Signify Nv · EURONEXT:LIGHT
Signify Nv — Shareholder Meeting (May 2020)
74 slides from Signify Nv's shareholder meeting presentation, May 2020
Slide 1: Annual General Meeting of Shareholders
Annual General Meeting of Shareholders
Slide 2: 1. Presentation by CEO Eric Rondolat
1. Presentation by CEO Eric Rondolat 2
Slide 3: Full year 2019
Full year 2019 A year of strengthening our industry leadership • Increased our LED-based sales to 78% (Q4 18: 71%) • Increased connected light points to 56m (Q4 18: 44m) • Total CSG -4.6%; LED-based comparable sales +1.4% • Lowered indirect cost base by EUR 125m • Operational profitability increased
Slide 4: Brighter lives, better world
Brighter lives, better world Sustainable revenues and Sustainable operations 82.5% sustainable 99% sustainable supply revenues chain (2020 target 90%) (2020 target 80%) On track for carbon neutrality in 2020 2017, 2018, 2019 #1 Industry leader, ‘Electrical Components and ` Equipment’ category, Dow J
Slide 5: Sound progress made on our strategic priorities in 2019
Sound progress made on our strategic priorities in 2019 Strategic priorities Proof points in 2019 Create segmented and differentiated LED offers to • Increased LED lighting share from 71% to 78% of total sales increase our share Drive systems growth to increase our connected • Installed light points
Slide 6: Signify is the world leader in lighting
Signify is the world leader in lighting We provide high-quality energy efficient lighting products, systems and services Light sources Luminaires Systems and Services No. 1 €6.2bn 4.5% No. 1 Connected, LED, sales in 2019, of sales reinvested Industry Leader Conventional ~ 75% professional in R&D Dow
Slide 7: We are continuously transforming our business
We are continuously transforming our business Transition from conventional to Development of Adj. EBITA margin LED-based sales (in % of total sales) 10.4% 10.1% 22% 9.6% Conventional 8.9% 7.3% 78% 6.8% 6.4% 4.7% 78% LED 22% 2012 2019 2012 2013 2014 2015 2016 2017 2018 2019 7
Slide 8: First quarter 2020
First quarter 2020 • Installed base of connected light points increased to 60m in Q1 2020 (Q4 19: 56m) • Adjusted indirect costs decreased by EUR 56m, or -11.1% • Improved Adjusted EBITA margin by 10 bps to 7.9%, with a neutral effect from currencies, despite 15.3% decrease in CSG • Doubled free cas
Slide 9: Completed acquisition of Cooper Lighting Solutions
Completed acquisition of Cooper Lighting Solutions • Acquired Cooper Lighting for USD 1.4bn on a cash and debt-free basis • Provides scale and operational efficiencies to make our offerings even more competitive • In 2019 Cooper generated EUR 1.5bn of sales, of which 84% LED-based • An adjusted EBIT
Slide 10: COVID-19 update Q1 and actions
COVID-19 update Q1 and actions Employee health and safety is our highest priority • Activated global and local crisis response teams • Restored global manufacturing capacity to more than 80% • Took broad range of mitigating actions to preserve profitability and cash flow • Now accelerating and exten
Slide 11: Outlook 2020
Outlook 2020 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. 11 Pune, India Aysén, Chile
Slide 12: Six platforms for growth
Six platforms for growth Professional systems Consumer systems Agriculture Solar 3D Printing LiFi
Slide 13: Growth platform: Professional systems
Growth platform: Professional systems More than 2,000 Interact City projects in 58 countries since 2012 13
Slide 14: Growth platform: Consumer systems
Growth platform: Consumer systems Release of Philips Hue Play HDMI Sync Box and Philips Hue Bluetooth expands range of features for users 14
Slide 15: Growth platform: Agriculture
Growth platform: Agriculture 150+ recipes for horticultural light 100+ sites for aquaculture lighting 15
Slide 16: Growth platform: Solar
Growth platform: Solar Expanded to new markets in Europe, Latin America and the Pacific 16
Slide 17: Growth platform: 3D Printing
Growth platform: 3D Printing Already printed 250k luminaires, rapid growth expected 17
Slide 18: Growth platform: LiFi
Growth platform: LiFi 100+ pilots worldwide; continually expanding into new segments 18
Slide 19: Thank you
Thank you ®ignify
Slide 20: 2. Remuneration report 2019
2. Remuneration report 2019 20
Slide 21: Remuneration Board of Management 2019
Remuneration Board of Management 2019 Board of Base Salary Annual (Cash) Incentive Long-term Equity-based Management 2019 1) (% of Base Salary) Incentive at target (% of Base Salary) 2) Min. Target Max. E.H.E. Rondolat € 871,000 0 80 160 100 S.L.A. Rougeot € 570,000 0 60 120 80 C.L. van Schooten € 5
Slide 22: Annual Incentive 2019 Long-term Incentive 2019
