RNS Number : 8778P

Dialight PLC

26 July 2010

 

 

26 July 2010                                                                                                                  PRESS RELEASE

 

 

Dialight plc

 

Half Yearly Financial Report

Highlights

 

 

·      Group Revenues up 33% at £46.2m

 

·      Signals/Illumination Revenue up by 23% to £26.1m driven by 60% growth in both Obstruction and Lighting

 

·      Operating profit of £5.3m (2009:£0.6m)

 

·      EPS of 10.8p (2009: 7.3p including exceptional credit)

 

·      Dividend increased to 2.8p (2009:2.3p)

 

 

 

For further information:

 

Roy Burton, Group Chief Executive and George Ralph, Interim Group Finance Director, Dialight plc

Tel: 01638 778640

 

Simon Bridges, Canaccord Genuity Limited

Tel: 020 7050 6500

 

Robert Speed/Andy Jones, Kreab Gavin Anderson

Tel: 020 7074 1800,

dialight@kreabgavinanderson.com

 

 

Chairman and Chief Executive’s statement

 

We are pleased to report a strong first half result despite what is a fragile recovering economy, with all three segments of the business showing growth.

Group revenues for the six months ended 30^th June 2010 were £46.2m (2009: £34.6m). Operating profit was £5.3m (2009: £0.6m) and profit before tax was £5.2m (2009: £0.5m). Currency has had a negligible effect on the Group’s results with the average US$ to GBP rate of exchange being 1.53 compared to the rate of 1.49 in the first half of 2009.

Signals and Illumination segment revenue grew by 23% with particularly strong growth in sales of both Obstruction and White Industrial Lights with increases in sales of 60%. In addition contribution margins showed a full six point increase over the same period last year and further improvement over the second half of 2009 as the combined effect of the engineering and operational improvements shows through.

Basic earnings per share increased to 10.8p (2009: 7.3p). The results in 2009 for the half year benefited from a non cash release of provisions in respect of disposals made in prior years and the underlying earnings were 1.0p.

The Group generated cash from operations of £ 4.2m and the cash position at the balance sheet date was £7.0m.

Dividend

The Board is pleased to declare an interim dividend of 2.8p a share (2009: 2.3p).The interim dividend is covered 3.86 times by profit after taxation (2009: 3.14 times).

The interim dividend is payable on 16 September 2010 to shareholders whose names are on the register of Members at close of business on 6 August 2010.

Business Review

Signals/Illumination segment

The first six months of 2010 produced a good result for the Group’s key growth segment. Revenue grew by 23% over the same period in 2009 most notably through growth in sales of both Obstruction and White Industrial Lights which grew by 60%. In addition contribution margins in the segment improved by more than 6%.  As we enter the second half of 2010 there is strong momentum for growth in both Obstruction and White Lighting.

In this segment increasing efforts are being made to capitalise on the improvements in LED technology that will allow us to deliver ever more valuable propositions to our customers. Strategically we identify regulated markets where the attributes of LED technology can bring energy savings, enhanced reliability and safety, reduction in carbon emissions and most importantly a swift payback to users in the Industrial Lighting and Signalling markets.

Traffic Lights

Sales of LED Traffic Lights grew by over 15% on the same period last year with good growth being seen through further penetration of the European traffic light market. Sales in the US remained relatively flat as expected.

It is anticipated that growth in Traffic Light sales will come from Europe which has yet to adopt these products as widely as the US. It remains to be seen what effect the austerity measures currently being adopted by European governments will do to capital spending but the first half performance confirms the Company’s outlook in this area. Should municipal headcounts be reduced, the adoption of LED traffic lights and the associated maintenance savings is one sure way to offset that reduction in manpower as our lights are guaranteed to last for a minimum of five years. In contrast to prior years, sales of these products during the six months ended 30 June 2010 have been comparable to those in the second half of 2009. Given the caveats on government spending, we would expect to see continued growth this year and for the years to come.

Obstruction Lights

Sales in the half showed 60% growth compared to the same period last year despite the evidence of some slowdown in the wind turbine market and its consequent use of LED obstruction lights.

