10th Sep 2007 07:02
Dialight PLC10 September 2007 Date: Embargoed until 07:00 am Monday 10 September 2007 Contacts: Roy Burton - Group Chief Executive Cathy Buckley - Finance Director Dialight PLC Tel: 01480 447490 Mark Ashurst - Managing Director Canaccord Adams Limited Tel: 020 7050 6500 Alistair Mackinnon-Musson Nicola Savage Hudson Sandler Tel: 020 7796 4133 Email: [email protected] DIALIGHT PLC Interim results for the six months ended 30 June 2007 Dialight plc, the UK based leader in applied LED technology, announces itsInterim results for the six months ended 30 June 2007. Dialight consists of two business segments: • Components comprising indication related businesses and electromagnetic disconnects • Signals / Illumination which includes Traffic and Rail Signals, Obstruction Lights and Solid State Lighting products Key Points: • Strong sales growth for Signals / Illumination - up 12% at constant currency rates • Components sales down 5% at constant currency rates • Components slowdown was previously announced - demand has since stabilised • Adverse impact of currency on reported sales and profits: • Group turnover down 4% to £28.9m (up 3% at constant currency) • Profit before tax down £1.3m to £1.3m - in line with market expectations • Earnings per share down 48% to 2.5p (2006: 5.2p) • Strong Operating Cashflow of £3.5m • Interim Dividend increased 9% to 1.9p • New products well received Roy Burton, Group Chief Executive, said: "With most of Dialight's sales and profits generated in US Dollars, the recentexchange movements have impacted the Company's first half result markedly.Underlying sales performance in our Signals / Illumination segment has beenstrong, demonstrating the growing demand for energy efficient lighting deliveredby our applied LED technology". "The slow-down in our Components segment, which we had reported earlier thisyear, was disappointing but demand has now stabilised". "We believe that our strategy of identifying and pursuing niche markets withstrong LED value propositions places Dialight in a strong position to capitaliseon the emerging Solid State Lighting opportunity". Financial Results Revenue for the six months to 30 June 2007 showed a small reduction on theprevious year due to the adverse currency background, with the US Dollar : £sterling averaging 1.97 against 1.79 in 2006. At constant currency, total Grouprevenue increased 3%, with the Signals / Illumination business reporting healthyrevenue growth of 12%. As previously announced, operating profit for the first half was adverselyaffected by lower sales within the Components segment and some slippage in costreduction programmes. These programmes, whilst implemented later than planned,are now producing the previously expected results. Basic earnings per sharewere reduced to 2.5 pence (2006: 5.2 pence). During the first half of the year the Group had a net operating cash inflow of£3.5 million. Improved working capital generated £1.4 million, including aninventory reduction of £0.8m since the beginning of the year, as sales ofTraffic Signals conforming to the new ITE standard accelerated. Business Review Components As reported in April, the Components segment began the year more slowly than in2006. Whilst we saw some improvement in the second quarter of this year, saleslevels are still not at those of last year. The majority of the slowdown in thefirst quarter was due to destocking by US distributors and similar actions byAsian based contract electronic manufacturers. The situation has sincestabilised and all indications supported by our distributors' point of salesdata are that the business will continue steadily for the rest of the year. The electromagnetic Disconnect product line continues to gain qualifications inthe US Smart Meter market and orders received to date are encouraging. Overall, Component sales were down 5% from 2006 at constant exchange rates.While margins were maintained on the individual products, a change in theproduct mix meant the total contribution was reduced. Signals/ Illumination The Signals / Illumination segment supplies High Brightness LEDs for Solid StateLighting applications and the Board views it as having significant growthpotential, driven by the new developments in LED technology for both colouredand white LEDs. During the last few months the major manufacturers of LED components haveannounced significant performance improvements, particularly for white LEDs.These improvements have allowed more competitive pricing of LED lightinggenerally, relative to traditional lighting products, thus enabling new LEDapplications to be economical in this sector. As yet there is no consensus as to the pace at which LEDs will be adopted forgeneral lighting applications, although the acquisition activity which has takenplace recently in the sector would suggest industry confidence in the eventualsuccess of LEDs for these applications. In the meantime, Dialight adheres to its strategy of identifying emergingspecialist LED market niches and producing LED products to