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Dialight PLC (DIA)

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Monday 24 February, 2014

Dialight PLC

Final Results

RNS Number : 7367A
Dialight PLC
24 February 2014
 



24 February 2014

Dialight plc

Unaudited Preliminary Results for the Year ended 31 December 2013

Dialight plc ('Dialight' or the 'Group'), the UK based leader in Applied LED Technology, announces its unaudited preliminary results for the year ended 31 December 2013.

 

Highlights

 

·     Group revenue increased to £131.2m from £115.1m

·     Lighting revenues increased by 51% to £68.5m (2012:£45.5m)

·     Lightingsegment profit increased 34% to £11.5m (2012:£8.6m)

·     Group underlying profit from operating activities £14.5m (2012:£19.6m)

·     Group profit from operating activities £11.6m (2012: £19.6m)

·     EPS - underlying EPS was 30.8p (2012: 41.7p)

- basic EPS was 26.2p (2012: 42.0p)

·     Final dividend held at 9.5p (2012: 9.5p) per ordinary share. Total dividend up 7% at 14.4p per share.

·     Net cash at 31 December of £7.1m (2012: £15.0m)

 

Roy Burton, Group Chief Executive, said:

"With market leading innovative products, expansion of our sales channels and continued buoyancy in the industrial lighting market, the Board expects to drive strong Lighting growth for 2014 and the years to come. This, combined with a stabilization of the Signals business leads the Board to expect a return to earnings growth in 2014."

 

 

Enquiries:

Dialight plc,

Roy Burton, Group Chief Executive

Kevin Higginson, Interim Chief Financial Officer

+44 (0) 1638 778640

 

CanaccordGenuity Limited

Simon Bridges

+44 (0) 20 7523 8000

 

FTI consulting

Nick Hasell

+44 (0) 20 7269 7191

 

 

Further information:

There will be an analyst and investor meeting at 10.30 hours this morning at FTI Consulting, Holborn Gate, 26 Southampton Buildings, London, WC2A 1PB.

 

A live audiocast of the event will be available at 10.30 hours on the company's website, http://www.dialight.com.

A slide presentation of the event will be available at 10.30 hours on http://www.dialight.com.

 

Internet users will be able to view this announcement, together with other information about Dialight at the company's web site http://www.dialight.com.

 

About Dialight

Dialight plc is leading the lighting revolution for industrial users across the world. Applying leading edge LED technology it produces retro-fittable lighting fixtures designed specifically for hazardous locations, obstruction signals and traffic signalling to vastly reduce maintenance, save energy, improve safety and ease disposal.

 

Dialight comprises the following business segments:

 

· Lighting which addresses the increasing demands for energy efficient Lighting solutions through the use of high brightness LEDs and utilisation of a number of associated technologies. Areas of business are Solid State Lighting products for Hazardous and Non-Hazardous Industrial application.

 

· Signals which addresses the increasing demands for energy efficient Signalling solutions through the use of high brightness LEDs and utilisation of a number of associated technologies. Areas of business include Traffic Signals and Obstruction Signals

· Components whose sales are primarily to Electronics OEMs for status indication and residual disconnect components for automotive and niche industrial application

 

The company is headquartered in the UK and listed on the London Stock Exchange (LSE:DIA.L, GB0033057794) with operating locations in the UK, USA, Germany, Denmark, Australia, Singapore, Japan, Malaysia and Mexico. More information is available at www.dialight.com.

 

 

Financial Results

Revenue from continuing operations grew by 14% to £131.2m (2012: £115.1m) with lighting segment revenue growth of 51% to £68.5m (2012: £45.5m). Group contribution margin from continuing operations reduced from 46.1% to 44.7% due to the effects of the downturn in the Obstruction business however, contribution margins in the Lighting segment grew from 44.3% in 2012 to 45.5% in 2013.

 

Underlying profit from operating activities from continuing operations was £14.5m (2012:£19.6m).  Non underlying costs of £2.9m (2012: nil) were incurred during the year including an intellectual property past-use access fee £1.4m relating to a one-off payment for access to certain patents and intellectual property over the last five years, goodwill and asset write downs £0.8m and employee severance, restructuring and other costs of £0.7m.  Profit from operating activities was £11.6m (2012: £19.6m).

 

During the year under review the Group delivered profit at a level that was lower than expectations.   As a matter of good governance, the Audit Committee, following discussion with the full Board, has undertaken an assessment, assisted by an independent consultant, of the Group's forecasting and performance process. This assessment has highlighted a number of process improvements, the implementation of which has begun. The review has been fully embraced by the interim CFO. It is envisaged that following completion of these improvements, the Group will have a much more robust and focused system of internal control that will support Dialight's growth in the coming years.

Profit before tax was £11.2m (2012:£19.8m). There was a profit after tax on the disposal of discontinued activities of £0.7m (2012: £0.1m).

Basic underlying EPS was 30.8p (2012:41.7p) withbasic EPS of 26.2p (2012:42.0p).

 

At 31 December, net cash was £7.1m (2012: £15.0m).

 

Dividend

The Board is recommending, subject to approval by shareholders, a final dividend of 9.5p giving a total dividend for the year of 14.4 p (2012: 13.5p). This will be paid on 3 June 2014 to shareholders on the register at the 2May  2014.

