Press Release
July 26, 2019

Signify reports second quarter sales of EUR 1.5 billion, operational profitability of 9.0% andfree cash flow of EUR 121 million
Second quarter 20191• Signify’s installed base of connected light points increased from 47 million in Q1 19 to 50 million in Q2 19• CSG growing profit engines -2.3%; CSG total Signify -6.1%• LED-based comparable sales grew by 0.2% to 77% of sales (Q2 18: 70%)
• Adj. indirect costs down EUR 37 million on a currency comparable basis, a reduction of 8%, or 60 bps of sales• Adj. EBITA margin improved by 60 bps to 9.0%, including currency impact of +20 bps• Net income improved by 73% to EUR 50 million (Q2 18: EUR 29 million)• Free cash flow amounted to EUR 121 million (Q2 18: EUR -31 million), mainly driven by higher income andphasing of payables and receivables
Half year 20191• CSG growing profit engines -0.7%; CSG total Signify -4.7%• LED-based comparable sales grew by 1.9% to 76% of sales (H1 18: 69%)
• Adj. indirect costs down EUR 77 million on a currency comparable basis, a reduction of 8%, or 120 bps of sales• Adj. EBITA margin improved by 70 bps to 8.4%, despite currency impact of -60 bps• Net income improved to EUR 95 million (H1 18: EUR 49 million)• Free cash flow increased to EUR 175 million (H1 18: EUR -37 million)
Eindhoven, the Netherlands – Signify (Euronext: LIGHT), the world leader in lighting, today announced the company’s
2019 second quarter results. “We are satisfied with the ongoing improvement in the operational profitability andcash generation of our businesses in the second quarter. Sales declined mainly due to economic headwinds in Europe
and non-recurring country-specific developments in growth markets,” said CEO Eric Rondolat. “While market
conditions remain challenging, the solid momentum in our growth platforms, our relentless focus on operational
efficiencies and our strong free cash flow profile position us well for the future.”¹This press release contains certain non-IFRS financial measures and ratios, such as comparable sales growth, EBITA, adjusted EBITA and free
cash flow, and related ratios, which are not recognized measures of financial performance or liquidity under IFRS. For a reconciliation of these
non-IFRS financial measures to the most directly comparable IFRS financial measures, see appendix B, Reconciliation of non-IFRS financial
measures, of this press release.

2

Outlook
We confirm our outlook that in 2019 our growing profit engines (LED, Professional and Home combined) are expected
to deliver a comparable sales growth in the range of 2% to 5%. Our cash engine, Lamps, is expected to decline at a
slower pace than the market, in the range of -21% to -24% on a comparable basis. For total Signify, we aim to reachan Adjusted EBITA margin in 2019 within the range of 11% to 13% set at the time of the IPO in May 2016. In 2019, we
expect free cash flow, excluding the positive impact from IFRS 16, to be above 5% of sales.

Financial review
2018

Second quarter
2019

1,537
583
37.9%

1,477
557
37.7%

-405
-73
-478
31.1%

-383
-67
-449
30.4%

130
8.4%
-53
77

133
9.0%
-28
104

54
-13
-12
29

80
-12
-19
50

-31
0.23
30,097121
0.41
28,144in € million, except percentages

-6.1%
1.7%
0.5%
-3.9%
-4.4%

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

3,038
1,163
38.3%

2,955
1,114
37.7%

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

-822
-153
-976
32.1%

-778
-136
-914
30.9%

Adjusted EBITA
Adjusted EBITA margin
Adjusted items
EBITA

235
7.7%
-96
140

247
8.4%
-50
198

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

94
-23
-22
49

149
-21
-35
95

-37
0.38
30,097175
0.76
28,144

6.0%

2.1%

35.2%
48.0%

72.6%

Free cash flow
Basic EPS (€)
Employees (FTE)2018

Six months
2019changechange
-4.7%
1.4%
0.6%
-2.7%
-4.2%

6.3%

5.1%

41.5%
59.3%

91.6%

Second quarter
Sales amounted to EUR 1,477 million. Adjusted for 1.7% positive currency effects, comparable sales decreased by
6.1%, with LED-based sales increasing by 0.2% and now accounting for 77% of total sales. The adjusted gross margin
declined by 20 bps to 37.7% due to lower sales volumes and price erosion, largely offset by ongoing procurementsavings. Adjusted indirect costs decreased by EUR 29 million, or 70 bps as a percentage of sales, as a result of ourongoing cost reduction initiatives. Adjusted EBITA amounted to EUR 133 million compared with EUR 130 million in
the same period last year. The Adjusted EBITA margin improved by 60 bps to 9.0%, despite a sales decline, andincludes a currency impact of +20 bps. Total restructuring costs were EUR 14 million and other incidentals were also
EUR 14 million.

3

Net income increased from EUR 29 million last year to EUR 50 million in Q2 19, mainly as a result of better operational
profitability and lower restructuring costs. Free cash flow, which included a positive impact of EUR 17 million related
to IFRS 16, amounted to EUR 121 million, mainly driven by higher income and the phasing of payables and receivables.
The effect of phasing is estimated to represent around half of the free cash flow in the quarter.

Road to Excellence
In 2018, we initiated a major five-year journey, ‘Road to Excellence’, to continue to transform at a fast pace, achieve
unequalled customer satisfaction and achieve organizational excellence. To achieve this, we constantly focus on
enhancing our capabilities by lean process improvements and building on our quality culture.
As part of this journey, we have introduced Project Horizon. This company-wide project includes a significant numberof cross-company opportunities that will further strengthen our execution capabilities and is expected to drive topline growth, enhance operational efficiencies, and free up working capital between now and the end of 2020.

Growing profit enginesin € million, except percentages

CSG

Adj. EBITA margin

LED
Professional
Home

Q2 18
0.0%
3.6%
-5.9%

Q2 19
-1.8%
-5.6%
19.0%

Q2 18
10.6%
8.4%
-27.9%

Q2 19
12.0%
8.8%
-7.8%

LED, Professional and Home combined

1.4%

-2.3%

6.5%

8.5%

* Excluding non-allocated free cash flow items (e.g. tax, interest) that are accounted for in Other

Second quarter
Performance in the second quarter reflects a more challenging macro environment. Comparable sales growth of our
growing profit engines was -2.3%. We experienced a lower level of market activity, most notably in Europe and were
impacted by non-recurring country-specific developments in Saudi Arabia and India in Professional. Our growth
platforms, connected systems, IoT platform services, horticulture, solar, and LiFi, show solid momentum. The
Adjusted EBITA margin of the growing profit engines improved by 200 bps to 8.5%, with all three business groups
contributing to this improvement.

LED
2018

Second quarter
2019

changein € million, unless otherwise indicated2018

Six months
2019change-1.8%

Comparable sales growth

443

445

0.4%

Sales

887

894

0.7%

47
10.6%
43
42

53
12.0%
49
48

13.8%

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

90
10.1%
85
83

107
12.0%
100
98

19.5%

12.4%
12.6%

-1.0%

18.3%
18.7%

4

Second quarter
Sales amounted to EUR 445 million, a decrease of 1.8% on a comparable basis. LED lamps delivered a solid
performance while sales in LED electronics continued to be impacted by lower customer demand, most notably inEurope. Adjusted EBITA increased by 13.8% to EUR 53 million, mainly driven by ongoing procurement savings andlower indirect costs. This resulted in an Adjusted EBITA margin improvement of 140 bps to 12.0%.