A major driver for growth in this area has been the adoption of our white LED strobe technology for use in the North American Telecommunications market. In 2009, we announced two contracts with cell phone tower operators for the use of these strobes. These contracts started to run at higher levels of demand from the second quarter of 2010 with the expectation being that this will continue throughout the rest of this year. Whilst these major contracts have undoubtedly driven excellent growth, strobe units have also been shipped to over fifty different customers in North America during the first half of 2010 as we continue to drive adoption of this technology. As reported at the end of last year we have continued to improve our product and are now shipping our “single level” strobe. Overall we have shipped almost as many strobes in the first half of this year as in the whole of 2009.

In May of this year, the Group acquired BTI Light Systems A/S (“BTI”), a supplier of Obstruction and Marine Lighting to the offshore wind turbine market. This acquisition gives us an entry point into the European wind turbine market for both offshore and onshore applications as a result of BTI’s strong customer relationships with the major turbine manufacturers. BTI is performing as expected and we are excited at the growth prospects for this business within the Dialight Group. Projections in the coming years for the installation of offshore wind turbines are quite promising not only in Europe but also in North America. The alliance of BTI’s position and intimate knowledge of this market and Dialight’s technology should provide a strong platform for growth.

Solid State Lighting

Sales of LED lighting products into the Architectural and Entertainment markets continued to be soft as discretionary spending was severely restricted. Dialight’s major lighting thrust, however, is into Industrial Lighting markets where LED lighting solutions can provide tangible and timely savings to customers as well as improved safety and reliability. Sales of Lighting products in this period have grown by 60% compared to the first half of 2009 and 25% from the second half of 2009.

We are selling into a multitude of industrial customers, some of which are in the heavy and highly regulated end of the market whilst others are in light industrial and warehousing where our products can still provide a significant payback. This market is characterised as one of “continuous improvement” where our engineers are working to improve the value the Group can bring to this segment. The development of ever more efficient and cost effective LEDs and our inventiveness in utilising improving technologies is opening up new applications for Dialight’s products in this area. As ever we strive to maintain focus on those markets where we can bring sustainable value to our customers and derive the true value for our products.

In order to continue the momentum which is building within the lighting sector, we are mindful that good plans must be well executed and that there is a need for the best resources in order to deliver the real prospects of this opportunity for our shareholders. We continually look to recruit the most capable technical and commercial staff and have expanded our investment in people to service this exciting market.

LED Indication segment

After a significant downturn at the end of 2008 and a very depressed market in the first half of 2009, sales in this product line have rebounded to be better than those in 2008 with over 50% growth on the first half of 2009. The end markets which are driving this growth include internet access equipment, data storage, networking equipment, servers and cellular infrastructure. The growth of cloud computing, social networks, 4G etc., are all drivers for this business.

Whilst end user demand for our products has shown a significant improvement, there has been a build-up of inventory in the distributor channel and June 2010 saw the first signs of a slowdown as channels to market became replenished. In addition to this inventory replenishment our customers saw shortages of standard electronic components due to other suppliers having shut down capacity in the previous year.

It is difficult to predict the result for the second half in this sector but if end user demand remains constant, we could expect a reduction of shipments compared to the first half of 2010 due to the absence of further increases in channel inventory. As is typical for this segment of our business, margins have remained stable and even though we anticipate some reduction of revenues in the second half, business levels should be on a par with those in the second half of 2009.

Electromagnetic Disconnect segment

Sales of high current switches into the US Smart Metering market grew in the period as our customers increased their deliveries to their utility customers. This market remains an exciting prospect for Dialight with the potential for high growth, albeit with margins that are thinner than the other segments of our business. Not only the US but other parts of the world are becoming interested in Smart Metering and the energy savings that it can provide. The UK, for example, has made a commitment to the technology as have a number of other countries and Dialight is working with the majority of the potential meter suppliers to these new markets.

Operations and Engineering

Once again our Operations and Engineering teams have played a key part in Dialight’s performance. Re-engineering and new product introduction helped drive strong margins in the Signals/Illumination segment and those efforts continue in the second half of 2010.We have a strong pipeline of new and improved products which will drive growth and improve not only the value propositions to our customers but also the profitability of Dialight.

