Dialight Regulatory News (DIA)

3 Mar 2008 07:01

Dialight PLC03 March 2008 Date: Embargoed until 07.00am, Monday 3 March 2008 Contacts: Roy Burton - Group Chief Executive Cathy Buckley - Finance Director Dialight PLC Tel: 01480 447490 Chris Bowman Canaccord Adams Limited Tel: 020 7050 6500 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 2007 Dialight plc, the UK based leader in Applied LED Technology, announces itsPreliminary results for the year ended 31 December 2007. Dialight consists of two business segments:- O Signals/Illumination which includes Traffic and Rail Signals, Obstruction Lights and the new product area of Solid State LightingO Components comprising Light Emitting Diode ("LED") Indication Components and Electromagnetic Disconnects ('smart' meter disconnect switches) Highlights O Signals/Illumination sales up 17% at constant currencyO Group sales up 8% at constant currencyO Profit before tax £4.5m - in line with market expectationsO Earnings per share of 8.8p (2006:11.8p)O Operating cash flow increased to £5.8m from £2.4m in 2006O Recommended final dividend increased by 9% to 3.8pO Initial conclusion of Strategic Review to realise full value of LED Indication Components business Roy Burton, Group Chief Executive, said "We are pleased to report our strategy of identifying and then servicing largeniche markets for LED based products is progressing well. In 2007, sales in theSignals/Illumination segment of our business grew over 17%. With an excellentpipeline of new products complementing the Safesite and White Strobe products,we are confident of continued growth in our Signals/Illumination business." Financial results With two-thirds of the Group's sales denominated in US$, the US$:£ exchange rateis a major influence on Dialight's results. The average USD:£ rate declined 9%from 1.84 to 2.0 from 2006 to 2007 and as a result, while Group sales in 2007 inconstant currency terms increased by 8% to £63.4 million, the effect of thedollar's decline was to constrain the Group's reported revenue growth to 2%. There were marked differences in the performance of the Group's two businesssegments. The Signals/Illumination division showed strong growth of 17% atconstant currency, versus 10% at actual exchange rates. Within this, the Trafficproduct line, which is a lower margin Signals product, grew by an impressive20%. Reported revenue in the Components segment was down by 6% but this declinewas principally due to adverse currency movements. Second half Group sales increased over the first half by 19% to £34.5 million,returning an operating profit for the half of £2.9 million (compared to £966,000in the first half) at an operating margin of 8.4%. The increase in profitabilityover the first half was due to higher sales and the successful implementation ofthe material cost reduction programme delayed in the first half. Margins for the Group remained healthy; however, the adverse impact of currencywould have reduced the 2006 reported contribution of the Components and Signals/Illumination segments by £1 million and £0.6 million respectively. There was further investment in resource to support the expanding Signals/Illumination business during the second half of the year, increasing theexpected year on year overhead base by 9%. The Components business reported asegment profit of £5.3 million and for the first time Signals/Illuminationbusiness reported a profit at £0.1 million. In line with market expectations, Group profit before tax decreased by 23% to£4.5 million from £5.8 million; this was a 15% decline on a constant currencybasis. Earnings per share were 8.8p compared with 11.8p in 2006. The Groupgenerated net cash inflow from operations of £5.8 million (2006: £2.4 million)representing 149% of operating profit and the Group ended the year with a cashbalance of £6.6 million (2006: £4.3 million). Dividend The Board is recommending a final dividend of 3.8 pence per share an increase of9% over last year's final dividend. The dividend will be paid on 9 May 2008 toshareholders on the register at close of business on 14 March 2008. The fullyear dividend is 5.7 pence per share and the dividend cover is 1.5 times. Strategic Review In January, the Board announced the commissioning of a strategic review of theGroup's businesses. This review has been received and after consideration by theBoard it has been concluded that we should explore the possibilities ofdivesting the LED Indication Components business (from the Group's Componentsdivision) with a view to realising the Board's view of appropriate shareholdervalue and streamlining the profile of the Group to more accurately reflectDialight as a focused Solid State Lighting business. Operating Review Signals/Illumination Change 2007 2006 Sales + 10% £33.4m £30.3mSegment