LED-based comparable sales growth of 4.7%, representing 70% of total sales (Q2 2017: 63%)
• Adj. currency comparable indirect costs down EUR 46 million, a reduction of 8%; or 150 basis points of sales• Adj. EBITA of EUR 130 million (Q2 2017: EUR 159 million), impacted by currency effects of EUR -22 million• Adj. EBITA margin of 8.4% (Q2 2017: 9.4%), including a currency impact of -80 basis points• Net income of EUR 29 million (Q2 2017: EUR 73 million), reflecting higher restructuring costs, lower
profitability and a real estate gain in Q2 2017
• Free cash flow of EUR -31 million (Q2 2017: EUR -44 million excluding real estate proceeds)• Share repurchase program for 2018 increased from EUR 150 million to EUR 300 million
Half year 2018 highlights1• Sales of EUR 3,038 million, a comparable decrease of 3.4%; LED-based comparable sales growth of 5.3%
• Strong reduction in currency comparable indirect costs of EUR 84 million, or 120 basis points of sales• Adjusted EBITA margin of 7.7% (H1 2017: 8.4%), including a currency impact of -60 basis points• Working capital improved by 70 basis points to 10.5% of sales• Free cash flow of EUR -37 million, an improvement compared with EUR -62 million, excluding real estateproceeds in H1 2017
Eindhoven, the Netherlands – Signify (Euronext: LIGHT), the world leader in lighting, today announced thecompany’s 2018 second quarter results. “In the second quarter, profitability improved in Lamps, LED andProfessional while the performance in Home remained weak. We significantly reduced our cost base andworking capital, thereby structurally improving our cash generation,” said CEO Eric Rondolat. “However,given the slow start to the year and as we expect ongoing challenging market conditions, we have decided torevise our sales outlook for the year. We expect our sales growth performance to improve in the second half,
but this will not be enough to deliver positive comparable sales growth for the full year. At the same time,
we confirm our profitability and cash flow outlook for the year as our teams remain focused on relentlessly
executing our strategy, driving down our cost base while investing in innovation and growth opportunities.”¹This press release contains certain non-IFRS financial measures and ratios, such as comparable sales growth, EBITA, adjusted EBITA andfree cash flow, and related ratios, which are not recognized measures of financial performance or liquidity under IFRS. For a reconciliationof 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.

2

OutlookGiven the slow start to the year in Home, more challenging market and competitive dynamics in somegeographies, as well as global scarcity in certain electronic components, Signify has decided to revise its sales
outlook for 2018. The company expects its comparable sales growth in the second half to improve comparedwith the first half, however, the improvement is not expected to be sufficient to deliver positive comparable
sales growth for the full year.
Taking into account the anticipated cost savings in the second half of 2018, the company maintains its earlier
outlook to improve the Adjusted EBITA margin from 9.6% in 2017 to 10.0-10.5% in 2018, albeit at the lower endof the range. The company also continues to expect to generate a solid free cash flow in 2018, which will besomewhat lower than the level in 2017 due to higher restructuring payments.

Capital allocation
Increase in share repurchase program for 2018 from EUR 150 million to EUR 300 million
The company has decided to increase the amount allocated for share repurchases from EUR 150 million to EUR
300 million. In the first half of 2018, the company repurchased shares for an amount of EUR 71 million by
participating in share disposals by its main shareholder. As a result, Signify intends to repurchase additional
shares for up to EUR 229 million in the remainder of 2018, either in the open market or by participating in sharedisposals by its main shareholder.
Second contribution of USD 50 million to US pension fund planned for Q3 2018
Signify has an active pension de-risking strategy in which it actively looks for opportunities to reduce the risks
associated with the defined-benefit plans. As part of this strategy, it announced in Q2 2017 that it intended tocontribute approximately USD 150 million to its US pension fund over the period 2017-2019 to further reduce
liabilities and to lower interest expenses going forward. Following the first contribution of USD 50 million in Q3
2017, Signify intends to make the second contribution of USD 50 million in Q3 2018.

3

Financial review
Changes to financial reporting
Since the first quarter of 2018, Signify reports and discusses its financial performance based on the recently
announced portfolio changes to further align the organizational structure with the strategy. In March 2018, thecompany provided an update to show the effect of changes to the business portfolio as well as changes to theallocation 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.

2017

Second quarter
2018

2017

Six months
2018changein € million, except percentages

-3.4%
-5.5%
-0.6%
-9.5%
-14.1%

Comparable sales growth
Effects of currency movements
Consolidation and other changes
Sales
Adjusted gross margin
Adj. gross margin (as % of sales)

3,389
1,349
39.8%

3,038
1,163
38.3%

Adj. SG&A expenses
Adj. R&D expenses

-946
-173

-822
-153

change
-3.4%
-6.3%
-0.6%
-10.4%-13.8%

1,699
678
39.9%

1,537
583
37.9%

-463
-85

-405
-73

-549
32.3%

-478
31.1%

12.9%

Adj. indirect costs
Adj. indirect costs (as % of sales)-1,119
33.0%

-976
32.1%

12.8%

159
9.4%
-20

130
8.4%
-53

-18.4%

Adjusted EBITA
Adjusted EBITA margin (%)
Adjusted items

286
8.4%
-25

235
7.7%
-96

-17.7%

13977-44.4%

EBITA

262

140

-46.6%

111
-11
-26
73

54
-13
-12
29

-51.4%

Income from operations (EBIT)Net financial income/expense
Income tax expense
Net income

206
-22
-50
134

94
-23
-22
49

-54.5%-27
0.51
34,545-31
0.23
30,097

Free cash flow
Basic EPS (€)
Employees (FTE)

-26
0.94
34,545-37
0.38
30,097-60.0%-63.2%

Second quarter
Performance in the second quarter reflects the weak performance in Home, more challenging market andcompetitive dynamics in some geographies as well as global scarcity in certain electronic components. Sales
amounted to EUR 1,537 million. Adjusted for -5.5% currency effects and -0.6% consolidation impact, comparable
sales decreased by 3.4%. Comparable LED-based sales grew by 4.7% and now represent 70% of total
sales compared with 63% in Q2 2017. The adjusted gross margin decreased by 200 basis points to 37.9%,
mainly due to a high comparison base in Lamps and weak performance in Home. Continued procurementsavings and increased productivity were offset by price erosion and currency effects.

4Adjusted indirect costs decreased by EUR 71 million, or 120 basis points as a percentage of sales, as a result of
rigorous implementation of cost reduction initiatives. Adjusted EBITA amounted to EUR 130 million, comparedwith EUR 159 million in the same period last year, and was negatively impacted by EUR 22 million of currency
effects. The Adjusted EBITA margin was 8.4%, compared with 9.4% last year, including currency effects of -80
basis points. Restructuring costs were EUR 35 million and incidental items were EUR 17 million. Net income was
EUR 29 million compared with EUR 73 million last year, due to lower Adjusted EBITA (EUR 29 million) and a realestate gain in Q2 2017 (EUR 15 million). Free cash flow amounted to EUR -31 million compared with EUR -44
million, excluding real estate proceeds of EUR 17 million in Q2 2017.
First half year
Adjusted for -6.3% currency effects and -0.6% consolidation impact, comparable sales decreased by 3.4%.
Comparable LED-based sales grew by 5.3%. Adjusted indirect costs decreased by EUR 143 million, or 90 basis
points as a percentage of sales. The Adjusted EBITA margin was 7.7% compared with 8.4% last year, including
currency effects of -60 basis points. Net income was EUR 49 million compared with EUR 134 million last year,
mainly due to lower Adjusted EBITA (EUR 51 million), higher restructuring costs (EUR 33 million) and real estate
gains in H1 2017 (EUR 30 million), partly offset by lower tax expenses (EUR 28 million). Free cash flow improved
to EUR -37 million, compared with EUR -62 million, excluding real estate proceeds of EUR 36 million in H1 2017.

Lamps
2017

Second quarter
2018

449
93
20.7%
96
95

351
74
21.2%
72
72

changein € million, unless otherwise indicated2017

Six months
2018-16.4%-21.8%-19.9%

Comparable sales growth (%)
Sales
Adjusted EBITA
Adjusted EBITA margin (%)
EBITA
Income from operations (EBIT)

939
193
20.5%
203
203

722
153
21.2%
134
133

change-17.0%-23.1%-20.7%

Second quarter
Sales amounted to EUR 351 million, a comparable decrease of 16.4% which is estimated to be lower than themarket decline, resulting in continued market share gains. The Adjusted EBITA margin improved by 50 basis
points to 21.2%. This was mainly driven by lower indirect costs, ongoing procurement savings and increased
productivity, more than offsetting currency effects. Adjusted EBITA amounted to EUR 74 million.

LED
Second quarter
2017
2018

changein € million, unless otherwise indicated0.0%Comparable sales growth (%)

2017

Six months
2018change
1.8%

477

443

-7.2%

Sales

945

887

-6.2%

50
10.5%
48
47

47
10.6%
43
42

-6.7%

Adjusted EBITA
Adjusted EBITA margin (%)
EBITA
Income from operations (EBIT)

90
9.5%
91
88

90
10.1%
85
83

-0.7%

5

Second quarter
Sales amounted to EUR 443 million. On a comparable basis, growth was flat year on year on the back of a highcomparison base and more challenging market conditions. Volumes in LED lamps continue to gradually converge
to market growth, while price erosion is slowing down. Following several quarters of lower demand from OEMs,
LED electronics’ comparable sales trend improved in the quarter. Adjusted EBITA amounted to EUR 47 million,
improving the Adjusted EBITA margin by 10 basis points to 10.6%. The improvement resulted from procurementsavings and lower indirect costs, partly offset by price erosion and currency effects.