Inventories grew during the first half of 2010, much of which was due to strategic stocking of high brightness white LEDs as well as the expected continued high run rates in both Obstruction and Lighting products. We anticipate tightness of supply in the LED market due to the growth in markets such as flat screen televisions; smart phones etc., and have managed our purchases accordingly to protect our continued growth.

Current Trading and Outlook

Despite the potential for a softer second half for Indication Components, the momentum in Signals/Illumination is growing driven by the prospect of significant benefits to our customers as they adopt our LED products. Our strategy of penetrating sizeable and regulated niche markets where LEDs can bring value for our customers today continues to demonstrate success allied with superior technical and operational performance.

The Board announced in an update to trading on 8 July 2010 that the Group would exceed   market expectations at that date. The Board remains confident in the Group’s prospects for 2010 and in Dialight’s ability to generate significant growth of its ultra efficient signals and lighting products in the coming years.

 

 

Harry Tee CBE                                                 Roy Burton

Chairman                                                          Group Chief Executive

 

 

Condensed consolidated income statement

For the period ended 30 June 2010

 

	Note	6 months ended 30 June 2010 (unaudited) £’000	6 months ended 30 June 2009 (unaudited) £’000	12 months ended 31 December 2009 (audited) £’000
Continuing operations
Revenue	2	46,167	34,625	77,304
Cost of sales		(33,570)	(27,626)	(58,621)
Gross profit		12,597	6,999	18,683
Distribution costs		(3,484)	(3,018)	(6,078)
Administrative expenses		(3,836)	(3,367)	(7,150)
Profit from operating activities	2	5,277	614	5,455
Financial income	4	881	880	1,711
Financial expense	4	(921)	(965)	(1,884)
Net financing expense	4	(40)	(85)	(173)
Profit before income tax	2	5,237	529	5,282
Income tax expense	5	(1,885)	(207)	(1,990)
Profit from continuing operations		3,352	322	3,292
Prior periods discontinued operations
Adjustment to profit from businesses sold in prior years	9	–	1,939	2,140
Profit for the period attributable to equity holders of the Company		3,352	2,261	5,432
Earnings per share
Basic	7	10.8p	7.3p	17.5p
Diluted	7	10.5p	7.1p	17.1p

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

 

Condensed consolidated statement of comprehensive income

For the period ended 30 June 2010

 

	6 months ended 30 June 2010 (unaudited) £’000	6 months ended 30 June 2009 (unaudited) £’000	12 months ended 31 December 2009 (audited) £’000
Other comprehensive income
Exchange difference on translation of foreign operations	1,420	(3,081)	(2,398)
Actuarial gains/(losses) on defined benefit pension schemes	–	(2,172)	1,844
Income tax on other comprehensive income	–	548	(663)
Other comprehensive income for the period, net of tax	1,420	(4,705)	(1,217)
Profit for the period	3,352	2,261	5,432
Total comprehensive income for the period attributable to equity holders of the Company	4,772	(2,444)	4,215

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 2010 (Unaudited)

 

	Share capital £’000	Merger reserve £’000	Translation reserve £’000	Capital redemption reserve £’000	Retained earnings £’000	Total £’000
Balance at 1 January 2010	591	546	3,088	2,232	33,647	40,104
Profit for the period attributable to equity holders of the Company	–	–	–	–	3,352	3,352
Shares issued on acquisition	6	903	–	–	–	909
Other comprehensive income
Foreign currency translation differences	–	–	1,420	–	–	1,420
Defined benefit plan actuarial losses, net of taxes	–	–	–	–	–	–
Dividends to shareholders	–	–	–	–	(1,343)	(1,343)
Share-based payments (net of tax)	–	–	–	–	74	74
Balance at 30 June 2010	597	1,449	4,508	2,232	35,730	44,516
Balance at 1 January 2009	591	546	5,486	2,232	28,649	37,504
Profit for the period attributable to equity holders of the Company	–	–	–	–	2,261	2,261
Other comprehensive income
Foreign currency translation differences	–	–	(3,081)	–	–	(3,081)
Defined benefit plan actuarial losses, net of taxes	–	–	–	–	(1,624)	(1,624)
Dividends to equity holders	–	–	–	–	(1,218)	(1,218)
Share-based payments (net of tax)	–	–	–	–	93	93
Balance at 30 June 2009	591	546	2,405	2,232	28,161	33,935

