Lighting group heading for profitable growth with new strategy

• New structures for better collaboration and efficient leverage of synergies
• Group revenues up 0.3 percent  at EUR 1.25 billion (US$ 920 million), Q4 growth up 8.1 percent
• Dynamic growth of 52.6 percent with LED products, which account for 33.6 percent of revenues
• Marked improvement in adjusted EBIT, up 33.3 percent at EUR 47.6 million
• Cost structure improvement projects being rapidly implemented
• Outlook: revenue growth of around 3  percent and EBIT margin of 5-6 percent expected for 2014/15 
• Recommended dividend of EUR 0.18 per share

For the Zumtobel Group the 2013/14 financial year was marked by the fundamental redirection of the international lighting group. In a phase of dynamic change, particularly with regard to the technology shift to LEDs, the Group’s new CEO Ulrich Schumacher, who took office on 1 October 2013, has chosen to focus on a consistent multi-brand strategy, intensive collaboration within the Group and flat, efficient organisational structures. The new structures that were implemented on 1 December 2013 support the stronger entrepreneurial management of the Zumtobel Group, the optimal utilisation of production and sales synergies and the strengthening of the Group’s innovative power.

“In my view the Zumtobel Group with its committed and highly qualified staff, its long-standing customer relations and its internationally established brands, has enormous potential. With the new structures we have prepared the ground to realise this potential and outperform the market as we benefit from the opportunities offered by the technology shift and the global markets. We are already witnessing the initial positive impact of improved cross-brand collaboration and flat, customer-centric structures. In what was a challenging economic environment, over the past year we have posted slight revenue growth and a sound improvement in operating results. Building on our new strategic direction, in the coming years we will be making systematic use of opportunities for growth and will achieve a clear improvement in our profitability,” said Ulrich Schumacher summing up the state of the Group.

Revenues: steady improvement in the course of the year; LED products account for over 30 percent

 At the Zumtobel Group the development of business in 2013/14 was influenced by the increasing stabilisation of the economic environment. While the first two quarters brought revenue declines, the third and fourth quarters saw a return to growth, with revenue growth of 8.1 percent in the final quarter giving particular cause for optimism. Total revenues recorded by the Zumtobel Group for the reporting year rose by 0.3  percent against the prior year to EUR 1,246.8 million (2012/13: EUR 1,243.6 million). Revenues from the sale of LED products were particularly positive, rising 52.6  percent year-on-year to EUR 419.0 million (2012/13: EUR 274.5 million), which equates to 33.6 percent of total Group revenues. This means that LED technology has taken a firm hold across a broad market segment, bringing customers and end-users optimum energy efficiency and new opportunities for the creative use of light.

Adjusted EBIT shows a 33.3 percent increase

 Despite the flat development of revenues and higher research and development expenditures (+3.9 percent) Group EBIT adjusted for special effects rose significantly year-on-year to EUR 47.6 million in 2013/14 (2012/13: EUR 35.7 million). This represents an improvement in the return on sales (adjusted EBIT margin) to 3.8 percent (2012/13: 2.9 percent). Contributory factors in this improvement in earnings power included reduced material costs and optimised product design, as well as the enhanced profitability of the LED products, particularly in the Components Segment.

Necessary restructuring results in substantial negative special effects in reporting year 

 In a phase of strategic redirection for the Zumtobel Group, during the reporting year management rapidly initiated the necessary restructuring projects and in some cases already completed them. In the Components Segment (Tridonic) the measures relate to the technology shift to LEDs and the related exit from the magnetic ballast business. In line with the new organisational structures, in the Lighting Segment (Zumtobel / Thorn) the previously separate sales and operations organisations for each brand were merged to form global cross-brand organisations. In this context, steps were taken in the final quarter to improve cost structures and capacity utilisation at the plants. Negative special effects totalled EUR 35.5 million in the reporting year (2012/13: EUR 14.0 million). These significant special effects impacted on net income for the 2013/14 financial year, with the outcome that after special effects, interest and taxes, the Zumtobel Group recorded a net loss of EUR 4.8 million (2012/13: net profit of EUR 6.1 million).

