Press Release
July 24, 2020

Signify reports second quarter sales of EUR 1.5 billion, maintains operational profitability of
9.0% and generates a free cash flow of EUR 158 million
1Second quarter 2020 – Demonstrating resilience in a challenging market environment• Signify’s installed base of connected light points increased from 61 million in Q1 20 to 64 million2 in Q2 20• Sales of EUR 1,469m, nominal sales growth of -0.6% and CSG of -22.5%• LED-based sales represented 80% of total sales (Q2 19: 79%3)• Adj. indirect costs down EUR 86 million, or -19.1%, excl. currency effects and changes in scope• Adj. EBITA margin remained stable at 9.0%, including currency impact of -60 bps• Adj. EBITA margin of the growing profit engines increased by 100 bps to 9.5%
• Net income increased to EUR 81 million (Q2 19: EUR 50 million) mainly due to one-off items• Free cash flow increased to EUR 158 million (Q2 19: EUR 121 million)• Cooper Lighting cost synergies ahead of plan
• Signify to achieve carbon neutrality before the end of the year
COVID-19 update – Fast adaptation while maintaining stringent health & safety standards• Health & safety of our employees and stakeholders remained our number one priority; 79% of all locations
re-opened under stringent health & safety conditions• A broad range of mitigating actions was successfully implemented to protect profitability and cash flow
• Over 85% participation in voluntary worktime reduction and a record-high employee NPS score attest to thehigh engagement of our employees• We are increasing our UV-C light source production capacity by a factor 8; we are launching 12 families of
UV-C based products; we have invested in upper-room air disinfection systems by acquiring GLA
Eindhoven, the Netherlands – Signify (Euronext: LIGHT), the world leader in lighting, today announced thecompany’s 2020 second quarter results. “In Q2, the engagement of our teams to face the challenges posed by
the pandemic have been second to none. The implementation of the safety measures helped to keep our people
safe. We successfully managed to maintain operational profitability while improving free cash flow in adverse
conditions. I am proud to finish the quarter with a strengthened cohesion across the organization, evidenced byour highest ever employee Net Promotor Score,” said CEO Eric Rondolat. “We remain very cautious aboutmarket developments but confident on our ability to further adapt. The disciplined execution of our strategy andthe acceleration of the integration of Cooper Lighting will continue to drive our growth platforms and new
business opportunities. Last but not least, let me share our excitement for achieving carbon neutrality in 2020,and for renewing our five-year sustainability program with even more ambitious commitments later in the year.”¹This press release contains certain non-IFRS financial measures and ratios, such as comparable sales growth, EBITA, adjusted EBITA and free cash flow, andrelated ratios, which are not recognized measures of financial performance or liquidity under IFRS. For a reconciliation of these non-IFRS financial measures to themostdirectly comparable IFRS financial measures, see appendix B, Reconciliation of non-IFRS financial measures, of this press release.
2
Excluding Cooper Lighting
3
Pro-forma incl. Cooper Lighting and Klite

2

Resilience in a challenging quarter
Health & safety of Signify’s employees and stakeholders remained the number one priority. 79% of all our
locations are open. The supply chain is 98% operational and employees are gradually returning to the offices in a
structured and safe way. At a very early stage of the COVID-19 outbreak, Signify identified a broad range of
mitigating actions to preserve profitability. These measures included non-structural cost savings of EUR 43
million in the second quarter, related to solidarity measures which were supported by our employees andgovernment contributions. Next to this, the company has also implemented a range of measures to safeguard
free cash flow, of which EUR 40 million was related to a temporary positive impact from real estate proceeds
and government-extended payment terms for taxes.

Continuous commitment to Sustainability
In the first half of 2020:• Sustainable revenues represented 83% of the total revenues, exceeding 2020 target of 80%.
• Signify sold 2.6 billion LED lamps and luminaires in the period from 2015 till the first half of 2020, well aheadof its commitment to deliver more than 2 billion LED lamps and luminaires by the end of 2020.
• The company also decreased its waste to landfill in Q2 by 89% compared with last year and is ahead of its
targets related to a safe & healthy workplace and a sustainable supply chain.
• The company reduced its carbon footprint by 26% compared with last year and is well on track to achievecarbon neutrality this year.
In June 2020, Signify announced that it will start phasing out plastics with the aim to be plastic-free on all
consumer-related packaging in 2021.
New sustainability targets as part of our coming five-year program will be announced in the second half of 2020.

OutlookConsidering the persistent uncertainty about the future course of the pandemic, and the length and depth of the
impact on the global economy, Signify still does not provide financial guidance at this point in time. However,Signify is confident in the underlying resilience of its businesses and operating model, and that its liquidity needs
are well covered by the financial framework it has in place. In line with the company’s policy to prioritize futuredeleveraging, Signify confirms its intention to utilize up to EUR 350 million to reduce gross debt in 2020.

3

Financial review
2019

Second quarter
2020

1,477
557
37.7%

1,469
567
38.6%

-383
-67
-449
30.4%

-401
-67
-468
31.9%

133
9.0%
-28
104

133
9.0%
-13
119

80
-12
-19
50

87
-16
10
81

121
0.41
28,144158
0.62
35,789change-22.5%
-0.8%
22.7%
-0.6%
1.8%

-4.2%

0.1%

14.4%
8.9%

61.5%

in millions of EUR, except percentages

2019

Six months
2020

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

2,955
1,114
37.7%

2,896
1,112
38.4%

Adj. SG&A expenses
Adj. R&D expenses
Adj. indirect costs
Adj. indirect costs (as % of sales)

-778
-136
-914
30.9%

-794
-134
-928
32.0%

Adjusted EBITA
Adjusted EBITA margin
Adjusted items
EBITA

247
8.4%
-50
198

245
8.5%
-55
189

-1.0%

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

149
-21
-35
95

130
-26
4
108

-12.6%

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

175
0.76
28,144270
0.85
35,789change-19.1%
0.1%
17.0%
-2.0%
-0.2%

-1.6%

-4.2%

14.4%

Second quarter
Sales amounted to EUR 1,469 million, a nominal decrease of 0.6%. Adjusted for 0.8% negative currency effects
and 22.7% consolidation and other changes (mainly related to the acquisitions of Cooper Lighting and Klite),comparable sales decreased by 22.5% mainly due to the impact of the COVID-19 pandemic. LED-based sales
accounted for 80% of total sales. The adjusted gross margin increased by 90 bps to 38.6%, including a currency
effect of -50 bps. The adjusted indirect costs increased by EUR 19 million. Excluding currency effects andchanges in scope, the adjusted indirect costs are down EUR 86 million, or -19.1%. Adjusted EBITA amounted to
EUR 133 million, the same amount as last year. The Adjusted EBITA margin remained stable at 9.0%, as a resultof the cost measures taken. Total restructuring costs were EUR 2 million and acquisition-related charges andother incidentals were EUR 11 million. Net income increased from EUR 50 million last year to EUR 81 million in
Q2 20, mainly as a result of lower restructuring costs and one-time non-cash tax benefits from changes in theorganizational structure. Free cash flow amounted to EUR 158 million, reflecting maintained profitability, strong
working capital management, the consolidation of Cooper Lighting, lower cash tax paid, and proceeds from thesale of real estate.

4

Growing profit engines
In percentages

CSG
Q2 2019
-5.6%
1.8%
-2.3%

Digital Solutions
Digital Products
Growing profit engines

Adj. EBITA margin
Q2 2019
Q2 2020
8.8%
9.6%
8.2%
9.3%
8.5%
9.5%

Q2 2020-22.4%-21.1%-21.9%

Second quarter
Comparable sales of the growing profit engines declined by 21.9% due to the spread of COVID-19 and thesubsequent measures taken by governments and customers. Despite the decline in top-line, the growing profit
engines have improved the Adjusted EBITA margin by 100 bps to 9.5%, with both divisions improving theirprofitability, driven by an increase in gross margin and indirect cost savings.

Digital Solutions
Second quarter
2019
632
55
8.8%
42
20

2020
781
75
9.6%
59
29

Six months
change in millions of EUR, unless otherwise indicated-22.4%

Comparable sales growth

23.6%
35.2%

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

41.0%
48.4%

2019

2020

change-18.9%

1,231
87
7.1%
66
21

1,420
118
8.3%
77
23

15.4%
34.7%
17.9%
8.0%

Second quarter
Sales amounted to EUR 781 million, a nominal increase of 23.6% as a result of the consolidation of Cooper
Lighting. Comparable sales declined by 22.4% and reflects a significant decline in demand across all regions. The
most severely impacted markets were North America, India, and France. LED-based sales accounted for 91% of
total sales including Cooper Lighting. Connected-based sales represented 18% of total sales excluding Cooper
Lighting. Adjusted EBITA amounted to 75 million, resulting in an improvement in the Adjusted EBITA margin of
80 bps to 9.6% that was driven by an increase in gross margin and indirect cost savings.

