Press Release
July 26, 2019
Signify reports second quarter sales of EUR 1.5 billion, operational profitability of 9.0% and free 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 and phasing 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 and cash 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.”
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 reach an 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
| Second quarter | Six months | |||||
| 2018 | 2019 | change | in € million, except percentages | 2018 | 2019 | change |
| -6.1% | Comparable sales growth | -4.7% | ||||
| 1.7% | Effects of currency movements | 1.4% | ||||
| 0.5% | Consolidation and other changes | 0.6% | ||||
| 1,537 | 1,477 | -3.9% | Sales | 3,038 | 2,955 | -2.7% |
| 583 | 557 | -4.4% | Adjusted gross margin | 1,163 | 1,114 | -4.2% |
| 37.9% | 37.7% | Adj. gross margin (as % of sales) | 38.3% | 37.7% | ||
| -405 | -383 | Adj. SG&A expenses | -822 | -778 | ||
| -73 | -67 | Adj. R&D expenses | -153 | -136 | ||
| -478 | -449 | 6.0% | Adj. indirect costs | -976 | -914 | 6.3% |
| 31.1% | 30.4% | Adj. indirect costs (as % of sales) | 32.1% | 30.9% | ||
| 130 | 133 | 2.1% | Adjusted EBITA | 235 | 247 | 5.1% |
| 8.4% | 9.0% | Adjusted EBITA margin | 7.7% | 8.4% | ||
| -53 | -28 | Adjusted items | -96 | -50 | ||
| 77 | 104 | 35.2% | EBITA | 140 | 198 | 41.5% |
| 54 | 80 | 48.0% | Income from operations (EBIT) | 94 | 149 | 59.3% |
| -13 | -12 | Net financial income/expense | -23 | -21 | ||
| -12 | -19 | Income tax expense | -22 | -35 | ||
| 29 | 50 | 72.6% | Net income | 49 | 95 | 91.6% |
| -31 | 121 | Free cash flow | -37 | 175 | ||
| 0.23 | 0.41 | Basic EPS (€) | 0.38 | 0.76 | ||
| 30,097 | 28,144 | Employees (FTE) | 30,097 | 28,144 | ||
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 procurement savings. Adjusted indirect costs decreased by EUR 29 million, or 70 bps as a percentage of sales, as a result of our ongoing 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, and includes a currency impact of +20 bps. Total restructuring costs were EUR 14 million and other incidentals were also EUR 14 million.
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.
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.
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 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 be available via the Investor Relations website.
Financial calendar
October 25, 2019 Third quarter results 2019
December 12, 2019 Capital Markets Day 2019
For full calendar click here.
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 Groningen
Tel: +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 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 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 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 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, 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 12 of 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 and other 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 political uncertainties, 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 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 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 the accounting 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.