REG-Dialight PLC Interim Results
Date/Range: 29-JUL-2008
Short Abstract: REG-Dialight PLC Interim Results
DIALIGHT PLC
Interim results for the six months ended 30 June 2008
Dialight plc, the UK based leader in Applied LED Technology, today publishes its
Interim results for the six months to 30 June 2008.
Dialight consists of two business segments:-
– Signals/Illumination which includes Traffic and Rail Signals, Obstruction
Lights and the new
product area of Solid State Lighting
– Components comprising Light Emitting Diode (“LED”) Indication Components and
Electromagnetic Disconnects (‘smart’ meter disconnect switches)
Highlights
* Group sales up 20% on H1 2007 to £34.5m
* Profit before tax up 68% to £2.1m (2007: £1.3m)
* Basic Earnings per Share increased 68% to 4.2p (2007: 2.5p)
* Signals/IIlumination up 28% on H1 2007 in both Sales and Orders, driven by
demand for energy efficient lighting solutions
* Electromagnetic Components sales up 18% on H1 2007 driven by increased demand
in the US Advanced Meter Infrastructure market
* Indication Business disposal project suspended
* Interim Dividend increased by 10% to 2.1p (2007: 1.9p)
Chairman and Chief Executive’s Statement
Financial Results
We are pleased to report on a period of significant progress and increasing
growth, particularly in our key Signals/Illumination business.
Driven by the increasing demand for energy efficiency and reduced carbon
footprints, Group revenues for the six months ended 30 June 2008 increased by
20% to £34.5m (2007: £28.9m). Operating profit was up by 104% to £2.0m (2007:
£1.0m) and profit before tax rose by 68% to £2.1m (2007: £1.3m). Basic earnings
per share increased to 4.2p from 2.5p in 2007.
The Group has generated net cash inflows from operations of £2.3m (2007: £3.5m)
representing 116% (2007: 358%) of operating profit. During the first half the
Group paid the final dividend to shareholders of £1.2m (2007: £1.1m) and income
tax amounting to £1.0m (2007: £1.1m received).
On 30 June 2008 the Company redeemed 2,695,120 of the remaining B Shares in
issue. The redemption reduced cash by £2.0m and debt carried on the balance
sheet by a corresponding amount.
As at 30 June 2008, following the redemption of the B Shares, the Group had a
cash balance of £3.5m (December 2007: £6.6m, June 2007: £7.0m).
Dividend
The Board is pleased to declare an interim dividend of 2.1 pence per share
(2007: 1.9 pence). The interim dividend is covered 2.0 times by profit after
taxation (2007: 1.3 times). The interim dividend is payable on 18 September 2008
to shareholders whose names are on the Register of Members at close of business
on 8 August 2008.
Business Review
Signals/Illumination
The Signals/Illumination segment addresses the increasing demands for Energy
Efficient Lighting solutions. Through the use of high brightness LEDs and
utilisation of a number of associated technologies we create and deliver
compelling value propositions to our customers. In the view of the Board, this
segment is a significant driver for growth as new applications gain increased
relevance in a society which is ever more conscious of the potential scarceness
of energy and harm to the environment.
In the first six months of 2008, all sectors of this business have delivered
strong growth as LED adoption has accelerated and a number of Dialight’s new
products were accepted in the market. Our strategy of identifying and servicing
sizeable regulated niche markets remains unchanged. The Company will continue to
work closely with LED developers to identify and bring to market Solid State
Lighting and Signalling Products which deliver value to its customers through
savings in energy and significantly improved product lifetimes and reliability.
Some of the raw materials used in this segment have been subject to commodity
price inflation but through both re-engineering and resourcing, the effects of
this inflation have been offset and our margins have held firm.
Traffic Lights
Overall, sales of Traffic Lights grew by over 25% against H1 2007 with both
North America and Europe contributing strongly. Enhanced by sales to Miami Dade
County of over $3m, North American sales posted a healthy increase over the same
period in 2007. The largest potential market for Traffic Signals growth is in
Europe where the adoption of LED technology lags significantly behind North
America and the Company saw an increase of over 40% in sales versus prior year.
This was achieved through an increase in the customer and geographical base as
well as maintaining our existing relationships with Traffic Systems OEMs. In
particular, the Company continues to be a significant supplier to Siemens both
in Germany and several other European countries.
