Signify Nv · EURONEXT:LIGHT
Signify Nv — Investor Presentation (June 2020)
40 slides from Signify Nv's investor presentation, June 2020
Slide 1: Investor presentation April - June 2020
Investor presentation April - June 2020
Slide 2: Important information
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 projectio
Slide 3: Growth potential of the lighting market is driven by megatrends
Growth potential of the lighting market is driven by 3 megatrends Population growth and Resource challenges Digitization urbanization More energy-efficient More demand for light More connected lighting lighting 3
Slide 4: Signify is the world leader in lighting
Signify is the world leader in lighting Light sources Luminaires Systems and Services Philips deco LED Smart Volume pendant Allianz Arena, Munich EUR 6 bn sales 38,000 employees 4.3% of sales #1 LED #1 Connected #1 Conventional in 2019 in 70 countries invested in R&D 78% of sales is LED- lighting sy
Slide 5: Signify leads the industry with unique positioning
Signify leads the industry with unique positioning Lamps & Electronics Conv Luminaires Lighting Systems Lighting Services Conventional LED LED Luminaires Lamps LED Professional (EUR 2.6bn) (EUR 1.2bn) (EUR 1.9bn) Home (EUR 0.5bn) 2019 sales split per BG¹ 2019 sales per market (% of total) Sales per
Slide 6: Five transitions in the lighting industry
Five transitions in the lighting industry 2018 Light as a Language Light as a language Systems LED Services Conventional 1891-2014 2008 2012 2016 Incandescent Introduction of LED Connected Lighting Lighting for IoT 6
Slide 7: Innovation strategy extending leadership in products, systems and services into IoT
Innovation strategy extending leadership in products, systems and services into Internet of Things 4.3% of sales contribute to R&D investments Professional Services Lifecycle Services Managed Services 78% Services LED based sales IoT Office & Retail & Systems Public Industry Hospitality Home > 1,000
Slide 8: Signify is well on track to achieve its 2020 Sustainability targets
Signify is well on track to achieve its 2020 Sustainability targets 2019 result Achievement 2020 target 82.5% Increasing energy Sustainable Sustainable revenues 80% revenues efficiency of portfolio LED lamps & 2.3 billion 117% of our commitment (cumulative from 2015) completed >2 billion luminaires
Slide 9: We are successfully managing the transition from conventional to LED
We are successfully managing the transition from conventional to LED Development of LED and conventional as % of sales Development of Adj. EBITA margin 10.1% 10.4% 29% 22% 9.6% 35% 8.9% 45% 57% 7.3% 66% 6.8% 74% 6.4% 65% 71% 78% 55% 43% 34% 26% 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016
Slide 10: Variety of dynamics in the different business groups
Variety of dynamics in the different business groups Conventional / Technologies End markets Shifts in demand LED Business Groups HID TL Public & Outdoor Office & Industry Lamps CFL, Fluorescent Retail & Hospitality 100% Conventional Lamps LED Halogen Demand shifting to LED Part of the LED lamps Hom
Slide 11: LED – differentiation through innovation
LED – differentiation through innovation Key highlights Financial profile • Global market leader, with c. 60% of sales coming from LED lamps and c. 40% from LED electronics1 Adj. EBITA -2.1% 1.4% 5.5% 8.7% 9.9% 11.7% 12.7% margin • Approx. twice as big as the next big competitor2 CSG 26.3% 27.0% 16.
