Interim Results

RNS Number : 0582A

Dialight PLC

29 July 2008

 



Date:	Embargoed until 07.00 am, Tuesday 29 July 2008
Contacts:	Roy Burton - Group Chief Executive  Cathy Buckley - Finance Director Dialight PLC Tel: [phone]
	Neil Johnson Canaccord Adams Limited Tel: [phone]
	Alistair Mackinnon-Musson      Nicola Savage Hudson Sandler Tel: [phone] Email:  [e-mail]

DIALIGHT PLC

Interim results for the six months ended 30 June 2008

Dialight plc, the UK based leader in Applied LED Technology, today publishes its Interim results for the six months to 30 June 2008.

Dialight consists of two business segments:-

- Signals/Illumination which includes Traffic and Rail Signals, Obstruction Lights and the new

  product area of Solid State Lighting

 

- Components comprising Light Emitting Diode (“LED”) Indication Components and

   Electromagnetic Disconnects (‘smart’ meter disconnect switches)

Highlights

• Group sales up 20% on H1 2007 to £34.5m

• Profit before tax up 68% to £2.1m (2007: £1.3m)

• Basic Earnings per Share increased 68% to 4.2p (2007: 2.5p)

• Signals/IIlumination up 28% on H1 2007 in both Sales and Orders, driven by demand for energy efficient lighting solutions

• Electromagnetic Components sales up 18% on H1 2007 driven by increased demand in the US Advanced Meter Infrastructure market

• Indication Business disposal project suspended

• Interim Dividend increased by 10% to 2.1p (2007: 1.9p)

Chairman and Chief Executive's Statement

Financial Results

We are pleased to report on a period of significant progress and increasing growth, particularly in our key Signals/Illumination business.

Driven by the increasing demand for energy efficiency and reduced carbon footprints, Group revenues for the six months ended 30 June 2008 increased by 20% to £34.5m (2007: £28.9m). Operating profit was up by 104% to £2.0m (2007: £1.0m) and profit before tax rose by 68% to £2.1m (2007: £1.3m). Basic earnings per share increased to 4.2p from 2.5p in 2007.

The Group has generated net cash inflows from operations of £2.3m (2007: £3.5m) representing 116% (2007: 358%) of operating profit. During the first half the Group paid the final dividend to shareholders of £1.2m (2007: £1.1m) and income tax amounting to £1.0m (2007: £1.1m received).

On 30 June 2008 the Company redeemed 2,695,120 of the remaining B Shares in issue. The redemption reduced cash by £2.0m and debt carried on the balance sheet by a corresponding amount.

As at 30 June 2008, following the redemption of the B Shares, the Group had a cash balance of £3.5m (December 2007: £6.6m, June 2007: £7.0m). 

Dividend 

The Board is pleased to declare an interim dividend of 2.1 pence per share (2007: 1.9 pence). The interim dividend is covered 2.0 times by profit after taxation (2007: 1.3 times). The interim dividend is payable on 18 September 2008 to shareholders whose names are on the Register of Members at close of business on 8 August 2008.

Business Review 

Signals/Illumination

The Signals/Illumination segment addresses the increasing demands for Energy Efficient Lighting solutions. Through the use of high brightness LEDs and utilisation of a number of associated technologies we create and deliver compelling value propositions to our customers. In the view of the Board, this segment is a significant driver for growth as new applications gain increased relevance in a society which is ever more conscious of the potential scarceness of energy and harm to the environment.

In the first six months of 2008, all sectors of this business have delivered strong growth as LED adoption has accelerated and a number of Dialight's new products were accepted in the market. Our strategy of identifying and servicing sizeable regulated niche markets remains unchanged. The Company will continue to work closely with LED developers to identify and bring to market Solid State Lighting and Signalling Products which deliver value to its customers through savings in energy and significantly improved product lifetimes and reliability.

Some of the raw materials used in this segment have been subject to commodity price inflation but through both re-engineering and resourcing, the effects of this inflation have been offset and our margins have held firm.