Annual Incentive 2019 Long-term Incentive 2019 The Annual Incentive 2019 consists of two major Long-term Incentive 2019 performance measures: components: 1 Financial • CSG - Comparable Sales Growth Component (ext. reported) • Adj. EBITA - Adjusted Earnings Three Before Interest, Tax and performance
Slide 23: Annual Incentive Realization 2019
Annual Incentive Realization 2019 on-target realized % realized % of of annual annual annual base incentive Performance Measures Weighting Realized % base (2019) (in EUR) Comparable Sales Growth 30% 0% Adj. EBITA 30% 50% E.H.E. Rondolat Free Cash Flow 20% 200% Team and individual performance measure
Slide 24: 2017 Long-Term Incentive grant performance achievement and vesting levels
2017 Long-Term Incentive grant performance achievement and vesting levels Achievement Weighting Vesting level TSR 100% 40% 40% Free Cash Flow 80% 40% 32% Sustainability 200% 20% 40% Total 112% 24
Slide 25: Remuneration Supervisory Board 2019
Remuneration Supervisory Board 2019 Supervisory Board Membership Committees Other compensation1) Total A.P.M. van der Poel € 110,000 € 25,000 € 2,500 € 137,500 G. van der Aast € 85,000 € 28,000 € - € 113,000 E. Blok € 75,000 € 20,500 € - € 95,500 R.S. Lane € 75,000 € 17,500 € 29,189 € 121,689 J. Lee
Slide 26: 3. Explanation of the policy on additions to reserves and dividends
3. Explanation of the policy on additions to reserves and dividends 26
Slide 27: Signify continues to exercise strict financial discipline in the generation and use of cash
Signify continues to exercise strict financial discipline in the generation and use of cash Cash available Cash usage • Free cash flow generation • Continue to pay a stable to increased dividend per share* • Signify’s focus remains on maintaining a robust capital structure and on its policy to prior
Slide 28: Signify’s Net Debt increased mainly due to the (non-cash) impact of IFRS16 on leases
Signify’s Net Debt increased mainly due to the (non-cash) impact of IFRS16 on leases Characteristics at the end of 2019 Net debt development in 2019 (in EUR million) • Total cash of EUR 847 million 55 • Debt of EUR 740 million and USD 500 million as 618 589 per Refinancing Term Loans with 3- and 5-y
Slide 29: We have subsequently restructured our core debt profile
We have subsequently restructured our core debt profile IPO term loans 31st Dec 2019 Key comments 1.186 As at 31st December 2019: 446 ▪ Our IPO debt was structured as EUR 740m and USD 500m and was maturing in May 2021 740 ▪ In addition we had an unutilized EUR 500m RCF in place maturing May 2021 202
Slide 30: 4. Financial statements 2019 5. Discharge members of the Board of Management and the Supervisory Board
4. Financial statements 2019 5. Discharge members of the Board of Management and the Supervisory Board 30
Slide 31: Triodos Investment Management, also representing Eumedion (Triodos/Eumedion)
Triodos Investment Management, also representing Eumedion (Triodos/Eumedion) 1. The closure of the Cooper acquisition unfortunately coincided with global outbreak of the COVID-19 virus. While the increased leverage following the acquisition looked manageable in the pre-COVID-19 world, it could bring
Slide 32: Triodos/Eumedion
Triodos/Eumedion 2. Secondly, as a result of the higher leverage, it may be more difficult to obtain additional liquidity. What’s your take on this (both the need for potential additional liquidity and access to it)? 32
Slide 33: Vereniging van Effectenbezitters (VEB)
Vereniging van Effectenbezitters (VEB) 3. Has Signify performed scenarios and stress-tests as a result of the coronavirus- pandemic? If so, what is the expected impact on adjusted EBITA, free cash flow, liquidity, and solvability? 33
Slide 34: VEB
VEB 4. Net debt amounts to 1,8 billion euros, or 2.7x EBITDA. Signify needs to maintain a net leverage ratio of no higher than 3.5x (or up to 4x in the 12 months after acquiring Cooper). a. Are you worried that Signify might breach its bank covenants given the deterioration in EBITDA? b. Would in a
Slide 35: VEB
VEB 5. The valuation of goodwill is a key audit matter. The key assumptions for the Professional- segment were downwardly adjusted (initial, extrapolation and terminal value period). These adjustments however did not result in an impairment of goodwill. a. Can you explain why the adjustments did not
Slide 36: VEB
VEB 6. Signify has a number of defined-benefit pension plan (Germany, United States and other countries). As a consequence of increasing liabilities and lower assets returns due to market turmoil, the funding status is likely deteriorating. Can you update shareholders on the expected cash outflows g
Slide 37: APG Asset Management