Slide 12: Professional – win in Systems & Services, build the largest connected installed base
Professional – win in Systems & Services, build the largest connected installed base Key highlights Financial profile • Global market leader supplying professional Adj. EBITA 2.2% 4.2% 5.4% 5.0% 8.3% 9.5% 10.0% margin luminaires to public, office & industry and retail & hospitality CSG 3.3% -0.7% -0
Slide 13: Home – Drive profitable growth in the connected home lighting system business
Home – Drive profitable growth in the connected home lighting system business Key highlights Financial profile • Our offering consists of functional home luminaires Adj. EBITA -11.6% -9.5% -11.1% -5.9% 2.3% -8.1% 3.8% margin and connected home lighting • Philips Hue – the clear #1 in connected home
Slide 14: Cash engine Lamps – be the last company standing
Cash engine Lamps – be the last company standing Key highlights Financial profile • Global market leader with a broad conventional lamps and electronics portfolio Adj. EBITA 16.4% 15.9% 16.2% 20.2% 19.3% 21.1% 19.2% margin • Approx. twice as big as the next best competitor -9.5% -15.9% -16.0% -19.0%
Slide 15: Growing profit engines significantly improved profitability and FCF
Growing profit engines significantly improved profitability and FCF Adj. EBITA margin (%) Adj. EBITA contribution (in EUR m) Free Cash Flow (in EUR m) LED, Professional & Home LED, Professional & Home vs cash engine +180 bps 10.4% 559 8.6% 222 302 370 308 222 525 425 2018 2019 -87 -100 2018 2019 201
Slide 16: Market dynamics impacted top-line in FY19, solid improvements in margins
Market dynamics impacted top-line in FY19, solid improvements in margins Growing profit engines Cash engine LED CSG & Adj. EBITA margin (%) Professional CSG & Adj. EBITA margin (%) Home CSG & Adj. EBITA margin (%) Lamps FCF (in EUR m) CSG 0.4% -1.1% CSG -0.4% -1.7% CSG -3.8% 11.3% 3.8% 308 9.5% 10.0
Slide 17: Comparable indirect costs decreased by 11%
Comparable indirect costs decreased by 11%, adjusted for currencies and changes in scope Key observations as % of sales 31.4% +80 bps 32.2% • Underlying indirect cost reduction of EUR 56m In EURm 464 460 • Negative currency impact of EUR 5m 69 -56 Adj. R&D 67 • Impact from changes in scope of EUR 46
Slide 18: WoCa decreased as % of sales, mainly due to solid inventory management
WoCa decreased by 320 bps as % of sales, mainly due to solid inventory management, lower receivables and higher payables Working capital1 (in EURm & as % of sales) Inventories (in EURm & as % of sales) 15.9% 16.5% 9.4% 8.0% 13.6%2 13.3%3 6.0%2 6.1%3 503 588 388 470 999 1.030 874 1.019 -160 bps Q2 19
Slide 19: Signify has substantially improved its business and financial profile
Signify has substantially improved its business and financial profile Successful transition Substantial Transition to an asset- from conventional to improvement in Strong FCF generation light business model LED profitability Total LED sales Adjusted EBITA margin Gross capex as % of sales FCF as % of
Slide 20: COVID-19 update Q1 and actions
COVID-19 update Q1 and actions • Health & safety of employees our highest priority • Supported local partners and communities: donations of UV-C lamps and (solar) luminaires • Global manufacturing capacity restored to more than 80% • Broad range of mitigating actions to preserve profitability and ca
Slide 21: Outlook
Outlook Considering the uncertainty about the future course of the pandemic, and the length and depth of the impact on the global economy, Signify does not provide financial guidance at this point in time. 21
Slide 22: Substantial acquisitions made in 2019 to strengthen our business and financial profile
Substantial acquisitions made in 2019 to strengthen our business and financial profile • Extends Signify’s leadership in connected • Enables Signify to capture attractive lighting by stepping into the Wi-Fi based growth in agricultural lighting smart lighting market • Closed Q2 2019 • Closed Q2 2019
Slide 23: Integration Cooper Lighting well underway, on track to achieve cost synergies
Integration Cooper Lighting well underway, on track to achieve cost synergies Cooper Lighting acquisition successfully completed on March 2, 2020 • Strengthens Signify’s market position • Better positions us to capture growth in the North American lighting market • Together, we’ll drive innovation a
Slide 24: Adaptation of business structure to strengthen customer centricity
Adaptation of business structure to strengthen customer centricity • Adapt the business structure to enable: • Stronger customer focus • Enhanced specialization • Increased execution speed • Consolidation of 4 BGs to 3 divisions • Focus our business around our customers and create one global operati
Slide 25: Acquisition of Cooper Lighting Solutions
