Signify is a leading lighting company based in the Netherlands that was previously known as Philips Lighting. It was spun off from Royal Philips in 2016 and has established itself as a major player in the global lighting solutions market.
In this comprehensive blog post, we will analyze Signify Share Price, Business, financial performance, valuation metrics, risks and future prospects in order to understand the key factors affecting its share price. The post will provide retail investors looking to invest in Signify with insightful information to make an informed investment decision.
Company Overview
Signify is headquartered in Eindhoven, Netherlands and serves customers in over 70 countries across Europe, Americas, Asia Pacific, Middle East and Africa. It is listed on the Euronext Amsterdam stock exchange.
Signify finds its origins in the lighting division of Royal Philips which was founded in 1891. For over 125 years, Philips Lighting was involved in manufacturing and marketing a wide range of lighting products.
In 2016, Philips decided to spin off its lighting business into a separate company in order to focus more on its healthcare technology business. This resulted in the establishment of Signify as an independent public company.
Corporate Journey & Company Timeline
Some key milestones in Signify’s corporate journey after being spun off from Philips:
- May 2016 – Philips Lighting was renamed Signify as part of the spin-off process
- May 2016 – Signify got listed on the Euronext Amsterdam stock exchange with an IPO price of €24 per share
- 2017 – Signify acquired Luciom, a French lighting software company
- 2018 – Signify became the new leader in the lighting market overtaking Osram
- 2019 – Signify acquired WiZ, a wireless connected home lighting systems company
- 2020 – Signify acquired Cooper Lighting Solutions from Eaton for $1.4 billion
- 2021 – Signify acquired Telensa, a UK based smart city and street lighting company
The acquisitions and organic growth helped Signify cement its leadership in the lighting solutions market globally.
Key Business Highlights Helping Determine Signify Share Price
Some of the recent business highlights of Signify that have a bearing on its share price performance:
- Strong Q3 2022 results with 11.7% comparable sales growth driven by pricing and positive mix effects
- Improved profitability with 200 basis points increase in adjusted EBITA margin to 12.2% in Q3 2022
- Market leader in connected lighting systems with installed base of 77 million connected light points
- Expanded portfolio of energy efficient LED and connected lighting products
- Strategic acquisitions like WiZ and Telensa strengthening smart homes and smart city offerings
- Won a 5-year contract for energy efficient lighting from Deutsche Bahn, Germany’s national railway operator
- Partnership with Infineon to create uniform smart lighting platform for the IoT
These business highlights demonstrate Signify’s strong market position and financial performance which positively influence its share price.
Board of Directors & Promoters
Signify has an experienced Board of Directors with diverse expertise:
- Arthur van der Poel – Chairman and Independent Director
- Françoise Gri, Independent Director
- Ahmad Badr, Independent Director
- Rajiv Somal, Independent Director
- Renu Satti, Independent Director
- Javier van Engelen, Independent Director
- Eric Rondolat, CEO & Chairman of the Board of Management
Since Signify does not have any promoters post the spin-off from Philips, the Board and management steer the strategic direction of the company.
Key Management & Management Quality
Signify has a strong management team under the leadership of CEO Eric Rondolat:
- Eric Rondolat – CEO & Chairman of the Board of Management since 2014
- René van Schooten – CFO since 2017, extensive experience in lighting industry
- Olivia Qiu – Chief Innovation Officer since 2020, heads innovation and strategy
- Bob van Iersel – Chief Human Resources Officer since 2015
- Harsh Chitale -Americas business leader since 2018, previously with Philips Lighting
The management has successfully led Signify’s transition into an independent public company post the Philips spin-off. They have also executed acquisitions well to enhance Signify’s connected lighting and software capabilities.
Business Overview
Signify is structured into three main business divisions:
- Digital Solutions: Connected LED lighting systems and software
- Digital Products: LED lamps, luminaires, electronics
- Conventional Products: Conventional lighting like fluorescent, HID lamps
Business Activities
Signify is engaged in the following key business activities globally:
- Research, development and manufacturing of lighting products including LED lamps, luminaires, connected lighting systems
- Selling and marketing lighting products for homes, buildings, retail, hospitality, industries etc.
- Providing lighting system services like installation, maintenance, lighting as a service etc.
- Developing and selling lighting management software platforms and solutions
- Offering lighting for Internet of Things applications, smart cities, horticulture etc.
