Presentation Thorn Brand

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 Group
ƒ Founded in 1928 in the UK
ƒ Acquired by Zumtobel Group in 2000/01
ƒ Lighting Segment consequently doubled in size
ƒ Comprehensive portfolio for indoor and outdoor lighting
solutions in professional lighting
ƒ Today: international brand with 2,587 employees
Strong challenges to overcome
ƒ Thorn struggled for many years due to
– Widespread organisation lacking common strategy,
leadership and product portfolio
– Unclear brand positioning
– Performance issues
ƒ Measures initiated in Europe; further stabilization, focus on
Asia (Far East) and turning towards profitable growth is next
April 18, 2012
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Thorn's target market has now been clearly defined
Thorn brand positioning
Performance segment
Budget segment
Value
Mid-end
Premium segment
High-end Premium
"Luxury"
Specification
OTC
Distribution channel:
ƒ Direct sales: ~ 60% of sales
ƒ Wholesalers/distributors: ~ 40% of sales (thereof 50% OTC)
Simplified illustration
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Thorn has a brand emphasis on dependable performance
Thorn brand positioning
Globally trusted supplier of both outdoor
and indoor luminaires and integrated
controls
Dependable Performance and smart
solutions are key brand messages
BASIC VALUES
Caretaking
CORE VALUES
Accountable
Dependable
Performance
Smart Solutions
Functional
Design
4
Flexible
Modularity
Trustworthy
Experienced
Engineering
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Reliable
Expert
ƒ End Users
ƒ Wholesalers/distributors for OTC &
project business to electrical contractors
and installers
Honest
BRAND
ESSENCE
Responsive
ƒ Street and Urban Lighting Consultants
ƒ Main & Electrical Contractors
Performance
Solutions
Easy to
deal with
Main customer groups:
ƒ M&E Consultants
Professional
Global & Local
4
Thorn holds strong position in UK, France, Northern Europe and Australia
Market share analysis
Market position in European markets
RANK
UK
France
Sweden
Norway
Denmark
Thorn
1
2
2
4
6
Zumtobel
6
Lighting Brands
1
10
2
2
4
Benelux
Switzerland
Germany
Austria
Italy
Europe 10
CEE1)
4
11
15
9
2
2
3
1
5
2
6
5
2
2
3
1
3
1
3
Lighting Segment – global market shares in professional lighting (Zumtobel + Thorn)
~16%
Majority relates
to Thorn
~9%
Europe
~1%
~0.5%
Asia
Americas
~1%
Australia/Oceania
Africa
1) CEE includes PL, CZ, SK, HU, CRO, SI, RO
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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)
ƒ The biggest markets for Thorn in Europe
are France, UK and Scandinavia
Other
AUS/NZ
~2%
ƒ Besides its core business in Europe
Thorn has a solid market position in
Asia, MENA and Australia/New Zealand
~12%
MENA
~4%
Far East
ƒ Various initiatives launched to
significantly increase market share in
Europe and expand in Far East and
MENA
~12%
~70%
Europe
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Thorn covers indoor and outdoor applications including street lighting
Thorn brand by application
Revenue distribution by application
Other
Systems
Commercial & Trade
Office
Outdoor
Industrial
Other Indoor
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Education
Art & Culture
Total Thorn revenue by application:
ƒ Indoor lighting solutions accounts for
>60%
ƒ Outdoor lighting solutions account for
30% and comprise the only offer for
street lighting solutions in the Zumtobel
Group
ƒ Systems account for approx. 4%
Municipalities and other public customers
account for approx. 40 % of revenues
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LED penetration also increases considerably in performance segment
Thorn position in LED lighting
Thorn - LED revenue share
thereof
> 50 % Outdoor
< 50 % Indoor
5.8 %
ƒ While premium segment is early adopter of new
technology, Thorn also experiences increasing
interest in LED from its customer base
ƒ LED share of total revenues amounted to 3.2% in
2010/11 and rose to 5.8 % in Q1-Q3 2011/12
(growth of ~150%)
ƒ LED price premium in more price sensitive customer
group limits penetration
ƒ Outdoor LED solutions with gaining importance
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After restructuring Thorn in Europe, further stabilization and turning towards
profitable growth is next on agenda
Thorn brand strategy
Æ
Global organisational set-up
Æ
Strengthen sales network in mature as well as emerging markets
Æ
Further enhance product portfolio for global markets with an emphasis on LED
and energy efficiency
April 18, 2012
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After restructuring Thorn in Europe, further stabilization and turning towards
profitable growth is next on agenda
Thorn brand strategy
Æ
Global organisational set-up
ƒ Historically lack of global structure with common strategy, leadership and portfolio
ƒ Global matrix functions were established in May 2011 (e.g. product management, R&D)
ƒ Management changes implemented (e.g. Asia)
Æ
Strengthen sales network in mature as well as emerging markets
Æ
Further enhance product portfolio for global markets with an emphasis on LED and
energy efficiency
April 18, 2012
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After restructuring Thorn in Europe, further stabilization and turning towards
profitable growth is next on agenda
Thorn brand strategy
