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Signify N.V. — Earnings Release 2021
Apr 30, 2021
3884_iss_2021-04-30_787e1fbe-6f04-4867-bcb6-ab005550933e.pdf
Earnings Release
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Press Release
April 30, 2021
Signify reports first quarter sales of EUR 1.6 billion, operational profitability of 10.8% and a free cash flow of EUR 168 million
First quarter 20211
- Signify's installed base of connected light points increased from 77 million in Q4 20 to 83 million in Q1 21
- Sales of EUR 1,599 million; 12.0% nominal sales growth and CSG of 3.2%
- LED-based sales represented 82% of total sales (Q1 2020: 79%2 )
- Adj. EBITA margin improved by 290 bps to 10.8%
- Net income increased to EUR 60 million (Q1 20: EUR 27 million)
- Free cash flow increased to EUR 168 million (Q1 20: EUR 112 million)
- Net debt/EBITDA ratio of 1.4x (Q1 20: 2.7x)
Eindhoven, the Netherlands – Signify (Euronext: LIGHT), the world leader in lighting, today announced the company's first quarter 2021 results.
"Our first quarter performance demonstrates the execution of our strategy, as we report growth driven by our connected businesses and our growth platforms. The adaptive measures we took in 2020, combined with continued pricing discipline, cost and working capital management, resulted in improvements in our operating margin and free cash flow. Our teams have also begun to execute our new 'Brighter Lives, Better World 2025' sustainability program, which aims to double our positive impact on the environment and society in 2025," said CEO Eric Rondolat.
"While we see signs of an economic recovery, supply chain performance is being challenged by component shortages, which are impacting the first half, and will, to a lesser extent, impact the second half of the year. We expect the continued vaccination rollouts and easing of lockdowns to drive an upswing in demand for our professional portfolio in the second half of the year. We are therefore aiming for mid-single digit full-year comparable sales growth and further year-on-year operating margin improvements, driven by our digital businesses."
Brighter Lives, Better World 2025
In the first quarter of the year, Signify made its first steps to achieve the ambitious goals it set for the Brighter Lives, Better World 2025 sustainability program, making progress on all four commitments that contribute to doubling its positive impact on the environment and society. In addition, the CDP Awards 2021 recognized Signify's leadership in Climate action, after the company had achieved carbon neutrality for all its operations in the world in 2020.
In Q1 2021, the company has started to make progress against its ambition of doubling its positive impact on the environment and society in 2025:
- Double the pace of the Paris agreement: Carbon reduction over value chain was 18 million tonnes, for which we set a 2025 target of 340 million tonnes
- Double our Circular revenues to 32%: Circular revenues were 19%, versus the 2019 baseline of 16% and the 2025 target of 32%
- Double our Brighter lives revenues to 32%: Brighter lives revenues were 23%, versus the 2019 baseline of 16% and the 2025 target of 32%
- Double the percentage of women in leadership positions to 34%: The percentage of women in leadership positions was 24%, versus the 2019 baseline of 17% and the 2025 target of 34%
Outlook
Following the operational performance in the first quarter and based on current visibility, Signify now anticipates comparable sales growth of 3% to 6% for the full year 2021. In addition, Signify expects to achieve an Adjusted EBITA margin of 11.5% to 12.5% and continues to expect free cash flow to exceed 8% of sales for the full year 2021. The company reassesses its medium-term guidance for the period 2021-2023 after each financial year.
Signify has refinanced EUR 350 million of its long-term debt with short-term loans with a maturity of December 2021 and is therefore fully committed to repaying EUR 350 million of debt in Q4 2021.
