Interim Results

Dialight PLC 10 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: dialight@hspr.com DIALIGHT PLC Interim results for the six months ended 30 June 2007 Dialight plc, the UK based leader in applied LED technology, announces its Interim 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 recent exchange movements have impacted the Company's first half result markedly. Underlying sales performance in our Signals / Illumination segment has been strong, demonstrating the growing demand for energy efficient lighting delivered by our applied LED technology'. 'The slow-down in our Components segment, which we had reported earlier this year, was disappointing but demand has now stabilised'. 'We believe that our strategy of identifying and pursuing niche markets with strong LED value propositions places Dialight in a strong position to capitalise on the emerging Solid State Lighting opportunity'. Financial Results Revenue for the six months to 30 June 2007 showed a small reduction on the previous year due to the adverse currency background, with the US Dollar : £ sterling averaging 1.97 against 1.79 in 2006. At constant currency, total Group revenue increased 3%, with the Signals / Illumination business reporting healthy revenue growth of 12%. As previously announced, operating profit for the first half was adversely affected by lower sales within the Components segment and some slippage in cost reduction programmes. These programmes, whilst implemented later than planned, are now producing the previously expected results. Basic earnings per share were 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 an inventory reduction of £0.8m since the beginning of the year, as sales of Traffic Signals conforming to the new ITE standard accelerated. Business Review Components As reported in April, the Components segment began the year more slowly than in 2006. Whilst we saw some improvement in the second quarter of this year, sales levels are still not at those of last year. The majority of the slowdown in the first quarter was due to destocking by US distributors and similar actions by Asian based contract electronic manufacturers. The situation has since stabilised and all indications supported by our distributors' point of sales data are that the business will continue steadily for the rest of the year. The electromagnetic Disconnect product line continues to gain qualifications in the 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 the product mix meant the total contribution was reduced. Signals/ Illumination The Signals / Illumination segment supplies High Brightness LEDs for Solid State Lighting applications and the Board views it as having significant growth potential, driven by the new developments in LED technology for both coloured and white LEDs. During the last few months the major manufacturers of LED components have announced significant performance improvements, particularly for white LEDs. These improvements have allowed more competitive pricing of LED lighting generally, relative to traditional lighting products, thus enabling new LED applications to be economical in this sector. As yet there is no consensus as to the pace at which LEDs will be adopted for general lighting applications, although the acquisition activity which has taken place recently in the sector would suggest industry confidence in the eventual success of LEDs for these applications. In the meantime, Dialight adheres to its strategy of identifying emerging specialist LED market niches and producing LED products to address their value proposition, although the rate of adoption continues to be a challenge. In the period, a number of such new products have been introduced which we believe have significant potential for Dialight. Traffic Signals Dialight's Traffic Signals product line showed excellent growth of 14% at constant currency versus the same period in 2006. The adoption of the new ITE Standards in the United States is beginning to accelerate and this has enabled Dialight to establish some differentiation for its products due to the limited number of fully qualified suppliers available. Dialight was the first to be fully qualified. The market for retrofit contracts in traffic signals has been fairly active in the first half. To date Dialight has been awarded contracts for traffic signals in Florida and New York State, amongst others. It is anticipated that shipments in the second half of 2007 will increase as a result of these and other major orders. In Europe, Dialight continued to work with traffic system OEMs in each country and the numbers of units sold increased. Cost reductions have enabled us to decrease pricing to the market driving adoption of these products. Our strategy in Asia is to sell only in regulated markets on a proposition of quality and performance, not lowest price. We are working with OEMs in the region to identify and service those segments which are subject to stringent specification. Obstruction Lights Orders for Obstruction Lights in the US showed over 30% growth although a strong increase in North American Sales was offset to some extent by a slowing in Europe. We expect to see improvement in European Obstruction orders, however, as we introduce our white strobe product to the Wind Tower Market. During the half, Dialight successfully launched the world's first White LED Obstruction Beacon. This product was qualified late in 2006 and initial shipments were made late in the first half of 2007. In order to enhance the value proposition for this product and as a result of improvements in white LEDs, we continued its development and qualified a smaller, lighter, more cost efficient product at the end of the period. White lighting products open up a significant market for our LED lighting products. In the USA towers for Cellular and Broadcast applications