Final Results
Dialight PLC
05 March 2007
Date: Embargoed until 07:00 am Monday 5 March 2007
Contacts: Roy Burton - Group Chief Executive
Cathy Buckley - Finance Director
Dialight PLC
Tel: 01480 447490
Alistair Mackinnon-Musson
Nicola Savage
Hudson Sandler
Tel: 020 7796 4133
Email: dialight@hspr.com
DIALIGHT PLC
Preliminary results for the year to 31 December 2006
Dialight plc, the UK based leader in Applied LED Technology, announces its
preliminary results for the year ended 31 December 2006.
Dialight consists of two business segments:
• Components comprising indication products and electromagnetic disconnects
• Signals / Illumination which includes Traffic and Rail Signals,
Obstruction Lights and the new Solid State Lighting products of the Group
Highlights
O Sales increased by 11% to £62.3m
O Contribution margins maintained
O Strong year end balance sheet
O Recommended Final Dividend increased by 17% to 3.5 pence
O Successful integration of Lumidrives
Roy Burton, Group Chief Executive, said: 'Dialight is very well placed to
benefit from the adoption of Solid State technology into a wide range of
industrial and architectural applications. We see opportunities in European
Traffic, Obstruction Lighting and the emerging markets for both Colour and White
Lighting and demand for these products continues to be encouraging. Demand for
our Components business is lower than last year primarily due to destocking by
distributors however as their own customer demand has remained reasonably stable
we expect demand for our Components product to return to 2006 levels by the
second quarter'.
Following the reconstruction of the Group in 2005, this is the first full year
of Dialight reporting as a standalone business focused entirely on Applied LED
Technology and the emerging Solid State Lighting market.
Over the past 12 months the Board has been implementing the strategy of the
Group, which has the overall objective of growing sales by a compound double
digit rate with the requisite increase in profitability. The Board sees
particular opportunities in European Traffic where there has been very little
adoption until now; Obstruction Lighting; and the emerging markets for both
Colour and White Lighting. Forecasts by industry commentators estimate that by
the year 2010 the High Brightness LED market will have worldwide sales of $1
billion and Dialight seeks to realise opportunities within this sector.
During 2006 there were two events which are key initiatives in achieving our
strategic objectives. Firstly, we acquired Lumidrives in January 2006 giving the
Company a position in the European Lighting Market. Secondly, we signed a
licence with Color Kinetics Inc., eliminating the potential conflict with this
company and providing our customers with Dialight's enhanced product range.
Financial results
On a continuing operations basis, sales in 2006 increased by 11% to £62.3
million and profit before tax as reported increased by 30% to £5.8 million.
Profit before tax increased by 7% compared with 2005 profit on a pro forma basis
* of £5.4 million. Earnings per share showed a gain of 17% to 11.8 pence per
share. Margins for the Group remained good with an improved contribution
percentage in the Signals/Illumination segment and a constant margin by product
line in the Components Segment.
The Group generated net cash inflow from Operations of £2.2 million (2005 £4.9
million) representing 41% of operating profit. During the year the Group used
£2.5 million cash in acquiring Lumidrives Limited and a further £309,000 in
buying 156,000 ordinary shares for the Share Trust. The Group absorbed £4.1
million of cash into Working Capital which was principally the build of
inventory to support product transition. At the year end the Group had a cash
balance of £4.3 million (2005 £9.8 million).
* the proforma basis is extracted from the 2005 Financial Statements adjusted
for reduced corporate costs of £1 million following the disposal of the
Solartron businesses.
Dividend
As stated in our Interim report, following the disposal of the Solartron
businesses, the dividend policy would be designed to reflect the new profile and
growth potential of the continuing Group.
The Board is recommending a final dividend of 3.5 pence per share, an increase
of 16.7% over last year's final dividend. The dividend will be paid on 12 May
2007 to shareholders on the register at close of business on 24 March 2007. The
full year dividend is 5.25 pence per share and the dividend cover is 2.2 times.
Operating Review
2006 2005
Continuing Business
Sales £62.3m £56.1m
Profit before tax £5.8m £4.5m
Dialight's business is reported in two segments:-
• Components comprising indication products and electromagnetic
disconnects
• Signals/Illumination which includes Traffic and Rail Signals,
Obstruction Lights and Solid State Lighting
Components
2006 2005
Sales £32.0m £26.6m
Contribution* £14.8m £13.3m
*Contribution is defined as sales less material, direct labour costs and sales
commissions.
