Signify – Signify’s second quarter results 2024

Signify reports second quarter sales of EUR 1.5 billion, operational profitability of 7.9% and a free cash flow of EUR 51 million

 

Second quarter 2024¹

• Installed base of connected light points increased to 136 million in Q2 24
• Released Climate Transition Plan with SBTi-validated net-zero targets
• Sales of EUR 1,483 million; nominal sales decline of -9.8% and CSG of -8.4%
• LED-based sales represented 86% of total sales (Q2 23: 84%)
• Adj. EBITA margin of 7.9% (Q2 23: 8.3%)
• Net income of EUR 63 million (Q2 23: EUR 45 million)
• Free cash flow of EUR 51 million (Q2 23: EUR 88 million)

 

Eindhoven, the Netherlands – Signify (Euronext: LIGHT), the world leader in lighting, today announced the company’s second quarter 2024 results.

“Our topline for the second quarter was impacted by the accelerated decline in Conventional lighting and continued market softness in Europe for the Professional business and in China. At the same time, we are encouraged by the positive trend in connected lighting, as well as the return to growth for our Consumer business outside of China and our OEM business. While the Adjusted EBITA margin of our Professional business was impacted, our Consumer and OEM businesses showed substantial improvements. Our free cash flow was in line with our expectations, reflecting the anticipated cash outflow from the restructuring program,” said Eric Rondolat, CEO of Signify.

“We remain cautious on Professional Europe and on China for the second semester, but expect to see positive traction for Professional in the Americas, as well as the OEM and Consumer businesses. As a result, we maintain our guidance, with an Adjusted EBITA margin at the lower end of the 10.0-10.5% range and free cash flow generation of 6-7% of sales.”

 

 

Brighter Lives, Better World 2025

In the second quarter of the year, Signify continued to advance its Brighter Lives, Better World 2025 sustainability program which commits to doubling its positive impact on the environment and society.

• Double the pace of the Paris Agreement

Signify is ahead of schedule to achieve its 2025 target to reduce greenhouse gas (GHG) emissions across its full value chain by 40% against a 2019 baseline – double the pace required by the Paris Agreement 1.5 degree scenario.

• Double Circular revenues

Circular revenues increased to 35%, up 1% on last quarter and ahead of the 2025 target of 32%. The main contribution came from serviceable luminaires for the professional segment and LED luminaires for the consumer segment.

• Double Brighter lives revenues

Brighter lives revenues remained at 31%, on track to reach the 2025 target of 32%. This includes a strong contribution from consumer products that support health and well-being, mainly EyeComfort, and professional luminaires that are Dark Sky compliant, reducing the impact on nature.

• Double the percentage of women in leadership

The percentage of women in leadership positions increased to 29%, a 1% improvement over last quarter, slightly behind the 2025 target of 34%. Signify continues its efforts to increase representation through focused hiring practices for diversity at all levels, and through retention and engagement activities to reduce attrition.

• Climate Transition Plan

In the second quarter, Signify released its Climate Transition Plan, which sets out the company’s climate strategy in line with its SBTi-validated 2040 net-zero targets:

• Net-zero GHG emissions across its entire value chain by 2040.
• Absolute reduction of scope 1, 2 and 3 GHG emissions of 50% by 2030, and 90% by 2040, against a 2019 baseline.

 

 

Outlook

We remain cautious on Professional Europe and on China for the second semester, but expect to see positive traction for Professional in the Americas, as well as the OEM and Consumer businesses. As a result, we maintain our guidance, with an Adjusted EBITA margin at the lower end of the 10.0-10.5% range and free cash flow generation of 6-7% of sales.

 

 

Financial review

Second quarter 

Nominal sales decreased by 9.8% to EUR 1,483 million, including a negative currency effect of 1.4%, mainly from CNY depreciation. Comparable sales declined by 8.4%, driven by lower professional lighting sales in Europe and continued softness in China, while the OEM and Consumer businesses continued to show sequential improvements. 

