2018 HALF YEAR RESULTS 30 JULY 2018
KEY POINTS H1 2018 OPERATIONAL ISSUES HIGHEST PRIORITY IN H1 REDUCE LEAD SIGNIFICANT READY FOR Q4 TIMES TO NORMAL PROGRESS MADE DEMAND SPIKE LEVELS TRANSITION FROM RECOVERY TO GROWTH Private and confidential 2
OPERATIONAL HIGHLIGHTS REDUCED LATE ORDERS BY 60% Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Total late orders SIGNIFICANT INCREASE IN Q4 PRODUCTION CAPACITY Q1 2018 Q2 2018 Q3 2018 Q4 2018 External capacity Internal capacity Private and confidential Private and confidential 3
FINANCIAL REVIEW FARIYAL KHANBABI Private and confidential
FINANCIAL SUMMARY – H1 AS EXPECTED Net cash Revenue Underlying EBIT £6.5m £92.7m £12.7m £80.1m £7.3m £2.9m H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 6.4p 35% £2.8m Underlying Underlying Underlying profit gross margin basic EPS before tax Private and confidential 5
EBIT BRIDGE Impact of revenue decrease (£1.8m) Dual running costs £6.5m (£0.9m) (£3.5m) £2.6m Operating costs £2.9m 2.9 $ Foreign exchange £ H1 2017 H1 2018 Private and confidential 6
LIGHTING Lighting Reported currency Reported currency £m H1 2018 H1 2017 Variance H2 2017 Variance Revenue 59.3 72.4 (18%) 65.1 (9%) Gross Profit 22.0 30.6 (28%) 23.7 (7%) Gross margin 37% 42% -500bps 36% +100bps Overheads (18.7) (23.1) 19% (20.0) 7% EBIT 3.3 7.5 (56%) 3.7 (11%) Gross margin bridge Duplicate plant Skilled labour force Increased freight Raw material running costs retention charges handling fees (220bps) (120bps) (110bps) (50bps) Private and confidential 7
LIGHTING ORDER INTAKE The Americas • Operational issues impacted lead times • Large projects not bid for • Order intake Lower distributor inventory (18 % ) • Continued strength of sales team EMEA £71m £64m • Narrow product range served from inventory on hand • New sales team +22 % • Increased distribution partners H1 2017 H1 2018 APAC • Narrow product range served from inventory on hand • Strong sales team +24 % • Increased distribution partners Private and confidential Private and confidential 8
SIGNALS AND COMPONENTS Revenue Underlying EBIT Gross margin £2.2m 30% £20.8m £20.3m 28% £1.6m H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 2% 38% 200 bps Revenue growth Improvement in EBIT Improvement in gross margin 12% 69% At constant currency At constant currency Private and confidential 9
CASH BRIDGE Operating cash £3.5m (£9.0m) Inventory increase £12.8m Raw material increase £7.3m due to Ensenada commencing High Bay production 2017 H1 2018 Private and confidential 10
H2 2018 PLANNING ASSUMPTIONS c.25% £1m - £2m c.£7m Group tax rate Savings in cash tax costs Capital investment Net interest Broadly in line with 2017 INCOME STATEMENT Tax rate c25% c.£7m for plant upgrades, IT Capex & product development CASH FLOW Increased inventory levels as Working capital Ensenada ramps up production Private and confidential 11
BUSINESS REVIEW MARTY RAPP Private and confidential
OPERATIONAL HIGHLIGHTS 60 % 83 % 35 % % improvement in level of late % increase in total lighting On time delivery at Ensenada orders production volumes Currently producing, 37% lighting volume at Ensenada; available capacity to move all remaining assembly operations if required Private and confidential 13
MANUFACTURING PARTNER PERFORMANCE Overdue units Weekly production units On time H1 2018 H1 2018 delivery 51% 48% Highbay Total 2017 H1 2018 Product lines transferred early 2017 returning to normal on time Production units remains flat over delivery H1 2018: 3% H1 2018 improvement High Bay line overdues increasing, improvement in June from transfer to Ensenada Private and confidential 14
ENSENADA PERFORMANCE Overdue units On time Production units H1 2018 delivery * 83% 75% 2017 H1 2018 Q4 2016 Jun-18 Q3 2018 Q4 2018 Capacity for all lighting assembly High Bay production commenced in June 2018 H1 2018: 8% Multiple suppliers of sub Overdue orders transferred from improvement assemblies manufacturing partner in April 2018 * On time delivery for June 2018 Private and confidential 15
