Half Yearly Financial Report

RNS Number : 9354K

Dialight PLC

25 July 2011

 



25 July 2011                                                                                                                 

Dialight plc

Half Yearly financial report

Highlights

·      Group Revenues up 12% at £51.7m (2010: £46.2m)

·      Signals/Illumination Revenue up by 31% to £34.1m (2010: £26.1m), driven by 161% growth in Solid State Lighting and 
51% growth in Obstruction Lights.

·      Operating profit growth of 17% to £6.2m (2010:£5.3m)

·      Underlying earnings per share (EPS) of 12.6p (2010: 10.8p).

·      Dividend increased to 3.3p (2010:2.8p)

Roy Burton, Group Chief Executive, said:

"We have continued to see strong performance in the Signals/Illumination segment during the first half. This gives us even more confidence in the positive outlook for Dialight, not only for 2011 but also for the coming years, as our Solid State Lighting products continue to penetrate the industrial market place."

For further information:   

Roy Burton, Group Chief Executive and Mark Fryer, Group Finance Director, Dialight plc, Tel: [phone] 

Simon Bridges, Canaccord Genuity Limited, Tel: [phone]

Robert Speed, Kreab Gavin Anderson, Tel: [phone], 

[e-mail]

Chairman and Chief Executive's statement

We are pleased to report another strong result for the first half driven by good performance in our Signals/Illumination Segment and an outstanding growth in Solid State Lighting. This was achieved despite a currency headwind of more than 7% against the US Dollar with the average US$ to GBP exchange being 1.63 versus 1.53 in the first half of 2010. Exchange parity would have improved our earnings by £0.5m.

Group revenues for the six months ended 30^th June 2011 were £51.7m (2010: £46.2m). Operating profit was £6.2m (2010: £5.3m) and underlying profit before tax was £6.2m (2010: £5.2m) before disposal of the US Pension Scheme.

Signals/Illumination segment revenue grew by 31% with particularly strong growth in sales of both Obstruction and White Industrial Lights with increases in sales of 51% and 161% respectively. Contribution margins in this segment showed a further increase of almost 3% over the prior year to 44.9%, demonstrating once again the continued focus on re-engineering of our products along with ongoing operational improvement.

Underlying earnings per share increased to 12.6p (2010: 10.8p). The Group generated cash from operations of £7.0m and the cash position at the balance sheet date was £6.2m.

Dividend

The Board is pleased to declare an interim dividend of 3.3 p a share (2010: 2.8p). The interim dividend is covered 3.4 times by profit after taxation (2009: 3.9 times).

The interim dividend is payable on 8 September 2011 to shareholders whose names are on the register of Members at close of business on 12 August 2011.

Business Review

Signals/Illumination segment

The first six months of 2011 produced an excellent result for the Group's key growth segment. Revenue grew by 31% over the same period in 2010 most notably through growth in sales of both Obstruction Lights and White Industrial Lights. Once again contribution margins in the segment improved sequentially through enhanced product design and the consequent reduction in LED content for a given light output and lifetime. These product improvements allow Dialight to bring greater value to its customers in its chosen niche markets where the most advanced LEDs can bring significant savings in energy and maintenance costs as well as improvements in safety and reliability.

Solid State Lighting

Whilst the potential market for LED lighting products into almost all lighting applications has been much publicised, Dialight's strategy has been to focus on the Industrial Lighting markets where today LED lighting solutions can provide superior returns for our customers through energy savings and reliability. Sales of Lighting products in this period have grown by 161% compared to the first half of 2010 and more than a third from the second half of 2010.

We continue to increase our customer base across industrial markets where our products offer significant payback - in some installations that payback can be less than a year. Our Development strategy is one of being "often pleased but never satisfied" and our Engineers and Scientists are constantly working to improve on their previous designs and thus bring ever more cost effective lighting solutions to the marketplace. In 2010 we invested in more technical resources and we continue to do so; always looking to recruit the best technical talent for our development teams in both the US and Europe. The natural complement to strong technical expertise is a strong commercial arm for the Company and we have invested in both Sales and Marketing staff in existing geographies and have expanded into new territories. This year has seen the establishment of Dialight Australia and Dialight Japan, both markets where we believe that there is strong demand for our products. The addition of these two teams, dedicated to Solid State Lighting for their Industrial Markets will help drive our ambitious growth plans. The appointment of a Chief Executive for our business in Europe, Middle East and Asia further confirms our commitment to growing both the volume and geographical spread of our business.