Professional
Second quarter
2017
2018
669
52
7.7%
28
3

652
55
8.4%
29
8

changein € million, unless otherwise indicated2017

Six months
2018

3.6%
-2.5%
6.2%

Comparable sales growth (%)
Sales
Adjusted EBITA
Adjusted EBITA margin (%)
EBITA
Income from operations (EBIT)

1,290
64
5.0%
39
-13

1,245
86
6.9%
58
15

change
3.4%
-3.5%
33.3%

Second quarter
Professional delivered a solid performance, taking into account more challenging market conditions in somegeographies and scarcity in certain electronic components globally. Sales increased by 3.6% to EUR 652 million
on a comparable basis. While markets like Canada and the UK experienced difficult market conditions, mostother countries in Europe and the Rest of the World delivered a solid performance. The comparable sales trend
in the US improved compared with preceding quarters. Saudi Arabia showed signs of improvement, limiting theimpact on comparable sales growth to -60 basis points. Adjusted EBITA amounted to EUR 55 million, improving
the Adjusted EBITA margin by 70 basis points to 8.4%, mainly driven by lower indirect costs, partly offset by amore challenging pricing environment.

Home
2017

Second quarter
2018

changein € million, unless otherwise indicated2017

Six months
2018change-5.9%-11.1%-310.5%Comparable sales growth (%)
Sales
Adjusted EBITA

206
-5

181
-46

-6.2%
-12.2%-741.2%Adjusted EBITA margin (%)

100
-6

89
-25

-6.0%

-27.9%-2.7%-25.5%

7

-29

EBITA

6

-51

7

-29

Income from operations (EBIT)

5-52

Second quarter
Sales amounted to EUR 89 million, a decrease of 5.9% on a comparable basis due to the protracted effects ofhigh inventory levels in US retail at the end of last year, which have now returned to more normalized levels. As
a result, sales in Home Systems improved in the quarter while sell-out continued to show substantial growth.
Adjusted EBITA amounted to EUR -25 million. The Adjusted EBITA margin of -27.9% was mainly the result of lower
fixed cost absorption and investments in growth since Q2 2017.

6

Other
Second quarter
Adjusted EBITA amounted to EUR -21 million (Q2 2017: EUR -30 million). It represents amounts not allocated tothe operating segments and includes certain costs related to central R&D activities to drive innovation as well asgroup enabling functions. EBITA amounted to EUR -38 million (Q2 2017: EUR -40 million), including restructuringcosts of EUR 8 million (Q2 2017: EUR 5 million). Other incidental items not part of the Adjusted EBITA included
EUR 9 million of costs mainly related to the company name change (Q2 2017: EUR 5 million of separation costs).

Sales by market
Second quarter

Six months

2017

2018

ChangeCSG*in € million, except percentages

2017

2018

change

CSG*

537

526

-2.1%

-1.1%

Europe**

1,101

1,082

-1.7%

-0.9%

539

443

-17.7%-8.4%

Americas

1,073

860

-19.9%

-9.2%

515

468

-9.1%

-0.4%

Rest of the World

1,004

901

-10.3%

-0.5%

109

101

-7.6%

-4.4%

Global businesses

211

196

-7.5%

-2.6%

1,699
1,537
-9.5%
* CSG: Comparable sales growth

-3.4%

Total

3,389

3,038

-10.4%-3.4%**

Russia & Central Asia are now included in Market Group Europe (were previously part of Rest of the World)

Second quarter
Comparable sales in Europe decreased by 1.1%. A solid performance in Germany, Austria, Switzerland
and Eastern Europe was offset by a weak performance in the UK and Spain. In the Americas, comparable
sales decreased by 8.4%, mainly due to the ongoing decline in Lamps and a weak performance in Home in
the US. Comparable sales for the Rest of the World decreased by 0.4%, with a solid performance in India
offset by continued challenging market conditions in the Middle East & Turkey.

Working capitalin € million, unless otherwise indicatedInventories
Receivables
Accounts and notes payable
Accrued liabilities
Other*
Working capital
As % of LTM** sales

30 Jun '17

31 Mar '18

30 Jun '18

1,082
1,410
-1,035
-434
-234
789
11.2%

957
1,235
-949
-413
-218
612
9.0%

1,009
1,243
-967
-414
-178
694
10.5%

* Working capital definition has been updated and no longer includes income tax receivable and income tax payable**

LTM: Last Twelve Months

Second quarter
Working capital improved year-on-year by EUR 95 million to EUR 694 million, mainly driven by lower receivables
and inventory levels. As a percentage of sales, working capital improved by 70 basis points to 10.5% of sales
compared with the end of June 2017.

7

Cash flow analysis
Second quarter
2017
2018
111
65
49
-58
-136
-4
-27
-10
-15
-27

54
58
53
-62
-84
-6
-22
-22
-1
-31

in € million

Income from operations (EBIT)
Depreciation and amortization
Additions to (releases of) provisions
Utilizations of provisions
Change in working capitalInterest paid
Income taxes paid
Net capex
Other
Free cash flow

Six months
2017

2018

206
130
80
-124
-185
-7
-55
-12
-58
-26

94
116
107
-121
-125
-11
-56
-43
2
-37

Second quarter
Free cash flow amounted to EUR -31 million, an improvement compared with EUR -44 million, excluding realestate proceeds of EUR 17 million in Q2 2017. Free cash flow in Q2 2018 included a restructuring pay-out of EUR
33 million (Q2 2017: EUR 22 million) and an outflow of EUR 10 million related to the company name change (Q22017: EUR 10 million related to the separation).

Net debt
in € million

Short-term debt
Long-term debt
Gross debt
Cash and cash equivalents
Net debt
Total equity

30 Jun '17
123
1,186
1,309
612
697
2,396

31 Mar '18
111
1,157
1,267
833
435
2,202

30 Jun '18
101
1,185
1,286
598
688
2,133

Net debt amounted to EUR 688 million, an increase of EUR 253 million compared with the end of March 2018.
Total equity reduced to EUR 2,133 million at the end of Q2 2018 (Q1 2018: EUR 2,202 million), primarily due todividend distribution and share repurchases, partly offset by net income and currency effects.

8

Other information
Appendix A – Condensed Consolidated Financial Statements for the six-month period ended June 30, 2018
Appendix B – Reconciliation of non-IFRS financial measures
Appendix C – Financial Glossary
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 GroningenTel: +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 theInternet 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 2017 sales of EUR 7.0 billion, wecurrently employ approximately 30,000 employees and have a presence in over 70 countries. We unlock theextraordinary potential of light for brighter lives and a better world. News from Signify is located at theNewsroom, Twitter and LinkedIn. Information for investors can be found on the Investor Relations page.

9

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 numberof 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 notlimited to: adverse economic and political developments, the impacts of rapid technological change, competition in thegeneral 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 listedcompany, pension liabilities and costs, establishment of corporate and brand identity, adverse tax consequences from theseparation 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. Suchrisks, uncertainties and other important factors should be read in conjunction with the information included in the Company’s
Annual Report 2017.
Looking ahead to the second half of 2018, 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 andprospects 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 estimatescompiled 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 offinancial 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 thesemeasures 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 inthis 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 theaccounting policies as stated in the Annual Report 2017 and semi-annual report 2018.

10

Changes to financial reporting following organizational changes to further align the organizational structurewith 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 Homeand 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 inHome, as these activities are managed outside of the aforementioned business groups. In addition, the switches businesswithin Lamps has been moved to LED.
Therefore, with effect from the first quarter of 2018, Signify reports and discusses its financial performance based on theabove portfolio changes. In March 2018, the company provided an update to show the effect of changes to the businessportfolio as well as changes to the allocation methods of centrally-managed costs and expenses and threshold for otherincidental 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 improvetransparency on cash flow movements. As of the first quarter of 2018, Signify provides cash flow statements per quarter.

Market Abuse Regulation

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

11

Unaudited condensed
consolidated interim
financial statements

For the six-month period ended June 30, 2018

Index to the unaudited condensed consolidated interim financial statements
Introduction
Management report

13
14

1. Condensed consolidated interim financial statements
1.1 Condensed consolidated statements of income
1.2 Condensed consolidated statements of comprehensive income
1.3 Condensed consolidated balance sheets
1.4 Condensed consolidated statements of cash flows
1.5 Condensed consolidated statements of changes in equity

16
16
17
18
20
21

2. Notes to the condensed consolidated interim financial statements
for the six-month period ended June 30, 2018
2.1 Introduction
2.2 Basis of preparation
2.3 IFRS accounting standards to be adopted as from 2019 and onwards
2.4 Notes

22
22
22
26
27

13

Semi-annual report
Introduction
The semi-annual report for the six-month
period ended June 30, 2018 of Signify N.V.
(the ‘Company’) consists of the semi-annual
condensed consolidated interim financial
statements, the semi-annual management
report and the responsibility statement by theCompany’s Board of Management.
The main risks and uncertainties for thesecond half of 2018 are addressed in the firstpart of the press release - please refer to thesection ‘Important Information’.
The information in this semi-annual report isunaudited. The semi-annual condensed
consolidated interim financial statements do
not include all the information and disclosuresrequired in the annual financial statements
and should be read in conjunction with theCompany’s Consolidated financial statements
for the year ended December 31, 2017.

