Switzerland - Landis+Gyr (LAND.SW) today announced unaudited financial results for the first half of financial year 2020 (April 1st - September 30th, 2020).
Key highlights included: COVID-19 and US regulatory project approval delays significantly impacted Landis+Gyr's business in the six months under review with H1 FY 2020 net revenues of USD 623.5 million, a decrease of 27.1% in constant currency Year-over-Year (YoY)
Despite temporary suspensions and slowdowns in installations, no major project cancellations have occurred
Order intake for H1 FY 2020 of USD 456.9 million, a book-to-bill ratio of 0.73 with continuing regulatory project approval delays in the US and slower tendering activities due to COVID-19
Committed backlog down 17.2% YoY to USD 2.1 billion
Adjusted EBITDA of USD 50.1 million, a margin of 8.0% compared to 14.5% in H1 FY 2019; Adjusted Operating Expenses reduced by USD 32.2 million YoY
The global restructuring and streamlining initiative announced on August 5th, 2020 will be concluded in FY 2020 with full year benefits expected to materialize in FY 2021
Net loss was USD 2.0 million, including restructuring costs of USD 15.4 million; loss per share was USD 0.07
Free Cash Flow (excl. M&A) was USD 45.3 million compared to USD 33.1 million in H1 FY 2019
Net cash was USD 12.1 million compared to net debt of USD 99.4 million at the end of H1 FY 2019
Additional revolving credit facilities of CHF 200 million were established during H1 FY 2020 and remain undrawn; cash on hand was USD 369 million
A distribution of CHF 2.00 per share for FY 2019 will be proposed at an Extraordinary General Meeting on November 24th, 2020
An update on the revenue & margin outlook FY 2020 is being provided, but remains subject to ongoing COVID-19 developments 'Over the past few months, our employees have demonstrated an incredible amount of resilience and dedication to ensure we continue to meet customer expectations and take care of each other, with health, safety and wellbeing remaining the top priority. As a global leader in an essential industry, we are proud to provide critical infrastructure to utilities around the world, helping our customers, energy consumers and entire communities to manage energy in a more informed and sustainable way. Since I took over as Chief Executive Officer six months ago, we have taken several targeted steps to further improve our competitive positioning, including the establishment of a strong leadership team and the reorganization of our global R&D setup to drive leading-edge innovation and increase speed to market and customer intimacy. In addition, we have implemented a global restructuring and streamlining initiative to rightsize the organization. Despite these unprecedented and challenging times, the Group improved its cash generation and its balance sheet remains very solid. Even though we have seen temporary suspensions of meter installations, we have not experienced any major project cancellations', said Werner Lieberherr, Chief Executive Officer of Landis+Gyr.
'When we announced our full year FY 2019 results on May 6th, 2020, we cautioned about a potentially material adverse impact of COVID-19 on the Company. It is the case that the results for the first half of financial year 2020 reflect the current challenging economic environment, impacted primarily by the COVID-19 crisis, further delaying regulatory project approval processes in the Americas region and temporarily suspending installations in other key markets, such as the UK. We have undertaken strict cost control measures throughout the organization, while maintaining key portfolio investments, and we are well positioned for the future, having all the fundamentals in place. For FY 2019, a distribution from capital reserves of CHF 2.00 per share will be proposed at an Extraordinary General Meeting on November 24th, 2020. Additional information on the strategic direction, as well as a possible update on mid-term guidance and dividend policy, will be given at the Capital Markets Day on January 27th, 2021', Lieberherr concluded.
COVID-19 Update
Landis+Gyr remains focused on meeting its customer requirements as well as ensuring the health and wellbeing of the Group's employees during these extraordinary times. Some of the Company's and its vendors' factories have been subject to lockdowns but all are currently operational again. Social distancing and all necessary hygiene measures have been implemented in all facilities according to local regulations. Overall, there has not been a significant impact to the supply chain, however risks remain as the COVID-19 situation evolves.
