Signify Reports Strong 2Q; Net Profit Jumps 62%; Carbon Neutral in 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

Sales fell only 0.6%;  Sales would have fallen by 23% were it not for Signify’s acquisition of Cooper Lighting Solutions

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

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 2020

January 29, 2021:  Fourth quarter and full year results 2020