Dialight Regulatory News (DIA)

5 Mar 2007 07:03

Dialight PLC05 March 2007 Date: Embargoed until 07:00 am Monday 5 March 2007 Contacts: Roy Burton - Group Chief Executive Cathy Buckley - Finance Director Dialight PLC Tel: 01480 447490 Alistair Mackinnon-Musson Nicola Savage Hudson Sandler Tel: 020 7796 4133 Email: dialight@hspr.com DIALIGHT PLC Preliminary results for the year to 31 December 2006 Dialight plc, the UK based leader in Applied LED Technology, announces itspreliminary results for the year ended 31 December 2006. Dialight consists of two business segments: • Components comprising indication products and electromagnetic disconnects • Signals / Illumination which includes Traffic and Rail Signals, Obstruction Lights and the new Solid State Lighting products of the Group Highlights O Sales increased by 11% to £62.3m O Contribution margins maintained O Strong year end balance sheet O Recommended Final Dividend increased by 17% to 3.5 pence O Successful integration of Lumidrives Roy Burton, Group Chief Executive, said: "Dialight is very well placed tobenefit from the adoption of Solid State technology into a wide range ofindustrial and architectural applications. We see opportunities in EuropeanTraffic, Obstruction Lighting and the emerging markets for both Colour and WhiteLighting and demand for these products continues to be encouraging. Demand forour Components business is lower than last year primarily due to destocking bydistributors however as their own customer demand has remained reasonably stablewe expect demand for our Components product to return to 2006 levels by thesecond quarter". Following the reconstruction of the Group in 2005, this is the first full yearof Dialight reporting as a standalone business focused entirely on Applied LEDTechnology and the emerging Solid State Lighting market. Over the past 12 months the Board has been implementing the strategy of theGroup, which has the overall objective of growing sales by a compound doubledigit rate with the requisite increase in profitability. The Board seesparticular opportunities in European Traffic where there has been very littleadoption until now; Obstruction Lighting; and the emerging markets for bothColour and White Lighting. Forecasts by industry commentators estimate that bythe year 2010 the High Brightness LED market will have worldwide sales of $1billion and Dialight seeks to realise opportunities within this sector. During 2006 there were two events which are key initiatives in achieving ourstrategic objectives. Firstly, we acquired Lumidrives in January 2006 giving theCompany a position in the European Lighting Market. Secondly, we signed alicence with Color Kinetics Inc., eliminating the potential conflict with thiscompany and providing our customers with Dialight's enhanced product range. Financial results On a continuing operations basis, sales in 2006 increased by 11% to £62.3million and profit before tax as reported increased by 30% to £5.8 million.Profit before tax increased by 7% compared with 2005 profit on a pro forma basis* of £5.4 million. Earnings per share showed a gain of 17% to 11.8 pence pershare. Margins for the Group remained good with an improved contributionpercentage in the Signals/Illumination segment and a constant margin by productline in the Components Segment. The Group generated net cash inflow from Operations of £2.2 million (2005 £4.9million) representing 41% of operating profit. During the year the Group used£2.5 million cash in acquiring Lumidrives Limited and a further £309,000 inbuying 156,000 ordinary shares for the Share Trust. The Group absorbed £4.1million of cash into Working Capital which was principally the build ofinventory to support product transition. At the year end the Group had a cashbalance of £4.3 million (2005 £9.8 million). * the proforma basis is extracted from the 2005 Financial Statements adjustedfor reduced corporate costs of £1 million following the disposal of theSolartron businesses. Dividend As stated in our Interim report, following the disposal of the Solartronbusinesses, the dividend policy would be designed to reflect the new profile andgrowth potential of the continuing Group. The Board is recommending a final dividend of 3.5 pence per share, an increaseof 16.7% over last year's final dividend. The dividend will be paid on 12 May2007 to shareholders on the register at close of business on 24 March 