Digital Products
2019

Second quarter2020

change in millions of EUR, unless otherwise indicated-21.1%

Comparable sales growth2019

Six months
2020

change-17.9%

552
45
8.2%

473
44
9.3%

-14.2%-2.2%

Sales
Adjusted EBITA
Adjusted EBITA margin

1,116
92
8.2%

1,002
91
9.1%

-10.2%
-0.4%

39

43

11.0%

EBITA

83

81

-2.4%

37

41

10.2%

Income from operations (EBIT)

80

77

-3.9%

Second quarter
Sales amounted to EUR 473 million, a nominal decrease of 14.2% and a decrease of 21.1% on a comparable
basis. LED-based sales accounted for 98% of total sales in Digital Products and connected-based sales
represented 14% of total sales. While overall demand was significantly impacted by the measures taken by
governments and customers, online sales in the consumer channel showed a solid performance. Furthermore,
sell-out rates for connected home lighting remained strong. Adjusted EBITA amounted to EUR 44 million,

5

resulting in an improvement in the Adjusted EBITA margin of 110 bps to 9.3%, as a result of positive mix impact,
reduced price erosion and an improved cost structure in connected home lighting.

Conventional Products
Second quarter
2019

2020

286
56
19.5%
50
50

211
37
17.5%
45
45

Six months
change in millions of EUR, unless otherwise indicated-25.2%

Comparable sales growth-26.5%-33.9%

Sales
Adjusted EBITA
Adjusted EBITA margin
EBITA
Income from operations (EBIT)-11.1%-11.0%

2019

2020

595
119
20.0%
111
111

468
82
17.6%
84
84

change-21.4%-21.4%-30.9%-24.4%-24.2%

Second quarter
Sales amounted to EUR 211 million, a comparable decrease of 25.2%. Despite the impact of the pandemic,
Conventional Products showed a solid performance partly as a result of strong demand for UV-C lighting andhorticulture lighting. The division continues to deliver on its ‘last company standing’ strategy, which resulted infurther market share gains and solid free cash flow generation. The Adjusted EBITA margin remained robust at
17.5%.

Other
Second quarter
Other represents amounts not allocated to the operating segments and includes certain costs related to central
R&D activities to drive innovation as well as group enabling functions. Adjusted EBITA amounted to EUR -23
million (Q2 19: EUR -24 million). EBITA amounted to EUR -28 million (Q2 19: EUR -27 million), including
restructuring costs of EUR 2 million (Q2 19: EUR 3 million). Incidental items amounted to EUR -2 million (Q2 19:
EUR 0 million).

Sales by market
Second quarter
2019

2020

Change

500
433
458
86
1,477

406
615
321
126
1,469

-18.9%
42.3%-29.9%
46.8%-0.6%

Six months
CSG in millions of EUR, except percentages-17.2%-23.6%-28.5%-15.1%-22.5%

EuropeAmericasRest of the World
Global businesses
Total

2019

2020

change

CSG

1,033
862
890
170
2,955

908
1,099
646
243
2,896

-12.1%
27.5%-27.4%
42.6%-2.0%-11.5%-20.1%-27.3%-15.7%-19.1%

Americas include Cooper Lighting and Global businesses include Klite

Second quarter
Comparable sales in Europe decreased by 17.2%, mainly reflecting challenging market conditions in France,
Spain and Italy. Comparable sales in the Americas decreased by 23.6%, due to the ongoing decline inConventional Products and more challenging market conditions. In the Rest of the World, comparable sales
decreased by 28.5%, with a particular impact in India and Southeast Asia. In China, demand is gradually
recovering although not yet back to pre-COVID-19 levels.

6

Working capitalin millions of EUR, unless otherwise indicatedInventories
Trade and other receivables
Trade and other payables
Other working capital items
Working capital
As % of LTM* sales*

LTM: Last Twelve Months

6,614

6,336

30 June,2019

31 March,
2020

30 June,
2020

999
1,203
(1,627)
(72)
503
8.0%

1,019
1,173
(1,673)
(49)
470
7.6%

1,032
1,096
(1,659)
(17)
452
7.3%

6,275

Second quarter
Working capital improved by EUR 51 million to EUR 452 million year-on-year, mainly driven by lower receivables
and higher payables, notwithstanding the addition of Cooper Lighting’s working capital. Working capital
represents 7.3% of sales, compared with 8.0% at the end of June 2019. Working capital improved by 170 bps to6.3% of sales when including pro-forma last-twelve-months sales for both Cooper Lighting and Klite.

Cash flow analysis
Second quarter
2019
2020
80
87
67
29
-53
56
-6
-20
-27
-8
121

86
24
-47
22
-13
0
-5
3
158

Six months
2019
149

in millions of EUR

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

137
70
-110
27
-10
-39
-37
-12
175

2020
130
164
57
-99
74
-23
-28
-21
16
270

Second quarter
Free cash flow increased by EUR 37 million to EUR 158 million. This is reflecting the consolidation of Cooper
Lighting, lower cash tax paid, and proceeds from the sale of real estate (EUR 20 million). Free cash flow included
a restructuring payout of EUR 12 million (Q2 19: EUR 27 million).
Six months
In millions of EUR

2019

2020

Digital Solutions

96

132

Digital Products

125

173

Conventional Products

102

91

Other*-148-125

Signify total

175

270

* Non-allocated free cash flow items (e.g. tax, interest)

In the first half of 2020, free cash flow of Digital Solutions significantly increased by EUR 36 million to EUR 132
million. Free cash flow of Digital Products improved by EUR 48 million to EUR 173 million. In Conventional
Products, free cash flow decreased by EUR 11 million to EUR 91 million. The free cash flow of the growing profit
engines was more than three times the level of the free cash flow of Conventional Products.

7

Net debt
in millions of EUR

30 June,2019

31 March,
2020

30 June,2020

Short-term debt

147

95

113

1,339
1,486
621
865
2,056

2,639
2,734
924
1,810
2,334

2,619
2,732
1,026
1,706
2,341

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

Second quarter
Signify’s cash position has increased by EUR 102 million to EUR 1,026 million compared with the end of March
2020. Net debt amounted to EUR 1,706 million, a decrease of EUR 104 million compared with the end of March
2020.
Total equity increased to EUR 2,341 million at the end of Q2 (Q1 20: EUR 2,334 million), primarily due to net
income offset by currency translation.
Despite the challenges the COVID-19 pandemic is causing, Signify is confident in the underlying resilience of its
businesses and operating model, and that its liquidity needs are well covered by the financial framework it has inplace. Signify’s focus remains on maintaining a robust capital structure and on its policy to prioritize futuredeleveraging to support its commitment to an investment grade credit rating. The company confirms its
intention to utilize up to EUR 350 million to reduce gross debt in 2020.

8

Other information
Appendix A – Selection of financial statements
Appendix B – Reconciliation of non-IFRS financial measures
Appendix C – Financial Glossary
Conference call and audio webcast
Eric Rondolat (CEO) and René van Schooten (CFO) will host a conference call for analysts and institutional
investors at 9:00 a.m. CET to discuss second quarter and first half 2020 results. A live audio webcast of theconference call will be available via the Investor Relations website.
Financial calendar 2020
October 23, 2020
January 29, 2021

Third quarter results 2020
Fourth quarter and full year results 2020

For further information, please contact:
Signify Investor Relations
Rogier Dierckx
Tel: +31 6 1138 4609
E-mail: rogier.dierckx@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 2019 sales of EUR 6.2 billion, we
have approximately 36,000 employees and are present in over 70 countries. We unlock the extraordinary
potential of light for brighter lives and a better world. We have been named Industry Leader in the Dow Jones
Sustainability Index for three years in a row. News from Signify is located at the Newsroom, Twitter, LinkedIn
and Instagram. Information for investors can be found on the Investor Relations page.

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 COVID-19, rapid technological change, competitionin the general lighting market, development of lighting systems and services, successful implementation of business
transformation programs, impact of acquisitions and other transactions, reputational and adverse effects on business due toactivities in Environment, Health & Safety, compliance risks, ability to attract and retain talented personnel, adverse currency
effects, pension liabilities, and exposure to international tax laws. Please see “Risk Factors and Risk Management” in Chapter
12 of the Annual Report 2019 for discussion of material risks, uncertainties and other important factors which may have amaterial 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 2019.
Looking ahead to the second half of 2020, the Group is primarily concerned about the challenging macro conditions andpolitical uncertainties, particularly related to the COVID-19 pandemic, 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 ofthis document could also prove to be important and may have a material adverse effect on the business, results ofoperations, financial condition and prospects of the Group or could cause the forward-looking events discussed in thisdocument 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 2019.