Responsibility statement
The Board of Management of the Company
hereby declares that, to the best of theirknowledge, the semi-annual condensed
consolidated interim financial statements forthe six-month period ended June 30, 2018,
which has been prepared in accordance with
IAS 34, Interim Financial Reporting, as
adopted by the European Union, gives a trueand fair view of the assets, liabilities, financial
position and profit or loss of the Company andthe undertakings included in the consolidation
taken as a whole, and the semi-annual
management report for the six-month period
ended June 30, 2018, gives a fair view of theinformation required pursuant to
Section 5:25d(8)-(9) of the Dutch Financial
Markets Supervision Act (Wet op het
Financieel toezicht).
Eindhoven, July 27, 2018

Board of Management
Eric Rondolat
Stéphane Rougeot
René van Schooten

14Management report
Business performance ¹)
First half 2018
Sales amounted to EUR 3,038 million, adecrease of 10.4% on a nominal basis.
Adjusted for a -6.3% currency effect and-0.6% consolidation and other impact,
comparable sales were 3.4% lower than in
the first half of 2017. Comparable LED-based
sales grew by 5.3% and accounted for 69% of
total sales. The adjusted indirect cost basereduced by EUR 143 million, improving by 90
basis points to 32.1% of sales. The Adjusted
EBITA margin was 7.7% compared with 8.4%
in the same period last year, as currency
effects impacted performance by -60 basis
points. Net income was EUR 49 million
compared with EUR 134 million last year,
mainly due to lower Adjusted EBITA (EUR 51
million), higher restructuring costs (EUR 33
million) and real estate gains in the first halfof 2017 (EUR 30 million). The effective tax
rate for the first half of 2018 was 30.7%
compared to 26.9% in 2017. The increase in
the effective tax rate is primarily due tolower non-taxable income in the first six
months of 2018 compared to the prior year.
Compared to the end of June 2017, working
capital as percentage of sales improved by 70
basis points to 10.5% of sales, mainly driven
by lower receivables. Free cash flow
amounted to EUR -37 million, compared with
EUR -62 million, excluding real estateproceeds of EUR 36 million in the first half of
2017.
Lamps
Sales amounted to EUR 722 million, a declineof 23.1% on a nominal basis and 17.0% on acomparable basis, which is estimated to belower than the market decline, resulting incontinued market share gains. Income fromoperations reduced to EUR 133 million due tothe decline in sales and currency effects,
partly offset by pro-active rationalization of
the manufacturing footprint, lower indirect

costs, ongoing procurement savings andincreased productivity. EBITA amounted to
EUR 134 million, compared to EUR 203
million in the first half of 2017. This includes
EUR 19 million of restructuring costs. The
Adjusted EBITA margin improved by 70 basis
points to 21.2%. Adjusted EBITA amounted to
EUR 153 million.
LED
Sales were EUR 887 million, a decline of 6.2%
on a nominal basis and positive growth of
1.8% on a comparable basis, on the back of ahigh comparison base. Growth in LED lamps
remained robust, with volume graduallyconverging to market growth while priceerosion is slowing down. Following several
quarters of lower demand from OEMs, LED
electronics’ comparable sales trend started
to improve in the course of the first half-year.
Income from operations amounted to EUR 83
million. EBITA of EUR 85 million included EUR
5 million of restructuring costs. The Adjusted
EBITA margin improved by 60 basis points to
10.1% as a result of procurement savings andlower indirect costs, partly offset by priceerosion and currency effects.
Professional
Sales were EUR 1,245 million, reflecting anominal sales decline of 3.5% andcomparable sales growth of 3.4%. Europe
and the Rest of the World delivered a solid
performance. The Americas was impacted bydifficult market conditions. The comparable
sales trend in the US improved somewhat in
the second quarter compared to preceding
quarters. Saudi Arabia impacted comparable
sales growth by -140 basis points. Income
from operations was EUR 15 million
compared to EUR -13 million in the same
period last year. EBITA amounted to EUR 58
million. It included restructuring costs of EUR
20 million, mainly related to simplification ofbusiness structures. Adjusted EBITA
amounted to EUR 86 million. The Adjusted
EBITA margin improved by 190 basis points
to 6.9%, mainly driven by lower indirect

1) This section contains certain non-IFRS financial measures and ratios, such as comparable sales growth, EBITA,
Adjusted EBITA, 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
measures, see “Reconciliation of non-IFRS financial measures”.

15

costs, operational leverage andmanufacturing footprint rationalization,
partly offset by a more challenging pricing
environment.
Home
Sales amounted to EUR 181 million, with anominal sales decline of 12.2% and a declineof 6.2% on a comparable basis. This wascaused by lower than expected sales at ourlargest US trade partners in the fourth
quarter of 2017, which resulted in lower sales
in the first half of 2018 to allow for inventory
reductions at our US trade partners. Income
from operations was EUR -52 million and was
impacted by lower fixed cost absorption andhigher investments in growth compared to
the first half of 2017. EBITA amounted to EUR-51 million and included restructuring costsof EUR 5 million. Adjusted EBITA was EUR -46
million.
Other
Reported EBITA amounted to EUR -85
million. This represents amounts notallocated to the operating segments andincludes certain costs related to central R&D
activities to drive innovation as well as groupenabling functions. Adjusted EBITA
amounted to EUR -47 million, compared with
EUR -56 million in the same period last year.
Restructuring costs were EUR 25 million.
Other incidentals, which are not part of
Adjusted EBITA, included EUR 13 million of
costs mainly related to the company namechange and the separation.

16

1. Condensed consolidated interim
financial statements
1.1 Condensed consolidated statements of income
Signify
Condensed consolidated statements of income in mEUR unless otherwise stated
Q2
Sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and development expenses
Impairment of goodwill[5] Other business income[5] Other business expenses
Income from operations
Financial income
Financial expenses
Results relating to investments in associates
Income before taxes[6] Income tax expense
Net income
Attribution of net income for the period:
Net income (loss) attributable to shareholders of Signify N.V.
Net income (loss) attributable to non-controlling interests
Earnings per common share attributable to shareholders
Weighted average number of ordinary shares outstanding used for calculation (in thousands):• Basic• Diluted
Net income attributable to shareholders per ordinary share in EUR:
• Basic• Diluted
The a ccompa nyi ng notes a re a n i ntegra l pa rt of thes e condens ed cons ol i da ted fi na nci a l s ta tements .

January to June

2017
1,699
(1,024)
676
(488)
(93)
18
(1)
111
1
(12)
(1)
99
(26)
73

2018
1,537
(970)
567
(428)
(78)
3
(10)
54
3
(17)
0
41
(12)
29

2017
3,389
(2,047)
1,343
(985)
(182)
34
(4)
206
4
(26)
0
184
(50)
134

2018
3,038
(1,906)
1,132
(858)
(173)
5
(12)
94
7
(30)
0
71
(22)
49

74
(1)

31
(2)

138
(4)

52
(3)

143,949
144,450

136,353
136,809

146,068
146,395

137,386
137,856

0.51
0.51

0.23
0.23

0.94
0.94

0.38
0.38

17

1.2 Condensed consolidated statements of comprehensive income
Signify
Condensed consolidated statements of comprehensive income in mEUR
Q2

January to June

2017
73

2018
29

2017
134

2018
49

(1)
(1)

(3)
(3)

-

(6)
(6)

(139)
-

115
-

(176)
-

51
-

(9)
3
(145)

(11)
1
104

(16)
3
(189)

(1)
(1)
48

Other comprehensive income (loss)
Total comprehensive income (loss)

(146)
(73)

102
131

(189)
(55)

43
92

Total comprehensive income (loss) attributable to:• Shareholders of Signify N.V.
• Non-controlling interests

(66)
(7)

128
3

(43)
(12)

93
(0)

Net income for the period
Pensions and other post-employment plans:• Remeasurements• Income tax effect on remeasurements
Total of items that will not be reclassified to profit or loss
Currency translation differences:• Net current period change, before tax• Income tax effectCash flow hedges:• Net current period change, before tax• Income tax effectTotal of items that are or may be reclassified to profit or loss

The a ccompa nyi ng notes a re a n i ntegra l pa rt of thes e condens ed cons ol i da ted fi na nci a l s ta tements .

18

1.3 Condensed consolidated balance sheets
Signify
Condensed consolidated balance sheets in mEUR
Non-current assets[7] Property, plant and equipment• At cost• Less accumulated depreciation[8] Goodwill[9] Intangible assets, excluding goodwill• At cost• Less accumulated amortization

December 31, 2017

2,333
(1,841)

2,018(1,455)

Non-current receivables
Investments in associates
Other non-current financial assets
Deferred tax assets
Other non-current assets
Total non-current assets
Current assets[10] Inventories

Current financial assets
Other current assets[16] Derivative financial assets
Income tax receivable
Receivables:• Accounts receivable• Other current receivables
Receivables
Assets classified as held for sale
Cash and cash equivalents
Total current assets
Total assets

492
1,694

562
49
21
12
440
35
3,306

June 30, 2018

2,313
(1,847)2,047(1,517)

924
0
77
16
39
1,311
62

1,373
1
942
3,372
6,678

466
1,745

530
49
18
14
462
33
3,317

1,009
4
117
24
35
1,186
57

1,243
7
598
3,038
6,355

19

Equity[11] Share capital
Share premium
Retained earnings
Currency translation differences
Cash flow hedges
Treasury shares
Non-controlling interests
Total equity
Non-current liabilities[12] Long-term debt
[13] Long-term provisions

Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Current liabilities[12] Short-term debt
[16] Derivative financial liabilities

Income tax payable
Account and notes payable
Accrued liabilities[13] Short-term provisions
Liabilities directly associated with assets classified held for sale
Other current liabilities
Total current liabilities
Total liabilities and total equity
The a ccompa nyi ng notes a re a n i ntegra l pa rt of thes e condens ed cons ol i da ted fi na nci a l s ta tements .