Obstruction Lighting

Sales in the half showed 51% growth compared to the same period last year. Our major driver for growth in this area has been our white LED strobe technology for use in the North American Telecommunications market. We continue to drive conversion to LED technology for operators of mobile phone towers and we are showing continued strong growth, with penetration at less than 7% and a remaining market worth over $200m. Approval for this light rests with the US Federal Aviation Administration and Dialight remains the only approved supplier of this device.

In early 2010, we acquired BTI Light Systems to address the Lighting needs of the Wind Turbine market in Europe. The latter part of 2010 proved to be slow for this business but in the first half of 2011, there has been a marked recovery in this market from the 2010 levels.

Traffic Signals

European traffic sales were up over 12% and US Traffic sales were flat on a like for like currency basis. Sales in the UK were marginally down due to end-user budget constraints. The significant savings in both energy and maintenance offered by our traffic products are expected to drive increased adoption of these products in both the UK and the rest of Europe and this remains a growth segment for the Company. Overall reported sales for Traffic were flat.

LED Indication segment

All sales in this segment are transacted in US$ and whilst sales in local currency fell approximately 5% versus H1 2010, compared to the second half of 2010, sales recorded an 8% increase. This recovery is partly due to stabilisation of inventories in the sales channel but also to a modest improvement in the demand from end users in this segment. Shipments in this market are made to electronics manufacturers serving infrastructure markets such as cloud computing, servers, networking equipment, data storage and internet access equipment on both a direct basis and through Dialight's network of distributors.

Electromagnetic Disconnect segment

Sales of high current switches into the US Smart Metering market were lower in the period due to a slowdown in some programmes for "smart metering" in the US. This market has the potential for high growth but enjoys margins which are less than we would wish and which have the potential to be adversely affected by the rise in the price of both copper and silver. We monitor our costs very carefully and will only take orders that will prove to be profitable based on the ruling commodity prices. Our customer base is narrow and sales are subject to significant fluctuation based on the progress of our customers' programmes. This situation should improve, as not only the US, but other parts of the world adopt Smart Metering. We have received initial trial orders for the UK market and expect to see further trial orders from other international customers in the coming months. 

Operations and Engineering

The execution of our Operations and Engineering teams is just as important as our Market Strategy and once again this has played a vital part in Dialight's performance. Our margins in the Signals/Illumination segment have continued to improve as we redesign our products to take advantage of the enhanced performance of high brightness LEDs. The growth in our volumes allows our procurement teams to leverage the best costs and we remain an important customer for the producers of the best performing LED devices.

Inventories grew during the first half of 2011, partly to service our higher revenues but in addition we have taken the precaution of procuring up to six months demand of strategic electronic components which had the potential to be affected by the Japanese earthquake and its aftermath. To date we have not been affected by component shortages but will continue to hold higher than normal inventories until we can be sure that supply is back to normal.

Current Trading and Outlook

Despite the uncertain prospects for the world economy, our strategy of bringing compelling value propositions to sizeable and regulated markets through the application of LED technology continues to drive strong growth in both revenues and profits.

The future for our White Lighting product line is ever more exciting and the increase in the Group's sales of these products reflects our ability to focus on appropriate applications and capitalise on the benefits delivered by our Solid State Lights. Expectations for 2011 are already high but the results of the first half give the Board confidence that the current outlook will be exceeded and that the Group's strategy will deliver strong results in the coming years.

Harry Tee CBE                                                 Roy Burton

Chairman                                                          Group Chief Executive