Obstruction Lights
Obstruction Lights demonstrated continued excellent growth with sales up over
40% from 2007 H1. These products comprise a range of warning lights for
installation on tall structures throughout the world to alert approaching
aircraft to their presence. Key markets for these products are towers for
broadcast, cell phones and wind turbines and products are supplied to national
and international standards.
Sales of red products have been driven by the increase in installation of wind
turbines in the North American market and Dialight has been successful in
winning a major share of this business with its energy efficient, GPS
synchronised beacon.
The North American Cell Tower market requires, in many instances, a white strobe
light of which Dialight is the only supplier. Sales of this strobe, although
only at the beginning of its life cycle, helped contribute to growth. Our
expectations are that this product will help sustain growth in this market over
the coming years as there exists a sizeable installed base of conventional
strobes which potentially will be replaced by this LED product.
Transportation
Sales in this sector are primarily to the US Transit Bus market where Dialight
supplies exterior marker, stop and tail lights. More recently Dialight has
introduced white LED lights for interiors, step wells and engine compartments
which have contributed to growth, although another major contributing growth
factor here has been sales into the military vehicle market where the long life
and ruggedness of our products brings significant value to our customers. Our
sales grew by 27% versus 2007 H1.
Lighting
Sales to the Lighting market grew by over 40% against 2007 H1, albeit from a
relatively small base. Our sales to the architectural market demonstrated
pleasing growth as we continued to extend our network of lighting partners in
Europe, and in the USA an agreement with Juno Lighting represents our first
major signing of an OEM partnership.
Sales through distributors are also important as they “seed “the market and we
are experiencing good traction through this channel which should lead us to
future customers. Particularly significant were sales of the “Safesite” product
for Hazardous and Industrial applications. Shipments of these lights met
management expectations in this first full half of availability. We continue to
expand the applications for these products into a wider range of industries and
the product is being received with enthusiasm as a result of its energy saving
characteristics, long life and ruggedness.
Growth in Solid State Lighting will be driven by more efficient LEDs and the
increasing requirement to save more energy and to reduce carbon emissions.
Dialight is ideally placed to service this demand by firstly identifying those
areas where a strong energy efficient value exists and then bringing innovative
products to market early to satisfy that growing demand.
Components
Indication Business
Sales of these products are primarily to Electronics OEMs for status indication.
Dialight has a prime position in this market niche and is on the Vendor Lists of
most of the world’s major OEMs in the professional electronic equipment market
and also sells through a number of major Electronic Distributors.
Sales were up 6% over H1 2007 and to date the market appears to be steady
although perhaps nervous of a further slowdown in the economy. In the present
environment it is difficult to predict market trends, but our Distributor “Point
of Sale” data, which is considered to be a good indicator of the state of this
market, has remained steady.
Overall margins have remained strong and stable for the past several years, but
the well publicised material price inflation had a minor effect on one of our
product lines. We have implemented price increases which will take effect in the
second half of this year.
Electromagnetic Disconnects
For some years the US Advanced Meter Infrastructure market has been poised to
deliver significant growth for our Electromagnetic Disconnect products. Driven
by the need to manage energy resources more carefully, this market has uplifted
our sales by 18% against H1 2007. In the half we made our first significant
shipments of our new 200 amp switch. In the period we booked over £2.5 million
in orders for meter manufacturers in the United States. Dialight is well
positioned in this US Advanced Meter Infrastructure market and we expect to take
a sizeable share of this rapidly growing demand over the next few years.
Indication Business Disposal Project
The Board has explored in recent months the possibility of divesting the LED
Indication Components business, with a view to realising the Board’s view of
appropriate shareholder value. We have received a number of indicative offers
for the business, against a background of exceptional financial market turmoil.
The Board and our advisers remain convinced of the high quality and value of
this business and given its strong earnings and cash flow characteristics and
potential, we do not believe it is in the interest of our shareholders to
consider these offers further at this time.
Current trading and outlook
As businesses and consumers struggle with the high cost of energy and strive to
reduce their carbon footprints, we believe that Dialight and our Solid State
Lighting offering are ideally placed to exploit the resultant opportunities.