December 31, 2017
1
2,163
287
(87)
1
(124)

2,242
79
2,321

June 30, 2018
1
2,009
152
(38)
(2)
(66)

2,057
76
2,133

1,170
777
27
167
2,140

1,185
783
22
172
2,162

140
8
79
1,001
475
204
0
309
2,216
6,678

101
19
65
967
414
195
0
300
2,060
6,355

20

1.4 Condensed consolidated statements of cash flows
Signify
Condensed consolidated statements of cash flows in mEUR
Q2

January to June

Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:• Depreciation, amortization and impairment of non-financial assets• Impairment (reversal) of goodwill, other non-current financial assets and investments in associates• Net gain on sale of assets• Interest income• Interest expense on debt, borrowings and other liabilities• Income tax expense• Additions to (releases of) provisions• Other items
Decrease (increase) in working capital:• Decrease (increase) in receivables• Decrease (increase) in inventories• Increase (decrease) in accounts payable• Increase (decrease) in other current assets, accrued and other current liabilities
Increase (decrease) in non-current receivables, other assets and other liabilities
Utilizations of provisions
Interest paid
Income taxes paid
Net cash provided by (used for) operating activities

2017

2018

2017

2018

73
119
65
1
(17)
(1)
5
26
49
(9)
(136)
(21)
(145)
43
(13)
18
(58)
(4)
(27)
(17)

29
135
58
0
(1)
(3)
7
12
53
8
(84)
12
(31)
(11)
(55)
0
(62)
(6)
(22)
(9)

134
221
130
(1)
(32)
(3)
10
50
80
(14)
(185)
105
(246)
60
(104)
4
(124)
(7)
(55)
(14)

49
267
116
1
(2)
(6)
15
22
107
13
(125)
111
(86)
(47)
(103)
3
(121)
(11)
(56)
6

Cash flows from investing activities
Net capital expenditures:• Additions of intangible assets• Capital expenditures on property, plant and equipment• Proceeds from disposal of property, plant and equipment
Net proceeds from (cash used for) derivatives and current financial assets
Proceeds from other non-current financial assets
Purchases of other non-current financial assets
Purchases of businesses, net of cash acquired
Proceeds from sale of interests in businesses, net of cash disposed of
Net cash provided by (used for) investing activities

(10)
(5)
(22)
18
(2)
1
(3)
0
(0)
(15)

(22)
(5)
(18)
1
(19)
0
(1)
5
0
(36)

(12)
(11)
(37)
36
(0)
0
(3)
(1)
(1)
(17)

(43)
(12)
(33)
1
(3)
1
(4)
5
(0)
(45)

15
(157)
(18)
(121)
(282)
(313)
(9)
935
612

(0)
(171)
(14)
(33)
(218)
(264)
26
825
588

3
(157)
(26)
(203)
(383)
(414)
(14)
1,040
612

(0)
(171)
(31)
(104)
(306)
(344)
7
925
588

Cash flows from financing activities
Funding by (distribution to) Royal Philips
Dividend paid
[12] Proceeds from issuance (payments) of debt
Purchase of treasury shares
Net cash provided by (used for) financing activities
Net cash provided by (used for) operations
Effect of changes in exchange rates on cash and cash equivalents and bank overdrafts
Cash and cash equivalents and bank overdrafts at the beginning of the period 1)
Cash and cash equivalents and bank overdrafts at the end of the period 2)

1) For Q2 2018 a nd 2017, thi s i ncl uded EUR 8 mi l l i on a nd EUR ni l mi l l i on of ba nk overdra fts , res pecti vel y. For the fi rs t ha l f 2018 a nd 2017, thi s i ncl uded ba nk
overdra fts of EUR 17 mi l l i on a nd EUR ni l mi l l i on, res pecti vel y.
2) Incl uded ba nk overdra fts of EUR 10 mi l l i on a nd EUR ni l mi l l i on a s of June 30, 2018 a nd 2017, res pecti vel y.
The a ccompa nyi ng notes a re a n i ntegra l pa rt of thes e condens ed cons ol i da ted fi na nci a l s ta tements .

21

1.5 Condensed consolidated statements of changes in equity
Signify
Condensed consolidated statements of changes in equity in mEUR

Balance as of January 1, 2017
Net Income
Other comprehensive income (loss)
Total comprehensive income (loss)
Movement in non-controllinginterests
Dividend distributed
Purchase of treasury shares
Cancellation of treasury shares
Share-based compensation plans
Funding by (distribution to) Royal
Philips
Balance as of June 30, 2017
Balance as of December 31, 2017
Adoption of IFRS 9 (net of tax)
Restated total balance as of January
1, 2018
Net Income
Other comprehensive income (loss)
Total comprehensive income (loss)
Movement in non-controllinginterests
Dividend distributed
Purchase of treasury shares
Cancellation of treasury shares
Re-issuance of treasury shares
Share-based compensation plans
Funding by (distribution to) Royal
Philips
Balance as of June 30, 2018

Sharecapital2-

Sharepremium
2,369-

Retainedearnings
139
138
138

Currencytranslationdifferences
190
(168)
(168)

Cash flow
hedges4(13)(13)

Treasuryshares-Total shareholders'equity
2,704
138
(181)
(43)

Noncontrollinginterests
104
(4)
(8)
(12)

Equity
2,808
134
(189)
(55)

-

(11)
(82)
4

(146)
-

-

-

(205)
82
-

(157)
(205)
4

-

(157)
(205)
4

2

1
2,281

131

22

(9)

(123)

1
2,304

92

1
2,396

1
-

2,163
-

287
(11)

(87)
-

1
-

(124)
-

2,242
(11)

79
(3)

2,321
(14)

1
-

2,163
-

276
52
(6)
47

(87)
49
49

1
(3)
(3)

(124)
-

2,231
52
40
93

76
(3)
2
(0)

2,307
49
43
92

-

(160)
(1)
9

(171)
-

-

-

(104)
160
1
-

(171)
(104)
9

1
-

1
(171)
(104)
9

1

(1)
2,009

152

(38)

(2)

(66)

(1)
2,057

76

(1)
2,133

The a ccompa nyi ng notes a re a n i ntegra l pa rt of thes e condens ed cons ol i da ted fi na nci a l s ta tements .

22

2. Notes to the condensed
consolidated interim financial
statements for the six-month
period ended June 30, 2018
All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up to totals provided.

2.1 Introduction
Signify N.V. is a public company with limited
liability incorporated under the laws of theNetherlands and listed on Euronext
Amsterdam under the symbol ‘LIGHT’.
As used herein, the term Signify is used for
Signify N.V. (‘the Company’) and its
subsidiaries within the meaning of Section
2:24b of the Dutch Civil Code.
The term Royal Philips is used for
Koninklijke Philips N.V. and its subsidiaries
within the meaning of Section 2:24b of the
Dutch Civil Code.
The Company was incorporated as a private
limited liability company on February 1,
2016 and converted into a public company
with limited liability on May 31, 2016. On
May 15, 2018 the name of the Company
changed from Philips Lighting N.V. to Signify
N.V. The corporate seat of the Company isin Eindhoven, the Netherlands and its
registered office is at High Tech Campus 45,5656 AE Eindhoven. The Company isregistered in the Commercial Register of the
Chamber of Commerce under number
65220692.
Separation from Royal Philips
On February 1, 2016, Koninklijke Philips
N.V. and Philips Lighting Holding B.V.
entered into the Separation Agreement anda set of ancillary agreements, together
effecting the Separation of their respective

businesses and providing a framework forthe relationship between Royal Philips andSignify thereafter (the ‘Separation’). For
more information regarding the Separation,please refer to note 1 in the Consolidated
financial statements for the year ended
December 31, 2017.

2.2 Basis of preparation
The condensed consolidated interim financial
statements have been prepared inaccordance with IAS 34 ‘Interim Financial
Reporting’ as adopted by the European
Union.
Except for the changes disclosed below, theaccounting policies applied in the condensed
consolidated interim financial statements are
consistent with those applied in chapter 14.6of the Consolidated financial statements forthe year ended December 31, 2017. A
number of other new standards andinterpretations are effective from January 1,
2018, including Classification andMeasurement of Share-based Payment
Transactions (Amendments to IFRS 2) andIFRIC 22 Foreign Currency Transactions andAdvance Consideration. These other new
standards and interpretations are notconsidered significant for Signify’s condensed
consolidated interim financial statements.
IFRS 9 Financial instruments
Transition and impact assessment
IFRS 9 Financial Instruments replaces IAS 39
Financial Instruments: Recognition and23

Measurement for annual periods beginningon or after January 1, 2018, bringing together
all three aspects of the accounting for
financial instruments: classification andmeasurement; impairment; and hedge
accounting.
With the exception of hedge accounting,which was applied prospectively, Signify
applied the new standard retrospectively on
January 1, 2018 with the practical expedients
permitted under the standard. Therefore,
comparatives for December 31, 2017 were
not restated. Signify concluded that timing ofrecognition of the expected credit losses for
assets in scope was accelerated compared tothe old requirements of IAS 39. The new
impairment calculation methodology for
trade accounts receivable utilizes thehistorical overdue and collection data as wellas the forward-looking country specific credit
default estimations. As these accounts
receivable do not contain a significant
financing component, Signify applied thesimplified approach whereby the lifetime
expected credit loss on the receivables isrecognized based on a matrix model
calculated per country.
Signify made the following adjustment to the
opening balance as at January 1, 2018. The
adjustment was a result of recording
impairment losses based on the expectedcredit loss model.
Signify
Adjustments IFRS 9 in mEUR

Balance as of December 31,
2017
Adjustment(Increase / (decrease))
Balance as at January 1, 2018
after the adoption of IFRS 9

Deferred tax
assets

Accounts
receivable,
net

Equity

440

1,311

2,321

2

(16)

(14)

442

1,295

2,307

Apart from the impact presented above, IFRS
9, which includes requirements forrecognition and measurement, classification,
impairment, derecognition of financial
instruments and general hedge accounting,does not have a material impact for Signify’s
condensed consolidated interim financial
statements.

Further details on accounting policies aredisclosed in note 16, Financial assets andliabilities.
IFRS 15 Revenue from contracts withcustomers
Transition and impact assessment
IFRS 15 establishes a comprehensive
framework for determining whether, howmuch and when revenue is recognized. It
replaced IAS 18 Revenue, IAS 11 Construction
Contracts and related interpretations.
Signify has adopted IFRS 15 using the
cumulative effect method. Accordingly, theinformation presented for 2017 has not been
restated. Under this method, the cumulative
effect of initially applying this standard isaccounted for as an adjustment to the
opening balance of equity at the date ofinitial application (i.e. January 1, 2018). The
impact of initial application is not material
and therefore no opening balanceadjustment was recorded. Signify applied the
new standard only to contracts that were notconsidered completed contracts at the dateof initial application.
There was no material impact on thecondensed consolidated interim financial
statements for the six-month period ended
June 30, 2018 from implementing IFRS 15. Inother words, had Signify not implemented
IFRS 15 as of January 1, 2018, the condensed
consolidated interim financial statements
would not have been materially different.
Accounting policy
Revenue from the sale of goods is recognizedat the point in time that the customer
obtains control of the goods. For standard
sale of products, control generally passes tothe customer at the time the product isdelivered and accepted, depending on thedelivery conditions. Example of delivery
conditions are “Free-On-Board point ofdelivery” and “Costs, Insurance Paid point ofdelivery”, where the point of delivery may be
the shipping warehouse, or any other pointof destination as agreed in the contract withthe customer.