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 2019 and semi-annual report 2020.

Market Abuse Regulation

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

Unaudited condensed
consolidated interim
financial statements

For the six-month period ended June 30, 2020

11

Index to the unaudited condensed consolidated interim
financial statements
Introduction.................................................................................................................................. 12
Management report...................................................................................................................... 13
1. Condensed consolidated interim financial statements............................................................. 15
1.1 Condensed consolidated statement of income................................................................

15

1.2 Condensed consolidated statement of comprehensive income......................................

16

1.3 Condensed consolidated statement of financial position................................................. 17
1.4 Condensed consolidated statement of cash flows........................................................... 18
1.5 Condensed consolidated statement of changes in equity................................................ 19
2. Notes to the condensed consolidated interim financial statements....................................... 20
2.1 Reporting entity................................................................................................................ 20
2.2 Basis of preparation......................................................................................................... 20
2.3 Notes................................................................................................................................ 22

12

Semi-annual report
Introduction

The semi-annual report for the six-month
period ended June 30, 2020 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
the Company’s Board of Management.
The main risks and uncertainties for thesecond half of 2020 are addressed in thefirst part of the press release - please referto the section ‘Important Information’.
The information in this semi-annual report isunaudited. The semi-annual condensed
consolidated interim financial statements do
not include all the information anddisclosures required in the annual financial
statements and should be read in
conjunction with the Company’s
Consolidated financial statements for theyear ended December 31, 2019.

Responsibility statement

The Board of Management of the Company
hereby declares that, to the best of its
knowledge, the semi-annual condensed
consolidated interim financial statements
for the six-month period ended June 30,
2020, which have been prepared inaccordance with IAS 34, Interim Financial
Reporting, as adopted by the European
Union, gives a true and fair view of theassets, liabilities, financial position andprofit or loss of the Company and theundertakings included in the consolidation
taken as a whole, and the semi-annual
management report for the six-month
period ended June 30, 2020, gives a fairview of the information required pursuant
to Section 5:25d(8)-(9) of the Dutch
Financial Markets Supervision Act (Wet op
het Financieel toezicht).
Eindhoven, July 24, 2020
Board of Management
Eric Rondolat
René van Schooten
Maria Letizia Mariani

13Management report
Business performance

1)

COVID-19
The first half of 2020 represented achallenging start of 2020 as a consequenceof the COVID-19 crisis. From the start ofthe outbreak, Signify has been very agile
and thorough in dealing with the challenges
through global and local crisis response
teams. The company has protected thehealth & safety of all its employees, while
fulfilling customer needs and leveraging its
global supply chain to ensure business
continuity. Signify has implemented a broad
range of mitigating actions to preserve
profitability. These measures include
savings in, amongst others, selling
expenses, travel costs and procurement
costs. In addition, over 85% of Signify’s
employees volunteered for 20% worktime
reduction and a pro-rata pay adjustment forthree months. All these measures haveresulted in indirect cost savings of EUR 141
million excluding currency effects andchanges in scope. The company has also
implemented a range of measures tosafeguard cash flow, including rigorous
working capital management, a curtailmentof uncommitted and non-essential capital
expenditure, and the withdrawal of thedividend proposal.

Financial performance
Sales amounted to EUR 2,896 million, adecrease of 2.0% on a nominal basis.
Adjusted for 0.1% currency effect and
17.0% consolidation and other impact(mainly related to the acquisitions of
Cooper Lighting Solutions and Klite),comparable sales were 19.1% lower than in
the first half of 2019 mainly due to the
COVID-19 crisis. Comparable LED-based
sales accounted for 79% of total sales,
including Cooper Lighting. The gross marginincreased by 70 basis points to 38.0%. The
adjusted indirect costs increased by EUR 14
million. Excluding currency effects andchanges in scope, the adjusted indirect
costs are down EUR 141 million, or -15.5%
compared with last year. Adjusted EBITA
amounted to EUR 245 million. The Adjusted
EBITA margin improved by 10 basis points to

8.5%, as a result of the cost measurestaken and included a currency effect of -30
basis points. Total restructuring costs were
EUR 15 million. Acquisition-related charges
and other incidentals were EUR 40 million
mainly related to the acquisitions of Cooper
Lighting and Klite. Net income was EUR 108
million compared with EUR 95 million lastyear mainly as a result of one-time noncash tax benefits from changes in theorganizational structure.
Compared with the end of June 2019,
working capital as percentage of sales
decreased by 70 basis points to 7.3% ofsales, reflecting continued focus on
improving working capital. Net cash fromoperating activities amounted to EUR 291
million, compared with EUR 212 million lastyear. This mainly reflects strong working
capital management, the consolidation of
Cooper Lighting, lower cash tax paid, andproceeds from the sale of real estate.

Digital Solutions
Sales were EUR 1,420 million, reflecting anominal sales increase of 15.4% as a resultof the consolidation of Cooper Lighting.
Comparable sales declined by 18.9% andreflects a significant decline in demandacross all regions as a result of COVID-19
measures taken. The most severely
impacted markets were North America,
India, France and Southeast Asia.
LED-based sales accounted for 91% of total
sales in Digital Solutions, including Cooper
Lighting. Income from operations amounted
to EUR 23 million. EBITA of EUR 77 million
included EUR 40 million of restructuring,acquisition-related charges, and otherincidental costs. Adjusted EBITA amounted
to 118 million, resulting in an improvement in
the Adjusted EBITA margin of 120 bps to8.3% which was driven by an increase ingross margin and indirect cost savings.

Digital Products
Sales were EUR 1,002 million, a decrease of
10.2% on a nominal basis and a decline of
17.9% on a comparable basis. LED-based
sales accounted for 98% of total sales in
Digital Products. Overall demand was
impacted by the COVID-19 pandemic. Online
sales in the consumer channel showed asolid performance. Sell-out rates forconnected home lighting remained strong.

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”.

14
Income from operations amounted to EUR
77 million. EBITA of EUR 81 million included
EUR 10 million of restructuring and otherincidental costs. The Adjusted EBITA margin
improved by 90 basis points to 9.1%, mainly
driven by positive mix impact, reduced priceerosion and an improved cost structure inconnected home lighting.

Conventional Products
Sales amounted to EUR 468 million, a declineof 21.4% on a nominal and comparable basis,
which is estimated to be lower than themarket decline, resulting in continued
market share gains. Despite the impact ofthe pandemic, Conventional Products
showed a solid performance partly as aresult of strong demand for UV-C andhorticulture lighting. Income fromoperations reduced to EUR 84 million due tothe decline in sales, partly offset byproactive rationalization of the
manufacturing footprint and lower indirect
costs. EBITA amounted to EUR 84 million
compared with EUR 111 million in the first halfof 2019. This includes EUR 1 million positive
impact of restructuring costs and otherincidental costs. The Adjusted EBITA margin
remained solid at 17.6%. Adjusted EBITA
amounted to EUR 82 million.

Other
Reported EBITA amounted to EUR -53
million. This represents amounts notallocated to the operating segments andincludes certain costs related to groupenabling functions as well as central R&D
activities to drive innovation. Adjusted EBITA
amounted to EUR -46 million, compared with
EUR -51 million in the same period last year.
Restructuring and other incidental costs
were EUR 6 million.

OutlookConsidering the persistent uncertainty
about the future course of the pandemic,
and the length and depth of the impact on
the global economy, Signify still doesn’t
provide financial guidance at this point intime. However, Signify is confident in theunderlying resilience of its businesses andoperating model, and that its liquidity needs
are well covered by the financial frameworkit has in place. In line with the company’s
policy to prioritize future deleveraging,
Signify confirms its intention to utilize up to
EUR 350 million to reduce gross debt in
2020.

15

1 Condensed consolidated
financial statements
1.1

Condensed consolidated statement of income

In millions of EUR unless otherwise stated
Note

Second quarter

January to June

2019

2020

2019

2020

1,477

1,469

2,955

2,896

Cost of sales

(926)

(901)

(1,852)(1,795)Gross margin

551

568

1,103

1,101

Selling, general and administrative expenses

(404)

(416)

(813)

(838)

(68)

(67)

(139)

(136)

—

—

—

—

Other business income

1

4

3

6

Other business expenses

(0)

(1)

(4)

(3)
130

Sales

1

Research and development expenses
Impairment of goodwill

5

Income from operations

80

87

149

Financial income

3

4

8

9

Financial expenses

(14)

(20)

(29)

(35)

Results relating to investments in associates

1

(0)

1

(0)

69

71

130

104

(19)

10

(35)

4

50

81

95

108

Net income (loss) attributable to shareholders of Signify N.V.

