Signify releases new strategy, targeting profit margin of 10% in 2029

On June 23, Signify, a world-renowned lighting company, held the 2026 Capital Markets Day event at its headquarters in Eindhoven, the Netherlands.

CEO As Tempelman and his management team introduced the company's updated strategic direction, portfolio priorities and 2029 mid-term financial goals to investors and analysts in detail.

Signify said that this strategic adjustment is not to completely reshape the company, but to create a more focused, better-performing and more customer-oriented version on the existing basis, in order to occupy a favorable position in emerging opportunities such as connected lighting.

Judging from the latest financial performance, Signify is currently in a critical stage of performance pressure and strategic transformation.

In the first quarter of 2026, the company achieved nominal sales of 1.274 billion euros, a nominal decrease of 12.0% from the same period last year. After excluding exchange rate changes and integration effects, comparable sales fell by 5.1%. The profit side was greatly affected. Net profit in the first quarter was 8 million euros, a sharp decrease from 67 million euros in the same period last year. This was mainly due to the 180 million euros cost reduction plan announced by the company in January, which resulted in 63 million euros in restructuring costs.

It is worth noting that despite the decline in performance, Signify's adjusted gross profit margin remained at a solid level of 40.6%, and free cash flow increased to 47 million euros, which was better than 40 million euros in the same period last year, reflecting the continued improvement of working capital management.

In response to the continued decline in performance, Signify announced a corresponding new strategy, the core of which lies in six clear investment portfolio choices, divided according to the two dimensions of "construction" and "harvest".

In the field of "construction", Signify will concentrate its resources on connected lighting, consumer business, selected professional market segments and more focused geographical layout. These areas are considered to be the directions in which the company has strong competitive advantages.

In the "harvest" area, including non-interconnected LED lamps, traditional lighting and businesses with a higher degree of commoditization, they will be optimized to improve performance and cash flow.

To support the implementation of the strategy, Signify will implement differentiated execution plans for three major performance areas: maximizing operating leverage in growth areas, promoting loss-turning in lower-profit areas, and maintaining high profitability levels in low-growth and declining areas. The execution level will focus on business capabilities, supply chain optimization, digitalization and artificial intelligence applications, and continue to promote cost management.

In terms of financial goals, Signify has set mid-term guidance for 2029: comparable sales growth of 0% to 1%, adjusted EBITA profit margin of approximately 10%, and free cash flow reaching 7% to 8% of sales.

Signify expects that profit margin improvements will mainly come from the combined force of indirect cost reductions, solid gross profit margins, and improved management of new performance areas; free cash flow will be achieved by relying on profitability improvement, working capital discipline, and cash management optimization.

The capital allocation framework also welcomes an update. Signify proposes four priority principles: maintain a sound capital structure that supports investment-grade credit ratings; pay cash dividends every year, with the dividend payout rate set at 40% to 50% of ongoing net income; continue to invest in organic and inorganic growth opportunities that are in line with strategic priorities; and provide additional capital returns to shareholders with remaining available funds.

Signify also announced that it has no plans to resume the share repurchase announced in 2025. Whether to restart in the future will depend on financial performance, capital needs and market conditions. In addition, the dividend per share will be rebalanced in fiscal 2026 to give greater flexibility to invest in growth.