Professional
Second quarter
2018
2019
652
55
8.4%
29
8

632
55
8.8%
42
20

changein € million, unless otherwise indicated2018

Six months
2019

-5.6%
-3.2%
1.2%

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

1,245
86
6.9%
58
15

1,231
87
7.1%
66
21

42.8%
137.5%

change
-3.7%
-1.2%
1.8%
13.6%
36.7%

Second quarter
Comparable sales decreased by 5.6% to EUR 632 million, due to a lower level of market activity in Europe, and thetemporary impact of SASO product re-certification in Saudi Arabia and elections in India. We experienced softening
demand for public & outdoor projects, most notably in Europe, while the Americas and China had a robust
performance. We have a solid order backlog and project pipeline for the second half of 2019, most notably in the
Middle East and in façade lighting in China. Adjusted EBITA amounted to EUR 55 million, which resulted in an
improvement in the Adjusted EBITA margin of 40 bps to 8.8% as procurement and indirect cost savings more thanoffset the negative impact of price and mix.

Home
2018

Second quarter
2019

changein € million, unless otherwise indicated2018

Six months
2019change

19.0%
20.4%
66.5%

Comparable sales growth
Sales
Adjusted EBITA

181
-46

222
-15

21.8%
22.9%
66.8%

Adjusted EBITA margin

89
-25

107
-8

-27.9%-7.8%-25.5%

-6.9%

-29

-10

66.1%

EBITA

-51

-17

66.7%

-29

-10

65.2%

Income from operations (EBIT)

-52

-18

65.7%

Second quarter
Sales amounted to EUR 107 million, an increase of 19.0% on a comparable basis, on the back of a strong performancein Europe as we continued to experience robust demand for connected offers. Adjusted EBITA increased by EUR 17
million to EUR -8 million thereby improving the Adjusted EBITA margin from -27.9% to -7.8%.

5Cash engine - Lamps
2018

Second quarter
2019

351
74
21.2%
72
72

286
56
19.5%
50
50

changein € million, unless otherwise indicated2018

Six months
2019-20.3%-18.5%-24.8%

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

722
153
21.2%
134
133

595
119
20.0%
111
111

-30.0%-29.9%

change-19.1%-17.6%-22.1%-17.1%-17.0%

Second quarter
Sales amounted to EUR 286 million, a comparable decrease of 20.3%. Our cash engine continues to deliver on its ‘last
man standing’ strategy, which resulted in further market share gains and solid free cash flow generation. The Adjusted
EBITA margin remained robust at 19.5%.

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 -24 million (Q2
18: EUR -21 million). EBITA amounted to EUR -27 million (Q2 18: EUR -38 million), including restructuring costs of EUR
3 million (Q2 18: EUR 8 million). There were no other incidental items that were not part of the Adjusted EBITA thisquarter (Q2 18: EUR 9 million, mainly related to the company name change).

Sales by market
2018

Second quarter
2019
ChangeCSG*in € million, except percentages

2018

Six months
2019change

CSG*

533
452
469
84
1,537

500
433
458
86
1,477

-6.3%
-8.1%
-4.7%
-1.5%
-6.1%

EuropeAmericasRest of the World
Global businesses
Total

1,093
874
903
169
3,038

1,033
862
890
170
2,955

-5.4%
-5.2%
-4.0%
-1.3%
-4.7%

-6.1%
-4.2%
-2.3%
2.0%
-3.9%

-5.5%
-1.3%
-1.4%
0.9%
-2.7%

Horticulture is included in Market Groups Europe, Americas and Rest of the World (was previously part of Global businesses)

Second quarter
Comparable sales in Europe decreased by 6.3%, mainly reflecting challenging market conditions in Germany, Italy andFrance. Comparable sales in the Americas decreased by 8.1%, mainly driven by the ongoing decline of conventional
and lower demand in the consumer channel of LED lamps. In the Rest of the World, comparable sales decreased by 4.7%, with a solid performance in China and Indonesia offset by Saudi Arabia and India.

6

Working capitalin € million, unless otherwise indicatedInventories
Receivables
Accounts and notes payable
Accrued liabilities
Other working capital items
Working capital
As % of LTM* sales* LTM: Last Twelve Months

30 Jun '18

31 Mar '19

30 Jun '19

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

943
1,231
-971
-431
-185
587
9.3%

999
1,203
-1,052
-460
-187
503
8.0%

6,614

6,336

6,275

Second quarter
Working capital decreased by EUR 191 million to EUR 503 million and by 250 basis points to 8.0% as a percentage ofsales, compared with the end of June 2018, including the above-mentioned phasing of payables and receivables. This
performance reflects the company’s continued focus on improving working capital.

Cash flow analysis
Second quarter
2018
2019
54
58
53
-62
-84
-6
-22
-22
-1
-31

80
67
29
-53
56
-6
-20
-27
-8
121

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
2018

2019

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

149
137
70
-110
27
-10
-39
-37
-12
175

Second quarter
Free cash flow amounted to EUR 121 million, including a positive impact of EUR 17 million related to IFRS 16,
compared with EUR -31 million in the same period last year. The increase in free cash flow is mainly driven by areduction in working capital, which included the above-mentioned phasing of payables and receivables. The effect ofphasing is estimated to represent around half of the free cash flow in the quarter. Free cash flow also included a lower
restructuring pay-out of EUR 27 million (Q2 18: EUR 33 million).

7

Net debt
in € million

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

30 Jun '18

31 Mar '19

30 Jun '19

101
1,185
1,286
598
688
2,133

151
1,370
1,521
733
789
2,208

147
1,339
1,486
621
865
2,056

Second quarter
Net debt amounted to EUR 865 million, an increase of EUR 76 million compared with the end of March 2019 mainly
due to dividend distribution of EUR 164 million which was partly offset by strong free cash flow generation. Total
equity decreased to EUR 2,056 million at the end of Q2 19 (end of March 2019: EUR 2,208 million), primarily due todividend distribution and currency translation results, partly offset by net income.

