January 31, 2020
Signify reports full-year sales of EUR 6.2 billion, improvement in profitability by 30 bps to 10.4% and a free cash flow of EUR 529 million
Full year 2019
- Signify’s installed base of connected light points increased from 44 million at YE 18 to 56 million at YE 19
- CSG growing profit engines -0.3%; CSG total Signify -4.6%
- LED-based comparable sales grew by 1.4%, representing 78% of sales (FY 18: 71%)
- indirect costs down EUR 125 million, or -6.6%, excl. currency effects and change in scope
- EBITA margin improved by 30 bps to 10.4%, despite a negative currency impact of 20 bps
- EBITA margin of the growing profit engines increased by 180 bps with each of the three BGs improving
- Net income increased to EUR 267 million (FY 18: EUR 261 million)
- Free cash flow amounted to EUR 529 million (FY 18: EUR 306 million) or 8.5% of sales
- Solid progress made on our sustainability goals for 2020; well on track to be carbon neutral in 2020
Fourth quarter 2019
- Sales of EUR 1.8 billion; 1.4% nominal sales growth
- CSG growing profit engines -0.7%; CSG total Signify -4.2%
- LED-based sales represent 80% of total sales
- indirect costs down EUR 25 million, or -5.4%, excl. currency effects and change in scope
- EBITA margin improved by 80 bps to 13.2%, including a positive currency impact of 30 bps
- EBITA margin of the growing profit engines increased by 180 bps
- Net income decreased to EUR 98 million compared with EUR 119 million last year
- Strong free cash flow of EUR 308 million (Q4 18: EUR 279 million)
Shareholder returns
In 2019, EUR 164 million of capital was returned through the annual dividend payment
Propose to pay a cash dividend of EUR 1.35 per share over 2019, an increase of 3.8% and a pay-out ratio of 47%
Eindhoven, the Netherlands – Signify (Euronext: LIGHT), the world leader in lighting, today announced the company’s fourth quarter and full-year 2019 results. “We are pleased that we’ve improved our Adjusted EBITA margin for the sixth consecutive year, which has led to a 400 basis points increase since 2013. During the same period, our LED-based sales increased from 26% to 78%, reflecting our successful transformation from conventional lighting technologies to LED lighting products, systems and services. Our free cash flow of EUR 529 million is at the highest level since the IPO. The profit and cash contribution from the growing profit engines is now more than twice that of Lamps. This demonstrates that we have significantly strengthened the business and financial profile of the company.
We are also seeing positive traction from the acquisitions we completed in 2019 and look forward to welcoming Cooper Lighting Solutions in 2020, which will strengthen our market position in North America and our overall business mix,” said CEO Eric Rondolat. “We propose a dividend of EUR 1.35 per share which brings the total return to shareholders to more than EUR 1.2 billion since the IPO. While we continue to face challenging market conditions, we are confident that our relentless focus on our growth initiatives will further strengthen our market leadership and progressively improve our growth profile.”
Sustainability
Sustainability is central to Signify’s strategy. It is the company’s purpose to unlock the extraordinary potential of light for brighter lives and a better world. In 2019, 82.5% of the company’s revenues came from its portfolio of sustainable products, systems and services, exceeding its 2020 target of 80%. Signify sold 2.3 billion LED lamps and luminaires in 2015-2019, in line with 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 by 70% and is ahead of its targets related to a safe & healthy workplace and a sustainable supply chain. The company reduced its carbon footprint by 10%, achieving carbon neutrality in 15 out of its 19 markets, demonstrating it is well on track to become carbon neutral this year. In 2019, Signify was named Industry Leader in the Dow Jones Sustainability Index for the third consecutive year and is included in CDP’s prestigious ‘A List’ for climate change since the IPO.
Outlook
For 2020, Signify aims to achieve a further improvement in the Adjusted EBITA margin and to deliver a free cash flow of at least 6% of sales. This outlook excludes the announced acquisition of Cooper Lighting Solutions. An update on the outlook will be provided after the closing of the Cooper Lighting Solutions acquisition, which is expected in Q1 2020, as previously indicated.
Capital allocation
Signify intends to maintain a robust capital structure and continues to aim towards a financing structure that is compatible with an investment grade profile. Following the announced acquisition of Cooper Lighting Solutions, the company will prioritize deleveraging with strong free cash flows expected to drive down Signify’s net leverage ratio from around 2x at closing to below 1x net debt/EBITDA within three years. The company intends to use EUR 350 million to reduce its debt in 2020.
The company plans to continue to pay a stable to increased dividend per share. While Signify will prioritize deleveraging, it will continue to invest in R&D and other organic growth opportunities. As Signify will focus on integrating Cooper Lighting Solutions, M&A will have a lower priority.
Dividend
The company proposes to pay a dividend of EUR 1.35 per share in cash related to full year 2019, which represents an increase of 3.8% compared with last year, and a pay-out ratio of 47%. The dividend payment is subject to approval by the Annual General Meeting of Shareholders (AGM) to be held on May 19, 2020. Further details will be provided in the agenda for the AGM.