Condensed consolidated income statement

For the period ended 30 June 2011

	Note	6 months ended 30 June 2011 (unaudited) £'000	6 months ended 30 June 2010 (unaudited) £'000	12 months ended 31 December 2010 (audited) £'000
Continuing operations
Revenue	2	51,659	46,167	99,183
Cost of sales		(36,843)	(33,570)	(71,897)
Gross profit		14,816	12,597	27,286
Distribution costs		(4,003)	(3,484)	(7,212)
Administrative expenses		(4,649)	(3,836)	(8,891)
Profit from operating activities	2	6,164	5,277	11,183
Financial income	4	728	881	1,937
Financial expense including non-underlying	4	(1,363)	(921)	(1,821)
Net financing (expense)/income	4	(635)	(40)	116
Profit before income tax	2	5,529	5,237	11,299
Analysed as:
Non-underlying administrative expenses	5	(47)	-	-
Non-underlying financial expense	5	(656)	-	-
Underlying profit before tax *		6,232	5,237	11,299
Profit before income tax		5,529	5,237	11,299
Income tax expense	6	(1,990)	(1,885)	(3,846)
Profit for the period		3,539	3,352	7,453
Profit for the period attributable to:
Equity owners of the Company		3,550	3,352	7,453
Non-controlling Interests		(11)	-	-
		3,539	3,352	7,453
Earnings per share
Basic	8	11.2p	10.8p	23.8p
Diluted	8	10.9p	10.5p	23.2p

*Underlying profit before tax represents profit before tax excluding non-recurring items.

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

Condensed consolidated statement of comprehensive income

For the period ended 30 June 2011

	6 months ended 30 June 2011 (unaudited) £'000	6 months ended 30 June 2010 (unaudited) £'000	12 months ended 31 December 2010 (audited) £'000
Other comprehensive income
Exchange difference on translation of foreign operations	(345)	1,420	118
Income tax on exchange differences on transactions of foreign operations	165	-	201
Actuarial losses on defined benefit pension schemes	(455)	-	(1,810)
Income tax on actuarial losses on defined benefit pension schemes	133	-	631
Other comprehensive income for the period, net of tax	(502)	1,420	(860)
Profit for the period	3,539	3,352	7,453
Total comprehensive income for the period	3,037	4,772	6,593
Attributable to:
-       Owners of the parent	3,050	4,772	6,593
-       Non-controlling interest	(13)	-	-
Total comprehensive income for the period	3,037	4,772	6,593

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

Condensed consolidated statement of changes in equity

For the period ended 30 June 2011 (Unaudited)

	Share  capital £'000	Merger reserve £'000	Translation reserve £'000	Capital redemption reserve £'000	Retained earnings £'000	Total £'000	Non- controlling interests £'000	Total Equity £'000
Balance at 1 January 2011	597	1,449	3,407	2,232	38,484	46,169	-	46,169
Profit	-	-	-	-	3,550	3,550	(11)	3,539
Other comprehensive income:
Foreign currency translation differences	-	-	(178)	-	-	(178)	(2)	(180)
Defined benefit plan actuarial losses, net of taxes	-	-	-	-	(322)	(322)	-	(322)
Total other comprehensive income	-	-	(178)	-	(322)	(500)	(2)	(502)
Total comprehensive income for the period	-	-	(178)	-	3,228	3,050	(13)	3,037
Transactions with owners, recorded directly in equity:
Own shares issued	4	-	-	-	(4)	-	-	-
Dividends to shareholders	-	-	-	-	(1,635)	(1,635)	-	(1,635)
Dividends on shares awarded under the PSP	-	-	-	-	(93)	(93)	-	(93)
Share-based payments (net of tax)	-	-	-	-	196	196	-	196
Total contributions by and distributions to owners	4	-	-	-	(1,536)	(1,532)	-	(1,532)
Change in ownership interests in subsidiaries that do not result in a loss of control:
Non-controlling interest  arising in business combination	-	-	-	-	-	-	41	41
Balance at 30 June 2011	601	1,449	3,229	2,232	40,176	47,687	28	47,715
Balance at 1 January 2010	591	546	3,088	2,232	33,647	40,104	-	40,104
Profit	-	-	-	-	7,453	7,453	-	7,453
Other comprehensive income:
Foreign currency translation differences, net of taxes	-	-	319	-	-	319	-	319
Actuarial losses on defined benefit pension plans, net of taxes	-	-	-	-	(1,179)	(1,179)	-	(1,179)
Total other comprehensive income	-	-	319	-	(1,179)	(860)	-	(860)
Total comprehensive income for the period	-	-	319	-	6,274	6,593	-	6,593
Transactions with owners, recorded directly in equity:
Shares issued on acquisition	6	903	-	-	-	909	-	909
Share-based payments (net of tax)	-	-	-	-	785	785	-	785
Dividends to shareholders	-	-	-	-	(2,228)	(2,228)	-	(2,228)
Unpaid dividends returned from shareholders	-	-	-	-	6	6	-	6
Total contributions by and distributions to owners	6	903	-	-	(1,437)	(528)	-	(528)
Balance at 31 December 2010	597	1,449	3,407	2,232	38,484	46,169	-	46,169

