Annual
Report
2019
Letter to Shareholders
Dear Landis+Gyr Shareholders,
In these unprecedented times, while the global economy is disturbed and most aspects of our lives are altered, we believe we are well equipped to manage through the current crisis. Our first priority remains the safety and wellbeing of our employees, partners and customers, promoting and enabling digital collaboration as well as well as social distancing.
Always, and especially now, we manage cost and liquidity carefully across the group to maintain our sound balance sheet with a substantial cash position. These attributes ensure that we can act from a position of strength as we go through the current crisis. Furthermore, Landis+Gyr, as an essential business, continues to support the world’s utilities with mission critical infrastructure equipment and services. Although the current pandemic has caused some utilities to suspend installations, no major projects have been cancelled and Software and Services contracts remain on track. As a result, we firmly believe that the demand downturn in our markets is temporary in nature.
Additionally, we are proud to contribute actively to a sustainable environment and will continue to expand our role in this effort by maintaining the R&D investments at levels consistent with prior years.
Financial year 2019 resultsLandis+Gyr delivered mixed financial results for the 2019 financial year. Order intake for FY 2019 was USD 1,371.4 million, a book to bill ratio of 0.81. Committed backlog was down 14.6% year-over-year at USD 2,223.9 million. The Americas and EMEA reported decreases in committed backlog compared to the prior year, while Asia Pacific rose slightly. In FY 2019, net revenue fell 2.0% year-over-year in constant currency to USD 1,699.0 million with growth experienced in both EMEA and Asia Pacific regions that partially offset the decline in the Americas. This decline was due to delays in regulatory approvals in the US and the roll off of two large projects underway in the US in FY 2018. The COVID-19 crisis impact lowered net revenue by approximately 1% in FY 2019.
Adjusted EBITDA was USD 237.2 million, including a one-off gain of USD 5.6 million resulting from a Brazilian VAT court case; excluding this, Adjusted EBITDA margin was 13.6%. All regions were profitable. Finally, turning to Free Cash Flow (excluding M&A activity), this was USD 120.4 million, a decrease of 2.5% year-over-year, reflecting solid cash generation driven by operating performance.
As a precautionary measure given the current COVID-19 driven global economic uncertainty, the Board of Directors has decided to postpone the decision on the proposed FY 2019 dividend for now, and intends to revisit the situation in conjunction with the release of the results of the first half year ending September 2020. Likewise, the share buyback program was suspended on March 27, 2020.
In that context, the Group Executive Management will take a 10% reduction in base salary for six months, and the members of the Board of Directors will likewise have their base and committee fees reduced by 10% for six months. In addition to the executive pay reduction, we have furloughed many of our staff and implemented short-time work for office functions in some locations. Currently, the future treatment of the short-term incentives for FY 2020 is also under review.
Andreas Umbach
Chairman
Werner Lieberherr
Chief Executive Officer
On April 1, 2020, we appointed Werner Lieberherr as Landis+Gyr’s new Chief Executive Officer. Werner’s global leadership experience with publicly traded companies in both the energy sector as well as the aerospace industry demonstrates his ability to build market-leading positions of global technology companies. He has a proven track record of delivering profitable organic and inorganic growth, while leading successful transformational activities and driving innovation. Therefore, Landis+Gyr will benefit from his in-depth technological know-how and experience in continuing the strategic transformation of our portfolio and the expansion of our offering in integrated energy management solutions. To further expand our technology leading position, investments in R&D remain a key focus and we plan to continue our funding at around the same level as in previous years. During FY 2019 we spent USD 152.2 million in Adjusted R&D expenses, equivalent to 9.0% of the Company’s annual sales and largely unchanged from the prior year. Our global force of 1,400 engineering professionals strives every day to provide leading-edge technologies, intelligent endpoints and flexible communications and applications to meet our markets’ expectations and to maintain and expand our grid edge intelligence leadership. Software, both discrete and embedded, is an essential element in our offering and was the largest area of R&D spending for the year. To further improve our successful competitive positioning, we are dedicated to realizing continuous productivity and cost reduction gains. Our asset light business model leverages best practices in supply chain management, while Project Lightfoot, an EMEA focused effort and one of our most important programs in this regard, delivered USD 10 million in incremental savings in FY 2019 compared to FY 2018, leading to a total in excess of USD 20 million annual savings delivered since the program’s inception. In the Americas, prior to the onset of the COVID-19 crisis, and in response to the top line pressure caused by regulatory delays, additional cost down actions delivered USD 19 million in annual run rate savings across the region. These benefits will start to materialize in the current year.
