Signify Reports 3Q Sales of EUR 1.7 Billion, Operating Profit of 11.5%

Third quarter 2020¹

• Signify’s installed base of connected light points increased from 64 million in Q2 20 to 71 million in Q3 20
• Sales of EUR 1,728 million, nominal sales growth of 12.1% and CSG of -8.3%
• LED-based sales represented 82% of total sales (Q3 19: 81%)
• Adj. indirect costs down EUR 22 million, or -4.9% excl. FX effects and changes in scope²
• Adj. EBITA margin increased by 50 bps to 11.5%, including currency impact of -30 bps
• Adj. EBITA margin of the growing profit engines increased by 130 bps to 12.3%
• Net income of EUR 90 million (Q3 19: EUR 74 million)
• Free cash flow increased to EUR 214 million (Q3 19: EUR 45 million)
• Cooper Lighting integration and synergies ahead of plan
• Achieved carbon neutrality and set course to double positive impact on environment and society in 2025
• Debt prepayment of EUR 350 million to reduce overall gross debt position; net leverage at 2.2x

Eindhoven, the Netherlands – Signify (Euronext: LIGHT), the world leader in lighting, today announced the company’s 2020 third quarter results. “We are very proud of our carbon neutrality achievement in Q3 and of the launch of our new sustainability program aimed at doubling our positive impact on the environment and society in 2025. Amidst difficult market dynamics caused by the COVID-19 pandemic, this financial quarter we are reporting yet another resilient performance underpinned by our consumer and connected lighting. Our gross margin improvement, through rigorous price management, translated into a higher operational margin. Our discipline in working capital management allowed us to generate a solid free cash flow for the quarter, while as previously announced, we reduced our debt by EUR 350 million,” said CEO Eric Rondolat. “Given the acceleration of the pandemic in many regions, we remain cautious about market developments, but confident in our ability to further adapt, which we have demonstrated since the beginning of the year. Our teams remain focused on making continued good progress on the integration of Cooper Lighting and Klite, while relentlessly driving our growth platforms to develop new business opportunities in line with our strategy.”

Outlook

Given recent developments of the pandemic, Signify does not provide financial guidance for full year 2020. Signify remains 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. During the virtual Capital Markets Day 2020, which is scheduled on December 9, Signify will provide more details on its expectations for the medium-term.  

Financial review

Third quarter					Nine months
2019	2020	change		in millions of EUR, except percentages	2019	2020	change
		-8.3	%	Comparable sales growth			-15.3	%
		-3.6	%	Effects of currency movements			-1.2	%
		24.0	%	Consolidation and other changes			19.3	%
1,542	1,728	12.1	%	Sales	4,497	4,624	2.8	%
585	689	17.8	%	Adjusted gross margin	1,699	1,801	6.0	%
37.9%	39.9%			Adj. gross margin (as % of sales)	37.8%	39.0%
-377	-443			Adj. SG&A expenses	-1,155	-1,237
-65	-77			Adj. R&D expenses	-201	-211
-442	-520	-17.7	%	Adj. indirect costs	-1,356	-1,448	-6.8	%
28.7%	30.1%			Adj. indirect costs (as % of sales)	30.2%	31.3%
169	199	17.7	%	Adjusted EBITA	416	444	6.6	%
11.0%	11.5%			Adjusted EBITA margin	9.3%	9.6%
-31	-38			Adjusted items	-80	-93
138	161	16.6	%	EBITA	336	351	4.4	%
114	131	14.9	%	Income from operations (EBIT)	263	261	-0.7	%
-11	-16			Net financial income/expense	-32	-42
-28	-25			Income tax expense	-63	-21
74	90	21.0	%	Net income	169	198	17.3	%
45	214			Free cash flow	220	484
0.58	0.67			Basic EPS (€)	1.34	1.53
27,337	37,057			Employees (FTE)	27,337	37,057

Third quarter

Sales amounted to EUR 1,728 million, a nominal increase of 12.1%. Adjusted for 3.6% negative currency effects and 24.0% consolidation, comparable sales decreased by 8.3%. LED-based sales decreased by 8.2% and now account for 82% of total sales. The adjusted gross margin increased by 200 bps to 39.9%, including a currency effect of -10 bps, largely as a result of solid pricing management. The adjusted indirect costs increased by EUR 78 million. Excluding currency effects and changes in scope, the adjusted indirect costs are down EUR 22 million, or 4.9%. Adjusted EBITA amounted to EUR 199 million, a 17.7% increase compared to the same period last year. The Adjusted EBITA margin improved by 50 bps to 11.5%, mainly driven by the robust gross margin improvement. Total restructuring costs were EUR 25 million and acquisition-related charges and other incidentals were EUR 13 million. Net income increased from EUR 74 million last year to EUR 90 million in Q3 20. Free cash flow amounted to EUR 214 million, reflecting profitability improvements, strong working capital management and the consolidation of Cooper Lighting and Klite.