use this white 'strobe' product for daytime warning and in Europe a similar product is used in the Wind Tower Market. These two applications give Dialight a potential market of over $40 million a year. In the first half of the year some success was achieved in LED lighting for Obstruction purposes that are qualified for use in hazardous locations and recently we received European approval for our products, thus expanding our potential 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 by strong demand in the US Bus market. At the end of the half, we made our first shipments 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 market were up in the period but against a relatively small comparator. Dialight has recently secured a contract with the New York Power Authority to supply over 10,000 more LED rail signals for use by New York City Transit. It is expected the majority of these will be shipped in the second half and be installed 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% at constant currency over the prior year first half. The introduction of new products in the second half is expected to improve further our position and drive growth. The preferred route to market for Dialight illumination products is through lighting manufacturers. We believe this is the most economical and effective way into the LED lighting market. The lighting industry is highly fragmented and traditionally conservative. The industry has never had to adopt such a radical technological change as that imposed by LEDs. It takes time for them to accept the inevitability of this change but our efforts with major Lighting OEMs on both sides of the Atlantic are promising. In May of this year, we had a good presence at the Lightfair show in New York with our products being displayed by a number of major OEMs. A Dialight product won an award for Best Product in Class for a fixture shown in conjunction with Hydrel (part of Acuity Brands Corp.). Improvements in white LED technology have been remarkable in the past few months. Lumileds and Cree, in particular, have announced LED product performances that rival some of the better conventional light sources for energy efficiency. The cost of these devices is still many times greater than the equivalent conventional light source, but with clever applications engineering - a speciality of Dialight - it is possible to make a good value proposition for use in certain niche applications. For example, Dialight has recently qualified its 'Safesite' White Light for hazardous locations. This fixture is a sealed for life unit that competes with a 150 watt traditional HID fixture and through innovative design, produces almost the same light at the target illumination area, with a saving of over 40% in energy usage compared with a conventional fixture. Our product will sell at about the same price as the conventional fixture and it is warranted for five years. It is expected to generate initial sales in the second half of 2007 and has received much interest from both end users and lighting OEMs. The improvements in white LEDs are also enabling other applications. Fluorescent tubes have long been a source of maintenance problems in buses and railway rolling stock. Dialight has introduced white fixtures for these applications and they are on trial with a number of US Transit Authorities. We believe that there is growing pressure towards the uptake of energy-efficient lighting applications and Dialight is well placed to benefit from this major global trend. Board Changes Jeff Hewitt retired from the Board on 31 August, 2007, having joined as a non-executive Director in 2001. Jeff was also Senior non-executive Director and Chairman of the Remuneration Committee and we thank him for his advice and support over the past six years. Dividend The Interim dividend is increased by 9% to 1.9 pence (2006: 1.75 pence) and will be payable on 11 October 2007, to shareholders on the register at 21 September 2007. The increased dividend reflects the Board's confidence in Dialight's future. Outlook Whilst our Components Segment began slowly this year, orders to date have stabilised and longer term prospects for the Meter Disconnect products appear to be excellent. In Signals / Illumination the new ITE standard for Traffic Lights in North America is showing accelerating adoption and there are some major contracts to be awarded, where Dialight is well placed to benefit. The introduction of white LED obstruction lighting in both Europe and the US is expected to improve our sales in the second half, as will the launch of our new Safesite product in the hazardous location market. The Board is confident about the underlying business but given the slower adoption in the Signals / Illumination segment, the full year results will be dependent on the timing of certain large retrofit contracts. Whilst we believe that we will win these contracts, there is an increasing risk that we will not secure releases to ship against them in 2007. In the eventuality that these shipments do not occur, the Board expects the impact on the operating performance in the second half to be up to £0.7m. The Board is confident that our strategy of identifying and pursuing niche LED lighting markets with strong value propositions, well positions Dialight to capitalise on the emerging trends in Solid State Lighting. Whilst with all new technology the timescales required for adoption are uncertain, the current signs remain 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 £'000 Continuing operations Revenue 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 3,668 holders 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 Financial Statements 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 £'000 Exchange difference on translation of foreign (402) (947) (1,900) operations Actuarial gains on defined