Financial review
| First quarter | |||
|---|---|---|---|
| in € million, except percentages | 2020* | 2021 | change |
| Comparable sales growth | 3.2 % | ||
| Effects of currency movements | -6.4 % | ||
| Consolidation and other changes | 15.2 % | ||
| Sales | 1,427 | 1,599 | 12.0 % |
| Adjusted gross margin | 545 | 637 | 16.9 % |
| Adj. gross margin (as % of sales) | 38.2% | 39.8% | |
| Adj. SG&A expenses | -393 | -424 | |
| Adj. R&D expenses | -67 | -72 | |
| Adj. indirect costs | -460 | -496 | -7.9 % |
| Adj. indirect costs (as % of sales) | 32.2% | 31.0% | |
| Adjusted EBITA | 112 | 172 | 53.3 % |
| Adjusted EBITA margin | 7.9% | 10.8% | |
| Adjusted items | -42 | -57 | |
| EBITA | 70 | 115 | 63.9 % |
| Income from operations (EBIT) | 43 | 85 | 97.6 % |
| Net financial income/expense | -10 | -10 | |
| Income tax expense | -6 | -15 | |
| Net income | 27 | 60 | 123.5 % |
| Free cash flow | 112 | 168 | |
| Basic EPS (€) | 0.24 | 0.47 | |
| Employees (FTE) | 38,446 | 37,356 |
* For comparability purposes please note that first quarter 2020 includes only 1 month of Cooper Lighting performance
First quarter
Sales amounted to EUR 1,599 million, a nominal increase of 12.0%, including a 6.4% negative currency effect. After adjusting for a 15.2% change in consolidation and other changes (mainly related to the consolidation of Cooper Lighting in 2020), comparable sales increased by 3.2%. The return to growth was driven by strong sales in the connected home category, the recovery in China as well as an improved performance in most of Europe, India and the Middle East. LED-based sales accounted for 82% of total sales (Q1 2020: 79%1 ). The adjusted gross margin increased by 160 bps to 39.8%, largely driven by a positive mix effect from strong connected home sales, pricing discipline compensating the initial impact of material cost inflation, and the consolidation of Cooper Lighting. Adjusted indirect costs as percentage of sales decreased by 120 bps to 31.0%, supported by continued spending discipline and positive operating leverage. Adjusted EBITA amounted to EUR 172 million, representing a EUR 60 million increase versus the same period last year. The Adjusted EBITA margin improved by 290 bps to 10.8%, with gross margin and SG&A efficiency equally contributing to the improvement. Total restructuring costs of EUR 47 million mainly related to the restructuring of the central organization. Acquisition-related charges were EUR 14 million and incidental items generated a EUR 4 million benefit. As a result of the higher income from operations, net income improved from EUR 27 million to EUR 60 million compared to the first quarter of last year.
Digital Solutions
| First quarter | ||||
|---|---|---|---|---|
| in millions of EUR, unless otherwise indicated | 2020* | 2021 | change | |
| Comparable sales growth | -1.8 % | |||
| Sales | 639 | 793 | 24.1 % | |
| Adjusted EBITA | 43 | 71 | 66.9 % | |
| Adjusted EBITA margin | 6.7% | 9.0% | ||
| EBITA | 18 | 48 | ||
| Income from operations (EBIT) | -7 | 20 |
* For comparability purposes please note that first quarter 2020 includes only 1 months of Cooper Lighting performance
First quarter
Sales amounted to EUR 793 million, a nominal increase of 24.1%, reflecting the consolidation impact of Cooper Lighting. Comparable sales declined by 1.8%, on the back of continued lockdowns, component shortages, continued macroeconomic softness in the Americas, yet a strong performance in China, the Middle East and India, and a partial recovery across Europe. LED-based sales accounted for 92% of total sales including Cooper Lighting. Adjusted EBITA was EUR 71 million, resulting in an Adjusted EBITA margin expansion of 230 bps to 9.0%, mainly driven by continued cost management and the consolidation impact of Cooper Lighting.
