Full Year Results 2014 02 March 2015 2014 Highlights Lighting - PowerPoint PPT Presentation

Full Year Results 2014 02 March 2015

2014 Highlights  Lighting revenue increased by 46% to £99.9m (constant currency +50%)  Lighting operating profit increased by 26% to £14.5m (constant currency +30%)  Obstruction revenue increased by 16% to £17.0m (constant currency +22%)  Group underlying EBIT increased 25% to £18.1m (constant currency +30%)  Basic underlying EPS up 20% at 36.8 pence (2013: 30.8 pence)  Basic statutory EPS up 12% to 29.4 pence (2013: 26.2 pence) 2

Income Statement Variance 2014 2013 £m Constant 2014 2013 Reported currency Underlying tax rate 33.5% 31.3% £m Tax rate 38.7% 30.6% Revenue 159.8 131.2 21.8% 25.1% Basic EPS Underlying 36.8 30.8 Direct costs (90.2) (72.5) Basic EPS Statutory 29.4 26.2 Contribution 69.6 58.7 18.6% 22.6% Production overhead (18.2) (14.8) Development cost (4.2) (2.3) Distribution costs (19.8) (18.1) Development costs Administration costs (9.3) (9.0) 2014 2013 £m Underlying EBIT 18.1 14.5 24.6% 30.1% Gross costs 5.3 4.5 Non-underlying items (2.3) (2.9) Finance expense (0.3) (0.4) Capitalised (2.6) (2.9) Profit before income tax 15.5 11.2 38.6% 44.5% Amortisation 1.5 0.7 Income tax expense (6.0) (3.5) Net cost 4.2 2.3 Gain from discontinued operations - 0.7 Capitalised % 49.1% 64.4% Profit for the year 9.5 8.4 13.2% 17.0%  Revenue growth driven by Lighting and Obstruction  Currency movements negatively impacted revenue by £4.6m and EBIT by £0.6m  Underlying EBIT growth of 30%  Increase in underlying tax rate due to growth in US business and withdrawal of capital allowance incentives 3

Underlying EBIT Bridge  Revenue increase resulted in £11m increase in contribution  Production costs remained at 11% of revenue and in line with capacity growth  Development costs remain constant and increase was driven by the amortisation charge  Other overheads decreased from 2.1% of revenue in 2013 to 1.8% in 2014 4

Segment Results Lighting Signals Components 2014 2013 2014 2013 2014 2013 £m Revenue 99.9 68.5 40.2 41.8 19.7 20.9 Direct Costs (57.6) (37.2) (22.2) (24.3) (10.4) (11.0) Contribution 42.3 31.3 18.0 17.5 9.3 9.9 Overhead (27.8) (19.8) (12.0) (12.3) (8.9) (8.6) Segment result 14.5 11.5 6.0 5.2 0.4 1.3 Contribution margin 42.3% 45.7% 44.8% 41.9% 47.2% 47.4%  Average selling prices remained robust and in line with prior year  Lighting margins remain strong but were affected by:  Increased air freight as a result of component shortages and US West Coast industrial action  Product mix Contribution margin  Unallocated overheads of £2.8m 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Lighting Signals Components 2013 2014 5

Non-underlying Items 2014 2013 £m Contingent consideration 3.1 0.0 Inventory provision (2.8) 0.0 Goodwill and asset write-down (1.3) (0.8) Employee severance and restructuring costs (1.1) (0.4) Intellectual property past-use access fee 0.0 (1.4) Other (0.2) (0.3) Non-underlying items (2.3) (2.9)  Settlement of Airinet deferred consideration  Change in inventory provisioning methodology  Intangibles related to Airinet acquisition written down  Redundancy and termination costs in relation to closure of Japanese operations incurred in the first half of the year 6

Balance Sheet  Net assets increased by £6.1m 2014 2013 £m  Increase in working capital of £12m driven by an increase in Fixed assets 15.2 13.4 Intangible assets 21.0 21.1 inventory of £8.2m Net Working Capital 43.1 31.1  Strengthening of supply chain Net cash 0.6 7.1  Strong Lighting growth Pension Provision (1.2) (0.4)  £25m RCF with HSBC, with £25m accordion Tax (current + deferred) (4.4) (1.3)  Compliant with all covenants at year end Contingent consideration (0.3) (3.3)  Net Debt to EBITDA 2.5:1 – net cash at year end Other provision (1.2) (1.0) Net Assets 72.8 66.7  Interest cover 4:1 – tested at 60x  ROCE improved 300bps to 24% (2013:21%) Investment in production capacity 2014 £m Mexico 3.2 Europe 0.2 Malaysia 0.2 Brazil 0.1 Total 3.7 ROCE = Underlying EBIT/Total assets less current liabilities 7