24

Revenue is recognized at the amount towhich Signify expects to be entitled. The
transaction price excludes amounts collected
on behalf of third parties, such as sales taxes,
and is adjusted for any significant financing
component. The transaction price may bevariable due to discounts, rebates or similararrangements. Revenue is only recognized
for the part of the consideration for which it
is highly probable that a significant reversal in
the amount of cumulative revenue
recognized will not occur. Judgment isrequired in determining the probability andlevel of discounts that will be granted. The
estimate is updated throughout the term of
the contract. For products for which a rightto return exists during a defined period,
revenue is recognized by taking into accountthe historical pattern of actual returns.
Return policies are typically based on
customary return arrangements in local
markets. In case of a right of return, a refund
liability is recorded, similar as was done
under previous guidance. In addition, under
IFRS 15, a return asset is recognized,
representing the right to recover the goods
from the customer. The return asset is anadjustment to cost of goods sold of thespecific transaction and is initially measured
at the former carrying amount of theinventory, less any expected costs to recover
the goods, including any potential decreases
in the value of the returned goods. Although
this represents a change from previous
guidance, due to limited right of returns
granted to date, the impact on Signify’s
condensed consolidated interim financial
statements for the six-month period ended
June 30, 2018, is not material.
Signify applies the practical expedient not toadjust the transaction price for the effects ofa significant financing component if, at
contract inception, it is expected that theperiod between customer payment and thetransfer of goods or services is one year or
less.
Signify offers a range of connected lighting
products, for which functionality is partly
cloud-enabled. When applying IFRS 15,

Signify regards the cloud-enabled services asa separate performance obligation. The
transaction price is allocated to the different
performance obligation based on the relative
stand-alone selling prices. Revenue for the
cloud-enabled services is recognized overtime when the performance obligation issatisfied. This constitutes a change fromprevious guidance, whereby the fullconsideration was recognized as revenue
upon the initial sale. The impact of thischange on the condensed consolidated
interim financial statements for the sixmonth period ended June 30, 2018, ishowever not material.
Shipping and handling expenses related tosales to third parties are generally recorded
as selling expenses. When shipping andhandling is part of a project and billed to thecustomer, then the related expenses arerecorded as cost of sales. Shipping andhandling billed to customers is recognized asrevenue.
A provision for product warranty is made at
the time of revenue recognition and reflects
the estimated costs of replacement and freeof-charge services that will be incurred by
Signify with respect to the products. For
certain products, customers have the option
to purchase an extension of the warranty
and/or life-cycle-services. Extended warranty
and lifecycle services are generally identified
as a separate performance obligation, andthe allocated transaction price is recognized
ratably over time during the extended
warranty- or service period.
Transactions that have multiple promised
goods and services mainly occur in parts ofbusiness group Professional. For thesetransactions, Signify accounts for individual
goods and services, including any goods orservices provided for free, separately in casethey are distinct. The total consideration of
the contract is allocated to all distinct
performance obligations in the contract
based on their stand-alone selling prices.
Stand-alone selling prices are determinedbased on other stand-alone sales

25

transactions that are directly observable,
when possible. However, observable prices
are not available for all performanceobligations. If no direct observable prices areavailable, the stand-alone selling price isnormally based on the expected cost plus a
margin approach.
When a single contract contains multipledeliverables, for example supply of goods
and services, these multiple deliverables
may be combined in one or more
performance obligations. Performanceobligations may be satisfied over time,
typically because Signify is creating or
enhancing an asset that the customer
controls. In limited cases, Signify may also becreating an asset with no alternative use
while having an enforceable right to payment
for performance to date. In both instances,
revenue is recognized over time. This
constitutes a change from previous guidance,
where for some contracts recognition ofrevenue was postponed until all promised
goods or services under the contract werecompleted and the customer had accepted
delivery. The impact of this change on thecondensed consolidated interim financial
statements for the six-month period ended
June 30, 2018, is not material.
Signify may incur costs for obtaining acontract, including payments made to agentsthat depend on winning the contract. Under
IFRS 15, incremental costs of obtaining acontract must be recognized as an asset if thecosts are expected to be recovered. Those
incremental costs are limited to the costs
that Signify would not have incurred if thecontract had not been successfully obtained(e.g. success fees paid to agents). Signify
applies the practical expedient, allowing theincremental costs of obtaining a contract tobe expensed if the associated amortization
period is 12 months or less. As a result, noamounts of contract costs are recognized as
an asset.
Revenue from royalties generally originatesfrom sales- or usage-based royalties. Under
IFRS 15, revenue from sales- or usage-based

royalties that are attributable to a license of
intellectual property is recognized at the laterof when the subsequent sale or usage occurs,
and the satisfaction or partial satisfaction of
the performance obligation to which some or
all of the sales- or usage-based royalty has
been allocated. Consequently, Signify
generally recognizes revenue from thesecontracts in line with the occurrence of therelated sales or usage. This is consistent withaccounting under previous guidance.
Contract assets mostly comprise of unbilled
receivables, where Signify has, partially or in
full, satisfied performance obligations but not
yet billed the customer. These are recorded
under either Other current receivables or
Non-current receivables, for a total amountof EUR 19 million, of which EUR 7 million isclassified as current. Contract liabilities
consist of deferred revenue and payments
received in advance, and are recorded underaccrued liabilities or other non-current
liabilities, for a total amount of EUR 117
million. From this amount, EUR 67 million isclassified as current. Implementation of IFRS
15 has not led to a change in classification orpresentation of contract assets and liabilitiesin Signify’s condensed consolidated interim
financial statements.
Estimates
The preparation of the condensed
consolidated interim financial statements
requires management to make judgments,
estimates and assumptions that affect theapplication of accounting policies and thereported amounts of assets and liabilities,
income and expense. Actual results may
differ from the estimates.
Except for the judgment and estimates
mentioned in relation to the adoption of IFRS
9 and IFRS 15, the significant estimates andjudgments in preparing the condensed
consolidated interim financial statements
made by management in applying theaccounting policies and the sources of
estimation uncertainty were the same as
those applied to the Company’s Consolidated
financial statements for the year ended

26

December 31, 2017.
Other changes to financial reporting
In March 2018, the Company provided an
Investor Relations notification to explain andshow the effect of the changes stated below.
The comparative figures for 2017 have been
restated in order to align with the changes
made.
Presentation of Selling and G&A expenses
The Company has reassessed thepresentation of Selling and General &Administration (G&A) expenses in the income
statement as two separate line items and has
decided as of 1 January 2018 to present
these as a single line item. This presentationaligns with how management is internallybudgeting and monitoring its cost base(controllability model) which changed
following the split from Royal Philips. In
addition, the presentation into one line isapplied by many other companies in our
industry and will therefore further enhancecomparability.
Change in business portfolio and allocation
methods
As of January 1, 2018, the Company reports
and discusses its financial performance basedon the portfolio changes to further align theorganizational structure with the strategy.
Presentation of cashflow statement
The cash flow presentation has been
amended to better correspond to thebalance sheet and to further improvetransparency on cash flow movements.

2.3 IFRS accounting standards to be
adopted as from 2019 andonwards
IFRS 16 Leases
IFRS 16 must be adopted for periods
beginning on, or after, January 1, 2019.
The Company identified the operating leases
which are expected to have an impact andthese mainly relate to real estate, fleet and
IT. So far, the most significant impact

identified is that Signify will recognize assets
and liabilities for its operating leases of realestate, while limited exposure is expectedfrom other operating leases. The Company isstill determining the estimated impact ofthese operating leases on the reported assets
and liabilities.
The Company intends to apply IFRS 16 using
the modified retrospective transition method(also referred to as cumulative effectmethod) whereby comparative figures are
not restated, but instead retained asreported under the previous standards. The
cumulative effect of applying IFRS 16 will be
accounted for as an adjustment to the
opening balance of equity as at the date ofinitial application (January 1, 2019).
In selecting which practical expedients toapply, the Company has focused on reducing
the complexity of implementation. Based on
analysis of the options available, theCompany will:• apply the low value and short-term lease
exemptions• use the transition option for leases with ashort remaining contract period• adjust the right-of-use asset by theamount of any provisions for onerous
lease provisions recognized under IAS 37
to approximate impairment
Whilst no significant impact is expected forlessor accounting, the Company is anintermediate lessor for some real estate
contracts and on transition, the Company
will:• reassess subleases that were previouslyclassified as operating leases and areongoing at the date of initial application
to determine the classification of theseleases under IFRS 16; and• for subleases that were classified as
operating leases under IAS 17, butfinance leases under IFRS 16, account forthe subleases as a new finance lease
entered at the date of initial application.
As disclosed in note 25 Contractual
Obligations of the Company’s 2017

27

Management of the Company). The
operating segments are Lamps, LED,
Professional and Home. The segments areorganized based on the nature of the
products and services. ‘Other’ represents
amounts not allocated to the operating
segments and mainly comprise of certain
costs of group enabling functions and certain
costs of the activities of Signify Innovation.

Consolidated financial statements for theyear ended December 31, 2017, Signify
identified EUR 332 million (undiscounted) of
off-balance operating lease obligations.