Solving Complex Challenges Utilities FaceRelevant innovation is fundamental in helping utilities to manage energy better. We actively shape the requirements around communications protocols, grid edge intelligence technologies and the smart infrastructure model through our contributions to standardization bodies and expert forums. Specifically, in FY 2019 we introduced two major new products. First, our Gridstream® Connect solution for European utilities, which is an open, secure and scalable Internet of Things (IoT) platform designed to unlock added value and maximize efficiencies from advanced metering infrastructures (AMI) by bringing together intelligent endpoints, communications, software and applications. Secondly, in North America Landis+Gyr announced the next generation of electric meters with leading-edge grid sensing technology in January 2020. The Revelo® metering platform introduces high resolution data sampling, increased computing power and provides communications flexibility, all supported by an application eco-system, enabling use case support ranging from consumer appliance-level energy usage details to grid level anomaly detection.
These new products deliver critical infrastructure to solve the complex challenges utilities face globally. Therefore, the continuing selection of Landis+Gyr’s products, solutions and services worldwide speaks to our strong and advantageous value proposition.
- In North America, Colorado Springs Utilities will deploy the Gridstream© Connect platform connecting more than 590,000 electric, natural gas and water meters to an integrated network management and data acquisition system. The new contract provides for managed services by Landis+Gyr for a 20-year period, including deployment and post-deployment services.
- In Sweden, Landis+Gyr will deliver its Gridstream© Connect solution for 1 million metering points to E.ON Sweden. With the contract, E.ON transitions to second-generation Smart Metering technology for excellent customer service and grid efficiency.
- In the UK, the transition to the next-generation smart meters (SMETS2) is underway at scale with more than 11 million smart meters deployed. As the UK market leader, Landis+Gyr has approximately 21 million meters deployed or under contract.
- In April 2020, Landis+Gyr announced the ward of an Advanced Metering Infrastructure (AMI) contract by The Hongkong Electric Co., Ltd. in support of Hong Kong’s transformation into a smart city.
- Frost & Sullivan selected Landis+Gyr as their Global AMI Company of the Year for 2019. This is the fifth consecutive time the company has received the award.
At this time we will not be providing guidance for the current financial year, as we are not able to estimate the FY 2020 net revenue impact from the COVID-19 crisis, which could have a material effect. The impacts vary widely, with most North American customers, though varied in pace, continuing to deploy meters, and several key customers in EMEA have currently suspended or delayed installations. Although there is currently no major impact to the supply chain, risks remain as the situation is evolving. The Group’s factories comply with relevant government policies and have been subject to lockdowns in some countries.
Delivering Critical Infrastructure and CO2 reductionsEach day all of our 5,768 Landis+Gyr employees, as well as key business partners, work passionately and with focus to deliver critical infrastructure to our customers and value to our shareholders. As a company we continuously seek to be active and engaged corporate citizens of the communities in which we operate. We promote a long-term vision and our comprehensive portfolio of products and services, contributes constructively to a reduced CO2 footprint both internally as well as for society at large.
Landis+Gyr has a longstanding history of success and we will continue to focus on offering leading innovation to customers, expanding strong partnerships, driving profitable growth and, thus, contributing to sustainable global development. On behalf of all of us at Landis+Gyr, we thank you, our shareholders, for the support and ownership in Landis+Gyr, and that you have joined us in continuing to achieve our our mission.
Yours sincerely,
Andreas Umbach
Chairman
Werner Lieberherr
Chief Executive Officer
Key Figures
Committed
Backlogin million USD
0 + 0%
Net
Revenuein million USD
0 + 0%
Earnings
per Sharein USD
0 + 0%
Adjusted
EBITDAin million USD
0 + 0%
* % of sales; FY 2019 figure includes a one-off gain of USD 5.6 million resulting from a Brazilian VAT court case; excluding this Adjusted EBITDA margin was 13.6%.
Free
Cashflow(excluding M&A) *
in million USD
0 + 0%
* Net cash provided by operating activities minus net cash used in investing activities, excluding merger & acquisition activities.
Dividend
per Sharein CHF
0 + 0%
* In May, as a precautionary measure due to COVID-19 driven uncertainty, the Board of Directors will defer the decision on the FY 2019 dividend and intends to revisit the topic in conjunction with the release of the results for the first half year ending September 2020.
Sustainability
Direct CO2 emissions reduced by 8 million tonsin 2019
CO2 emission reduction through Landis+Gyr’s installed Smart Meter base
CO2 emissions from Landis+Gyr OperationsKg CO2e per USD 100 turnover
1.3 kgin 2019
Consolidated Statements of Operations
Consolidated Balance Sheets
Highlights
April
Landis+Gyr will support Ameren Missouri’s Smart Meter Project through the deployment of 1.4 million advanced meters and a utility IoT network. Ameren Missouri will implement Landis+Gyr’s Gridstream® Connect solution, including 1.27 million advanced electricity meters and 130,000 gas meters.