Digital Products
| First quarter | |||
|---|---|---|---|
| in millions of EUR, unless otherwise indicated | 2020 | 2021 | change |
| Comparable sales growth | 15.7 % | ||
| Sales | 529 | 575 | 8.7 % |
| Adjusted EBITA | 47 | 82 | 73.1 % |
| Adjusted EBITA margin | 8.9% | 14.2% | |
| EBITA | 38 | 76 | |
| Income from operations (EBIT) | 36 | 74 |
First quarter
Sales amounted to EUR 575 million, a nominal increase of 8.7%. On a comparable basis, sales improved by 15.7%, mainly driven by continued strong growth in the consumer segment for both the connected home and LED lamps and luminaires categories, partially offset by a lower recovery speed in the professional segment. Adjusted EBITA was EUR 82 million, resulting in an Adjusted EBITA margin of 14.2%, up from 8.9% in the first quarter of last year, mainly driven by the strong sales recovery, the resulting operating leverage, a solid gross margin and a higher contribution and improvement from connected home products.
Conventional Products
| First quarter | |||
|---|---|---|---|
| in millions of EUR, unless otherwise indicated | 2020 | 2021 | change |
| Comparable sales growth | -6.1 % | ||
| Sales | 257 | 227 | -11.7 % |
| Adjusted EBITA | 45 | 47 | 3.3 % |
| Adjusted EBITA margin | 17.6% | 20.6% | |
| EBITA | 39 | 53 | |
| Income from operations (EBIT) | 39 | 53 |
First quarter
Sales amounted to EUR 227 million, translating into a comparable decline of 6.1%, positively affected by continued strong traction in the consumer and horticulture segments. The Adjusted EBITA margin improved by 300 bps to 20.6%, driven by pricing discipline and operational efficiencies.
Other
First 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. 'Other' Adjusted EBITA amounted to EUR -28 million (Q1 20: EUR -23 million). 'Other' EBITA amounted to EUR -62 million (Q1 20: EUR -25 million), which includes restructuring costs of EUR -34 million (Q1 20: EUR -2 million).
Sales by market
| First quarter | ||||
|---|---|---|---|---|
| in millions of EUR, except percentages | 2020 | 2021 | Change | CSG |
| Europe | 502 | 523 | 4.1 % | 6.0 % |
| Americas | 486 | 589 | 21.2 % | -7.7 % |
| Rest of the World | 325 | 370 | 13.8 % | 22.9 % |
| Global businesses | 115 | 118 | 3.0 % | 1.7 % |
| Total | 1,427 | 1,599 | 12.0 % | 3.2 % |
Americas includes Cooper Lighting and Global businesses includes Klite
Wiz Connected is included in Market Groups Europe, Americas and Rest of the World (was previously part of Global businesses)
First quarter
Comparable sales in Europe grew by 6.0%, as most markets saw a partial recovery despite ongoing COVID-19 related measures. In the Americas, comparable sales declined by 7.7% as most countries continued to face a challenging macroeconomic environment at the start of the first quarter, yet with a stronger performance in March. In the Rest of the World, China showed a strong recovery. Together with India and the Middle East, China benefited from a low comparison base.
Working capital
| in millions of EUR, unless otherwise indicated | 31 Mar, 2020 | 31 Dec, 2020 | 31 Mar, 2021 |
|---|---|---|---|
| Inventories | 1,019 | 885 | 946 |
| Trade and other receivables | 1,173 | 1,140 | 1,074 |
| Trade and other payables | -1,673 | -1,731 | -1,784 |
| Other working capital items | -49 | 19 | -1 |
| Working capital | 470 | 313 | 236 |
| As % of LTM* sales | 7.6 % | 4.8 % | 3.5 % |
* LTM: Last Twelve Months
First quarter
Working capital improved by EUR 234 million year on year to EUR 236 million, driven by higher payables, lower receivables and lower inventories. As a percentage of sales, working capital improved by 410 bps to 3.5% of sales. When including last twelve-month sales pro-forma Cooper Lighting and Klite, working capital improved by 260 bps.