result (see page 14) £0.1m £(0.4)m Dialight's strategy is to address large niche markets which have some measure ofregulation or other barriers to entry. Whilst there are many areas where LEDscan be used, Dialight has been careful to select those markets which fit itsstrategy and allow defensible and profitable growth. During 2007, the efficiency of white LEDs has improved significantly and anumber of new applications are becoming economically viable, bringing newopportunities for the Company. This segment of our business saw significantgrowth in 2007 and the availability of more efficient white LEDs enabled us tolaunch some important new products which we expect to deliver continued growthfor 2008. Overall this segment grew at 17% for the year at constant currency. Traffic Our Traffic Light Business showed growth of 20% year on year with both Europeand North America contributing strongly; however, in Group terms this is arelatively low margin activity. Under normal circumstances, we would expectNorth American sales to be relatively flat but increased adoption of the 2006ITE Standard for Traffic Lights helped Dialight to grow. Dialight was the firstcompany to have a comprehensive portfolio of traffic light products that arefully compliant to the new standard and we believe we gained market share forthat reason. In developing lights for the new standard, we have filed severalpatents to protect our investment in this area. Towards the end of the year, we were awarded a contract to supply over 70,000traffic lights for Miami Dade County in Florida. A minor portion of thiscontract was supplied in 2007 and it is expected that the balance will bedelivered in 2008. With the exception of major contracts like Miami, the US Traffic Business shouldcontinue at current levels and will be serviced in the main through ourextensive and exclusive network of Traffic Dealers who allow us to maintain ourmarket share in North America. Whilst a majority of the installed base of lightshas been converted to LEDs, the earliest installed LED lights are coming to theend of their useful life, after well over five years in service. The cycle ofreplacement of these lights should sustain this business for the foreseeablefuture. European traffic lights have been targeted by Dialight as a major growthopportunity due to the current low adoption of LED traffic lights in Europe.This market is serviced through traffic systems OEMs who are nationally basedand standards are set either by the OEM or by the individual countries inEurope. Dialight has increased its list of OEM partners in both Western andEastern Europe and is well placed to service this market growth. We haverelationships with at least one major OEM in almost every European country. Thelargest multinational OEM is Siemens and we continue to develop ourrelationships with them building on a strong base with Siemens in Germany. Former US President Bill Clinton has been instrumental through the ClintonClimate Initiative in setting up volume pricing arrangements with companiesproviding energy efficient products. In November Dialight announced the signingof a volume pricing agreement with the Clinton Foundation to make attractivepricing for our LED traffic lights available to cities on a global basis. It ishoped that this agreement will help to accelerate the adoption of our energyefficient traffic lights by cities around the world. Obstruction Lights For the past five years, Dialight has been developing products for the aircraftobstruction light market. This is a true niche market with strong regulationwhich represents an opportunity to substitute LED based lights in an installedbase worth well over $300 million in North America alone, with similarregulatory standards being applied throughout the world. Obstruction lights arepositioned on broadcast towers, cellular phone towers, tall buildings andstructures and latterly on wind turbines. The wind turbine lighting marketrepresents a new build opportunity of several million dollars over the next fiveyears if wind energy projections are met. Dialight has been the global innovator in the obstruction light market and hasestablished clear market leadership and a growing business for products usingred LEDs. However, half of the installations in this obstruction light marketuse white lighting and up until early in 2007, no qualified white LED productswere available; the advent of brighter and less expensive white LEDs has changedthat situation. Early in 2007, we launched a ground breaking white LED strobe light to addressthe cell phone tower market in North America and for the new wind installationsniche in Europe. The initial version of this new light was introduced afterextensive development efforts by our scientists and engineers and once