 

2013 Review

The focus of 2013 was the continued growth in Industrial lighting and the repositioning of Obstruction signals as a systems business offering monitoring and control to the major tower operators. Once again Industrial lighting posted significant growth of £23.0m, with strong contributions from all geographies driven by our ever increasing sales force and industry leading product performance.

 

The year was impacted by the transition ofthe obstruction business andthe continued delay in the award of large contracts bycell phone tower operators in the USA.  The performance of the traffic business in the US and Europe was also impacted with revenues being down £3m on 2012. We suffered from the late receipt of orders in the Lighting segment as well as investment decisions by certain end customers, primarily in the USA, being deferred until 2014. When all this is taken together the Group managed to achieve underlying profit for the full year of £14.5m (2012:£19.6m). This reflects, in part, the full impact of the Group's increased sales costs without the benefits of increased sales.

 

Lighting Segment


2013

2012


Revenue

£68.5m

£45.5m

51%

Segment result

£11.5m

£8.6m

34%

Contribution Margin

45.5%

44.3%


 

Industrial Lighting continued to grow with revenues of £68.5m, £23.0m ahead of 2012 and with strong contributions from all geographies. Since our entry into the lighting market our strategy has been to address sizeable niche markets with defensible barriers to entry and where reliable, efficient LED based lighting can produce a strong return on investment.  This is important as we are constantly in the process of persuading customers of the benefit in the replacement of their existing conventional lighting fixtures with Dialight lights. These customers are concentrated in the Industrial Market, particularly those industries involving hazardous environments alongside heavy manufacturing, food and beverage processing and peripherally, warehousing and cold storage. We support users in the oil and gas market, power generation, waste water treatment and many other segments where operations run round the clock and where shutdowns are both difficult and expensive. These markets have an existing installed base of conventional lighting valued at the tens of billions of pounds globally. Our sales of £68.5m million  demonstrate not only the minimal penetration of LED lighting to date, but most importantly the long term growth prospects for companies like Dialight who are able to offer a compelling proposition to customers in these markets and to offer savings lasting well in excess of ten years.

It is in these applications that Dialight's ability to save more than 50% of the energy bill and guarantee uninterrupted lighting for up to ten years drives rapid paybacks and significant returns on investment.

 

Dialight serves its chosen markets on a global basis and has manufacturing operations in theUK, USA, Mexico, Brazil, Malaysia and Denmark to support our sales offices throughout the world. During 2013 our salesforce has increased to over 100 people (2012: 55) in almost 30 countries and we expect it will continue to grow in 2014.

 

This year has seen rapid progress in new product development. We entered the year with products that had just achieved an output efficiency of 100 lumens per watt and start 2014 with an industry leading 25% improvement on that, allied with a 10 year full performance warranty, again a first in the industry. These improvements come in the main from Dialight's own technology and the comprehensive vertical integration of both design and manufacturing of the end product. In addition to superior performance and lifetime, Dialight has delivered its first products equipped with integral controls and monitoring, allowing our users to apply control to fine tune the savings they can obtain from their lighting. The introduction of these new and superior products has enabled Dialight to secure some significant customer wins. After extensive trials and validation, Ford Motor Company has chosen Dialight's new Vigilant range of high performance lights to be its preferred light for factory installation. First shipments have commenced and while no quantities are guaranteed, we believe there is scope for significant future sales.

 

Signals Segment


2013

2012


Revenue

£41.8m

£48.1m

(13%)

Segment result

£5.2m

£11.3m

(54%)

Contribution Margin

41.8%

47.0%


Signals comprises the Obstruction, Traffic and Transportation business.

 

Although down overall, Obstruction posted higher revenues in the second half of 2013 than in the previous two halves and received significant customer qualifications which positions products well for any major contracts that may be awarded in 2014.The balance of the Signals Segment was down due to softness in the US Traffic Signals market.  Neither Traffic nor Transportation sales are expected to show growth in the coming years.

 

Obstruction 

Dialight has been the pioneer of LED technology for use in Obstruction for a number of years. This market did not really take off until 2010 with the advent of an LED based white strobe light which addressed a market to place lighting on top of thousands of cellphone towers around the USA. The potential market is c80, 000 towers. Sales grew to almost £18 million in 2011 with prospects of continued growth. Dialight's channel to market had been primarily through a value added reseller. In the second half of 2012 this reseller became a competitor, the result of which was to stall the market at the time when a major tower operator was about to place contracts for a retrofit project of up to 7000 towers.

 

In the ensuing months, our Obstruction business saw a significant downturn in revenues affecting both the second half of 2012 and the first half of 2013.It was only in the second half of 2013 that we saw any sort of recovery which resulted in revenues in the second half of 2013 being 10% ahead of prior year but down 20% for the full year of 2013.

 

 Much progress has been made since the separation from our former reseller and the business is no longer merely a light fixture business but is now one supplying sophisticated monitoring and control for Obstruction. Dialight is now approved as a supplier to a number of the major tower operators in the US and we believe there is significant  potential in the Latin American market for its new products.

 

Within Obstruction there is a European business which addresses the market place for lights for wind turbines. This business showed good progress in 2013.

 

Components Segment


2013

2012


Revenue

£20.9m

£21.5m

(3%)

Segment result

£1.3m

£3.1m

(58%)

Contribution Margin

47.5%

47.9%


 

This segment of our business is the supply of small LED Indicators into the Professional Electronics market. As expected this business is flat and while over time it may suffer the market fluctuations associated with the electronics OEM market, it is not expected to suffer the same degree of revenue fluctuation or price pressure as other components. Product contribution margins have been stable over a number of years and there are no significant customer concentration issues. Much of the business is transacted through distributors with over 15,000 end customers.