Condensed consolidated statement of changes in equity continued

For the period ended 30 June 2011 (Unaudited)

	Share  capital £'000	Merger reserve £'000	Translation reserve £'000	Capital redemption reserve £'000	Retained earnings £'000	Total £'000	Non- controlling interests £'000	Total Equity £'000
Balance at 1 January 2010	591	546	3,088	2,232	33,647	40,104	-	40,104
Profit	-	-	-	-	3,352	3,352		3,352
Other comprehensive income:
Foreign currency translation differences	-	-	1,420	-	-	1,420	-	1,420
Total other comprehensive income	-	-	1,420	-	-	1,420	-	1,420
Total comprehensive income for the period	-	-	1,420	-	3,352	4,772	-	4,772
Transactions with owners, recorded directly in equity:
Shares issued on acquisition	6	903	-	-	-	909	-	909
Dividends to shareholders	-	-	-	-	(1,343)	(1,343)	-	(1,343)
Share-based payments (net of tax)	-	-	-	-	74	74	-	74
Total contributions by and distributions to owners	6	903	-	-	(1,269)	(360)	-	(360)
Balance at 30 June 2010	597	1,449	4,508	2,232	35,730	44,516	-	44,516

Condensed consolidated statement of total financial position

As at 30 June 2011 (Unaudited)

	30 June 2011 (unaudited) £'000	30 June 2010 (unaudited) £'000	31 December 2010 (audited) £'000
Assets
Property, plant and equipment	8,505	8,007	8,218
Intangible assets	11,020	10,957	10,488
Deferred tax asset	2,349	2,070	3,162
Employee benefits	126	-	-
Total non-current assets	22,000	21,034	21,868
Inventories	13,562	12,630	9,187
Trade and other receivables	23,383	21,491	18,856
Cash and cash equivalents	6,231	6,978	10,359
Total current assets	43,176	41,099	38,402
Total assets	65,176	62,133	60,270
Liabilities
Trade and other payables	(15,330)	(13,899)	(11,265)
Provisions	(685)	-	(694)
Tax liabilities	(990)	(1,830)	(239)
Total current liabilities	(17,005)	(15,729)	(12,198)
Employee benefits	-	(475)	(1,441)
Provisions	(456)	(1,413)	(462)
Deferred tax liability	-	-	-
Total non-current liabilities	(456)	(1,888)	(1,903)
Total liabilities	(17,461)	(17,617)	(14,101)
Net assets	47,715	44,516	46,169
Equity attributable to owners of the parent
Issued share capital	601	597	597
Merger reserve	1,449	1,449	1,449
Other reserves	5,461	6,740	5,639
Retained earnings	40,176	35,730	38,484
	47,687	44,516	46,169
Non-controlling interests	28	-	-
Total equity	47,715	44,516	46,169

Condensed consolidated statement of cash flows

For the period ended 30 June 2011 (Unaudited)

	6 months ended 30 June 2011 (unaudited) £'000	6 months ended 30 June 2010 (unaudited) £'000	12 months ended 31 December 2010 (audited) £'000
Operating activities
Profit for the year	3,539	3,352	7,453
Adjustments for:
Financial income	(728)	(881)	(1,937)
Financial expense (excluding non-underlying items)	707	921	1,821
Income tax expense	1,990	1,885	3,846
Share-based payments	196	119	312
Depreciation of property, plant and equipment	1,008	681	2,012
Amortisation of intangible assets	313	610	1,588
Operating cash flow before movements in working capital	7,025	6,687	15,095
(Increase)/decrease in inventories	(4,377)	(2,161)	847
(Increase)/decrease in trade and other receivables	(4,731)	(2,246)	(233)
Increase/(decrease) in trade and other payables	4,455	2,556	(424)
Pension contributions in excess of the income statement charge	(57)	(604)	(1,269)
Non-underlying pension contribution in excess of the income statement charge	(2,321)	-	-
Cash (outflow)/generated from operations	(6)	4,232	14,016
Income taxes paid	(211)	(1,647)	(4,657)
Interest paid	(29)	-	(25)
Net cash from operating activities	(246)	2,585	9,334
Investing activities
Acquisition of Subsidiary, Net of Cash Acquired	(249)	(2,074)	(2,074)
Interest received	10	11	23
Capital expenditure	(1,222)	(1,097)	(2,767)
Sale of tangible fixed assets	61	-	12
Expenditure on development	(627)	(578)	(1,208)
Net cash used in investing activities	(2,027)	(3,738)	(6,014)
Financing activities
Dividends returned	-	-	6
Dividends paid	(1,650)	(1,343)	(2,228)
Net cash used in financing activities	(1,650)	(1,343)	(2,222)
Net (decrease)/increase in cash and cash equivalents	(3,923)	(2,496)	1,098
Cash and cash equivalents at 1 January	10,359	9,092	9,092
Effect of exchange rates on cash held	(205)	382	169
Cash and cash equivalents at end of period	6,231	6,978	10,359

