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Dialight plc 2012 Interim Results

July 2012

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•

Highlights and Financials

•

Business review and outlook

•

Q&A

Agenda

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Group Operating Profit of £8.1m up 31% (2011: £6.2m) 

•

Group Half year Revenues grew 18.2% to £61.1m (2011: 

£51.7m)

•

Signals/Illumination segment revenues increased by 25.1% to 

£42.7m (2011: £34.1m) 

•

Obstruction sales increased 40.4% to £10.2m (2011: £7.3m)

•

Lighting sales increase 65.1% to £17.2m (2011: £10.4m)

•

Successful acquisition of Airinet

•

Dialight Malaysia established

•

Decision to dispose of Smart Metering product line

•

Dividend increased to 4.0 pence (2011 3.3 pence)

Highlights of First Half 2012

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Five Year History

2012 H1£m

2011£m

2010£m

2009£m

2008£m

2007£m

2006£m

Turnover 61.1 113.5 99.2 77.3 77.9 63.4 52.3

Profit before tax 8.1 15.1 11.3 5.3 5.6 4.5 5.8

Operating Cash flow 9.8 17.7 15.1 11.0 6.0 5.8 2.2

Net Cash 8.1 13.7 10.4 9.1 4.1 4.4 2.2

Net Assets 57.2 54.8 46.2 40.1 37.5 30.8 29.7

Return on Sales % 13.2 13.3 11.4 6.9 7.2 7.1 11.1

Return on Capital % 

(Exc

Cash) 33.0 36.7 31.6 17.1 17.7 17.0 21.1

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2012 £M 2011 £M

Revenue 61.1 51.7

Gross Profit 18.6 14.8

Gross Profit % 30.4 28.6

Overhead costs (10.5) (8.6)

Operating profit 8.1 6.2

Net financing cost 

inc non‐underlying0.1 (0.7)

Profit before tax 8.2 5.5

Tax (2.8) (2.0)

Profit for the period 5.4 3.5

Group Summary Profit and Loss

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£m

2011 H1 EBIT 6.2

Signals & Illumination Increased Contribution Margin 4.0

Additional Sales Cost (1.3)

Lower  Indication Sales (1.5)

Higher Disconnect  0.5

Currency 0.3

Other (0.1)

2012  H1 EBIT 8.1

2011 Interim Financial Result Bridge

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JUNE 2012 

£M

JUNE 2011 

£M

DEC 2011 

£M

Non current assets 29.2 22.0 23.8

Cash 8.1 6.2 13.7

Other current assets 44.5 37.0 38.7

Current liabilities (21.7) (17.0) (21.0)

Non current liabilities (2.9) (0.5) (0.5)

Net Assets 57.2 47.7 54.8

Balance Sheet

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Cashflow

2012 H1 £M

2011 H1 £M

Operating cash 9.8 7.0

Working capital (7.6) (4.6)

Disposal of Pension Fund ‐ (2.4)

Cash from operations 2.2 0.0

Tax/financing (1.2) (0.2)

Investing activities (4.2) (2.0)

Dividend Paid (2.1) (1.7)

Change in net cash (5.3) (3.9)

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Half Year Revenues

2012 2011

Total Revenue £61.1m £51.7m

Signals/Illumination £42.7m £34.1m

Electromagnetic Components £9.2m £6.4m

Indication Components £9.2m £11.2m

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Contribution Margin

2012H1

2011H1

Signals/Illumination 45.7% 44.9%

Electromagnetic Components 15.1% 17.4%

Indication Components 52.9% 55.6%

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Business Overview

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Niche with over 15,000 customers –

strong profit and cash 

generator

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Revenues £9.2m compared with strong H1 2011 at £11.2m.