The Adjusted gross margin increased by 140 bps to 40.3% driven by effective COGS management and positive sales mix. Adjusted indirect costs as a percentage of sales increased by 170 bps to 33.5%, as the reduction of indirect costs did not keep pace with lower sales volumes.

Adjusted EBITA decreased to EUR 118 million. The Adjusted EBITA margin decreased by 40 bps to 7.9%, as gross margin expansion was offset by an under-absorption of fixed costs.

Restructuring costs were EUR 9 million, acquisition-related charges were EUR 2 million and incidental items had a positive impact of EUR 8 million.

Net income increased to EUR 63 million, mainly driven by lower adjusted items, lower non-cash losses on Virtual Power Purchase Agreements and higher financial income.

The number of employees (FTE) decreased from 33,181 at the end of Q2 23 to 31,219 at the end of Q2 24. The yearon-year decrease is mostly related to a reduction of factory personnel due to lower production volumes and the first effects of the reorganization program. In general, the number of FTEs is affected by fluctuations in volume and seasonality.

 

 

Professional

Second quarter 

Nominal sales decreased by 9.5% to EUR 959 million, including a negative currency effect of 1.1%. Comparable sales declined by 8.3%, mainly due to continued softness in Europe and China, while Agriculture lighting showed sequential improvements. The Adjusted EBITA margin decreased by 30 bps to 8.1%, mainly due to an under-absorption of fixed costs, as negative pricing was compensated by BOM savings and positive sales mix.

 

Consumer

Second quarter 

Nominal sales decreased by 4.7% to EUR 297 million, including a negative currency effect of 2.3%. Comparable sales declined by 2.4%, mainly due to lower sales in China, while the connected offers were back to growth. The Adjusted EBITA margin improved by 160 bps to 7.1%, driven by COGS savings, positive sales mix and a positive currency effect.

 

OEM

Second quarter 

Nominal sales decreased by 2.5% to EUR 106 million, including a negative currency effect of 2.7%. Comparable sales grew by 0.1%, as inventory levels of OEM distributors normalized. The Adjusted EBITA margin increased by 370 bps to 10.9%, mainly driven by COGS savings

 

Conventional

Second quarter 

Nominal sales decreased by 28.3% to EUR 114 million, including a negative currency effect of 0.7%. Comparable sales declined by 27.6%, reflecting the impact of the fluorescent bans in Europe, which became effective in February and August 2023. The Adjusted EBITA margin decreased by 420 bps to 15.7%, reflecting an under-absorption of fixed costs following the accelerated sales decline and one-off charges

 

Other

Second quarter ‘Other’ represents amounts not allocated to the businesses and mainly includes costs related to ventures, exploratory research and audits. Adjusted EBITA was EUR -11 million, in line with last year (Q2 23: EUR -10 million).

 

Working capital

Second quarter 

Working capital increased from EUR 473 million at the end of March 2024 to EUR 502 million at the end of June 2024. The increase is mainly driven by higher receivables, higher inventories and lower other working capital items, partly offset by higher payables. As a percentage of last twelve-month sales, working capital increased by 60 bps to 7.9%. 

Compared with June 2023, working capital decreased by EUR 138 million. This decrease is mainly driven by lower inventories, which benefited from shorter lead times, and lower receivables, partly offset by lower payables and lower other working capital items. As a percentage of last-twelve month sales, working capital decreased by 100 bps.

 

Cash flow analysis

Second quarter 

Free cash flow decreased to EUR 51 million, mainly due to a higher restructuring payout and a higher cash outflow from working capital, partly offset by a higher income from operations. Free cash flow included a restructuring payout of EUR 39 million (Q2 23: EUR 12 million).