Cash flow analysis
| First quarter | ||
|---|---|---|
| in millions of EUR | 2020 | 2021 |
| Income from operations (EBIT) | 43 | 85 |
| Depreciation and amortization | 78 | 77 |
| Additions to (releases of) provisions | 33 | 60 |
| Utilizations of provisions | -52 | -50 |
| Change in working capital | 52 | 30 |
| Net interest and financing costs paid | -10 | -1 |
| Income taxes paid | -28 | -21 |
| Net capex | -17 | -16 |
| Other | 12 | 3 |
| Free cash flow | 112 | 168 |
First quarter
Free cash flow increased by EUR 56 million to EUR 168 million, as a result of higher income from operations, partly offset by a lower albeit continued inflow from working capital improvement. Free cash flow included a restructuring payout of EUR 13 million (Q1 20: EUR 18 million).
Net debt and total equity
| in millions of EUR | 31 Mar,2020 31 Dec, 2020 |
31 Mar, 2021 | ||
|---|---|---|---|---|
| Short-term debt | 95 | 86 | 433 | |
| Long-term debt | 2,639 | 2,221 | 1,899 | |
| Gross debt | 2,734 | 2,307 | 2,332 | |
| Cash and cash equivalents | 924 | 1,033 | 1,192 | |
| Net debt | 1,810 | 1,275 | 1,141 | |
| Total equity | 2,334 | 2,321 | 2,469 |
First quarter
Our cash position increased by EUR 159 million to EUR 1,192 million compared with the end of December 2020. EUR 350 million of long-term debt was converted into short-term debt during Q1 2021. Net debt amounted to EUR 1,141 million, a decrease of EUR 134 million compared with the end of December 2020. Net leverage
reduced from 2.7x at the end of March 2020, following the acquisition of Cooper Lighting, to 1.4x by the end of March 2021, which is in line with our deleveraging strategy. Total equity increased to EUR 2,469 million at the end of the first quarter (Q4 20: EUR 2,321 million), primarily due to currency translation and net income offset by share repurchases to cover obligations arising from long-term employee share plans.
Other information
Appendix A – Selection of financial statements Appendix B – Reconciliation of non-IFRS financial measures Appendix C – Financial Glossary
Conference call and audio webcast
Eric Rondolat (CEO) and Javier van Engelen (CFO) will host a conference call for analysts and institutional investors at 9:00 a.m. CET to discuss the 2021 first quarter results. A live audio webcast of the conference call will be available via the Investor Relations website.
Financial calendar 2021
| May 18, 2021 | Annual General Meeting |
|---|---|
| May 20, 2021 | Ex-dividend date |
| May 21, 2021 | Dividend record date |
| June 1, 2021 | Dividend payment date |
| July 23, 2021 | Second quarter results 2021 |
| October 29, 2021 | Third quarter results 2021 |
For further information, please contact: Signify Investor Relations Thelke Gerdes Tel: +31 6 1801 7131 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 2020 sales of EUR 6.5 billion, we have approximately 37,000 employees and are present in over 70 countries. We unlock the extraordinary potential of light for brighter lives and a better world. We achieved carbon neutrality in 2020, have been in the Dow Jones Sustainability World Index since our IPO for four consecutive years and were named Industry Leader in 2017, 2018 and 2019. News from Signify is located at the Newsroom, Twitter, LinkedIn and Instagram. Information for investors can be found on the Investor Relations page.
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, the impacts of COVID-19, 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. Please see "Risk Factors and Risk Management" in Chapter 12 of the Annual Report 2020 for discussion of material risks, uncertainties and other important factors which may have a material adverse effect on the business, results of operations, financial condition and prospects of the Group. Such risks, uncertainties and other important factors should be read in conjunction with the information included in the Company's Annual Report 2020.
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 or 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 18 Reconciliation of non-IFRS measures" in the Annual Report 2020.
Change in reporting segments
Effective Q2 2020, to further adapt to the industry transition and strengthen customer centricity, Signify changed the organizational structure, which included changing the previously four business groups (BG's) to three divisions. Division Digital Solutions (formerly BG Professional, including Cooper Lighting Solutions) offers luminaires, lighting systems and services for the Internet of Things to the customers in the professional segment; Division Digital Products (combines BG LED and BG Home). This division offers LED lamps, LED luminaires and connected products, including Hue and Wiz, and LED electronics to professional customers, OEM partners and consumers. By bringing together its entire consumer LED portfolio, Signify can better manage this lighting category for its channel partners; and Division Conventional Products (formerly BG Lamps) continues to focus on
conventional lamps and electronics for professional customers, OEM partners and consumers. It is organized separately to bring a clear distinction between conventional and digital offerings.