againresulted in several patents being filed. This was succeeded by the introductionof an improved version to meet this very demanding specification and in thesecond half of 2007 we announced the qualification of our new smaller, lighterand lower price product which performed to the same exacting standards as ourfirst generation. In the North American market, there are over 50,000 conventional versions ofthis light installed on towers and the complete unit is replaced on a ten yearcycle, with a change of strobe tubes six or seven times in this period - our LEDlight does not need to be replaced. Although our improved product was onlylaunched in the second half of 2007, we sold close to a hundred units by the endof the year, into a market which is inherently cautious of adopting newtechnology. The Company foresees excellent growth prospects for this product in2008 which has already been adopted as a standard by one North American cellularoperator. The largest potential for Obstruction Lights is in North America and overall oursales grew by 25% in that market in 2007. As the white strobe light was only inits initial year it made no more than small contribution to this growth. 2008should see continued opportunity for this whole product line, helped byaggressive adoption of the white strobe light and by further installations onwind turbines. Lighting In the LED world, there is much talk of the potential for LEDs to replaceconventional light sources for illumination purposes and undoubtedly there isthe possibility that in time this will become a reality. Up until now, themajority of LED use for illumination has been in coloured lighting forarchitectural or entertainment uses and in order to gain a presence in this partof the market, Dialight acquired Lumidrives two years ago. This acquisition hasbeen successfully integrated into the Group and we have been able to bringLumidrives coloured products to the North American market and to open upopportunities in our distributor channel, due to our existing relationships withthose distributors. Although we have had some success with lighting OEMs in North America, withsophisticated coloured and colour mixing lights using our patented technologies,sales progress has been slower than we would have liked, as the lightingcompanies themselves take time to roll out their new Dialight offerings and toobtain the appropriate approvals. In May 2007, in conjunction with Hydrel, adivision of Acuity Brands, we were awarded a prize for a coloured underwaterfixture at the Lightfair Show in New York and we expect to see sales growth ofthis and similar products in 2008. Growth of the whole Lighting product line was 2% in 2007 although volume salesgrew just under 10 per cent offset by some price erosion. Along with the slowadoption by US based OEMs, in Europe we were adversely affected by some delay inthe introduction of next generation products for the Dialight Lumidrives line.This in turn resulted in some price erosion as our less sophisticatedcompetition was able to replicate our old range of products. By the end of theyear, a complete new line of products had been successfully introduced and wefully expect to get back to good growth in 2008 and be able to distanceourselves once more from the competition. Whilst great technical improvements in white LEDs have been realised in 2007,these devices are still expensive and have no better energy performance than themost efficient conventional light sources. Dialight believes there areapplications in industrial white lighting today where LEDs can do a better andmore effective job than the incumbent conventional light. We identified lightsqualified for use in hazardous locations as a good potential for LED lightingand in late 2006 "relamped" an existing hazardous location fixture with LEDs. Encouraged by the favourable reaction to this light, we have developed a customLED fixture which fulfils the same application and the SafeSite range was shownat the New York Lightfair show with a very complimentary reaction. This lightwas finally qualified and launched to the market in the fourth quarter of 2007. SafeSite is designed to emulate an existing 150 watt HID (very efficient)conventional fixture and would be used typically as an area illumination lightin oil refineries, offshore rigs, mines, pharmaceutical plants, food processingplants and so on. It is qualified to the appropriate Underwriters Laboratoriesspecifications and is a 'sealed for life' product - life being at least fiveyears. Although it is noted earlier in this report that LED light sources availabletoday cannot outperform the better conventional light sources (like HID), wehave demonstrated that through clever and unique design, the SafeSite fixturecan offer a 40% energy saving over its