SIGNIFY N.V. Press Release
July 28, 2023
Signify reports second quarter sales of EUR 1.6 billion, operational profitability of 8.3% and a free cash flow of EUR 88 million
Second quarter 20231
- Signify's installed base of connected light points increased from 117 million in Q1 23 to 119 million in Q2 23
- On track for all Brighter Lives, Better World 2025 sustainability program commitments
- Sales of EUR 1,644 million; nominal sales decline of -10.5% and CSG of -8.6%
- LED-basedsales represented 84% of total sales (Q2 22: 84%)
- Adj. EBITA margin of 8.3% (Q2 22: 9.5%)
- Net income of EUR 45 million (Q2 22: EUR 248 million)
- Free cash flow of EUR 88 million (Q2 22: EUR 135 million)
Eindhoven, the Netherlands - Signify (Euronext: LIGHT), the world leader in lighting, today announced the company's second quarter 2023 results.
"In the second quarter, we saw continued softness in the consumer, indoor professional and OEM channels and a slower than anticipated recovery of the Chinese market. Against this backdrop, our actions to improve gross margin are paying off, although fixed costs reduction plans are not yet fully compensating for the volume decline. While our Digital Solutions and Conventional Products divisions demonstrated resilience in their bottom line, our Digital Products division was more exposed to these challenges," said Eric Rondolat, CEO of Signify.
"The continued economic softness has led us to apply caution in our outlook for the full year and adjust our Adjusted EBITA margin guidance to 9.5-10.5%. On the other hand, our free cash flow generation has and will continue to benefit from supply chain lead time improvements and effective working capital measures. We therefore expect our free cash flow generation to be at the higher end of the 6-8% range. To optimize our global operations, we have begun implementing structural measures to adapt our cost structure to the market environment. These measures will enable enhanced performance and a stronger focus on growth opportunities."
- 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.
Brighter Lives, Better World 2025
In the second quarter of the year, Signify remained on track to deliver on its Brighter Lives, Better World 2025 sustainability programcommitments:
Double the pace of the Paris Agreement
Signify is on track to reduce emissions across the entire value chain by 40% against the 2019 baseline - double the pace required by the Paris Agreement. This is driven by Signify's leadership in energy efficient and connected LED lighting solutions, which significantly reduce emissions during the use phase.
Double Circular revenues
Circular revenues remained stable at 29%, on track to reach the 2025 target of 32%. The main contribution is from serviceable and upgradeable luminaires, including the first serviceable Horticulture product family.
Double Brighter lives revenues
Brighter lives revenues increased to 28%, on track to reach the 2025 target of 32%. This was driven by the performance of Cooper's tunable products supporting the consumer well-being portfolio and continued strength of the safety & security portfolio.
Double the percentage of women in leadership
The percentage of women in leadership positions continued to improve to 30%, on track to reach the 2025 target of 34%. This was mainly due to the acceleration of hiring practices for diversity across all levels.
Outlook
The continued economic softness has led us to apply caution in our outlook for the full year and adjust our Adjusted EBITA margin guidance to 9.5-10.5%. On the other hand, our free cash flow generation has and will continue to benefit from supply chain lead time improvements and effective working capital measures. We therefore expect our free cash flow generation to be at the higher end of the 6-8% range.
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Financial review
Second quarter | Six months | |||||
2022 | 2023 | change | in millions of EUR, except percentages | 2022 | 2023 | change |
-8.6% | Comparable sales growth | -8.9% | ||||
-2.8% | Effects of currency movements | -1.0% | ||||
0.9% | Consolidation and other changes | 1.5% | ||||
1,836 | 1,644 | -10.5% | Sales | 3,624 | 3,322 | -8.3% |
674 | 639 | -5.3% | Adjusted gross margin | 1,359 | 1,298 | -4.4% |
36.7% | 38.9% | Adj. gross margin (as % of sales) | 37.5% | 39.1% | ||
-465 | -454 | Adj. SG&A expenses | -921 | -915 | ||
-73 | -68 | Adj. R&D expenses | -144 | -143 | ||
-537 | -523 | 2.7% | Adj. indirect costs | -1,065 | -1,058 | 0.7% |
29.3% | 31.8% | Adj. indirect costs (as % of sales) | 29.4% | 31.8% | ||
174 | 136 | -22.1% | Adjusted EBITA | 361 | 285 | -21.1% |
9.5% | 8.3% | Adjusted EBITA margin | 10.0% | 8.6% | ||
166 | -28 | Adjusted items | 125 | -95 | ||
340 | 108 | -68.3% | EBITA | 486 | 190 | -60.8% |
306 | 88 | -71.2% | Income from operations (EBIT) | 421 | 149 | -64.6% |
11 | -31 | Net financial income/expense | 5 | -61 | ||
-68 | -12 | Income tax expense | -91 | -15 | ||
248 | 45 | -81.9% | Net income | 335 | 73 | -78.3% |
135 | 88 | Free cash flow | -54 | 139 | ||
1.97 | 0.32 | Basic EPS (€) | 2.66 | 0.52 | ||
35,407 | 33,181 | Employees (FTE) | 35,407 | 33,181 |
Second quarter
Nominal sales decreased by 10.5% to EUR 1,644 million, including a negative currency effect of 2.8%, mainly from CNY depreciation, and a positive effect of 0.9% from the consolidation of Fluence, Pierlite and Intelligent Lighting Controls (ILC). Comparable sales declined by 8.6%, as the indoor professional business, the consumer segment and the OEM channel continued to be weak.