 

 

Condensed consolidated statement of total financial position

As at 30 June 2010

 

	30 June 2010 (unaudited) £’000	30 June 2009 (unaudited) £’000	31 December 2009 (audited) £’000
Assets
Property, plant and equipment	8,007	6,735	7,248
Intangible assets	10,957	8,237	8,589
Deferred tax asset	2,070	3,560	1,914
Total non-current assets	21,034	18,532	17,751
Inventories	12,630	9,490	9,194
Trade and other receivables	21,491	14,624	18,186
Cash and cash equivalents	6,978	7,041	9,092
Total current assets	41,099	31,155	36,472
Total assets	62,133	49,687	54,223
Liabilities
Trade and other payables	(13,899)	(8,032)	(11,015)
Tax liabilities	(1,830)	(1,141)	(1,083)
Total current liabilities	(15,729)	(9,173)	(12,098)
Employee benefits	(475)	(5,418)	(948)
Provisions	(1,413)	(1,011)	(1,073)
Deferred tax liability	–	(150)	–
Total non-current liabilities	(1,888)	(6,579)	(2,021)
Total liabilities	(17,617)	(15,752)	(14,119)
Net assets	44,516	33,935	40,104
Equity
Issued share capital	597	591	591
Merger reserve	1,449	546	546
Other reserves	6,740	4,637	5,320
Retained earnings	35,730	28,161	33,647
Total equity attributable to equity shareholders of the parent company	44,516	33,935	40,104

 

 

Condensed consolidated statement of cash flows

For the period ended 30 June 2010

 

	6 months ended 30 June 2010 (unaudited) £’000	6 months ended 30 June 2009 (unaudited) £’000	12 months ended 31 December 2009 (audited) £’000
Operating activities
Profit for the year	3,352	2,261	5,432
Adjustments for:
Financial income	(881)	(880)	(1,711)
Financial expense	921	965	1,884
Income tax expense	1,885	207	1,990
Adjustment to profit on sale of businesses in prior years	–	(1,939)	(2,140)
Share-based payments	119	93	197
Depreciation of property, plant and equipment	681	782	1,525
Amortisation of intangible assets	610	561	1,143
Operating cash flow before movements in working capital	6,687	2,050	8,320
(Increase)/decrease in inventories	(2,161)	2,546	2,882
(Increase)/decrease in trade and other receivables	(2,246)	3,781	(240)
Increase/(decrease) in trade and other payables	2,556	(1,743)	1,342
Pension contributions in excess of the income statement charge	(604)	(845)	(1,305)
Cash generated from operations	4,232	5,789	10,999
Income taxes paid	(1,647)	(387)	(1,581)
Net cash from operating activities	2,585	5,402	9,418
Investing activities
Acquisition of Subsidiary, Net of Cash Acquired	(2,074)	–	–
Interest received	11	12	12
Capital expenditure	(1,097)	(385)	(1,576)
Sale of tangible fixed assets	–	–	22
Expenditure on development	(578)	(467)	(966)
Net cash used in investing activities	(3,738)	(840)	(2,508)
Financing activities
Dividends paid	(1,343)	(1,218)	(1,937)
Net cash used in financing activities	(1,343)	(1,218)	(1,937)
Net increase/(decrease) in cash and cash equivalents	(2,496)	3,344	4,973
Cash and cash equivalents at 1 January	9,092	4,145	4,145
Effect of exchange rates on cash held	382	(448)	(26)
Cash and cash equivalents at end of period	6,978	7,041	9,092

 

Notes to the financial statements

For the period ended 30 June 2010 (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 2010 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 2009 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 2009 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 2010 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 2009.

This condensed set of financial statements was approved by the Board of Directors on 26 July 2010.

Adoption of new and revised standards

The following standards and interpretations are applicable to the Group and have been adopted in 2010 as they are mandatory for the year ended 31 December 2010.

·      IFRS 3 (revised 2008), “Business combinations” and consequential amendments to IAS 27, “Consolidated and separate financial statements”, IAS 28 “Investments in associates” and IAS 31 “Interests in joint ventures”.