•

Business expected to be flat H2 over H1

•

Fundamentals of the business unchanged 

•

Margins solid but influenced by mix

•

Demand driven by Servers, Storage, Cellular Infrastructure 

and Internet Access

Indication

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Revenues up £2.9m (45%) versus 2011

•

All growth from single Smart Meter customer

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Traditional business flat

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Smart Meter margins still poor

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Decision made to divest Smart Meter product line

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Conclusion expected H2

Electromagnetic Components

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Signals / Illumination Five Year History

2012 H1£m

2011£m

2010£m

2009£m

2008£m

2007£m

2006£m

Turnover 42.7 78.8 61.1 46.4 43.3 33.4 28.6

Operating Profit 8.0 13.8 8.7 3.3 1.7 0.1 (0.5)

Return on Sales % 18.8 17.5 14.2 7.1 3.9 0.3 n/a

% of Group Profit 98.8% 91.3 77.7 62.2 30.4 2.2 n/a

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Signals/Illumination

2012H1

2011H2

2011H1

Total Revenue £42.7m £44.8m £34.1m

Traffic £10.9m £14.3m £12.2m

Obstruction £10.2m £10.5m £7.3m

Transportation £4.3m £4.0m £4.2m

Lighting £17.2m £16.0m £10.4m

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Signals/Illumination ‐

Transportation

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Exterior lights for US Transit Buses

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Revenues flat last three halves as expected

•

Some potential growth with LED Headlights

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Still low single digit

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Signals/Illumination ‐

Traffic

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Business down 11% versus H1 2011

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Europe flat helped by major UK contract

•

Expected some recovery in H2 but full year still down on 

2011•

Future prospects still to grow low single digit

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LED Obstruction Lighting

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Signals/Illumination ‐

Obstruction

•

40% growth to £10.2m

•

Growth drivers are:‐1.

US Cell Tower market –

80,000 towers to light, less than 9,000 

done Remaining market worth over $200m

2.

US Broadcast Tower market –

1800+ Towers to light. Market worth 

over $200m

3.

Offshore Wind Turbine market – much less than 1 and 2 above but 

increasing. As turbines get bigger, lights are becoming brighter

and 

more important.

•

Dialight works to get sole sourced/qualified positions

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Guidance of 30‐50% growth for the coming year

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Illumination

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Vertically Focused –

Hazardous & Industrial

Regulated Primary MarketsOil & GasPower GenMiningChemical

PharmaceuticalWater & SewageFood & Beverage

Secondary MarketsManufacturingWarehousingCold StorageData Centers

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Signals/Illumination ‐

Lighting

•

Revenues up over 65% versus H1/2011

•

Introduction of first 100 lumen/Watt fixture

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Acquisition of Airinet Controls to enhance payback

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Introduction of first 10 year warranty

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Expected accelerated growth in H2/2012

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What are the prospects for Growth ?

•

Is the market big enough for sustained growth?

•

Is our value proposition good enough to drive adoption?

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Do we have the sales channel to drive adoption?

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How big is the market, is the opportunity real?

2010 Global Industrial Sales: $5.25 billion

Source: Freedonia IMS

•

Freedonia says Industrial Lighting is 

approx., $5Bn Annually

•

We address the installed base which 

is probably 10 times that size

•

Hazardous and Heavy is about 20% 

of that

•

Dialight has achieved between 0.1 

and 0.5% penetration

•

Major investment in channel 

expansion

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Illumination‐

Value Drivers

•

Fixture Efficiency  →

Lumens/Watt

•

Lifetime/Reliability  →

Warranty

•

Optimisation

of Lighting  →

Control

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50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Driving Lumen Affordability with Technology$

/lm

(Coo

l Whi

te, 6

500K

)

Annual Improvement in 

$/lm @ Standard Drive 

Current

43% 45% 35% 29% 45% 40%

Copyright © 2012, Cree, Inc. pg. 26

Efficacy (LPW

)

XR‐EXR‐E

XRXR

XP‐EXP‐E

XP‐GXP‐G

XM‐LXM‐LXT‐EXT‐E

$0.10

$0.09

$0.08

$0.07

$0.06

$0.05

$0.04

$0.03

$0.02

$0.01

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Improving Fixture Lumens/Watt

8,000 lumens

53 lm/W

12,000 lumens

81 lm/W      

14,000 lumens

90 lm/W

17,000 lumens

100 lm/W

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LED PackageEfficacy (LPW)

150

OpticsEfficacy (%)

90

PSU (Driver)Efficacy (%)

87

ThermalEfficacy (%)

85

FixtureEfficacy (LPW)