2.4 Notes[1] Information by segment and main country
Operating segments are components of thecompany’s business activities about which
separate financial information is available
that is evaluated regularly by the chief
operating decision maker (the Board of

The following is an overview of Signify
revenues and results by segment:

Signify
Information on income statement by segment in mEUR unless otherwise stated
Q2 2018

Lamps
LED
Professional
Home
Other 3)
Intersegment elimination
Signify
Amortization 4)
Income from operations

Sales
351
443
652
89
2
1,537

Sales
includingintersegment
353
474
652
89
4
(36)
1,537

January to June 2018

Depreciation
andamortization 1)
(9)
(3)
(11)
(3)
(9)

EBITA 2)
72
43
29
(29)
(38)

(34)

77
(23)
54

EBITA as a %of sales
20.4%
9.8%
4.5%
(32.3%)

5.0%

Sales
722
887
1,245
181
3
3,038

Sales
includingintersegment
727
949
1,247
182
7
(74)
3,038

Q2 2017

Lamps
LED
Professional
Home
Other 3)
Intersegment elimination
Signify
Amortization 4)
Income from operations

Sales
449
477
669
100
4
1,699

Sales
includingintersegment
454
509
670
101
5
(38)
1,699

Depreciation
andamortization 1)
(19)
(6)
(22)
(5)
(18)

EBITA 2)
134
85
58
(51)
(85)

(70)

140
(46)
94

EBITA as a %of sales
18.5%
9.6%
4.6%
(28.1%)

4.6%

January to June 2017

Depreciation
andamortization 1)
(11)
(3)
(13)
(3)
(7)

EBITA 2)
96
48
28
7
(40)

(37)

139
(28)
111

EBITA as a %of sales
21.3%
10.0%
4.2%
7.2%

8.2%

Sales
939
945
1,290
206
9
3,389

Sales
includingintersegment
949
1,010
1,292
207
13
(82)
3,389

Depreciation
andamortization 1)
(24)
(7)
(25)
(5)
(13)

EBITA 2)
203
91
39
6
(77)

(74)

262
(56)
206

1) Excl udi ng a morti za ti on a nd i mpa i rments of a cqui s i ti on rel a ted i nta ngi bl e a s s ets a nd goodwi l l .
2) Income from opera ti ons excl udi ng a morti za ti on a nd i mpa i rments of a cqui s i ti on rel a ted i nta ngi bl e a s s ets a nd goodwi l l (“EBITA”).
3) Cons i deri ng the na ture of Others , EBITA a s a % of s a l es for Others i s not mea ni ngful .
4) Amorti za ti on a nd i mpa i rments of a cqui s i ti on rel a ted i nta ngi bl e a s s ets a nd goodwi l l .

EBITA as a %of sales
21.7%
9.6%
3.0%
2.8%

7.7%

For the six-month period ended June 30,
2018, sales consisted primarily (97%) of salesof goods (January to June 2017: 97%).

Signify
Sales, tangible and intangible assets by main countries in mEUR

Sales between the segments mainly relate to
the supply of goods. The pricing of suchtransactions is determined on an ‘arm’s
length basis’.

Netherlands
United States
China
Germany
India
Saudi Arabia
Other countries
Total countries

Sales and tangible and intangible assets arereported based on the country of origin as
follows:

Tangible and intangible
assets 1)

Sales
January toJune 2017
238
809
230
214
225
87
1,586
3,389

January toJune 2018
249
650
223
219
209
58
1,430
3,038

December31, 2017

June 30,
2018

129
1,797
78
8
19
183
534
2,748

121
1,825
79
7
17
181
511
2,741

1) Incl udi ng goodwi l l .

[2] Financial risk management
The aspects of the Company’s financial risk
management objectives and policies are
consistent with these disclosed in theConsolidated financial statements for theyear ended December 31, 2017.

28[3] Seasonality
The conventional lighting industry generally
experiences minor seasonal fluctuations insales, as the first and fourth quarters of theyear (largely correlating with winter in thenorthern hemisphere) have shorter daylightperiods causing higher demand for lighting
products than in the second and third
quarter of the year. Due to less daylight,
lights are turned on for longer periods oftime during the day, thus requiring more
replacements than in summertime withlower light consumption. In the case of
Signify, this seasonality effect may moststrongly influence sales of Lamps.

[5] Other business income (expenses)
Other business income (expenses) consists ofthe following:

However, sales are more strongly influenced
by other trends, including the overall decline
in sales of Lamps and overall increase in LED
sales as a result of the transition fromconventional lighting technologies to LED
lighting technologies, and the timing ofspecific projects in the case of sales ofProfessional.

For the six-month period ended June 30,
2018, the result on other remaining
businesses includes a EUR 8 million expense
related to a legal provision for an adverse
outcome of an appeal on a jury verdict inProfessional. Signify is petitioning to the state
Supreme Court to accept this ruling of theintermediate court for review.

[4] Depreciation, amortization and impairment
Depreciation of property, plant andequipment, amortization of intangible assets
and impairment of non-financial assets, areas follows:

For the six-month period ended June 30,
2017, the result on disposal of fixed assets ismostly related to the sale of real estate. It
includes a EUR 15 million gain mainly
allocated to Lamps and a gain of EUR 15
million in Home.

Signify
Depreciation, amortization and impairment in mEUR
January to June
Property, plant and equipment
Internal-use software
Other intangible assets
Development costs
Total

2017
(61)
(4)
(55)
(10)
(130)

2018
(60)
(3)
(46)
(7)
(116)

Depreciation of property, plant andequipment is primarily included in cost of
sales. Amortization of brand names andcustomer relationships part of intangible
assets, is reported in selling, general andadministrative expenses. Amortization oftechnology-based and other intangible assets
is reported in cost of sales. Amortization ofdevelopment costs is included in researchand development expenses.

Signify
Other business income (expenses) in mEUR
January to June
Result on disposal of businesses:• Income• Expense
Result on disposal of fixed assets:• Income• Expense
Result on other remaining businesses:• Income• Expense
Other business income (expenses)
Total other business income
Total other business expense

2017

2018

1
(0)

0
(0)

31
(0)

1
(0)

2
(4)
30
34
(4)

3
(12)
(7)
5
(12)

[6] Income taxes
Income tax expense recognized based on
management’s estimate of the weighted
average effective annual income tax rate
expected for the full year.
Income tax expense in the first six months of2018 decreased by EUR 28 million comparedto the corresponding period of the previous
year, mainly the result of lower income forthe first half of 2018.
The effective tax rate for the first half was
30.7% compared to 26.9% in 2017. The
increase in the effective tax rate is primarily
due to lower year-to-date income in 2018.
[7] Property, plant and equipment
Property, plant and equipment decreased by
EUR 26 million during the six-month period
ended June 30, 2018, mainly due to29reference is made to note 14, Goodwill in the
Company’s Consolidated financial statements
for the year ended December 31, 2017.
No events have been identified bymanagement in the first six months of 2018that required an update of the mentioned
impairment tests.

depreciation of EUR 54 million (six-month
period ended June 30, 2017: EUR 59 million)
and impairment charges of EUR 7 million (sixmonth period ended June 30, 2017: EUR 2
million) partly offset by additions of EUR 36
million (six-month period ended June 30,
2017: EUR 37 million).

[9] Intangible assets excluding goodwill
The changes in intangible assets excluding
goodwill for the six-month period ended June30, 2018 are summarized as follows:[8] Goodwill
For information regarding the most recent
impairment test of the different cashgenerating units, including Professional,
Signify
Intangible assets movements schedule in mEUR

Balance as of January 1, 2018
Cost
Accumulated amortization/ impairment
Book value
Change in book value:
Additions
Amortization
Acquisitions
Impairment
Translation differences and other movements
Total changes
Balance as of June 30, 2018
Cost
Accumulated amortization/ impairment
Book value

Product
development

Technology
based

Customer
relationships

Brand
names

Software

Other

Total

167
(141)
26

339
(252)
87

1,142
(807)
335

331
(234)
97

27
(15)
12

12
(6)
6

2,018
(1,455)
562

5
(7)
(0)
1
(1)

2
(9)
1
(6)

(31)
7
(24)

(6)
3
(4)

4
(3)
(0)
(0)
1

(0)
0
(0)

12
(55)
(0)
12
(32)

151
(126)
25

349
(267)
81

1,168
(857)
311

337
(244)
93

30
(17)
13

12
(6)
5

2,047
(1,517)530[10] Inventories

with a nominal value of EUR 0.01 per share.
No preference shares have been issued.

Signify
Inventories in mEUR

Raw materials
Work in progress
Finished goods
Total

December31, 2017
300
25
599
924

June 30,
2018
329
27
653
1,009

For the six-month period ended June 30,
2018, the amount of write-down of
inventories to realizable value was EUR 9
million (six-month period ended June 30,
2017: EUR 8 million).
[11] Equity
Share Capital
The Company has an authorized share capitalof EUR 6 million, divided into 300,000,000
ordinary shares with a nominal value of
EUR 0.01 per share and 300,000,000
preference shares with a nominal value of
EUR 0.01 per share. As of June 30, 2018, theissued share capital of the Company
consisted of 138,000,000 ordinary shares

As of June 30, 2018, 18.31% (December 31,
2017: 29.01%) of the issued share capitalwere held by Royal Philips, 80.03%(December 31, 2017: 68.31%) were publicly
traded at Euronext Amsterdam and 1.66%(December 31, 2017: 2.68%) were held astreasury shares.
Dividend distribution
In May 2018, the Company settled a dividendof EUR 1.25 per ordinary share, representing
a total value of EUR 171 million including
costs.
Share repurchases and cancellations
In February 2018, 2,800,000 shares werecancelled. The Company acquired theseshares for cancellation purposes for aconsideration of EUR 90 million in November
2017.
In February 2018, the Company announced

30

that it intends to return up to EUR 150
million to its shareholders by participating inshare disposals by its main shareholder. In
line with this intention, in February 2018,
2,200,000 shares were acquired forcancellation purposes for a consideration of
EUR 71 million. These shares were cancelledin May 2018. In July 2018, the company
decided to increase the amount allocated forshare repurchases to EUR 300 million. The
company intends to repurchase additional
shares for up to EUR 229 million in theremainder of 2018, either in the open market
or by participating in share disposals by its
main shareholder.
In May 2018, the Company completed ashare repurchase program to coverobligations arising from its share-based
compensation plans. The total number ofshares repurchased were 1,300,000 for a
total consideration of EUR 33 million.
Treasury shares
As of June 30, 2018, the total number oftreasury shares amounted to 2,293,305
which were purchased at an average price of
EUR 28.90 per share.

remains as of June 30, 2018 at 0.65% basedon the level of the Net Leverage Ratio. The
Net Leverage Ratio is the ratio ofconsolidated total net debt as of the test
date to consolidated adjusted EBITDA for thepreceding 12 months.
Other debt includes various local (bank)loans. The main other debt position are loansof Signify in Saudi Arabia amounting to EUR
19 million (2017: EUR 45 million) with anominal average interest rate of 4.19% andwhich are denominated in SAR.
New borrowings and repayments of shortterm and long-term debt resulting fromfinancing activities are as follows:Signify
Movement schedule of short and long term debt in mEUR

Balance as of January 1, 2018
New Borrowings
Repayments
Translation differences andother movements
Balance as of June 30, 2018

Long Term
Debt

Short Term
Debt

Total

1,170
-

140
32
(64)

1,309
32
(64)

16
1,185

(7)
101

9
1,286

[13] Provisions
Provisions are summarized as follows:Signify
Provisions in mEUR

[12] Short-term and long-term debt
Short-term and long-term debt relate tofinancing by local banks and financial
institutions.