In line with this change, effective Q2 2020, Signify's operating segments are Digital Solutions, Digital Products, and Conventional Products. The segments are organized based on the nature of the products and services. 'Other' represents amounts not allocated to the operating segments and includes certain costs related to central R&D activities to drive innovation as well as group enabling functions.
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 2020.
Market Abuse Regulation
This press release contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.
Appendix A – Financial statement information
A. Condensed consolidated statement of income
In millions of EUR unless otherwise stated
| First quarter | ||
|---|---|---|
| 2020 | 2021 | |
| Sales | 1,427 | 1,599 |
| Cost of sales | (895) | (970) |
| Gross margin | 533 | 629 |
| Selling, general and administrative expenses | (422) | (484) |
| Research and development expenses | (68) | (71) |
| Other business income | 2 | 13 |
| Other business expenses | (1) | (2) |
| Income from operations | 43 | 85 |
| Financial income | 5 | 5 |
| Financial expenses | (15) | (15) |
| Results relating to investments in associates | — | — |
| Income before taxes | 33 | 75 |
| Income tax expense | (6) | (15) |
| Net income | 27 | 60 |
| Attribution of net income for the period: | ||
| Net income (loss) attributable to shareholders of Signify N.V. | 30 | 59 |
| Net income (loss) attributable to non-controlling interests | (3) | 1 |
B. Condensed consolidated statement of comprehensive income
In millions of EUR
| First quarter | ||
|---|---|---|
| 2020 | 2021 | |
| Net income (loss) | 27 | 60 |
| Pensions and other post-employment plans: | ||
| Remeasurements | — | — |
| Income tax effect on remeasurements | — | — |
| Total of items that will not be reclassified to profit or loss | — | — |
| Currency translation differences: | ||
| Net current period change, before tax | (31) | 147 |
| Income tax effect | — | — |
| Net investment hedge | ||
| Net current period change, before tax | — | (20) |
| Income tax effect | — | — |
| Cash flow hedges: | ||
| Net current period change, before tax | 14 | (18) |
| Income tax effect | (3) | 4 |
| Total of items that are or may be reclassified to profit or loss | (20) | 113 |
| Other comprehensive income (loss) | (20) | 113 |
| Total comprehensive income (loss) | 6 | 173 |
| Total comprehensive income (loss) attributable to: | ||
| Shareholders of Signify N.V. | 9 | 166 |
| Non-controlling interests | (3) | 7 |
C. Condensed consolidated statement of financial position
| In millions of EUR | ||
|---|---|---|
| December 31, | ||
| 2020 | March 31, 2021 | |
| Non-current assets | ||
| Property, plant and equipment | 708 | 720 |
| Goodwill | 2,251 | 2,357 |
| Intangible assets, other than goodwill | 775 | 776 |
| Investments in associates | 12 | 12 |
| Financial assets | 55 | 49 |
| Deferred tax assets | 473 | 471 |
| Other assets | 60 | 70 |
| Total non-current assets | 4,334 | 4,455 |
| Current assets | ||
| Inventories | 885 | 946 |
| Financial assets | — | — |
| Other assets | 171 | 209 |
| Derivative financial assets | 104 | 63 |
| Income tax receivable | 39 | 50 |
| Trade and other receivables | 1,140 | 1,074 |
| Cash and cash equivalents | 1,033 | 1,192 |
| Assets classified as held for sale | 3 | — |
| Total current assets | 3,376 | 3,534 |
| Total assets | 7,710 | 7,989 |
| Equity | ||
| Shareholders' equity | 2,196 | 2,338 |
| Non-controlling interests | 124 | 131 |
| Total equity | 2,321 | 2,469 |
| Non-current liabilities | ||
| Debt | 2,221 | 1,899 |
| Post-employment benefits | 390 | 390 |
| Provisions | 224 | 229 |
| Deferred tax liabilities | 22 | 24 |
| Income tax payable | 108 | 111 |