Notes to the financial statements

For the period ended 30 June 2011 (unaudited)

1.  Basis of preparation and principal accounting policies

Dialight Plc (the "Company") is a company domiciled in the UK. The condensed set of financial statements as at, and for, the six month period ended 30 June 2011 comprises the Company and its subsidiaries (together referred to as the "Group").

The Group financial statements as at, and for, the year ended 31 December 2010 prepared in accordance with IFRSs as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, are available upon request from the Company's registered office at Exning Road, Newmarket CB8 0AX.

The comparative figures for the year ended 31 December 2010 are not the Company's statutory accounts for that year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified (ii) did not include any reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The condensed set of financial statements for the six month ended 30 June 2011 is unaudited but has been reviewed by the auditors. The Independent review report is set out at the end of this report.

Statement of compliance

The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The condensed set of financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's financial statements as at, and for the year ended 31 December 2010.

This condensed set of financial statements was approved by the Board of Directors on 25 July 2011.

Adoption of new and revised standards

There are a number of new standards, amendments to standards and interpretations which have been adopted as they are mandatory for the year ending 31 December 2011. However, none of these have had a material impact on the consolidated financial statements of the Group.

Estimates and judgements

The preparation of a condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

2.  Operating segments

The Group has three reportable segments, as described below, which are the Group's strategic business units. The strategic units offer different products. They require different technology and marketing strategies. For each of the units the CEO reviews internal monthly reports. The following summary describes the operations in each of the Group's reportable segments.

The Group comprises the following business segments:

·  Signals/Illumination 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 include Traffic and Rail Signals, Obstruction Lights and Solid State Lighting products.

·  LED Indication components whose sales are primarily to Electronics OEMs for status indication; and

·  Electromagnetic components which supplies smart meter disconnect switches which are used by utility companies to manage remotely electrical supply to residential and business premises.

There is no inter-segment revenue.

2.  Operating segments continued

Reportable segments

6 months ended 30 June 2011		Electro- magnetic components £'000	LED Indication components £'000	Signals/ Illumination £'000	Total £'000
Revenue		6,370	11,157	34,132	51,659
Contribution		1,108	6,202	15,339	22,649
Overhead costs		(1,729)	(3,707)	(9,920)	(15,356)
Segment results		(621)	2,495	5,419	7,293
Unallocated expenses					(1,129)
Operating profit					6,164
Net financing income					21
Non-underlying financial expense					(656)
Profit before tax					5,529
Income tax expense					(1,990)
Profit for the period					3,539

 

		Electro- magnetic components	LED Indication Components	Signals/ Illumination	Total
6 months ended 30 June 2010		£'000	£'000	£'000	£'000
Revenue		7,529	12,518	26,120	46,167
Contribution		1,381	6,835	10,979	19,195
Overhead costs		(1,456)	(3,643)	(7,862)	(12,961)
Segment results		(75)	3,192	3,117	6,234
Unallocated expenses					(957)
Operating profit					5,277
Net financing expense					(40)
Profit before tax					5,237
Income tax expense					(1,885)
Profit for the period					3,352

		Electro- magnetic components	LED Indication Components	Signals/ Illumination	Total
12 months ended 31 December 2010		£'000	£'000	£'000	£'000
Revenue		14,645	23,450	61,088	99,183
Contribution		2,516	12,406	25,753	40,675
Overhead costs		(2,443)	(6,809)	(17,079)	(26,331)
Segment result		73	5,597	8,674	14,344
Unallocated expenses					(3,161)
Operating profit					11,183
Net financing income					116
Profit before tax					11,299
Income tax expense					(3,846)
Profit for the period					7,453

Note: Contribution is revenue less direct material, direct labour, freight and sales commission.