The Segments: good improvements in both Lighting and Components 

 A breakdown by segment reveals gratifying improvements in both the Lighting and Components Segments. Lighting Segment revenues (Thorn / Zumtobel) rose by 0.3 percent to EUR 938.5 million in 2013/14 (2012/13: EUR 935.7 million), with the second half bringing a return to growth. Once again the lighting brands were able to equip a number of outstanding projects, such as the campus of Vienna University of Economics and Business, the new Museo Jumex in Mexico City and major retail projects around the world (all Zumtobel), various sports venues for the Winter Olympics in Sochi, a large-scale project involving 17 halls of residence at Lincoln University, and the landmark Chifeng Bridge in China (Thorn). In the course of the year, several trailblazing cross-brand projects were also realised, including illumination of the Formula 1 track in Bahrain and other infrastructure projects in the Middle East, as well as initial joint projects in Europe involving indoor lighting from Zumtobel and outdoor lighting from Thorn.

In the Components Segment (Tridonic) after two difficult years 2013/14 brought a return to revenue growth. Segment revenues totalled EUR 384.5 million for the reporting year, an increase of 1.8 percent over the previous year. Good progress in the development and sale of LED converters and LED modules successfully offset the substantial decline in demand for magnetic and electronic ballasts. This development is reflected in the 54.1 percent share of revenues generated with new products, the highest level ever achieved by Tridonic.

The Regions: European markets more stable, light and shade elsewhere

 Developments in the individual regions differed significantly during 2013/14. All European regions apart from Eastern Europe showed a steady improvement in revenues during the course of the year. Revenues in the D/A/CH region (Germany, Austria, Switzerland) were in growth, especially in Germany and Switzerland. There was also modest growth in Northern Europe. Western Europe, which is the strongest sales region in the Zumtobel Group, was negatively affected by substantial foreign exchange effects. However, revenues in the region still rose by 3.6 percent. Southern Europe returned respectable revenue growth of 7.5 percent.

Outside Europe the picture for 2013/14 was mixed: the development of revenues in the Middle East was outstanding, but the lighting business in Asia remained disappointing. The America region remained substantially below expectations with a drop of 13.0 percent. In Australia & New Zealand, slower business development and negative foreign exchange effects led to a decline in revenues.

Employees: selective increases in the workforce 

There were several changes in the size of the workforce during the reporting year. In the production sector the number of employees declined by 124, chiefly due to Tridonic’s exit from the magnetic ballast business. The sales workforce was reduced by 104 employees, above all owing to the merger of the previously separate Zumtobel and Thorn sales organisations. In the research and development sector the size of the workforce increased by 54 employees. The number of contract workers rose by 296 due to the sound development of revenues, especially in the fourth quarter. On 30 April 2014 the Zumtobel Group had 7,291 full-time employees worldwide (including contract workers, not including apprentices). This corresponds to 129 more than in the previous year, an increase of 1.8 percent. The training of apprentices is assigned high priority at the Zumtobel Group. On the balance sheet date 147 apprentices were being trained within the Group.

Outlook: further revenue and earnings growth anticipated

 Based on the positive economic signals from the second half of 2013/14 and the planned significant cost savings, the Management Board of the Zumtobel Group looks toward the coming months with reserved optimism in spite of the still limited visibility. The development of revenues will be supported by slight tailwinds from the recovering market environment in Europe, but revenues from the sale of magnetic ballasts have now ended with Tridonic’s exit from this technology. Overall, despite the absence of magnetic ballast revenues, the Management Board expect the 2014/15 financial year to bring an increase of approximately 3 percent in revenues as well as an improvement in the adjusted EBIT margin from its current level of 3.8 percent to between 5 percent and 6 percent.

Recommended dividend of EUR 0.18 per share

Based on the anticipated positive development, the Management Board and Supervisory Board will recommend to the annual general meeting of Zumtobel AG on 25 July 2014 payment of a dividend of EUR 0.18 per share for the 2013/14 financial year.