Philips spin-off Signify to cut 1,000 jobs with market challenges ahead

Signify is cutting 1,000 jobs, including about 500 in the Netherlands, CEO Eric Rondolat announced with the company’s annual and quarterly figures. The lighting company previously divested from Philips is struggling with challenging market conditions and needs to make cuts, Rondolat said on the company's Friday morning investor call. Profit at the company fell substantially last year, and investors on the call were frustrated that Rondolat and his team did not provide solid sales and revenue forecasts for the coming periods.

The job cuts are part of a total reorganization of the company meant to save over 200 million euros per year. While half of the job losses will take place in the Netherlands, the rest will be spread out around the world. Most of the job losses will be implemented in the first few months of this year. Negotiations are still ongoing about compensation that will be paid to the employees losing their jobs.

The cuts were unavoidable, he said prior to the call. “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.” Signify is struggling with disappointing results, particularly in China - its second-largest market.

Late last year, Signify announced plans to slash an unstated number of jobs, acknowledging this would include layoffs. Few details were released at the time, other than the company intended to cut non-manufacturing costs. “We will continue to protect our gross margin and enhance our focus on costs,” Rondolat said on Friday.

The company already reduced its workforce by almost 2,700 full-time equivalent employees since the start of 2023. At the start of last year, there were over 34,619 full-time positions staffed at the company’s global locations. That total fell to 31,920 by the end of the year, according to their year-end report.

“While we anticipate challenging conditions will persist through the year ahead, I am confident in our strategy and in our proven ability to adapt,” Rondalat said. “In the past quarter, we introduced a new operating model and measures that will enhance our performance and deliver annualized savings in excess of 200 million euros.” Two-thirds of cost savings are expected to take effect this year, with the remainder implemented the following year.

The job cuts are part of the company’s plan to improve profitability by cutting operating costs amid a weaker market. Signify ended the year with earnings of 215 million euros, far below the 2022 total of 532 million euros. That year, profit was positively impacted by the sales of real estate worth 184 million euros.

When excluding that one-time boost in 2022, profit fell by 38 percent in 2023. When including the real estate sales, profitability fell by nearly 60 percent. Sales at Signify fell by nearly 11 percent to 6.7 billion euros, with totals dragged down by a weaker fourth quarter.

At the same time, as the workforce was slimmed down over the course of the year, its margin rose to over 12 percent in the last quarter of 2023, the company said. “In Q4, our gross margin was again strong, confirming our improving operational performance. This brought our adjusted EBITA margin into double digits for the full year,” Rondolat said in a written statement.

Signify said that the job cuts are part of its reorganization to four silos: Professional, Consumer, OEM and Conventional lighting. Each silo will have their own sales, marketing, manufacturing, and development teams, instead of single marketing and operations divisions across all silos.

Signify also announced plans to increase annual dividends from 1.50 euros per share last year to 1.55 euros this year. That reflects a 5.1 percent yield considering the share price of 30.32 euros at the end of the year. The total cash dividend will equal 196 million euros.

The company also noted that women now make up 29 percent of the company’s leadership positions, which is below its 2023 target. It said it will continue with more diversity in hiring at all levels, including the retention of women already staffed there. The company did not say how this would factor into its decision over the announced job losses.

Signify was established in Eindhoven seven years ago as Philips Lighting. The company was announced as a spin-off comprised of the Philips division responsible for lighting, fixtures, and Internet of Things products.

The Signify name was adopted in 2018. The company has a license to continue producing products under the Philips and Philips Hue brands, and it also develops systems and products such as architectural lighting firm Color Kinetics, budget smart lighting brand Wiz, and the Internet of Things platform Interact.