Although we have characterised our Components Business as being relatively low
growth, 2006 saw sales increase over 20%. The general electronics market was
favourable and Dialight's position continues to be strong both through its
Distribution channel and through its preferred status with many of the world's
OEMs in the professional electronics market. In December we experienced a
slowdown in order intake as a number of customers reduced their inventory. This
slower order rate has continued through the first two months of 2007 being a 20%
reduction on the same two months last year. We see no market reason for this to
continue and expect that demand will recover to the prior year levels in the
second quarter.
In 2006, revenues benefited from one off major contracts for the meter
disconnect products of Dialight BLP. For the first time we have seen significant
US sales for BLP and the Company is well positioned to take advantage of the
growing North American market for 'smart meters'.
Signals/Illumination
2006 2005
Sales £30.3m £29.6m
Contribution * £10.6m £9.9m
*Contribution is defined as sales less material, direct labour costs and sales
commissions.
Lighting
In January we completed the acquisition of Lumidrives, a UK based supplier of
Solid State Lighting for the architectural market. Lumidrives provides not only
a platform for the European Lighting Market but also a ready made range of
fixtures and modules that we have introduced to the North American market. Our
sales of Solid State Lighting grew by almost 30% when compared to 2005
(including Lumidrives in both years) and we signed agreements with a number of
global distributors who have recognized the potential of the Solid State
Lighting market. In June, we signed a licence agreement with Color Kinetics in
the USA allowing Dialight to provide 'pass through' licences to our OEM
customers in North America.
The Lumidrives acquisition addresses mostly coloured lighting for architectural
applications. Solid State White Lighting remains expensive and is not yet
efficient enough to replace conventional light sources across the board. There
are, however, areas where LEDs provide a strong value proposition today. In the
early part of the year, Dialight introduced a white downlight for use in
Hazardous Locations. Due to the inherent safety of LED lights and their long
life and robustness, areas like offshore rigs and petrochemical establishments
are ideally suited as applications for these lights. There exists around the
world a large installed base of conventional Hazardous Location Lights for which
LEDs would make an ideal replacement, bringing strong value to the users. We
continue to look at the use of LEDs in other industrial applications where
robustness and long life are important. It is expected that areas such as street
lighting, parking garage and tunnel and bridge lighting will be viable areas for
LED lighting in the next two to three years.
Obstruction
In 2002 Dialight introduced a range of red LED lights qualified for use as
Aircraft Obstruction Lights on Broadcast Towers, Wind Turbines, Cellular Towers
and tall buildings. During the last three years the products have been refined
and improved and although still quite low, adoption is accelerating. In 2005 the
Company benefited from some large orders in Poland which did not repeat in
2006.Underlying growth, however, is still good and the introduction in early
2006 of the third generation of our L864 Beacon with even lower power
consumption, has significantly improved the value proposition for users of these
lights. In November 2006, Dialight once again proved itself to be the innovator
in LED Lighting with the introduction of a white LED strobe light. This product
is designed for the Cellular Tower Market in North America and the Wind Turbine
Market in Europe. Products are in test at customers for Wind Turbines in Europe
and we expect to ship products for trial in the US shortly.
Dialight has extended its product range through the qualification of a number of
products for use in the petrochemical industry where their use is not only as
aircraft warning lights but also as signal lights to indicate the location of
safety appliances.
Traffic
Dialight has been a leader in the LED Traffic Light market since the
introduction of the first products in the late 1990's. Most of the sales to date
have been in North America. Adoption in Europe has been low to this point but
2006 saw an acceleration in the use of these products across many European
countries which helped grow our sales. In addition, Dialight's position as a
supplier to Traffic Systems OEMs has enabled us to take market share through a
number of key customers. We are pleased with the relationship established with
Siemens and the development of new products in conjunction with them. Siemens is
the largest supplier of Intelligent Traffic Systems in Europe.
Sales of Traffic Lights in North America declined in 2006. Although the base
business continued to be steady, timing of some major contracts affected the
sales in the year. In 2006 Dialight introduced a new range of products that
conform to the newly released Institute of Traffic Engineers' Standards. This
was a major undertaking to conform to a particularly stringent standard and to
date Dialight is the only supplier that has fully conforming product for all
three of red, yellow and green signals. This new standard whilst not mandatory
is gaining adoption throughout North America and inventory has been increased to
support this transition.
Transport
Although we are not a major player in the automotive market, Dialight is a
significant supplier to US City Transit Authorities for their bus programmes. So
far this has been for brake, rear and turn indicator lights using red and yellow
LEDs. As white LEDs become more efficient the possibility of replacing interior
fluorescent lighting becomes more of a reality. First trials of an LED interior
light have taken place. The market potential for white lights is in fact greater
than for exterior bus lighting and we will continue to work with our existing
customer base to expand our product range.