| Other liabilities | 159 | 175 |
| Total non-current liabilities | 3,123 | 2,828 |
| Current liabilities | ||
| Debt, including bank overdrafts | 86 | 433 |
| Derivative financial liabilities | 44 | 37 |
| Income tax payable | 20 | 13 |
| Trade and other payables | 1,731 | 1,784 |
| Provisions | 172 | 189 |
| Other liabilities | 213 | 236 |
| Liabilities from assets classified as held for sale | — | — |
| Total current liabilities | 2,266 | 2,692 |
| Total liabilities and total equity | 7,710 | 7,989 |
D. Condensed consolidated statement of cash flows
In millions of EUR
| First quarter | ||
|---|---|---|
| 2020 | 2021 | |
| Cash flows from operating activities | ||
| Net income (loss) | 27 | 60 |
| Adjustments to reconcile net income (loss) to net cash provided by operating | ||
| activities: | 133 | 156 |
| • Depreciation, amortization and impairment of non-financial assets | 78 | 77 |
| • Impairment (reversal) of goodwill, other non-current financial assets and | ||
| investments in associates | — | — |
| • Net gain on sale of assets | — | (11) |
| • Net interest expense on debt, borrowings and other liabilities | 7 | 7 |
| • Income tax expense | 6 | 15 |
| • Additions to (releases of) provisions | 28 | 56 |
| • Additions to (releases of) post-employment benefits | 5 | 4 |
| • Other items | 8 | 8 |
| Decrease (increase) in working capital: | 52 | 30 |
| • Decrease (increase) in trade and other receivables | 220 | 84 |
| • Decrease (increase) in inventories | (9) | (35) |
| • Increase (decrease) in trade and other payables | (185) | (8) |
| • Increase (decrease) in other current assets and liabilities | 26 | (10) |
| Increase (decrease) in other non-current assets and liabilities | 7 | 9 |
| Utilizations of provisions | (43) | (42) |
| Utilizations of post-employment benefits | (9) | (8) |
| Net interest and financing costs paid | (10) | (1) |
| Income taxes paid | (28) | (21) |
| Net cash provided by (used for) operating activities | 129 | 184 |
| Cash flows from investing activities | ||
| Net capital expenditures: | (17) | (16) |
| • Additions of intangible assets | (5) | (8) |
| • Capital expenditures on property, plant and equipment | (12) | (21) |
| • Proceeds from disposal of property, plant and equipment | — | 13 |
| Net proceeds from (cash used for) derivatives and other financial assets | 10 | (5) |
| Purchases of businesses, net of cash acquired | (1,270) | — |
| Proceeds from sale of businesses, net of cash disposed of | — | — |
| Net cash provided by (used for) investing activities | (1,277) | (21) |
| Cash flows from financing activities | ||
| Dividend paid | — | (3) |
| Proceeds from issuance of debt | 2,455 | 350 |
| Repayment of debt | (1,218) | (371) |
| Purchase of treasury shares | (6) | (24) |
| Net cash provided by (used for) financing activities | 1,231 | (48) |
| Net cash flows | 84 | 115 |
| Effect of changes in exchange rates on cash and cash equivalents and bank overdrafts | (5) | 46 |
| Cash and cash equivalents and bank overdrafts at the beginning of the period1 | 840 | 1,030 |
| Cash and cash equivalents and bank overdrafts at the end of the period2 | 919 | 1,191 |
1 For Q1 2021 and Q1 2020, included bank overdrafts of EUR 3 million and EUR 7 million, respectively.
2 Included bank overdrafts of EUR 1 million and EUR 5 million as at March 31, 2021 and 2020, respectively.
Appendix B - Reconciliation of non-IFRS financial measures
Change in reporting segments
As indicated in the Important Information section, Signify changed its segment reporting in Q2 2020. The main change relates to combining BG LED and BG Home into division Digital Products. The comparatives 2020 in below tables have been updated to reflect the updated segment structure.