The Adjusted gross margin increased by 220 bps to 38.9% driven by effective COGS management and price discipline. Adjusted indirect costs as a percentage of sales increased by 250 bps to 31.8%, as indirect costs did not keep pace with lower sales.
Adjusted EBITA was EUR 136 million. The Adjusted EBITA margin decreased by 120 bps to 8.3%, mainly due to under-absorption of fixed costs. Digital Products was mainly impacted, while Digital Solutions and Conventional Products both achieved Adjusted EBITA margin gains.
Restructuring costs were EUR 9 million, acquisition-related charges were EUR 3 million and incidental items had a negative impact of EUR 16 million.
Net income decreased to EUR 45 million, mainly due to lower income from operations and higher financial expenses, partly offset by lower income tax expense due to lower taxable income. In Q2 2022, income from operations included a EUR 184 million gain from the disposal of non-strategic real estate, while financial income included a benefit from a non-cash fair value adjustment of the Virtual Power Purchase Agreements.
The number of employees (FTE) decreased from 35,407 at the end of Q2 22 to 33,181 at the end of Q2 23. The year-on-year decrease is mostly related to a reduction of factory personnel due to lower production volumes. In general, the number of FTEs is affected by fluctuations in volume and seasonality.
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Digital Solutions
Second quarter | Six months | |||||
2022 | 2023 | change | in millions of EUR, unless otherwise indicated | 2022 | 2023 | change |
-5.7% | Comparable sales growth | -7.2% | ||||
1,042 | 974 | -6.5% | Sales | 2,022 | 1,924 | -4.8% |
98 | 97 | -1.6% | Adjusted EBITA | 193 | 179 | -7.2% |
9.5% | 10.0% | Adjusted EBITA margin | 9.6% | 9.3% | ||
92 | 91 | -0.9% | EBITA | 167 | 161 | -3.4% |
60 | 73 | 21.1% | Income from operations (EBIT) | 107 | 123 | 15.4% |
Includes Intelligent Lighting Controls since March 1, 2023, Pierlite since April 29, 2022 and Fluence since May 2, 2022
Second quarter
Nominal sales decreased by 6.5% to EUR 974 million, including a negative currency effect of 2.4% and a positive effect of 1.7% from the consolidation of Fluence, Pierlite and Intelligent Lighting Controls. Comparable sales declined by 5.7%, as continued strength in outdoor professional lighting was more than offset by softness in indoor professional and horticulture lighting. The Adjusted EBITA margin increased by 50 bps to 10.0%, mainly driven by gross margin expansion from lower COGS and continued price discipline.
Digital Products
Second quarter | Six months | |||||
2022 | 2023 | change | in millions of EUR, unless otherwise indicated | 2022 | 2023 | change |
-12.1% | Comparable sales growth | -11.1% | ||||
598 | 505 | -15.4% | Sales | 1,198 | 1,043 | -13.0% |
63 | 35 | -45.1% | Adjusted EBITA | 140 | 79 | -43.4% |
10.6% | 6.9% | Adjusted EBITA margin | 11.7% | 7.6% | ||
63 | 33 | -47.4% | EBITA | 128 | 72 | -43.7% |
61 | 31 | -48.2% | Income from operations (EBIT) | 124 | 69 | -44.4% |
Second quarter
Nominal sales decreased by 15.4% to EUR 505 million, including a negative currency effect of 3.4%. Comparable sales declined by 12.1%, due to continued weakness in the consumer connected and OEM businesses, as well as Klite. The Adjusted EBITA margin decreased by 370 bps to 6.9%, mainly reflecting the under-absorption of fixed costs as a result of lower sales volumes.