Working Capital and Cashflow Net Cash Movement Working Capital Day 2014 2013  Working capital absorption increased as the supply chain is (countback) strengthened Debtor days 53.2 46.6  Capital expenditure of £7.2m Creditor days (102.0) (108.5)  Tax and dividend payments of £7.9m Inventory days 95.4 86.5 Net Working Capital Days 46.7 24.6 8

Business Strategy Highly Regulated Niche Innovation & Technology Strategic Expansion Markets Clear industry leader “Land grab” Focus on Industrial & Hazardous Pure play LED Growing sales team & strategic High barriers to entry Vertically integrated channel development Rapid development cycle Expanding production capacity 9

How does Dialight differ?  Integrated systems approach – vertical integration  Power Supply Technology  Key to reliability & fixture longevity (10 year warranty)  In-house designed , patent protected technology Controls  Most efficient power supplies available today (93-94%) Electrical Design  Intelligent Thermal Management  Temperature compensation technology managing heat from LEDs to maximize life Optical Design Heat Management  Optical Design  Custom reflectors to direct light to where it is needed at the work place  Intelligent Controls (IoT)  Controls embedded within Dialight power supply  Integrating with existing building / process management system infrastructure  Hazardous certified control systems 10

The Lighting Market Dialight targets: Heavy Industrial  Steel processing  Pulp & paper  Auto manufacturing plants £50bn annual Mining revenue  Surface mining Food & Beverage  Food processing  Agricultural Power Generation Freedonia Global Estimate:  Coal, nuclear £50bn annual lighting market   Renewable (wind, solar, geothermal) £3.5bn annual industrial revenue  Oil, Gas & Petrochem  Dialight addresses installed base; 20+ years retro-fit cycle for light fixtures  Upstream (exploring & drilling) £70bn - £100bn Total Addressable Market (TAM)   Downstream (refining) 11

Where are we on the growth curve? Estimated LED penetration in Industrial / Hazardous Locations: Vertical & Geographical Markets for Dialight 1%-2% Mass market adoption Early adopters Innovators  £70bn - £100bn TAM  Dialight estimates LED lighting sales into Industrial / Hazardous locations are between £650m to £1bn to date  This excludes markets that Dialight does not sell into such as China, Russia, India & Africa 12

Lighting is the growth driver Lighting revenues Asia & Australia Vertical segments 13

Channel Expansion  Expanding distribution channel to maximise reach 30% increase in channel to market Making in-roads to customers and  territories not previously available to us Established national distributor programs:  Rexel / Gexpro  50% increase in Affiliated Distributors/  no. of customers SupplyFORCE Consolidated Electrical  Distributors (CED) From trials to orders to roll out  176% increase in orders over £30k 14

Dialight LED Lighting Portfolio Linears Flood Lights 10’ → 20’ mounting 15’ → 100’ mounting   Indoor & outdoor rated Mostly outdoor   Hazardous & industrial Hazardous & industrial   High Bays Area Lights 15’ → 100’ mounting 10’ → 20’ mounting   Mostly indoor Indoor & outdoor rated   Hazardous & industrial Hazardous & industrial   15

New Markets - 1,000W Replacements 60K High Bay 55K Flood Light TAM Potential TAM Potential £4bn (20% of high bays) £1bn (15% of flood lights)   Markets (indoor) Markets (outdoor) Aerospace Oil, gas & petrochemicals   Automotive Power generation   Steel processing Mining   Pulp & paper Other industrial & hazardous   outdoor Other industrial indoor  16

Obstruction - back to growth US Obstruction 2014: a changed business model  Direct relationships with tower operators  New technology – Internet-based monitoring systems  Dialight is the only FAA approved high intensity LED system   Telecom Market  The market for lit towers is estimated to be 70,000 towers in the US  10% have adopted LED, with an estimated 90% using Dialight  Broadcast  3,000+ towers in the US  4% have adopted LED 17

2014 Summary  Lighting revenue increased by 50% (constant currency)  Lighting operating profit increased by 30% (constant currency)  Obstruction back to growth  2014 – a year of strong growth 18

FY 2015 Outlook “The adoption of LED lighting in the industrial and hazardous markets is still at an early stage and the opportunity for growth remains significant. We continue to see strong demand for our LED lighting and the Board remains confident in the future prospects of the Group.” 19