2007. Thefull year dividend is 5.25 pence per share and the dividend cover is 2.2 times. Operating Review 2006 2005Continuing BusinessSales £62.3m £56.1mProfit before tax £5.8m £4.5m Dialight's business is reported in two segments:- • Components comprising indication products and electromagneticdisconnects • Signals/Illumination which includes Traffic and Rail Signals,Obstruction Lights and Solid State Lighting Components 2006 2005Sales £32.0m £26.6mContribution* £14.8m £13.3m *Contribution is defined as sales less material, direct labour costs and salescommissions. Although we have characterised our Components Business as being relatively lowgrowth, 2006 saw sales increase over 20%. The general electronics market wasfavourable and Dialight's position continues to be strong both through itsDistribution channel and through its preferred status with many of the world'sOEMs in the professional electronics market. In December we experienced aslowdown in order intake as a number of customers reduced their inventory. Thisslower order rate has continued through the first two months of 2007 being a 20%reduction on the same two months last year. We see no market reason for this tocontinue and expect that demand will recover to the prior year levels in thesecond quarter. In 2006, revenues benefited from one off major contracts for the meterdisconnect products of Dialight BLP. For the first time we have seen significantUS sales for BLP and the Company is well positioned to take advantage of thegrowing North American market for "smart meters". Signals/Illumination 2006 2005Sales £30.3m £29.6mContribution * £10.6m £9.9m *Contribution is defined as sales less material, direct labour costs and salescommissions. Lighting In January we completed the acquisition of Lumidrives, a UK based supplier ofSolid State Lighting for the architectural market. Lumidrives provides not onlya platform for the European Lighting Market but also a ready made range offixtures and modules that we have introduced to the North American market. Oursales of Solid State Lighting grew by almost 30% when compared to 2005(including Lumidrives in both years) and we signed agreements with a number ofglobal distributors who have recognized the potential of the Solid StateLighting market. In June, we signed a licence agreement with Color Kinetics inthe USA allowing Dialight to provide "pass through" licences to our OEMcustomers in North America. The Lumidrives acquisition addresses mostly coloured lighting for architecturalapplications. Solid State White Lighting remains expensive and is not yetefficient enough to replace conventional light sources across the board. Thereare, however, areas where LEDs provide a strong value proposition today. In theearly part of the year, Dialight introduced a white downlight for use inHazardous Locations. Due to the inherent safety of LED lights and their longlife and robustness, areas like offshore rigs and petrochemical establishmentsare ideally suited as applications for these lights. There exists around theworld a large installed base of conventional Hazardous Location Lights for whichLEDs would make an ideal replacement, bringing strong value to the users. Wecontinue to look at the use of LEDs in other industrial applications whererobustness and long life are important. It is expected that areas such as streetlighting, parking garage and tunnel and bridge lighting will be viable areas forLED lighting in the next two to three years. Obstruction In 2002 Dialight introduced a range of red LED lights qualified for use asAircraft Obstruction Lights on Broadcast Towers, Wind Turbines, Cellular Towersand tall buildings. During the last three years the products have been refinedand improved and although still quite low, adoption is accelerating. In 2005 theCompany benefited from some large orders in Poland which did not repeat in2006.Underlying growth, however, is still good and the introduction in early2006 of the third generation of our L864 Beacon with even lower powerconsumption, has significantly improved the value proposition for users of theselights. In November 2006, Dialight once again proved itself to be the innovatorin LED Lighting with the introduction of a white LED strobe light. This productis designed for the Cellular Tower Market in North America and the Wind TurbineMarket in Europe. Products are in test at customers for Wind Turbines in Europeand we