Dialight Dialight plc 2012 Interim Results July 2012 1 Agenda Dialight • Highlights and Financials • Business review and outlook • Q&A 2 Highlights of First Half 2012 Dialight • Group Operating Profit of £8.1m up 31% (2011: £6.2m) • Group Half year Revenues grew 18.2% to £61.1m (2011: £51.7m) • Signals/Illumination segment revenues increased by 25.1% to £42.7m (2011: £34.1m) • Obstruction sales increased 40.4% to £10.2m (2011: £7.3m) • Lighting sales increase 65.1% to £17.2m (2011: £10.4m) • Successful acquisition of Airinet • Dialight Malaysia established • Decision to dispose of Smart Metering product line • Dividend increased to 4.0 pence (2011 3.3 pence) 3 Five Year History Dialight 2012 H1 £m 2011 £m 2010 £m 2009 £m 2008 £m 2007 £m 2006 £m 61.1 113.5 99.2 77.3 77.9 63.4 52.3 Profit before tax 8.1 15.1 11.3 5.3 5.6 4.5 5.8 Operating Cash flow 9.8 17.7 15.1 11.0 6.0 5.8 2.2 Net Cash 8.1 13.7 10.4 9.1 4.1 4.4 2.2 Net Assets 57.2 54.8 46.2 40.1 37.5 30.8 29.7 Return on Sales % 13.2 13.3 11.4 6.9 7.2 7.1 11.1 Return on Capital % (Exc Cash) 33.0 36.7 31.6 17.1 17.7 17.0 21.1 Turnover 4 Group Summary Profit and Loss Dialight 2012 £M 2011 £M Revenue 61.1 51.7 Gross Profit 18.6 14.8 Gross Profit % 30.4 28.6 Overhead costs (10.5) (8.6) Operating profit 8.1 6.2 Net financing cost inc non‐underlying 0.1 (0.7) Profit before tax 8.2 5.5 (2.8) (2.0) 5.4 3.5 Tax Profit for the period 5 2011 Interim Financial Result Bridge Dialight £m 2011 H1 EBIT 6.2 Signals & Illumination Increased Contribution Margin 4.0 Additional Sales Cost (1.3) Lower Indication Sales (1.5) Higher Disconnect 0.5 Currency 0.3 Other 2012 H1 EBIT (0.1) 8.1 6 Balance Sheet Dialight JUNE 2012 £M JUNE 2011 £M DEC 2011 £M 29.2 22.0 23.8 8.1 6.2 13.7 44.5 37.0 38.7 (21.7) (17.0) (21.0) Non current liabilities (2.9) (0.5) (0.5) Net Assets 57.2 47.7 54.8 Non current assets Cash Other current assets Current liabilities 7 Cashflow Dialight 2012 H1 £M 2011 H1 £M Operating cash 9.8 7.0 Working capital (7.6) (4.6) ‐ (2.4) 2.2 0.0 Tax/financing (1.2) (0.2) Investing activities (4.2) (2.0) Dividend Paid (2.1) (1.7) Change in net cash (5.3) (3.9) Disposal of Pension Fund Cash from operations 8 Half Year Revenues Dialight 2012 2011 Total Revenue £61.1m £51.7m Signals/Illumination £42.7m £34.1m Electromagnetic Components £9.2m £6.4m Indication Components £9.2m £11.2m 9 Contribution Margin Dialight 2012 H1 2011 H1 Signals/Illumination 45.7% 44.9% Electromagnetic Components 15.1% 17.4% Indication Components 52.9% 55.6% 10 Dialight Business Overview 11 Indication Dialight • Niche with over 15,000 customers – strong profit and cash generator • Revenues £9.2m compared with strong H1 2011 at £11.2m. • Business expected to be flat H2 over H1 • Fundamentals of the business unchanged • Margins solid but influenced by mix • Demand driven by Servers, Storage, Cellular Infrastructure and Internet Access 12 Electromagnetic Components Dialight • Revenues up £2.9m (45%) versus 2011 • All growth from single Smart Meter customer • Traditional business flat • Smart Meter margins still poor • Decision made to divest Smart Meter product line • Conclusion expected H2 13 Signals / Illumination Five Year History Dialight 2012 H1 £m 2011 £m 2010 £m 2009 £m 2008 £m 2007 £m 2006 £m 42.7 78.8 61.1 46.4 43.3 33.4 28.6 8.0 13.8 8.7 3.3 1.7 0.1 (0.5) Return on Sales % 18.8 17.5 14.2 7.1 3.9 0.3 n/a % of Group Profit 98.8% 91.3 77.7 62.2 30.4 