Signify reports first quarter sales of €1.8bn & CSG of 6.4%
Signify has announced the company’s first quarter 2022 results.
“Our main priority in the first quarter was to safeguard and support our Ukrainian employees and their families to the best extent possible. We are happy to report that all of our people are safe, and we were proud to see the very strong engagement from our colleagues and the Signify Foundation in supporting the people and communities so desperately affected by the war. Investments in Russia were stopped and all new business was paused since February 25th. We were also impacted by the return of lockdowns in China towards the end of the quarter. Throughout these challenging conditions, Signify continued to see strong momentum in the professional channel in the US and in most of the other geographies.
We grew by 6.4% in the first quarter and maintained a strong double-digit adjusted EBITA margin. Global supply chain disruptions, which brought longer supplier lead times and higher levels of inventory, have negatively affected our cash flow. We expect this to positively readjust as the year progresses,” said CEO, Eric Rondolat.
“Given the world’s growing need for sustainable, connected and energy efficient lighting, we remain more focused than ever on our strategic priorities. For the remainder of the year, we anticipate a lower performance from our consumer-focused business due to inflationary headwinds. At the same time, we still expect strong demand for our professional business, driven by ongoing investments in the energy transition. Moving forward, our guidance for the year remains within reach, assuming the Chinese market and global supply chain dynamics do not deteriorate further.”
Brighter lives, better world 2025
In the first quarter of the year, Signify was on track for most of its Brighter Lives, Better World 2025 sustainability program commitments that contribute to doubling its positive impact on the environment and society.
- Double the pace of the Paris Agreement:
Cumulative carbon reduction over the value chain is on track. This is mainly due to the accelerated shift to energy efficient and connected LED lighting, which decreases carbon emissions in the use phase, and Signify's ongoing efforts to decarbonize its supply chain.
- Double our Circular revenues to 32%:
Circular revenues increased to 30%, well on track to reach the target. This positive trend is attributable to the recent upgrade of a family of luminaires, which are now serviceable, and to the further expansion of the serviceable portfolio in outdoor luminaires.
- Double our Brighter lives revenues to 32%:
Brighter lives revenues were 27%, on track to reach the target. The main contributions come from the consumer well-being portfolio, as well as UV-C disinfection and emergency lighting.
- Double the percentage of women in leadership positions to 34%:
The percentage of women in leadership positions was 26%, slightly off track, yet Signify expects to see further progress during the year. In Q1, Signify conducted the first all-employee session of the Powering Inclusion Series with more than 5,000 participants across the company, and celebrated International Women's Day with its global #BreakTheBias campaign. Signify participated in the UN Global Compact’s Target Gender Equality event to share its mentoring practices for improving diverse representation in its organisation.
Following the solid performance in the first quarter, the strong order intake and the continued momentum in the professional segment, Signify maintains its guidance for 2022. This assumes that the Chinese market and global supply chain dynamics do not deteriorate further.
- Comparable sales growth in the range of 3-6%
- Continued Adjusted EBITA margin improvement of up to 50bps
- Free cash flow in excess of eight percent of sales
Sales increased by 11.8% to EUR 1,788 million, with a comparable sales growth of 6.4%. Nominal sales growth included a positive currency effect of 5.2%, mainly attributable to the appreciation of the dollar, and a positive impact from consolidation and other changes of 0.2%. LED-based sales increased from 82% in Q1 21 to 84% in Q1 2022.
During the quarter, energy prices increased significantly. Together with higher transportation costs, the increase in energy costs impacted the adjusted gross margin, mainly in Conventional Products due to its energy intensive production processes. As a result of these cost increases, the Adjusted gross margin decreased by 150 bps to 38.3%, yet on the back of a high comparison base in Q1 2021. The company is implementing further price increases to compensate for these effects.
Adjusted indirect costs as a percentage of sales decreased by 150bps to 29.5%, driven by operating leverage and structural cost savings.
Adjusted EBITA increased by 8.6% to €187m. The Adjusted EBITA margin was 10.5%, remaining above 10% for the second consecutive year. The Adjusted EBITA margin decline of 30bps reflects the high comparison base of the previous year, a negative currency effect of 130bps and higher COGS, which were partly compensated by price increases, positive sales mix and operating leverage.
Restructuring costs were €4m, acquisition-related charges were €7m and incidental items were €29m, largely attributable to impairments related to Signify's operations in Russia and Ukraine.
Net income increased by €27m to €87m, mainly reflecting higher income from operations and lower net financial expenses, partly reduced by impairments related to our operations in Russia and Ukraine.