Dialight Regulatory News (DIA)

14 Mar 2005 07:00

Roxboro Group PLC14 March 2005 Date: Embargoed until 07:00am Monday 14 March 2005 Contacts: Harry Tee - Group Chief Executive Alf Vaisey - Group Finance Director The Roxboro Group PLC Tel: 020 7796 4133 (14/03/05) 01223 424626 (thereafter) Alistair Mackinnon-Musson Philip Dennis Hudson Sandler Tel: 020 7796 4133 Email: roxboro@hspr.co.uk Photographs: Available upon request from Hudson Sandler (see above) THE ROXBORO GROUP PLC PRELIMINARY RESULTS The Roxboro Group PLC, the international specialist electronics group, announcesits Preliminary results for the year to 31 December 2004. The Roxboro Group consists of two divisions: Solartron in electronic measurementand Dialight in electronic lighting. Highlights • Operating profit on continuing operations up 87% to £10.2 million (2003: £5.4 million)• At constant currency, operating profit would have doubled to £10.8 million• Adjusted EPS up 75% to 22p per share (2003: 12.6p per share)• Excellent operating cash flow - 130% of operating profit and up 25% on the previous year• Proposed 10% increase in final dividend to 7.6p (2003: 6.9p) making 11.0p for the year (2003: 10.0p)• Outstanding operational progress at Dialight, with profits up five fold and double digit margins achieved• Steady result at Solartron, with substantially higher year-end order book Harry Tee, Group Chief Executive, said: "I am delighted to report Roxboro made excellent progress in 2004, asdemonstrated by the substantial improvement in Group profits". "The order book at the beginning of the current year was strong and we arecurrently trading ahead of the same period last year." We are pleased to report Roxboro's continuing operations made excellent progressin 2004, demonstrated by a substantial improvement in operating profit beforegoodwill that showed an 87% increase to £10.2 million (2003: £5.4 million). Ona constant currency basis operating profit would have doubled to £10.8 million.This success was achieved despite turnover being marginally lower than in theprevious year at £118.9 million (2003: £122.2 million) entirely due to currencymovements having the effect of reducing sales by over £6 million. On a constantcurrency basis turnover would have shown a 2.5% increase. Profit before goodwill and tax was up 100% to £10.2 million (2003: £5.1 millioncontinuing operations only) and adjusted EPS showed a 75% improvement to 22pence per share (2003: 12.6 pence per share). Group operating cash flows werestrong at £13.2 million, up 25% on the prior year (2003: £10.6 million) whichrepresents 130% of operating profit. At the year end the Group had a cashbalance of £6.8 million (2003: £2.0 million). Group operating profit in the second half showed a 22% advance over the firsthalf. In the main this was due to the significant advances made by the Signalsbusiness unit of Dialight, which made a good profit contribution in the secondhalf as a result of the benefits derived from relocating production to Mexico in2003. Our Mexico operation is now functioning efficiently with excellent localmanagement in place. Dividend The Board is recommending an increased final dividend of 7.6 pence (2003: 6.9pence) to be paid on 13 May 2005 to shareholders on the register at 29 March2005. As a result total dividends per share for 2004 will be 11 pence, anincrease of 10% on the 2003 level. Operational Review The Roxboro Group consists of two divisions: Dialight in electronic lighting andSolartron in electronic measurement. Dialight Division 2004 2003 £m £mSales 55.3 57.9Operating Profit 5.9 1.1 Dialight made good operational progress in 2004. Operating profits increasedfive fold to £5.9 million from £1.1 million the prior year, with operatingmargins returning to double digits for the first time since the significantdownturn in the technology sector in 2001. Had exchange rates remainedconstant, Dialight's turnover would have shown an increase of 5% to £60.6million but with the weakness of the US Dollar in the year, the reported numbershows a marginal reduction to £55.3 million. Opto-electronics Dialight's unique surface mounted LED product, Prism, is becoming the acceptedindustry standard, being designed into multiple applications by a wide range ofcustomers. The product line has a number of variants but a recently introducedbi-level version is also now being designed into a wide range of equipmentparticularly in the telecoms