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 Stéphane Rougeot (CFO) will host a conference call for analysts and institutional investors at
9:00 a.m. CET to discuss second quarter and first half 2019 results. A live audio webcast of the conference call will beavailable via the Investor Relations website.
Financial calendar
25 October 201912 December 2019

Third quarter results 2019
Capital Markets Day 2019

For further information, please contact:
Signify Investor Relations
Robin Jansen
Tel: +31 6 1594 4569
E-mail: robin.j.jansen@signify.com
Signify Corporate Communications
Elco van 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 the Internetof Things. Our Philips products, Interact connected lighting systems and data-enabled services, deliver business value
and transform life in homes, buildings and public spaces. With 2018 sales of EUR 6.4 billion, we have approximately
28,000 employees and are present in over 70 countries. We unlock the extraordinary potential of light for brighter
lives and a better world. We have been named Industry Leader in the Dow Jones Sustainability Index for two years ina row. News from Signify is located at the Newsroom, Twitter, LinkedIn and Instagram. Information for investors canbe 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 growthand future operational results.
By their nature, these statements involve risks and uncertainties facing the Company and its Group Companies and a number ofimportant factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking
statement as a result of risks and uncertainties. Such risks, uncertainties and other important factors include but are not limited
to: adverse economic and political developments, the impacts of rapid technological change, competition in the general lighting
market, development of lighting systems and services, successful implementation of business transformation programs, impact ofacquisitions and other transactions, reputational and adverse effects on business due to activities in Environment, Health & Safety,
compliance risks, ability to attract and retain talented personnel, establishment of corporate and brand identity, adverse currency
effects, pension liabilities, and exposure to international tax laws. Please see “Risk Factors and Risk Management” in Chapter 12of the Annual Report 2018 for discussion of material risks, uncertainties and other important factors which may have a material
adverse effect on the business, results of operations, financial condition and prospects of the Group. Such risks, uncertainties andother important factors should be read in conjunction with the information included in the Company’s Annual Report 2018.
Looking ahead to the second half of 2019, the Group is primarily concerned about the challenging economic conditions and politicaluncertainties, for example related to the impact of the recently imposed import tariffs, 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 thisdocument could also prove to be important and may have a material adverse effect on the business, results of operations, financial
condition and prospects of the Group or could cause the forward-looking events discussed in this document not to occur. The
Group undertakes no duty to and will not necessarily update any of the forward-looking statements in light of new information or
future events, except to the extent required by applicable law.

Market and Industry Information
All references to market share, market data, industry statistics and industry forecasts in this document consist of 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 grossmargin, EBITA, adjusted EBITA, and free cash flow, and other related ratios, which are not recognized measures of financial
performance or liquidity under IFRS. The non-IFRS financial measures presented are measures used by management to monitor
the underlying performance of the Group’s business and operations and, accordingly, they have not been audited or reviewed.
Not all companies calculate non-IFRS financial measures in the same manner or on a consistent basis and these measures andratios may not be comparable to measures used by other companies under the same or similar names. A reconciliation of these
non-IFRS financial measures to the most directly comparable IFRS financial measures is contained in this document. For further
information on non-IFRS financial measures, see “Chapter 18 Reconciliation of non-IFRS measures” in the Annual Report 2018.

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 2018 and semi-annual report 2019.

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

10

Unaudited condensed
consolidated interim
financial statements

For the six-month period ended June 30, 2019

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

12
13

1.

15
15
16
17
18
19

Condensed consolidated interim financial statements
1.1 Condensed consolidated statements of income
1.2 Condensed consolidated statements of comprehensive income
1.3 Condensed consolidated statements of financial position
1.4 Condensed consolidated statements of cash flows
1.5 Condensed consolidated statements of changes in equity

2. Notes to the condensed consolidated interim financial statements
2.1 Reporting entity
2.2 Basis of preparation
2.3 Notes

20
20
20
23

12

Semi-annual report
Introduction
The semi-annual report for the six-month
period ended June 30, 2019 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 2019 are addressed in the firstpart of the press release - please refer tothe 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, 2018.

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 forthe six-month period ended June 30, 2019,
which have been prepared in accordancewith 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
and the undertakings included in the
consolidation taken as a whole, and the semiannual management report for the six-month
period ended June 30, 2019, gives a fair viewof the information required pursuant to
Section 5:25d(8)-(9) of the Dutch Financial
Markets Supervision Act (Wet op het
Financieel toezicht).

Eindhoven, July 26, 2019

Board of Management
Eric Rondolat
Stéphane Rougeot
René van Schooten

13Management report
Business performance 1)
First half 2019
Sales amounted to EUR 2,955 million, adecrease of 2.7% on a nominal basis.
Adjusted for 1.4% currency effect and 0.6%
consolidation and other impact, comparable
sales were 4.7% lower than in the first half of2018. Comparable LED-based sales grew by
1.9% and accounted for 76% of total sales.
The adjusted indirect cost base reduced by
EUR 62 million, improving by 120 basis points
to 30.9% of sales. The Adjusted EBITA margin
was 8.4% compared with 7.7% in the same
period last year, as currency effects
negatively impacted performance by 60 basis
points. Net income was EUR 95 million
compared with EUR 49 million last year mainly
as a result of EUR 12 million higher Adjusted
EBITA and EUR 46 million lower restructuringcosts and other incidentals. The effective tax
rate for the first half of 2019 was 27.4%
compared with 30.8% in 2018. The decreasein the effective tax rate was primarily due tohigher year to date income. Compared withthe end of June 2018, working capital as
percentage of sales decreased by 250 basis
points to 8.0% of sales, reflecting continued
focus on improving working capital andincludes an impact from phasing of payables& receivables. Free cash flow amounted to
EUR 175 million, compared with
EUR -37 million last year and included apositive impact of EUR 34 million from IFRS 16.

Growing profit engines
Our growing profit engines, LED, Professionaland Home, represent the foundations Signify

is building and investing in, in line with ourstrategy to move to LED and connectivity,
unleashing new growth platforms. These
include connected systems, IoT platform
services, horticulture, solar, and LiFi.
Comparable sales of these three businessgroups combined declined by 0.7%, mainlyreflecting a lower level of market activity inEurope which impacted Professional and LED
electronics. The Adjusted EBITA margin of
the growing profit engines combined
improved by 200 basis points to 7.6%.

LED
Sales were EUR 894 million, an increase of
0.7% on a nominal basis and a decline of 1.0%
on a comparable basis. LED lamps showed asolid performance while sales in LED
electronics slowed down in Europe. Income
from operations amounted to EUR 98 million.
EBITA of EUR 100 million included EUR 7 millionof restructuring and other incidental costs.
The Adjusted EBITA margin improved by 190
basis points to 12.0%, mainly driven byongoing procurement savings and lower
indirect costs.

Professional
Sales were EUR 1,231 million, reflecting anominal sales decline of -1.2% and -3.7% on acomparable basis, due to a lower level ofmarket activity in Europe, while the Americas
had a solid performance. After lower market
activity in China in the second half of 2018,
performance in this market started to
improve in the course of the first half of2019. Income from operations was
EUR 21 million compared with EUR 15 million in
the same period last year. EBITA amounted to
EUR 66 million, compared with EUR 58 million
in the first half of 2018. It included
restructuring and other incidental costs of1) 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 mostdirectly comparable IFRS measures, see “Reconciliation of non-IFRS financial measures”.

14

EUR 22 million. Adjusted EBITA amounted to
EUR 87 million compared with EUR 86 million
in the first half of 2018. The Adjusted EBITA
margin improved by 20 basis points to 7.1%,
as continued procurement and indirect costsavings more than offset the negative impact
of price, mix and currencies.

Home
Sales amounted to EUR 222 million, with anominal sales increase of 22.9% and anincrease of 21.8% on a comparable basis.
This was driven by a strong performance inEurope as the business group continued toexperience robust demand for connected
offers. Income from operations was
EUR -18 million, a significant improvementcompared with EUR -52 million last year.
EBITA amounted to EUR -17 million.
Restructuring and other incidental costs
amounted to EUR 2 million in the first half of
2019.