address their valueproposition, although the rate of adoption continues to be a challenge. In theperiod, a number of such new products have been introduced which we believe havesignificant potential for Dialight. Traffic Signals Dialight's Traffic Signals product line showed excellent growth of 14% atconstant currency versus the same period in 2006. The adoption of the new ITEStandards in the United States is beginning to accelerate and this has enabledDialight to establish some differentiation for its products due to the limitednumber of fully qualified suppliers available. Dialight was the first to befully qualified. The market for retrofit contracts in traffic signals has been fairly active inthe first half. To date Dialight has been awarded contracts for traffic signalsin Florida and New York State, amongst others. It is anticipated that shipmentsin the second half of 2007 will increase as a result of these and other majororders. In Europe, Dialight continued to work with traffic system OEMs in each countryand the numbers of units sold increased. Cost reductions have enabled us todecrease pricing to the market driving adoption of these products. Our strategy in Asia is to sell only in regulated markets on a proposition ofquality and performance, not lowest price. We are working with OEMs in theregion to identify and service those segments which are subject to stringentspecification. Obstruction Lights Orders for Obstruction Lights in the US showed over 30% growth although a strongincrease in North American Sales was offset to some extent by a slowing inEurope. We expect to see improvement in European Obstruction orders, however, aswe introduce our white strobe product to the Wind Tower Market. During the half, Dialight successfully launched the world's first White LEDObstruction Beacon. This product was qualified late in 2006 and initialshipments were made late in the first half of 2007. In order to enhance thevalue proposition for this product and as a result of improvements in whiteLEDs, we continued its development and qualified a smaller, lighter, more costefficient product at the end of the period. White lighting products open up a significant market for our LED lightingproducts. In the USA towers for Cellular and Broadcast applications use thiswhite "strobe" product for daytime warning and in Europe a similar product isused in the Wind Tower Market. These two applications give Dialight a potentialmarket of over $40 million a year. In the first half of the year some success was achieved in LED lighting forObstruction purposes that are qualified for use in hazardous locations andrecently we received European approval for our products, thus expanding ourpotential sales. Transportation This category comprises sales into the US vehicle market (mostly Transit Buses)and the rail market. During the half this segment posted 18% growth, driven bystrong demand in the US Bus market. At the end of the half, we made our firstshipments into the heavy duty vehicle market and we have orders totalling over$1 million for these products in the second half. Shipments to the rail marketwere up in the period but against a relatively small comparator. Dialight has recently secured a contract with the New York Power Authority tosupply over 10,000 more LED rail signals for use by New York City Transit. It isexpected the majority of these will be shipped in the second half and beinstalled alongside the more than 50,000 signals that we have already supplied. Illumination The Illumination segment of our business showed growth of more than 11% atconstant currency over the prior year first half. The introduction of newproducts in the second half is expected to improve further our position anddrive growth. The preferred route to market for Dialight illumination products is throughlighting manufacturers. We believe this is the most economical and effective wayinto the LED lighting market. The lighting industry is highly fragmented andtraditionally conservative. The industry has never had to adopt such a radicaltechnological change as that imposed by LEDs. It takes time for them to acceptthe inevitability of this change but our efforts with major Lighting OEMs onboth sides of the Atlantic are promising. In May of this year, we had a good presence at the Lightfair show in New Yorkwith our products being displayed by a number of major OEMs. A Dialight productwon an award for Best Product in Class for a fixture shown in conjunction withHydrel (part of Acuity Brands Corp.). Improvements in white LED technology have been remarkable in the past fewmonths. Lumileds and Cree, in particular, have announced LED productperformances that rival some of the better conventional light sources for energyefficiency. The cost of these devices is still many times greater than theequivalent conventional light source, but with clever applications engineering -a speciality of Dialight - it is possible to make a good value proposition foruse in certain niche applications. For example, Dialight has recently qualified