52

79

96

109

Net income (loss) attributable to non-controlling interests

(2)

2

(2)

(1)

Basic

126,116

126,715

126,127

126,646

Diluted127,403

127,814

127,226

128,008

Basic

0.41

0.62

0.76

0.86

Diluted

0.41

0.62

0.76

0.85

Income before taxes
Income tax expense

4

Net income
Attribution of net income for the period:

Earnings per ordinary share attributable to shareholders
Weighted average number of ordinary shares outstanding used for
calculation (in thousands):

Net income attributable to shareholders per ordinary share in EUR:

The accompanying notes are an integral part of these condensed consolidated financial statements.

16

1.2

Condensed consolidated statement of comprehensive income

In millions of EUR
Second quarter

January to June

2019

2020

2019

2020

50

81

95

108

Remeasurements

—

(0)

(2)

0

Income tax effect on remeasurements

—

—

—

—

—

(0)

(2)

0

(27)

(81)

17

(113)

—

—

(1)

—

Net income (loss)
Pensions and other post-employment plans:

Total of items that will not be reclassified to profit or loss
Currency translation differences:
Net current period change, before tax
Income tax effect
Net investment hedge
Net current period change, before tax

—

6

—

6

Income tax effect

—

0

—

0

(12)

(9)

5

5

3

2

(0)

(1)

Total of items that are or may be reclassified to profit or loss

(36)

(82)

21

(102)

Other comprehensive income (loss)

(36)

(82)

18

(102)

Total comprehensive income (loss)

14

(1)

113

6

Shareholders of Signify N.V.

16

(1)

114

8

Non-controlling interests

(2)

0

(1)

(3)

Cash flow hedges:
Net current period change, before tax
Income tax effectTotal comprehensive income (loss) attributable to:

The accompanying notes are an integral part of these condensed consolidated financial statements.

17

1.3

Condensed consolidated statement of financial position

In millions of EUR
Note

December 31, 2019

June 30, 2020

Non-current assets
Property, plant and equipment

1

644

769

Goodwill

1, 5

1,943

2,396

Intangible assets, other than goodwill

1, 5

443

881

Investments in associates

14

12

Financial assets

10

49

50

Deferred tax assets

4

384

468

Other assets
Total non-current assets

64

66

3,541

4,641

874

1,032

Current assets
Inventories
Financial assets

10

Other assets

—

—

161

224

Derivative financial assets

10

16

16

Income tax receivable

4

48

59

1,223

1,096

847

1,026

Trade and other receivables
Cash and cash equivalents

10

Assets classified as held for sale

40

Total current assets

3,174

3,453

Total assets

6,715

8,094

2,181

2,201

EquityShareholders’ equity

6

Non-controlling interests
Total equity

142

141

2,324

2,341

1,369

2,619

437

423

216

244

Non-current liabilities
Debt

7

Post-employment benefits
Provisions

8

Deferred tax liabilities

28

24

Income tax payable

52

110

Other liabilities
Total non-current liabilities

135

134

2,236

3,553

113

Current liabilities
Debt, including bank overdrafts

7

96

Derivative financial liabilities

10

20

34

22

30

1,684

1,659

Income tax payable
Trade and other payables
Provisions
Other liabilities
Liabilities from assets classified as held for sale

8

149

141

183

223

2

0

Total current liabilities

2,155

2,200

Total liabilities and total equity

6,715

8,094

The accompanying notes are an integral part of these condensed consolidated financial statements.

18

1.4

Condensed consolidated statement of cash flows

In millions of EUR
Note

Second quarter

January to June

1

2020

2019

1

2020

50

81

95

108

2019
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided byoperating activities:

126

120

258

254

• Depreciation, amortization and impairment of non-financial assets• Impairment (reversal) of goodwill, other non-current financial assets andinvestments in associates

67

86

137

164

—

—

(0)

—

• Net gain on sale of assets

(1)

(1)

(1)

(1)

• Net interest expense on debt, borrowings and other liabilities

5

7

8

14

• Income tax expense

4

19

(10)

35

(4)

• Additions to (releases of) provisions

8

23

18

58

47

• Additions to (releases of) post-employment benefits

6

5

12

11

• Other items

7

15

8

23

Decrease (increase) in working capital:

56

22

27

74

• Decrease (increase) in trade and other receivables

22

85

43

305

• Decrease (increase) in inventories

(60)

(48)

(113)

(57)

• Increase (decrease) in trade and other payables

102

(17)

92

(202)

• Increase (decrease) in other current assets and liabilities

(8)

2

4

28

Increase (decrease) in other non-current assets and liabilities

(7)

(1)

(8)

5

(43)

(39)

(92)

(82)

Utilizations of provisions

8

Utilizations of post-employment benefits

(9)

(8)

(18)

(17)

Net interest and financing costs paid

(6)

(13)

(10)

(23)

Income taxes paid

(20)

(0)

(39)

(28)

Net cash provided by (used for) operating activities

147

163

212

291

(27)

(5)

(37)

(21)

(12)

(8)

(16)

(13)

(16)

(16)

(23)

(28)

• Proceeds from disposal of property, plant and equipment

1

19

2

20

Net proceeds from (cash used for) derivatives and other financial assets

(3)

(4)

2

7

Purchases of businesses, net of cash acquired

(20)

(5)

(20)

(1,275)

Cash flows from investing activities
Net capital expenditures:• Additions of intangible assets

5• Capital expenditures on property, plant and equipment

Proceeds from sale of businesses, net of cash disposed of

5

2

5

2

(45)

(11)

(50)

(1,288)

(164)

—

(164)

—

1

1,280

1

3,735

Repayment of debt

(27)

(1,311)(55)(2,529)Purchase of treasury shares

(6)

—

(6)

(6)

Net cash provided by (used for) financing activities

(197)

(31)

(224)

1,201

Net cash flows
Effect of changes in exchange rates on cash and cash equivalents andbank overdrafts
Cash and cash equivalents and bank overdrafts at the beginning of the2
period

(94)

121

(62)

205

(5)

(24)

9

(29)

Net cash provided by (used for) investing activities
Cash flows from financing activities
Dividend paid
Proceeds from issuance of debt

3

Cash and cash equivalents and bank overdrafts at the end of the period

712

919

664

840

612

1,016

612

1,016

10

8

13

17

Non-cash investing and financing activities:
Acquisition of fixed asset by means of leases
1

2

3

Certain reclassifications have been made to prior year figures to conform with current year presentation. Refer to our Annual Report 2019 for further
details of the reclassifications. These reclassifications did not impact net cash flows, or total cash flows from operating, investing and financing activities.
For Q2 2020 and Q2 2019, included bank overdrafts of EUR 5 million and EUR 20 million, respectively. For the first half of 2020 and 2019, included bankoverdrafts of EUR 7 million and EUR 12 million, respectively.
Included bank overdrafts of EUR 10 million and EUR 9 million as at June 30, 2020 and 2019, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

19

1.5

Condensed consolidated statements of changes in equity

In millions of EUR
Currency
Retained translation Cash flow
earnings differences
hedgesTotalshareNonholders' controlling
equity interests

SharecapitalSharepremium

Balance as at January 1,
2019

1

2,179

(37)

(29)

(9)

(65)

2,041

78

2,119

Adoption of IFRS 16 (netof tax)TreasurysharesEquity

—

—

(12)

—

—

—

(12)

(0)

(12)

Restated balance as atJanuary 1, 2019

1

2,179

(48)

(29)

(9)

(65)

2,030

78

2,108

Net Income

—

—

96

—

—

—

96

(2)

95

Other comprehensive
income (loss)

—

—

(2)

15

4

—

18

1

18

Total comprehensive
income (loss)

—

—

94

15

4

—

114

(1)

113

Dividend distributed

—

—

(164)

—

—

—

(164)

—

(164)

Purchase of treasury
shares

—

—

—

—

—

(6)

(6)

—

(6)

Delivery of treasury
shares

—

(2)

(1)

—

—

2

—

—

—

Share-based
compensation plans

—

6

—

—

—

—

6

—

6

Balance as at June 30,
2019

(119)

(13)

(4)

(69)

1,979

77

2,056

1

2,183

Balance as at January 1,
2020

1

2,195

53

7

(7)

(68)

2,181

142

2,324

Net Income

—

—

109

—

—

—

109

(1)

108

Other comprehensive
income (loss)

—

—

0

(105)

4

—

(101)

(2)

(102)

Total comprehensive
income (loss)

—

—

109

(105)

4

—

8

(3)

6

Movement in noncontrolling interests

—

—

—

—

—

—

—

1

1

Purchase of treasury
shares

—

—

—

—

—

(6)

(6)

—

(6)

Delivery of treasury
shares

—

(29)

(2)

—

—

31

—

—

—

Share-based
compensation plans

—

16

—

—

—

—

16

—

16

Balance as at June 30,
2020

1

2,182

160

(98)

(3)

(42)

2,201

141

2,341

The accompanying notes are an integral part of these condensed consolidated financial statements.

