January 26, 2024
Leaner Signify Hits €6.7B in Sales; Plans 1000 Job Cuts
Above: Signify CEO Eric Rondolat speaks with CNBC Europe Friday morning
Global lighting leader takes steps to right-size company in response to certain market contractions
Signify, the worldwide leader in lighting, reported its financial results for 2023, marking a year of mixed performance amid challenging global market conditions.
In a year that Signify CEO Eric Rondolat characterized as one of "recovery and progression," the company concluded 2023 with a decrease in sales, totaling €6.7 billion ($6.15 billion USD). This represents a comparable sales decline of 8.3% compared to 2022.
Attributing this downturn to sustained weaknesses in specific markets, including consumer, OEM and China, Signify is implementing previously announced organizational changes. These adjustments aim to align non-manufacturing costs to be a more sustainable proportion of top-line revenues.
In intraday trading on the Amsterdam Stock Exchange, Signify N.V. (LIGHT.AS) experienced a decline in its stock price by €1.21, or 4.02%, to €28.91.
1000 job cuts planned in 2024
Late last year, Signify announced its restructuring plan, aimed to right-size the organization and align business units more closely with customer channels. These plans included the reduction of an unspecified number of jobs. Initially, few details were disclosed, with the company stating its intention to decrease non-manufacturing expenses to a certain proportion of sales.
Today, Rondolat provided additional information, revealing that the restructuring will involve eliminating 1,000 jobs across 30 countries in 2024. Rondolat stated that these cuts were necessary. "If you look at our costs as a percentage of turnover, we were at 31 percent at the end of 2023. That is far too high," he explained, according to NL Times, an English language publication in Signify's home country of Netherlands.
Last week, a Signify spokesperson reconfirmed to Inside Lighting the company's ongoing commitment to aligning non-manufacturing costs with 25-29% of sales, consistent with the broader organizational objectives. This framework includes Signify globally as well as its U.S. subsidiaries Signify North America and Cooper Lighting Solutions.
Since the beginning of 2023, the company has already reduced its workforce by approximately 2,700 full-time equivalent employees. At the start of last year, Signify employed 34,619 full-time staff globally. This number dropped to 31,920 by the year's end, as reported in their financial statements.
Restructuring costs were €83 million for Q4 2023. These consisted of €77 million of employee termination benefits and €6 million of other costs related to restructuring programs.
Revenue and Profitability
Full-Year Sales: Signify’s sales reached €6.7 billion ($6.15 billion), marking a nominal decrease of 10.8% from the previous year. This decline partly resulted from adverse currency movements and tough market conditions.
Profit Margins: The adjusted EBITA margin was 10.0%, slightly down from 10.1% in 2022. This margin resilience amidst falling revenues indicates effective cost management and operational efficiency.
Segment performance
Consumer and OEM: These segments faced significant challenges, contributing to the overall sales decline. The OEM segment, in particular, underperformed, reflecting broader market difficulties.
Outdoor Lighting: Demonstrating robust performance, this segment withstood the market's tough conditions, highlighting its strategic value in Signify's portfolio.
Cash flow and dividends
Free Cash Flow: The company’s free cash flow was impressive at €586 million ($537.61 million), representing 8.7% of sales and showing an increase from €445 million ($408.26 million) in 2022.
Dividends: A proposed increase in cash dividend to €1.55 per share ($1.42 per share) for 2023, up from €1.50 ($1.38) in 2022, signals confidence in Signify's financial health and commitment to shareholders.
Q4 2023
In the fourth quarter of 2023, Signify reported a challenging period marked by a decline in revenue and net income. Sales for the quarter amounted to €1.734 billion ($1.59 billion), reflecting a nominal decline of 12.3% compared to the same period in the previous year. Despite this decrease in revenue, the company managed to improve its adjusted EBITA margin to 12.1%, up from 10.2% in Q4 2022, indicating a robust operational performance under challenging conditions.
The quarter's results were impacted by continuing market challenges, particularly in the consumer and OEM segments, although there was a notable resilience in professional connected systems.
Global topics
The Americas and Europe experienced comparable sales declines, mainly due to the struggling consumer and OEM segments. The 'Rest of the World' also faced challenges but to a lesser extent.
Signify's progress in its "Brighter Lives, Better World 2025" sustainability program is notable, including meeting the doubled pace of the Paris agreement and surpassing circular revenues targets ahead of schedule.
Forward outlook
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The company anticipates an adjusted EBITA margin improvement of up to 50 bps and aims for a free cash flow generation of 6-7% of sales. The year ahead is expected to be challenging.
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Signify plans to boost its performance through a new operating model, targeting annualized savings of over €200 million ($183.49 million) and focusing on gross margin and cost efficiency.
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The company did not publish guidance on 2024 revenue.
In 2023, Signify navigated challenging global market conditions with strategic cost management and a focus on sustainable growth. The decline in revenue highlights pressures in consumer and OEM segments, but the company's profitability and cash flow strength underscore its resilience.
Moving forward, Signify's emphasis on efficiency, and strategic market adaptation will be crucial in handling economic uncertainties.