The revised standard continues to apply the acquisition method to business combinations with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. All acquisition related costs should be expensed.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the year ending 31 December 2010 but are not currently relevant for the Group.

·      Amendments to IFRS 2 – Group Cash-settled Share-based Payment Transactions

·      Amendments to IAS 39 – Eligible Hedged Items

·      Amendments to IFRIC 9 and IAS 39 – Embedded Derivatives

·      IFRIC 17 – Distribution of Non-Cash Assets to Owners

·      IFRIC 18 – Transfers of Assets from Customers

In addition to the above, amendments to a number of standards under the annual improvements project to IFRS, which are mandatory for the year ended 31 December 2010, have been adopted in the year. None of these amendments have had a material impact on the Group’s financial statements.

New standards and interpretations not yet adopted

The following standards and interpretations have been published, endorsed by EU, and are available for early adoption, but have not yet been applied by the Group in these financial statements.

·      Amendments to IAS 32 “Classification of Rights Issues” – requires that rights, options or warrants to acquire a fixed number of the entity’s own equity instruments for a fixed amount of any currency are equity instruments if the entity offers the rights options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments.

·      IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments” – deals with how entities should measure equity instruments issued in a debt for equity swap.  It addresses the accounting for such a transaction by the debtor only.

The above new standards, amendments to standards or interpretations will become mandatory for the Group’s 2011 consolidated financial statements and are not expected to have a material impact.

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.

In particular, it is managements’ judgement that the assumptions underpinning the year end actuarial valuation of the Group’s defined benefit pension schemes, have not changed significantly. This has typically been the situation but was not the view in 2009 when market conditions strongly indicated the need for an actuarial valuation to be done.

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 monthly. 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.

·  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.

Reportable segments

 

6 months ended 30 June 2010	Electro- magnetic components £’000	Indication components £’000	Total Components £’000	Signals/ Illumination £’000	Total £’000
Revenue	7,529	12,518	20,047	26,120	46,167
Contribution	1,381	6,835	8,216	10,979	19,195
Overhead costs	(1,456)	(3,643)	(5,099)	(7,862)	(12,961)
Segment results	(75)	3,192	3,117	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 from continuing operations					3,352

 

 

2. Operating segments continued

 

 

	Electro- magnetic components	Indication Components	Total Components	Signals/ Illumination	Total
6 months ended 30 June 2009	£’000	£’000	£’000	£’000	£’000
Revenue	5,383	8,013	13,396	21,229	34,625
Contribution	1,338	3,940	5,278	7,539	12,817
Overhead costs	(1,239)	(2,956)	(4,195)	(7,188)	(11,383)
Segment results	99	984	1,083	351	1,434
Unallocated expenses					(820)
Operating profit					614
Net financing expense					(85)
Profit before tax					529
Income tax expense					(207)
Profit from continuing operations					322

 

	Electro- magnetic components	Indication Components	Total Components	Signals/ Illumination	Total
12 months ended 31 December 2009	£’000	£’000	£’000	£’000	£’000
Revenue	13,333	17,576	30,909	46,395	77,304
Contribution	3,167	9,257	12,424	17,979	30,403
Overhead costs	(2,445)	(6,102)	(8,547)	(14,707)	(23,254)
Segment result	722	3,155	3,877	3,272	7,149
Unallocated expenses					(1,694)
Operating profit					5,455
Net financing expense					(173)
Profit before tax					5,282
Income tax expense					(1,990)
Profit from continuing operations					3,292

 

 

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

2. Operating segments continued

 

6 months ended 30 June 2010 Other information	Electro- magnetic components £’000	Indication Components £’000	Total Components £’000	Signals/ Illumination £’000	Total £’000
Capital additions	266	82	348	1,265	1,613
Depreciation and amortisation	(187)	(66)	(253)	(1,026)	(1,279)

 

12 months ended 31 December 2009 Other information	Electro- magnetic components £’000	Indication Components £’000	Total Components £’000	Signals/ Illumination £’000	Total £’000
Capital additions	402	208	610	1,822	2,432
Depreciation and amortisation	(380)	(527)	(907)	(1,746)	(2,653)