20

2 Notes to the consolidated
interim financial statements
All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up to
totals provided.

2.1

Reporting entity

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 Company was incorporated as a private
limited liability company on February 1, 2016
and converted into a public company withlimited 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 is in
Eindhoven, the Netherlands and its
registered office is at High Tech Campus 48,
5656 AE Eindhoven. The Company isregistered in the Commercial Register of
the Chamber of Commerce under number
65220692.

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.
The income tax expense is recognizedbased on management’s estimate of theweighted average effective annual income
tax rate expected for the full year.
Except for the changes disclosed below,
the accounting policies applied in thecondensed consolidated interim financial
statements are consistent with those
applied in chapter 14.6 of the Consolidated
financial statements for the year ended
December 31, 2019. Several otheramendments apply for the first time in 2020,

but do not have an impact on thecondensed consolidated interim financial
statements of Signify.

Change in reporting segments

Operating segments are components of thecompany’s business activities for which
separate financial information is available
that is evaluated regularly by the chief
operating decision maker (the Board ofManagement of the Company).
Effective Q2 2020, to further adapt to theindustry transition and strengthen
customer centricity, Signify changed theorganizational structure, which included
changing the previously four businessgroups (BG’s) to three divisions.
• Division Digital Solutions (formerly BG
Professional, including Cooper Lighting
Solutions) offers luminaires, lighting systems
and services for the Internet of Things to
the customers in the professional segment;• Division Digital Products (combines BG
LED and BG Home). This division offers LED
lamps, LED luminaires and connected
products, including Hue and Wiz, and LED
electronics to professional customers, OEM
partners and consumers. By bringing
together its entire consumer LED portfolio,
Signify can better manage this lighting
category for its channel partners; and• Division Conventional Products (formerly
BG Lamps) continues to focus onconventional lamps and electronics for
professional customers, OEM partners andconsumers. It is organized separately tobring a clear distinction between
conventional and digital offerings.
In line with this change, effective Q2 2020,
Signify's operating segments are Digital
Solutions, Digital Products, andConventional Products. The segments areorganized based on the nature of the
products and services. ‘Other’ represents
amounts not allocated to the operating
segments and includes certain costs related

21
to central R&D activities to drive innovation
as well as group enabling functions.
For impairment testing, goodwill is allocatedto cash-generating units, which represent
the lowest level at which the goodwill ismonitored internally for management
purposes. Previously, the cash-generating
units for goodwill testing were the fourBusiness Groups. As a result of theorganizational changes, the cashgenerating units for goodwill testing havealso been updated to correspond to thenew operating segments. The goodwill of BG
LED and BG Home were combined into the
goodwill of the new division Digital Products.

Impact of the COVID-19 pandemic

The COVID-19 pandemic has created an
unprecedented situation globally. From theoutset, Signify has taken considerable
action focused on the health and safety of
its employees, on customer engagement
and supply chain continuity and on free cash
flow generation and operating expenses.
Signify continues to closely monitor thedevelopment of COVID-19 and to analyzerisks for its financial results, position andcash flows and implementing mitigating
actions promptly.
Given the high level of global uncertainty
and the very limited visibility on how thiscrisis might unfold, Signify has decided tosuspend its financial outlook for 2020 asannounced on January 31, 2020.
Further information and considerations withregard to areas of significant judgments andestimates have been included below.

Liquidity and risk management

At a very early stage of the COVID-19
outbreak, Signify has identified a broad
range of mitigating actions to preserveliquidity. These measures include, among
others, the deployment of initiatives
worldwide to flexibly decrease labor cost in
Q2, savings in selling expenses, travel costs
and procurement costs. Next to this, thecompany has also implemented a range ofmeasures to safeguard cash flow, including
rigorous working capital management, thecurtailment of uncommitted and nonessential capital expenditure, and thewithdrawal of the 2019 dividend proposal.

Goodwill impairment

The negative impact of COVID-19 on the
global economy, resulted in the Company
performing a goodwill impairment test in thesecond quarter of the year.
The key assumptions of the goodwill
impairment test include sales growth rates,
EBITA and the rates used for discounting
the projected cash flows. All key
assumptions were updated to reflect
management’s current best estimates.
The goodwill impairment test did not resultin an impairment loss being recognized. For
further details refer to note 5 Intangible
assets.

Inventories

The Company has not identified a materialchange to the write-down of inventories to
net realizable value, compared with the sixmonth period that ended June 30, 2019.

Trade receivables

The Company's expected credit loss
allowance as of June 30, 2020 has notincreased materially when compared to theallowance as of December 31, 2019.
Furthermore, the allowance for individually
impaired receivables has not increasedmaterially compared to the allowance as ofDecember 31, 2019.

Pensions

COVID-19 impacted interest rates andinvestment performance. The Company
performed an analysis to quantify the
impact of these changes on the valuation of
the net defined benefit liability. The
quantified impact did not result in aremeasurement of the net defined benefit
liability.

Estimates

The preparation of the condensed
consolidated interim financial statements inthese challenging circumstances requires
management to make judgments, estimatesand assumptions that affect the applicationof accounting policies and the reported
amounts of assets and liabilities, income andexpense. Actual results may differ from theestimates.
Except for the impact of the COVID-19
pandemic, the significant estimates and22
judgments 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 theyear ended December 31, 2019.

2.3

Notes

1

Information by segment and main
country

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

Second Quarter
DigitalSolutions

ConvenDigitaltional
Products Products

January to June

4

Other

Intersegment
elimination

Signify

DigitalSolutions

DigitalProducts

Conventional
Products

1,469

1,420

1,002

468

6

1,469

1,421

1,084

471

6

4

Other

Intersegment
elimination

Signify

2020
Sales to externalcustomers

781

473

211

4

Sales includingintersegment

781

515

212

4

Depreciation and1amortization

(22)

(7)

(8)

(17)

(54)

(37)

(14)

(18)

(35)

59

43

45

(28)

119

77

81

84

(53)

7.6%

9.1%

21.2%

8.1%

5.4%

8.1%

17.9%

2

EBITA

EBITA as a % of sales

(44)

3

Amortization
Income fromoperations

2,896
(87)

(105)
189
6.5%

(32)
29

41

45

(28)

2,896

(59)

87

23

77

84

(53)

130

Financial income andexpenses(16)

Results frominvestments inassociates

(0)

(0)

Income before taxes

71

104

(26)

2019
Sales to externalcustomers

632

552

286

7

Sales includingintersegment

632

592

288

8

Depreciation and1amortization

(13)

(7)

(7)

42

39

50

6.7%

7.0%

17.5%

2

EBITA

EBITA as a % of sales

1,477

1,231

1,116

595

14

1,477

1,233

1,192

598

14

(16)

(43)

(25)

(15)

(15)

(33)

(27)

104

66

83

111

(62)

7.1%

5.3%

7.5%

18.6%

3

Amortization
Income fromoperations

20

37

50

(27)

Results frominvestments inassociates
Income before taxes
2
3
4

(81)

2,955
(89)
198
6.7%

(24)

Financial income andexpenses

1

(43)

2,955

(49)

80

21

80

111

(63)

149

(12)

(21)

1

1

69

130

Excluding amortization and impairments of acquisition related intangible assets and goodwill
Income from operations excluding amortization and impairments of acquisition related intangible assets and goodwill ("EBITA")
Amortization and impairments of acquisition related intangible assets and goodwill
Considering the nature of Other, EBITA as a % of sales for Other is not meaningful

Sales between the segments mainly relate
to the supply of goods. The pricing of suchtransactions is determined on an ‘arm’s
length basis’. Sales and tangible andintangible assets are reported based on the
country of origin as follows:

Tangible and intangible1
assetsSales
January toJune 2019

1
2
3

January toJune 2020

December31, 2019

June 30,
2020

Netherlands

240

228

195

494

United States

653

923

2

1,799

2,531
295

China

245

258

3

308

Germany

195

179

16

15

France

143

104

17

16

India

197

91

22

32

Canada

94

90

2

39

49

Other countries

1,189

1,024

635

613

Total countries

2,955

2,896

3,030

4,046

Includes goodwill
Includes Cooper Lighting Solutions
Includes Klite23

2

Acquisition of Cooper Lighting
Solutions

At acquisition date

On March 2, 2020, the Company completed
the acquisition of 100% interest in Cooper
Lighting Solutions for a total considerationof EUR 1,260 million. The initial consideration
was paid in cash and closing settlement
procedures are expected to be finalized
during 2020. The transaction price does notinclude any contingent and/or deferredconsiderations. The overall cash position of
Cooper Lighting Solutions on thetransaction date was EUR 2 million.
Cooper Lighting, headquartered in
Peachtree City, GA, United States, is aleading provider of professional lighting,lighting controls, and connected lighting.
The business offers a large breadth of
products and applications, both in theindoor and outdoor segments, sold underrenowned brands in North America includingCorelite, Halo, McGraw-Edison and Metalux.
The company sells its lighting portfolio
through a strong agent network and has
direct relationships with retailers,
distributors and other end-user customers.
Acquisition-related costs that wererecognized in General and administrative
expenses amounted to EUR 13 million
incurred in 2019 and in 2020. As of March 2,
2020, Cooper Lighting was fully
consolidated as part of division Digital
Solutions.
The condensed balance sheet of Cooper
Lighting at the acquisition date was asfollows:
At acquisition date
Goodwill

481

Other Intangible assets

509

Property, plant and equipment

203

Trade and other receivables

215

Inventories

128

Other assets acquired

28

Cash

2

Customer relationships

335

Brand names

103

Technology based

69

Software1

Total other intangible assets

509

The fair value of assets and liabilities at theacquisition is provisional due to the timing of
the acquisition in relation to Signify's interim
reporting. Receivables and other current
assets are assumed to be valued against
their fair value. Goodwill recognized for theamount of EUR 481 million is primarily related
to the synergies expected to be achieved
from integrating Cooper Lighting within
division Digital Solutions. The goodwill
recognized is expected to be deductible fortax purposes.
From the acquisition date, Cooper
Lighting’s contribution to the sales and net
income of the Company was EUR 433 million
and EUR 17 million accordingly. If theacquisition had taken place on January 1,
2020, sales and net income for theCompany would have been EUR 3,126 million
and EUR 118 million respectively for first half
year, ended June 30, 2020.

3

Disaggregated revenue
information

Information on sales per segment isdisclosed in note 1, Information by segment
and main country. For the six-month period
ended June 30, 2020, sales consisted
primarily (97%) of sales of goods tocustomers (January to June 2019: 97%).
Sales by market:
Second quarter

January to June

2019

2020

2019

Europe

500

406

1,033

908

Americas

433

615

862

1,099

Rest of the world

458

321

890

646

Globalbusinesses

2020

86

126

170

243

1,477

1,469

2,955

2,896

Trade and other payables

(203)

Total

Other liabilities assumed(103)

Americas include Cooper Lighting and Global businesses include Klite.

Net deferred tax assets

1

Net assets acquired

1,260

Financed by loans

1,260

The other intangible assets were reported
as follows:4

Income taxes

The income tax expense in the first six
months of 2020 decreased by EUR 39
million compared to the corresponding
period of the previous year, mainly as a

24result of lower income and one-time noncash tax benefits from changes in theorganizational structure.
The effective tax rate for the six-month
period ended June 30, 2020, was (3.6%)
compared to 27.1% in 2019.

5value of goodwill of Signify at June 30,
2020.

Intangible assets
Intangible
assets,other than
Goodwill
goodwill

Total

Balance as at January 1,
2020
Cost

2,651

2,141

4,791

Accumulated
depreciation /impairment(708)(1,697)(2,405)

Book value

1,943

443

2,386

Change in book value:
Additions

—

13

13

Amortization

—

(69)

(69)

Acquisitions

481

510

991

Impairment

—

—

—

The basis of the recoverable amount usedof the cash-generating units is the value in
use. Key assumptions used in the
impairment tests for the units were sales
growth rates, EBITA and the rates used for
discounting the projected cash flows. These
cash flow projections were determinedusing management’s internal forecasts thatcover an initial three-year period till 2022
that matches the period used for our
strategic process. Projections wereextrapolated with declining growth rates fora period of five years, after which a terminal
value was calculated. The sales growth
rates and EBITA used to estimate cash flows
are based on past performance, externalmarket growth assumptions (updated for
COVID-19) and industry long-term growth
averages.
For Digital Solutions, EBITA is expected toincrease over the initial forecast period as aresult of volume growth and cost
efficiencies. Cash flow projections for 2020
were based on the key assumptions
included in the table below:

Translation differences
and other movements

(28)

(16)

(44)

Total changes

453

437

891

Cost

3,100

2,635

5,735

Accumulated
depreciation /impairment(705)(1,755)(2,459)Compound sales growth rate

Book value

2,396

881

3,276

Used toInitialExtra calculate Pre-tax
forecast polation terminal discount2
periodperiodvalue
rates

Balance as at June 30,
2020

Key assumptions in %Due to a change in Signify's organizational
structure, the cash-generating units forgoodwill impairment testing have been
updated to be based on the new operating
segments. Refer to 2.2 Basis of preparation
for further details.

DigitalSolutionshalf-year
2020
1
2

The goodwill allocated to each of the cashgenerating units as of June 30, 2020, ispresented as follows:
Goodwill allocated to the cash-generating unit in mEUR
December31, 2019

June 30,
2020

Division Digital Solutions

1,573

2,034

Division Digital Products

307

305

Division Conventional Products

62

57

1,943

2,396

1

Book value
1

Includes Cooper Lighting Solutions.

Goodwill allocated to the cash-generating
unit Digital Solutions is considered to besignificant in comparison to the total book

(0.1)

2.4

1

0.3

10.7

Compound sales growth rate is the annualized steady growth rateover the forecast period.
The CAGR% for the initial forecast period is presented as if Cooper
would have been part of Signify in 2019 for comparability purposes.

The results of the impairment test of Digital
Solutions have indicated a headroom of
EUR 524 million. The recoverable amountwould equal the carrying amount if the
discount rate increased by 150 bps or if theforecasted cash flows declined by 12.3%.

6EquityShare repurchases

In February 2020, the Company purchased
shares to cover obligations arising from its
share-based compensation plans. The total
number of shares repurchased was 183,418
for a total consideration of EUR 6 million.

25

Treasury shares

structure consisting of EUR 400 million and
USD 275 million maturing in January 2023
and EUR 340 million and USD 225 million
maturing in January 2025. At the same time,
the revolving credit facility (RCF) of EUR
500 million was refinanced for the sameamount with a five-year maturity plus two
one-year extension options.

As of June 30, 2020, the total number oftreasury shares amounted to 1,628,312
which were purchased at an average priceof EUR 26.05 per share.

7

Debt
December31, 2019

June 30,
2020

Facility (EUR)

740

737

Facility (USD)

446

Eurobonds

442
1,260

Lease liabilities

252

Other Debt

20

23

Subtotal

1,458

2,722

Bank overdrafts

260

7

10

Gross debt

1,465

2,732

Cash and cash equivalents(847)(1,026)

618

1,706

Total equity

2,324

2,341

Net debt and total equity

2,942

4,047

Net debt divided by net
debt and total equity (in %)

21%

42%

Total equity divided by net
debt and total equity (in %)

79%

58%

Net debt (cash)

The term loans and RCF agreement include
a financial covenant providing that Signify
maintains a net leverage ratio of no greaterthan 3.5x. The net leverage ratio may
temporarily increase to 4.0x within 12
months of the closing of the Cooper
Lighting acquisition or other material
acquisitions. The covenant does not apply if
Signify has at least one investment grade
rating, which is currently the case, as thecompany has two investment grade ratings.

Eurobonds issuanceNew term loan structure and a revolving
credit facility

In January 2020, Signify refinanced the termloans of EUR 740 million and USD 500 million
maturing in May 2021, with a new term loan

In May 2020, the Company issued EUR 675
million of fixed rate notes due in May 2024with a coupon of 2.000% and EUR 600
million of fixed rate notes due in May 2027
with a coupon of 2.375%. The net proceedsof the notes were used to repay the bridge
loan used to finance the acquisition of
Cooper Lighting.