December 31, 2017

Signify
Short-term and long-term debt in mEUR

Facility (EUR)
Facility (USD)
Finance lease
Other Debt
Subtotal
Bank overdrafts
Total

December31, 2017
736
417
19
120
1,292
17
1,309

June 30,
2018
737
432
20
87
1,276
10
1,286

Of which:
Short-term debt
Long-term debt
Total

140
1,170
1,309

101
1,185
1,286

There has been no new financing for the EUR
and USD facilities. All terms and conditions as
disclosed in the latest annual report of theCompany remain the same, including statusof financial covenants, guarantees, revolving
credit facility and the interest margin which

Provision for
defined benefits
Restructuring
related provisions
Environmental
provisions
Product warranty
Other provisions
Total

June 30, 2018

Long-term

Short-termLong-term

Short-term

497

-

507

-

37

108

34

107

104
15
124
777

26
31
40
204

92
15
135
783

30
30
28
195

The decrease in provisions was mainly
attributable to usage of the environmental
provisions.
With regard to provision for defined benefits,
no significant market fluctuations occurred
during the first six months of 2018 which
would require re-measurement under IAS 34.
[14] Contingent Liabilities
Indemnifications
By way of surety for the fulfilment of Signify’s
obligations under the Separation Agreement,
including the indemnifications granted to31

Royal Philips, certain major subsidiaries ofSignify have provided guarantees to Royal
Philips. Conversely, certain major subsidiaries
of Royal Philips have provided guarantees to
Signify. Refer to note 17, Related party
transactions.
Environmental remediation
Signify is subject to environmental laws andregulations. Under these laws andregulations, Signify may be required to
remediate the effects of certain chemicals on
the environment.
Legal proceedings
Signify is involved as a party in legal
proceedings, including discussions on
potential remedial actions, relating tocommercial transactions, intellectual
property disputes, product liability,
environmental pollution and businessconduct rules.
For information regarding legal, regulatory
and arbitration proceedings in which theCompany is involved, please refer to note 26
in the Consolidated financial statements forthe year ended December 31, 2017.
[15] Share-based compensation
Total share-based compensation costs for
Signify for the six-month period ended June30, 2018 were EUR 17 million (six-months
period ended June 30, 2017: EUR 18 million).
Of the EUR 17 million share-based
compensation costs for the six-month period
ended June 30, 2018, EUR 9 million was
related to the Signify share-based
compensation plans, and the remaining was
related to the Royal Philips Long-term
Incentive Plan (“Royal Philips LTI Plan”).
Of the EUR 18 million share-based
compensation costs for the six-month period
ended June 30, 2017, EUR 4 million was
related to the Signify share-based
compensation plans, and the remaining was
related to the Royal Philips LTI Plan.
Signify share-based compensation plans
In the six-month period ended June 30, 2018,
Signify granted 1,170,956 performance

shares, 263,171 conditional shares and28,200 restricted shares to its employees andmembers of the Board of Management. For
the same period, a total of 32,616 vested
shares (performance, conditional, andrestricted) were delivered to Signify
employees.
At the end of 2017 Signify introduced a onetime special performance share award to alimited group of key employees below thelevel of the Board of Management. The
purpose of this award is to focus these key
leaders on achieving the company’s 2019
operational profitability objective. This award
is equity settled.
Royal Philips LTI Plan
In the six-month period ended June 30, 2018,a total of 1,540,533 shares (performance andrestricted) vested and were delivered to
Signify employees and members of the Boardof Management of Signify by Royal Philips.
[16] Financial assets and liabilities
The IFRS 9 classification and measurement
requirements are applicable as of January 1,
2018 for financial assets and liabilities. Under
the new standard, the classification andmeasurement requirements have no material
impact on Signify’s condensed consolidated
interim financial statements.
According to IFRS 9, the classification andmeasurement of trade and other accounts
receivable, loans receivable, accounts andnotes payable and interest bearing debt, areclassified as financial assets and liabilities
carried at amortised cost. Derivative assets
and liabilities are classified as financial assets
and liabilities through profit and loss.
Available-for sale investments in equity
securities are classified as financial assets via
other comprehensive income.
The estimated fair value of financial
instruments has been determined by Signify
using available market information andappropriate valuation methods. The
estimates presented are not necessarily
indicative of the amounts that will ultimately
be realized by Signify upon maturity or

32

disposal. The use of market assumptions
and/or estimation methods may have amaterial effect on the estimated fair value
amounts.

pricing service, or regulatory agency, andthose prices represent actual and regularly
occurring market transactions on an arm’s
length basis.

For cash and cash equivalents and financial
assets and liabilities carried at amortisedcost, the carrying amount is a reasonableapproximation of their fair value.

Level 2
The fair value of financial instruments thatare not traded in an active market (forexample, over-the-counter derivatives) aredetermined by using valuation techniques.
These valuation techniques maximize the useof observable market data where it isavailable and rely as little as possible onentity-specific estimates. If all significant
inputs required to fair value an instrument
are based on observable market data, theinstrument is included in Level 2. The fairvalue of derivatives is calculated as thepresent value of the estimated future cash
flows based on observable interest yield
curves, basis spread and foreign exchange
rates.

The following hierarchy is applied to classify
the financial assets and liabilities:
Level 1
Instruments included in Level 1 arecomprised primarily of listed equity
investments classified as financial assets atfair value via other comprehensive income
and financial assets designated at fair value
through profit and loss. The fair value offinancial instruments traded in active
markets is based on unadjusted quoted
prices in active markets for identical assets or
liabilities at the balance sheet date. A market
is regarded as active if quoted prices arereadily and regularly available from an
exchange, dealer, broker, industry group,

Level 3
If one or more of the significant inputs are
not based on observable market data, theinstrument is included in Level 3.

Signify
Fair value hierarchy in mEUR
Balance as of December 31, 2017
Derivative financial instruments - assets
Fair value through profit and loss - non-current
Available-for-sale financial assets
Total

Level 1

Level 2

Level 3

Total

-

16
16

1
2
3

16
1
2
19

-

(8)
(8)

-

(8)
(8)

Derivative financial instruments - liabilities
Total
Balance as of June 30, 2018
Financial assets at fair value through profit and loss
Derivatives designated as hedging instruments
Derivatives not designated as hedging instruments
Equity instruments at fair value through OCI
Unquoted equity shares
Total

-

24
-

2

24
2

-

24

2
4

2
28

Financial liabilities at fair value through profit and loss
Derivatives designated as hedging instruments
Total

-

(19)
(19)

-

(19)
(19)

[17] Related party transactions
These condensed consolidated interim
financial statements include transactions
with Royal Philips and its group companies
that are outside of Signify. Royal Philips is arelated party as it had significant influence on
Signify during the periods presented.

Transactions during the period mainly relate
to the brand license fee and the Transitional
Service Level Agreement, based on which
Royal Philips provides Signify with certain
services such as IT, real estate, humanresources among others.

33

Signify uses the Philips brand name under the
trademark license agreement with Royal
Philips.
An overview of the significant related party
transactions and balances is as follows:Signify
Related party transactions in mEUR
January to June
Sales to Royal Philips
Purchases from Royal Philips
Repurchases of shares from Royal Philips
Movement in funding from (to) Royal
Philips
Brand license fee costs
Transition Service Level Agreement costs

2017
6
(11)
(183)

2018
6
(3)
(71)

1
(19)
(25)

(1)
(18)
(18)

December31, 20177(26)June 30,
2018
4
(18)

26
(75)

24
(74)

Signify
Related party balances in mEUR

Accounts receivable from Royal Philips
Accounts payable to Royal Philips
Indemnification receivable from Royal
PhilipsIndemnification payable to Royal Philips

In addition to these transactions andbalances, please refer to note 15 Share-based
compensation for disclosures on the Royal
Philips LTI Plan.
Indemnification receivable from (payable to)
Royal Philips mainly relates to theindemnification for tax assets (liabilities)
arising after Separation which are
attributable to Signify.