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

30 June 2010 Total financial position – assets	Electro- magnetic components £’000	Indication Components £’000	Total Components £’000	Signals/ Illumination £’000	Total £’000
Segment assets	8,635	10,421	19,056	34,110	53,166
Unallocated assets					9,011
Consolidated total assets					62,177

 

30 June 2010 Total financial position – liabilities	Electro- magnetic components £’000	Indication Components £’000	Total Components £’000	Signals/ Illumination £’000	Total £’000
Segment liabilities	(3,860)	(2,906)	(6,766)	(9,233)	(15,999)
Unallocated liabilities					(1,736)
Consolidated total liabilities					(17,735)

 

31 December 2009 Total financial position – assets	Electro- magnetic components £’000	Indication Components £’000	Total Components £’000	Signals/ Illumination £’000	Total £’000
Segment assets	9,089	9,135	18,224	27,235	45,459
Unallocated assets					8,764
Consolidated total assets					54,223

 

31 December  2009 Total financial position – liabilities	Electro- magnetic components £’000	Indication Components £’000	Total Components £’000	Signals/ Illumination £’000	Total £’000
Segment liabilities	(3,943)	(1,782)	(5,725)	(7,357)	(13,082)
Unallocated liabilities					(1,037)
Consolidated total liabilities					(14,119)

 

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 2010 £’000	6 months ended 30 June 2009 £’000	12 months ended 31 December 2009 £’000
North America	30,901	24,494	52,717
UK	5,337	3,341	7,790
Rest of Europe	5,028	3,159	8,436
Rest of World	4,901	3,631	8,361
	46,167	34,625	77,304

3. Acquisition of subsidiary

 

On 28 April 2010, the Group acquired 100% of the issued share capital of BTI Light Systems A/S (“BTI”), a Danish company offering signalling and safety equipment for the wind, marine and airport industries. BTI was acquired from its management for an initial consideration of DKK 26m (£3.0m), DKK 18m (£2.1m) of which was payable in cash with the remainder satisfied by the issue of 360,730 ordinary shares of 1.89p at a share price of 252.4 pence. In addition a contingent liability of £193,000 has been recognised. This is payable by March 2012 to the vendors and is contingent upon the performance of the business in 2010 and 2011.

 

The acquisition enhances the Group’s rapidly growing signalling business, providing a strong channel to the growing European Offshore Wind market. This complements the Group’s already significant North American penetration of the Wind Turbine market and strengthens our presence in Europe.

 

In its most recent audited accounts for the year to 30 September 2009, BTI reported revenues of DKK 32.1m (£3.7m), an EBIT of DKK 3.8m (£0.45m), a profit after tax of DKK 2.8m (£ 0.3m) and gross assets of DKK 15.2m (£1.8 m).

 

BTI contributed £655,000 to revenue and a profit of £88,000 to profit before tax for the period between the date of acquisition and the balance sheet date. The costs incurred, of £75,000, in making the acquisition have been expensed as required under the revised standard.

 

If the acquisition of BTI had been completed on the first day of the financial year Group revenues for the period would have been £48.2m and the Group profit before tax would have been £5.7m.

 

Recognised amounts of identifiable assets acquired and liabilities assumed at fair value	£000
Property, plant and equipment	111
Intangible assets	–
Deferred tax	(15)
Current assets	1,660
Current liabilities	(886)
Net assets acquired	870
Allocation to Goodwill	2,378
Total Consideration	3,248
Satisfied by:
Fair value of shares issued	909
Cash and cash equivalents	2,146
Contingent consideration	193
	3,248
Net cash outflow arising on acquisition
Cash and cash equivalents acquired	72
Directly attributable costs	(75)
	(3)

 

The fair values are provisional due to the timing of the transaction and will be finalised by the end of the current financial year.

Currently all of the excess between the consideration and the provisional fair value of the net assets acquired has been classified as Goodwill. This is due to the fact that a report on the potential value of Intangible Assets acquired is only at an early stage of preparation and requires additional information before it can be finalised.  This will mean that intangible assets such as customer lists are expected to be recognised and this will result in the second half of the current financial year, in an amortisation charge being made as these intangible assets are amortised over their estimated useful lives.