its "Safesite" White Light forhazardous locations. This fixture is a sealed for life unit that competes with a150 watt traditional HID fixture and through innovative design, produces almostthe same light at the target illumination area, with a saving of over 40% inenergy usage compared with a conventional fixture. Our product will sell atabout the same price as the conventional fixture and it is warranted for fiveyears. It is expected to generate initial sales in the second half of 2007 andhas received much interest from both end users and lighting OEMs. The improvements in white LEDs are also enabling other applications. Fluorescenttubes have long been a source of maintenance problems in buses and railwayrolling stock. Dialight has introduced white fixtures for these applications andthey are on trial with a number of US Transit Authorities. We believe that there is growing pressure towards the uptake of energy-efficientlighting applications and Dialight is well placed to benefit from this majorglobal trend. Board Changes Jeff Hewitt retired from the Board on 31 August, 2007, having joined as anon-executive Director in 2001. Jeff was also Senior non-executive Director andChairman of the Remuneration Committee and we thank him for his advice andsupport over the past six years. Dividend The Interim dividend is increased by 9% to 1.9 pence (2006: 1.75 pence) and willbe payable on 11 October 2007, to shareholders on the register at 21 September2007. The increased dividend reflects the Board's confidence in Dialight'sfuture. Outlook Whilst our Components Segment began slowly this year, orders to date havestabilised and longer term prospects for the Meter Disconnect products appear tobe excellent. In Signals / Illumination the new ITE standard for Traffic Lightsin North America is showing accelerating adoption and there are some majorcontracts to be awarded, where Dialight is well placed to benefit. Theintroduction of white LED obstruction lighting in both Europe and the US isexpected to improve our sales in the second half, as will the launch of our newSafesite product in the hazardous location market. The Board is confident about the underlying business but given the sloweradoption in the Signals / Illumination segment, the full year results will bedependent on the timing of certain large retrofit contracts. Whilst we believethat we will win these contracts, there is an increasing risk that we will notsecure releases to ship against them in 2007. In the eventuality that theseshipments do not occur, the Board expects the impact on the operatingperformance in the second half to be up to £0.7m. The Board is confident that our strategy of identifying and pursuing niche LEDlighting markets with strong value propositions, well positions Dialight tocapitalise on the emerging trends in Solid State Lighting. Whilst with all newtechnology the timescales required for adoption are uncertain, the current signsremain encouraging. CONSOLIDATED INCOME STATEMENT For the period ended 30 June 2007 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 Note £'000 £'000 £'000Continuing operationsRevenue 3 28,890 29,997 62,302 Cost of sales (22,600) (22,240) (46,202)Gross Profit 6,290 7,757 16,100 Distribution costs (2,530) (2,221) (5,126) Administrative expenses (2,794) (3,224) (5,650) Operating profit 3 966 2,312 5,324 Financial income 1,177 1,104 2,154 Financial expense (872) (835) (1,665) Net financing income 4 305 269 489 Profit before tax 1,271 2,581 5,813 Income tax expense 5 (483) (961) (2,145) Profit for the year attributable to equity 788 1,620 3,668holders of the parent Earnings per share Basic earnings per share 7 2.5p 5.2p 11.8p Diluted earnings per share 7 2.5p 5.2p 11.7p The accompanying Notes form an integral part of these Interim FinancialStatements CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the period ended 30 June 2007 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £'000 £'000 £'000Exchange difference on translation of foreign (402) (947) (1,900)operationsActuarial gains on defined benefit pension - - 303schemesTax on items taken directly in equity (58) - (133) Income and expense recognised directly in (460) (947) (1,730)equity Profit for the period 788 1,620 3,668 Total recognised income and expense for the 328 673 1,938period attributable to equity holders of theparent The accompanying Notes form an integral part of these Interim FinancialStatements CONSOLIDATED BALANCE SHEET As at 30 June 2007 (unaudited) 30 June 2007 30 June 2006 31 December 2006 Note £'000 £'000 £'000AssetsProperty, plant & equipment 5,657 5,752 5,557 Intangible assets 7,473 7,274 7,495 Deferred tax asset 1,143 1,873 1,249 Total non-current assets 14,273 14,899 14,301 Inventories 9,394 10,805 10,397 Trade and other receivables 12,463 13,493 14,629 Cash and cash equivalents 6,957 5,517 4,346 Total current assets 28,814 29,815 29,372Total assets 43,087 44,714 43,673 LiabilitiesLoans and borrowings (2,174) (2,196) (2,184) Trade and other payables (7,393) (9,335) (8,478) Tax liabilities (2,324) (942) (765) Total current liabilities (11,891) (12,473) (11,427) Employee benefits (1,281) (2,408) (1,671) Provisions (774) (871) (802) Deferred tax liability (112) (52) (83) Total non-current liabilities (2,167) (3,331) (2,556)Total liabilities (14,058) (15,804) (13,983)Net assets 29,029 28,910 29,690 EquityIssued share capital 8 591 591 591 Merger reserve 8 546 546 546 Other reserves 8 (2,234) (901) (1,842) 8 30,126 28,674 30,395Retained earnings Total equity attributable to equity 29,029 28,910 29,690shareholders of the parent company CONSOLIDATED CASH FLOW STATEMENT For the period ended 30 June 2007 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £'000 £'000 £'000Operating activitiesProfit for the year 788 1,620 3,668 Adjustments for: Financial income (1,177) (1,104) (2,154) Financial expense 872 835 1,665 Income tax expense 483 961 2,145 Share based payments 104 68 130 Depreciation of property, plant and equipment 561 636 1,154 Amortisation of intangible assets 388 317 658Operating cash flow before movements in working 2,019 3,333 7,266capitalDecrease/(increase) in inventories 819 (4,197) (4,152)Decrease/(increase) in trade and other receivables 2,073 136 (2,062)(Decrease)/increase in trade and other payables (994) 1,562 1,504 Decrease in pension liabilities (459) (452) (849)Transfer from "Restricted Cash" - - 485Cash generated from operations 3,458 382 2,192Income taxes received/(paid) 1,149 (511) (1,623)Income tax paid on gain on disposals on businesses - (2,397) (2,559)sold in 2005 Interest paid (872) (832) (1,665)Net cash from operating activities 3,735 (3,358) (3,665)Investing activitiesInterest received 1,177 1,104 2,154Acquisition of subsidiary (net of cash received) - (2,449) (2,449)Capital expenditure (737) (602) (1,207)Expenditure on development (385) (507) (976)Sale of tangible fixed assets - - 82 Net cash generated from/(used in)investing 55 (2,454) (2,396)activitiesFinancing activitiesDividends paid (1,093) (937) (1,484)Transfer from "Restricted Cash" - 2,813 2,559Redemption of preference shares treated as debt (10) (17) (29)Own shares acquired - (308) (308) Net cash (used in)/generated by financing (1,103) 1,551 738activitiesNet increase/(decrease) in cash and cash 2,687 (4,261) (5,313)equivalents Cash and cash equivalents at 1 January 4,346 9,829 9,829 Effect of exchange rates on cash held (76) (51) (170) Cash and cash equivalents at end of period 6,957 5,517 4,346 Significant Accounting Policies For the period ended 30 June 2007 (unaudited) 1) Basis of preparation The consolidated interim financial statements have been prepared on thehistorical cost basis except for the revaluation of certain financialinstruments. The financial information for the six months ended 30 June 2007 andthe comparative figures for the six months ended 30 June 2006 are unaudited andhave been prepared applying the accounting policies and presentation that wereapplied in the preparation of the company's published consolidated financialstatements for the year ended 31 December 2006. In respect of the Defined Benefit plans no actuarial gains or losses wererecognised in the period. There will be a full review performed at the year endand any actuarial gains and losses arising will be recognised through thestatement of recognised income and expense at that date. The comparative figures for the year ended 31 December 2006 does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. A copyof the statutory accounts for that year have been delivered to the Registrar ofCompanies and include an audit report which was unqualified and did not containa statement under either Section 237(2) or 237(3) of the Companies Act 1985. Basis of consolidation Subsidiaries are entities controlled by the Group. The financial statements ofsubsidiaries are included in the consolidated financial statements from the datecontrol commences until the date that control ceases. 2) Accounting estimates and judgements The preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from the estimates. In preparing these interim financial statements, the significant judgements madeby management in applying the Group's accounting policies and the key sources ofestimation uncertainty were the same as those that applied to the consolidatedfinancial statements as at and for the year ended 31 December 2006. 