sector for channel indication. This product hasthe further advantage of being RoHS compliant meeting the latest EU directiverequirements including lead-free solder. Over the past five years Dialight has produced around 100 million Prism devicesand demand continues to grow, with 2004 sales increasing by over 30% from theprevious year. The fastest growing sector for Prism is mobile telephony,although there is also growing demand across a wide range of other electronicsectors. Dialight saw demand strengthen early in the year from the general electronicsindustry, particularly the telecoms sector, for its opto-electronic components.Sales to US distributors, which account for 50% of these product sales, werestrong in the first half although this slowed somewhat in the third quarter asindustry demand weakened. Nevertheless, second half demand was ahead of thesecond half of previous year. Dialight exports approximately 50% of its opto-electronic components with themajority of these being shipped to Asia where contract manufacturers produceequipment for major OEM customers, such as Cisco and Lucent. Most OEM customersdesign their equipment in the United States where Dialight is able to achievespecified status. In many cases production is then transferred to contractmanufacturers in Asia, increasing Dialight's export percentage. Success in this business area is achieved through continuous design activity.To that end the company has enjoyed good success with both traditional customersand in new areas such as networking and wireless but also in emergingtechnologies such as Storage Area Networks and Voice Over Internet. The companyis also penetrating new areas such as gaming machines, where opportunities forLED devices have been identified particularly for panel mounted indicators. Signals The major change at Dialight during 2004 was the performance of the Signalsbusiness unit. Following the relocation of production from the United States toMexico in 2003, the cost benefits, including the elimination of duplicatedcosts, showed through strongly in 2004. This business unit is again making apositive contribution to profits. At a time when concerns continue to grow about the dangers of global warmingthrough greenhouse gas emissions, it is interesting to note that 20% of theworld's electricity production is used in illumination, but of this totallighting usage, over 30% is wasted in the generation of unwanted heat. Dialight's solid state lighting solutions use typically 10% of the energyconsumed by conventional light sources for coloured applications and less thanhalf the energy of an incandescent source for white light, substantiallyreducing the demand for electricity. 50% of traffic signals in the UnitedStates have already been converted to solid state light, while in Europe thefigure is less than 5%. Dialight continues to hold a market leadership position in solid state trafficsignals and has excellent relationships with both dealers and traffic systemsOEMs in the United States and increasingly in Europe. These OEMs incorporateDialight's solid state lighting modules into their signal heads for new trafficinstallations or in the refurbishment of older systems, which is likely tocontinue to be a growing part of Dialight's business. Pricing in the trafficsignals sector has stabilised somewhat and price-downs are anticipated to be atmanageable levels in the future. In Europe the launch of the new Eclipse range of solid state traffic modules hasbeen well received and is expected to lead to increased volumes with OEMs suchas Siemens Traffic Systems. European OEMs have until now been reluctant to takehigher volumes because of the relatively high unit cost of the Europeanspecified product, where sun phantom requirements (the reflection of sun on thelens) are much more rigorous than in the United States. This requirementeliminates the effect of sunlight causing a traffic signal to appear illuminatedwhen it is switched off. The Eclipse range eliminates the sun phantom concern by applying the very latestAllNGaP and InGaN LED technologies and lens design techniques, substantiallyreducing unit costs, while still achieving the tougher European standards. AsEclipse volumes increase the sub-assemblies that are highly labour intensive toproduce, will be built in Mexico and then shipped to Europe for final assembly. Continuing strong growth in demand for solid state obstruction lights