Our strategy for growth, first outlined in 2005, has delivered a further period
of strong double digit growth in Signals/Illumination and the Board is
encouraged by the increased adoption of our Solid State applications and the
good reception for our new products.
In addition to the strong performance in Signals/Illumination, our Disconnect
business is at last beginning to show strong growth in the US Utility market,
driven by adoption of the Advanced Meter Infrastructure.
Whilst the uncertainty of the global economic situation gives rise to some
caution in the outlook for sales of Indication Components, the energy efficient
nature of our Signals/Illumination products and our position in our chosen
markets give the Board confidence of further growth.
Harry Tee Roy Burton
Chairman Chief Executive
CONSOLIDATED INCOME STATEMENT
For the period ended 30 June 2008 (unaudited)
6 months ended 6 months ended 12 months ended
30 June 2008 30 June 2007 31 December 2007
Note £’000 £’000 £’000
Continuing operations
Revenue 2 34,543 28,890 63,408
Cost of sales (27,504) (22,600) (49,137)
Gross Profit 7,039 6,290 14,271
Distribution costs (2,391) (2,530) (5,053)
Administrative expenses (2,675) (2,794) (5,325)
Operating profit 2 1,973 966 3,893
Financial income 1,104 1,177 2,383
Financial expense (936) (872) (1,796)
Net financing income 3 168 305 587
Profit before tax 2 2,141 1,271 4,480
Income tax expense 4 (835) (483) (1,751)
Profit for the period attributable to equity holders 1,306 788 2,729
of the parent
Earnings per share
Basic 6 4.2p 2.5p 8.8p
Diluted 6 4.1p 2.5p 8.6p
The accompanying Notes form an integral part of these Interim Financial
Statements
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the period ended 30 June 2008 (unaudited)
6 months ended 6 months ended 12 months ended
30 June 2008 30 June 2007 31 December 2007
£’000 £’000 £’000
Exchange difference on translation of foreign operations 317 (402) 193
Actuarial gains on defined benefit pension schemes – – (339)
Tax on items taken directly in equity – (58) 131
Effect of change in UK tax rate – – (64)
Income and expense recognised directly in equity 317 (460) (79)
Profit for the period 1,306 788 2,729
Total recognised income and expense for the period attributable 1,623 328 2,650
to equity holders of the parent
The accompanying Notes form an integral part of these Interim Financial
Statements
CONSOLIDATED BALANCE SHEET
As at 30 June 2008 (unaudited)
30 June 2008 30 June 2007 31 December 2007
Note £’000 £’000 £’000
Assets
Property, plant & equipment 6,121 5,657 6,072
Intangible assets 8,109 7,473 7,913
Deferred tax asset 1,035 1,143 1,209
Total non-current assets 15,265 14,273 15,194
Inventories 10,936 9,394 9,846
Trade and other receivables 16,560 12,463 15,629
Cash and cash equivalents 3,540 6,957 6,561
Total current assets 31,036 28,814 32,036
Total assets 46,301 43,087 47,230
Liabilities
Loans and borrowings (151) (2,174) (2,172)
Trade and other payables (10,631) (7,393) (9,271)
Tax liabilities (2,513) (2,324) (2,822)
Total current liabilities (13,295) (11,891) (14,265)
Employee benefits (888) (1,281) (1,227)
Provisions (851) (774) (779)
Deferred tax liability (122) (112) (110)
Total non-current liabilities (1,861) (2,167) (2,116)
Total liabilities (15,156) (14,058) (16,381)
Net assets 31,145 29,029 30,849
Equity
Issued share capital 7 591 591 591
Merger reserve 7 546 546 546
Other reserves 7 701 (2,234) (1,637)
Retained earnings 7 29,307 30,126 31,349
Total equity attributable to equity shareholders of 31,145 29,029 30,849
the parent company
CONSOLIDATED CASH FLOW STATEMENT
For the period ended 30 June 2008 (unaudited)
6 months ended 6 months ended 12 months ended
30 June 2008 30 June 2007 31 December 2007
£’000 £’000 £’000
Operating activities
Profit for the year 1,306 788 2,729
Adjustments for:
Financial income (1,104) (1,177) (2,383)
Financial expense 936 872 1,796
Income tax expense 835 483 1,751
Share based payments 51 104 196
Depreciation of property, plant and equipment 615 561 1,155
Amortisation of intangible assets 477 388 843
Operating cash flow before movements in working capital 3,116 2,019 6,087
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables (1,132) 819 475
Increase/(decrease) in trade and other payables (969) 2,073 (1,356)