3) Segmental reporting The Group's primary reporting format is business segments and its secondaryformat is geographical segments. A business segment is a component of the Groupthat is engaged in providing a group of related products and is subject to risksand returns that are different from those other business segments. Ageographical segment is a component of the Group that operates within aparticular economic environment and this is subject to risks and returns thatare different from those of components operating in other economic environments. Business segments The Group comprises the following business segments: - • Components comprising the indication businesses and electromagneticdisconnects. • Signals/Illumination which includes Traffic and Rail Signals,Obstruction Lights and Solid State Lighting products. All revenue relates to the sale of goods. The contribution shown belowrepresents sales less direct costs incurred by each business segment. Business segmentsSix months ended 30 June 2007 Components Signals/ Illumination Total £'000 £'000 £'000 Revenue 14,068 14,822 28,890Contribution 6,167 4,916 11,083Unallocated expenses (10,117)Operating profit from continuing operations 966Net financing income 305Profit before tax from continuing operations 1,271Income tax expense (483)Profit after tax from continuing operations 788 Six months ended 30 June 2006 Components Signals/ Illumination Total £'000 £'000 £'000Revenue 15,790 14,207 29,997Contribution 7,564 5,162 12,726Unallocated expenses (10,414)Operating profit from continuing operations 2,312Net financing income 269Profit before tax from continuing operations 2,581Income tax expense (961)Profit after tax from continuing operations 1,620 Year ended 31 December 2006 Components Signals/ Illumination Total £'000 £'000 £'000Revenue 32,015 30,287 62,302Contribution 14,779 10,602 25,381Unallocated expenses (20,057)Operating profit from continuing operations 5,324Net financing income 489Profit before tax from continuing operations 5,813Income tax expense (2,145)Profit after tax from continuing operations 3,668 4. Net financing income 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £'000 £'000 £'000Interest income 217 193 355Expected return on assets in the defined benefit pension schemes 960 911 1,799 1,177 1,104 2,154Interest expense (42) (43) (100) Interest charge on pension scheme liabilities (830) (792) (1,565) (872) (835) (1,665)Net financing income 305 269 489 5. Income tax expense The tax charge of £483,000 for the half year to 30 June 2007 reflects theanticipated effective tax rate for the year ending 31 December 2007. 6. Dividends During the period the following dividends were paid: 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £'000 £'000 £'000Final - 3.5p (2006:3.0p) per ordinary share 1,093 937 937Interim - 1.75p per ordinary share - - 547 1,093 937 1,484 After the balance sheet dates the following dividends were recommended by theDirectors. The dividends have not been provided for and there are no taxconsequences for the Company. 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £'000 £'000 £'0003.5p final dividend proposed - - 1,0931.9p (2006:1.75p) interim dividend declared 594 547 - 594 547 1,093 7. Earnings per share The calculation of basic earnings per share is based on the profit for theperiod of £788,000 (2006:£1,620,000) and a weighted average number of ordinaryshares outstanding during the six months ended 30 June 2007 of 31,084,000 (2006:31,219,000). 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2007 2006 2006 Number Number NumberWeighted average number of shares 31,084,000 31,219,000 31,150,000 Diluted effect of share options 233,000 - 217,000 Diluted weighted average number of shares 31,317,000 31,219,000 31,367,000 The weighted average number of shares used in the basic earnings per sharecalculation excludes 156,000 shares held by the Dialight Employees' ShareOwnership Plan Trust. 8. Capital and Reserves Share Merger Translation Capital Retained Total capital reserve reserve redemption earnings reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2007 591 546 (1,890) 48 30,395 29,690 Profit for the period - - - - 788 788 Net expense recogniseddirectly in equity (SeeStatement of Recognised - - (402) - (58) (460)Income and Expense) Dividends to shareholders - - - - (1,093) (1,093) Share based payments - - - - 104 104 B Shares redeemed - - - 10 (10) - Balance at 30 June 2007 591 546 (2,292) 58 30,126 29,029 Balance at 1 January 2006 587 - 10 19 28,248 28,864 Profit for the period - - - - 1,620 1,620Net expense recogniseddirectly in equity (SeeStatement of Recognised - - (947) - - (947)Income and Expense)Dividends to shareholders - - - - (937) (937) Share -based payments - - - - 68 68 B Shares redeemed - - - 17 (17) - New shares issued 4 546 - - - 550 Own shares purchased - - - - (308) (308) Balance at 30 June 2006 591 546 (937) 36 28,674 28,910 Balance at 1 January 2006 587 - 10 19 28,248 28,864 Profit for the period - - - - 3,668 3,668 Net expense recogniseddirectly in equity (SeeStatement of Recognised - - (1,900) - 170 (1,730)Income and Expense) Dividends to shareholders - - - - (1,484) (1,484) Share -based payments - - - - 130 130 B Shares redeemed - - - 29 (29) - New shares issued 4 546 - - - 550 Own shares purchased - - - - (308) (308) Balance at 31 December 2006 591 546 (1,890) 48 30,395 29,690 The reserve for own shares comprises the cost of the Company's shares held bythe Group. At 30 June 2007 the number of shares held by the group through theShare Ownership Trust was 156,000 (2006: 156,000). The market value of theseshares at 30 June 2007 is £309,000 (2006:£321,000). - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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