2.  Operating segments continued

6 months ended 30 June 2011 Other information		Electro- magnetic components £'000	LED Indication Components £'000	Signals/ Illumination £'000	Total £'000
Capital additions		90	225	1,475	1,790
Depreciation and amortisation		(280)	(174)	(713)	(1,167)

12 months ended 31 December 2010 Other information		Electro- magnetic components £'000	LED Indication Components £'000	Signals/ Illumination £'000	Total £'000
Capital additions		550	459	2,851	3,860
Depreciation and amortisation		(395)	(627)	(2,374)	(3,396)

Not included above are central assets and depreciation not allocated to a segment

30 June 2011 Total financial position - assets		Electro- magnetic components £'000	LED Indication Components £'000	Signals/ Illumination £'000	Total £'000
Segment assets		8,285	8,670	39,889	56,844
Unallocated assets					8,332
Consolidated total assets					65,176

30 June 2011 Total financial position - liabilities		Electro- magnetic components £'000	LED Indication Components £'000	Signals/ Illumination £'000	Total £'000
Segment liabilities		(3,068)	(2,111)	(7,816)	(12,995)
Unallocated liabilities					(4,466)
Consolidated total liabilities					(17,461)

31 December 2010 Total financial position - assets		Electro- magnetic components £'000	LED Indication Components £'000	Signals/ Illumination £'000	Total £'000
Segment assets		10,795	8,379	30,011	49,185
Unallocated assets					11,085
Consolidated total assets					60,270

31 December  2010 Total financial position - liabilities		Electro- magnetic components £'000	LED Indication Components £'000	Signals/ Illumination £'000	Total £'000
Segment liabilities		(3,716)	(1,832)	(6,276)	(11,824)
Unallocated liabilities					(2,277)
Consolidated total liabilities					(14,101)

 

2. Operating segments continued

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

	6 months ended  30 June 2011	6 months ended  30 June 2010	12 months ended 31 December 2010
North America	34,613	30,901	68,156
UK	5,235	5,337	10,138
Rest of Europe	6,063	5,028	11,161
Rest of World	5,748	4,901	9,728
	51,659	46,167	99,183

3. Acquisition of subsidiary

On 4 January 2011, the Group acquired 75% of the issued share capital of Lightday Investment Pty Ltd trading as Industrial Lighting Solutions ("ILS"), an Australian company and distributor of ultra efficient lighting products. ILS was acquired from its management for an initial consideration of AUD$0.3m  (£0.2m) which was payable in cash.

The acquisition will serve the large industrial/hazardous/mining sector in Australia and further supports the Group's thrust into the industrial and hazardous lighting market with its ultra efficient lighting products.

ILS contributed £593,000 to revenue and a loss of £65,000 to profit before tax for the period between the date of acquisition and the balance sheet date. The costs incurred of £8,000, in making the acquisition have been expensed as required under the revised standard.

Recognised amounts of identifiable assets acquired and liabilities assumed at fair value	£000
Property, plant and equipment	39
Intangible assets - Customer relationships	99
Current assets	229
Current liabilities	(204)
Net assets acquired	163
Goodwill	70
Non-controlling interest	(41)
Total Consideration	192
Satisfied by:
Cash and cash equivalents	192
	192
Net cash outflow arising on acquisition
Cash consideration	192
Cash and cash equivalents acquired	57
	249

The goodwill of £70,000 arising from the acquisition represents the workforce and future access into the Australian market for Dialight products.

4. Net financing income

	6 months ended 30 June 2011 £'000	6 months ended 30 June 2010 £'000	12 months ended 31 December 2010 £'000
Recognised in condensed consolidated income statement
Interest income on bank deposits	10	3	-
Expected return on assets in the defined benefit pension schemes	718	878	1,937
Finance income	728	881	1,937
Interest expense on financial liabilities	(7)	-	(2)
Interest charge on pension scheme liabilities	(678)	(921)	(1,819)
Fair value loss on financial instruments recognised at fair value through the income statement	(22)	-	-
Non-underlying settlement loss on buy-out of US pension scheme	(656)	-	-
Finance expense	(1,363)	(921)	(1,821)
Net financing expense recognised in condensed consolidated income statement	(635)	(40)	116

5. Non-underlying expenses

As disclosed with our Interim Management Statement in April we have recently agreed to grant a lifetime licence to a third party for the use of a number of our patents. The income from this licence is included within non-underlying administrative expenses.