 

Operations and Engineering

Once again our Engineering and Operations teams had a busy year. From the introduction of ground breaking new products to establishing manufacturing presence in a new region; South America, where we are establishing an assembly plant in Sao Paolo for Industrial Lighting products in the Brazilian market.

 

Our latest product offering is the new 125 lumen per watt Vigilant series using our latest Resonant Power Supply technology with a ten year full performance warranty. This new power supply is the key to both the improved efficiency and the longer life of our light fixture. Developed in our own laboratories, this technology is the beginning of further significant developments in the ways that we improve the value of our products to our customer base. We expect to see further improvements and new features throughout the coming months.

 

Not only have our Industrial Lighting products seen the benefit of skills of our engineering and scientific teams. As previously mentioned, the Obstruction product line has been completely reinvented and now offers the most comprehensive monitoring and control systems on the market, offering tower operators significant benefits in communications and diagnostics with the ability to upgrade the system remotely.

 

During the year we have almost doubled our manufacturing space in Mexico and made major investments in equipment for both Power Supply and completed Light Fixture manufacturing.

 

Intellectual property is important to us and in the year we had 23 new patents granted. We filed 32 new applications and we had 87 patent applications pending at the year end. At the end of 2013, Dialight joined the Philips Luminaire Licensing Programme, which gives access to a broad range of Phillips' intellectual property relating to luminaries.

 

Board Changes

Two new non-executive directors, Stephen Bird and Tracey Graham joined the Board on 10 January 2013 and have made an excellent contribution during that time.

 

Mark Fryer left the Company on 15 January 2014. We wish him well for the future. An executive search firm has been engaged to find his successor. In the meantime, Kevin Higginson has joined the Company as Interim Chief Financial Officer, but has not been appointed a statutory director.

 

 

Outlook

With market leading innovative products, expansion of our sales channels and continued buoyancy in the industrial lighting market, the Board expects to drive strong Lighting growth for 2014 and the years to come. This, combined with a stabilization of the Signals business leads the Board to expect a return to earnings growth in 2014.

 

Roy Burton, Group Chief Executive

Bill Ronald, Chairman

24 February 2014

 

 

Consolidated income statement

For the year ended 31 December 2013

 




12 months ended
31 December 2013


12 months ended
31 December 2012 (restated#)


Note


Underlying

£'m

Non-

Underlying*

£'m

Total

£'m


Underlying

£'m

Non-

Underlying*

£'m

Total

£'m

Continuing operations










Revenue

1


131.2

-

131.2


115.1

-

115.1

Cost of sales



(89.6)

-

(89.6)


(73.9)

-

(73.9)

Gross profit



41.6

-

41.6


41.2

-

41.2

Distribution costs



(18.1)

-

(18.1)


(12.5)

-

(12.5)

Administrative expenses



(9.0)

(2.9)

(11.9)


(9.1)

-

(9.1)

Profit/(Loss) from operating activities

1


14.5

(2.9)

11.6


19.6

-

19.6

Financial income

4


-

-

-


0.2

-

0.2

Financial expense

4


(0.1)

(0.3)

(0.4)


(0.1)

0.1

-

Net financing (expense) /  income

4


(0.1)

(0.3)

(0.4)


0.1

0.1

0.2

Profit/(Loss) before income tax

1


14.4

(3.2)

11.2


19.7

0.1

19.8

Income tax expense

5


(4.5)

1.0

(3.5)


(6.5)

-

(6.5)

Profit/(Loss) from continuing operations after tax

1


9.9

(2.2)

7.7


13.2

0.1

13.3

Discontinued operations










Gain from discontinued operations (net of taxes)

2


-

0.7

0.7


-

0.1

0.1

Profit/(Loss) for the year

1


9.9

(1.5)

8.4


13.2

0.2

13.4

Profit for the period attributable to:










Equity owners of the Company





8.5




13.5

Non-controlling Interests





(0.1)




(0.1)

Profit for the year





8.4




13.4

Earnings per share - underlying










Basic

6




30.8p




41.7p

Diluted

6




30.5p




41.0p

Earnings per share










Basic

6




26.2p




42.0p

Diluted

6




25.9p




41.3p

Earnings per share - continuing operations










Basic

6




23.9p




41.4p

Diluted

6




23.7p




40.7p

The accompanying Notes form an integral part of these financial statements.

# See notes - changes in accounting policies

* See note 3

 

 

 

Consolidated statement of comprehensive income

For the year ended 31 December 2013

 


2013

£'m

2012

(restated#)

£'m

Other comprehensive income



Items that may be reclassified subsequently to profit and loss

Exchange difference on translation of foreign operations

(1.3)

(1.7)

Income tax on exchange difference on translation of foreign operations

-

0.3


(1.3)

(1.4)

Items that will not be reclassified subsequently to profit and loss



Remeasurement of defined benefit pension liability

0.7

(2.5)

Income tax on remeasurement of defined benefit pension liability

(0.2)

0.6


0.5

(1.9)

Other comprehensive income for the year, net of tax

(0.8)

(3.3)

Profit for the year

8.4

13.4

Total comprehensive income for the year

7.6

10.1

Attributable to:



 Owners of the parent

7.7

10.2

 Non-controlling interest

(0.1)

(0.1)