Conventional Products
Second quarter | Six months | |||||
2022 | 2023 | change | in millions of EUR, unless otherwise indicated | 2022 | 2023 | change |
-15.0% | Comparable sales growth | -11.6% | ||||
193 | 160 | -17.3% | Sales | 394 | 346 | -12.4% |
30 | 33 | 9.6% | Adjusted EBITA | 62 | 75 | 20.3% |
15.5% | 20.5% | Adjusted EBITA margin | 15.7% | 21.6% | ||
20 | 27 | 32.9% | EBITA | 43 | 22 | -49.6% |
20 | 27 | 32.9% | Income from operations (EBIT) | 43 | 22 | -49.6% |
Second quarter
Nominal sales decreased by 17.3% to EUR 160 million, including a negative currency effect of 2.3%. Comparable sales declined by 15.0%, as lower volumes were partially compensated by price increases. The Adjusted EBITA
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margin increased by 500 bps to 20.5%, reflecting a positive effect from price increases in combination with lower COGS, while Adjusted EBITA in the previous year also included one-off obsolescence charges.
Other
Second quarter
'Other' represents amounts not allocated to the operating segments and includes costs related both to central R&D activities to drive innovation, and to Group enabling functions. Adjusted EBITA was EUR -29 million (Q2 22: EUR -17 million) and EBITA was EUR -43 million (Q2 22: EUR 165 million). EBITA included a negative impact from restructuring costs of EUR 2 million and incidental items of EUR 13 million.
Sales by market
Second quarter | Six months | |||||||
2022 | 2023 | Change | CSG | in millions of EUR, except percentages | 2022 | 2023 | change | CSG |
502 | 444 | -11.6% | -10.6% | Europe | 1,059 | 968 | -8.6% | -8.3% |
747 | 665 | -11.0% | -9.5% | Americas | 1,450 | 1,318 | -9.1% | -10.2% |
433 | 396 | -8.5% | -2.6% | Rest of the world | 826 | 765 | -7.4% | -4.7% |
154 | 138 | -10.3% | -14.2% | Global businesses | 289 | 271 | -6.3% | -15.3% |
1,836 | 1,644 | -10.5% | -8.6% | Total | 3,624 | 3,322 | -8.3% | -8.9% |
Americas includes Intelligent Lighting Controls since March 1, 2023. Global businesses include Fluence since May 2, 2022. Rest of the world includes Pierlite since April 29, 2022.
Second quarter
The second quarter showed similar dynamics as the first quarter of the year. In addition, most markets had a high base of comparison. In Europe, comparable sales decreased by 10.6%, as most markets declined. In the Americas, comparable sales decreased by 9.5%, mainly reflecting lower sales in the US and Canada. In the Rest of the World, comparable sales decreased by 2.6%, mainly due to China, the Middle East and Indonesia. Global businesses' comparable sales decreased by 14.2%, mainly due to Klite.
Working capital
in millions of EUR, unless otherwise indicated | Jun 30, 2022 | Mar 31, 2023 | Jun 30, 2023 |
Inventories | 1,635 | 1,337 | 1,288 |
Trade and other receivables | 1,191 | 1,032 | 1,002 |
Trade and other payables | -2,030 | -1,710 | -1,608 |
Other working capital items | -13 | -42 | -42 |
Working capital | 783 | 617 | 640 |
As % of LTM* sales | 10.8% | 8.3% | 8.9% |
- LTM: Last Twelve Months
Second quarter
Compared to March 2023, working capital slightly increased to EUR 640 million, as lower inventories and lower receivables were offset by lower payables. As a percentage of last twelve-month sales, working capital increased by 60 bps to 8.9%. Including last twelve-month sales pro forma for Fluence and Pierlite, working capital also increased by 60 bps.
Compared to June 2022, working capital reduced by EUR 143 million, mainly driven by a strong reduction of inventories and lower receivables, partly offset by lower payables. As a percentage of last twelve-month sales, working capital decreased by 190 bps. Including last twelve-month sales pro forma for Fluence and Pierlite, working capital decreased by 160 bps.
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Signify NV published this content on 28 July 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2023 19:20:23 UTC.