conventional rival, whilst delivering thesame amount of useful light. In addition, this is a product which requires nomaintenance and is warranted for at least five years - in fact we expectsignificantly longer life. It sells at close to the price of a conventionallight and addresses a market of at least $250 million a year in newinstallations. There is also a significant installed base of conventional lightswhich offer potential for retrofit. While the SafeSite only became available late in the year, we are pleased tohave sold some 300 lights, most of which were for initial trial purposes beforeour customers commit to major adoption or refits. In one case, however, a majorUS operator of offshore exploration rigs has decided to refit a complete rigwith over forty SafeSites and to test it in the field. Dialight, through its distributor Unimar, has recently reached an agreement withRio Tinto to install Dialight's LED based SafeSite fixtures throughout many oftheir coal distribution centres, thus improving safety and decreasingmaintenance and energy costs in these locations. Dialight is in discussion with a number of OEMs to private label this product inaddition to opening up its own routes to market. SafeSite provides an immediatevalue proposition for lighting users in the hazardous location market and thereis the potential for Dialight to ship several thousands of these lights in 2008and beyond. This hazardous location light is an example of using our strong technical skillsto develop a product for a market where today the special attributes of LEDs canmake an attractive proposition for the end user. Other examples are in the areaof "rough service"; we have been qualified to supply an LED light for use inmobile shelters for field hospitals, communications centres, command posts etc.The rugged nature of LEDs, combined with the ability to offer a low profilelight with the certainty that however roughly the shelter has been transported,the LED light will still work, is a very attractive proposition. For some years Dialight has been the predominant supplier of coloured LEDexterior lights for the US transit bus industry. We have an excellent positionand command a major share of this market with a strong reputation for qualitybased on the lifetime warranty that we provide to the bus operators. Asmentioned earlier, the efficiency and economics of white LEDs improvedsignificantly in 2007, enabling us to solve a problem with the interior lightingof these buses. Typically, fluorescent tubes are used for the interiorillumination of a bus. These tubes do not perform well due to their sensitivityto shock, vibration, cold and also being switched on and off frequently. Thisresults in a significant maintenance cost for the operators. Dialight hasstarted shipping LED lights to a number of transit authorities to replace thesefluorescent tubes. Our LED lights are impervious to vibration and shock and theycan be switched off and on any number of times without deterioration. Since theyhave a warranty for the life of the bus, they eradicate the maintenance issue ofconventional lights. Each year there are almost 5,000 new buses built whichcould use these lights and of course, there is a significant retrofitopportunity for those buses which are already in service. With the continuing improvements in white LED performance, a number of largerlighting markets such as roadway, tunnel and industrial lighting are beginningto open up. Creating a value proposition against existing technology in thesedemanding applications means we need to harness all the unique properties of LEDtechnology. To expand our knowledge base we are working with the University ofManchester, with strategic grant support from the UK Technology and StrategyBoard, to develop a number of key technologies essential to create reliable andefficient LED lighting systems. The results of the project can be used to produce new generation street lightingsolutions - with levels of reliability, control and performance never beforepossible and with a superior light quality to today's solutions. During the year, Dialight's technical staff filed 19 patents and had 7 grantedwith 47 pending approval. We typically spend over 6% of our Signals/Illuminationrevenues on R & D as we keep pace with the developments in efficiency andeconomics of our LED suppliers. Dialight has teams of engineers and scientistsfrom optical, mechanical and electrical/electronic backgrounds, in the USA, UK,Germany and Mexico, working to keep Dialight at the forefront in LEDapplication. Components 2007 2006Sales LED Indication Components £19.0m £20.6m Electromagnetic Disconnects £11.0m £11.4mTotal sales £30.0m £32.0m Segment results LED Indication Components £5.4m £6.6m Electromagnetic Disconnects £(0.1)m £0.5mTotal segment