In this Research Note, we examine the professional and public lighting business of Fagerhult Group, based on their 2021 Annual Report, Q1 2022 financial results, investor presentations, growth strategy and M&A.
Fagerhult Group’s history began in 1945 as a family business in Fagerhult, Sweden. Today, this Nasdaq listed manufacturer of professional lighting solutions based in Habo, Sweden, has operations in 28 countries, 13 sales companies located around Europe and 4,700 employees. Their product portfolio encompasses 13 lighting brands in four business areas (Collection, Premium, Professional and Infrastructure) with a focus on office, education, healthcare, retail and outdoor applications.
During 2021 the Group began to recover from the significant negative impacts of the pandemic with net sales of SEK 7,088 million (USD 705.9 million). 79% of sales originate in Europe. Delivering a solid 13.0% growth in organic order intake offset the 12.3% decline in 2020 and profitability recovered well with an operating margin of 10.0%.
As a response to the growing interest in smart connected lighting solutions, Fagerhult has chosen to coordinate initiatives in connectivity at the Group level to allow all of their companies to leverage this technological development and know-how. Two companies in the Group focus on connectivity solutions. The foundation for both of these solutions is to adapt lighting based on movement, which leads to significant energy savings.
- Organic Response, which develops connected lighting solutions for indoor environments such as schools, offices and hospitals. Fagerhult acquired the Intellectual Property Rights (IPR) and assets of Organic Response, a Melbourne, Australia based startup which went into administration in 2017.
- Seneco, a Danish lighting connectivity company founded in 2010 which has developed the Citygrid connectivity technology for outdoor street lighting. Fagerhult Group acquired the remaining 80% shares in Seneco A/S in April 2021, having previously acquired a 20% stake in 2017. Most of Seneco's installations are found in Denmark and adjacent European markets.
Fagerhult 2021 Annual Report highlighted that customer demand for connected solutions has continued to grow.
During the year, the number of installed sensor nodes from Organic Response grew by 29% compared to the previous year. In total the installed base of the latest generation of sensors is close to 200 000 units.
One example of a use case based on the Organic Response solution is the partnership with Sony’s smart solution, Nimway. Fagerhult has packaged light control and navigation for a connected workplace utilizing Organic Response’s built-in sensors for indoor positioning.
The Nimway system can help employees to find the best way through the premises, to book conference rooms or find out where their colleagues are located. The collaboration with Sony has initially been launched in the Nordic market, with plans to introduce the concept globally.
The company reported in Q1 2022 an increasing ‘pull’ from the market for connected Organic Response solutions and an expansion across the Group’s indoor brands. In Sweden, there are a growing number of new opportunities with several leading real estate companies and in Italy they are undertaking a pilot project with a leading financial institution.
Fagerhult confirms the Memoori view that the connected lighting market remains undeveloped, due in part to inadequate knowledge. Education is required, internally and externally, about connectivity and how it can enable new functions while reducing energy consumption and environmental impact.
This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.