2.2 n/a Turnover Operating Profit 14 Signals/Illumination Dialight 2012 H1 2011 H2 2011 H1 Total Revenue £42.7m £44.8m £34.1m Traffic £10.9m £14.3m £12.2m Obstruction £10.2m £10.5m £7.3m £4.3m £4.0m £4.2m £17.2m £16.0m £10.4m Transportation Lighting 15 Signals/Illumination ‐ Transportation Dialight • Exterior lights for US Transit Buses • Revenues flat last three halves as expected • Some potential growth with LED Headlights • Still low single digit 16 Signals/Illumination ‐ Traffic Dialight • Business down 11% versus H1 2011 • Europe flat helped by major UK contract • Expected some recovery in H2 but full year still down on 2011 • Future prospects still to grow low single digit 17 LED Obstruction Lighting Dialight 18 Signals/Illumination ‐ Obstruction • • 40% growth to £10.2m Growth drivers are:‐ 1. US Cell Tower market – 80,000 towers to light, less than 9,000 2. 3. • • Dialight done Remaining market worth over $200m US Broadcast Tower market – 1800+ Towers to light. Market worth over $200m Offshore Wind Turbine market – much less than 1 and 2 above but increasing. As turbines get bigger, lights are becoming brighter and more important. Dialight works to get sole sourced/qualified positions Guidance of 30‐50% growth for the coming year 19 Illumination Dialight 20 Vertically Focused – Hazardous & Industrial Dialight Regulated Primary Markets Oil & Gas Power Gen Mining Chemical Pharmaceutical Water & Sewage Food & Beverage Secondary Markets Manufacturing Warehousing Cold Storage Data Centers 21 Signals/Illumination ‐ Lighting Dialight • Revenues up over 65% versus H1/2011 • Introduction of first 100 lumen/Watt fixture • Acquisition of Airinet Controls to enhance payback • Introduction of first 10 year warranty • Expected accelerated growth in H2/2012 22 What are the prospects for Growth ? Dialight • Is the market big enough for sustained growth? • Is our value proposition good enough to drive adoption? • Do we have the sales channel to drive adoption? 23 How big is the market, is the opportunity real? Dialight • Freedonia says Industrial Lighting is approx., $5Bn Annually • We address the installed base which is probably 10 times that size • Hazardous and Heavy is about 20% of that • Dialight has achieved between 0.1 and 0.5% penetration • Major investment in channel expansion Source: Freedonia IMS 2010 Global Industrial Sales: $5.25 billion 24 Illumination‐ Value Drivers Dialight • Fixture Efficiency → Lumens/Watt • Lifetime/Reliability → Warranty • Optimisation of Lighting → Control 25 Driving Lumen Affordability with Technology Dialight 250 $0.10 $0.09 $/lm (Cool White, 6500K) 200 $0.07 $0.06 XM‐L $0.05 XT‐E 150 XP‐G $0.04 XP‐E $0.03 Efficacy (LPW) $0.08 100 $0.02 $0.01 XR‐E XR 50 2005 2006 Annual Improvement in $/lm @ Standard Drive Current 2007 2008 2009 2010 2011 2012 43% 45% 35% 29% 45% 40% 2013 2014 26 Copyright © 2012, Cree, Inc. pg. 26 Improving Fixture Lumens/Watt Dialight 17,000 lumens 100 lm/W 14,000 lumens 90 lm/W 12,000 lumens 8,000 lumens 81 lm/W 53 lm/W 27 LED Luminaire Performance (Lumens/Watt) Dialight High Bay – 17K Lumens LED Package Efficacy (LPW) Optics Efficacy (%) PSU (Driver) Efficacy (%) Thermal Efficacy (%) Fixture Efficacy (LPW) 150 90 87 85 100 Wattage (W) 170 Total Initial Lumens 17,000 28 Illumination‐ LED Lifetime Dialight Lifetime vs Drive Current & Junction Temperature 120 100 Light Output (%) 80 60 40 High Temp High