Decrease in pension liabilities
1,489 (994) 800
(213) (459) (192)
Cash generated from operations 2,291 3,458 5,814
Income taxes (paid)/received (964) 1,149 423
Interest paid (936) (872) (152)
Net cash from operating activities 391 3,735 6,085
Investing activities
Interest received 1,104 1,177 484
Capital expenditure (579) (737) (1,626)
Expenditure on development (369) (385) (958)
Sale of tangible fixed assets – – 11
Net cash generated from/(used in)investing activities 156 55 (2,089)
Financing activities
Dividends paid (1,187) (1,093) (1,687)
Redemption of preference shares treated as debt (2,021) (10) (12)
Own shares acquired
(191) – –
Net cash used in financing activities (3,399) (1,103) (1,699)
Net (decrease)/increase in cash and cash equivalents (2,852) 2,687 2,297
Cash and cash equivalents at 1 January 6,561 4,346 4,346
Effect of exchange rates on cash held (169) (76) (82)
Cash and cash equivalents at end of period 3,540 6,957 6,561
Notes to the Financial Statements
For the period ended 30 June 2008 (unaudited)
1) Basis of Preparation and Principal Accounting Policies
Dialight Plc (the “Company”) is a company domiciled in the UK. The condensed set
of financial statements as at, and for, the six month period ended 30 June 2008
comprises the Company and its subsidiaries (together referred to as the
“Group”).
The Group financial statements as at, and for, the year ended 31 December 2007
prepared in accordance with IFRSs as adopted by the EU and with those parts of
the Companies Act 1985 applicable to companies reporting under IFRS, are
available upon request from the Company’s registered office at 2B Vantage Park,
Washingley Road, Huntingdon PE29 6SR.
In respect of the Defined Benefit plans no actuarial gains or losses were
recognised in the period. There will be a full review performed at the year end
and any actuarial gains and losses arising will be recognised through the
statement of recognised income and expense at that date.
The comparative figures for the year ended 31 December 2007 are not the
Company’s statutory accounts for that year. Those accounts have been reported on
by the Company’s auditors and delivered to the registrar of companies. The
report of the auditors was (i) unqualified (ii) did not include any reference to
any matters to which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section
237(2) or (3) of the Companies Act 1985.
The condensed set of financial statements for the six month ended 30 June 2008
is unaudited but has been reviewed by the auditors. The Independent Review
Report is set out on page xx.
Statement of Compliance
The condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the EU. The condensed set of financial statements do not include
all of the information required for full annual financial statements, and should
be read in conjunction with the Group’s financial statements as at, and for the
year ended 31 December 2007.
This condensed set of financial statements was approved by the Board of
Directors on 29 July 2008.
Significant Accounting Policies
The accounting policies applied by the Group in this condensed set of financial
statements are the same as those applied by the Group in its financial
statements as at, and for the year ended 31 December 2007.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the year ending 31 December 2008 but have no
material impact to the Group.
IFRIC 11,IFRS 2- Group and Treasury Share Transactions, effective for annual
periods beginning on or after 1 March 2007.
IFRIC 14 IAS 19-The limit on a defined Asset Minimum Funding Requirements and
their Interaction. IFRIC 14 has yet to be adopted by the EU.
Estimates and Judgements
The preparation of a condensed set of financial statements requires management
to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group’s accounting
policies and the key sources of uncertainty were the same as those applied to
the Group financial statements as at 31 December 2007.
2) Segmental reporting
Business segments
The Group comprises the following business segments: –
* Signals/Illumination which includes Traffic and Rail Signals, Obstruction
Lights and Solid State Lighting products.
* Components comprising the indication businesses and electromagnetic
components.