is veryencouraging, both in the United States and Europe, with Dialight shipping 15,000lights to the Federal Aviation Authority for use at US airports during the year.These products are particularly attractive because of their long life whenlocated in such places as on the tops of buildings, towers or masts where accessis difficult and expensive. Dialight has also introduced a range of specially designed solid state lightingproducts for use in hazardous environments such as oil refineries, where safetyis critical. The low voltage and low heat of solid state lights makes themideal for these types of applications. In the rail sector Dialight has taken its first orders in Europe and China forwayside signals. In the US the introduction of Dialight's unique "light-outdetection" feature is expected to lead to additional business in 2005. Dialight has opened up new opportunities for growth in the lighting industrywhere solid state lighting is increasingly being seen as a disruptive technologyreplacing traditional light sources. Dialight has developed a relationship withRosco Laboratories Inc., the leading producer of colour gels for theatrelighting worldwide. Using SpectraMix, Dialight's proprietary colour mixingtechnology, in association with its solid state lighting products, colours inthe Rosco palette of theatrical colour media can now be reproduced withrepeatable exact colour matching. Associated with SpectraMix, Dialight has also developed a range of solid statelighting products including a long-throw spotlight module again for theatricaluse. Incorporating a patented optical system, Dialight has produced a productable to produce 1214 lumens per square inch, considerably higher than anythingelse on the market. When coupled with frontal secondary optics, Dialight'sspotlights or floodlights will be capable of providing 6000 lumens in a 500 wattsolid state package with virtually infinite colour variation. The uniqueoptical solution also eliminates optical fringing, the separated coloured edgesoften seen around shadows. Dialight's solid state lighting solutions generate virtually no heat andtherefore are considerably more efficient than conventional light sources.Incorporating RGBA (red, green, blue and amber) multi-channel LED arrays, thecolour control provided by SpectraMix allows complete control through more thanone billion colours or shades. These are the first of a range of high-end solid state lighting products plannedto be introduced at Dialight into what is expected to be a very dynamic marketover the next several years. BLP Following the cost reduction exercise in 2003, BLP made a positive contributionin the year. The continued development of the X-PulseTM pager network in the USled to even further interest in this remote connect / disconnect product, whichbodes well for the growth in this market. Solartron Division 2004 2003 £m £mSales 63.6 64.3Operating Profit 6.7 6.6 Solartron, the Group's electronic measurement specialist, produced a steadyresult in an unfavourable environment caused by the weakness of the US dollar.This made it difficult for Solartron, whose manufacturing is in the UK andFrance, to compete with indigenous USA suppliers, even though in many casesSolartron's products are superior. Both the North and South American marketswere also affected by low investment in the domestic downstream oil & gassector. These conditions, however, were offset by strong growth in Asia, wheredemand for fluid analysis systems for oil installations was strong in China andin Japan good sales of analytical instruments was achieved. Order intake improved strongly, but too late in the year in some cases tobenefit 2004. As a result, however, the order book at the year-end wassubstantially higher than at the half year, placing us in a good position for2005. Some encouraging advances were made, in particular the introduction of the newPegasus 2-wire FMCW non-contacting Radar Level Transmitter. This advancedtechnology product, which can be used in the level measurement of liquids orslurries, brings performance normally associated with more expensive measurementsolutions, and addresses the fastest growing segment in the level measurementmarket. Solartron has also successfully continued its strategy of introducing andproducing "best-of-breed" products, and this has led to agreements withindustry-leading global instrumentation suppliers. The Analytical Instruments