Traffic Lights

Overall, sales of Traffic Lights grew by over 25% against H1 2007 with both North America and Europe contributing strongly. Enhanced by sales to Miami Dade County of over $3m, North American sales posted a healthy increase over the same period in 2007. The largest potential market for Traffic Signals growth is in Europe where the adoption of LED technology lags significantly behind North America and the Company saw an increase of over 40% in sales versus prior year. This was achieved through an increase in the customer and geographical base as well as maintaining our existing relationships with Traffic Systems OEMs. In particular, the Company continues to be a significant supplier to Siemens both in Germany and several other European countries.

Obstruction Lights

Obstruction Lights demonstrated continued excellent growth with sales up over 40% from 2007 H1. These products comprise a range of warning lights for installation on tall structures throughout the world to alert approaching aircraft to their presence. Key markets for these products are towers for broadcast, cell phones and wind turbines and products are supplied to national and international standards. 

Sales of red products have been driven by the increase in installation of wind turbines in the North American market and Dialight has been successful in winning a major share of this business with its energy efficient, GPS synchronised beacon.

The North American Cell Tower market requires, in many instances, a white strobe light of which Dialight is the only supplier. Sales of this strobe, although only at the beginning of its life cycle, helped contribute to growth. Our expectations are that this product will help sustain growth in this market over the coming years as there exists a sizeable installed base of conventional strobes which potentially will be replaced by this LED product.

Transportation

Sales in this sector are primarily to the US Transit Bus market where Dialight supplies exterior marker, stop and tail lights. More recently Dialight has introduced white LED lights for interiors, step wells and engine compartments which have contributed to growth, although another major contributing growth factor here has been sales into the military vehicle market where the long life and ruggedness of our products brings significant value to our customers. Our sales grew by 27% versus 2007 H1.

Lighting

Sales to the Lighting market grew by over 40% against 2007 H1, albeit from a relatively small base. Our sales to the architectural market demonstrated pleasing growth as we continued to extend our network of lighting partners in Europe, and in the USA an agreement with Juno Lighting represents our first major signing of an OEM partnership.

Sales through distributors are also important as they 'seed 'the market and we are experiencing good traction through this channel which should lead us to future customers. Particularly significant were sales of the 'Safesite' product for Hazardous and Industrial applications. Shipments of these lights met management expectations in this first full half of availability. We continue to expand the applications for these products into a wider range of industries and the product is being received with enthusiasm as a result of its energy saving characteristics, long life and ruggedness.

Growth in Solid State Lighting will be driven by more efficient LEDs and the increasing requirement to save more energy and to reduce carbon emissions. Dialight is ideally placed to service this demand by firstly identifying those areas where a strong energy efficient value exists and then bringing innovative products to market early to satisfy that growing demand.

Components

Indication Business

Sales of these products are primarily to Electronics OEMs for status indication. Dialight has a prime position in this market niche and is on the Vendor Lists of most of the world's major OEMs in the professional electronic equipment market and also sells through a number of major Electronic Distributors.

Sales were up 6% over H1 2007 and to date the market appears to be steady although perhaps nervous of a further slowdown in the economy. In the present environment it is difficult to predict market trends, but our Distributor 'Point of Sale' data, which is considered to be a good indicator of the state of this market, has remained steady.

Overall margins have remained strong and stable for the past several years, but the well publicised material price inflation had a minor effect on one of our product lines. We have implemented price increases which will take effect in the second half of this year.

Electromagnetic Disconnects

For some years the US Advanced Meter Infrastructure market has been poised to deliver significant growth for our Electromagnetic Disconnect products. Driven by the need to manage energy resources more carefully, this market has uplifted our sales by 18% against H1 2007. In the half we made our first significant shipments of our new 200 amp switch. In the period we booked over £2.5 million in orders for meter manufacturers in the United States. Dialight is well positioned in this US Advanced Meter Infrastructure market and we expect to take a sizeable share of this rapidly growing demand over the next few years.

Indication Business Disposal Project

The Board has explored in recent months the possibility of divesting the LED Indication Components business, with a view to realising the Board's view of appropriate shareholder value. We have received a number of indicative offers for the business, against a background of exceptional financial market turmoil. The Board and our advisers remain convinced of the high quality and value of this business and given its strong earnings and cash flow characteristics and potential, we do not believe it is in the interest of our shareholders to consider these offers further at this time.