Acquisition of Cooper Lighting Solutions 25
Slide 26: Transaction highlights
Transaction highlights Key terms • Acquisition of Cooper Lighting Solutions from Eaton for USD 1.4bn (EUR 1.3bn) in cash • Transaction fully funded by debt, with committed bridge financing in place • Intention to replace the bridge loan and the existing term loan debt obtained at IPO Financing with
Slide 27: A strategic and value creative transaction
A strategic and value creative transaction 1 2 3 Clear strategic fit Significant value creation Beneficial to all stakeholders Improved market positions, with increased innovation Disciplined acquisition with Customers, agents, power and more competitive substantial cost synergies employees and shar
Slide 28: A strategic transaction to strengthen our position in the North American professional lighting market
A strategic transaction to strengthen our position in the North American professional lighting market Together, the two businesses will be better positioned to benefit from the growing USD 12bn professional lighting market in North America Expand our position in the attractive North American lightin
Slide 29: North America is a very attractive market for lighting
North America is a very attractive market for lighting Top 3 lighting markets (USD bn) Highlights • World’s largest lighting market, including for 23 Professional • Leading market for Systems & Services 18 11 • Front runner in innovation 15 9 8 12 9 6 North America Europe Greater China Professional
Slide 30: Cooper Lighting is a leading professional lighting player
Cooper Lighting is a leading professional lighting player Key facts & 2019 figures(1) Sales: EUR 1.5bn Headquarters: Peachtree City, GA 85% LED-based Adjusted EBITA: EUR 150m 11 manufacturing sites 10.2% margin Reported EBITA: EUR 165m ~5,100 employees 11.2% margin Sales breakdown Key brands RoW By
Slide 31: Cooper Lighting brings strong capabilities in LED and connected lighting
Cooper Lighting brings strong capabilities in LED and connected lighting The breadth and depth of Cooper Lighting’s product portfolio is among the best in the industry Connected & Recessed Ambient Industrial Outdoor Controls Brands Utility Site Downlight Street Sensors High Bay Recessed Products Sur
Slide 32: A strong and diverse go-to-market model in North America
A strong and diverse go-to-market model in North America Cooper Lighting’s go-to-market setup • Strong agent network (125+ agents) Agents strategically located • Average tenure of >20 years • Solid position with major distributors Distributors carrying broad portfolio • Dedicated team with direct Sp
Slide 33: An attractive transaction with substantial cost synergy opportunity
An attractive transaction with substantial cost synergy opportunity Attractive transaction Significant value creation Enterprise Value of USD 1.3bn (approx. EUR 1.2bn) net of Substantial cost synergies of more than USD 60 million per ✓ ✓ the present value of future tax benefits(1) year, largely to b
Slide 34: Tangible and well-identified synergies, largely achieved in the first three years
Tangible and well-identified synergies, to be largely achieved in the first three years Type of cost synergies Significant value creation potential Bill of ✓ Negotiation, supplier consolidation and product re-engineering materials Collaborative implementation of manufacturing standards & Supply chai
Slide 35: Integration plan designed to ensure commercial success while capturing synergies
Integration plan designed to ensure commercial success of both businesses while rapidly capturing synergies Integration plan Sales and • Maintain separate agent networks, brand portfolios, marketing teams marketing • Keep sales momentum intact and avoid disruption for customers, agents and distribut
Slide 36: Improving business mix and increasing presence in North America
Improving business mix and increasing presence in North America Signify1 Signify + Cooper Lighting1 LED LED 25% 30% Professional Professional 43% 53% Improving EUR 6.2bn EUR 7.7bn Lamps business mix 15% Lamps 19% Home Home 7% 8% Global businesses 6% of which Global businesses 5% of which US US Ameri
Slide 37: We intend to maintain a robust capital structure and will prioritize deleveraging
We intend to maintain a robust capital structure and will prioritize future deleveraging to support our commitment to an investment grade credit rating We will prioritize deleveraging in the coming years aiming to drive down Net debt / EBITDA trajectory net leverage ratio from around 2.7x at the end
Slide 38: Notes
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Slide 39: Notes
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Slide 40: Notes
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