Signify Reports 1Q Sales of EUR 1.4B; OPof 7.9% and a Free Cash Flow of EUR 112M

First quarter 2020¹

• Signify’s installed base of connected light points increased from 56 million in Q4 19 to 60 million in Q1 20
• CSG growing profit engines -14.5%; CSG total Signify -15.3%
• Adj. indirect costs down EUR 56 million, or -11.1%, excl. currency effects and changes in scope
• Adj. EBITA margin improved by 10 bps to 7.9%, with a neutral effect from currencies
• Adj. EBITA margin of the growing profit engines increased by 100 bps to 7.7%
• Net income of EUR 27 million (Q1 19: EUR 44 million)
• Free cash flow doubled to EUR 112 million (Q1 19: EUR 55 million)
• Acquisition of Cooper Lighting completed; integration is well underway and achievement of synergies on track

COVID-19 update Q1

• Health & safety of employees was our highest priority
• Supported local partners and communities: donations of UV-C lamps and (solar) luminaires
• Our global manufacturing capacity was restored to more than 80%
• Broad range of mitigating actions to preserve profitability and free cash flow in place from start of Q1
• Liquidity remains strong, with a cash position of EUR 924 million at the end of Q1 20

       
Eindhoven, the Netherlands – Signify (LIGHT.NX), the world leader in lighting, today announced the company’s first quarter 2020 results. “We were early to mobilize our teams worldwide and implement a broad range of actions to face the unprecedented situation caused by the COVID-19 pandemic. I am particularly satisfied with the successful measures we took to protect the health and safety of our employees and the people around us. We largely restored the performance of our supply chain to minimize the impact on our customers. We rapidly implemented a set of dedicated actions that enabled us to improve our operating margin and double our free cash flow despite a decline in demand,” said CEO Eric Rondolat. “We are building on these achievements to manage our performance in the second quarter as we expect demand to be further impacted. In addition, we are taking extra measures to protect our profitability and cash flow. We have also started to explore new business opportunities arising from the situation whilst remaining very close to our customers. I believe that all these measures will help us to strengthen our market positions.”

COVID-19 actions

From the start of the outbreak, we have been very agile and thorough in dealing with the challenges through global and local crisis response teams. We have implemented a variety of policies including a ban on domestic and international travel, access restrictions to our sites, homeworking and very stringent hygiene and health measures across our plants, logistic hubs and R&D centers. We provided protective equipment, such as hand sanitizers, masks and temperature measurement tools.

We also implemented a broad range of mitigating actions to preserve profitability. These measures include savings in, amongst others, selling expenses, travel costs and procurement costs. In addition, we have implemented a range of measures to safeguard cash flow, including rigorous working capital management, a curtailment of uncommitted and non-essential capital expenditure, and the withdrawal of the dividend proposal.

We are accelerating and extending mitigating measures, including:

• Supervisory Board and Leadership Team took a 20% salary reduction for Q2
• A significant part of our employees voluntarily supported a 20% worktime reduction and pro-rata pay adjustment for a period of 3 months
• A 6-month delay in merit increases, where possible
• An external hiring freeze

Outlook

Considering the uncertainty about the future course of the pandemic, and the length and depth of the impact on the global economy, Signify does not provide financial guidance at this point in time.

Successfully completed Cooper Lighting acquisition

On March 2, 2020, Signify completed the acquisition of Cooper Lighting Solutions from Eaton. Since the announcement of the transaction, Signify has worked intensively with the Cooper Lighting teams to finalize integration plans which enabled us to start the implementation from day one. As a result, key business systems have been successfully segregated from Eaton and Cooper Lighting is now operating as a business unit within Signify. The agents are committed to the go-to market approach and associated benefits of the acquisition. The integration teams are also well on track to achieve the anticipated cost savings in procurement, supply chain and sourcing optimization.

Financial review

First quarter

Sales amounted to EUR 1,427 million, a nominal decrease of 3.5%. Adjusted for 1.3% currency effects and 10.6% consolidation (mainly related to the acquisitions of Cooper Lighting and Klite) and other changes, comparable sales declined by 15.3%. LED-based sales represent 78% of total sales. The adjusted gross margin increased by 50 bps to 38.2%, including a negative currency effect of 10 bps. Adjusted indirect costs decreased by EUR 4 million. Excluding currency effects and changes in scope, indirect costs decreased by EUR 56 million, or 11.1%. Adjusted EBITA amounted to EUR 112 million compared with EUR 115 million in the same period last year. The Adjusted EBITA margin increased by 10 bps to 7.9%, with a neutral effect from currencies. Total restructuring costs were EUR 13 million, acquisition-related charges EUR 18 million and incidental items EUR 11 million. Net income decreased from EUR 44 million last year to EUR 27 million in Q1 20, mainly due to higher acquisition-related charges and other incidentals. Free cash flow doubled from EUR 55 million last year to EUR 112 million in Q1 20, mainly as a result of strong working capital management in the growing profit engines, and the consolidation of Cooper Lighting.

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.

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