Current trading and outlook

As businesses and consumers struggle with the high cost of energy and strive to reduce their carbon footprints, we believe that Dialight and our Solid State Lighting offering are ideally placed to exploit the resultant opportunities.

Our strategy for growth, first outlined in 2005, has delivered a further period of strong double digit growth in Signals/Illumination and the Board is encouraged by the increased adoption of our Solid State applications and the good reception for our new products. 

In addition to the strong performance in Signals/Illumination, our Disconnect business is at last beginning to show strong growth in the US Utility market, driven by adoption of the Advanced Meter Infrastructure.

Whilst the uncertainty of the global economic situation gives rise to some caution in the outlook for sales of Indication Components, the energy efficient nature of our Signals/Illumination products and our position in our chosen markets give the Board confidence of further growth. 

Harry Tee	Roy Burton
Chairman	Chief Executive

CONSOLIDATED INCOME STATEMENT

For the period ended 30 June 2008 (unaudited)

	Note	6 months ended  30 June 2008  £'000	6 months ended  30 June 2007  £'000	12 months ended  31 December 2007  £'000
Continuing operations Revenue Cost of sales	2	34,543  (27,504)	28,890  (22,600)	63,408  (49,137)
Gross Profit Distribution costs Administrative expenses		7,039  (2,391) (2,675)	6,290  (2,530) (2,794)	14,271  (5,053) (5,325)
Operating profit  Financial income Financial expense	2	1,973  1,104  (936)	966  1,177  (872)	3,893  2,383  (1,796)
Net financing income	3	168	305	587
Profit before tax  Income tax expense	2 4	2,141  (835)	1,271  (483)	4,480  (1,751)
Profit for the period attributable to equity holders of the parent		1,306	788	2,729
Earnings per share
Basic	6	4.2p	2.5p	8.8p
Diluted	6	4.1p	2.5p	8.6p

The accompanying Notes form an integral part of these Interim Financial Statements

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the period ended 30 June 2008 (unaudited)

	6 months ended  30 June 2008  £'000	6 months ended  30 June 2007  £'000	12 months ended  31 December 2007  £'000
Exchange difference on translation of foreign operations	317	(402)	193
Actuarial gains on defined benefit pension schemes	-	-	(339)
Tax on items taken directly in equity	-	(58)	131
Effect of change in UK tax rate	-	-	(64)
Income and expense recognised directly in equity	317	(460)	(79)
Profit for the period	1,306	788	2,729
Total recognised income and expense for the period attributable to equity holders of the parent	1,623	328	2,650

The accompanying Notes form an integral part of these Interim Financial Statements

CONSOLIDATED BALANCE SHEET

As at 30 June 2008 (unaudited)

	Note	30 June 2008  £'000	30 June 2007  £'000	31 December 2007 £'000
Assets Property, plant & equipment Intangible assets Deferred tax asset		6,121  8,109  1,035	5,657  7,473  1,143	6,072  7,913  1,209
Total non-current assets		15,265	14,273	15,194
Inventories Trade and other receivables Cash and cash equivalents		10,936  16,560  3,540	9,394  12,463  6,957	9,846  15,629  6,561
Total current assets		31,036	28,814	32,036
Total assets		46,301	43,087	47,230
Liabilities Loans and borrowings Trade and other payables  Tax liabilities		(151) (10,631) (2,513)	(2,174) (7,393)  (2,324)	(2,172) (9,271)  (2,822)
Total current liabilities		(13,295)	(11,891)	(14,265)
Employee benefits Provisions Deferred tax liability		(888) (851) (122)	(1,281) (774)  (112)	(1,227) (779)  (110)
Total non-current liabilities		(1,861)	(2,167)	(2,116)
Total liabilities		(15,156)	(14,058)	(16,381)
Net assets		31,145	29,029	30,849
Equity Issued share capital Merger reserve  Other reserves Retained earnings	7 7 7 7	591  546  701   29,307	591  546  (2,234) 30,126	591  546  (1,637) 31,349
Total equity attributable to equity shareholders of the parent company		31,145	29,029	30,849