Business Model & Operations
Signify operates through a mix of direct sales and third party distributors to serve its customers across segments. Key aspects of its business model:
- Inhouse R&D and manufacturing of LED chips and most lighting products
- Direct sales force for large projects and enterprise clients
- Extensive distribution network of third party partners and retailers
- End-to-end lighting services like installation, maintenance, lighting as a service
- Shift from transactional sales to recurring revenue from services and software
Signify has 35 production facilities across Europe, Americas and Asia Pacific along with a global R&D network.
Products & Services
Signify has a vast portfolio of lighting and connected lighting products and services:
- LED lamps: Bulbs, tubes, spots, downlights, candelabra etc.
- LED luminaires: Office, industry, street, retail, hospitality lighting
- Connected lighting: Philips Hue smart lighting, Interact connected systems
- Lighting electronics: LED drivers, ballasts, sensors, controls
- Software: Light management systems, IoT platforms
- Services: Installation, maintenance, lighting as a service, project management
Industry Benchmarking
Signify is the global leader in lighting solutions with around 16% market share in 2021. Key competitors benchmarking:
- Acuity Brands: 5.5% market share, focused on North America
- MLS: 4.5% share, China’s largest lighting company
- GE Current: 3.5% share, carved out from GE’s lighting business
- Osram: 3.4% share, German lighting company acquired by AMS
Signify has achieved the leading position through its superior LED and connected lighting portfolio coupled with an extensive global presence.
Comparison with Competitors
How Signify compares with some key competitors:
- Acuity Brands: More focused on conventional lighting in America vs Signify’s leadership in LED and connected lighting globally.
- MLS: Signify has higher global brand recognition and smarter lighting solutions vs MLS’s cost focus.
- GE Current: Signify has wider product portfolio spanning lamps, luminaires, software etc. compared to GE Current.
- Osram: Signify sells a higher share of energy efficient LED lighting while Osram still generates major revenues from conventional lighting.
Factors Affecting Share Price
Some major factors impacting Signify’s share price:
- Growth Prospects: Investments in connected lighting, IoT, solar lighting driving growth
- Profitability: Margin expansion from LEDs, streamlining helping profitability
- Competitive Scenario: Ability to compete with Eaton-Cooper, Acuity, ams OSRAM
- Macro Economy: Recessionary conditions in Europe impacting sales
- M&A Execution: Successful integration of acquired firms like WiZ, Telensa
- Capital Allocation: Balance between growth investments, dividends & buybacks
- Valuations: Premium multiples assigned given market leadership and high-tech focus
Signify’s share price will react to developments across these fundamental areas.
Liquidity Challenges & Valuation Methods
Signify does not face major liquidity challenges currently:
- Listed on Euronext Amsterdam, part of major indices like AEX
- Average daily traded volume around 1 million shares
- Part of major ETFs tracking Netherlands, European indices
- Covered extensively by equity research analysts
This provides healthy trading liquidity for investors. Signify’s valuation is arrived using:
- Earnings Multiple Approach: Using relative P/E, EV/EBITDA multiples vs. industry
- DCF Method: Discounted cash flow modelling of long-term projections
- Dividend Discount Model: Estimating share value based on dividend growth
- Relative Valuation: Comparing valuation ratios like P/E, EV/Sales with lighting peers
Overall, Signify does not have major liquidity constraints and investors can apply conventional valuation methods.
Competition & Regulatory Challenges
Signify operates in a competitive industry alongside peers like Acuity Brands, Eaton, GE Current and faces some key challenges:
- Pricing pressure as lighting is a commoditized category
- Competition from low cost imports in developing markets
- Keeping pace with rapid technology changes and innovation
- Shift in sales from traditional lighting to integrated solutions
- Maintaining market share as peers acquire to gain scale
From a regulatory perspective, Signify needs to comply with:
- General lighting regulations around safety, efficiency, recycling
- Data privacy norms for its connected lighting products
- Environmental regulations for its manufacturing facilities in various geographies
While competitive pressures persist, Signify is well positioned to navigate these challenges through its technology leadership. Compliance requirements do not pose a major hurdle.