Cash engine - Lamps
Sales amounted to EUR 595 million, a declineof 17.6% on a nominal basis and 19.1% on acomparable basis, which is estimated to belower than the market decline, resulting incontinued market share gains. Income fromoperations reduced to EUR 111 million due tothe decline in sales, partly offset by proactive rationalization of the manufacturing
footprint and lower indirect costs. EBITA
amounted to EUR 111 million compared with
EUR 134 million in the first half of 2018. This
includes EUR 8 million of restructuring costs
and other incidental costs. The Adjusted
EBITA margin remained solid at 20.0%.
Adjusted EBITA amounted to EUR 119 million.

Other
Reported EBITA amounted to EUR -62 million.
This represents amounts not allocated to theoperating segments and includes certain
costs related to group enabling functions aswell as central R&D activities to drive
innovation. Adjusted EBITA amounted to
EUR -51 million, compared with
EUR -47 million in the same period last year.
Restructuring and other incidental costs
were EUR 11 million.

15

1

Condensed consolidated
financial statements

1.1

Condensed consolidated statements of income

In millions of EUR unless otherwise stated

Second quarter
Sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and development expenses
Impairment of goodwill
Other business income
Other business expenses
Income from operations
Financial income
Financial expenses
Results relating to investments in associates
Income before taxes
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 (inthousands):• Basic• Diluted
Net income attributable to shareholders per ordinary share in EUR:
• Basic• Diluted
The accompanying notes are an integral part of these condensed consolidated financial statements.

January to June

2018

2019

2018

2019

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

1,477
(926)
551
(404)
(68)
1
(0)
80
3
(14)
1
69
(19)
50

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

2,955
(1,852)
1,103
(813)
(139)
3
(4)
149
8
(29)
1
130
(35)
95

31
(2)

52
(2)

52
(3)

96
(2)

136,353
136,809126,116
127,403137,386
137,856

126,127
127,226

0.23
0.23

0.41
0.41

0.38
0.38

0.76
0.76

16

1.2

Condensed consolidated statements of comprehensive income

In millions of EUR

Second quarter
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

January to June

2018
29

2019
50

2018
49

2019
95

(3)
(3)

-

(6)
(6)

(2)
(2)

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

115
-

(27)
0

51
-

17
(1)

(11)
1
104

(12)
3
(36)

(1)
(1)
48

5
(0)
21

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

102
131

(36)
14

43
92

18
113

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

128
3

16
(2)

93
(0)

114
(1)

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

17

1.3

Condensed consolidated statements of financial position

In millions of EUR

December 31, 2018
Non-current assets
Property, plant and equipment• At cost• Less accumulated depreciation
Goodwill
Intangible assets, excluding goodwill• At cost• Less accumulated amortization

2,230(1,798)2,467(1,858)
431
1,771

2,065
(1,572)

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

June 30, 2019

609
1,812
2,100
(1,637)

493
38
11
20
399
49
3,211

463
42
13
18
402
53
3,413

878
4
107
28
35

999
3
124
13
37

1,167
64

1,124
79
1,231
9
676
2,969
6,181

1,203
7
621
3,007
6,420

EquityShareholders' equity
Non-controlling interests
Total equity

2,041
78
2,119

1,979
77
2,056

Non-current liabilities
Long-term debt
Long-term provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities

1,187
712
19
173
2,091

1,339
695
17
165
2,216

Current liabilities
Short-term debt
Derivative financial liabilities
Income tax payable
Accounts and notes payable
Accrued liabilities
Short-term provisions
Liabilities directly associated with assets classified as held for sale
Other current liabilities
Total current liabilities
Total liabilities and total equity

78
22
15
953
444
168
0
288
1,970
6,181

147
13
21
1,052
460
143
0
311
2,147
6,420

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

18

1.4

Condensed consolidated statements of cash flows

In millions of EUR

Second quarter

January to June

2018

2019

2018

2019

29
135
58

50
126
67

49
267
116

95
258
137

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

(1)
(3)
8
19
29
7
56
22
(60)
89
6
(7)
(53)
(6)
(20)
147

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

(0)
(1)
(8)
16
35
70
8
27
43
(113)
92
5
(8)
(110)
(10)
(39)
212

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

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

(27)
(12)
(16)
1
(2)
1
(2)
(20)
5
(45)

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

(37)
(16)
(23)
2
2
1
(2)
(20)
5
(50)

Cash flows from financing activities
Dividend paid
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)

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

(164)
(27)
(6)
(197)
(94)
(5)
712
612

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

(164)
(53)
(6)
(224)
(62)
9
664
612

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 received (paid)
Income taxes paid
Net cash provided by (used for) operating activities

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

10

13

For the six-month period ended June 30, 2019, non-cash investing and financing activities also included the impact from the adoption of IFRS 16(refer to paragraph 2.2, Basis of preparation) and EUR 19 million of deferred settlement of considerations from acquisition of businesses.

1) For Q2 2019 and Q2 2018, this included bank overdrafts of EUR 20 million and EUR 8 million, respectively. For the first half of 2019 and the first half of 2018,
this included bank overdrafts of EUR 12 million and EUR 17 million, respectively.
2) Included bank overdrafts of EUR 9 million and EUR 10 million as of June 30, 2019 and 2018, 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

Balance as of January 1, 2018
Adoption of IFRS 9 (net of tax)
Restated balance as of January 1, 2018
Net Income
Other comprehensive income (loss)
Total comprehensive income (loss)
Movement in non-controlling interests
Dividend distributed
Purchase of treasury shares
Cancellation of treasury shares 1)
Delivery of treasury shares
Share-based compensation plans
Income tax share-based compensation
plans
Funding by (distribution to) Royal
Philips
Balance as of June 30, 2018
Balance as of January 1, 2019
Adoption of IFRS 16 (net of tax) 2)
Restated balance as of January 1, 2019
Net Income
Other comprehensive income (loss)
Total comprehensive income (loss)
Movement in non-controlling interests
Dividend distributed
Purchase of treasury shares
Cancellation of treasury shares
Delivery of treasury shares
Share-based compensation plans
Income tax share-based compensation
plans
Balance as of June 30, 2019

Sharecapital
1
1
-

Share
premium
2,163
2,163
(1)
9

Retainedearnings
287
(11)
276
52
(6)
47
(171)
(160)
-

Currencytranslationdifferences
(87)
(87)
49
49
-

Cash flow
hedges
1
1
(3)
(3)
-

Treasuryshares
(124)
(124)
(104)
160
1
-

Total shareholders'equity
2,242
(11)
2,231
52
40
93
(171)
(104)
9

Noncontrollinginterests
79
(3)
76
(3)
2
(0)
1
-

Equity
2,321
(14)
2,307
49
43
92
1
(171)
(104)
9

-

-

-

-

-

-

-

-

-

1

(1)
2,169

(8)

(38)

(2)

(66)

(1)
2,057

76

(1)
2,133

1
1
-

2,179
2,179
(2)
6

(37)
(12)
(48)
96
(2)
94
(164)
(1)
-

(29)
(29)
15
15
-

(9)
(9)
4
4
-

(65)
(65)
(6)
2
-

2,041
(12)
2,030
96
18
114
(164)
(6)
6

78
(0)
78
(2)
1
(1)
-

2,119
(12)
2,108
95
18
113
(164)
(6)
6

1

2,183

(119)

(13)

(4)

(69)

1,979

77

2,056

1) Prior period amounts have been adjusted to reflect a revised split between share premium and retained earnings.
2) Refer to paragrah 2.2, Basis of preparation.
The accompanying notes are an integral part of these condensed consolidated financial statements.