CONSOLIDATED CASH FLOW STATEMENT

For the period ended 30 June 2008 (unaudited)

	6 months ended  30 June 2008  £'000	6 months ended  30 June 2007  £'000	12 months ended 31 December 2007 £'000
Operating activities Profit for the year Adjustments for: Financial income Financial expense Income tax expense Share based payments Depreciation of property, plant and equipment Amortisation of intangible assets	1,306  (1,104) 936  835  51  615  477	788  (1,177) 872  483  104  561  388	2,729  (2,383) 1,796  1,751  196  1,155  843
Operating cash flow before movements in working capital (Increase)/decrease in inventories (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Decrease in pension liabilities	3,116  (1,132) (969) 1,489  (213)	2,019  819  2,073  (994) (459)	6,087  475  (1,356) 800  (192)
Cash generated from operations Income taxes (paid)/received  Interest paid	2,291  (964) (936)	3,458  1,149  (872)	5,814  423  (152)
Net cash from operating activities	391	3,735	6,085
Investing activities Interest received Capital expenditure Expenditure on development Sale of tangible fixed assets	1,104  (579) (369) -	1,177  (737) (385) -	484  (1,626) (958) 11
Net cash generated from/(used in)investing activities	156	55	(2,089)
Financing activities Dividends paid Redemption of preference shares treated as debt Own shares acquired	(1,187) (2,021) (191)	(1,093) (10) -	(1,687) (12) -
Net cash used in financing activities	(3,399)	(1,103)	(1,699)
Net (decrease)/increase in cash and cash equivalents	(2,852)	2,687	2,297
Cash and cash equivalents at 1 January Effect of exchange rates on cash held	6,561  (169)	4,346  (76)	4,346  (82)
Cash and cash equivalents at end of period	3,540	6,957	6,561

Notes to the Financial Statements

For the period ended 30 June 2008 (unaudited)

1)    Basis of Preparation and Principal Accounting Policies

Dialight Plc (the 'Company') is a company domiciled in the UK. The condensed set of financial statements as at, and for, the six month period ended 30 June 2008 comprises the Company and its subsidiaries (together referred to as the 'Group').

The Group financial statements as at, and for, the year ended 31 December 2007 prepared in accordance with IFRSs as adopted by the EU and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, are available upon request from the Company's registered office at 2B Vantage Park, Washingley Road, Huntingdon PE29 6SR.

In respect of the Defined Benefit plans no actuarial gains or losses were recognised in the period. There will be a full review performed at the year end and any actuarial gains and losses arising will be recognised through the statement of recognised income and expense at that date. 

The comparative figures for the year ended 31 December 2007 are not the Company's statutory accounts for that year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified (ii) did not include any reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

The condensed set of financial statements for the six month ended 30 June 2008 is unaudited but has been reviewed by the auditors. The Independent Review Report is set out on page xx.

Statement of Compliance

The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The condensed set of financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's financial statements as at, and for the year ended 31 December 2007.

This condensed set of financial statements was approved by the Board of Directors on 29 July 2008. 

Significant Accounting Policies

The accounting policies applied by the Group in this condensed set of financial statements are the same as those applied by the Group in its financial statements as at, and for the year ended 31 December 2007.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the year ending 31 December 2008 but have no material impact to the Group.

IFRIC 11,IFRS 2- Group and Treasury Share Transactions, effective for annual periods beginning on or after 1 March 2007.

IFRIC 14 IAS 19-The limit on a defined Asset Minimum Funding Requirements and their Interaction. IFRIC 14 has yet to be adopted by the EU.

Estimates and Judgements

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

The significant judgements made by management in applying the Group's accounting policies and the key sources of uncertainty were the same as those applied to the Group financial statements as at 31 December 2007.

2)    Segmental reporting

Business segments

The Group comprises the following business segments: -

• Signals/Illumination which includes Traffic and Rail Signals, Obstruction Lights and Solid State Lighting products.
• Components comprising the indication businesses and electromagnetic components.