APG Asset Management 7. Cooper acquisition: a) Explanation of the Net Debt to EBITDA ratio at closing of x 2.0 which was communicated on October 15th 2019 and the Net Debt to EBITDA ratio of >2.7 after the 1Q20 results. What explains the large deterioration? b) With the Net Debt to EBITDA ratio targ
Slide 38: Triodos/Eumedion
Triodos/Eumedion 8. It has been suggested by a competitor that the Cooper acquisition will create unrest among the agent networks in the US. This is because these agents fear that Signify will in the end consolidate the agent network. As a result, it has been said that employees from Cooper and Sign
Slide 39: VEB
VEB 9. Signify commented that the acquisition of Cooper Lighting Solutions would substantially strengthen its position in the attractive U.S. market. Are you able to share some additional details on the market position (for example market share) of Signify in comparison to its competitors in the U.S
Slide 40: APG Asset Management
APG Asset Management 10. Klite acquisition: a) We find this acquisition was not well communicated despite the fact that it added some 5.500-6,000 employees to the company, around 17-20% more to the group at that moment. Also the fact that Klite is a large supplier to Signify, some 40% of its sales,
Slide 41: VEB
VEB 11. Signify has stopped or postponed certain R&D expenses. Last year the company already spent less on R&D (283 versus 312 million euro). Innovation capabilities and investments in R&D are an important element through which Signify aims to differentiate itself from competitors. a. Is Signify sti
Slide 42: VEB
VEB 12. Signify’s Lamps-segment continues to see comparable sales growth decline by 20 percent or more per year (FY:2020 potentially over 30 percent). With its ‘last company standing’ strategy Signify continues to rationalize the manufacturing footprint and reduce operational costs. How much further
Slide 43: VEB
VEB 13. How likely is it that the Signify Home-segment could continue to deliver strong growth and eventually become a meaningful profit driver for the group? 43
Slide 44: VEB
VEB 14. Signify is protecting its liquidity position by withdrawing its dividend proposal, curtailing capex, while the Supervisory Board and leadership team took a 20 percent salary reduction for Q2. a. 85 percent of Signify employees voluntarily supported a 20 percent working time reduction and pro
Slide 45: Triodos/Eumedion
Triodos/Eumedion 15. We learned from the publication of your 1Q20 results that the COVID-19 virus has led to both employees and the board of management taking a (temporary) cut in pay. We appreciate this gesture, but also have several questions about this: a. How will you decide about potential prol
Slide 46: Triodos/Eumedion
Triodos/Eumedion 16. The report from the audit committee is quite similar to last year, so we would welcome more disclosure about the insights from its activities. For 2019 specifically, we’d like to know the key findings from the evaluation of the functioning of the external auditor. 46
Slide 47: VEB
VEB 17. During fiscal year 2019 the Supervisory Board had in-depth sessions to review and discuss developments in specific markets such as the Kingdom of Saudi Arabia and India. Can you share some background on these specific discussions in Saudi Arabia and India? 47
Slide 48: VEB
VEB 18. In previous years following an internal review, weaknesses were identified with respect to the operations in Saudi Arabia. In 2017 the auditor even included a key audit matter on the Saudi operations. Are there any improvements yet to be made in this area? What remediations were effectuated
Slide 49: Vereniging van Beleggers voor Duurzame Ontwikkeling (VBDO)
Vereniging van Beleggers voor Duurzame Ontwikkeling (VBDO) 19. VBDO would like to compliment Signify as being one of the first companies committing to 1.5°C-aligned emission reduction targets, and also with its efforts to reduce its own carbon footprint and the carbon footprint of its suppliers as w
Slide 50: VBDO
VBDO 20. VBDO recognises Signify as a best practice in supply chain management and compliments the company on transparently disclosing information to its stakeholders. Additionally, VBDO is pleased to read that Signify reached its set target, by maintaining a Supplier Sustainability Performance (99%
Slide 51: VBDO
VBDO 21. Signify created a Diversity and Inclusion Board to discuss current policies as well as to implement new initiatives and review progress. Signify recognises the global need for a better balance in diversity in two specific areas: generational diversity and gender diversity (AR, 139). The imp
Slide 52: VEB: “General points of attention in times of crisis”