It was also disclosed in the risks and uncertainties section of the Preliminary Results and the Annual Report and Accounts for 2010 that there was a potential claim from a customer in the Signals/ Illumination segment. This relates to an existing agreement from 2007 for the development of a new LED light for rail signalling to an end customer specified standard. As a result of changes in these requirements we are in dispute with our immediate customer and whilst no final agreement has been reached, we are able to take a view of the potential liability and this has been provided as a one-off loss. Such an agreement is not part of the normal business model of Dialight and we believe this is an isolated incident. The provision for this potential exposure is included within non-underlying administrative expenses.

The Directors believe that separate disclosure of the income and expenses which are non-underlying would be prejudicial to the commercial and legal outcome of that potential claim. The net impact of these two non-underlying items is £47,000.

As announced on 16^th March, we have successfully bought out the US Pension Scheme. The cost of securing these liabilities was £2,321,000 and as a result there is a one-off non-underlying financial expense of £656,000.

6. Income tax expense

The tax charge of £1,990,000 for the half year to 30 June 2011 reflects the anticipated effective tax rate of 36.0% for the year ending 31 December 2011. The effective tax rate is higher than the current UK tax rate of 26.0% due to the level of Group profits in the US which has an effective tax rate of 38.0%.  The effective tax rate in the year ended 31 December 2010 was 34.0%.

 

7. Dividends

During the period the following dividends were paid:

	6 months ended 30 June 2011 £'000	6 months ended 30 June 2010 £'000	12 months ended 31 December 2010 £'000
Final - 5.2p (2010 Second interim: 4.3p) per ordinary share	1,643	1,343	1,343
Less: dividends on shares held in trust	(8)	-	-
	1,635	1,343	1,343
Final dividend - 5.2p on shares award under the PSP not yet vested	39	-	-
Dividends accrued on shares awarded under the PSP but not yet vested	39	-	-
Dividends paid on shares awarded under the PSP vested during the period	15	-	-
Total (amount shown in the statement of changes in equity)	1,728	1,343	1,343
Interim - 2.8p per ordinary share	-	-	885
	1,728	1,343	2,228

The Directors have declared an interim dividend of 3.3p per share (2010: 2.8p) costing £1,073,000 (including dividends on shares awarded under the PSP but not yet vested) (2010: £885,000). It is payable on 8 September 2011 to shareholders whose names are on the Register of Members at close of business on 12 August 2011. The ordinary shares will become ex-dividend on 10 August 2011.

As the dividend was declared after the end of the period being reported and in accordance with IAS 10 "Events after the Balance Sheet Date", the interim dividend has not been accrued for in these financial statements. It will be shown as a deduction from equity in the financial statements for the year ending 31 December 2011.

8. Earnings per share

The calculation of basic earnings per share is based on the profit for the period of £3,539,000 (2010: £3,352,000) and a weighted average number of ordinary shares outstanding during the six months ended 30 June 2011 of 31,582,225 (2010: 31,004,340).

	6 months ended 30 June 2011 Number '000	6 months ended 30 June 2010 Number '000	12 months ended 31 December 2010 Number '000
Weighted average number of shares	31,582	31,004	31,287
Diluted effect of share options	902	819	794
Diluted weighted average number of shares	32,484	31,823	32,081

The weighted average number of shares used in the basic earnings per share calculation excludes 39,216 shares held by the Dialight Employees' Share Ownership Plan Trust.

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.

	6 months ended 30 June 2011 Per share	6 months ended 30 June 2010 Per share	12 months ended 31 December 2010 Per share
Basic earnings	11.2p	10.8p	23.8p
Non-underlying items*	1.4p	-	-
Underlying earnings	12.6p	10.8p	23.8p
Diluted earnings	10.9p	10.5p	23.2p
Non-underlying items*	1.4p	-	-
Underlying diluted earnings	12.3p	10.5p	23.2p

* Non-underlying items as explained in note 5.

