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 Reported Revenue 159.8 131.2 Direct costs (90.2) (72.5) Contribution 69.6 58.7 (18.2) (14.8) Development cost (4.2) (2.3) Distribution costs (19.8) (18.1) Administration costs (9.3) (9.0) Underlying EBIT 18.1 14.5 Non-underlying items (2.3) (2.9) Finance expense (0.3) (0.4) Profit before income tax 15.5 11.2 Income tax expense (6.0) (3.5) - 0.7 9.5 8.4 £m Production overhead Gain from discontinued operations Profit for the year 21.8% 18.6% Constant currency 25.1% 22.6% 2014 2013 Underlying tax rate 33.5% 31.3% Tax rate 38.7% 30.6% Basic EPS Underlying 36.8 30.8 Basic EPS Statutory 29.4 26.2 2014 2013 Gross costs 5.3 4.5 Capitalised (2.6) (2.9) Amortisation 1.5 0.7 Net cost 4.2 2.3 49.1% 64.4% £m Development costs 24.6% 38.6% 13.2% 30.1% 44.5% 17.0% £m Capitalised % 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 £m 2014 2013 2014 2013 2014 2013 Revenue 99.9 68.5 40.2 41.8 19.7 20.9 (57.6) (37.2) (22.2) (24.3) (10.4) (11.0) 42.3 31.3 18.0 17.5 9.3 9.9 (27.8) (19.8) (12.0) (12.3) (8.9) (8.6) 14.5 11.5 6.0 5.2 0.4 1.3 42.3% 45.7% 44.8% 41.9% 47.2% 47.4% Direct Costs Contribution Overhead Segment result Contribution margin 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 2013 Components 2014 5 Non-underlying Items 2014 2013 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) 0.0 (1.4) Other (0.2) (0.3) Non-underlying items (2.3) (2.9) £m Contingent consideration Intellectual property past-use access fee 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 £m 2014 2013 Net assets increased by £6.1m Fixed assets 15.2 13.4 Increase in working capital of £12m driven by an increase in Intangible assets 21.0 21.1 Net Working Capital 43.1 31.1 0.6 7.1 Pension Provision (1.2) (0.4) Tax (current + deferred) (4.4) (1.3) Contingent consideration (0.3) (3.3) Other provision (1.2) (1.0) Net Assets 72.8 66.7 Net cash inventory of £8.2m Strengthening of supply chain Strong Lighting growth £25m RCF with HSBC, with £25m accordion Compliant with all covenants at year end Net Debt to EBITDA 2.5:1 – net cash at year end Interest cover 4:1 – tested at 60x ROCE improved 300bps to 24% (2013:21%) Investment in production capacity £m 2014 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 (countback) 2014 2013 Debtor days 53.2 46.6 (102.0) (108.5) Capital expenditure of £7.2m Inventory days 95.4 86.5 Tax and dividend payments of £7.9m Net Working Capital Days 46.7 24.6 Creditor days Working capital absorption increased as the supply chain is strengthened 8 Business Strategy Highly Regulated Niche Markets Innovation & Technology Strategic Expansion Clear industry leader Focus on Industrial & Hazardous High barriers to entry Pure play LED Vertically integrated Rapid development cycle “Land grab” Growing sales team & strategic channel development Expanding production capacity 9 How does Dialight differ? Integrated systems approach – vertical integration Power Supply Technology Controls Electrical Design Key to reliability & fixture longevity (10 year warranty) In-house designed , patent protected technology Most efficient power supplies available today (93-94%) Intelligent Thermal Management Optical Design Temperature compensation technology managing heat from LEDs to maximize life 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 £50bn annual revenue Steel processing Pulp & paper Auto manufacturing plants Mining Surface mining Food & Beverage Freedonia Global Estimate: £50bn annual lighting market £3.5bn annual industrial revenue Dialight addresses installed base; 20+ years retro-fit cycle for light fixtures £70bn - £100bn Total Addressable Market (TAM) Food processing Agricultural Power Generation Coal, nuclear Renewable (wind, solar, geothermal) Oil, Gas & Petrochem Upstream (exploring & drilling) 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 50% increase in no. of customers Established national distributor programs: Rexel / Gexpro Affiliated Distributors/ 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 £4bn (20% of high bays) TAM Potential £1bn (15% of flood lights) Markets (indoor) Aerospace Automotive Steel processing Pulp & paper Other industrial indoor Markets (outdoor) Oil, gas & petrochemicals Power generation Mining Other industrial & hazardous outdoor 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