UPGRADES AT OUR ENSENADA FACILITY PEOPLE • Upgraded operations leadership • Labour force skilled in complex assembly process • Enhanced sustaining engineering on site PROCESSES • Improved shop floor controls – upgraded manufacturing practices • Improved Sales and Operations Planning process • Improved visibility and response to Key Performance Indicators Private and confidential 16
OUTSOURCING Initial Hybrid Outsourcing assumptions Increased on time Labour efficiencies Increased assembly time delivery targeted at by 20% Reduce assembly times 90% by 45% Material cost savings Dialight material cost Improved gross Reduction of 10% reductions only margins >40% Private and confidential 17
HYBRID MANUFACTURING MODEL External Finished goods Machining Cable harness PCBAs &Painting • Internal capacity for assembly of all Select sku inventory Internal Final assembly lighting products Final assembly and supply chain management • Qualified sub assembly suppliers for Ensenada and Penang facilities • • • Complete control of supply chain • Operational recovery to be Customers • Reduced lead times completed by Q4 2018 • Improved on time delivery • Competitive pricing Private and confidential 18
FROM RECOVERY TO GROWTH Fro rom To To Cur urren rent t Bus usiness ness Fut utur ure e Directi ection on • Inwardly focused • Strongly positioned for fast • Centralised functions growth • Move to contract • Leaders in innovation manufacturing impacted • Adjacent products to product leadership position enhance customer offering • Strong market dynamics • Regional approach • Leader in small profitable • Leader in larger market niche Private and confidential 19
REGIONAL EMPHASIS – TO SUPPORT LOCAL EXPANSION OPERATIONS ENGINEERING • Regional assembly facilities • Global technology leadership • Global purchasing with local delivery deployed regionally • Fulfilment from regional hubs • Dialight design rules • Regional customer service • Increase speed to market SALES PRODUCT MANAGEMENT • Outstanding customer experience • Globally coordinated • Global coordination for global • Regionally focused • Regionally specified products customers • Continued regional teams Private and confidential 20
OPPORTUNITY – EXTEND PRODUCT RANGE TO OUR EXISTING CUSTOMERS Core product offering in hazardous environments of the heavy industrial space Dialight £0.5b £0.5bn current market n Expand our offering to provide a more Potential competitive product for the lighter £2bn £1.8b expanded market industrial areas of our existing n customers Global Global LED £100b £50bn LED Lighting Lighting market n Source: Internal analysis Per annum Private and confidential 21
SUMMARY • Corrective actions yielding results, benefits in H2 • Transfer to own facilities running efficiently - good on time delivery • Reliance on manufacturing partner significantly reduced • As previously guided, 2018 results heavily weighted to H2 • Industrial LED market opportunity largely untapped • Compelling market proposition with sustainability benefits • Aggressive approach from recovery to growth Private and confidential 22
Questions Private and confidential 23
OUTLOOK We have taken targeted actions to improve our operational performance, reducing late orders significantly since the start of the year. This improvement is primarily due to moving an increasing proportion of our product assembly back in-house. On-time delivery and cost performance of our internal assembly are both excellent. I am now confident that as we move toward our traditionally heavy fourth quarter we will be able to deliver our products on time and in the quantities needed. As previously guided, our results for 2018 will be heavily weighted to H2 reflecting the continued resolution of our operational issues. Our market proposition remains compelling with the sustainability benefits of reduced energy usage, lower carbon emissions, reduced maintenance and improved safety offering real value to our customers. We are now resuming a more aggressive approach to delivering growth, as we transition from recovery to growth. We remain excited by the Group’s prospects for the future. Private and confidential 24
Recommend
More recommend