Business segments

Six months ended 30 June 2008	Signals/ Illumination £'000	Electromagnetic components £'000	Indication business £'000	Total components £'000	Total £'000
Revenue	18,989	6,045	9,509	15,554	34,543
Contribution	5,976	1,494	5,015	6,509	12,485
Overhead costs	(5,737)	(1,502)	(2,603)	(4,105)	(9,842)
Segment results	239	(8)	2,412	2,404	2,643
Unallocated expenses (see below)					(670)
Operating profit					1,973
Net financing income					168
Profit before tax					2,141
Income tax expense					(835)
Profit after tax					1,306
Six months ended 30 June 2007	Signals/ Illumination £'000	Electromagnetic components £'000	Indication business £'000	Total components £'000	Total £'000
Revenue	14,822	5,134	8,934	14,068	28,890
Contribution	4,916	1,193	4,974	6,167	11,083
Overhead costs	(5,396)	(1,424)	(2,555)	(3,979)	(9,375)
Segment result	(480)	(231)	2,419	2,188	1,708
Unallocated expenses					(742)
Operating profit					966
Net financing income					305
Profit before tax					1,271
Income tax expense					(483)
Profit after tax					788
Year ended 31 December 2007	Signals/ Illumination £'000	Electromagnetic components £'000	Indication business £'000	Total components £'000	Total £'000
Revenue	33,379	11,000	19,029	30,029	63,408
Contribution	10,774	2,656	10,525	13,181	23,955
Overhead costs	(10,660)	(2,808)	(5,083)	(7,891)	(18,551)
Segment results	114	(152)	5,442	5,290	5,404
Unallocated expenses					(1,511)
Operating profit					3,893
Net financing income					587
Profit before tax					4,480
Income tax expense					(1,751)
Profit after tax					2,729

Profit before tax is stated after charging:	6 months ended  30 June 2008 £'000	6 months ended 30 June 2007 £'000	12 months ended 31 December 2007 £'000
Professional costs related to the suspended disposal	(378)	-	-
Release of provision for businesses sold in 2005 as no longer required	496	-	-
	118	-	-

3.    Net financing income

Recognised in profit and loss account	6 months ended  30 June 2008 £'000	6 months ended 30 June 2007 £'000	12 months ended 31 December 2007 £'000
Interest income on bank deposits	95	217	484
Expected return on assets in the defined benefit pension schemes	1,009	960	1,899
Finance income	1,104	1,177	2,383
Interest expense on financial liabilities	(40)	(42)	(152)
Interest charge on pension scheme liabilities	(896)	(830)	(1,644)
Finance expense	(936)	(872)	(1,796)
Net financing income recognised in profit and loss account	168	305	587
Recognised directly in equity
Foreign currency translation differences for foreign operations	317	(402)	193

4.    Income tax expense

The tax charge of £835,000 for the half year to 30 June 2008 reflects the anticipated effective tax rate for the year ending 31 December 2008.

5.    Dividends

During the period the following dividends were paid:

	6 months ended  30 June 2008 £'000	6 months ended 30 June 2007 £'000	12 months ended 31 December 2007 £'000
Final - 3.8p (2007:3.5p) per ordinary share	1,187	1,093	1,093
Interim - 1.90p per ordinary share	-	-	594
	1,187	1,093	1,687

The Directors have declared an interim dividend of 2.10 p per share (2007:1.90p) costing £656,000 (2007:£594,000). It is payable on 18 September 2008 to shareholders whose names are on the Register of Members at close of business on 8 August 2008. The ordinary shares will become ex-dividend on 6 August 2008. 

As the dividend was declared after the end of the period being reported and in accordance with IAS 10 'Events After the Balance Sheet Date', the interim dividend has not been accrued for in these financial statements. It will be shown as a deduction from equity in the financial statements for the year ending 31 December 2008.

6.    Earnings per share

The calculation of basic earnings per share is based on the profit for the period of £1,306,000 (2007:£788,000) and a weighted average number of ordinary shares outstanding during the six months ended 30 June 2008 of 31,050,000 (2007: 31,084,000).

