Eric Rondolat’s 2019 CEO message

Thanks to our continued dedication to simplification and cost reduction measures, our operational profitability continues to improve, and free cash flow is strong. Exciting developments in our growth platforms – connected systems, IoT platform services, horticulture, solar, and LiFi – continue to show that we’re leading the industry toward a new era. All of this, amid some challenging market conditions, increase my confidence that we’re on the right track.
 

We announced several acquisitions this year: Klite in China for private and branded LED labels; WiZ in Hong Kong for WiFi-based connected lighting; US-based Once Inc. and iLOX in Germany for animal-centric lighting; and Cooper Lighting Solutions in the US for professional lighting in North America. These strategically sound moves contribute to differentiating us structurally, while enhancing our ability to serve our customers.

We continue to execute against our strategic priorities, transforming our industry and building on our heritage.
 

• We again increased our market share in conventional lamps, sustaining a high level of profitability, benefiting from our ‘last company standing’ strategy
• Our LED sales increased by 6% to 78% of our total sales by the end of the year
• Our connected install base surpassed more than 56 million light points globally through our professional and consumer lighting offerings
• We installed 12 million connected light points, bringing the total to 56 million connected light points globally
• Our continuous innovation and responsiveness to customer needs is demonstrated by the launch of BrightSites smart poles and the Philips Hue HDMI SyncBox, as well as the continued enhancements to our LiFi offering (to name but a few)
• Our transformation program Horizon is speeding up our execution, and improving our top line, profitability and cash, and boosting our organizational health

We’ve taken several steps this year which illustrate our focus on strategic growth areas and attractive markets. We expanded our connected lighting offering through the acquisition of WiZ Connected, allowing us to extend our leadership in the smart home by stepping into the WiFi-based lighting market. This perfectly complements Signify’s existing offers and will help us to continue to deliver an experience rich in light and intuitive in use for our customers.
 

As part of our commitment to agricultural lighting, we increased our exposure to the promising market of animal-centric lighting by acquiring experts Once Inc. and iLOX. These tailormade lighting systems improve the quality of life for livestock, which leads to healthier animals and enhanced production for the farmer.
 

By acquiring a majority stake in Klite, we secured an independent supply chain in China and strengthened our position in the fast-growing private and branded label segments. This move strengthens our position in the supply chain of LED lamps and luminaires, and the enhanced distribution scale will help us deliver cost-efficient innovations to customers faster, including connected lighting offerings.

In 2019 we increased our profitability for the sixth consecutive year, which resulted in an improvement of the adjusted EBITA margin of 400 basis points since 2013, as well as the highest level of free cash flow since our IPO. The profit and cash contribution of the growing profit engines increased in 2019 and now stands at more than twice the contribution of Lamps, as we continue to shift from conventional lamps to lighting products, systems and services. This strong performance has been achieved in a challenging macro-environment; lower activity in several markets – including India, Europe and the US.
 

These positive indicators show the success of our strategy, even in the face of continued challenging market conditions. I’m confident that our relentless focus on our growing profit engines and new growth platforms will further strengthen our market leadership and progressively improve our growth profile.