Total comprehensive income for the year

7.6

10.1

 

# See notes - changes in accounting policies

 

 

 

Consolidated statement of changes in equity

For the year ended 31 December 2013

 


Share

capital

£'m

Merger

reserve

£'m

Translation

reserve

£'m

Capital

redemption

reserve

£'m

Retained

earnings

£'m

Total

£'m

Non-

controlling

interests

£'m

Total

equity

£'m

Balance at 1 January 2013

0.6

1.4

2.1

2.2

56.7

63.0

0.0

63.0

Profit

-

-

-

(0.1)

8.4

Other comprehensive income:






Foreign exchange translation differences, net of taxes

-

(1.3)

-

-

(1.3)

Remeasurement of defined benefit pension liability, net of taxes

-

-

-

-

0.5

0.5

-

0.5

Total other comprehensive income

-

-

(1.3)

-

0.5

(0.8)

-

(0.8)

Total comprehensive income for the year

-

-

(1.3)

-

9.0

7.7

(0.1)

7.6

Transactions with owners, recorded directly in equity:









Share-based payments, net of tax

-

-

-

-

0.7

0.7

-

0.7

Dividends

-

-

-

-

(4.6)

Total contributions by and distributions to owners

-

-

-

-

(3.9)

(3.9)

-

(3.9)

Balance at 31 December 2013

0.6

1.4

0.8

2.2

61.8

66.8

(0.1)

66.7

Balance at 1 January 2012

0.6

1.4

3.5

2.2

47.0

54.7

0.1

54.8

Profit

-

-

-

(0.1)

13.4

Other comprehensive income:






Foreign exchange translation differences, net of taxes

-

(1.4)

-

-

(1.4)

Remeasurement of defined benefit pension liability, net of taxes

-

-

-

-

(1.9)

(1.9)

-

(1.9)

Total other comprehensive income

-

-

(1.4)

-

(1.9)

(3.3)

-

(3.3)

Total comprehensive income for the year

-

-

(1.4)

-

11.6

10.2

(0.1)

10.1

Transactions with owners, recorded directly in equity:









Share-based payments, net of tax

-

-

-

-

1.4

Deferred bonus share scheme

-

-

-

-

0.2

Dividends

-

-

-

-

(3.4)

Dividends on shares awarded under the PSP

-

-

-

-

(0.1)

Total contributions by and distributions to owners

-

-

-

-

(1.9)

(1.9)

-

(1.9)

Balance at 31 December 2012

0.6

1.4

2.1

2.2

56.7

63.0

-

63.0

At 31 December 2013 the number of shares held by the Group through the Dialight Employees' Share Ownership Plan Trust ("ESOT") trust was nil (2012: 47,596). The market value of these shares at 31 December 2013was £nil (2012: £505,945).

 

 

 

Consolidated statement of total financial position

For the year ended 31 December 2013

 


2013

£'m

2012

£'m

Assets



Property, plant and equipment

13.4

10.9

Intangible assets

21.1

18.2

Deferred tax assets

0.4

1.6

Total non-current assets

34.9

30.7

Inventories

24.2

19.6

Trade and other receivables

27.9

27.0

Cash and cash equivalents

8.8

15.0

Total current assets

60.9

61.6

Total assets

95.8

92.3

Liabilities



Trade and other payables

(22.7)

(22.4)

Provisions

(0.3)

(0.5)

Contingent consideration

(0.6)

(0.6)

Tax liabilities

(1.7)

(1.5)

Total current liabilities

(25.3)

(25.0)

Employee benefits

(0.4)

(1.2)

Contingent consideration

(2.7)

(2.7)

Provisions

(0.7)

(0.4)

Total non-current liabilities

(3.8)

(4.3)

Total liabilities

(29.1)

(29.3)

Net assets

66.7

63.0

Equity



Issued share capital

0.6

0.6

Merger reserve

1.4

1.4

Other reserves

3.0

4.3

Retained earnings

61.8

56.7


66.8

63.0

Non-controlling interests

(0.1)

-

Total equity

66.7

63.0

 

The accompanying notes form part of the financial statements.

 

 

 

Consolidated statement of cash flows

For the year ended 31 December 2013


2013

£'m

2012

(restated #)

£'m

Operating activities



Profit for the year

8.4

13.4

Adjustments for:



Financial income

-

(0.3)

Financial expense

0.4

0.1

Income tax expense

3.4

6.3

Share-based payments

0.4

0.5

Deferred bonus share scheme

-

0.2

Depreciation of property, plant and equipment

2.0

2.0

Amortisation of intangible assets

1.1

0.9

Impairment losses on intangible assets and goodwill

0.3

-

Gain on sale of discontinued operation, net of tax

(1.0)

(0.5)

Operating cash flow before movements in working capital

15.0

22.6

Increase in inventories

(5.2)

(7.5)

Increase in trade and other receivables

(1.5)

(4.9)

(Decrease) / increase in trade and other payables

(1.2)

4.0

Increase/(decrease) in provisions

0.1

-

Pension contributions in excess of the income statement

(0.3)

(0.4)

Cash generated from operations

6.9

13.8

Income taxes paid

(2.2)

(4.3)

Interest paid

(0.1)

-

Net cash generated from operating activities

4.6

9.5

Investing activities



Acquisition of subsidiary, net of cash acquired

-

(1.6)

Non-controlling interest

0.1

-

Disposal of discontinued operation, net of cash disposed of

1.3

4.3

Capital expenditure

(4.9)