result (see page 14) £5.3m £7.1m Dialight's Components business comprises two product areas: LED IndicationComponents - LED indicator lights supplied to the OEM market; andElectromagnetic Disconnects - 'smart' meter disconnect switches which are usedby utility companies to manage remotely electrical supply to residential andbusiness premises. As described above, the Group is exploring the possibilitiesof divesting the LED Indication Components business which would leave the 'smart' meter operation as the segment's sole activity. The start of 2007 was adversely affected by a slowdown in orders for indicatorlights which had first impacted in December 2006. This was principally as theresult of a decision by one of our major distributors to reduce inventory, whichhad the effect of reducing our revenues in the first quarter. However, asanticipated there was no slowdown in the demand from end users and we saw arecovery to normal revenues by the end of the quarter, which continued for therest of the year. Dialight's Indication business services a mature niche in the electronics marketplace which will exhibit low growth over time. Sales of our US distributors grewat over 3% in the year and our sales to OEMs were steady. Many such componentsbusinesses are commodities and are subject to severe price pressures, however,Dialight is in a unique position in a market niche which avoids such majorpressures to reduce price and once again our margins have been maintained. Whilst most of our Components business relates to LED Indicators, Dialight alsosupplies 'smart' meter disconnect switches to the utility industry. In theUnited States there is a major move to implement an advanced meterinfrastructure in the electricity market. This requires the replacement of up to130 million electricity meters over the next several years. Each one of thesemeters may need a switch capable of safely handling 200 amps. Dialightmanufactures such a switch and is qualified with three of the top suppliers ofthese new 'smart' meters. Market projections are that up to 18 million switches will be needed by the endof 2010 and Dialight is well positioned to supply over a quarter of these. TheDialight switch is the result of significant development effort and uses severalunique approaches for which patents have been filed. Supply of these switches isexpected to drive significant growth for Dialight, beginning this year andElster, one of the major US smart meter manufacturers, has placed a blanketorder for 200,000 switches worth over $4,000,000 of which volume shipment isexpected to start late in the first half. Outlook The return of our Components segment to normal levels is expected to continue,given no major market downturns, with the added potential for good performancefrom the 'smart' meter disconnect products in 2008. As reported above, the Boardbelieves that the divesture of the LED Indication Components business may be themost appropriate way to deliver value to shareholders from this part of thegroup and to assist the focus on the Solid State Lighting business. During 2007, the Signals/Illumination segment achieved strong growth andimportantly, a number of key new products were introduced. The DialightLumidrives line was completely redesigned, SafeSite was successfully launchedand the newest version of the White Strobe is showing strong acceptance in themarket. In addition there is a pipeline of other new white light based productsfor 2008.The Board is therefore confident that in 2008 and beyond, our strategyfor growth in the Signals/Illumination market will show continued successfollowing the double digit sales performance in 2007. 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 STATEMENTfor the year ended 31 December 2007 Note 2007 2006 £'000 £'000Continuing operationsRevenue 1 63,408 62,302Cost of sales (49,137) (46,202) Gross profit 14,271 16,100 Distribution expenses (5,053) (5,126)Administrative expenses (5,325) (5,650)Operating profit 1 3,893 5,324Financial income 2,383 2,154Financial expense (1,796) (1,665) Net financing costs 587 489 Profit before tax 4,480 5,813 Income tax expense 2 (1,751) (2,145) Profit for the year attributable to equity holders of the parent 2,729 3,668 Earnings per shareBasic earnings per share 3 8.8p 11.8p Diluted earnings per share 3 8.6p 11.7p CONSOLIDATED BALANCE SHEETAs at 31 December 2007 2007 2006 £'000 £'000AssetsProperty, plant and equipment 6,072 5,557Intangible assets 7,913 7,495Deferred tax assets 1,209 1,249 Total non-current assets 15,194 14,301 Inventories 9,846 10,397Trade and other receivables 15,629 14,629Cash and cash equivalents 6,561 4,346Total current assets 32,036 29,372 Total assets 47,230 43,673 Liabilities Current liabilitiesInterest-bearing loans and borrowings (2,172) (2,184)Trade