Press Release
October 25, 2019
Signify reports third quarter sales of EUR 1.5 billion, operational profitability of 11.0% and free cash flow of EUR 45 million
Third quarter 20191
- Signify’s installed base of connected light points increased from 50 million in Q2 19 to 53 million in Q3 19
- CSG growing profit engines +1.0%; CSG total Signify -5.0%
- LED-based comparable sales grew by 2.6% to 78% of sales (Q3 18: 70%)
- Adj. indirect costs down EUR 22 million on a currency comparable basis, a reduction of 4.7%
- Adj. EBITA margin reduced by 100 bps to 11.0%, due to a very high comparison base in BG Lamps and currency impact of -30 bps
- Adj. EBITA margin of the growing profit engines increased by 80 bps with each of the three BGs improving
- Net income of EUR 74 million (Q3 18: EUR 93 million), reflecting lower operational profitability and higher restructuring costs
- Free cash flow amounted to EUR 45 million (Q3 18: EUR 64 million) reflecting phasing of payables and receivables as previously indicated at the end of Q2
Eindhoven, the Netherlands – Signify (Euronext: LIGHT), the world leader in lighting, today announced the company’s 2019 third quarter results. “We are pleased with the comparable sales growth and improved operational profitability of our growing profit engines in the third quarter, against the backdrop of ongoing economic headwinds across the world. In the first nine months, we delivered a solid improvement in operational profitability, net income and free cash flow,” said CEO Eric Rondolat. “While market conditions continue to deteriorate, we remain confident that we will be able to improve our profitability for 2019, albeit somewhat less than we previously anticipated.”
Outlook
Although sales in the second half of the year are impacted by continuing deteriorating market conditions, Signify remains confident that it will be able to improve its Adjusted EBITA margin for 2019, albeit somewhat less than previously anticipated. Signify now expects the Adjusted EBITA margin to be in the range of 10.3% to 10.6%.
The comparable sales growth of the growing profit engines (LED, Professional and Home combined) for 2019 is expected to be flat. The comparable sales growth of BG Lamps for 2019 is expected to decline at a pace which is towards the higher end of the previously indicated range of -24% to -21%.
The company confirms that its free cash flow, excluding the positive impact from IFRS 16, is expected to be above 5% of sales.
Financial review
| Third quarter | Nine months | |||||
| 2018 | 2019 | change | in € million, except percentages | 2018 | 2019 | change |
| -5.0% | Comparable sales growth | -4.8% | ||||
| 1.4% | Effects of currency movements | 1.4% | ||||
| 0.3% | Consolidation and other changes | 0.5% | ||||
| 1,594 | 1,542 | -3.3% | Sales | 4,633 | 4,497 | -2.9% |
| 623 | 585 | -6.1% | Adjusted gross margin | 1,786 | 1,699 | -4.9% |
| 39.1% | 37.9% | Adj. gross margin (as % of sales) | 38.5% | 37.8% | ||
| -388 | -377 | Adj. SG&A expenses | -1,210 | -1,155 | ||
| -70 | -65 | Adj. R&D expenses | -223 | -201 | ||
| -458 | -442 | 3.4% | Adj. indirect costs | -1,434 | -1,356 | 5.4% |
| 28.7% | 28.7% | Adj. indirect costs (as % of sales) | 30.9% | 30.2% | ||
| 191 | 169 | -11.3% | Adjusted EBITA | 426 | 416 | -2.2% |
| 12.0% | 11.0% | Adjusted EBITA margin | 9.2% | 9.3% | ||
| -24 | -31 | Adjusted items | -119 | -80 | ||
| 167 | 138 | -17.2% | EBITA | 307 | 336 | 9.6% |
| 143 | 114 | -20.6% | Income from operations (EBIT) | 237 | 263 | 11.0% |
| -12 | -11 | Net financial income/expense | -34 | -32 | ||
| -37 | -28 | Income tax expense | -59 | -63 | ||
| 93 | 74 | -20.1% | Net income | 142 | 169 | 18.6% |
| 64 | 45 | Free cash flow | 27 | 220 | ||
| 0.71 | 0.58 | Basic EPS (€) | 1.08 | 1.34 | ||
| 29,646 | 27,337 | Employees (FTE) | 29,646 | 27,337 | ||
Third quarter
Sales amounted to EUR 1,542 million. Adjusted for 1.4% positive currency effects and 0.3% consolidation and other changes, comparable sales decreased by 5.0%. LED-based sales increased by 2.6% and now account for 78% of total sales. The adjusted gross margin declined by 120 bps to 37.9%, mainly due to lower sales volumes in Lamps following a very high comparison base. Adjusted indirect costs decreased by EUR 16 million as a result of ongoing cost reduction initiatives. Adjusted EBITA amounted to EUR 169 million compared with EUR 191 million in the same period last year. While each of the growing profit engines improved its Adjusted EBITA margin in the quarter, the company’s overall Adjusted EBITA margin decreased by 100 bps to 11.0% due to the very high comparison base in Lamps. Total restructuring costs were EUR 24 million, acquisition-related charges EUR 1 million and incidental items EUR 6 million. Net income decreased from EUR 93 million last year to EUR 74 million in Q3 19, mainly due to lower operational profitability and higher restructuring costs. Free cash flow, which included a positive impact of EUR 18 million related to IFRS 16, amounted to EUR 45 million and included a negative effect from the phasing of payables and receivables of around EUR 60 million, as previously indicated at the end of Q2, and a contribution to the US pension fund of EUR 18 million (Q3 18: EUR 26 million).
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 third quarter results. A live and on-demand audio webcast of the conference call will be available via the Investor Relations website.
Financial calendar
January 31, 2020 Fourth quarter & full-year results 2019
February 25, 2020 Annual Report 2019
May 19, 2020 Annual General Meeting of Shareholders
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 27,000 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 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 and semi-annual report 2019.
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.