thorn brand - strategy update - zumtobel group · 2 2 a brief portrait of thorn ... strengthen...

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Thorn Brand - Strategy Update Capital Markets Day 2012

Martin Brandt, COO Zumtobel Group

April 18, 2012

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A brief portrait of Thorn Lighting People

Thorn is the oldest brand in the Zumtobel GroupFounded in 1928 in the UKAcquired by Zumtobel Group in 2000/01Lighting Segment consequently doubled in sizeComprehensive portfolio for indoor and outdoor lighting solutions in professional lightingToday: international brand with 2,587 employees

Strong challenges to overcomeThorn struggled for many years due to– Widespread organisation lacking common strategy,

leadership and product portfolio– Unclear brand positioning – Performance issuesMeasures initiated in Europe; further stabilization, focus on Asia (Far East) and turning towards profitable growth is next

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Distribution channel:

Direct sales: ~ 60% of sales

Wholesalers/distributors: ~ 40% of sales (thereof 50% OTC)

Thorn's target market has now been clearly defined Thorn brand positioning

Budget segment Performance segment Premium segment

"Luxury"PremiumHigh-endMid-endValue

OTC Specification

Simplified illustration

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Thorn has a brand emphasis on dependable performance Thorn brand positioning

BRAND ESSENCEDependablePerformance

Smart Solutions

CORE VALUES

Easy todeal with

FunctionalDesign

PerformanceSolutions

FlexibleModularity

BASIC VALUES

Caretaking

Expert

ExperiencedTrustworthy

Accountable

Reliable

Honest

Responsive

Professional

Global & LocalEngineering

Globally trusted supplier of both outdoor and indoor luminaires and integrated controls

Dependable Performance and smart solutions are key brand messages

Main customer groups:

M&E Consultants

Street and Urban Lighting Consultants

Main & Electrical Contractors

End Users

Wholesalers/distributors for OTC & project business to electrical contractors and installers

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Thorn holds strong position in UK, France, Northern Europe and Australia Market share analysis

1) CEE includes PL, CZ, SK, HU, CRO, SI, RO

RANK UK France Sweden Norway Denmark Benelux Switzer- land Germany Austria Italy Europe 10 CEE1)

Thorn 1 2 2 4 6 15 4 11

Zumtobel 6 10 9 2 2 3 1 5 2 6

Lighting Brands 1 2 2 4 5 2 2 3 1 3 1 3

Market position in European markets

Lighting Segment – global market shares in professional lighting (Zumtobel + Thorn)

Europe Asia Americas Australia/Oceania Africa

~9%

~1% ~0.5%

~16%

~1%

Majority relates to Thorn

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Majority of sales in Europe, but solid position in Far East and AUS/NZ Geographical scope of Thorn brand

Regional revenue distribution (Q1-Q3 2011/12)

The biggest markets for Thorn in Europe are France, UK and ScandinaviaBesides its core business in Europe Thorn has a solid market position in Asia, MENA and Australia/New ZealandVarious initiatives launched to significantly increase market share in Europe and expand in Far East and MENA

Far East

Europe

MENA

AUS/NZ

Other

~70%

~12%

~4%~12%

~2%

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Thorn covers indoor and outdoor applications including street lighting Thorn brand by application

Revenue distribution by application

Total Thorn revenue by application:Indoor lighting solutions accounts for >60%Outdoor lighting solutions account for 30% and comprise the only offer for street lighting solutions in the Zumtobel GroupSystems account for approx. 4%

Municipalities and other public customers account for approx. 40 % of revenues

Office

Industrial

EducationArt & CultureOther Indoor

Outdoor

Systems Commercial & TradeOther

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LED penetration also increases considerably in performance segment Thorn position in LED lighting

Thorn - LED revenue share

While premium segment is early adopter of new technology, Thorn also experiences increasing interest in LED from its customer baseLED share of total revenues amounted to 3.2% in 2010/11 and rose to 5.8 % in Q1-Q3 2011/12 (growth of ~150%)LED price premium in more price sensitive customer group limits penetrationOutdoor LED solutions with gaining importance

5.8 %

thereof> 50 % Outdoor< 50 % Indoor

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After restructuring Thorn in Europe, further stabilization and turning towards profitable growth is next on agenda Thorn brand strategy

Global organisational set-up

Strengthen sales network in mature as well as emerging markets

Further enhance product portfolio for global markets with an emphasis on LED and energy efficiency

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Global organisational set-up Historically lack of global structure with common strategy, leadership and portfolioGlobal matrix functions were established in May 2011 (e.g. product management, R&D)Management changes implemented (e.g. Asia)



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Strengthen sales network in mature as well as emerging marketsStrong focus on profitability in Europe led to increase in sales per headcountAdditions for Thorn brand were done mainly in emerging markets (> +20 employees in China)Selective further investments while focusing on reducing share of fixed costs


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Phase-out of old, low margin productsIncrease production efficiency (platform approach and complexity reduction)19% of sales from newly introduced productsImprove product portfolio for Asia (Far East)Focus selling approach on energy efficiency

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Solid growth mainly results from successful measures for Thorn Europe Lighting Segment – Revenue development