Outlook
Dialight has strong margins and will continue to focus on increasing market
share in its chosen markets whilst maintaining tight control on costs. Demand
for Signals/Illumination Products continues to be encouraging and in particular
the prospects for Solid State Lighting, Obstruction and European Traffic remain
good.
The demand for our Components business is lower than the same period last year
by approximately 20%, primarily as a result of destocking by distributors. The
distributors' own customer demand has remained reasonably constant and
consequently we expect demand for our Components products to return to the
levels of 2006 by the second quarter. Taking this and the translation impact of
the currently weak US Dollar, the Board takes a cautious view of the outlook for
the first half. The Board remains confident of the longer term prospects in 2007
and beyond.
Roy Burton Harry Tee
Chief Executive Chairman
Safe Harbour 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.
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2006
Note 2006 2005
£'000 £'000
Continuing operations
Revenue 1 62,302 56,129
Cost of sales (46,202) (41,432)
Gross profit 16,100 14,697
Distribution expenses (5,126) (4,485)
Administrative expenses (5,650) (6,266)
Operating profit 1 5,324 3,946
Financial income 2,154 2,201
Financial expense (1,665) (1,691)
Net financing costs 489 510
Profit before tax 5,813 4,456
Income tax expense 2 (2,145) (1,403)
Profit after tax from continuing operations 3,668 3,053
Profit from discontinued operations, net of tax - 24,945
Profit for the year attributable to equity holders of the parent 3,668 27,998
Earnings per share
Basic earnings per share 3 11.8p 92.2p
Diluted earnings per share 3 11.7p 92.2p
Continuing operations
Basic earnings per share 3 11.8p 10.1p
Continuing operations
Diluted earnings per share 3 11.7p 10.1p
CONSOLIDATED BALANCE SHEET
As at 31 December 2006
2006 2005
£'000 £'000
Assets
Property, plant and equipment 5,557 5,983
Intangible assets 7,495 4,321
Deferred tax assets 1,249 2,405
Total non-current assets 14,301 12,709
Inventories 10,397 6,742
Trade and other receivables 14,629 16,685
Cash and cash equivalents 4,346 9,829
Total current assets 29,372 33,256
Total assets 43,673 45,965
Liabilities
Current liabilities
Interest-bearing loans and borrowings (2,184) (2,213)
Trade and other payables (8,478) (7,477)
Tax liabilities (765) (3,364)
Total current liabilities (11,427) (13,054)
Non-current liabilities
Employee benefits (1,671) (3,104)
Provisions (802) (890)
Deferred tax liabilities (83) (53)
Total non-current liabilities (2,556) (4,047)
Total liabilities (13,983) (17,101)
Net assets 29,690 28,864
Equity
Issued share capital 591 587
Merger reserve 546 -
Other reserves (1,842) 29
Retained earnings 30,395 28,248
Total equity 29,690 28,864
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2006
Note 2006 2005
£'000 £'000
Operating activities
Profit for the year 3,668 27,998
Adjustments for:
Financial income (2,154) (2,399)
Financial expense 1,665 1,993
Income tax expense 2,145 2,742
Gain on disposal of discontinued operations (net of tax) - (22,022)
Depreciation of property, plant and equipment 1,154 1,423
Amortisation of intangible assets 658 567
Operating cash flow before movements in working capital 7,136 10,302
Increase/(decrease) in inventories
(4,152) 1,017
Increase in trade and other receivables (2,062) (3,115)
Increase/ (decrease) in trade and other payables 1,634 (168)
Decrease in pension liabilities (849) (418)
Transfer from 'Restricted Cash' 485 -
Cash generated from operations 2,192 7,618
Income taxes paid on profit on ordinary activities (1,623) (2,777)
Income tax paid on gain on disposals (2,559) (5,237)
Interest paid (1,665) (1,986)
Net cash from operating activities (3,655) (2,382)
Investing activities
Interest received 2,154 2,399
Disposal of discontinued operations - 65,689
Acquisition of subsidiary (net of cash received) (2,449) -
Capital expenditure (1,207) (2,228)
Expenditure on development (976) (1,505)
Sale of tangible fixed assets 82 44
Net cash (used)/ generated in investing activities (2,396) 64,399
Financing activities
Dividends paid (1,484) (3,341)
Proceeds from the issue of shares - 2,089
Transfer to 'Restricted Cash' 5 2,559 (4,000)
Special contributions to pension funds - (7,374)
Preference shares redeemed (29) (67)
Own shares acquired (308) -
Return to shareholders following disposal of businesses - (46,524)
Net cash generated/(used) in financing activities 738 (59,217)
Net (decrease)/ increase in cash and cash equivalents (5,313) 2,800
Cash and cash equivalents at 1 January 9,829 6,768
Effect of exchange rates on cash held (170) 261
Cash and cash equivalents at 31 December 4,346 9,829
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 December 2006
2006 2005
£'000 £'000
Exchange difference on translation of foreign operations (1,900) 1,100
Exchange realised on disposal of businesses - (13)
Actuarial losses on defined benefit pension schemes 303 (1,266)
Tax on items taken directly in equity (133) 424
Income and expense recognised directly in equity (1,730) 245
Profit for the period 3,668 27,998
Total recognised income and expense for the period attributable to 1,938 28,243
equity holders of the parent
Effect of change in accounting policy
Impact of adoption of IAS32 and 39 (net of tax) to
- retained earnings: Cash flow hedges 190
- share capital: Reclassification of preference shares (2,280)
Attributable to members (2,090)
Notes to the consolidated financial statements
for the year ended 31 December 2006
The consolidated financial statements of the Company for the year ended 31
December 2006 comprise the Company and its subsidiaries (together referred to as
the 'Group').