The Group announced the release of MDMS 4.1, the latest version of its meter data management system software that adds features for gas utilities and includes enhanced support for consumption interval billing and complex rebilling operations.
May
In the context of its grid modernization strategy, Grand Bahama Power Company will deploy Landis+Gyr’s Gridstream® Connect solution to include advanced electricity meters, distribution automation devices and meter data management software.
Landis+Gyr was recognized for excellence in operational safety at two of its North American facilities. The Group received the Meritorious Achievement Award from the Minnesota Safety Council, highlighting the health and safety record and related programs at the company’s Roseville, MN facility.
June
The Group’s work on CLP Power’s Advanced Metering Infrastructure (AMI) platform in Hong Kong has been extended to support the full smart metering roll-out covering 2.6 million customers. The contract extension will see Landis+Gyr deploying additional smart meter endpoints, as well as the Gridstream® solution platform, to CLP Power’s Hong Kong service territory over seven years.
Landis+Gyr secured a contract to partner with Slovakian IT solutions provider Aqist for the delivery of E.ON’s smart metering solution in the Czech Republic. Landis+Gyr will provide more than 30,000 smart electricity meters, data concentrators and a head-end software system.
July
The Group will deliver its Gridstream® Connect solution for one million metering points to E.ON in Sweden. With the contract, E.ON will transition to second-generation smart metering technology in order to improve customer service and grid efficiency.
Colorado Springs Utilities will deploy the business’s Gridstream® Connect platform connecting more than 590,000 electric, natural gas and water meters to an integrated network management and data acquisition system. The new contract also extends the existing managed service agreement.
August
Landis+Gyr is joining forces with Utilidata, the industry leader in energy optimization software from the substation to the grid edge, to provide groundbreaking grid management through the deployment of edge applications on Landis+Gyr advanced meters, planned initially for the North American market.
September
Landis+Gyr strengthened its offering for smart metering field operations support by combining its Advanced Metering Infrastructure (AMI) deployment and operations experience with an Android mobile application and digital platform hosted by GeoPal Solutions.
As part of a Software-as-a-Service contract, Landis+Gyr is taking over the data and software hosting for smart metering at Liechtensteinische Kraftwerke (LKW). As well as the backup and maintenance of the metering, order and billing data, the scope of services includes audits and the implementation of all relevant security and data protection measures.
The Group announced the certification of the Network Bridge, an intelligent routing and distribution automation device, as a border router under the Wi-SUN FAN 1.0 field area network certification program.
October
Many consumer residences today have large electrical loads where typical 200 amp residential service is no longer adequate. Landis+Gyr released a first-of-its-kind advanced meter with an integrated remote service switch to safely manage 320 ampere residential applications.
Frost & Sullivan awarded Landis+Gyr the “Global AMI Company of the Year” 2019 Award for its innovative AMI solutions that meet current and future customer needs. According to Frost & Sullivan, Gridstream® Connect is capable of transforming utility operations.
Landis+Gyr completed an advanced metering and smart grid project for CEEE, the largest electric distribution utility serving the state of Rio Grande do Sul in Brazil. The project includes both Gridstream® RF mesh and cellular deployment for nearly 12,000 commercial and industrial meters.
Landis+Gyr released MDMS 4.2. The new MDMS version improves integration with Landis+Gyr’s Command Center head-end software to increase the speed with which reads, intervals and events are processed, as well as providing improved integration of gas and water endpoints.
November
The Group announced the launch of its Gridstream® Connect solution for European energy companies. As an open, secure and scalable IoT platform, Gridstream Connect combines smart sensors, communication technologies, software and applications.
December
Landis+Gyr added four-relay and two-relay load control switches to its North American load management product portfolio. The new generation of switches allows the control of multiple appliances from a single installation, to support more effective utility demand response and variable rate programs.
January
Landis+Gyr delivered the technology Swiss energy supplier WWZ AG’s first wave of smart meter rollouts. This includes modern meters, as well as the necessary communication technology and an as-a-service meter data processing system in cooperation with a third-party supplier.
February
With the Revelo release, Landis+Gyr has changed the way utilities visualize the quality of power delivery at the edge of the grid, enabling them to manage energy more proactively. Combining edge computing, with Landis+Gyr’s proven grid metering technology for waveform data capture, Revelo enables utilities to develop real-time pattern recognition of energy delivery.