9. Principal exchange rates

	6 months ended  30 June 2011	6 months ended  30 June 2010	12 months ended 31 December 2010
Average for the period
Euro	1.15	1.15	1.17
US dollar	1.63	1.53	1.53

	30 June 2011	30 June 2010	31 December 2010
Spot rate
Euro	1.11	1.22	1.16
US dollar	1.61	1.50	1.56

10. Related party transactions

There have been no changes in the nature of related party transactions to those described in the 2010 Annual Report that could have a material effect on the financial position or performance of the Group in the period to 30 June 2011.

11. Post balance sheet events

On 1 July 2011, the Group via its 75% owned subsidiary 'Dialight Japan KK', acquired the assets and contracts of I-Spec Limited, its Japanese distributor. The cash consideration paid at the date of acquisition was USD $350,000. Due to the timing of the acquisition the fair values have yet to be determined and will be announced in the annual report.

12. Principal risks and uncertainties

As required by DTR 4.2.7R of the Disclosure and Transparency Rules we have described below the principal risks and uncertainties which may impact on the performance of the Group during the next six months.

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

A significant slowdown in economic conditions globally and in certain territories such as North America could have a material effect on sales and operating profit. Management of the LED Indication business monitor the general electronics demand index as well as industry forecasts so as to become aware of market trends. In addition the monthly Point of Sales data which is provided by US customers is reviewed on a monthly basis as this is also considered to provide valuable information on market demand.

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

The current adverse economic conditions may cause both private and public organisations to reduce and/or defer their capital spending budgets which may impact on sales of almost all 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/Illumination business.

Additionally legislation may introduce new higher and more exacting specifications for existing products which will require product redesign and regulatory re-certification. 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. Therefore changes in product specifications should favour Dialight in giving us an advantage over competition.

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 US 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. 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.

Strategy for revenue growth - LED technology

The strategy of the Board includes the following financial goals:

1.             To grow sales by compound double-digit percentage

2.             Compound EPS growth in the mid teens

The achievement of the goals is dependent on growing sales in the chosen markets within the Signals/Illumination business such as 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 with 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. Over the last couple of years a plan to improve the quality of the New Product Introduction systems across the businesses has 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.

Financial markets

Continued uncertainty in global economical and financial matters 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.

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

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

The Group has a new relationship with the principal Group bankers, Barclays. Currently the Group has no draw down against the existing facility. Regular contact will be kept with the banks to ensure that they understand the business and its requirements.

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 dollar and Euros and are therefore subject to translation to Sterling for incorporation into the Group's results. In addition, transactions are carried out by Group companies in currencies other than 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 Group's acquisition strategy may not achieve its goals due to an inability to identify suitable acquisition targets and to integrate successfully acquired businesses into the Group.

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.

The successful implementation of our acquisition strategy depends on our ability to identify targets, in completing the transaction, achievement of an acceptable rate of return, and a successful and timely integration post acquisition.

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

·  the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

·  the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

Roy Burton                                           Mark Fryer

Group Chief Executive                        Group Finance Director

25 July 2011

Independent review report to Dialight plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the Condensed consolidated income statement, Condensed consolidated statement of comprehensive income, the Condensed consolidated statement of changes in equity, the Condensed consolidated statement of financial position, the Condensed consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

G A Watts

Senior Statutory Auditor

for and on behalf of KPMG Audit Plc,

Statutory Auditor

Chartered Accountants

One Snowhill

Snow Hill Queensway

Birmingham

B4 6GH

25 July 2011

There will be an analyst and investor meeting at 09.30 hours this morning at Kreab Gavin Anderson, Scandinavian House, 2-6 Cannon Street, London EC4M 6XJ.

A slide presentation of the event will be available at 09.30 hours on http://www.dialight.com

Internet users will be able to view this announcement, together with other information about Dialight plc 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 lighting, traffic and rail signalling to vastly reduce maintenance, save energy, improve safety and ease disposal. Versions of these high specification luminaries are also produced for more general commercial, industrial and outdoor situations.

Dialight comprises the following business segments:

·      Signals/Illumination which addresses the increasing demands for Energy Efficient Lighting solutions through the use of high brightness LEDs and utilization of a number of associated technologies. Areas of business include Traffic and Rail Signals, Obstruction Lights and Solid State Lighting products.

·      LED Indication components whose sales are primarily Electronic OEMs for status indication; and

·      Electromagnetic components which supplies smart meter disconnect switches which are used by utility companies to manage remotely electrical supply to residential and business premises.

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 and Mexico. More information is available at www.dialight.com.

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.

 

END

 

 

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