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
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
Second quarter 20201 –
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 the high 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 the company’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 by our highest ever employee Net Promotor
Score,” said CEO Eric Rondolat. “We remain very cautious about
market developments but confident on our ability to further adapt.
The disciplined execution of our strategy and the 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.”
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 and government 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 ahead of 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 achieve carbon 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.
Outlook
Considering 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 future deleveraging, Signify confirms its intention to
utilize up to EUR 350 million to reduce gross debt in 2020.
Financial review
Second quarter |
|
Six months |
2019 |
2020 |
change |
in millions of EUR, except percentages |
2019 |
2020 |
change |
|
|
-22.5 |
% |
Comparable sales growth |
|
|
-19.1 |
% |
|
|
-0.8 |
% |
Effects of currency movements |
|
|
0.1 |
% |
|
|
22.7 |
% |
Consolidation and other changes |
|
|
17.0 |
% |
1,477 |
|
1,469 |
|
-0.6 |
% |
Sales |
2,955 |
|
2,896 |
|
-2.0 |
% |
557 |
|
567 |
|
1.8 |
% |
Adjusted gross margin |
1,114 |
|
1,112 |
|
-0.2 |
% |
37.7 |
% |
38.6 |
% |
|
Adj. gross margin (as % of sales) |
37.7 |
% |
38.4 |
% |
|
|
|
|
|
|
|
|
-383 |
|
-401 |
|
|
Adj. SG&A expenses |
-778 |
|
-794 |
|
|
-67 |
|
-67 |
|
|
Adj. R&D expenses |
-136 |
|
-134 |
|
|
-449 |
|
-468 |
|
-4.2 |
% |
Adj. indirect costs |
-914 |
|
-928 |
|
-1.6 |
% |
30.4 |
% |
31.9 |
% |
|
Adj. indirect costs (as % of sales) |
30.9 |
% |
32.0 |
% |
|
|
|
|
|
|
|
|
133 |
|
133 |
|
0.1 |
% |
Adjusted EBITA |
247 |
|
245 |
|
-1.0 |
% |
9.0 |
% |
9.0 |
% |
|
Adjusted EBITA margin |
8.4 |
% |
8.5 |
% |
|
-28 |
|
-13 |
|
|
Adjusted items |
-50 |
|
-55 |
|
|
104 |
|
119 |
|
14.4 |
% |
EBITA |
198 |
|
189 |
|
-4.2 |
% |
|
|
|
|
|
|
|
80 |
|
87 |
|
8.9 |
% |
Income from operations (EBIT) |
149 |
|
130 |
|
-12.6 |
% |
-12 |
|
-16 |
|
|
Net financial income/expense |
-21 |
|
-26 |
|
|
-19 |
|
10 |
|
|
Income tax expense |
-35 |
|
4 |
|
|
50 |
|
81 |
|
61.5 |
% |
Net income |
95 |
|
108 |
|
14.4 |
% |
|
|
|
|
|
|
|
121 |
|
158 |
|
|
Free cash flow |
175 |
|
270 |
|
|
0.41 |
|
0.62 |
|
|
Basic EPS (€) |
0.76 |
|
0.85 |
|
|
28,144 |
|
35,789 |
|
|
Employees (FTE) |
28,144 |
|
35,789 |
|
|
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 and changes
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 result of the cost measures taken. Total restructuring costs were
EUR 2 million and acquisition-related charges and other 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 the organizational 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 the sale of real estate.
1 This 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 Excluding Cooper Lighting 3 Pro-forma incl. Cooper
Lighting and Klite
For the full and original version of the press release click
here. For the presentation click here
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 the conference call will be available via the Investor
Relations website.
Financial calendar 2020
October 23, 2020: Third quarter results
2020January 29, 2021: 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 Groningen Tel: +31 6 1086 5519 E-mail:
elco.van.groningen@signify.com
About SignifySignify (Euronext: LIGHT) is the
world leader in lighting for professionals and consumers and
lighting for the Internet 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. 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
number of 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 not
limited to: adverse economic and political developments, the
impacts of COVID-19, rapid technological change, competition in 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 to activities 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 a material 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 and political
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 of this document 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 estimates compiled 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 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 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 in this 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 the accounting 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.
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