8

Provisions

Provisions are summarized as follows:
Restructuringprovisions

Environmental
Provisions

Product
warranty

Other
provisions

Total

Balance as at January 1, 2020

78

110

41

136

365

Additions

15

7

29

18

70

Utilizations

(30)

(6)

(29)

(17)

(82)

Acquisitions

—

5

33

21

58

Releases

(8)

(1)

—

(10)

(18)

Changes in discount rate

—

1

—

(0)

0

Accretion

—

0

—

0

1

Translation differences and othermovements

(0)

(2)

(2)

(5)

(10)

Balance as at June 30, 2020

55

114

73

143

385

Short-term

40

17

42

43

141

Long-term

15

98

31

100

244

9

Share-based compensation

Total share-based compensation costs for
Signify for the six-month period ended June30, 2020 were EUR 17 million (six-months
period ended June 30, 2019: EUR 9 million).
The fluctuations in the expenses is mainly
explained by regular updates in the

expected number of shares granted under
non-market performance conditions. Of theEUR 9 million share-based compensation
costs for the six-month period ended June30, 2019, EUR 6 million was related to the
Signify share-based compensation plans,
and the remaining was related to the Royal26
Philips Long-term Incentive Plan (“Royal
Philips LTI Plan”).

For the same period, a total of 960,713
vested shares (performance, conditional,
and restricted) were delivered to Signify
employees.

Signify share-based compensation plans
As mentioned in the annual report 2019vesting of performance is conditional on theachievement of performance conditions
over a period of three years. For the 2020
grant the performance condition
measurement is based on four measures(with equal weighing of 25%): Relative Total
Shareholder Return, Free Cash Flow,
Return on Capital Employed andSustainability. In addition, vesting isconditional to the grantee still being
employed with Signify at the vesting date. In
the six-month period ended June 30, 2020,
Signify granted 1,058,996 performance
shares, 392,327 conditional shares and
169,057 restricted shares to its employees
and members of the Board of Management.

Carried at

10

Financial assets and liabilities

Financial risk management

The Company’s financial risk management
objectives and policies are consistent withthose disclosed in the Consolidated
financial statements for the year ended
December 31, 2019.

Fair value hierarchy

The valuation techniques and inputs used todevelop measurements for financial assets
and liabilities are consistent with those
disclosed in the Consolidated financial
statements for the year ended December
31, 2019.

Amounts notoffset on the
Gross amount balance sheet,recognised but are subject
on theto masterbalance
netting
sheet arrangements

Net amount

Fair value
hierarchy Estimated fair
level
value

Balance as at December 31, 20191

Non-current financial assets

amortised cost

44

44

Unquoted equity sharesfair value (FVOCI)

3

3

1,223

1,223

1

Trade and other receivables

amortised cost

Derivative financial assets
designated as hedging instruments

fair value (FVTPL)

16

Derivative financial assets notdesignated as hedging instruments

fair value (FVTPL)

2Cash and cash equivalents
1

Debt (excluding Eurobonds)

amortised cost

Derivative financial liabilities
designated as hedging instruments

(14)

2

16

2

3

2

(1,465)847

847(1,465)(1,465)

2

(6)

2

14

3
1,223

2

fair value (FVTPL)(20)

Trade and other payables

amortised cost

(1,663)(1,663)

Contingent considerations

fair value (FVTPL)

(21)

(21)

Non-current financial assets

amortised cost

37

37

Unquoted equity sharesfair value (FVOCI)

4

4
1,096

1

44
3

2

847

(20)
(1,663)

3(21)

Balance as at June 30, 2020
1

1

Trade and other receivables

amortised cost

1,096

Derivative financial assets
designated as hedging instruments

fair value (FVTPL)

25

Derivative financial assets notdesignated as hedging instruments

fair value (FVTPL)

1

Debt (excluding Eurobonds)

Derivative financial liabilities
designated as hedging instruments

1
2

9

2
3

25

0

0
1,026

amortised cost

(1,260)(1,260)1(1,281)amortised cost

(1,472)(1,472)

2(1,472)(18)

2

fair value (FVTPL)(34)

Trade and other payables

amortised cost

(1,643)(1,643)

Contingent considerations

fair value (FVTPL)

(16)

(16)

1

4
1,096

1,026

Cash and cash equivalents
Debt (Eurobonds)

(16)

37
3

16

0
1,026

(34)
(1,643)3

In view of the nature, maturity or the magnitude of the amounts, Signify considers that the fair value of non-current financial assets, trade and otherreceivables, debt (excluding Eurobonds), trade and other payables are not materially different from their carrying value.
The fair value of 2019 Derivative financial assets not designated as hedging instruments has been adjusted from 10 to 2 for 2019.

(16)

27

11

Events after the balance sheet
date

No subsequent events occurred thatare material to Signify.

28

Appendix B - Reconciliation of non-IFRS financial measures
Change in reporting segments

As mentioned in the basis of preparation of this report Signify changed its segment reporting.
The main change relates to combining BG LED and BG Home into division Digital Products. The
comparatives 2019 in below tables have been updated to reflect the updated segment
structure.

Sales growth composition per businessin %Second quarter2020 vs2019
DigitalSolutionscomparable currency
growtheffects(22.4)

DigitalProducts
Conventional
Products(25.2)

Total(22.5)(21.1)

January to June

consolidationand otherchangesnominalgrowth2020 vs2019

comparable currency
growtheffects

46.5

23.6

DigitalSolutions(18.9)(0.5)

8.1(14.2)

(1.1)

(0.2)

(26.5)

DigitalProducts
Conventional
Products

(0.8)

22.7

(0.6)

Total

(1.2)

consolidationand otherchangesnominalgrowth

0.3

34.0

15.4

(17.9)(0.1)

7.8(10.2)(21.4)

0.1(0.2)(21.4)(19.1)

0.1

17.0

(2.0)

consolidationand otherchangesnominalgrowthSales growth composition per market in%
January to June

Second quarter2020 vs2019

comparable currency
growtheffects

consolidationand otherchangesnominalgrowth2020 vs2019

comparable currency
growtheffects

Europe(17.2)

(1.2)

(0.5)

(18.9)

Europe(11.5)

(0.4)

(0.3)

(12.1)

Americas(23.6)

0.0

65.9

42.3

Americas(20.1)

0.8

46.8

27.5

(29.9)

Rest ofthe World(27.3)(0.2)

0.1(27.4)

46.8

Globalbusinesses(15.7)

(0.5)

58.8

42.6

(0.6)

Total

(19.1)

0.1

17.0

(2.0)

Rest ofthe World
Globalbusinesses
Total(28.5)(15.1)(22.5)

(1.7)
(1.2)
(0.8)

0.4
63.1
22.7

Americas include Cooper Lighting and Global businesses include Klite.

Americas include Cooper Lighting and Global businesses include Klite.

29

Adjusted EBITA to Income from operations (or EBIT) in millions of EUR
Signify

DigitalSolutions

Digital Conventional
Products
Products

Adjusted EBITA

133

75

44

37

(23)

Restructuring

(2)

(1)

(0)

1

(2)

Acquisition-related charges

(15)

(14)

(0)

—

—

4

(0)

(0)

7

(2)
(28)

Other

Second quarter 2020

Incidental items
EBITA

119

59

43

45

(32)

(30)

(2)

—

(0)

87

29

41

45

(28)

Adjusted EBITA

133

55

45

56

(24)

Restructuring

(14)

(7)

(1)

(3)

(3)

Acquisition-related charges

(1)

(1)

(0)

—

—

Incidental items

(13)

(6)

(5)

(3)

(0)

EBITA

104

42

39

50

(27)

(24)

(22)

(1)

(0)

(1)

80

20

37

50

(27)

Digital Conventional
Products
Products

Other

1

Amortization

2

Income from operations (or EBIT)
Second quarter 20191

Amortization

2

Income from operations (or EBIT)
1
2

Amortization and impairments of acquisition related intangible assets and goodwill.
For a reconciliation to income before taxes, refer to note 1, Information by segment and main country, of this Semi-annual Report.