expect to ship products for trial in the US shortly. Dialight has extended its product range through the qualification of a number ofproducts for use in the petrochemical industry where their use is not only asaircraft warning lights but also as signal lights to indicate the location ofsafety appliances. Traffic Dialight has been a leader in the LED Traffic Light market since theintroduction of the first products in the late 1990's. Most of the sales to datehave been in North America. Adoption in Europe has been low to this point but2006 saw an acceleration in the use of these products across many Europeancountries which helped grow our sales. In addition, Dialight's position as asupplier to Traffic Systems OEMs has enabled us to take market share through anumber of key customers. We are pleased with the relationship established withSiemens and the development of new products in conjunction with them. Siemens isthe largest supplier of Intelligent Traffic Systems in Europe. Sales of Traffic Lights in North America declined in 2006. Although the basebusiness continued to be steady, timing of some major contracts affected thesales in the year. In 2006 Dialight introduced a new range of products thatconform to the newly released Institute of Traffic Engineers' Standards. Thiswas a major undertaking to conform to a particularly stringent standard and todate Dialight is the only supplier that has fully conforming product for allthree of red, yellow and green signals. This new standard whilst not mandatoryis gaining adoption throughout North America and inventory has been increased tosupport this transition. Transport Although we are not a major player in the automotive market, Dialight is asignificant supplier to US City Transit Authorities for their bus programmes. Sofar this has been for brake, rear and turn indicator lights using red and yellowLEDs. As white LEDs become more efficient the possibility of replacing interiorfluorescent lighting becomes more of a reality. First trials of an LED interiorlight have taken place. The market potential for white lights is in fact greaterthan for exterior bus lighting and we will continue to work with our existingcustomer base to expand our product range. Outlook Dialight has strong margins and will continue to focus on increasing marketshare in its chosen markets whilst maintaining tight control on costs. Demandfor Signals/Illumination Products continues to be encouraging and in particularthe prospects for Solid State Lighting, Obstruction and European Traffic remaingood. The demand for our Components business is lower than the same period last yearby approximately 20%, primarily as a result of destocking by distributors. Thedistributors' own customer demand has remained reasonably constant andconsequently we expect demand for our Components products to return to thelevels of 2006 by the second quarter. Taking this and the translation impact ofthe currently weak US Dollar, the Board takes a cautious view of the outlook forthe first half. The Board remains confident of the longer term prospects in 2007and beyond. Roy Burton Harry TeeChief Executive Chairman Safe Harbour Statement This announcement contains certain statements, statistics and projections thatare or may be forward looking. The accuracy and completeness of all suchstatements, including, without limitation, statements regarding the futurefinancial position, strategy, projected costs, plans and objectives for themanagement of future operations of Dialight plc and its subsidiaries is notwarranted or guaranteed. These statements typically contain words such as "intends", "expects", "anticipated", "estimates", and words of similar import. Bytheir nature, forward-looking statements involve risk and uncertainty becausethey 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 Dialightplc, which could cause actual results and developments to differ materially fromthose expressed or implied by such forward-looking statements. CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2006 Note 2006 2005 £'000 £'000Continuing operationsRevenue 1 62,302 56,129Cost of sales (46,202) (41,432) Gross profit 16,100 14,697 Distribution expenses (5,126) (4,485)Administrative expenses (5,650) (6,266)Operating profit 1 5,324 3,946Financial income 2,154 2,201Financial expense (1,665) (1,691) Net financing costs 489 510 Profit before tax 5,813 4,456 Income tax expense 2 (2,145) (1,403) Profit after tax from continuing operations 3,668 3,053Profit from discontinued operations, net of tax - 24,945 Profit for the year attributable to equity holders of the parent 3,668 27,998 Earnings per shareBasic earnings per share 3 11.8p 92.2p Diluted earnings per share 3 11.7p 92.2p Continuing operationsBasic earnings per share 3 11.8p 10.1p Continuing operationsDiluted earnings per share 3 11.7p 10.1p CONSOLIDATED BALANCE SHEET As at 31 December 2006 2006 2005 £'000 £'000Assets Property, plant and equipment 5,557 5,983Intangible assets 7,495 4,321Deferred tax assets 1,249 2,405 Total non-current assets 14,301 12,709 Inventories 10,397 6,742Trade and other receivables 14,629 16,685Cash and cash equivalents 4,346 9,829Total current assets 29,372 33,256 Total assets 43,673 45,965 Liabilities Current liabilitiesInterest-bearing loans and borrowings (2,184) (2,213)Trade and other payables (8,478) (7,477)Tax liabilities (765) (3,364)Total current liabilities (11,427) (13,054) Non-current liabilities Employee benefits (1,671) (3,104)Provisions (802) (890)Deferred tax liabilities (83) (53) Total non-current liabilities (2,556) (4,047) Total liabilities (13,983) (17,101) Net assets 29,690 28,864 Equity Issued share capital 591 587Merger reserve 546 -Other reserves (1,842) 29Retained earnings 30,395 28,248 Total equity 29,690 28,864 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2006 Note 2006 2005 £'000 £'000 Operating activities Profit for the year 3,668 27,998Adjustments for:Financial income (2,154) (2,399)Financial expense 1,665 1,993Income tax expense 2,145 2,742Gain on disposal of discontinued operations (net of tax) - (22,022)Depreciation of property, plant and equipment 1,154 1,423Amortisation of intangible assets 658 567 Operating cash flow before movements in working capital 7,136 10,302 Increase/(decrease) in inventories (4,152) 1,017Increase in trade and other receivables (2,062) (3,115)Increase/ (decrease) in trade and other payables 1,634 (168)Decrease in pension liabilities (849) (418)Transfer from "Restricted Cash" 485 -Cash generated from operations 2,192 7,618Income taxes paid on profit on ordinary activities (1,623) (2,777)Income tax paid on gain on disposals (2,559) (5,237)Interest paid (1,665) (1,986) Net cash from operating activities (3,655) (2,382) Investing activities Interest received 2,154 2,399Disposal of discontinued operations - 65,689Acquisition of subsidiary (net of cash received) (2,449) -Capital expenditure (1,207) (2,228)Expenditure on development (976) (1,505)Sale of tangible fixed assets 82 44Net cash (used)/ generated in investing activities (2,396) 64,399 Financing activities Dividends paid (1,484) (3,341)Proceeds from the issue of shares - 2,089Transfer to "Restricted Cash" 5 2,559 (4,000)Special contributions to pension funds - (7,374)Preference shares redeemed (29) (67)Own shares acquired (308) -Return to shareholders following disposal of businesses - (46,524)Net cash generated/(used) in financing activities 738 (59,217) Net (decrease)/ increase in cash and cash equivalents (5,313) 2,800Cash and cash equivalents at 1 January 9,829 6,768Effect of exchange rates on cash held (170) 261Cash and cash equivalents at 31 December 4,346 9,829 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the year ended 31 December 2006 2006 2005 £'000 £'000Exchange difference on translation of foreign operations (1,900) 1,100Exchange realised on disposal of businesses - (13)Actuarial losses on defined benefit pension schemes 303 (1,266)Tax on items taken directly in equity (133) 424 Income and expense recognised directly in equity (1,730) 245Profit for the period 3,668 27,998 Total recognised income and expense for the period attributable to 1,938 28,243equity holders of the parent Effect of change in accounting policy Impact of adoption of IAS32 and 39 (net of tax) to- retained earnings: Cash flow hedges 190 - share capital: Reclassification of preference shares (2,280) Attributable to members (2,090) Notes to the consolidated financial statements for the year ended 31 December 2006 The consolidated financial statements of the Company for the year ended 31December 2006 comprise the Company and its subsidiaries (together referred to asthe "Group"). Statement of compliance The consolidated financial statements have been prepared and approved by thedirectors in accordance with International Financial Reporting Standards