(4.2)

Capitalised expenditure on development

(4.4)

(2.8)

Sale of tangible fixed assets

0.1

-

Net cash used in investing activities

(7.8)

(4.3)

Financing activities



Dividends paid

(4.6)

(3.4)

Net cash used in financing activities

(4.6)

(3.4)

Net increase in cash and cash equivalents

(7.8)

1.8

Cash and cash equivalents at beginning of the year

15.0

13.7

Effect of exchange rates on cash held

(0.1)

(0.5)

Cash and cash equivalents at end of year (see note 9)

7.1

15.0

 

#see notes - changes in accounting policies

 

 

 

Notes to the consolidated financial statements

For the year ended 31 December 2013

 

Basis of preparation

The summary financial statements have been prepared on the historical cost basis except for the revaluation of certain financial instruments which are carried at fair value.

The financial information set out in this announcement does not constitute the company's statutory accounts for the years ended 31 December 2013 or 2012. The financial information for 2012 is derived from the statutory accounts for 2012 which have been delivered to the registrar of companies. The auditors have reported on the 2012 accounts; their report was (i) unqualified, (ii) did not include a 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 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2013 will befinalisedon the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course.

Full financial statements for the year ended 31 December 2013, will be posted to shareholders on 18 March, and delivered to the registrar after the Annual General Meeting on 16 April.

 

Changes in accounting policies

 

Except for the changes below, the Group has consistently applied the accounting policies set out in the Group's 2012 annual report and accounts to all periods presented in these consolidated financial statements.

 

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2013. Whilst there are further new or amended standards to those detailed below, these have not had a material impact on the Group and are therefore not disclosed.

·      Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)

·      IAS 19 Employee Benefits (2011)

The nature and effect of these changes are explained below.

Presentation of items of OCI

As a result of the amendments to IAS 1, the Group has modified the presentation of items of OCI in its statement of profit or loss and OCI, to present separately items that would be reclassified to profit or loss from those that would never be. Comparative information has been re-presented accordingly. 

Post-employment defined benefit plans

As a result of IAS 19 (2011), the Group has changed its accounting policy with respect to the basis for determining the income or expense related to its post-employment defined benefit plans. 

Under IAS 19 (2011), the Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability (asset) now comprises: interest cost on the defined benefit obligation, interest income on plan assets, and interest on the effect on the asset ceiling. Previously, the Group determined interest income on plan assets based on their long-term rate of expected return. 

The quantitative impact of the change is an increase in profit after tax for the year ended 31 December 2012 of £58,000 and a decrease in other comprehensive income of the same amount. In addition, the expected return on assets and interest charge on scheme liabilities have been presented net in the income statement.

No other changes to new or revised accounting standards have had a material impact on the consolidated financial statements of the Group.

 

1. Operating segments

The Group comprises three reportable operating segments.  These segments have been identified based on the internal information that is supplied regularly to the Group's Chief Operating Decision Maker for the purposes of assessing performance and allocating resources.  The Chief Operating Decision Maker is considered to be the Group's Chief Executive.

The three reportable operating segments are:

·      Lighting, which develops, manufactures and supplies highly efficient LED lighting solutions for hazardous and industrial applications in which lighting performance is critical. 

·      Signals, which develops, manufactures and supplies highly efficient LED signalling solutions for markets including anti-collision obstruction lighting and traffic signals.

·      Components, which develops, manufactures and supplies status indication components for electronics OEMs, together with niche industrial and automotive electronic components.

There is no inter-segment revenue.

All revenue relates to the sale of goods. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated expenses comprise corporate costs including share-based payments.

There are no individual customers representing more than 10% of revenue.

Reportable segments

2013

Lighting

£'m

Signals

£'m

Components

£'m

Continuing

Operations

£'m

Electro-

Magnetic

Components

(discontinued)

£'m

Total

£'m

Revenue

68.5

41.8

20.9

131.2

0.5

131.7

Contribution

31.3

17.5

9.9

58.7

0.1

58.8

Overhead costs

(19.8)

(12.3)

(8.6)

(40.7)

(0.5)

(41.2)

Segment results

11.5

5.2

1.3

18.0

(0.4)

17.6

Unallocated expenses




(3.5)

-

(3.5)

Underlying operating profit




14.5

(0.4)

14.1

Non-underlying expenses




(2.9)

-

(2.9)

Operating profit




11.6

(0.4)

11.2

Net financing (expense)




(0.4)

-

(0.4)

Profit on sale




-

1.3

1.3

Profit before tax




11.2

0.9

12.1

Income tax expense




(3.5)

(0.2)

(3.7)

Profit after tax




7.7

0.7

8.4

2012

Lighting

£'m

Signals

£'m

Components

£'m

Continuing

Operations

£'m

Electro-

Magnetic

Components

(discontinued)

£'m

Total

£'m

Revenue

45.5

48.1

21.5

115.1

14.6

129.7

Contribution

20.2

22.6

10.3

53.1

1.9

55.0

Overhead costs

(11.6)

(11.3)

(7.2)

(30.1)

(2.4)

(32.5)

Segment results

8.6

11.3

3.1

23.0

(0.5)

22.5

Unallocated expenses




(3.4)

-

(3.4)

Operating profit




19.6

(0.5)

19.1

Net financing  income




0.2

-

0.2

Profit on sale




-

0.7

0.7

Profit before tax




19.8

0.2

20.0

Income tax expense




(6.5)

(0.1)

(6.6)

Profit after tax




13.3

0.1

13.4

 

 

Geographical segments

The Lighting, Signals and Components segments are managed on a worldwide basis but operate in four principal geographic areas: North America, UK, Europe and Rest of World. The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods.All revenue relates to the sale of goods.

