In this Research Note, we examine the lighting business of Signify, based on their 2021 annual results, investor presentations and lighting technology-related activities throughout 2021.
Signify, headquartered in Eindhoven, the Netherlands, is the global market leader in energy-efficient lighting systems and services. The business, employing 38,000 people in 74 countries, reported 2021 sales of EUR 6,860 million and operational profitability of 11.6% on 28th January 2022.
Full year sales increased by 5.5% while comparable sales grew by 3.8% in 2021. Despite the significant cost increases of raw materials, components, and logistics, the business expanded their operational profit margin for the eighth consecutive year, with an improvement of 90 basis points. This was driven by the strong performance of their two digital business units, which combined now account for more than 80% of their sales, profit and cash flow. These improved results follow two challenging years in 2019 and 2020 with declining sales on a comparable basis, due to weak market conditions caused by the COVID-19 pandemic.
Over the past few years, Signify has strengthened its position as the lighting industry transitioned from conventional to LED and to connected lighting. Signify's installed base of connected light points increased from 77 million in 2020 to 96 million in 2021 while connected lighting sales grew by 21% to €1.4 billion, driven by demand for their consumer brands, Philips Hue and WiZ and their professional systems brand, Interact Office.
Signify’s four growth platforms – agricultural lighting, solar lighting, UV-C disinfection and 3D printing, grew by 19% in 2021 to EUR 326 million. A significant contribution to their growth in 2021 was the accelerated demand for UV-C disinfection technology and in 2022 the forthcoming acquisition of Fluence, announced in December 2021 for $272 million will further strengthen their agricultural lighting platform. Connected lighting and growth platform sales increased to EUR 1.7 billion in 2021, which together represents 25% of overall sales.
The Digital Solutions division accounted for 51% of group revenues in 2021, the business mix having improved from 42% in 2019 with the acquisition of Cooper Lighting in 2020 which strengthened Signify’s position in the attractive North American lighting market. Professional lighting products, systems and services offered by Digital Solutions are used in multiple market segments such as offices, commercial buildings, shops, hospitality, industry and outdoor environments including smart cities. Connected-based sales represented 22% of total sales.
An important acquisition in the smart cities market was the purchase of Telensa, a Cambridge UK-based provider of connected street lighting solutions. Telensa, founded in 2005, employs 58 people with sales amounting to approximately GBP 11 million for the year ending March 2021. With Telensa, Signify adds a narrow-band and TALQ-compliant solution to its portfolio. This will enable Signify Digital Solutions business to service a broader group of customers, by making smart city infrastructure affordable to small and mid-sized cities utilizing the unlicensed radio space. To date, Telensa has sold approximately 100 networks connecting over 2 million light points in more than 400 cities worldwide.
The Digital Products Division accounted for 36% of group revenues. Sales increased by 7.2% to EUR 2,452 million with a comparable sales growth of 8.8%. This performance was driven by strong demand for connected home lighting and improving professional sales, despite supply chain constraints and component shortages. Connected-based sales represented 24% of total sales (2020: 21%).
A significant partnership was announced in December 2020 when Honeywell and Signify announced a strategic alliance to deploy integrated, smart lighting solutions for commercial buildings. Together, the companies aim to improve the occupant experience – focusing on productivity and well-being – and to reduce energy consumption.
The collaboration integrates Signify’s Interact connected lighting system and software, and its UV-C disinfection lighting, with Honeywell Building Management Systems and the Honeywell Forge enterprise performance management platform. The combined offerings manage energy consumption while factoring in occupancy along with air quality indicators such as temperature and humidity. Signify’s lighting solutions complement Honeywell’s Healthy Buildings air quality solutions beginning in early 2021, and can be controlled, measured and monitored via the Healthy Buildings dashboard to understand air and surface cleaning compliance and metrics.
Honeywell and Signify have deployed integrated offerings at OPTIMAX Eye Specialists, a network of eye specialist clinics in Malaysia, to help the organization improve its air quality and surface disinfection efforts. The partners are also currently deploying the integrated solutions, including Signify's Philips UV-C disinfection upper air luminaires, in several Honeywell global offices. A recent case study highlighted the deployment of Interact Office connected lighting solutions at Honeywell offices in Katowice, Poland.
With limited market adoption of lighting-based smart building systems in commercial real estate to date, these results and the strategic alliance of two major building technology players may be the impetus to propel the deployment of connected lighting solutions beyond illumination.
This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.