Sales growth composition per business in %
| First quarter | |||||
|---|---|---|---|---|---|
| Comparable growth |
Currency effects | Consolidation and other changes |
Nominal growth | ||
| 2021 vs 2020 | |||||
| Digital Solutions | -1.8 | -6.6 | 32.6 | 24.1 | |
| Digital Products | 15.7 | -6.4 | -0.6 | 8.7 | |
| Conventional Products | -6.1 | -5.5 | -0.1 | -11.7 | |
| Total | 3.2 | -6.4 | 15.2 | 12.0 |
Sales growth composition per market in %
| First quarter | |||||||
|---|---|---|---|---|---|---|---|
| Comparable growth |
Currency effects | Consolidation and other changes |
Nominal growth | ||||
| 2021 vs 2020 | |||||||
| Europe | 6.0 | -1.6 | -0.3 | 4.1 | |||
| Americas | -7.7 | -9.0 | 37.8 | 21.2 | |||
| Rest of the World | 22.9 | -9.5 | 0.4 | 13.8 | |||
| Global businesses | 1.7 | -2.7 | 4.0 | 3.0 | |||
| Total | 3.2 | -6.4 | 15.2 | 12.0 |
Adjusted EBITA to Income from operations (or EBIT) in millions of EUR
| Digital | Digital | Conventional | |||
|---|---|---|---|---|---|
| Signify | Solutions | Products | Products | Other | |
| First quarter 2021 | |||||
| Adjusted EBITA | 172 | 71 | 82 | 47 | (28) |
| Restructuring | (47) | (7) | (3) | (2) | (34) |
| Acquisition-related charges | (14) | (14) | — | — | — |
| Incidental items | 4 | (2) | (2) | 9 | — |
| EBITA | 115 | 48 | 76 | 53 | (62) |
| Amortization1 | (30) | (28) | (2) | — | 0 |
| Income from operations (or EBIT) | 85 | 20 | 74 | 53 | (62) |
| First quarter 2020 | |||||
| Adjusted EBITA | 112 | 43 | 47 | 45 | (23) |
| Restructuring | (13) | (4) | (4) | (3) | (2) |
| Acquisition-related charges | (18) | (16) | (2) | — | — |
| Incidental items | (11) | (4) | (4) | (3) | — |
| EBITA | 70 | 18 | 38 | 39 | (25) |
| Amortization1 | (27) | (25) | (2) | — | — |
| Income from operations (or EBIT) | 43 | (7) | 36 | 39 | (25) |
1 Amortization and impairments of acquisition related intangible assets and goodwill.
First quarter 2021 Income from operations to Adjusted EBITA in millions of EUR
| Acquisition related |
Incidental | ||||
|---|---|---|---|---|---|
| Reported | Restructuring | charges | items1 | Adjusted | |
| First quarter 2021 | |||||
| Sales | 1,599 | — | — | — | 1,599 |
| Cost of sales | (970) | 5 | 2 | — | (962) |
| Gross margin | 629 | 5 | 2 | — | 637 |
| Selling, general and administrative expenses | (484) | 43 | 12 | 5 | (424) |
| Research and development expenses | (71) | (1) | — | — | (72) |
| Indirect costs | (555) | 42 | 12 | 5 | (496) |
| Impairment of goodwill | — | — | — | — | — |
| Other business income | 13 | — | (9) | 4 | |
| Other business expenses | (2) | — | — | — | (2) |
| Income from operations | 85 | 47 | 14 | (4) | 142 |
| Amortization | (30) | — | — | — | (30) |
| Income from operations excluding | |||||
| amortization (EBITA) | 115 | 47 | 14 | (4) | 172 |
| First quarter 2020 | |||||
| Sales | 1,427 | — | — | — | 1,427 |
| Cost of sales | (895) | 4 | 7 | 2 | (882) |
| Gross margin | 533 | 4 | 7 | 2 | 545 |
| Selling, general and administrative expenses | (422) | 8 | 12 | 10 | (393) |
| Research and development expenses | (68) | 1 | — | — | (67) |
| Indirect costs | (490) | 9 | 12 | 10 | (460) |
| Impairment of goodwill | — | — | — | — | — |
| Other business income | 2 | — | — | — | 2 |
| Other business expenses | (1) | — | — | — | (1) |
| Income from operations | 43 | 13 | 18 | 11 | 85 |
| Amortization | (27) | — | — | — | (27) |
| Income from operations excluding | |||||
| amortization (EBITA) | 70 | 13 | 18 | 11 | 112 |
1 Incidental items are non-recurring by nature and relate to separation, transformation, net real estate gains, environmental provision for inactive sites and discounting effect of long-term provisions.