20

2 Notes to the condensed
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.

Separation from Royal Philips
On February 1, 2016, Koninklijke Philips N.V.
(‘Royal Philips’) and Philips Lighting Holding
B.V. entered into the Separation Agreement
and a set of ancillary agreements, together
effecting the Separation of their respective
businesses and providing a framework for the
relationship between Royal Philips and Signify

thereafter (the ‘Separation’). For more
information regarding the Separation, pleaserefer to note 1 in the Consolidated financial
statements for the year ended December 31,
2018.

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, 2018. Several
other amendments and interpretations apply
for the first time in 2019, but do not have an
impact on the condensed consolidated
interim financial statements of Signify.

IFRS 16 leasing
IFRS 16 replaced IAS 17 Leases and became
effective on January 1, 2019. Under the newlease standard, assets leased by theCompany are being recognized in thestatements of financial position with acorresponding lease liability.
Lessor accounting under IFRS 16 issubstantially unchanged from IAS 17. Lessors

21

will continue to classify leases as either
operating or finance leases using similar
principles as in IAS 17. Therefore, IFRS 16 did
not have an impact for leases where theCompany is the lessor.
The Company adopted IFRS 16 using themodified retrospective transition method(also referred to as cumulative effectmethod) with the date of initial application ofJanuary 1, 2019. This means that comparative
figures were not restated and the cumulative
effect of the initial application of thestandard is accounted for as an adjustment
to the opening balance of equity as at thedate of initial application.

Transition and impact assessment
Lease contracts that have a meaningful
impact on the company’s (condensed)
consolidated (interim) financial statements
relate to real estate, car fleet and IT
equipment. In selecting which practical
expedients to apply, the Company focusedon reducing the complexity of
implementation and:•applied the exemption not torecognize right-of-use assets and liabilities
for leases of low value assets (mainly
laptops)•for real estate leases, applied theexemption not to recognize right-of-use
assets and liabilities for leases with less than
12 months of lease terms. These include
leases with a remaining lease term of 12months or less at the transition date•adjusted the right-of-use asset by
the amount of any provisions for onerous
lease contracts recognized under IAS 37 toapproximate impairment.
The effect of the adoption of IFRS 16 to thestatements of financial position as of January
1, 2019 is as follows:

In millions of EUR

AssetsProperty, plant and equipment
Deferred tax assets
Non-current assets
Current assets
Total assets
EquityRetained earnings
Total equity
Liabilities
Long-term debt
Provisions
Short-term debt
Total liabilities

222
2
9
5
238
(12)
(12)
214
(9)
45
250

Property, plant and equipment increased by
EUR 222 million due to the recognition ofright-of-use-assets. Current and noncurrent assets increased by EUR 14 million
due to the inclusion of sublease receivables.
Provisions decreased by EUR 9 million,
relating to the derecognition of onerous
lease provisions, which was recognized as an
adjustment to right-of-use assets upontransition to IFRS 16.
The effect of the adoption of IFRS 16 had no
impact on the Company’s sales, while theIncome from operations is positively
impacted by approximately EUR 6 million forthe six-month period ended June 30, 2019.
This is caused by operating lease expenses
being replaced by depreciation, service
costs and interest expenses, of which thelatter is not recognized in Income fromoperations.
In addition, the cash flow from operating
activities for the six-month period ended
June 30, 2019, was positively impacted byaround EUR 34 million as, under the newstandard, cash payments for the principal
part of the lease liability are classified in the
cash flow from financing activities instead ofin the cash flow from operating activities.
The Company foresees no impact of the
adoption of IFRS 16 on compliance with debt
covenants.

22

Leases previously accounted for as
operating leases
The Company recognized right-of-use assets
and lease liabilities for those leases
previously classified as operating leases,
except for short-term leases and leases of
low-value assets. The right-of-use assets
were recognized based on the carrying
amount as if the standard had always been
applied, apart from the use of theincremental borrowing rate at the date ofinitial application. Lease liabilities wererecognized based on the present value ofthe remaining lease payments anddiscounted using the incremental borrowing
rate at the date of initial application.
The lease liabilities as of January 1, 2019reconcile to the operating leasecommitments as of December 31, 2018, as
follows:
In millions of EUR

Operating lease commitments as of December 31, 2018
Discounting impact
Short term leases
Derecognition of lease liabilities for IT equipment
Other impacts
IFRS16 opening balance impact on lease liabilities as ofJanuary 1, 2019

285
(23)
(5)
(9)
11
259

Other impacts include, among others,
adjustments made as a result of a different
treatment of extension and termination
options. The Company applied a weighted
average discount rate of 3.1% for real estate
and a single discount rate of 1.5% for cars.

Summary of new accounting policies
Right-of-use assets
The Company recognizes right-of-use assets
at the commencement date of the lease (i.e.,the date the underlying asset is available foruse). Right-of-use assets are measured atcost, less any accumulated depreciation andimpairment losses, and adjusted for any
remeasurement of lease liabilities. The costof right-of-use assets includes the amountof lease liabilities recognized, initial direct

costs incurred, and lease payments made ator before the commencement date less anylease incentives received. Unless theCompany is reasonably certain to obtainownership of the leased asset at the end of
the lease term, the recognized right-of-use
assets are depreciated on a straight-line
basis over the shorter of its estimated usefullife and the lease term. Right-of-use assets
are subject to impairment.
Lease liabilities
At the commencement date of the lease, theCompany recognizes lease liabilities
measured at the present value of lease
payments to be made over the lease term.
The lease payments include (in-substance)
fixed payments (less any lease incentives),
variable lease payments that depend on anindex or a rate, and amounts expected to be
paid under residual value guarantees. The
lease payments also include the exercise
price of a purchase option reasonably
certain to be exercised by the Company andpayments of penalties for terminating alease, if the lease term reflects the Company
exercising the option to terminate.
In calculating the present value of lease
payments, the Company uses the incremental
borrowing rate at the lease commencement
date if the interest rate implicit in the lease is
not readily determinable. After thecommencement date, the amount of leaseliabilities is increased to reflect the accretionof interest and reduced for the lease
payments made. In addition, the carrying
amount of lease liabilities is remeasured if
there is a modification, a change in the leaseterm, a change in the in-substance fixedlease payments or a change in theassessment to purchase the underlying
asset.

23

Short-term leases and leases of low-value
assetsThe Company applies the short-term leaserecognition exemption to its short-termleases for real estate (i.e., those leases thathave a lease term of 12 months or less fromthe commencement date and do not containa purchase option). It also applies the leaseof low-value assets recognition exemption toleases of office equipment that areconsidered of low value. Lease payments on
short-term leases and leases of low-value
assets are recognized as expense on astraight-line basis over the lease term.
Significant judgement in determining thelease term of contracts with renewal
options
The Company determines the lease term as
the non-cancellable term of the lease,
together with any periods covered by anoption to extend the lease if it is reasonably
certain to be exercised, or any periods
covered by an option to terminate the lease,
if it is reasonably certain not to be exercised.
When determining the lease term, Signify
considers all relevant facts andcircumstances that create an economic
incentive to exercise an extension option, or
not to exercise a termination option. These
circumstances include the Company’s
strategic plans, the industrial footprint of theCompany and Business Group and theimportance of the site to the Company’s
operations.