Sales revenue by geographical market

2013

£'m

2012

£'m

North America

82.8

90.1

UK

12.0

11.7

Rest of Europe

17.5

12.9

Rest of World

19.4

15.0

Electro-magnetic components (discontinued)

(0.5)

(14.6)


131.2

115.1

 

Reconciliations of reportable segment profit or loss


2013

£'m

2012

£'m

Total profit or loss for reportable segments

17.6

22.5

Elimination of discontinued operations

0.4

0.5

Unallocated amounts:



Other corporate expenses

(3.5)

(3.4)

Non-underlying expenses

(2.9)

-

Net financing (expenses) / income

(0.4)

0.2

Consolidated profit from continuing activities before tax

11.2

19.8

 

2. Discontinued operations

The Group disposed of the assets of its electromagnetic components business in late 2012.  During the year, the Group received contingent consideration of £1.3m (before tax) and sold some residual inventory.  The results of these activities have been presented as discontinued operations.

Results of discontinued operation


2013

£'m

2012

£'m

Revenue

0.5

14.6

Expenses

(0.9)

(15.1)

Results from operating activities

(0.4)

(0.5)

Tax

0.1

0.1

Results from operating activities, net of tax

(0.3)

(0.4)

Gain on sale of discontinued operation

1.3

0.7

Tax on gain on sale of discontinued operation

(0.3)

(0.2)

Profit for the year

0.7

0.1

Basic earnings per share

2.2p

0.5p

Diluted earningsper share

2.2p

0.5p

 

The operating loss from discontinued operations of £0.4m (2012: loss of £0.5m) is attributable entirely to the owners of the Company.

Cashflows from / (used in) discontinued operations


2013

£'m

2012

£'m

Consideration received, satisfied in cash

1.3

5.7

Cash paid for redundancy and staff costs

-

(0.9)

Cash paid for professional and other fees

-

(0.5)

Net cash inflow from investing activities

1.3

4.3

 

The net cash used in operating activities for the year ended 31 December 2013 is £0.1m (2012: £0.2m).

 

3. Non-underlying expense

From time-to-time, the Group incurs costs and earns income that is non-recurring in nature or that is otherwise considered to be not reflective of the underlying performance of the business.  In the assessment of performance of the components of the Group, management examines underlying performance, which removes the impact of non-underlying costs and income.  The results of discontinued operations are also considered to form part of non-underlying operations.

The table below presents the components of non-underlying profit or loss recorded within administrative expenses:


2013

£'m

2012

£'m

Intellectual property past-use access fee

(1.4)

-

Goodwill and asset write-down

(0.8)

-

Employee severance and restructuring costs

(0.4)

-

Other

(0.3)

-

Non-underlying costs recorded in administrative expenses

(2.9)

-

 

The intellectual property past-use access fee relates to a one-off payment for access to certain patents and intellectual property over the last five years.

During the year, the goodwill, intangible assets and certain operating assets related to the Group's Japanese subsidiary, Dialight Japan KK, were written-down in full due to deterioration in the Group's projections for that territory.

During the year, the Group closed its UK research and development site and engaged in certain other limited restructuring exercises which led to staff redundancies and other termination costs.

The table below presents the components of non-underlying profit or loss recorded within finance income / (expenses):


2013

£'m

2012

£'m

Change in fair value of contingent consideration

(0.3)

(0.1)

Release of provision related to closure of US pension scheme

-

0.2

Non-underlying (costs) / income recorded in finance (expense) / income

(0.3)

0.1

 

4. Net financing (expense) / income

Recognised in profit and loss


12 months 31 December 2013


12 months 31 December 2012

(restated #)


Underlying

£'m

Non-

Underlying*

£'m

Total

£'m


Underlying

£'m

Non-

Underlying*

£'m

Total

£'m

Interest income on bank deposits

-

-

-


0.1

-

0.1

Net change in fair value of financial assets at fair value through profit or loss held for trading

-

-

-


0.1

-

0.1


-

-

-


0.2

-

0.2

Interest expense on financial liabilities

(0.1)

-

(0.1)


(0.1)

-

(0.1)

Change in fair value on contingent consideration

-

(0.3)

(0.3)


-

(0.1)

(0.1)

Net interest on net defined benefit liability

-

-

-


-

-

-

Non-underlying settlement loss on buy-out of US pension scheme

-

-

-


-

0.2

0.2


(0.1)

(0.3)

(0.4)


(0.1)

0.1

-

Net financing (expense) / incomerecognised in consolidated income statement

(0.1)

(0.3)

(0.4)


0.1

0.1

0.2

 

# See notes - changes in accounting policies

* See note 3

 

5. Income tax expense

Current tax expense - recognised in the income statement


2013

£'m

2012

£'m

Tax expense from continuing operations

3.5

6.4

Tax from discontinued operations (excluding gain on sale)

(0.1)

(0.1)


3.4

6.3

Tax on gain on sale of discontinued operation

0.3

0.2

Income tax expense

3.7

6.5

 