Appendix C – Financial glossary
Acquisition-related charges
Costs that are directly triggered by the acquisition of a company, such as transaction costs, purchase accounting related costs and integration-related expenses.
Adjusted EBITA
EBITA excluding restructuring costs, acquisitionrelated charges and other incidental charges.
Adjusted EBITA margin
Adjusted EBITA divided by sales to third parties (excluding intersegment).
Adjusted gross margin
Gross margin, excluding restructuring costs, acquisition-related charges and other incidental items attributable to cost of sales.
Adjusted indirect costs
Indirect costs, excluding restructuring costs, acquisition-related charges and other incidental items attributable to indirect costs.
Adjusted R&D expenses
Research and development expenses, excluding restructuring costs, acquisition-related charges and other incidental items attributable to research and development expenses.
Adjusted SG&A expenses
Selling, general and administrative expenses, excluding restructuring costs, acquisition-related charges and other incidental items attributable to selling, general and administrative expenses.
Changes in scope
Consolidation effects related to acquisitions (mainly Cooper Lighting).
Comparable sales growth (CSG)
The period-on-period growth in sales excluding the effects of currency movements and changes in consolidation and other changes.
EBIT
Income from operations.
EBITA
Income from operations excluding amortization and impairment of acquisition related intangible assets and goodwill.
EBITDA
Income from operations excluding depreciation, amortization and impairment of non-financial assets.
Effects of changes in consolidation and other changes
In the event a business is acquired (or divested), the impact of the consolidation (or deconsolidation) on the Group's figures is included (or excluded) in the calculation of the comparable sales growth figures. Other changes include regulatory changes and changes originating from new accounting standards.
Effects of currency movements
Calculated by translating the foreign currency financials of the previous period and the current period into euros at the same average exchange rates.
Employees
Employees of Signify at period end expressed on a full-time equivalent (FTE) basis.
Free cash flow
Net cash provided by operating activities minus net capital expenditures. Free cash flow includes interest paid and income taxes paid.
Gross margin
Sales minus cost of sales.
Incidental charges
Any item with an income statement impact (loss or gain) that is deemed to be both significant and not part of normal business activity. Other incidental items may extend over several quarters within the same financial year.
Indirect costs
The sum of selling, general and administrative expenses and R&D expenses.
Net capital expenditures
Additions of intangible assets, capital expenditures on property, plant and equipment and proceeds from disposal of property, plant and equipment.
Net debt
Short-term debt, long-term debt minus cash and cash equivalents.
Net leverage ratio
The ratio of consolidated reported net debt to consolidated reported EBITDA for the purpose of calculating the financial covenant.
R&D expenses
Research and development expenses.
Restructuring costs
The estimated costs of initiated reorganizations, the most significant of which have been approved by the group, and which generally involve the realignment of certain parts of the industrial and commercial organization.
SG&A expenses
Selling, general and administrative expenses.
Working capital
The sum of inventories, trade and other receivables, other current assets, derivative financial assets minus the sum of trade and other payables, derivative financial liabilities and other current liabilities.