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
16, the significant estimates and judgments in
preparing the condensed consolidated
interim financial statements, made bymanagement in applying the accounting
policies and the sources of estimation
uncertainty, were the same as those applied
to the Company’s Consolidated financial
statements for the year ended December 31,
2018.

2.3

Notes

1

Information by segment andmain 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 ofManagement of the Company). The operating
segments are Lamps, LED, Professional andHome. The segments are organized based on
the nature of the products and services.
‘Other’ represents amounts not allocated tothe operating segments and includes certain
costs related to central R&D activities todrive innovation as well as group enabling
functions.
The following is an overview of Signify
revenues and results by segment:

24
In millions of EUR

Second quarter

2019
Lamps
LED
Professional
Home
Other 3)
Intersegment
elimination
Signify
Amortization 4)
Income from operations
Financial income andexpenses
Results relating toinvestments inassociates
Income before taxes
2018
Lamps
LED
Professional
Home
Other 3)
Intersegment
elimination
Signify
Amortization 4)
Income from operations
Financial income andexpenses
Results relating toinvestments inassociates
Income before taxes

January to June

Depreciation
andSales toexternalcustomers

Sales
includingintersegment

amortization 1)

EBITA 2)

286
445
632
107
7

288
485
632
107
8

(7)
(3)
(13)
(3)
(16)

50
49
42
(10)
(27)

1,477

(43)
1,477

(43)

104
(24)
80

Depreciation
andSales toexternalcustomers

Sales
includingintersegment

amortization 1)

EBITA 2)

17.5%
10.9%
6.7%
(9.1%)

595
894
1,231
222
14

598
969
1,233
223
14

(15)
(7)
(25)
(8)
(33)

111
100
66
(17)
(62)

18.6%
11.2%
5.3%
(7.6%)

7.1%

2,955

(82)
2,955

(89)

198
(49)
149

6.7%

EBITA as a
% of sales

(12)

(21)

1
69

1
130

EBITA as a
% of sales

351
443
652
89
2

353
474
652
89
4

(9)
(3)
(11)
(3)
(9)

72
43
29
(29)
(38)

20.4%
9.8%
4.5%
(32.3%)

722
887
1,245
181
3

727
949
1,247
182
7

(19)
(6)
(22)
(5)
(18)

134
85
58
(51)
(85)

18.5%
9.6%
4.6%
(28.1%)

1,537

(36)
1,537

(34)

77
(23)
54

5.0%

3,038

(74)
3,038

(70)

140
(46)
94

4.6%

(13)

(23)

0
41

0
71

1) Excluding amortization and impairments of acquisition related intangible assets and goodwill.
2) Income from operations excluding amortization and impairments of acquisition related intangible assets and goodwill (“EBITA”).
3) Considering the nature of Other, EBITA as a % of sales for Other is not meaningful.
4) Amortization and impairments of acquisition related intangible assets and goodwill.

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:2

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,
2018.

In millions of EUR

Tangible and intangible

Netherlands
United States
China
India
Germany
Saudi Arabia
Other countries
Total countries
1) Including goodwill.

Sales
January to
January toJune, 2018 June, 2019
249
240
650
653
223
245
209
197
219
195
58
50
1,430
1,376
3,038
2,955

assets 1)
DecemberJune 30,
31, 2018
2019
120
196
1,814
1,803
86
123
15
21
6
17
174
170
490
543
2,695
2,884

3

Seasonality

The sales trend is influenced by the exposure
to the consumer market (in general higher
sales in the second half of the year) and thetiming of specific larger-sized projects in thesegment Professional.

25

4

Sales

Disaggregated revenue information
Information on sales per segment is disclosed
in note 1, Information by segment and main
country. For the six-month period ended
June 30, 2019, sales consisted primarily(97%) of sales of goods to customers(January to June 2018: 97%), for whichrevenue is generally recognized at the point
in time that the customer obtains control of
the goods. Mainly in the Professional
segment, revenue from the sale of goods
may also be recognized over time.
Remaining sales include revenue fromservices, sales-and usage-based royalties
and leases.
Revenue from services and sales- and usagebased royalties is generally recognized overtime. Revenue from leases mainly relates tofinance leases, whereby revenue for theleased assets is recognized at the leasecommencement date.
Sales by market:
In millions of EUR

EuropeAmericasRest of the world
Global businesses
Total

5

Second quarter
2018
2019
533
500
452
433
469
458
84
86
1,537
1,477

January to June
2018
2019
1,093
1,033
874
862
903
890
169
170
3,038
2,955

Depreciation, amortization andimpairment

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

Depreciation of property, plant andequipment is primarily included in Cost of
sales. Amortization of other intangible assets
is reported in Selling, general andadministrative expenses for brand names andcustomer relationships and in Cost of sales
for technology-based and other intangible
assets. Amortization of development costs is
included in Research and development
expenses.

6

January to June
2018
2019
(60)
(78)
(3)
(3)
(46)
(49)
(7)
(7)
(116)
(137)

Other business income andexpenses

Other business income and expenses
consists of the following:
In millions of EUR

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 and expenses
Total other business income
Total other business expenses

2018

2019

0
(0)

0
-

1
(0)

1
(0)

3
(12)
(7)
5
(12)

2
(4)
(1)
3
(4)

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, in the United States of America.

7

In millions of EUR

Property, plant and equipment
Internal-use software
Other intangible assets
Development costs
Total

Depreciation of property, plant andequipment increased by EUR 18 million due tothe implementation of IFRS 16 which waspartially offset by lower depreciation ofother tangible assets.

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.

26

Income tax expense in the first six months of2019 increased by EUR 13 million compared tothe corresponding period of the previous
year, mainly as a result of higher income forthe six-month period ended June 30, 2019.
The effective tax rate for the six-month
period ended June 30, 2019, was 27.1%
compared to 30.7% in 2018. The decrease in
the effective tax rate is primarily due tohigher year-to-date income in 2019.

due to amortization of EUR 58 million (sixmonth period ended June 30, 2018: EUR 55
million), partially offset by additions of EUR 17
million (six-month period ended June 30,
2018: EUR 12 million) and other movements
including translation differences of EUR 13
million (six-month period ended June 30,
2018: EUR 12 million).

8

For the six-month period ended June 30,
2019, the amount of write-down of
inventories to realizable value was EUR 7
million (six-month period ended June 30,
2018: EUR 9 million).

Property, plant and equipment

Property, plant and equipment increased by
EUR 178 million during the six-month period
ended June 30, 2019, mainly due to the
opening balance adjustment of EUR 222
million related to the IFRS 16 implementation(refer to paragraph 2.2). The remainingchange mainly relates to depreciation of EUR
76 million (six-month period ended June 30,
2018: EUR 54 million) and additions of EUR 36
million (six-month period ended June 30,
2018: EUR 36 million). The increase indepreciation is caused by first time inclusionof depreciation of right-of-use assets.

9

Goodwill

For information regarding the most recent
impairment test of the different cashgenerating units, including Professional,
reference is made to note 15, Goodwill in the
Company’s Consolidated financial statements
for the year ended December 31, 2018.
No events have been identified bymanagement in the first six months of 2019that required an update of the mentioned
impairment tests.