and other payables (9,271) (8,478)Tax liabilities (2,822) (765) Total current liabilities (14,265) (11,427) Non-current liabilitiesEmployee benefits (1,227) (1,671)Provisions (779) (802)Deferred tax liabilities (110) (83) Total non-current liabilities (2,116) (2,556) Total liabilities (16,381) (13,983) Net assets 30,849 29,690 EquityIssued share capital 591 591Merger reserve 546 546Other reserves (1,637) (1,842)Retained earnings 31,349 30,395 Total equity 30,849 29,690 CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 December 2007 Note 2007 2006 £'000 £'000 Operating activities Profit for the year 2,729 3,668Adjustments for:Financial income (2,383) (2,154)Financial expense 1,796 1,665Income tax expense 1,751 2,145Share based payments 196 130Depreciation of property, plant and equipment 1,155 1,154Amortisation of intangible assets 843 658 Operating cash flow before movements in working capital 6,087 7,266Decrease/(increase) in inventories 475 (4,152)Increase in trade and other receivables (1,356) (2,062)Increase in trade and other payables 800 1,504Decrease in pension liabilities (192) (615)Transfer from "Restricted Cash" - 485 Cash generated from operations 5,814 2,426 Income taxes received/(paid) on profit on ordinary activities 423 (1,623)Income tax paid on gain on disposals - (2,559)Interest paid (152) (100) Net cash from operating activities 6,085 (1,856) Investing activities Interest received 484 355Acquisition of subsidiary (net of cash received) - (2,449)Capital expenditure (1,626) (1,207)Expenditure on development (958) (976)Sale of tangible fixed assets 11 82 Net cash used in investing activities (2,089) (4,195) Financing activities Dividends paid (1,687) (1,484)Transfer to "Restricted Cash" 5 - 2,559Preference shares redeemed (12) (29)Own shares acquired - (308) Net cash (used in)/generated from financing activities (1,699) 738 Net increase/(decrease) in cash and cash equivalents 2,297 (5,313)Cash and cash equivalents at 1 January 4,346 9,829Effect of exchange rates on cash held (82) (170)Cash and cash equivalents at 31 December 6,561 4,346 Consolidated statement of recognised income and expenseFor the year ended 31 December 2007 2007 2006 £'000 £'000Exchange difference on translation of foreign operations 193 (1,900)Actuarial losses on defined benefit pension schemes (339) 303Tax on items taken directly in equity 131 (133)Effect of change in UK Tax rate (64) -Income and expense recognised directly in equity (79) (1,730)Profit for the period 2,729 3,668 Total recognised income and expense for the period attributable to 2,650 1,938equity holders of the parent Notes to the consolidated financial statementsfor the year ended 31 December 2007 The consolidated financial statements of the Company for the year ended 31December 2007 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 2007and 2006. Statutory accounts for 2006 have been delivered to the registrar ofcompanies, and those for 2007, 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 2007, will shortly be postedto share holders, and after adoption at the Annual General Meeting on 7 May 2008will be delivered to the registrar. 1. Segment reporting Business segments The Group comprises the following business segments: - • Components comprising the indication business and electromagnetic disconnects• Signals/Illumination which includes Traffic and Rail Signals, Obstruction Lights and the new Solid State Lighting products. All revenue relates to the sale of goods. The primary format used for segmentalreporting is by business segment as this reflects the internal managementstructure and reporting of the Group. Segment results, assets and liabilitiesinclude items directly attributable to a segment as well as those that can beallocated on a reasonable basis. Unallocated expenses comprise corporate costsincluding share based payments and unallocated assets and liabilities comprisecash, borrowings, and pension fund liabilities. The 2006 segmental results havebeen restated in line with the format included in this year's report. Business segments 2007 Electro LED magnetic Indication Total Signals/ components business Components Illumination Total £'000 £'000 £'000 £'000 £'000Revenue 11,000 19,029 30,029 33,379 63,408 Contribution 2,656 10,525 13,181 10,774 23,955 Overhead costs (2,808) (5,083) (7,891) (10,660) (18,551) Segment results (152) 5,442 5,290 114 5,404 Unallocated expenses (1,511) Operating profit 3,893Net financing income 587 Profit before tax 4,480Income tax expense (1,751) Profit after tax 2,729 2006 Electro LED magnetic Indication Total Signals/ components business Components Illumination Total £'000 £'000 £'000 £'000 £'000Revenue 11,361 20,654 32,015 30,287 62,302 Contribution 3,078 11,701 14,779 10,602 25,381 Overhead costs (2,598) (5,076) (7,674) (10,970) (18,644) Segment results 480 6,625 7,105 (368) 6,737 Unallocated expenses (1,413) Operating profit 5,324Net financing income 489 Profit before tax 5,813Income tax expense (2,145) Profit after tax 3,668 2007Other Information Electro magnetic LED components Indication Total Components Signals/ business Illumination Total £'000 £'000 £'000 £'000 £'000Capital Additions 222 431 653 973 1,626Depreciation and 441 420 861 1101 1,962amortisation 2006Other Information Electro magnetic LED components Indication Total Components Signals/ business Illumination Total £'000 £'000 £'000 £'000 £'000Capital Additions 209 344 553 654 1,207Depreciation and 352 397 749 1,020 1,769amortisation Balance Sheet - Assets 2007 Electro magnetic LED components Indication Total Components Signals/ business Illumination Total £'000 £'000 £'000 £'000 £'000Segment assets 6,320 7,999 14,319 24,495 38,814Unallocated assets 8,416 Consolidated total assets 47,230 Balance Sheet - Liabilities 2007 Electro magnetic LED components Indication Total Components Signals/ business Illumination Total £'000 £'000 £'000 £'000 £'000Segment liabilities (1,267) (2,705) (3,972) (5,757) (9,729)Unallocated liabilities (6,652) Consolidated total (16,381)liabilities Balance Sheet - Assets 2006 Electro magnetic LED components Indication Total Components Signals/ business Illumination Total £'000 £'000 £'000 £'000 £'000Segment assets 6,901 7,033 13,934 23,828 37,762Unallocated assets 5,911 Consolidated total assets 43,673 Balance Sheet - Liabilities 2006 Electro magnetic LED components Indication Total Signals/ business Components Illumination Total £'000 £'000 £'000 £'000 £'000Segment liabilities (1,448) (1,773) (3,221) (5,455) (8,676)Unallocated liabilities (5,307) Consolidated total (13,983)liabilities 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 Total 2007 2006 £'000 £'000North America 37,116 36,386UK 11,401 10,896Rest of Europe 7,300 7,690Rest of world 7,591 7,330 63,408 62,302 Continuing operations Segmental assets Capital expenditure 2007 2006 2007 2006 £'000 £'000 £'000 £'000North America 26,059 22,394 1,125 899UK 14,487 15,248 460 259Rest of Europe 6,684 6,031 41 49 47,230 43,673 1,626 1,207 2. Income tax expense Recognised in the income statement 2007 2006 £'000 £'000Current tax expenseCurrent year 1,825 1,838Adjustment for prior years (110) (209) 1,715 1,629Deferred tax expenseOrigination and reversal of temporary differences 58 505Adjustment for prior years (22) 11Total income tax expense 1,751 2,145 Reconciliation of effective tax rate 2007 2007 2006 2006 % £'000 % £'000Profit for the period 2,729 3,668Total income tax expense 1,751 2,145 Profit excluding income tax 4,480 5,813 Income tax using the UK corporation tax rate of 30% 30.0 1,344 30.0 1,744Effect of tax rates in foreign jurisdictions 6.7 302 6.0 346Non-deductible expenses 1.2 54 0.6 37Research and development credit - - (0.7) (41)Unrecognised losses 4.3 194 4.4 257Change in UK tax rate (0.2) (11) - -Over provision in prior years (2.9) (132) (3.4) (198) 39.1 1,751 36.9 2,145 Deferred tax recognised directly in equity 2007 2006 £'000 £'000Relating to pension accounting 67 (133) 3. Earnings per share Basic earnings per share The calculation of basic earnings per share at 31 December 2007 was based on theprofit for the year of £2,729,000 (2006:£3,668,000) and a weighted averagenumber of ordinary shares outstanding during the year ended 31 December 2007 of31,084,000 (2006:31,150,000). Diluted earnings per share The calculation of diluted earnings per share at 31 December 2007 was based onprofit for the year of £2,729,000 (2006:£3,668,000) and a weighted averagenumber of ordinary shares outstanding during the year ended 31 December 2007 of31,619,000 (2006:31,367,000) calculated as follows: - Weighted average number of ordinary shares (diluted) 2007 2006 '000 '000Weighted average number of ordinary shares 31,084 31,150Effect of share options on issue 535 217 Weighted average number of ordinary shares (diluted) 31,619 31,367 4. Dividends The following dividends were paid in the year: 2007 2006 £'000 £'000Interim-1.90p per ordinary share (2006:1.75p) 594 5472006 Final-3.5p per ordinary share (2005:3.0p) 1093 937 1,687 1,484 After the balance sheet date the following dividends were recommended by theDirectors. The dividends have not been provided for and there are nocorporation tax consequences. 2007 2006 £'000 £'000Final recommended dividend3.8p per ordinary share (2006:3.5p) 1,187 1,093 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. At 31 December2007 the balance on the restricted cash balance was £956,000 (2006:£956,000) andis included in trade and other receivables. - ENDS - This information is provided by RNS The company news service from the London Stock Exchange