Æ
Global organisational set-up
Æ
Strengthen sales network in mature as well as emerging markets
ƒ Strong focus on profitability in Europe led to increase in sales per headcount
ƒ Additions for Thorn brand were done mainly in emerging markets
(> +20 employees in China)
ƒ Selective further investments while focusing on reducing share of fixed costs
Æ
Further enhance product portfolio for global markets with an emphasis on LED and
energy efficiency
April 18, 2012
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After restructuring Thorn in Europe, further stabilization and turning towards
profitable growth is next on agenda
Thorn brand strategy
Æ
Global organisational set-up
Æ
Strengthen sales network in mature as well as emerging markets
Æ
Further enhance product portfolio for global markets with an emphasis on LED
and energy efficiency
ƒ Phase-out of old, low margin products
ƒ Increase production efficiency (platform approach and complexity reduction)
ƒ 19% of sales from newly introduced products
ƒ Improve product portfolio for Asia (Far East)
ƒ 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
Revenues in EUR million
+10.5%
+11.6%
+8.7%
300
252.7
250
236.1
228.8
211.6
223.6
222.9
205.7
200
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
150
100
50
Thorn Asia (Far East): Development
disappointing with growth below target
0
Q1
Q2
Revenues FY 2010/11
Q3
Q4
Revenues FY 2011/12
Revenues Q1-Q3 2011/12 EUR 712.4 million (plus 10.3%)
Revenues Q1-Q3 2010/11 EUR 646.0 million
ƒ Strong dependence on third party
products
ƒ Lack of regional product fit and
distribution channels
1) Reported EBIT adjusted for special effects
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Improving profitability in Europe, while Asia (Far East) turned weak
Lighting Segment – EBIT development
Lighting Segment
Adjusted EBIT
7.6%
32
28
7.2%
24
20
16
12
4.6%
Impairment of
development costs:
EUR 0.3m
Write-down of inventory:
EUR 2.1m
16.4 19.3
10.8
8
2%
4
0.4 0.2%
0
-8
0.7%
0%
-2%
-1.8%
Q1
Q2
Q3
Q4
Adjusted EBIT FY 2010/11,
Adjusted EBIT FY 2010/11,
Adjusted EBIT FY 2011/12
in EUR million
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%)
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1.6
-4.1
-4
April 18, 2012
6%
4%
4.1%
8.6
8%
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
ƒ Improvement in product design (cost and
quality driven)
ƒ Sales approach focused on profitable
growth
ƒ Strict focus on fixed costs
ƒ Improvement in performance towards
customer (e.g. OTD rate, Quality)
Thorn Asia yields negative EBIT contribution in 2011/12 after a solid prior year
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Excursion: Asia (Far East)
Lighting Segment strategy
Major sales contribution of revenues in Asia (excl. MENA) is attributable to Thorn
Lighting Brands Asia (Far East):
revenues Q1-Q3 EUR 45 million
(> 50% in China)
Brand
positioning
Production
footprint
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ƒ Thorn is perceived as high-end European brand with a well established reputation in
many markets (activities in Asia since 1980s)
ƒ Zumtobel is represented through international projects mainly in 1st tier cities
ƒ Tianjin (Thorn Outdoor), Guangzhou (Thorn Indoor)
ƒ Third party products fill existing gaps in own product offerings
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Excursion: Asia (Far East)
Lighting Segment strategy
Strategic
measures
New management with strong experience in Zumtobel Group started in mid 2011
ƒ Expansion of local sales force
ƒ Intensified training of sales force to convey local approach
ƒ Sales approach focus towards 2nd and 3rd tier cities
ƒ Adjustment of local product portfolio: clear insourcing
ƒ Organic growth is core of strategy
ƒ Serve highest end of the market through International Projects team
ƒ Localize European product portfolio for Asian markets
ƒ Local sales force to improve access of International Projects team
Target
April 18, 2012
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reach growth over Group average and align to medium-term profitability targets
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Outlook and Challenges
Thorn brand strategy
Thorn is a strong brand and showed solid improvement in recent periods
Uncertainties remain such as
ƒ General market development
ƒ Pricing environment
Æ
ƒDependence on public spending (approx. 40% of revenues)
Measures for further stabilization and profitable growth are defined:
ƒ Continuous focus on profitable sales approach and cost
Measures for
growth and
margin
improvement
Æ
reduction for volume products
ƒ Broaden European footprint
ƒ Improve operations in Asia (Far East)
ƒ New marketing initiatives targeting gains in energy efficiency space
Focus on execution
April 18, 2012
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ƒ Increase production efficiency through platform-based product lines and complexity
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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
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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
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Contacts:
Investor Relations
Tel.: +43 (5572) 509-1510
investorrelations@zumtobel.com
www.zumtobelgroup.com
April 18, 2012
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