asadopted by the EU ("Adopted IFRSs"). The Company has elected to present itsparent company financial statements in accordance with UK GAAP. Basis of preparation The financial statements have been prepared on the historical cost basis exceptfor the revaluation of certain financial instruments which are carried at fairvalue. The financial information contained in this preliminary announcement does notconstitute the Company's statutory accounts for the years ended 31 December 2006and 2005. Statutory accounts for 2005 have been delivered to the registrar ofcompanies, and those for 2006, will be delivered in due course. The auditorshave reported on these accounts, their reports were unqualified and did notcontain statements under section 237 (2) or (3) of the Companies Act 1985. Fullfinancial statements for the year ended 31 December 2006, will shortly be postedto share holders, and after adoption at the Annual General Meeting on 9 May 2007will be delivered to the registrar. 1. Segment reporting The primary format used for segmental reporting is by business segment as thisreflects the internal management structure and reporting of the Group. Intragroup trading is determined as an arm's length basis. Business segments The Group comprises the following business segments: - • Components comprising the indication business andelectromagnetic disconnects. • Signals/Illumination which includes Traffic and Rail Signals,Obstruction Lights and the new Solid State Lighting products. The business segment, Solartron, was sold during 2005 and is shown asdiscontinued operations below. All revenue relates to the sale of goods. The 2005 segment results and assetsand liability allocations have been restated for the continuing operationsbetween Components and Signals/Illumination to reflect the reporting structureof the Group going forward. The contribution shown below for the continuingoperations represents sales less direct costs incurred by each business segment.All indirect costs including production overheads, sales and marketing, andadministration costs are included in unallocated expenses as due to the sharednature of these functions any allocation would be arbitrary. Business segments 2006 Components Signals/ Illumination Total £'000 £'000 £'000Revenue 32,015 30,287 62,302Contribution 14,779 10,602 25,381Unallocated expenses from continuing operations (20,057)Operating profit from continuing operations 5,324Net financing income 489Profit before tax from continuing operations 5,813Income tax expense (2,145)Profit after tax from continuing operations 3,668 2005 Components Signals/ Illumination Total £'000 £'000 £'000Revenue 26,564 29,565 56,129Contribution 13,313 9,902 23,215Unallocated expenses from continuing operations (19,269)Operating profit from continuing operations 3,946Net financing income 510Profit before tax and sale of discontinued operations 4,456Income tax expense (1,403)Profit after tax from continuing operations 3,053 Other Information Components Signals/2006 Illumination Total £'000 £'000 £'000Capital Additions 553 654 1,207Depreciation and amortisation 749 1,020 1,769 Other Information Components Signals/ Discontinued2005 Illumination Operations Total £000 £'000 £'000 £'000Capital Additions 458 839 931 2,228Depreciation and amortisation 941 1,017 32 1,990 Balance Sheet - Assets 2006 Components Signals/ Illumination Total £'000 £'000 £'000Segment assets 13,934 23,828 37,762Unallocated assets 5,911Consolidated total assets 43,673 Balance Sheet - Liabilities 2006 Components Signals/ Illumination Total £'000 £'000 £'000Segment liabilities (3,221) (5,455) (8,676)Unallocated liabilities (5,307)Consolidated total liabilities (13,983) Balance Sheet - Assets 2005 Components Signals/ Illumination Total £'000 £'000 £'000Segment assets 11,937 17,376 29,313Unallocated assets 16,652Consolidated total assets 45,965 Balance Sheet - Liabilities 2005 Components Signals/ Illumination Total £'000 £'000 £'000Segment liabilities (2,892) (4,307) (7,199)Unallocated liabilities (9,902)Consolidated total liabilities (17,101) Geographical segments The Components and Signals/Illumination segments are managed on a worldwidebasis, but operate in three principal geographic areas, UK, Europe and NorthAmerica. The following table provides an analysis of the Group's sales bygeographical market, irrespective of the origin of the goods. All revenuerelates to the sale of goods. Sales