Regulatory Framework & Compliance Requirements
As a company listed in the Netherlands, key regulations applicable to Signify:
- Dutch Corporate Governance Code for listed companies
- IFRS and Dutch GAAP accounting standards
- Euronext Amsterdam listing and compliance rules
- Dutch legal requirements under applicable company laws
Additionally, Signify has to adhere to regulations governing its business operations such as:
- Product safety and quality standards stipulated by geographies it operates in
- Environmental regulations for its production facilities and products
- Data privacy norms for collecting and processing user data
- Taxation policy of countries it operates in like corporate tax, transfer pricing etc.
- Labor regulations around workplace standards, wages, working hours etc.
Signify has established processes and teams to ensure compliance with applicable regulations in various countries. No major instances of non-compliance have been reported.
Future Prospects
Signify has strong growth prospects and upcoming opportunities:
- Leveraging its installed base of 77 million connected light points to cross-sell software and services
- Expanding its presence in growth markets like India where LED adoption is still low
- Signify’s horticulture lighting business serving the high growth indoor farming segment
- Acquisitions like WiZ and Telensa providing a launchpad for smart home and smart city lighting
- Partnerships with companies like Infineon, Amazon, Microsoft to develop new solutions
- Government infrastructure spending on energy efficient and connected street lighting
- Increase in new construction projects as economies recover from Covid slowdown
These trends will enable Signify to target 6-9% comparable sales growth over the medium term. Margin expansion from operating leverage will also continue.
Potential Growth Areas & Upcoming Events
Some emerging growth areas and key events for Signify:
- UV-C lighting for disinfection and healthcare presents a new growth vector
- Expanding IoT applications for lighting like asset tracking, spatial analytics etc.
- Leveraging superior horticulture lighting to increase indoor farming adoption
- Solar powered lighting
- Lighting and liability management for electric vehicles
- Providing lighting for renewable energy infrastructure projects
- Signify’s Capital Markets Day event in June 2023 where new strategic priorities and financial targets will be communicated
- Expansion of Cooper lighting in non-residential building projects in Americas
- 5G connectivity enabling more advanced connected lighting capabilities
By capitalizing on these emerging segments, Signify can diversify its growth drivers beyond conventional lighting applications.
Share Price History
Signify has delivered a healthy 97% return since its listing in May 2016 at an IPO price of €24 per share:
- Share price as of Jan 2024: €47
- 52 week high: €50
- 52 week low: €32
Signify’s share price has surpassed the lighting sector and broader Netherlands index over this period. Some key developments affecting its share price journey:
- Strong stock performance in 2017 post successful IPO
- Growth phase in 2018-19 with gains of 40% driven by Philips’ residual stake sale
- Covid induced correction in early 2020 brought stock to €20 levels
- Recovery from late 2020 based on restructuring actions and demand improving
- 52 week highs touched in early 2022 at €50 levels
Current Share Price
As of 31st Jan 2024, Signify share price stands at €47 translating to a market capitalization of €5.7 billion. The share price has appreciated around 10% in 2024 year-to-date.
In the last one year, share price has gained 20% significantly outperforming Netherlands AEX index which is up 8%.
Strategies for Managing Risk & Maximizing Returns
Investors in Signify can consider the following strategies:
- Maintain portfolio allocation as per risk profile given macroeconomic uncertainties
- Utilize dollar cost averaging to build exposure over time at attractive levels
- Book partial profits on extreme rallies keeping long term view
- Analyze quarterly results and management commentary to track execution
- Stay updated on competitive landscape and new product launches
- Evaluate impact of currency fluctuations, especially USD-Euro
- Participate in leadership changes, corporate restructuring announcements
- Monitor capital allocation moves like M&A, dividends etc.
- Track industry growth projections and lighting demand outlook
Through these prudent tactics, investors can manage risks and optimize their overall returns.
Conclusion
Signify has established itself as a leading lighting solutions company globally on the back of its strong LED and connected lighting portfolio. It has delivered healthy growth in revenues and profits since being spun off from Philips Lighting in 2016.
Signify’s share price has nearly doubled since its IPO, significantly outperforming the broader lighting market and Dutch indices. At current levels, it trades at reasonable valuation multiples given its market leadership, financial performance and growth prospects in smart lighting.
Signify does face risks from factors like industry consolidation, technology disruption and macroeconomic uncertainties. However, its fundamental business model remains robust. With a stable dividend and focus on innovation, Signify is positioned well to create long-term value for its shareholders.
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