Statement of compliance
The consolidated financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting Standards as
adopted by the EU ('Adopted IFRSs'). The Company has elected to present its
parent company financial statements in accordance with UK GAAP.
Basis of preparation
The 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 contained in this preliminary announcement does not
constitute the Company's statutory accounts for the years ended 31 December 2006
and 2005. Statutory accounts for 2005 have been delivered to the registrar of
companies, and those for 2006, will be delivered in due course. The auditors
have reported on these accounts, their reports were unqualified and did not
contain statements under section 237 (2) or (3) of the Companies Act 1985. Full
financial statements for the year ended 31 December 2006, will shortly be posted
to share holders, and after adoption at the Annual General Meeting on 9 May 2007
will be delivered to the registrar.
1. Segment reporting
The primary format used for segmental reporting is by business segment as this
reflects the internal management structure and reporting of the Group. Intra
group trading is determined as an arm's length basis.
Business segments
The Group comprises the following business segments: -
• Components comprising the indication business and
electromagnetic disconnects.
• Signals/Illumination which includes Traffic and Rail Signals,
Obstruction Lights and the new Solid State Lighting products.
The business segment, Solartron, was sold during 2005 and is shown as
discontinued operations below.
All revenue relates to the sale of goods. The 2005 segment results and assets
and liability allocations have been restated for the continuing operations
between Components and Signals/Illumination to reflect the reporting structure
of the Group going forward. The contribution shown below for the continuing
operations represents sales less direct costs incurred by each business segment.
All indirect costs including production overheads, sales and marketing, and
administration costs are included in unallocated expenses as due to the shared
nature of these functions any allocation would be arbitrary.
Business segments
2006 Components Signals/
Illumination Total
£'000 £'000 £'000
Revenue 32,015 30,287 62,302
Contribution 14,779 10,602 25,381
Unallocated expenses from continuing operations (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
2005 Components Signals/
Illumination Total
£'000 £'000 £'000
Revenue 26,564 29,565 56,129
Contribution 13,313 9,902 23,215
Unallocated expenses from continuing operations (19,269)
Operating profit from continuing operations 3,946
Net financing income 510
Profit before tax and sale of discontinued operations 4,456
Income tax expense (1,403)
Profit after tax from continuing operations 3,053
Other Information Components Signals/
2006 Illumination Total
£'000 £'000 £'000
Capital Additions 553 654 1,207
Depreciation and amortisation 749 1,020 1,769
Other Information Components Signals/ Discontinued
2005 Illumination Operations Total
£000 £'000 £'000 £'000
Capital Additions 458 839 931 2,228
Depreciation and amortisation 941 1,017 32 1,990
Balance Sheet - Assets 2006
Components Signals/
Illumination Total
£'000 £'000 £'000
Segment assets 13,934 23,828 37,762
Unallocated assets 5,911
Consolidated total assets 43,673
Balance Sheet - Liabilities 2006
Components Signals/
Illumination Total
£'000 £'000 £'000
Segment liabilities (3,221) (5,455) (8,676)
Unallocated liabilities (5,307)
Consolidated total liabilities (13,983)
Balance Sheet - Assets 2005
Components Signals/
Illumination Total
£'000 £'000 £'000
Segment assets 11,937 17,376 29,313
Unallocated assets 16,652
Consolidated total assets 45,965
Balance Sheet - Liabilities 2005
Components Signals/
Illumination Total
£'000 £'000 £'000
Segment liabilities (2,892) (4,307) (7,199)
Unallocated liabilities (9,902)
Consolidated total liabilities (17,101)
Geographical segments
The Components and Signals/Illumination segments are managed on a worldwide
basis, but operate in three principal geographic areas, UK, Europe and North
America. 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
Continuing Discontinued Total
Operations Operations
2006 2005 2005 2006 2005
£'000 £'000 £'000 £'000 £'000