Recognised in the income statement


2013

£'m

2012

£'m

Current tax expense



Current year

3.5

5.4

Adjustment for prior years

(0.1)

(0.1)

Utilisation of previously unrecognised losses

(0.2)

-


3.2

5.3

Deferred tax expense



Origination and reversal of temporary differences

0.7

1.1

Adjustment for prior years

0.1

0.1

Reduction in tax rate

0.2

-

Recognition of previously unrecognised losses

(0.7)

-

Change in recognised deductible timing differences

0.2

-

Income tax expense

3.7

6.5

 

Reconciliation of effective tax rate


2013

%

2013

£'m

2012

%

2012

£'m

Profit for the year


8.4


13.4

Total income tax expense


3.7


6.5

Profit excluding income tax


12.1


19.9

Income tax using the UK corporation tax rate

23.3

2.8

24.5

4.9

Effect of tax rates in foreign jurisdictions

8.3

1.0

10.2

2.0

Reduction in  tax rate

1.7

0.2

0.4

-

Non-deductible expenses

1.7

0.2

(0.7)

(0.1)

Recognition of tax effect of previously unrecognised losses

(7.4)

(0.9)

(1.0)

(0.2)

Current year losses for which no deferred tax is recognised

4.1

0.5

-

-

Change in recognised deductible timing differences

1.7

0.2

-

-

Research and development credits

(0.8)

(0.1)

(0.7)

(0.1)

Other

(1.7)

(0.2)

(0.1)

-


30.9

3.7

32.6

6.5

 

Deferred tax recognised directly in equity


2013

£'m

2012

£'m

Share-based payments

0.3

0.9

Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective 1 April 2013) were substantively enacted on 26 March 2012 and 3 July 2012 respectively. Further reductions to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. This will reduce the company's future current tax charge accordingly. The deferred tax assets (liabilities) at 31 December 2013 has been calculated based on a rate of 20% substantively enacted at the balance sheet date.  Deferred tax assets have not been recognised in respect of tax losses amounting to £2.1m because it is not probable that future taxable profits will be available against which the Group can use the benefits therefrom.

 

6. Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 December 2013 was based on the profit attributable to equity owners of the company for the year of £8.5m (2012: £13.4m) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2013 of 32,248,312 (2012: 31,988,109).

Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2013 was based on profit attributable to equity owners of the company for the year of £8.5m (2012: £13.4m) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2013 of 32,602,867 (2012: 32,534,704) calculated as follows:

Weighted average number of ordinary shares (diluted)


2013

'000

2012

'000

Weighted average number of ordinary shares

32,248

31,988

Effect of share options on issue

355

547

Weighted average number of ordinary shares (diluted)

32,603

32,535

 

Underlying earnings per share are highlighted below as the Directors consider that this measurement of earnings give valuable information on the performance of the Group.

 


2013

Per share

2012

Per share

Basic earnings

26.2p

42.0p

Underlying basic earnings*

30.8p

41.7p

Continuing operations basic earnings

23.9p

41.4p




Diluted earnings

25.9p

41.3p

Underlying diluted earnings*

30.5p

41.0p

Continuing operations diluted earnings

23.7p

40.7p




 

* Underlying earnings excludes non-underlying items as explained in note 3 and discontinued operations as explained in note 2 and allocates tax at the appropriate rate.

 

7. Dividends

After the balance sheet date the following dividends were proposed by the Directors. The dividends have not been provided for and there are no income tax consequences for the Company.

Final proposed dividend

2013

£'m

2012

£'m

9.5 pence per ordinary share (2012: 9.5 pence)

3.1

3.1

 

During the year the following dividends were paid:


2013

£'m

2012

£'m

Final - 9.5 pence (2012: 6.7 pence) per ordinary share

3.1

2.1

Interim - 4.9 pence (2012: 4.0 pence) per ordinary share

1.5

1.3

Less: dividends on shares held in trust

-

-


4.6

3.4

Dividends accrued on shares awarded under the PSP and deferred share scheme but not yet vested

-

0.1

Total (amount shown in the statement of changes in equity)

4.6

3.5

 

8. Principal exchange rates


Year ended

31 December 2013

Year ended

31 December

2012

Average for the period



Euro

1.18

1.23

US dollar

1.57

1.58




 


31 December

2013

31 December

2012

Spot rate



Euro

1.20

1.23

US dollar

1.66

1.63




 

9. Cash and cash equivalents


2013

£'m

2012

£'m

Cash and cash equivalents in the statement of total financial position

8.8

15.0

Bank overdrafts used for cash management purposes

(1.7)

-

Cash and cash equivalents in the statement of cash flows

7.1

15.0

 

 

Principal Risks and Uncertainties

 

The following section sets out the principal risks and uncertainties facing the Group. There may be other risks and uncertainties, which are not yet known or which are currently considered to be immaterial, but later turn out to have a material impact. Some of the areas set out will be outside of any influence that the business may exert. Should any of the risks actually materialise then Dialight's business, financial condition, prospects and share price could be materially and adversely affected.

Macro-economic conditions

The Group's sales and profits may be impacted by spending slowdowns and/or increasing inflationary pressures. A continuing significant slowdown in economic conditions globally and in certain territories such as North America could have a material effect on sales and operating profit, in particular for the Components segment. We closely monitor the general electronics demand index as well as industry forecast so as to become aware of market trends. In addition, monthly data provided by distributors in America is examined, documented and reviewed as this is also considered to provide valuable information on market demand.