benefit pension - - 303 schemes Tax 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 1,938 period attributable 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 2007 (unaudited) 30 June 2007 30 June 2006 31 December 2006 Note £'000 £'000 £'000 Assets Property, 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 29,372 Total assets 43,087 44,714 43,673 Liabilities Loans 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 Equity Issued 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 30,395 Retained earnings Total equity attributable to equity 29,029 28,910 29,690 shareholders 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 £'000 Operating activities Profit 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 388 317 658 Operating cash flow before movements in working 2,019 3,333 7,266 capital Decrease/(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' - - 485 Cash generated from operations 3,458 382 2,192 Income 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 activities Interest received 1,177 1,104 2,154 Acquisition 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) activities Financing activities Dividends paid (1,093) (937) (1,484) Transfer from 'Restricted Cash' - 2,813 2,559 Redemption of preference shares treated as debt (10) (17) (29) Own shares acquired - (308) (308) Net cash (used in)/generated by financing (1,103) 1,551 738 activities Net 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 the historical cost basis except for the revaluation of certain financial instruments. The financial information for the six months ended 30 June 2007 and the comparative figures for the six months ended 30 June 2006 are unaudited and have been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2006. 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 2006 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year have been delivered to the Registrar of Companies and include an audit report which was unqualified and did not contain a 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 of subsidiaries are included in the consolidated financial statements from the date control commences until the date that control ceases. 2) Accounting estimates and judgements The preparation of interim 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 the estimates. In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial 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 secondary format is geographical segments. A business segment is a component of the Group that is engaged in providing a group of related products and is subject to risks and returns that are different from those other business segments. A geographical segment is a component of the Group that operates within a particular economic environment and this is subject to risks and returns that are 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 electromagnetic disconnects. • 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 below represents sales less direct costs incurred by each business segment. Business segments Six months ended 30 June 2007 Components Signals/ Illumination Total £'000 £'000 £'000 Revenue 14,068 14,822 28,890 Contribution 6,167 4,916 11,083 Unallocated expenses (10,117) Operating profit from continuing operations 966 Net financing income 305 Profit before tax from continuing operations 1,271 Income tax expense (483) Profit after tax from continuing operations 788 Six months ended 30 June 2006 Components Signals/ Illumination Total £'000 £'000 £'000 Revenue 15,790 14,207 29,997 Contribution 7,564 5,162 12,726 Unallocated expenses (10,414) Operating profit from continuing operations 2,312 Net financing income 269 Profit before tax from continuing operations 2,581 Income tax expense (961) Profit after tax from continuing operations 1,620 Year ended 31 December 2006 Components Signals/ Illumination Total £'000 £'000 £'000 Revenue 32,015 30,287 62,302 Contribution 14,779 10,602 25,381 Unallocated expenses (20,057) Operating profit from continuing operations 5,324 Net financing income 489 Profit before tax from continuing operations 5,813 Income 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 £'000 Interest income 217 193 355 Expected return on assets in the defined benefit pension schemes 960 911 1,799 1,177 1,104 2,154 Interest 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 the anticipated 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 £'000 Final - 3.5p (2006:3.0p) per ordinary share 1,093 937 937 Interim - 1.75p per ordinary share - - 547 1,093 937 1,484 After the balance sheet dates the following dividends were recommended by the Directors. The dividends have not been provided for and there are no tax consequences for the Company. 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £'000 £'000 £'000 3.5p final dividend proposed - - 1,093 1.9p (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 the period of £788,000 (2006:£1,620,000) and a weighted average number of ordinary shares 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 Number Weighted 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 share calculation excludes 156,000 shares held by the Dialight Employees' Share Ownership 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 recognised directly in equity (See Statement 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 1,620 Net expense recognised directly in equity (See Statement 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 recognised directly in equity (See Statement 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 by the Group. At 30 June 2007 the number of shares held by the group through the Share Ownership Trust was 156,000 (2006: 156,000). The market value of these shares 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 Exchange

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