product line enjoyed strong demand in the secondhalf, particularly in Asia, primarily driven by greater investment in researchinto advanced materials, electrochemistry and energy storage devices. Late inthe year a new modular battery and fuel cell tester was launched providing verycost effective multi-channel impedance and charge / discharge testing. The coreof this product is a new modular Frequency Response Analyzer that will allow thecompany to broaden its market by addressing an increasing range of measurementapplications in materials research. In the oil and gas sector the business performed well, but again with a latepick-up in orders received and contracts awarded, much of this was carried overand will benefit the current year. In particular good business with ChinaPetroleum for fluid analysis and measurement systems was maintained and isexpected to continue to grow for several years as China continues to invest inits oil distribution infrastructure. Solartron supplied three Dualstream 2 wetgas meters for use in the Atlantic and Cromarty North Sea gas and condensatefields, for Amerada Hess and BG International respectively. The products willbe used both for allocation gas metering and the detection of waterbreak-through from the reservoir. The meters are fully integrated into WellheadProduction Trees and are located on the sea bed at a depth of over 100 metresmaking reliability a key factor. Solartron enjoyed a particularly good year in the metrology sector withincreasing demand for its unique range of analogue and digital gaugingtransducers, used for quality control throughout the world. The introduction ofa range of new products, targeted to meet the specific needs of the industry foruse in difficult applications, has injected new growth into this area. The new "mini-probe" has been designed into the American Axle project byValenite to electronically measure internal bores in a difficult application.Solartron supplies mainly to OEMs such as Valenite, Renishaw, Air Gage andEtamic and commands a significant share of the world market for gaugingtransducers, but has been progressively expanding its market base with theintroduction of new products. Solartron's Orbit Network is increasingly becoming accepted as an industrystandard for digital gauging, providing the company with a material lead overits competitors, as the gauging world increasingly moves to digital rather thananalogue measurement. Staff There has been a significant change in the distribution of our employees overthe past two years with over 460 now being employed in Mexico. We wish towelcome all our new colleagues and to thank them, together with all of theGroup's other employees for their hard work and commitment over the past year. Outlook The order book at the year-end was strong, particularly at Solartron, andtrading in the early part of the current year is ahead of the same period lastyear. Order intake rates at Dialight Opto-electronics picked up somewhat fromthe lower rates in the second half of last year, and increasing demand for solidstate obstruction lighting products has continued. Consequently the Board is confident that the Group will show further progress inthe current year. Sir Alan Cockshaw Harry TeeChairman Group ChiefExecutive14 March 2005 GROUP PROFIT AND LOSS ACCOUNTfor the year ended 31 December 2004 Notes 2004 2003 £'000 £'000Turnover 2(a)Continuing operations 118,852 122,173Discontinued operations - 14,606 118,852 136,779Cost of sales (80,521) (96,342) Gross profit 38,331 40,437Distribution costs (15,777) (18,062)Administrative expenses (13,501) (15,304) Operating profit 2(b)Continuing operations 9,053 4,235Discontinued operations - 2,836 9,053 7,071 Operating profit before amortisation of intangible assets 10,170 8,273Amortisation of intangible assets (1,117) (1,202) Profit on disposal of discontinued operations - 15,585Profit on ordinary activities before interest and taxation 9,053 22,656 Net interest payable 5 (326) Profit on ordinary activities before taxation 9,058 22,330Tax on profit on ordinary activities (3,462) (2,612) Profit for the financial year 5,596 19,718 Dividends 4 (3,391) (3,042) Retained profit for the financial year 2,205 16,676 Pence Pence Earnings per share - basic 5 18.3 45.4 - adjusted 5 22.0 12.6 - diluted 5 18.2 45.4 GROUP BALANCE SHEETSat 31 December 2004 2004 2003 £'000 £'000Fixed assetsIntangible assets 14,347 15,464Tangible assets 