Landis+Gyr has not experienced any major project cancellations and software and service contracts continue unchanged. The Company is working closely with all customers and partners to ensure continued operational excellence, however, some customers have suspended or slowed down meter installations. There have been further delays to regulatory project approvals in the US and to contract awards more widely, with some rescheduling of new project deployments, which were originally planned for 2020 and 2021. As a result, the Company's revenue fell significantly in H1 FY 2020 and has elevated the urgency of rightsizing the organization, improving the Company's cost structure with a continued focus on lowering operating and capital expenditure while maintaining technological leadership.
Order Intake, Committed Backlog and Net Revenue
As expected due to the impact of COVID-19 during the first half of FY 2020 and various government measures implemented in connection therewith as well as US regulatory project approval delays, order intake for H1 FY 2020 was USD 456.9 million, a book-to-bill ratio of 0.73 and a decrease of 44% YoY in constant currency. Committed backlog was down 17% YoY at USD 2,080.7 million with all three regions reporting decreases YoY.
In H1 FY 2020, net revenue fell 27.1% YoY in constant currency to USD 623.5 million.
The Americas region delivered lower net revenue YoY, down 29.2% in constant currency, due to headwinds related to COVID-19, further delays in regulatory project approvals in the US and recent project roll-offs not replaced by new business as well as slower tendering activities. The Americas' committed backlog was USD 1,333.1 million at the end of H1 FY 2020, down 18.5% YoY.
Net revenue in the EMEA region was down compared to the prior year by 30.4% in constant currency. Temporary installation suspensions due to COVID-19, particularly in the UK, drove the region's decline in financial performance. EMEAs committed order backlog was USD 663.2 million at the period end, down 16.1% YoY.
Asia Pacific sales were down 2.2% YoY in constant currency, as growth in Hong Kong partially offset COVID-19 related declines in Australia and India. Committed backlog was USD 84.3 million, down 5.3% YoY.
Overall, H1 FY 2020 Adjusted EBITDA was USD 50.1 million. The H1 FY 2020 Adjusted EBITDA margin decreased to 8.0% from 14.5% in the prior year. Adjusted EBITDA declined due to lower gross profit given the reduced volumes in the Americas and EMEA with a partial offset from lower operating expenses.
Adjusted Operating Expenses reduced by USD 32.2 million compared to the previous year. The reduction is attributable to cost control measures, lower variable compensation and COVID-19 impacts. The impact of the global restructuring and streamlining initiative announced on August 5th, 2020 (known as Project Hermes) is expected to materialize from H2 FY 2020 onwards.
In H1 FY 2020, the Operating loss was USD 9.9 million, down from an Operating income of USD 84.9 million in H1 FY 2019. Reported EBITDA was USD 31.8 million versus USD 128.2 million in H1 FY 2019.
In H1 FY 2020, the adjustments were in three categories. First, with respect to Restructuring Charges, the USD 15.4 million related to initiatives taken across the organization, mainly in respect of project Hermes, the Company's global restructuring and streamlining initiative. Secondly, the Warranty Normalization Adjustments of USD -6.7 million represents the amount of warranty provisions made relative to the average actual warranty utilization for the last three years. Thirdly, the Timing Difference on FX Derivatives adjustment was USD 9.7 million in H1 FY 2020 and relates to mark to market differences on hedges.
Net Income / (Loss) and EPS
Net loss for H1 FY 2020 was USD 2.0 million (loss per share of USD 0.07), compared to Net income of USD 71.8 million (earnings per share of USD 2.45) for H1 FY 2019.
Cash Flow and Net Debt
Cash provided by operating activities was USD 56.6 million in H1 FY 2020 compared to USD 45.7 million in the prior year.
Free Cash Flow (excl. M&A) was USD 45.3 million in H1 FY 2020, an increase of USD 12.2 million YoY.
In H1 FY 2020, capital expenditure amounted to USD 11.3 million, 11.0% below the H1 FY 2019 level of USD 12.7 million, consistent with the Company's asset-light business model. Cash generated from lower operating working capital was USD 32.1 million. Warranty and warranty settlement cash outs were USD 7.2 million, down from USD 23.4 million in the prior year as cash outs related to legacy component issues fell.