Current Low Temp Low Current 68000 Hours 330000 Hours 20 0 1000 10000 100000 1000000 Time (Hours) 29 Illumination‐ Electronics Lifetime Dialight • LEDs will last up to 40 years if properly driven – the driver electronics have a more limited lifetime • All Dialight’s Lighting products have a comprehensive 5 year warranty • New Power Supply Topology has enabled the introduction of a 10 year warranty on our 17,000 High Bay lights. • This will extend to further products • Further development will improve PSU efficiency to improve lumens/Watt 30 Illumination ‐Controls & Networking Dialight • Dimming/Trimming • Flexible Scheduling • Daylight Harvesting → Faster payback Lower cost of ownership • Fault Management/Diagnostics • Smart Grid 31 Controls – Hazardous/Heavy Industrial Lighting PLC HB1 PLC PLC HB2 PLC Daylight Sensor HB N‐1 PLC HBN PLC/ Ethernet Wall Controller Internet PLC Motion Sensor iPhone Laptop Dialight Network Manager iPad 32 Controls improve payback! Dialight Light Level Time $US Energy rate = $0.11/kWh Light Operating Profile $5,000 $4,500 Cost of Ownership $4,000 $3,500 $3,000 Conventional 250W Dialight 12K High Bay (120W) Dialight 12K High Bay (120W) + CTRL $2,500 $2,000 $1,500 $1,000 $500 $0 0 1 2 3 4 5 6 7 8 9 Years 10 11 12 13 14 15 Scenario: Retrofit 33 Global Hazardous Market requires Global Sales Dialight Europe 150 Refineries 80 Nuclear Plants 500 Offshore Platforms 32 Refineries 113 Rigs 3,533 Offshore Platforms 40 Refineries 43 Coal Power Plants 144 Offshore Platforms Middle East Gulf Coast ASEAN Region 40 Refineries 121 Offshore Platforms Australia 565 Surface Mines 8 Refineries 30 Coal Power Plants 69 Offshore Platforms 10 Offshore Rigs 34 Industrial Energy Rates – focus Dialight Region Avg Rates per kWh US/Canada $0.07 UK $0.12 Germany $0.13 France $0.07 Japan $0.15 Australia $0.15 Brazil $0.12 ASEAN $0.07 35 Expanding our Reach Dialight • UL 1598 & UL 844 for North America • CE/ATEX/IECEx for UK, Europe & ROW • NEC 505 for ASEAN regions • TIIS & PSE Marking for Japan • INMETRO for Brazil • GOST for Russia & Kazakhstan • CCC for China • VDE for Germany • TISI for Thailand • CNS for Taiwan 36 Direct Customer facing Sales Channels Dialight Sales Force June 2012 Sales Force 2011 18 6 Europe 8 5 Middle East 3 1 Australasia 10 5 Total 39 17 North America 37 Prospects Dialight • Multi‐Billion Dollar addressable Market in Lighting with low penetration • Ever improving value proposition driven by Efficiency, Lifetime and Control • Major Sales Force expansion to continue with the objective to become Number 1 in Hazardous Lighting • Almost $0.5Bn addressable market in Obstruction with low penetration and prime position • Objective to achieve strong growth by driving adoption of our technology 38 Dialight Dialight Challenging the status quo in the lighting industry 39 The Future Dialight Dialight Signals & Illumination Leverage Base % Fixed % Variable % Revenue 100 Direct Material 45% 0 100 Direct Labour 6% 0 100 Sales Commission 2% 0 100 Freight 2% 0 100 45% 0 100 8% 50 50 Contribution Margin Production Cost Gross Margin 37% Development 6% 75 25 Sales & Marketing 9% 0 100 Administration 7% 95 5 EBIT 15% • Operational leverage and maintained/improving contributions will drive the Groups operating Income • Continued doubling lighting through ’14 would triple the size of the Group • £100m Incremental Revenue drives £30m Incremental EBIT 40