	6 months ended 30 June 2008	6 months ended 30 June 2007	12 months ended 31 December 2007
	Number	Number	Number
Weighted average number of shares Diluted effect of share options Diluted weighted average number of shares	31,050,000 695,000 31,745,000	31,084,000 233,000 31,317,000	31,084,000 535,000 31,619,000

The weighted average number of shares used in the basic earnings per share calculation excludes 256,000 shares held by the Dialight Employees' Share Ownership Plan Trust.

7.    Capital and Reserves

	Share capital £'000	Merger reserve £'000	Translation reserve £'000	Capital redemption reserve £'000	Retained earnings £'000	Total £'000
Balance at 1 January 2008	591	546	(1,697)	60	31,349	30,849
Profit for the period  Net expense recognised directly in equity (See Statement of Recognised Income and Expense) Dividends to shareholders Share based payments B Shares redeemed Own shares purchased	- - - - -	- - - - -	-  317  -  -  -	-  -  -  -  2,021	1,306  -  (1,187) 51  (2,021) (191)	1,306  317  (1,187) 51  -  (191)
Balance at 30 June 2008	591	546	(1,380)	2,081	29,307	31,145
Balance at 1 January 2007	591	546	(1,890)	48	30,395	29,690
Profit for the period  Net expense recognised directly in equity (See Statement of Recognised Income and Expense) Dividends to shareholders Share -based payments B Shares redeemed	- - - - -	- - - - -	-  (402) -  -  -	-  -  -  -  10	788  (58) (1,093) 104  (10)	788  (460) (1,093) 104  -
Balance at 30 June 2007	591	546	(2,292)	58	30,126	29,029
Balance at 1 January 2007	591	546	(1,890)	48	30,395	29,690
Profit for the period  Net expense recognised directly in equity (See Statement of Recognised Income and Expense) Dividends to shareholders Share -based payments B Shares redeemed	- - - - -	- - - - -	-  193  -  -  -	-  -  -  -  12	2,729  (272) (1,687) 196  (12)	2,729  (79) (1,687) 196  -
Balance at 31 December 2007	591	546	(1,697)	60	31,349	30,849

8.    Principal Exchange Rates

	Six months ended 30 June 2008	Six months ended 30 June  2007	Year ended 31 December  2007
Average for the period
Euro	1.29	1.48	1.47
USD	1.98	1.97	2.00
	30 June 2008	30 June 2007	31 December 2007
Spot rate
Euro	1.26	1.49	1.36
USD	1.99	2.00	1.96

9.    Related Party Transactions

There have been no changes in the nature of related party transactions to those described in the 2007 Annual Report that could have a material effect on the financial position or performance of the group in the period to 30 June 2008.

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. 

Macro-economic conditions

A major 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 LED Indication business. Management of the LED Indication business monitor the general electronics demand index as well as industry forecasts so as to remain 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 on areas such as raw material and sub contract costs may have a adverse impact on operating margins. 

The adverse economic conditions may cause both private and public organisations to reduce their capital spending budgets which may impact on sales of almost all of our product lines.

Foreign exchange

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 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 reasonably certainty.

Disposal of businesses

During the last five years the Group has sold businesses in three separate transactions to major US corporations. In each transaction the Company was required to provide certain warranties and indemnities to the purchaser. The terms and nature of the warranties and indemnities were not unusual for these types of transactions. A number of the indemnities principally in relation to taxation are still in place and will expire over time with the last expiring in December 2011. The Company has not received any claims and has not been notified of any potential claims by any of the purchasers in relation to these warranties and indemnities. Management considers that the risk of a material claim by the purchasers to be remote and accordingly no provision is required to be made.

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 the Group as a major player in our chosen markets and helps to reduce the risk of losing market share to competition.

Group Strategy for Revenue Growth

The strategy of the Group is to grow sales by compound double-digit percentage.

The achievement of this goal is dependent in 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 acceptance of current value propositions offered by LED lighting.

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, Group Chief Executive

Cathy Buckley Group Finance Director

29 July 2008

  Independent Review Report to Dialight Plc

Introduction

We have been engaged by the Company to review the condensed set of financial set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Cash Flow Statement, the Consolidated Statement of Recognised Income and Expense 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 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 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 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

KPMG Audit Plc

Chartered Accountants

Birmingham B3 2DL

29 July 2008

 

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