Signify

DigitalSolutions

Adjusted EBITA

245

118

91

82

(46)

Restructuring

(15)

(5)

(4)

(2)

(4)

Acquisition-related charges

(33)

(31)

(2)

—

—

Incidental items

(7)

(4)

(4)

3

(2)

189

77

81

84

(53)

(59)

(55)

(4)

(0)

(1)

130

23

77

84

(53)

January to June 2020

EBITA
1

Amortization

2

Income from operations (or EBIT)
January to June 2019
Adjusted EBITA

247

87

92

119

(51)

Restructuring

(34)

(15)

(3)

(5)

(9)

Acquisition-related charges

(1)

(1)

—

—

—

Incidental items

(15)

(6)

(5)

(3)

(2)

EBITA

198

66

83

111

(62)

(49)

(45)

(3)

(0)

(1)

149

21

80

111

(63)

1

Amortization

2

Income from operations (or EBIT)
1
2

Amortization and impairments of acquisition related intangible assets and goodwill.
For a reconciliation to income before taxes, refer to note 1, Information by segment and main country, of this Semi-annual Report.

30

Income from operations to Adjusted EBITA in millions of EUR

Reported

Restructuring

Acquisition
relatedcharges

Incidental
2
items

Adjusted

Second quarter 2020
Sales

1,469

—

—

—

1,469

Cost of sales

(901)

(1)

7

(7)

(901)

Gross margin

568

(1)

7

(7)

567

Selling, general and administrative expenses

(416)

3

8

4

(401)

Research and development expenses
1

Indirect costs

(67)

0

0

—

(67)

(483)

3

8

4

(468)
—

Impairment of goodwill

—

—

—

—

Other business income

4

—

—

(1)

2

Other business expenses

(1)

—

—

(0)

(1)

Income from operations

87

2

15

(4)

100

Amortization

(32)

—

—

—

(32)

Income from operations excluding amortization(EBITA)

119

2

15

(4)

133

Sales

1,477

—

—

—

1,477

Cost of sales

(926)

6

—

—

(920)

Gross margin

551

6

—

—

557

Selling, general and administrative expenses

(404)

7

1

14

(383)

Second quarter 20191
2

Research and development expenses

(68)

1

—

—

(67)

Indirect costs

(471)

8

1

14

(449)
—

Impairment of goodwill

—

—

—

—

Other business income

1

—

—

(0)

0

Other business expenses

(0)

—

—

—

(0)

Income from operations

80

14

1

13

108

Amortization

(24)

—

—

—

(24)

Income from operations excluding amortization(EBITA)

104

14

1

13

133

Adj. indirect costs included a positive currency impact of EUR 4 million and changes in scope of EUR 108 million in Q2 20. Adjusting for the currency andchanges in scope, indirect costs reduced by EUR 85 million on a comparable basis.
Incidental items are non-recurring by nature and relate to separation, company name change, transformation, environmental provision for inactive sites anddiscounting effect of long-term provisions.

31

Acquisition
relatedcharges

Incidental2
items

Reported

Restructuring

Adjusted

Sales

2,896

—

—

—

2,896

Cost of sales(1,795)

3

13

(5)

(1,784)January to June 2020

Gross margin

1,101

3

13

(5)

1,112

Selling, general and administrative expenses

(838)

11

19

14

(794)

Research and development expenses

(136)

1

0

—

(134)

(973)

12

19

14

(928)

Impairment of goodwill

—

—

—

—

—

Other business income

6

—

—

(1)

4

Other business expenses

(3)

—

—

(0)

(3)

Income from operations

130

15

33

7

186

Amortization

(59)

—

—

—

(59)

Income from operations excluding amortization(EBITA)

189

15

33

7

245

1

Indirect costs

January to June 2019

1
2

Sales

2,955

—

—

—

2,955

Cost of sales(1,852)

11——(1,841)Gross margin

1,103

11

—

—

1,114

Selling, general and administrative expenses

(813)

19

1

15

(778)

Research and development expenses

(139)

4

—

—

(136)

Indirect costs

(953)

23

1

15

(914)

Impairment of goodwill

—

—

—

—

—

Other business income

3

—

—

(0)

3

Other business expenses

(4)

—

—

—

(4)

Income from operations

149

34

1

15

199

Amortization

(49)

—

—

—

(49)

Income from operations excluding amortization(EBITA)

198

34

1

15

247

Adj. indirect costs included a negative currency impact of EUR 1 million and changes in scope of EUR 153 million in H1 20. Adjusting for the currency andchanges in scope, indirect costs reduced by EUR 140 million on a comparable basis.
Incidental items are non-recurring by nature and relate to separation, company name change, transformation, environmental provision for inactive sites anddiscounting effect of long-term provisions.

Composition of cash flows in millions of
EUR
Second quarter
2019
Cash flows fromoperating activities

147

2020
163

January to June
2019
212

291

(45)

(11)

(50)

(1,288)Cash flows before
financing activities

103

151

162

(996)

Cash flows fromoperating activities

147

163

212

291

Net capital
expenditures:

(27)

(5)

(37)

(21)

• Additions ofintangible assets

(12)

(8)

(16)

(13)

• Capital expenditureson property, plant andequipment

(16)

(16)

(23)

(28)

Free cash flows

January to June

2020

Cash flows frominvesting activities• Proceeds from
disposal of property,
plant and equipment

Composition of free cash-flows per
division in millions of EUR

1

19

2

20

121

158

175

270

2019

2020

Digital Solutions

96

132

Digital Products

125

173

Conventional Products

102

91

Other*

(148)

(125)

Signify total

175

270

* Non-allocated free cash flow items (e.g. tax, interest).

32

Working capital to total assets inmillions of EUR
June 30, December June 30,1
201931, 2019
2020
Working capital

503

388

452

Eliminate liabilities
comprised in WoCa:
1,627

1,684

1,659

• Derivative financial
liabilities• Trade and other payables

13

20

34

• Other current liabilities

196

183

223

• Non-current assets

3,413

3,541

4,641

• Income tax receivable

37

48

59

• Current financial assets

3

0

—

621

847

1,026

7

4

0

6,420

6,715

8,094

Include assets notcomprised in WoCa:• Cash and cash
equivalents• Assets classified as held
for sale
Total assets
1

Prior year has been revised to align with the updated presentation of
the Consolidated statement of financial position as disclosed in the2019 Annual report.

33

Appendix C – Financial glossary
Acquisition-related charges
Costs that are directly triggered by theacquisition of a company, such astransaction costs, purchase accounting
related costs and integration-related
expenses
Adjusted EBITAEBITA excluding restructuring costs,
acquisition-related charges and otherincidental charges
Adjusted EBITA margin
Adjusted EBITA divided by sales to third
parties (excluding intersegment)
Adjusted gross margin
Gross margin, excluding restructuringcosts, acquisition-related charges andother incidental items attributable to costof salesAdjusted indirect costs
Indirect costs, excluding restructuringcosts, acquisition-related charges andother incidental items attributable toindirect costs
Adjusted R&D expenses
Research and development expenses,
excluding restructuring costs, acquisitionrelated 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 otherincidental items attributable to selling,
general and administrative expenses
Changes in scope
Consolidation effects related toacquisitions (mainly Cooper Lighting)Comparable sales growth (CSG)
The period-on-period growth in sales
excluding the effects of currency
movements and changes in consolidationand other changes
EBIT
Income from operations

EBITA
Income from operations excluding
amortization and impairment of acquisition
related intangible assets and goodwill
EBITDA
Income from operations excluding
depreciation, amortization and impairment
of non-financial assets
Effects of changes in consolidation andother changes
In the event a business is acquired (ordivested), the impact of the consolidation(or de-consolidation) on the Group’s figures
is included (or excluded) in the calculationof the comparable sales growth figures.
Other changes include regulatory changes
and changes originating from new
accounting standards
Effects of currency movements
Calculated by translating the foreign
currency financials of the previous period
and the current period into euros at thesame average exchange rates
Employees
Employees of Signify at period end
expressed on a full-time equivalent (FTE)basis
Free cash flow
Net cash provided by operating activities
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 bothsignificant and not part of normal businessactivity. Other incidental items may extend
over several quarters within the samefinancial year
Indirect costs
The sum of selling, general andadministrative expenses and R&D expenses

34
Net capital expenditures
Additions of intangible assets, capital
expenditures on property, plant andequipment and proceeds from disposal ofproperty, plant and equipment
Net debt
Short-term debt, long-term debt minus
cash and cash equivalents
Net leverage ratio
The ratio of consolidated reported net debt
to consolidated reported EBITDA for the
purpose of calculating the financial
covenant
R&D expenses
Research and development expenses

Restructuring costs
The estimated costs of initiatedreorganizations, the most significant of
which have been approved by the group,
and which generally involve the realignmentof certain parts of the industrial andcommercial organization
SG&A expenses
Selling, general and administrative expenses
Working capital
The sum of inventories, trade and otherreceivables, other current assets,
derivative financial assets minus the sum of
trade and other payables, derivative
financial liabilities and other current
liabilities