The full year results for 2017 at Philips Lighting featured a return to positive comparable sales growth, driven by the growth of LED and connected lighting Systems & Services.
Total sales of €6.965 million represented a small but significant 0.5 percent increase. By contrast, the 2016 results had showed a 2.4 percent decline in like for like sales.
Profits, expressed as adjusted EBITA, improved to €699 million (2016: €645 million). That translates as a healthy enough 10 percent margin on sales (2016: 9.1 percent) across its four business sectors.
LED sales were up 12.5 percent on 2016 to total €1.7m; double-digit growth in volumes was partly offset by lower selling prices overall and stronger growth in more affordable products. All regions contributed to growth, with countries with low LED penetration rates continuing to show higher growth.
Professional sales were up 2.7 percent to €2.8m. Saudi and US markets were relatively tough but sales were driven by robust growth elsewhere. In Q4 2017 the professional sector was the top contributor to profits for the first time; this is an area where Philips is moving away from hardware sales to a service business model, a transition that is not proving easy for many of its competitors.
The Home business continues to grow strongly, with sales of €684m showing comparable growth of 26.5 percent across both Home Systems and Home Luminaires. Demand for Philips Hue increased “significantly” in 2017, largely as a result of a continued focus on innovation and partnerships with the makers of recently introduced voice-activated smart home devices.
The fourth sector, Lamps, showed a predictable decline in sales – down 22 percent to €2.3m – but Philips estimates that the overall market for conventional lighting declined at a faster pace in 2017, resulting in market share gains that reflect the successful implementation of a “last man standing” strategy to extract maximum value from the conventional business.
“In line with our objectives, Philips Lighting returned to comparable sales growth in 2017 driven by the growth of LED and connected lighting Systems & Services,” said CEO Eric Rondolat. “We also further increased our operational profitability with significant improvements in LED, Professional and Home and we delivered a solid free cash flow. This will enable us to continue to invest in growth opportunities, provide a return to shareholders and optimise our balance sheet.”
In a discussion with analysts following publication of the results, Philips Lighting revealed it is soon changing its name to reflect the increased importance of IT-based lighting and services. “We intend to announce our new corporate name in the first half of 2018,” Rondolat said. “Needless to say, we will continue to use the Philips brand for our product as we have a brand license agreement for the coming decade.” (Philips Lighting is a separate company to its former parent, the Royal Philips group, which spun out the lighting division a couple of years ago.)