Performance Review
Americas
Landis+Gyr's deployments in the Americas continue despite some regulatory delays for new projects. The region introduced an exiting new IoT grid sensing meter, and has won a number of new customers.
Net
Revenuein million USD
0 + 0%
Adjusted
EBITDAin million USD
0 + 0%
Hawaiian Electric Company (HECO)
Landis+Gyr and Hawaiian Electric Company are partnering for the first phase of an advanced metering project built on Wi-SUN-certified network components, to support the utility’s Grid Modernization Strategy. The project will utilize Landis+Gyr’s Gridstream® Connect solution, providing flexible communication options at both the field area network and device level.
Benefits for Utility and Consumers
- Enabling operation of RF Mesh IP, Cellular, PLC and other communication options from a single network manager
- Provision of connectivity to participating customer accounts
- New grid and distributed energy resource management capabilities
- Support data validation
Support for Local Schools
In the Americas region, Landis+Gyr invested both money and man-hours to support local schools in the reporting period. In Reynosa, Mexico, Landis+Gyr donated nine laptops to an Elementary School. This gave 150 students access to computers who previously had no laptops in the classroom. In Alpharetta, USA, the System Deployment group’s network design team had set the goal to participate in a community volunteer effort. They put their resolutions into practice and supported a new elementary school in the preparation for the first day of school. The five-member team unpacked and sorted educational reading materials and school supplies, categorized books and assembled gift bags for the 1st to 5th grade students.
Performance Review
Europe, Middle East and Africa
The region recorded slight revenue growth while significantly improving performance and profitability in 2019.
Net
Revenuein million USD
0 + 0%
Adjusted
EBITDAin million USD
0 + 0%
Landis+Gyr Secures Major Contract with E.ON in Sweden
Landis+Gyr will deliver its Gridstream® Connect solution for one million metering points with NB-IoT/M1 communication technology and a Gridstream® Connect platform to E.ON in Sweden. The contract will see E.ON transition to second-generation smart metering technology, delivering excellent customer service and grid efficiency.
Benefits for Utility and Consumers
- Increased transparency and control in E.ON’s distribution grid
- Enhanced customers’ experience through reliable and precise data
- Enabling of the introduction of extended applications and further services in the next phase
#Eachfor-Equal and Cycling for a Good Cause
On International Women’s Day on March 8, 2020, Landis+Gyr’s UK sites celebrated #EachforEqual. The schedule of events included a roundtable with Executive Vice-President EMEA Susanne Seitz, who shared her experiences in business and discussed equality in the workplace and in society. In Greece, Landis+Gyr sponsored a team of cyclists around one of the Group’s employees. They pedaled 830 kilometers from Milan over the Alps to Munich as part of the European tour of the Global Biking Initiative (GBI). GBI is a global community which organizes cycling events to raise funds for charities in more than twenty countries. The team sponsored by Landis+Gyr donated to a SOS Children’s Village based in Athens.
Landis+Gyr’s employees in Zug, Switzerland, participated in the “Bike to Work” health initiative: Ten teams of four persons cycled a combined distance of 6490 kilometers in June 2019.
Performance Review
Asia Pacific
Landis+Gyr continues to expand its presence in the Asia Pacific region. Contracts in Australia and Hong Kong drove revenue growth, while next mover markets like Malaysia offer new opportunities.
Net
Revenuein million USD
0 + 0%
Adjusted
EBITDAin million USD
0 + 0%
HK Electric Selects Landis+Gyr for AMI roll out
Landis+Gyr supports Hong Kong’s transformation into a smart city. The Group has been awarded an Advanced Metering Infrastructure (AMI) contract by The Hongkong Electric Co., Ltd. (HK Electric) comprising smart meters, communication infrastructure, a head-end system and meter data management all combined in Landis+Gyr’s Gridstream® solution platform.
Benefits for Utility and Consumers
- Facilitated monitoring and control of the grid, getting closer to a smart grid
- Enabling better management of electricity consumption for customers
- Helping HK Electric to meet its future sustainable development goals
Invincible Women and Bushfire Donations
In Australia, the bushfires marked the year-end 2019 and the start into 2020. Landis+Gyr’s teams contributed to reducing the consequences of the fires: In Melbourne, they held a barbecue to raise donations to support those affected. In Sidney, Landis+Gyr employees sold raffle tickets to collect donations for the Port Macquarie Koala Hospital, which cares for the koalas affected by the bushfires.
In India, a program to empower women was launched. Landis+Gyr created the Women Invincible Forum (WIN) to help women interact with each other more often and share their experiences. WIN promotes the personal and professional growth of women in technology and encourages leadership, mentorship and career development of women in the community.