VEB: “General points of attention in times of crisis” 1. Waive variable remuneration 2. Extra review accountant 3. Decrease number of board positions 4. Climate responsibilities 52
Slide 53: Triodos/Eumedion
Triodos/Eumedion In general, we continue to be pleased with the extensiveness of reporting, both from a financial and sustainability perspective. Regarding sustainability specifically, we are happy to read that your carbon footprint continues to decline and that you’re also taking an active role in
Slide 54: 6. Composition of the Board of Management
6. Composition of the Board of Management 54
Slide 55: 7. Composition of the Supervisory Board
7. Composition of the Supervisory Board 55
Slide 56: 8. Remuneration policies Board of Management and Supervisory Board
8. Remuneration policies Board of Management and Supervisory Board 56
Slide 57: Proposed remuneration policy for the Board of Management
Proposed remuneration policy for the Board of Management Labor market peer group Companies in the labor market peer group Aalberts BAM KPN Osram Rheinmetall Group AkzoNobel Boskalis Legrand Prysmian Siemens Gamesa ASML DSM Nexans Rexel 57
Slide 58: Proposed remuneration policy for the Board of Management
Proposed remuneration policy for the Board of Management Long-Term Incentive Current policy: Proposed new policy: Performance measures 25% 25% Relative TSR Free Cash Flow Sustainability ROCE 25% 25% Performance-incentive zone for TSR in % of grant value 58
Slide 59: Proposed Remuneration policy for the Supervisory Board
Proposed Remuneration policy for the Supervisory Board SB fixed annual fee In EUR Chairman 110,000 Vice Chairman 85,000 Member 75,000 Committee fees Audit Committee Chairman 22,500 Member 13,000 Remuneration Committee Chairman 15,000 Member 10,000 Nomination Committee Chairman 15,000 Member 7,500 Tr
Slide 60: Remuneration Board of Management - Outlook 2020
Remuneration Board of Management - Outlook 2020 60
Slide 61: Overview of Total Direct Compensation for the Board of Management
Overview of Total Direct Compensation for the Board of Management Outlook 2020 total direct compensation for members of the Board of Management In EUR Base Salary Base Salary Short-Term Long-Term Total Direct Jan 1, 2020 April 1, 2020 Incentive 3) Incentive 3) Compensation 3) (+2.5%) (+1%) E.H.E. Ro
Slide 62: VEB
VEB 22. Is the Supervisory Board considering using its discretionary power to further reduce or slash all variable payment components for 2020, for instance, because the pay-for- performance relation is weaker than ever in the current turbulence? 62
Slide 63: VEB
VEB 23. The labor market peer group among others consists of a number of Dutch companies. Why has Signify chosen companies like ASML, Aalberts, AkzoNobel, DSM, and KPN, that are active in vastly different sectors and on average a lot larger? Why did Signify not add more Dutch Midcap companies that a
Slide 64: VEB
VEB 24. Signify proposes to add the return on capital employed to its financial measures in the long- term incentive plan (LTIP). a. Will Signify also report on as well as publish a detailed calculation of its return on capital employed (RoCE) to give investors more insight in its realized returns g
Slide 65: VEB
VEB 25. Signify announced several acquisitions in 2019. How does the Supervisory Board take this into account in the remuneration policy? For example, regarding the realization of expected cost synergies? 65
Slide 66: VEB
VEB 26. With the acquisition of Cooper Lighting Solutions, the net debt level increased significantly (2.7x EBITDA). Signify aims to reduce the net leverage ratio to below 1x net debt/EBITDA within three years. Why hasn’t the Supervisory Board chosen to explicitly include the leverage ratio as a sep
Slide 67: Triodos/Eumedion
Triodos/Eumedion We welcome the increased weight of sustainability in the targets for long-term equity-based incentives and are also pleased to see that you will include return on invested capital as a (potential) target. 67
Slide 68: 9. Re-appointment of the external auditor of the company
9. Re-appointment of the external auditor of the company 68
Slide 69: 10. Authorizations of the Board of Management to issue shares or grant rights
10. Authorizations of the Board of Management to (a) issue shares or grant rights to acquire shares, and (b) restrict or exclude pre-emptive rights 69
Slide 70: 11. Authorization of the Board of Management to acquire shares in the company
11. Authorization of the Board of Management to acquire shares in the company 70
Slide 71: 12. Cancellation of shares
12. Cancellation of shares 71
Slide 72: 13. Any other business / additional questions
13. Any other business / additional questions 72
Slide 73: Voting results
73 Voting results ®ignify
Slide 74: Signify
Sianty