4. Net financing income

	6 months ended 30 June 2010 £’000	6 months ended 30 June 2009 £’000	12 months ended 31 December 2009 £’000
Recognised in condensed consolidated income statement
Interest income on bank deposits	3	12	12
Expected return on assets in the defined benefit pension schemes	878	868	1,699
Finance income	881	880	1,711
Interest expense on financial liabilities	–	–	–
Interest charge on pension scheme liabilities	(921)	(965)	(1,884)
Finance expense	(921)	(965)	(1,884)
Net financing expense recognised in condensed consolidated income statement	(40)	(85)	(173)

5. Income tax expense

 

The tax charge of £1,885,000 for the half year to 30 June 2010 reflects the anticipated effective tax rate of 36.0% for the year ending 31 December 2010. The effective tax rate is higher than the current UK tax rate of 28.0% 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 2009 was 37.7%.

6. Dividends

 

During the period the following dividends were paid:

 

	6 months ended 30 June 2010 £’000	6 months ended 30 June 2009 £’000	12 months ended 31 December 2009 £’000
2nd Interim –  4.3p (2008 Final: 3.9p) per ordinary share	1,343	1,218	1,218
Interim – 2.1p per ordinary share	–	–	719
	1,343	1,218	1,937

The Directors have declared an interim dividend of 2.8p per share (2009: 2.3p) costing £868,000 (2009: £719,000). It is payable on 16 September 2010 to shareholders whose names are on the Register of Members at close of business on 6 August 2010. The ordinary shares will become ex-dividend on 4 August 2010.

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 2010.

7. Earnings per share

The calculation of basic earnings per share is based on the profit for the period of £3,352,000 (2009: £2,261,000) and a weighted average number of ordinary shares outstanding during the six months ended 30 June 2010 of 31,004,340 (2009: 30,984,000).

	6 months ended 30 June 2010 Number ‘000	6 months ended 30 June 2009 Number ‘000	12 months ended 31 December 2009 Number ‘000
Weighted average number of shares	31,004	30,984	30,984
Diluted effect of share options	819	702	804
Diluted weighted average number of shares	31,823	31,686	31,788

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.

 

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

	6 months ended 30 June 2010 Per share	6 months ended 30 June 2009 Per share	12 months ended 31 December 2009 Per share
Basic earnings	10.8p	7.3p	17.5p
Profit from businesses sold in prior years (Note 9)	–	(6.3p)	(6.9p)
Underlying earnings	10.8p	1.0p	6.6p
Diluted earnings	10.5p	7.1p	17.1p
Profit from businesses sold in prior years (Note 9)	–	(6.1p)	(6.7p)
Underlying diluted earnings	10.5p	1.0p	10.4p

 

8. Principal exchange rates

	6 months ended 30 June 2010	6 months ended 30 June 2009	12 months ended 31 December 2009
Average for the period
Euro	1.15	1.12	1.12
US dollar	1.53	1.49	1.57

 

	30 June 2010	30 June 2009	31 December 2009
Spot rate
Euro	1.22	1.17	1.13
US dollar	1.50	1.65	1.62

 

9. Adjustment to profit from businesses sold in prior years

 

The adjustment to profit from businesses sold in prior years comprises two non-cash items being a release of a provision of £0.4 million for a business sold in 2003 and a release of a tax provision of £1.7 million in connection with the disposal of businesses in 2005, which are no longer required.

10. Related party transactions

 

There have been no changes in the nature of related party transactions to those described in the 2009 Annual Report that could have a material effect on the financial position or performance of the Group in the period to 30 June 2010.

11. 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 built up long standing relationships with the principal Group bankers. 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’s 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                                           George Ralph

Group Chief Executive                        Interim Group Finance Director

26 July 2010

 

 

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 2010 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 2010 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

26 July 2010

 

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 https://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 https://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 luminaires 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 utilisation of a number of associated technologies. Areas of business include Traffic and Rail Signals, Obstruction Lights and Solid State Lighting products.

·  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

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 and Mexico. More information is available at dialightdev.wpenginepowered.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.

 

 

This information is provided by RNS

The company news service from the London Stock Exchange

 

END

 

 

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