10

Intangible assets excluding
goodwill

Intangible assets other than goodwill
decreased by EUR 29 million during the sixmonth period ended June 30, 2019, mainly

11

Inventories

In millions of EUR

Raw materials
Work in progress
Finished goods
Total

12

December31, 2018
315
14
550
878

June 30,
2019
352
4
643
999

EquityShare 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 pershare. As of June 30, 2019, the issued sharecapital of the Company consisted of
128,344,238 ordinary shares with a nominal
value of EUR 0.01 per share. No preference
shares have been issued.

Dividend distribution
In May 2019, the Company settled a dividendof EUR 1.30 per ordinary share, representing
a total value of EUR 164 million including
costs.

Share repurchases
In June 2019, the Company completed ashare repurchase program to cover

27

obligations arising from its share-based
compensation plans. The total number ofshares repurchased was 240,000 for a total
consideration of EUR 6 million.

Treasury shares
As of June 30, 2019, the total number oftreasury shares amounted to 2,419,054
which were purchased at an average price of
EUR 28.41 per share.

13

Short-term and long-term debt

Short-term and long-term debt relate tofinancing by local banks and financial
institutions.
In millions of EUR

Facility (EUR)
Facility (USD)
Lease liabilities
Other Debt
Subtotal
Bank overdrafts
Total

December31, 2018
737
437
18
62
1,253
12
1,265

June 30,
2019
738
440
255
44
1,477
9
1,486

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

78
1,187
1,265

147
1,339
1,486

Short-term and long-term debt includes
an increase of EUR 259 million due to leaseliabilities from the implementation of IFRS 16
as of January 1, 2019.
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
remains at 0.65% as of June 30, 2019, 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.
New borrowings and repayments of shortterm and long-term debt resulting fromfinancing activities are as follows:
In millions of EUR

Balance as of January 1, 2018
New Borrowings
Repayments
Transfers
Translation differences andother movements
Balance as of June 30, 2018
Balance as of January 1, 2019
IFRS 16 adoption effectRestated balance as of January
1, 2019
New Borrowings
Repayments
Transfers
Translation differences andother movements
Balance as of June 30, 201914

Long-term
Debt
1,170
(3)

Short-term
Debt
140
32
(64)
3

Total
1,309
32
(64)
-

19
1,185

(10)
101

9
1,286

1,187
214

78
45

1,265
259

1,401
(80)

123
1
(55)
80

1,524
1
(55)
-

18
1,339

(2)
147

16
1,486

Provisions

Provisions are summarized as follows:
In millions of EUR

December 31, 2018

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

June 30, 2019

Longterm

ShorttermLongterm

Shortterm

475

-

473

-

18

81

15

58

95

20

89

23

17
107
712

25
42
168

17
100
695

27
35
143

The decrease in provisions was mainly
attributable to usage of restructuring
related provisions and the implementation of
IFRS 16 (refer to paragraph 2.2, Basis ofpreparation).
With regard to provision for postemployment benefits, no significant market
fluctuations occurred during the first six
months of 2019 which would require remeasurement under IAS 34.

28

15

Contingent liabilities

Indemnifications
By way of surety for the fulfilment of Signify’s
obligations under the Separation Agreement,
including the indemnifications granted toRoyal 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 28 in the Consolidated
financial statements for the year ended
December 31, 2018.

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.

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 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 LTI Plan.

Signify share-based compensation plans
In the six-month period ended June 30, 2019,
Signify granted 818,301 performance shares,
315,311 conditional shares and28,473 restricted shares to its employees
and members of the Board of Management.
For the same period, a total of 70,111 vested
shares (performance, conditional, andrestricted) were delivered to Signify
employees.

Legal proceedings
Signify is involved as a party in legal
proceedings, regulatory and othergovernmental proceedings, including
discussions on potential remedial actions,relating to commercial transactions,
intellectual property disputes, productliability, environmental pollution, labor
related disputes and business conduct rules.

Royal Philips LTI Plan

For information regarding legal, regulatory
and arbitration proceedings in which theCompany is involved, please refer to note 27
in the Consolidated financial statements forthe year ended December 31, 2018.

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

16

Share-based compensation

Total share-based compensation costs for
Signify for the six-month period ended June30, 2019, were EUR 9 million (six-months
period ended June 30, 2018: EUR 17 million).
Of the EUR 9 million share-based
compensation costs for the six-month period
ended June 30, 2019, EUR 6 million was

In the six-month period ended June 30, 2019,a total of 1,294,970 shares (performance andrestricted) vested and were delivered to
Signify employees and members of the Boardof Management of Signify by Royal Philips.

17

Financial assets and liabilities

For cash and cash equivalents and financial
assets and liabilities carried at amortized29

cost, the carrying amount is a reasonableapproximation of their fair value.
The following hierarchy is applied to classify
the financial assets and liabilities:

Level 1
Instruments included in Level 1 are comprised
primarily of listed equity investments
classified as financial assets at fair value via
other comprehensive income and financial
assets designated at fair value through profit
and loss. The fair value of financial
instruments traded in active markets is basedon unadjusted quoted prices in active
markets for identical assets or liabilities atthe balance sheet date. A market is regarded
as active if quoted prices are readily andregularly available from an exchange, dealer,
broker, industry group, pricing service, or
regulatory agency, and those prices
represent actual and regularly occurring
market transactions on an arm’s length basis.

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.

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

In millions of EUR

Level 1

Level 2

Level 3

Total

-

28
-

2

28
2

-

28

2
4

2
32

-

(22)
(22)

-

(22)
(22)

-

13
-

2

13
2

-

13

2
4

2
18

-

(14)
(14)

-

(14)
(14)

Balance as of December 31, 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
Financial liabilities at fair value through profit and loss:
Derivatives designated as hedging instruments
Total
Balance as of June 30, 2019
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
Financial liabilities at fair value through profit and loss:
Derivatives designated as hedging instruments
Total

30

18

Events after the balance sheet
date

On July 25 the Company agreed to acquire a
51% stake in Zhejiang Klite Lighting Holdings
Co., Ltd. This Zhejiang, China-based company
is one of the leading providers of high-quality,
cost-efficient LED lamps and luminaires,
which generated around EUR 250 million insales to third parties in 2018. This transaction
will strategically strengthen Signify’s positionin the supply chain of LED lamps andluminaires thereby allowing a faster deliveryof cost-efficient innovations to customers
and to capture value from the growing private
label segment. The transaction, which is
subject to customary closing conditions, is
expected to close in the second half of 2019.