Net cash was USD 12.1 million compared to net debt of USD 99.4 million at the end of H1 FY 2019. Additional revolving credit facilities of CHF 200 million were established during H1 FY 2020 and these facilities remain undrawn.
Global Restructuring & Streamlining Initiative (Project Hermes)
Project Hermes, the global initiative which is aimed at restructuring and streamlining the organization to increase efficiencies and optimize its cost structure, was announced on August 5th, 2020 and is proceeding according to plan.
Project Hermes targets to reduce the number of employees by approximately 12%, representing about 700 employees across all levels and regions of the Company, and is expected to result in annual run-rate savings of approximately USD 30 million from FY 2021 onwards.
Annual run-rate savings in Adjusted Operating Expenses of USD 16 million are expected to be realized from FY 2021 onwards. In addition, annual run-rate savings in Cost of Goods Sold of USD 14 million are expected to be realized from FY 2021 onwards, helping to protect gross profit margins given lower revenues.
Savings in Adjusted Operating Expenses of USD 5 million and in Cost of Goods Sold of USD 5 million are expected to materialize in H2 FY 2020.
Total restructuring charges are expected to be approximately USD 19 million of which USD 14.0 million were booked in H1 FY 2020; of this total, USD 0.7 million was cashed out in H1 FY 2020 with most of the remainder expected to be cashed out in H2 FY 2020.
In this context the Group Executive Management has taken a 10% reduction in base salary for six months, and the members of the Board of Directors have likewise taken a 10% reduction in their base and committee fees for six months.
Contact:
Eva Borowski
Tel: +41 41 935 6396
Email: Eva.Borowski@landisgyr.com
About Landis+Gyr
Landis+Gyr is a leading global provider of integrated energy management solutions for the utility sector. Offering one of the broadest portfolios, we deliver innovative and flexible solutions to help utilities solve their complex challenges in Smart Metering, Grid Edge Intelligence and Smart Infrastructure. With sales of USD 1.7 billion in FY 2019, Landis+Gyr employs approximately 5,500 people in over 30 countries across five continents, with the sole mission of helping the world manage energy better.
Disclaimer
This release contains information regarding alternative performance measures or non USGAAP measures, such as Reported EBITDA, Adjusted EBITDA, Adjusted Gross Profit, Adjusted Research and Development, Adjusted Sales, General and Administrative, and Adjusted Operating Expenses. Definitions of these measures and reconciliations between such measures and their USGAAP counterparts if not defined in this release may be found on pages 21 to 27 of the Landis+Gyr Financial Report 2019 on our website at www.landisgyr.com/investors.
Forward-looking Information
This press release includes forward-looking information and statements, including statements concerning the outlook for Landis+Gyr Group AGs businesses. These statements are based on current expectations, estimates and projections about the factors that may affect the Companys future performance, including global economic conditions, and the economic conditions of the regions and industries that are major markets for Landis+Gyr. These expectations, estimates and projections are generally identifiable by statements containing words such as 'expects', 'believes', 'estimates', 'targets', 'plans', 'outlook' 'guidance' or similar expressions.
There are numerous risks, uncertainties and other factors, many of which are beyond Landis+Gyrs control, that could cause the Companys actual results to differ materially from the forward-looking information and statements made in this presentation and which could affect the Companys ability to achieve its stated targets. The important factors that could cause such differences include, among others: the duration, severity and geographic spread of the COVID-19 pandemic, government actions to address or mitigate the impact of the COVID-19 pandemic, and the potential negative impacts of COVID-19 on the global economy, the Company's operations and those of its customers and suppliers; business risks associated with the volatile global economic environment and political conditions; costs associated with compliance activities; market acceptance of new products and services; changes in governmental regulations and currency exchange rates; estimates of future warranty claims and expenses and sufficiency of accruals and other such factors as may be discussed from time to time in Landis+Gyr Group AG filings with the SIX Swiss Exchange. Although Landis+Gyr Group AG believes that its expectations reflected in any such forward-looking statement are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved.
LANDIS+GYR GROUP AG 