Business segments
Six months ended 30 June 2008 Signals/ Illumination Electromagnetic components Indication business Total components
£’000 £’000 £’000 £’000 Total
£’000
Revenue 18,989 6,045 9,509 15,554 34,543
Contribution 5,976 1,494 5,015 6,509 12,485
Overhead costs (5,737) (1,502) (2,603) (4,105) (9,842)
Segment results 239 (8) 2,412 2,404 2,643
Unallocated expenses (see below) (670)
Operating profit 1,973
Net financing income 168
Profit before tax 2,141
Income tax expense (835)
Profit after tax 1,306
Six months ended 30 June 2007 Signals/ Illumination Electromagnetic components Indication business Total components Total
£’000 £’000 £’000 £’000
£’000
Revenue 14,822 5,134 8,934 14,068 28,890
Contribution 4,916 1,193 4,974 6,167 11,083
Overhead costs (5,396) (1,424) (2,555) (3,979) (9,375)
Segment result (480) (231) 2,419 2,188 1,708
Unallocated expenses (742)
Operating profit 966
Net financing income 305
Profit before tax 1,271
Income tax expense (483)
Profit after tax 788
Year ended 31 December 2007 Signals/ Illumination Electromagnetic components Indication business Total components Total
£’000 £’000 £’000 £’000
£’000
Revenue 33,379 11,000 19,029 30,029 63,408
Contribution 10,774 2,656 10,525 13,181 23,955
Overhead costs (10,660) (2,808) (5,083) (7,891) (18,551)
Segment results 114 (152) 5,442 5,290 5,404
Unallocated expenses (1,511)
Operating profit 3,893
Net financing income 587
Profit before tax 4,480
Income tax expense (1,751)
Profit after tax 2,729
6 months 6 months 12 months
ended ended ended
Profit before tax is stated after charging: 30 June 2008 30 June 31 December
£’000 2007 2007
£’000 £’000
Professional costs related to the suspended disposal (378) – –
Release of provision for businesses sold in 2005 as 496 – –
no longer required
118 – –
3. Net financing income
6 months 6 months 12 months
ended ended ended
Recognised in profit and loss account 30 June 2008 30 June 31 December
2007 2007
£’000 £’000 £’000
Interest income on bank deposits 95 217 484
Expected return on assets in the defined benefit pension 1,009 960 1,899
schemes
Finance income 1,104 1,177 2,383
Interest expense on financial liabilities (40) (42) (152)
Interest charge on pension scheme liabilities (896) (830) (1,644)
Finance expense (936) (872) (1,796)
Net financing income recognised in profit and loss account 168 305 587
Recognised directly in equity
Foreign currency translation differences for foreign 317 (402) 193
operations
4. Income tax expense
The tax charge of £835,000 for the half year to 30 June 2008 reflects the
anticipated effective tax rate for the year ending 31 December 2008.
5. Dividends
During the period the following dividends were paid:
6 months 6 months 12 months
ended ended ended
30 June 2008 30 June 2007 31 December
2007
£’000 £’000 £’000
Final – 3.8p (2007:3.5p) per ordinary share 1,187 1,093 1,093
Interim – 1.90p per ordinary share – – 594
1,187 1,093 1,687
The Directors have declared an interim dividend of 2.10 p per share (2007:1.90p)
costing £656,000 (2007:£594,000). It is payable on 18 September 2008 to
shareholders whose names are on the Register of Members at close of business on
8 August 2008. The ordinary shares will become ex-dividend on 6 August 2008.
As the dividend was declared after the end of the period being reported and in
accordance with IAS 10 ‘Events After the Balance Sheet Date’, the interim
dividend has not been accrued for in these financial statements. It will be
shown as a deduction from equity in the financial statements for the year ending
31 December 2008.
6. Earnings per share
The calculation of basic earnings per share is based on the profit for the
period of £1,306,000 (2007:£788,000) and a weighted average number of ordinary
shares outstanding during the six months ended 30 June 2008 of 31,050,000 (2007:
31,084,000).
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2008 2007 2007
Number Number Number
Weighted average number of shares 31,050,000 31,084,000 31,084,000
Diluted effect of share options 695,000 233,000 535,000
Diluted weighted average number of shares 31,745,000 31,317,000 31,619,000
The weighted average number of shares used in the basic earnings per share
calculation excludes 256,000 shares held by the Dialight Employees’ Share
Ownership Plan Trust.
7. Capital and Reserves
Share capital Merger reserve Translation reserve Capital redemption reserve Retained earnings Total
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