 

Net debt and total equity

Second quarter 

Compared with the end of March 2024, the cash position decreased by EUR 836 million to EUR 567 million, mainly due to the repayment of debt and the dividend payment, partly offset by positive free cash flow. Following the repayment of debt, the gross debt position decreased to EUR 1,732 million. As a result, net debt increased by EUR 162 million to EUR 1,165 million. Total equity decreased to EUR 2,965 million (Q1 24: EUR 3,090 million), primarily due to dividend distribution, partly offset by net income and currency translation results. 

Compared with the end of June 2023, the cash position decreased by EUR 17 million, while the gross debt position decreased by EUR 290 million. As a result, the net debt decreased by EUR 274 million year on year. At the end of June 2024, the net debt/EBITDA ratio was 1.8x (Q2 23: 1.9x).

 

 

Other information

Appendix A – Reconciliation of non-IFRS financial measures 

Appendix B – Financial glossary

 

 

Conference call and audio webcast

Eric Rondolat (CEO) and Željko Kosanović (CFO) will host a conference call for analysts and institutional investors at 9:00 a.m. CET to discuss the second quarter 2024 results. A live audio webcast of the conference call will be available via the Investor Relations website.

 

 

Financial calendar

October 25, 2024: Third quarter results 2024

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 A, Reconciliation of non-IFRS financial measures, of this press release.

 

 

Important information

Forward-Looking Statements and Risks & Uncertainties

This document and the related oral presentation contain, and responses to questions following the presentation may contain, forward-looking statements that reflect the intentions, beliefs or current expectations and projections of Signify N.V. (the “Company”, and together with its subsidiaries, the “Group”), including statements regarding strategy, estimates of sales growth and future operational results.

By their nature, these statements involve risks and uncertainties facing the Company and its Group companies, and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement as a result of risks and uncertainties. Such risks, uncertainties and other important factors include but are not limited to: adverse economic and political developments, in particular the impacts of the Russia-Ukraine conflict, the conflict in the Middle East, the recovery trajectory of the Chinese economy, cost inflation, rapid technological change, competition in the general lighting market, development of lighting systems and services, successful implementation of business transformation programs, impact of acquisitions and other transactions, reputational and adverse effects on business due to activities in Environment, Health & Safety, compliance risks, ability to attract and retain talented personnel, adverse currency effects, pension liabilities, and exposure to international tax laws. Above-mentioned risks are also applicable to the second half of 2024. The Group will continue to monitor how these topics develop.

Additional risks currently not known to the Group or that the Group has not considered material as of the date of this document could also prove to be important and may have a material adverse effect on the business, results of operations, financial condition and prospects of the Group or could cause the forward-looking events discussed in this document not to occur. The Group undertakes no duty to and will not necessarily update any of the forward-looking statements in light of new information or future events, except to the extent required by applicable law.

 

Market and Industry Information

All references to market share, market data, industry statistics and industry forecasts in this document consist of estimates compiled by industry professionals, competitors, organizations or analysts, of publicly available information or of the Group’s own assessment of its sales and markets. Rankings are based on sales unless otherwise stated.

 

Non-IFRS Financial Measures

Certain parts of this document contain non-IFRS financial measures and ratios, such as comparable sales growth, adjusted gross margin, EBITA, adjusted EBITA, and free cash flow, and other related ratios, which are not recognized measures of financial performance or liquidity under IFRS. The non-IFRS financial measures presented are measures used by management to monitor the underlying performance of the Group’s business and operations and, accordingly, they have not been audited nor reviewed. Not all companies calculate non-IFRS financial measures in the same manner or on a consistent basis and these measures and ratios may not be comparable to measures used by other companies under the same or similar names. A reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures is contained in this document. For further information on non-IFRS financial measures, see “Chapter 19 Reconciliation of non-IFRS measures” in the Annual Report 2023.

 

Presentation

All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up to totals provided. All reported data are unaudited. Unless otherwise indicated, financial information has been prepared in accordance with the accounting policies as stated in the Annual Report 2023.

 

Market Abuse Regulation

This press release contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.