100

Wattage (W) 170

Total Initial Lumens 17,000

LED Luminaire

Performance (Lumens/Watt)

High Bay – 17K Lumens

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Illumination‐

LED Lifetime

Lifetime vs Drive Current & Junction Temperature

0

20

40

60

80

100

120

1000 10000 100000 1000000

Time (Hours)

Ligh

t Out

put (

%)

High Temp High Current

Low Temp Low Current

68000 Hours

330000 Hours

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Illumination‐

Electronics Lifetime

•

LEDs

will last up to 40 years if properly driven – the driver 

electronics have a more limited lifetime

•

All Dialight’s

Lighting products have a comprehensive 5 year 

warranty

•

New Power Supply Topology has enabled the introduction of 

a 10 year warranty on our 17,000 High Bay lights.

•

This will extend to further products

•

Further development will improve PSU efficiency to improve 

lumens/Watt

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Illumination ‐Controls & Networking

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Dimming/Trimming

•

Flexible Scheduling

•

Daylight Harvesting

•

Fault Management/Diagnostics

•

Smart Grid

Faster paybackLower cost of 

ownership→

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HB1 HB2 HB N‐1

PLC MotionSensor

PLCPLC PLC PLC

NetworkManageriPhone

PLC/ EthernetWall Controller

Internet

HBN

PLC DaylightSensor

iPadLaptop

Controls –

Hazardous/Heavy Industrial Lighting

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$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Conventional 250WDialight 12K High Bay (120W)Dialight 12K High Bay (120W) + CTRL

Scenario: RetrofitYears

Cost of O

wne

rship

$US

Energy rate = $0.11/kWh

Controls improve payback!

Light Operating Profile

Time

Light Level

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Global Hazardous Market requires Global Sales

Gulf Coast32 Refineries113 Rigs3,533 Offshore Platforms

Europe150 Refineries80 Nuclear Plants500 Offshore Platforms

Middle East

40 Refineries121 Offshore Platforms

Australia565 Surface Mines8 Refineries30 Coal Power Plants69 Offshore Platforms10 Offshore Rigs

ASEAN Region

40 Refineries43 Coal Power Plants144 Offshore Platforms

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Industrial Energy Rates – focus 

Region Avg

Rates per kWh

US/Canada $0.07

UK $0.12

Germany $0.13

France $0.07

Japan $0.15

Australia $0.15

Brazil $0.12

ASEAN $0.07

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UL 1598 & UL 844 for North America

•

CE/ATEX/IECEx

for UK, Europe & ROW

•

NEC 505 for ASEAN regions

•

TIIS & PSE Marking for Japan

•

INMETRO for Brazil

•

GOST for Russia & Kazakhstan

•

CCC for China

•

VDE for Germany

•

TISI for Thailand 

•

CNS for Taiwan

Expanding our Reach

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Direct Customer facing Sales Channels

Sales Force June 2012

Sales Force 2011

North America 18 6

Europe 8 5

Middle East 3 1

Australasia 10 5

Total 39 17

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Multi‐Billion Dollar addressable Market in Lighting with low penetration

•

Ever improving value proposition driven by Efficiency, Lifetime and 

Control

•

Major Sales Force expansion to continue with the objective to become 

Number 1 in Hazardous Lighting

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Almost $0.5Bn addressable market in Obstruction with low penetration 

and prime position

•

Objective to achieve strong growth by driving adoption of our 

technology

Prospects

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DialightChallenging the status quo in 

the lighting industry

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Operational leverage and maintained/improving contributions will

drive 

the Groups operating Income •

Continued doubling lighting through ’14 would triple the size of the Group•

£100m Incremental Revenue drives £30m Incremental EBIT

The FutureDialight Signals & Illumination Leverage

Base % Fixed % Variable %

Revenue 100

Direct Material 45% 0 100

Direct Labour 6% 0 100

Sales Commission 2% 0 100

Freight 2% 0 100

Contribution Margin 45% 0 100

Production Cost 8% 50 50

Gross Margin 37%

Development 6% 75 25

Sales & Marketing 9% 0 100

Administration 7% 95 5

EBIT 15%