Signify reports full year sales of EUR 6.4 billion, improvement in operational profitability by 50 bps to 10.1% and free cash flow of EUR 306 million

Full year 20181
Signify's installed base of connected light points increased from 30 million at YE 17 to 44 million at YE 18
LED-based sales grew by 2.5% on a comparable basis to 71% of sales (FY 17: 65%); CSG total Signify -4.4%
Adj. indirect costs down EUR 224 million on a currency comparable basis, a reduction of 10%, or 180 bps of sales
Adj. EBITA margin improved by 50 bps to 10.1%, despite a negative currency impact of -50 bps
Net income of EUR 261 million (FY 17: EUR 281 million including net real estate gains of EUR 52 million)
Working capital improved by 20 bps to 8.4% of sales
Free cash flow of EUR 306 million (FY 17: EUR 403 million, which included EUR 56 million real estate proceeds and EUR 40 million lower restructuring cash-out)

Fourth quarter 20181

LED-based sales grew by 0.2% on a comparable basis; CSG total Signify -7.3% (Q4 17: 3.0%)
Adj. indirect costs down EUR 83 million on a currency comparable basis, a reduction of 15%, or 250 bps of sales
Adj. EBITA margin improved by 150 bps to 12.4%, despite a negative currency impact of -50 bps
Net income improved to EUR 119 million compared with EUR 38 million last year
Free cash flow of EUR 279 million (Q4 17: EUR 434 million)

Shareholder returns
In 2018, EUR 462 million of capital was returned through share repurchases and ordinary dividends
Propose to pay a cash dividend of EUR 1.30 per share over 2018, an increase of 4% and a pay-out ratio of 46%
Signify will have returned EUR 1.1 billion to shareholders since IPO, including 2018 dividend

Eindhoven, the Netherlands - Signify (Euronext: LIGHT), the world leader in lighting, today announced the company's fourth quarter and full-year results 2018. "We continued to make solid progress with our simplification and cost reduction actions in 2018, resulting in a substantial increase in profitability and strong free cash flow delivery. In line with our strategy, our growing profit engines - LED, Professional and Home - have strongly contributed to these improvements and our LED-based sales have grown by 2.5%, now representing 71% of total revenues," said CEO Eric Rondolat. "While market conditions are challenging, we continue to focus on new growth platforms to strengthen our market leadership and progressively improve our growth profile. With our proposal to increase our dividend to EUR 1.30 per share, we will have returned more than EUR 1 billion to shareholders over the last three years. Looking forward, I'm confident we have built a solid foundation to deliver in 2019 on the mid-term targets set at the time of the IPO."

Outlook
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 reach an Adjusted EBITA margin in 2019 within the range of 11 to 13% set at the time of the IPO in May 2016. We expect free cash flow in 2019 to be above 5% of sales.

Financial review

Capital allocation
Signify continues to exercise strict financial discipline in the generation and use of cash and remains committed to
managing its financial ratios to maintain a financing structure compatible with an investment-grade profile, including
disciplined management of its balance sheet. Furthermore, the company continues to consider non-organic
opportunities primarily through small- to medium-sized acquisitions to accelerate growth.

Dividend
In 2018, Signify paid a dividend of EUR 171 million over full-year 2017. The company proposes a dividend of EUR 1.30 per share in cash related to full year 2018, which represents an increase of 4% compared with last year, and a payout ratio of 46%. The dividend payment is subject to approval by the Annual General Meeting of Shareholders (AGM) to be held on May 14, 2019. Further details will be provided in the agenda for the AGM.

Share repurchases
In 2018, the company repurchased shares for an amount of EUR 291 million by repurchasing in the open market and
by participating in share disposals by its main shareholder. Furthermore, the company repurchased shares for a total
consideration of EUR 33 million to cover obligations arising from its long-term incentive performance share plan and other employee share plans.
In line with its capital allocation policy, Signify will continue to look for non-organic growth opportunities primarily through small- to medium-sized acquisitions. If, in the course of the year, the funds needed for non-organic growth opportunities are substantially less than the capital available, the company will consider other use of its capital, which
includes returning excess cash to shareholders through share repurchases.
Changes to financial reporting

Since the first quarter of 2018, Signify reports and discusses its financial performance based on the portfolio changes that were announced in the first quarter of 2018. In March 2018, the company provided an update to show the effect of changes to the business portfolio as well as changes to the allocation methods of centrally-managed costs and to the threshold for other incidental items as adjusting items when presenting certain non-IFRS measures such as Adjusted EBITA. More details can be found on page 12 in the full and original version of the press release.

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https://www.signify.com/static/quarterlyresults/2018/q4_2018/signify-fourth-quarter-and-full-year-results-2018-report.pdf