North America 36,386 35,201 7,630 36,386 42,831
UK 10,896 7,523 8,276 10,896 15,799
Rest of Europe 7,690 7,435 13,242 7,690 20,677
Rest of world 7,330 5,970 9,875 7,330 15,845
62,302 56,129 39,023 62,302 95,152
Continuing operations Segmental assets Capital expenditure
2006 2005 2006 2005
£'000 £'000 £'000 £'000
North America 22,394 23,996 899 1,016
UK 15,248 15,412 259 198
Rest of Europe 6,031 6,557 49 83
43,673 45,965 1,207 1,297
2. Income tax expense
Recognised in the income statement
2006 2005
£'000 £'000
Current tax expense
Current year 1,838 2,335
Adjustment for prior years (209) (308)
1,629 2,027
Deferred tax expense
Origination and reversal of temporary differences 505 616
Adjustment for prior years 11 99
Total income tax expense excluding tax on sale of discontinued 2,145 2,742
operations in income statement
Income tax from continuing operations 2,145 1,403
Income tax from discontinued operations (excluding gain on sale) - 1,339
2,145 2,742
Reconciliation of effective tax rate
2006 2006 2005 2005
% £'000 % £'000
Profit for the period 3,668 27,998
Total income tax expense 2,145 11,704
Profit excluding income tax 5,813 39,702
Income tax using the UK corporation tax rate of 30.0 1,744 30.0 11,911
30%
Effect of tax rates in foreign jurisdictions 6.0 346 0.9 354
Effect of lower rate on gain on sales of
discontinued operations - (0.8) (334)
Non-deductible expenses 0.6 37 0.1 40
Research and development credit (0.7) (41) - -
Unrecognised losses 4.4 257 0.7 302
Deduction for gain on share options - - (0.9) (360)
Over provision in prior years (3.4) (198) (0.5) (209)
36.9 2,145 29.5 11,704
Deferred tax recognised directly in equity 2006 2005
£'000 £'000
Relating to pension accounting (133) 424
3. Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 December 2006 was based on the
profit for the year of £3,668,000 (2005:£27,998,000) and a weighted average
number of ordinary shares outstanding during the year ended 31 December 2006 of
31,150,000 (2005:30,369,000).
Diluted earnings per share
The calculation of diluted earnings per share at 31 December 2006 was based on
profit for the year of £3,668,000 (2005:£27,998,000) and a weighted average
number of ordinary shares outstanding during the year ended 31 December 2006 of
31,367,000 (2005:30,371,000) calculated as follows: -
Weighted average number of ordinary shares (diluted)
2006 2005
'000 '000
Weighted average number of ordinary shares 31,150 30,369
Effect of share options on issue 217 2
Weighted average number of ordinary shares (diluted) 31,367 30,371
Earnings per share for continuing and discontinued operations
2006 2005
Pence Pence
Continuing operations 11.8 10.1
Profit from discontinued operations - 82.1
11.8 92.2
In 2005 earnings per share for continuing and discontinued operations has been
calculated using the same figures as the basic earnings per share except that
the profit for the period used in the calculation is the profit relating to
continuing operations of £3,053,000 and the one relating to discontinued
operations of £2,923,000. The calculation of the earnings per share from the
gain of discontinued operations is calculated using the weighted average number
of shares shown above and the gain after tax on the disposals of £22,022,000.
4. Dividends
The following dividends were paid in the year:
2006 2005
£'000 £'000
Inteim-1.75p per ordinary share (2005:3.4p) 547 1,053
2005 Final-3.0p per ordinary share (2004:7.6p) 937 2,288
1,484 3,341
After the balance sheet date the following dividends were proposed by the
Directors. The dividends have not been provided for and there are no
corporation tax consequences.
2006 2005
£'000 £'000
Final proposed dividend
3.5p per ordinary share (2005:3.0p) 1,093 937
5. Restricted cash
As part of the Capital Reduction in 2005 the Court required certain cash to be
set aside into a separate bank account 'Creditors Account' for the protection of
actual, prospective or contingent liabilities of the Company.
The movement in the restricted cash during the year relates principally to
payment of tax due on the 2005 disposal of the Solartron businesses together
with certain other liabilities due at the time of the Capital Reduction held in
other creditors.
This information is provided by RNS
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