11,463 13,100 25,810 28,564 Current assetsStocks 15,404 16,118Debtors 26,314 25,879Cash at bank and in hand 6,819 4,332 48,537 46,329 Creditors:Amounts falling due within one yearBorrowings (51) (2,364)Other creditors (20,144) (19,354) (20,195) (21,718) Net current assets 28,342 24,611 Total assets less current liabilities 54,152 53,175 Provisions for liabilities and charges (1,667) (1,507) 52,485 51,668 Capital and reservesCalled up share capital 2,849 3,115Share premium account 6,049 5,976Capital redemption reserve 40,372 40,104Profit and loss account 3,215 2,473Shareholders' funds - equity and non-equity interests 52,485 51,668 GROUP STATEMENT OF CASH FLOWSfor the year ended 31 December 2004 Notes 2004 2003 £'000 £'000 Cash flow from operating activities 3 13,201 10,562 Returns on investments and servicing of financeInterest paid (90) (529)Interest received 95 216Net cash inflow/(outflow) from returns on investment 5 (313)and servicing of finance Taxation (3,583) (1,867) Capital expenditure and financial investment Purchase of tangible fixed assets (1,299) (1,726)Sale of tangible fixed assets 13 101Net cash outflow from investing activities (1,286) (1,625) Acquisitions and disposalsDisposal of subsidiary undertakings - 52,654 Purchase of intangible assets - (50) - 52,604 Dividends paid (3,135) (4,883) Cash inflow before use of liquid resources and financing 5,202 54,478 FinancingIssue of ordinary share capital 74 97Share issue expenses - (459)Redemption of B shares (267) (40,053)Net loan (repayments)/advances - (17,065)Capital element of finance lease rental payments (7) (20) (200) (57,500) Increase/(decrease) in cash in the year 5,002 (3,022) Reconciliation of net cash flow to movements in net funds Increase/(Decrease) in cash in the year 5,002 (3,022)Cash outflow from change in debt and lease financing 7 17,085Change in net funds resulting from cash flows 5,009 14,063Translation difference (209) (393)Movement in net funds in the year 4,800 13,670Net funds at beginning of year 1,968 (11,702)Net funds at end of year 6,768 1,968 GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor the year ended 31 December 2004 2004 2003 £'000 £'000 Profit for the financial year 5,596 19,718 Currency translation differences on foreign currency net investments (1,195) (2,281)Total gains recognised in the year 4,401 17,437 RECONCILIATION OF MOVEMENTS IN GROUP'S SHAREHOLDERS' FUNDS 2004 2003 £'000 £'000The movements in group's shareholders' funds are:Total recognised gains and losses 4,401 17,437Dividends (3,391) (3,042)Goodwill previously taken to profit and loss account - 21,664New share capital subscribed 74 97Share Issue expenses - (459)Redemption of B Shares (267) (40,053)Net change to shareholders' funds 817 (4,356)Balance brought forward 51,668 56,024Balance carried forward 52,485 51,668 NOTES TO THE ACCOUNTS 1. The financial information has been prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 31 December 2003. 2. Segmental information Turnover, profit before interest and taxation and net assets are analysed below: 2004 2003 £'000 £'000a) Turnover By geographical destination: UK 23,007 28,562 USA 45,961 56,005 Other European countries 29,450 31,367 Rest of the world 20,434 20,845 118,852 136,779 By geographical origin: UK 62,353 71,397 USA 49,759 58,882 Other European countries 15,626 15,698 127,738 145,977 Inter-segment sales (8,886) (9,198) 118,852 136,779 By business operation: Continuing operations Dialight 55,268 57,916 Solartron 63,584 64,257 118,852 122,173 Discontinued operations Weston - 14,606 118,852 136,779 b) Profit before interest and taxation 2004 2003 By geographical origin: £'000 £'000 UK 7,381 9,004 USA 5,846 1,944 Other European countries (637) (445) Operating profit before central costs and intangible assets amortisation 12,590 10,503 Central costs (2,420) (2,230) Amortisation of intangible assets (1,117) (1,202) Operating profit on ordinary activities 9,053 7,071 Profit on sale of discontinued operations - 15,585 Profit before interest and taxation 9,053 22,656 By business operation: Continuing operations Dialight 5,879 1,071 Solartron 6,711 6,596 12,590 7,667 Discontinued operation Weston - 2,836 Operating profit before central costs and intangible assets amortisation 12,590 10,503 Central costs (2,420) (2,230) Amortisation of intangible assets (1,117) (1,202) Operating profit on ordinary activities 9,053 7,071 Profit on sale of