revenue by geographical market Continuing Discontinued Total Operations Operations 2006 2005 2005 2006 2005 £'000 £'000 £'000 £'000 £'000North America 36,386 35,201 7,630 36,386 42,831UK 10,896 7,523 8,276 10,896 15,799Rest of Europe 7,690 7,435 13,242 7,690 20,677Rest of world 7,330 5,970 9,875 7,330 15,845 62,302 56,129 39,023 62,302 95,152 Continuing operations Segmental assets Capital expenditure 2006 2005 2006 2005 £'000 £'000 £'000 £'000North America 22,394 23,996 899 1,016UK 15,248 15,412 259 198Rest of Europe 6,031 6,557 49 83 43,673 45,965 1,207 1,297 2. Income tax expense Recognised in the income statement 2006 2005 £'000 £'000Current tax expenseCurrent year 1,838 2,335Adjustment for prior years (209) (308) 1,629 2,027Deferred tax expenseOrigination and reversal of temporary differences 505 616Adjustment for prior years 11 99Total income tax expense excluding tax on sale of discontinued 2,145 2,742operations in income statementIncome tax from continuing operations 2,145 1,403Income tax from discontinued operations (excluding gain on sale) - 1,339 2,145 2,742 Reconciliation of effective tax rate 2006 2006 2005 2005 % £'000 % £'000Profit for the period 3,668 27,998Total income tax expense 2,145 11,704Profit excluding income tax 5,813 39,702Income tax using the UK corporation tax rate of 30.0 1,744 30.0 11,91130%Effect of tax rates in foreign jurisdictions 6.0 346 0.9 354Effect of lower rate on gain on sales ofdiscontinued operations - (0.8) (334)Non-deductible expenses 0.6 37 0.1 40Research and development credit (0.7) (41) - -Unrecognised losses 4.4 257 0.7 302Deduction for gain on share options - - (0.9) (360)Over provision in prior years (3.4) (198) (0.5) (209) 36.9 2,145 29.5 11,704 Deferred tax recognised directly in equity 2006 2005 £'000 £'000Relating to pension accounting (133) 424 3. Earnings per share Basic earnings per share The calculation of basic earnings per share at 31 December 2006 was based on theprofit for the year of £3,668,000 (2005:£27,998,000) and a weighted averagenumber of ordinary shares outstanding during the year ended 31 December 2006 of31,150,000 (2005:30,369,000). Diluted earnings per share The calculation of diluted earnings per share at 31 December 2006 was based onprofit for the year of £3,668,000 (2005:£27,998,000) and a weighted averagenumber of ordinary shares outstanding during the year ended 31 December 2006 of31,367,000 (2005:30,371,000) calculated as follows: - Weighted average number of ordinary shares (diluted) 2006 2005 '000 '000Weighted average number of ordinary shares 31,150 30,369Effect of share options on issue 217 2Weighted average number of ordinary shares (diluted) 31,367 30,371 Earnings per share for continuing and discontinued operations 2006 2005 Pence PenceContinuing operations 11.8 10.1Profit from discontinued operations - 82.1 11.8 92.2 In 2005 earnings per share for continuing and discontinued operations has beencalculated using the same figures as the basic earnings per share except thatthe profit for the period used in the calculation is the profit relating tocontinuing operations of £3,053,000 and the one relating to discontinuedoperations of £2,923,000. The calculation of the earnings per share from thegain of discontinued operations is calculated using the weighted average numberof shares shown above and the gain after tax on the disposals of £22,022,000. 4. Dividends The following dividends were paid in the year: 2006 2005 £'000 £'000Inteim-1.75p per ordinary share (2005:3.4p) 547 1,0532005 Final-3.0p per ordinary share (2004:7.6p) 937 2,288 1,484 3,341 After the balance sheet date the following dividends were proposed by theDirectors. The dividends have not been provided for and there are nocorporation tax consequences. 2006 2005 £'000 £'000Final proposed dividend3.5p per ordinary share (2005:3.0p) 1,093 937 5. Restricted cash As part of the Capital Reduction in 2005 the Court required certain cash to beset aside into a separate bank account "Creditors Account" for the protection ofactual, prospective or contingent liabilities of the Company. The movement in the restricted cash during the year relates principally topayment of tax due on the 2005 disposal of the Solartron businesses togetherwith certain other liabilities due at the time of the Capital Reduction held inother creditors. This information is provided by RNS The company news service from the London Stock Exchange