34

Appendix B - Reconciliation of non-IFRS financial measures
Signify
Sales growth composition per business in %Q2

2018-2017
Lamps
LED
Professional
Home
Others
Total

Comparable
growth
(16.4)
0.0
3.6
(5.9)
(48.4)(3.4)

Currency
effects
(5.1)
(6.7)
(5.3)
(3.2)
(2.0)
(5.5)

Signify
Sales growth composition per business in %January to June
Consolidationand otherchanges
(0.3)
(0.5)
(0.7)
(2.0)
(0.6)

Nominalgrowth(21.8)(7.2)(2.5)(11.1)(50.5)(9.5)

2018-2017
Lamps
LED
Professional
Home
Others
Total

Signify
Sales growth composition per market in %Q2

2018-2017
EuropeAmericasRest of the World
Global businesses
Total

Comparable
growth
(1.1)
(8.4)
(0.4)
(4.4)
(3.4)

Currency
effects
(1.0)
(8.9)
(7.6)
(1.4)
(5.5)

Currency
effects
(5.8)
(7.4)
(6.2)
(3.9)
(1.9)
(6.3)

Consolidationand otherchanges
(0.3)
(0.5)
(0.7)
(2.1)
(0.6)

Nominalgrowth(23.1)(6.2)(3.5)(12.2)(63.1)(10.4)

Consolidationand otherchanges
(0.4)
(1.2)
(2.0)
(0.6)

Nominalgrowth
(1.7)(19.9)(10.3)(7.5)(10.4)

Signify
Sales growth composition per market in %January to June
Consolidationand otherchanges
(0.4)
(1.2)
(1.8)
(0.6)

Nominalgrowth(2.1)(17.7)
(9.1)
(7.6)
(9.5)

Signify
Adjusted EBITA to Income from operations (or EBIT) in mEUR
Q2
2018
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items
EBITA
Amortization 1)
Income from operations (or EBIT)

Comparable
growth
(17.0)
1.8
3.4
(6.2)
(61.2)(3.4)

2018-2017
EuropeAmericasRest of the World
Global businesses
Total

Comparable
growth
(0.9)
(9.2)
(0.5)
(2.6)
(3.4)

Signify

Lamps

LED

Professional

Home

Others

130
(35)
(0)
(17)
77
(23)
54

74
(3)
0
72
(0)
72

47
(4)
43
(1)
42

55
(17)
(0)
(8)
29
(21)
8

(25)
(4)
(29)
(0)
(29)

(21)
(8)
(9)
(38)
(0)
(39)

159
(30)
0
10
139
(28)
111

93
3
96
(0)
95

50
(3)
48
(1)
47

52
(23)
0
28
(26)
3

(6)
(2)
15
7
(1)
7

(30)
(5)
(5)
(40)
(0)
(40)

Signify

Lamps

LED

Professional

Home

Others

235
(74)
(0)
(21)
140
(46)
94

153
(19)
(0)
134
(0)
133

90
(5)
85
(2)
83

86
(20)
(0)
(8)
58
(42)
15

(46)
(5)
(51)
(1)
(52)

(47)
(25)
(13)
(85)
(1)
(86)

286
(41)
(0)
16
262
(56)
206

193
0
10
203
(0)
203

90
(3)
3
91
(2)
88

64
(27)
(0)
2
39
(52)
(13)

(5)
(3)
15
6
(1)
5

(56)
(8)
(14)
(77)
(1)
(78)

2017
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items
EBITA
Amortization 1)
Income from operations (or EBIT)

Currency
effects(0.8)(10.3)
(8.6)
(2.8)
(6.3)

1) Amortization and impairments of acquisition related intangible assets and goodwill.

Signify
Adjusted EBITA to Income from operations (or EBIT) in mEUR
January to June2018
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items
EBITA
Amortization 1)
Income from operations (or EBIT)
2017
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items
EBITA
Amortization 1)
Income from operations (or EBIT)

1) Amorti za ti on a nd i mpa i rments of a cqui s i ti on rel a ted i nta ngi bl e a s s ets a nd goodwi l l .

35Signify
Income from operations to Adjusted EBITA in mEUR
Q2

Reported
1,537
(970)
567

Restructuring
16
16

Acquisition
relatedcharges(0)(0)

Selling, general and administrative expenses
Research and development expenses
Indirect costs

(428)
(78)
(506)

14
5
20

0
0

8
8

Adjusted
1,537
(955)
583
(405)
(73)
(478)

Impairment of goodwill
Other business income
Other business expenses
Income from operations

3
(10)
54

35

0

0
9
17

3
(1)
107

Amortization 1)
Income from operations excluding amortization (EBITA)

(23)
77

35

0

17

(23)
130

Reported
1,699(1,024)676

3
3

Acquisition-

Incidental(0)(0)

Selling, general and administrative expenses
Research and development expenses
Indirect costs

(488)
(93)
(581)

19
8
27

(0)
(0)

5
5

Adjusted
1,699(1,021)
678
(463)
(85)
(549)

Impairment of goodwill
Other business income
Other business expenses
Income from operations

18
(1)
111

30

(0)

(15)
(10)

3
(1)
131

Amortization 1)
Income from operations excluding amortization (EBITA)

(28)
139

30

(0)

(10)

(28)
159

Reported
3,038(1,906)
1,132

Restructuring
31
31Acquisition
relatedcharges00Incidental
items
0
0

(858)
(173)
(1,032)

24
20
44

0
0

12
12

Adjusted
3,038(1,876)
1,163
(822)
(153)
(976)

Impairment of goodwill
Other business income
Other business expenses
Income from operations

5
(12)
94

74

0

(1)
10
21

4
(2)
189

Amortization 1)
Income from operations excluding amortization (EBITA)

(46)
140

74

0

21

(46)
235

Reported
3,389(2,047)1,343

6
6Acquisition-

Incidental
(0)
(0)

(985)
(182)
(1,167)

26
9
35

0
0

13
13

Impairment of goodwill
Other business income
Other business expenses
Income from operations

34
(4)
206

41

0

(29)
(16)

Adjusted
3,389(2,040)
1,349
(946)
(173)
(1,119)5(4)231

Amortization 1)
Income from operations excluding amortization (EBITA)

(56)
262

41

0

(16)

(56)
286

2018
Sales
Cost of sales
Gross margin

2017
Sales
Cost of sales
Gross margin

Incidental
items-

1) Amorti za ti on a nd i mpa i rment of a cqui s i ti on rel a ted i nta ngi bl e a s s ets a nd goodwi l l .

Signify
Income from operations to Adjusted EBITA in mEUR
January to June

2018
Sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and development expenses
Indirect costs

2017
Sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and development expenses
Indirect costs

1) Amorti za ti on a nd i mpa i rment of a cqui s i ti on rel a ted i nta ngi bl e a s s ets a nd goodwi l l .

36Signify
Composition of cash flows in mEUR
Q2

January to June

2017
Cash flows fromoperating activities
Cash flows frominvesting activities
Cash flows before
financing activities
Cash flows fromoperating activities
Net capital expenditures:• Additions of intangible
assets• Capital expenditureson property, plant andequipment• Proceeds from
disposal of property,
plant and equipment
Free cash flows

2018

2017

2018

(17)

(9)

(14)

6

(15)

(36)

(17)

(45)

(31)

(45)

(31)

(38)
`

(17)
(10)

(9)
(22)

(14)
(12)

6
(43)

(5)

(5)

(11)

(12)

(22)

(18)

(37)

(33)

18
(27)

1
(31)

36
(26)

1
(37)

Signify
Working capital to total assets in mEUR

Working capital
Eliminate liabilities
comprised in WoCa:• Accounts and notes payable• Accrued liabilities• Derivative financial liabilities• Other current liabilities
Include assets not comprisedin WoCa:• Non-current assets• Income tax receivable• Current financial assets• Cash and cash equivalents• Assets classified as held forsale
Total assets

Balance as ofJune 30,
2017789

Balance as ofDecember31, 2017
597

Balance as ofJune 30,
2018
694

1,035
434
11
326

1,001
475
8
309

967
414
19
300

3,551
55
0
612

3,306
39
0
942

3,317
35
4
598

3
6,816

1
6,678

7
6,355

37

Appendix C - Financial glossary
Acquisition-related charges

Adjusted EBITA
Adjusted EBITA margin (%)
Adjusted gross margin
Adjusted indirect costs
Adjusted R&D expenses

Adjusted SG&A expenses

Comparable sales growth
EBIT
EBITA
EBITDA
Effects of changes in consolidation and otherchanges

Effects of currency movements

Employees
Free cash flow

Costs that are directly triggered by theacquisition of a company, such as transaction
costs, purchase accounting related costs andintegration-related expenses
EBITA excluding restructuring costs, acquisitionrelated charges and other incidental charges
Adjusted EBITA divided by Sales to third parties(excluding intersegment)
Gross margin, excluding restructuring costs,
acquisition-related charges and other incidental
items attributable to cost of sales
Indirect costs, excluding restructuring costs,
acquisition-related charges and other incidental
items attributable to indirect costs
Research and development expenses, excluding
restructuring costs, acquisition-related charges
and other incidental items attributable toresearch and development expenses
Selling, general and administrative expenses,
excluding restructuring costs, acquisitionrelated charges and other incidental items
attributable to selling, general andadministrative expenses
The period-on-period growth in sales excluding
the effects of currency movements and changes
in consolidation and other changes
Income from operations
Income from operations excluding amortizationand impairment of acquisition related intangible
assets and goodwill
Income from operations excluding depreciation,amortization and impairment of non-financial
assetsIn the event a business is acquired (or divested),
the impact of the consolidation (or deconsolidation) on the Group’s figures is included(or excluded) in the calculation of thecomparable sales growth figures. Other changes
include regulatory changes and changes
originating from new accounting standards
Calculated by translating previous periods’
foreign currency amounts into euro at thefollowing periods’ exchange rates in comparison
to the euro as historically reported
Employees of Signify at period end expressed ona full-time equivalent (FTE) basis
Net cash provided by operations minus net
capital expenditures. Free cash flow includes
interest paid and income taxes paid

38

Gross margin
Indirect costs
Net capital expenditures

Incidental charges

Net debt
R&D expenses
Restructuring costs

SG&A expenses
Working capital

Sales minus cost of sales
The sum of selling, general and administrative
expenses and R&D expenses
Additions of intangible assets, capital
expenditures on property, plant and equipment
and proceeds from disposal of property, plantand equipment, and intangible assets
Any item with an income statement impact (lossor gain) that is deemed to be both significant
and not part of normal business activity. Other
incidental items may extend over several
quarters
Short-term debt, long-term debt minus cash andcash equivalents
Research and development expenses
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 theindustrial and commercial organization
Selling, general and administrative expenses
The sum of Inventories, Receivables, Other
current assets, Derivative financial assets, minus
the sum of Accounts and notes payable,
Accrued liabilities, Derivative financial liabilities,
and Other current liabilities.