31

Appendix B - Reconciliation of non-IFRS financial measures
Sales growth composition per businessIn percentage

In percentage

January to June

Second quarter2019 vs 2018
Lamps
LED
Professional
Home
Other
Total

Comparable
growth(20.3)
(1.8)
(5.6)
19.0
255.7
(6.1)

Currency
effects
1.8
2.1
1.4
1.3
18.3
1.7

Consolidationand otherchanges
0.0
1.0
0.5

Nominalgrowth(18.5)
0.4
(3.2)
20.4
274.0
(3.9)

2019 vs 2018
Lamps
LED
Professional
Home
Other
Total

Comparable
growth(19.1)
(1.0)
(3.7)
21.8
302.8
(4.7)

Currency
effects
1.5
1.7
1.1
1.1
22.1
1.4

Consolidationand otherchanges
0.0
1.4
0.6

Nominalgrowth
(17.6)
0.7
(1.2)
22.9
324.9
(2.7)

Sales growth composition per market
In percentage

In percentage

January to June

Second quarter
Comparable
2019 vs 2018
growthEurope(6.3)
Americas(8.1)
Rest of the World(4.7)
Global businesses
(1.5)
Total
(6.1)

Currency
effects
(0.1)
3.9
1.7
1.1
1.7

Consolidationand otherchanges
0.4
0.0
0.7
2.4
0.5

Nominalgrowth
(6.1)
(4.2)
(2.3)
2.0
(3.9)

Comparable
2019 vs 2018
growthEurope(5.4)
Americas(5.2)
Rest of the World(4.0)
Global businesses
(1.3)
Total
(4.7)

Currency
effects
(0.3)
3.8
1.1
1.1
1.4

Consolidationand otherchanges
0.2
0.0
1.5
1.1
0.6

Nominalgrowth
(5.5)
(1.3)
(1.4)
0.9
(2.7)

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

Second quarter
Signify

Lamps

LED

Professional

Home

Other

2019
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items
EBITA
Amortization 1)
Income from operations (or EBIT)

133
(14)
(1)
(13)
104
(24)
80

56
(3)
(3)
50
(0)
50

53
(1)
(0)
(4)
49
(1)
48

55
(7)
(1)
(6)
42
(22)
20

(8)
(0)
(1)
(10)
(0)
(10)

(24)
(3)
(0)
(27)
(1)
(27)

2018
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items 3)
EBITA
Amortization 1)
Income from operations (or EBIT)

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)

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

32
In millions of EUR

January to June
Signify

Lamps

LED

Professional

Home

Other

2019
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items
EBITA
Amortization 1)
Income from operations (or EBIT)

247
(34)
(1)
(15)
198
(49)
149

119
(5)
(3)
111
(0)
111

107
(3)
(0)
(4)
100
(2)
98

87
(15)
(1)
(6)
66
(45)
21

(15)
(0)
(1)
(17)
(1)
(18)

(51)
(9)
(2)
(62)
(1)
(63)

2018
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items 3)
EBITA
Amortization 1)
Income from operations (or EBIT)

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)

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

Income from operations to Adjusted EBITA
In millions of EUR

Second quarter

Reported

Restructuring

Acquisition
relatedcharges

Incidental
items

Adjusted

2019
Sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and development expenses
Indirect costs
Impairment of goodwill
Other business income
Other business expenses
Income from operations
Amortization 1)
Income from operations excluding amortization (EBITA)

1,477
(926)
551
(404)
(68)
(471)
1
(0)
80
(24)
104

6
6
7
1
8
14
14

1
1
1
1

14
14
(0)
13
13

1,477
(920)
557
(383)
(67)
(449)
0
(0)
108
(24)
133

2018
Sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and development expenses
Indirect costs
Impairment of goodwill
Other business income
Other business expenses
Income from operations
Amortization 1)
Income from operations excluding amortization (EBITA)

1,537
(970)
567
(428)
(78)
(506)
3
(10)
54
(23)
77

16
16
14
5
20
35
35

(0)
(0)
0
0
0
0

8
8
9
17
17

1,537
(955)
583
(405)
(73)
(478)
3
(1)
107
(23)
130

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

33
In millions of EUR

January to June

Reported

Restructuring

Acquisition
relatedcharges

Incidental
items

Adjusted

2019
Sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and development expenses
Indirect costs
Impairment of goodwill
Other business income
Other business expenses
Income from operations
Amortization 1)
Income from operations excluding amortization (EBITA)

2,955(1,852)
1,103
(813)
(139)
(953)
3
(4)
149
(49)
198

11
11
19
4
23
34
34

1
1
1
1

15
15
(0)
15
15

2,955
(1,841)
1,114
(778)
(136)
(914)
3
(4)
199
(49)
247

2018
Sales
Cost of sales
Gross margin
Selling, general and administrative expenses 2)
Research and development expenses
Indirect costs
Impairment of goodwill
Other business income
Other business expenses
Income from operations
Amortization 1)
Income from operations excluding amortization (EBITA)

3,038(1,906)
1,132
(858)
(173)
(1,032)
5
(12)
94
(46)
140

31
31
24
20
44
74
74

0
0
0
0
0
0

0
0
12
12
(1)
10
21
21

3,038
(1,876)
1,163
(822)
(153)
(976)
4
(2)
189
(46)
235

June 30,
2018
694

December31, 2018
536

June 30,
2019
503

967
414
19
300

953
444
22
288

1,052
460
13
311

3,317
35
4
598

3,211
35
4
676

3,413
37
3
621

7
6,355

9
6,181

7
6,420

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

Working capital to total assets

Composition of cash flows

In millions of EUR

In millions of EUR

Second quarter
2018
2019
Cash flows fromoperating activities
Cash flows frominvesting activities
Cash flows before
financing activities
Cash flows fromoperating activities
Net capital
expenditures:• Additions ofintangible assets

January to June
2018
2019

(9)

147

6

212

(36)

(45)

(45)

(50)

(45)

103

(38)

162

(9)

147

6

212

(22)

(27)

(43)

(37)

(5)

(12)

(12)

(16)

• Capital
expenditures onproperty, plant andequipment

(18)

(16)

(33)

(23)

• Proceeds from
disposal ofproperty, plant andequipment
Free cash flows

1
(31)

1
121

1
(37)

2
175

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

34

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 (CSG)

EBIT
EBITA

Costs that are directly triggered by theacquisition of a company, such as transaction costs,
purchase accounting related costs and integrationrelated 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 andother incidental items attributable to research anddevelopment expenses
Selling, general and administrative expenses,
excluding restructuring costs, acquisition-related
charges and other incidental items attributable toselling, general and administrative expenses
The period-on-period growth in sales excluding theeffects of currency movements and changes in
consolidation and other changes
Income from operations

Income from operations excluding amortization andimpairment of acquisition related intangible assets
and goodwill
Effects of changes in consolidation and other In the event a business is acquired (or divested), thechanges
impact of the consolidation (or de-consolidation) on
the Group’s figures is included (or excluded) in thecalculation of the comparable sales growth figures.
Other changes include regulatory changes andchanges 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 the same average exchange
rates.
Employees
Employees of Signify at period end expressed on afull-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

35

Incidental charges

Indirect costs
Net capital expenditures

Net debt
R&D expenses
Restructuring costs

SG&A expenses
Working capital

Any item with an income statement impact (loss orgain) that is deemed to be both significant and notpart of normal business activity. Other incidental
items may extend over several quarters within thesame financial year
The sum of selling, general and administrative
expenses and R&D expenses
Additions of intangible assets, capital expenditureson property, plant and equipment and proceedsfrom disposal of property, plant and equipment
Short-term debt, long-term debt minus cash andcash equivalents
Research and development expenses
The estimated costs of initiated reorganizations, themost significant of which have been approved by theGroup, and which generally involve the realignmentof certain parts of the industrial and commercialorganization
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.