Increasing inflationary pressures on areas such as raw material and sub-contract costs may have an adverse impact on operating margins.

The current adverse conditions for public organisations to reduce and/or defer their capital spending budgets may impact on sales of some of our products.

Changes in government legislation or policy

National and local policies with regard to energy savings in a number of areas such as transport and communication are constantly evolving. This should favour Dialight's efforts in growing sales in some key niche current and potential opportunities identified by the Signals segment.

Additionally, legislation may introduce new higher and more exacting specifications for existing products which will require product redesign and regulatory re-certification.Therefore changes in product specifications should favour Dialight in giving us an advantage over competition. It is Dialight policy to operate in highly regulated markets which require suppliers to achieve compliance with demanding product standards. Our design and engineering departments have a proven track record in technical ability evidenced by strong working relationships with customers and regulatory boards, the design and introduction of new products and the portfolio of registered IPR.

Competitive environment

We operate in competitive markets and there exists a threat that existing competitors or potential new entrants will be successful in taking market share. The threat may, for example, come from an extremely aggressive pricing policy for larger traffic contract bids in America and Europe.

Our focus on identifying, developing and maintaining sales routes to market, servicing strong customer relationships, competitive and leading edge product portfolios and cost efficient manufacturing plants supports Dialight as a major player in our chosen markets and helps to reduce the risk of losing market share to competition.

Laws and regulations

The Group's operations are subject to a wide range of laws and regulations including employment, environmental and health and safety legislation. Group policies and procedures are documented and communicated throughout the Group. All Group companies have an employee handbook detailing employment practices and staff who receive the appropriate training and support to operate in their roles. Each site has a health and safety manager responsible for compliance and performance in this area. A new Governance and Risk Committee has been established to monitor compliance with existing policies and procedures and consider improvements and changes to these on an on-going basis.

Strategy for revenue growth -LED Lighting

The achievement of our goals is dependent on growing sales in our chosen markets for Industrial White Lighting. The adoption by the market of LEDs for new applications is principally dependent on the increased efficiency and reduced cost of LEDs versus existing technologies such as fluorescent or high intensity discharge. The achievability of the Group's longer term sales growth would be seriously at risk if the parties who are developing the LEDs did not achieve the expected progress such that new applications did not become feasible.

Additionally within the fast changing technology world that exists there is a possibility of a technology being developed that supersedes LEDs. Our engineers are actively contributing by their presence on industry related boards, attendance and presentations at industry seminars etc., so as to be proactively involved and keep abreast of developments on a regular basis.

Intellectual property

The development and ownership of intellectual property is critical in underpinning the growth potential for the business. The Group operates a stringent policy on the sharing of know how with third-parties as well as having a well defined policy on the in house identification and registration of patents. If the Group fails to or is unable to protect, maintain and enforce its existing intellectual property, it may result in the loss of the Group to the exclusive right to use technologies and processes which are included or used in its businesses. Plans to improve the quality of the new product introduction systems across the businesses have been implemented with good progress being made as evidenced by the expanding Patent portfolio.

Product liability risks

If a product of the Group does not conform to agreed specifications or is otherwise defective, the Group may be the subject to claims by its customers arising from end-product defects or other such claims. The Group carries product liability insurance. We have a well-developed stringent quality control system to help identify any defects before they are despatched to customers.

Financial markets

Turmoil in global financial markets could pose risks to the financial position of both our customers and suppliers and also to the ability of the Group to renegotiate bank facilities.

There are on-going reviews of supplier bases to ensure wherever possible that there is not over-reliance on one specific supplier.

The Group has a banking relationship with a number of banks. Currently the Group has not drawn down any borrowings against the existing facility with Barclays Bank plc. Regular contact will be kept with the banks to ensure that they understand the business and its requirements.

Customers are subject to credit checks and there is very close review of trade debtors, day's outstanding and overdue amounts. Purchase limits are set for all customers.

Currency exchange rate risk

The Group is exposed to translation exchange rate risk as a significant proportion of the Group's results and assets and liabilities are reported in US Dollars and Euros and are therefore subject to translation to UK Sterling for incorporation into the Group's results. In addition, transactions are carried out by Group companies in currencies other than UK Sterling leading to transactional foreign exchange risk. Where possible the Group nets such exposures and maintains a hedging programme utilising foreign exchange forward contracts and currency overdrafts to cover specific contracts and such proportion of other anticipated exposures as can be estimated with reasonable certainty.

Acquisition strategy

The successful implementation of the Group's acquisition strategy depends on its ability to identify targets, successful completion of the transaction, achievement of an acceptable rate of return and a successful and timely integration post-acquisition.

The Board plans to make acquisitions of businesses if the targets fit appropriately into the strategy by strengthening our product range and existing technologies, offering new and attractive sales routes to markets, have high performance and motivated management, and have a proven profit record.

By order of the Board

Nick Giles

Company Secretary

Exning Road

Newmarket

Suffolk

CB8 0AX

24 February 2014

 

Cautionary Statement

This announcement contains certain statements, statistics and projections that are or may be forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans and objectives for the management of future operations of Dialight plc and its subsidiaries is not warranted or guaranteed. These statements typically contain words such as 'intends', 'expects', 'anticipated', 'estimates' and words of similar import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Although Dialight plc believes that the expectations will prove to be correct. There are a number of factors, many of which are beyond the control of Dialight plc, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements.

 


This information is provided by RNS
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