European Stock Story of the Month – Signify

As a child of the 1970s, many of my early memories are in the dark. Literally. Living in the middle of Salisbury Plain, blackouts were all too frequent, and we kept paraffin lamps in strategic places, candles by the hundredweight and big torch batteries. When the lecky did come back on, the light bulbs would inevitably pop so we kept them by the pallet load too. Leaving lights on left us at risk of going to bed hungry. In short, wasting electricity was a sin. Today, lighting represents 13% of total electricity demand. Given our voracious appetite for power on demand we need to make savings where we can. The advent of LED means that lighting will alleviate that figure to 8% by 2030[1]

When we launched the fund in late 2017, we looked for companies with a strong franchise that were going to have a material positive impact on the world their business model was geared towards, and Signify, or Philips Lighting as it was then known, was a business going through a major technological leap, with huge challenges and also huge opportunities. A huge transformation of the industry has taken place with only three out of the top six players of 2013 still in the top six five years later and 40% of the global lighting assets changing hands in the five years up to the end of 2020.[2]

Signify (www.signify.com) is a leading player in the lighting industry today. Based in the Netherlands, it was part of the Philips group until it was spun off in 2016. Changing its name in 2018, it has a 30 year license to use the Philips brand name. A multinational with operations all over the world, Signify employs nearly 38,000 people in 74 countries[3], and has delivered over 2.9 billion LED lamps by the end of 2020. These are big numbers in themselves but the impressive part is the company’s ability to assess its transformation into a much lower carbon consumer producing lower carbon products for a more sustainable future. Here are some of the highlights.

84% of revenues are geared towards sustainable products and services with LED sales now accounting for 78% of total sales. Signify boast a net carbon neutral footprint  and are able to demonstrate that they have reduced their gross carbon footprint by 70% since 2010. 91% of industrial waste is recycled[4]. As well as being the number one producer in LED’s, in connected lighting and in conventional lighting, Signify invest twice the amount of R&D in $ terms than their nearest competitor[5].

These numbers are indeed impressive but what does it mean for us as normal people going about our daily lives? For example, the Arc de Triomphe in Paris is lit by Signify’s lamps. A huge fantasia of a display, the energy consumption is a mere fraction of its former self. Of course, there are much more intelligent and intuitive utilities that Signify has developed in terms of connected technology. Smart lighting is being rolled out in towns and on motorways, illuminating swathes of road only when cars approach, thus saving energy when not needed. These lights use sensors to pick up sound – an oncoming vehicle will set off a sensor to light the vehicle’s way. Smart lighting can also be used to pinpoint accidents for emergency services at all hours. When sudden noise erupts, this can now be used to send a signal to the emergency services to warn of an accident and also pinpoint an accurate GPS signal to direct airborne services to the RTA in good time.

We have all started to think much more about food miles when we buy our groceries. Out-of-season fruit, salad and veg hold a horrifyingly large carbon footprint -that is if we can get hold of them despite Brexit and COVID transport issues Signify has now developed intelligent lighting systems which mean that cucumbers can be grown all year round, and the concept of vertical farming means that the utilisation of space is revolutionised. The success of the project and the impact of such technological advance means that we can now hope to enjoy a wider variety of produce which no longer has to be transported hundreds, or indeed thousands, of miles by sea or air.

Under new European rules, the publication of data auditing information on environmental, social and governance issues are going to mean an awful lot of hard work to demonstrate and prove companies’ ability to measure and improve their impact on our world. Signify are leading the charge in their technology and their attitude towards understanding impact. I feel we’ve come a long way from my old man’s cry of ‘how many times have I told you to turn off the d-d lights’, but in truth we have a very long way to go, and we’ve only just started.

PS. If anyone tells you they have teenagers who do turn the lights off, ask for documentary evidence. Plus ca change…..

Written by Rory Hammerson

[1] https://www.signify.com/global/our-company/investors  (IR starter-kit, brighter-lives-better-world-presentation-2020)

[2] https://www.assets.signify.com/is/content/Signify/Assets/signify/global/ir/capital-markets-day-2020-presentation.pdf

[3] https://www.signify.com/static/2020/signify-annual-report-2020.pdf

[4] https://www.signify.com/global/our-company/investors  (IR starter-kit, brighter-lives-better-world-presentation-2020)

[5] https://www.assets.signify.com/is/content/Signify/Assets/signify/global/ir/capital-markets-day-2020-presentation.pdf

Information is accurate as at 05.07.2021. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment capital is at risk.