Financial review
| Fourth quarter | Twelve months | |||||
| 2018 | 2019 | change | in millions of EUR, except percentages | 2018 | 2019 | change |
| -4.2% | Comparable sales growth | -4.6% | ||||
| 2.0% | Effects of currency movements | 1.6% | ||||
| 3.5% | Consolidation and other changes | 1.3% | ||||
| 1,726 | 1,750 | 1.4% | Sales | 6,358 | 6,247 | -1.8% |
| 647 | 661 | 2.2% | Adjusted gross margin | 2,433 | 2,360 | -3.0% |
| 37.5% | 37.8% | Adj. gross margin (as % of sales) | 38.3% | 37.8% | ||
| -398 | -389 | Adj. SG&A expenses | -1,609 | -1,544 | ||
| -64 | -68 | Adj. R&D expenses | -288 | -270 | ||
| -463 | -457 | 1.1% | Adj. indirect costs | -1,896 | -1,813 | 4.4% |
| 26.8% | 26.1% | Adj. indirect costs (as % of sales) | 29.8% | 29.0% | ||
| 214 | 232 | 8.4% | Adjusted EBITA | 640 | 648 | 1.3% |
| 12.4% | 13.2% | Adjusted EBITA margin | 10.1% | 10.4% | ||
| -17 | -67 | Adjusted items | -136 | -148 | ||
| 197 | 164 | -16.7% | EBITA | 504 | 500 | -0.7% |
| 173 | 138 | -19.9% | Income from operations (EBIT) | 410 | 401 | -2.0% |
| -7 | -11 | Net financial income/expense | -41 | -43 | ||
| -47 | -29 | Income tax expense | -106 | -93 | ||
| 119 | 98 | -17.3% | Net income | 261 | 267 | 2.3% |
| 279 | 308 | Free cash flow | 306 | 529 | ||
| 0.90 | 0.74 | Basic EPS (€) | 1.95 | 2.08 | ||
| 29,237 | 32,005 | Employees (FTE) | 29,237 | 32,005 | ||
Fourth quarter
Sales amounted to EUR 1,750 million, a nominal increase of 1.4%. Adjusted for 2.0% currency effects and 3.5% consolidation and other changes, comparable sales declined by 4.2%. LED-based sales represent 80% of total sales. The adjusted gross margin increased by 30 bps to 37.8%, including a positive currency effect of 30 bps. Adjusted indirect costs decreased by EUR 5 million, or 70 bps as a percentage of sales. Excluding currency effects and change in scope, indirect costs decreased by EUR 25 million. Adjusted EBITA amounted to EUR 232 million compared with EUR 214 million in the same period last year. The Adjusted EBITA margin increased by 80 bps to 13.2%, including a positive currency impact of 30 bps. Total restructuring costs were EUR 42 million, acquisition-related charges EUR 11 million and incidental items EUR 15 million. Net income decreased from EUR 119 million last year to EUR 98 million in Q4 19, mainly due to higher restructuring costs and other incidentals. Free cash flow, which includes a positive impact of EUR 18 million related to IFRS 16, amounted to EUR 308 million compared with EUR 279 million last year.
Full year
Sales amounted to EUR 6,247 million, a nominal decrease of 1.8%. Adjusted for 1.6% currency effects and 1.3% consolidation and other changes, comparable sales decreased by 4.6%. LED-based sales grew by 1.4% on a comparable basis and represented 78% of sales compared with 71% in 2018. The adjusted gross margin declined by 50 bps to 37.8%, including a negative currency effect of 30 bps. Adjusted indirect costs decreased by EUR 83 million, or 80 bps as a percentage of sales.
Excluding currency effects and changes in scope, indirect costs decreased by EUR 125 million, as a result of continued rigorous implementation of cost reduction initiatives. Adjusted EBITA amounted to EUR 648 million compared with EUR 640 million last year and was negatively impacted by EUR 4 million of currency effects. The Adjusted EBITA margin improved by 30 bps to 10.4%, including an adverse currency effect of 20 bps. This improvement was driven by LED, Professional and Home. Total restructuring costs were EUR 99 million, acquisition-related charges were EUR 13 million and incidental items were EUR 36 million. Net income was EUR 267 million compared with EUR 261 million last year. Free cash flow, which includes a positive impact of EUR 71 million related to IFRS 16, amounted to EUR 529 million compared with EUR 306 million last year. Free cash flow was 8.5% of sales in 2019.
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 fourth quarter and full-year 2019 results. A live and on-demand audio webcast of the conference call will be available via the Investor Relations website.
Financial calendar 2020
February 25 Annual report 2019
April 24 First quarter results 2020
May 19 Annual General Meeting of Shareholders
May 21 Ex-dividend date
May 22 Dividend record date
June 2 Dividend payment date
June 18 Capital Markets Day
July 24 Second quarter and half year results 2020
October 23 Third quarter results 2020
For further information, please contact:
Signify Investor Relations
Robin Jansen
Tel: +31 6 1594 4569
E-mail: [email protected]
Signify Corporate Communications
Elco van Groningen
Tel: +31 6 1086 5519
E-mail: [email protected]
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 2019 sales of EUR 6.2 billion, we have approximately 32,000 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.