Lighting Segment

Thorn revenues account for less than 50% of Lighting Segment revenues

Revenue development below Lighting Segment average, but solid improvement in Europe:

Thorn Europe: Repositioning of brand, new product introduction, improvement of internal performance bear first fruits in 2011/12 so far

Thorn Asia (Far East): Development disappointing with growth below target

Strong dependence on third party productsLack of regional product fit and distribution channels

1) Reported EBIT adjusted for special effects

Revenues Q1-Q3 2011/12 EUR 712.4 million (plus 10.3%)Revenues Q1-Q3 2010/11 EUR 646.0 million

0

50

100

150

200

250

300

Q1 Q2 Q3 Q4

Revenues FY 2010/11 Revenues FY 2011/12

211.6236.1 228.8

205.7222.9

Revenues in EUR million+11.6%

252.7

+10.5% +8.7%

223.6

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Improving profitability in Europe, while Asia (Far East) turned weak Lighting Segment – EBIT development

Lighting Segment

Thorn brand is still lacking profitability, but with solid improvement:Turnaround of Thorn brand in Europe: After substantial loss in 2010/11 Thorn approaches break even in 2011/12 on successful restructuring and solid revenue growth

Improvement in product design (cost and quality driven)Sales approach focused on profitable growthStrict focus on fixed costsImprovement in performance towards customer (e.g. OTD rate, Quality)

Thorn Asia yields negative EBIT contribution in 2011/12 after a solid prior year

Adjusted EBIT

Adjusted EBIT FY 2010/11,Adjusted EBIT FY 2011/12 in EUR million

Adjusted EBIT FY 2010/11,Adjusted EBIT FY 2011/12 as a % of revenues

Adjusted EBIT Q1-Q3 2011/12 EUR 25.9 million (margin of 3.6%)Adjusted EBIT Q1-Q3 2010/11 EUR 25.4 million (margin of 3.9%)

-8

-4

0

4

8

12

16

20

24

28

32

Q1 Q2 Q3 Q4-2%

0%

2%

4%

6%

8%

8.610.8

16.4

0.41.6

4.6%

4.1%

0.2% 0.7%

7.6%

-1.8%

-4.1

7.2%

19.3

Impairment of development costs: EUR 0.3mWrite-down of inventory: EUR 2.1m

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Excursion: Asia (Far East) Lighting Segment strategy

Major sales contribution of revenues in Asia (excl. MENA) is attributable to Thorn

Brand positioning

Thorn is perceived as high-end European brand with a well established reputation in many markets (activities in Asia since 1980s)Zumtobel is represented through international projects mainly in 1st tier cities

Production footprint

Tianjin (Thorn Outdoor), Guangzhou (Thorn Indoor)Third party products fill existing gaps in own product offerings

Lighting Brands Asia (Far East): revenues Q1-Q3 EUR 45 million (> 50% in China)

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Strategic measures

Excursion: Asia (Far East) Lighting Segment strategy

Expansion of local sales forceIntensified training of sales force to convey local approachSales approach focus towards 2nd and 3rd tier cities Adjustment of local product portfolio: clear insourcingOrganic growth is core of strategy

Serve highest end of the market through International Projects teamLocalize European product portfolio for Asian marketsLocal sales force to improve access of International Projects team

New management with strong experience in Zumtobel Group started in mid 2011

Target reach growth over Group average and align to medium-term profitability targets

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Outlook and Challenges Thorn brand strategy

Measures for growth and

margin improvement

Thorn is a strong brand and showed solid improvement in recent periods

Uncertainties remain such as General market developmentPricing environment

Focus on execution

Measures for further stabilization and profitable growth are defined:

Dependence on public spending (approx. 40% of revenues)

Continuous focus on profitable sales approach and costIncrease production efficiency through platform-based product lines and complexityreduction for volume productsBroaden European footprintImprove operations in Asia (Far East)New marketing initiatives targeting gains in energy efficiency space

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Disclaimer

The facts and information contained herein constitute forward-looking statements as of the date they were made and based upon assumptions as to future events or circumstances that may not prove to be complete or accurate. By their nature, these statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and are difficult to predict. Therefore, actual outcomes or results may differ materially from what is expressed, implied or forecasted in these statements. Neither Zumtobel AG nor any of its directors, officers, employees or advisors nor any other person makes any representation or warranty, expressed or implied, as to the accuracy or completeness of the facts and information contained in this document or the related oral presentation thereof, including responses to questions following the presentation. Neither Zumtobel AG nor any of its directors, officers, employees and advisors nor any other person shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this document, the facts and/or information.Whilst all reasonable care has been taken to ensure the facts stated herein are accurate and that the assumptions and opinions contained herein are fair and reasonable, this document is selective in nature and is intended to provide an introduction to, and overview of, the business of Zumtobel AG as of the date this document was made. Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by Zumtobel AG as being accurate.

Contacts:Investor Relations Tel.: +43 (5572) 509-1510 [email protected]

April 18, 2012

thorn brand - strategy update - zumtobel group · 2 2 a brief portrait of thorn ... strengthen...

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