discontinued operations - 15,585 Profit before interest and taxation 9,053 22,656 In 2004, £766,000 of the amortisation of intangible assets related to the Solartron business, and £351,000 related to the Dialight business. In 2003, £766,000 of the goodwill amortisation of intangible assets related to the Solartron business, £84,000 related to the Weston business and £352,000 related to the Dialight business. Net assets 2004 2003c) £'000 £'000 By geographical origin: UK 19,383 21,099 USA 12,474 14,770 Other European countries 1,823 1,693 33,680 37,562 Unallocated central net assets 18,805 14,106 52,485 51,668 By business operation: Continuing operations Dialight 17,705 20,406 Solartron 15,975 17,156 33,680 37,562 Unallocated central net assets 18,805 14,106 52,485 51,668 Unallocated central net assets include intangible assets of £14,347,000 of which £11,399,000 relates to the Solartron business and £2,948,000 relates to the Dialight business. In 2003 the unallocated central net assets included intangible assets of £15,464,000 of which £12,165,000 related to the Solartron business and £3,299,000 related to the Dialight business. 3. Reconciliation of operating profit to cash inflow from operating activities 2004 2003 £'000 £'000 Operating profit 9,053 7,071 Depreciation charges 2,606 3,390 Amortisation of intangible assets 1,117 1,202 Loss/(profit) on sale of tangible fixed assets 54 (59) Decrease in stocks 238 2,462 Increase in debtors (1,076) (1,988) Increase/(decrease) in creditors 1,009 (1,713) Increase in provisions 200 197 Net cash inflow from operating activities 13,201 10,562 4. Dividends The directors have proposed a final dividend of 7.6p (2003: 6.9p) which is subject to shareholder approval at the Annual General Meeting on 10 May 2005, and if approved, will be payable on 13 May 2005 to shareholders on the register on 29 March 2005. 5. Earnings per Share The calculation of earnings per ordinary share is based on profit after tax of £5,596,000 (2003:£19,718,000) and after non-equity dividends of £80,000 (2003: £35,000) and on 30,091,000 (2003:43,324,000) ordinary shares, being the average number of ordinary shares in issue during the year. The diluted earnings per share is based on profit after tax for the year of £5,596,000 (2003:£19,718,000) and non-equity dividends of £80,000 (2003: £35,000) and 30,339,000 (2003: 43,339,000) ordinary shares, calculated as follows: 2004 2003 Thousands Thousands Basic weighted average number of shares 30,091 43,324 Dilutive potential ordinary shares: Employee and Executive share options 248 15 30,339 43,339 Reconciliation to adjusted earnings per share 2004 2003 Pence Pence Basic earnings per share 18.3 45.4 Amortisation of intangible assets of £1,117,000 (2003: £ 1,202,000) 3.7 2.8 Profit on sale of discontinued operations - (35.6) Adjusted earnings per share 22.0 12.6 6. Pensions FRS 17 'Retirement Benefits' was issued in November 2000 to replace SSAP 24 by 2005. Although it is not required to be fully implemented until 2005 there is a phased approach with regards to disclosures which the Group has complied with. If the Group had fully adopted FRS17 in 2004 then the profit and loss account in respect of defined benefit schemes would have reflected a charge of £0.9m, a reduction of £0.5m from the actual 2004 SSAP 24 based charge. In addition, the net deficit arising on FRS17 applied principals which is effectively a snapshot of the assets of the year end date would have led to the Group's net assets being reduced by £7.9 m (2003: £7.5m) 7. The Annual Report and Accounts for the year ended 31 December 2004 which was approved by the Board of directors on 14 March 2005 includes an unqualified audit opinion and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. Accounts will be despatched to shareholders on 8 April 2005. The accounts will be available from that date from the Company Secretary at the Company's registered office, Byron House, Cambridge Business Park, Cambridge, CB4 4WZ. 8. The above financial information does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The comparative financial information for the year ended 31 December 2003 is abridged and has been extracted from the statutory accounts, on which the auditors issued an unqualified opinion, and which have been delivered to the Registrar of Companies. ENDS This information is provided by RNS The company news service from the London Stock Exchange