Dialight plc November 2011 1 Five Year History 2011 H1 £m Turnover 2010 £m 2009 £m 2008 £m 2007 £m 2006 £m 51.7 99.2 77.3 77.9 63.4 52.3 Profit before tax 6.2 11.3 5.3 5.6 4.5 5.8 Operating Cash flow 7.0 15.1 11.0 6.0 5.8 2.2 Net Cash 6.2 10.4 9.1 4.1 4.4 2.2 Shareholders Funds 47.7 46.2 40.1 37.5 30.8 29.7 Return on Sales % 12.0 11.4 6.9 7.2 7.1 11.1 Return on Capital % (Exc Cash) n/a 31.6 17.1 17.7 17.0 21.1 2 Half Year Revenues 2011 2010 Total Revenue £51.7m £46.1m Signals/Illumination £34.1m £26.1m £6.4m £7.5m £11.2m £12.5m Electromagnetic Components LED Indication Components 3 Niche % LED Penetration DIA Speed to Market % Growth Expectation DIA Share Indication H H Flat H Transportation H H GDP H Traffic US H H Flat H Traffic Europe L H 5-10% H Obstruction L H 30-50% H Industrial Lighting L H 100% H Signals/Illumination Five Year History 2011 H1 £m 2010 £m 2009 £m 2008 £m 2007 £m 2006 £m Turnover 34.1 61.1 46.4 43.3 33.4 28.6 Operating Profit 5.4 8.7 3.3 1.7 0.1 (0.5) Return on Sales % 15.8 14.2 7.1 3.9 0.3 n/a % of Group Profit 87.1 77.7 62.2 30.4 2.2 n/a 5 Signals/Transportation Sales £m ● ● ● ● 2009 2010 2011/H1 10.2 9.8 4.2 Niche business in US Transit Bus market Large market share Lights are specified by Transit Authorities Sales will be flat for the foreseeable future 6 Signals/Traffic Sales £m 2009 2010 2011/H1 23.6 27.4 12.2 ● Dialight is the world’s largest manufacturer of LED Traffic Lights ● US market mature shows little growth almost 80% adoption of LED Traffic Lights ● European market only 20% adopted ● Europe sales 33% of total ● Europe should grow to equal US business ● Expect high single digit growth over the next 3- 4 years ● Interest building for LED street lights from customers in both US and Europe 7 Signals/Obstruction Global Markets Served Telecom Markets • Cellular • Private Microwave networks • Private Pager networks Utilities • Stacks, Chimneys & Cooling Towers • Catenary Systems Wind Markets • Onshore • Offshore Marine • Offshore Platforms • Fixed & Seasonal Aids Broadcast Market • 500‐2,200 Ft. Towers Tall Structures • Buildings • Bridges • Cranes 8 Signals/Obstruction Sales £m 2009 2010 2011/H1 7.0 12.3 7.3 ● Dialight is the world leader in LED based Obstruction Lighting ● Strong margins driven by new Beacon and Strobe designs ● More than 5,000 White Strobes supplied to US Cell Tower market since launch– 75,000 to go worth over $200m! ● Dialight still the only FAA Approved supplier of this light ● Danish operation performing to plan amid signs of improving European wind market ● Expect 30-50% annual growth over the next 3-4 years 9 Signals/Illumination Sales £m 2009 2010 2011/H1 5.5m 11.6m 10.4 ● Dialight is first to market with LED based lighting for Hazardous and Industrial applications ● Over 20,000 Industrial White Lights shipped in H1 –equivalent to whole of 2010! ● High Bay Light major success –over 30,000 installed in 18 months ● Winner of multiple awards ● Pipeline of new/improved products ● Customer base grown from 300 in 2010 to 460 at end of H1/11 10 Evolution of Energy Efficient Lighting Industrial Lighting ● Highest customer base segment – Oil, Gas, Petrochem ● Worldwide presence expanded with investment in Sales personnel in Europe/Middle East and acquisitions in Australia and Japan ● Largest LED lighting portfolio for hazardous locations ● H1/11 released one new product per month ● Product sells on payback to customer generated by energy saving, maintenance, difficulty of access, 24/7 operations, high electricity cost. ● LED improved performance and price improving payback to customers. ● 50 of 50 States offering rebates ● LED Lighting can be the “low hanging fruit” of energy saving/carbon reduction whilst saving money 12 Market Size Hazardous Lighting Utilities 4% Textile Machinery 0% Automotive 2% Other Industries 16% Rubber & Plastics 7% Pulp & Paper 3% Building Automation 2% Chemical & Pharmaceutical 21% Defence 3% Food & Beverage 7% Oil & Gas 32% Machine Tools Metals 2% 1% 2010 Estimated Global Sales: $900+ Million Growth projections 7%+ CAGR 2011 ‐ 2015 Source: Freedonia 13 Customer Base by Market Segments Customer Base by Market Segments 25% 34% Oil & Gas, Petrochemical, Chemical & Pharmaceutical Mining & Power Generation Water, Waste Water, Processing & Food Plants 18% 23% Industrial ‐ Warehouse, Manufacturing & Cold Storage 14 Progress to date – Customers / Segments Oil & Gas, Petrochemical, Chemical & Pharmaceutical AES Alyeska Pipeline Services Co. (2 locations) Anadarko Petroleum Apache Arkema Chemicals Atwood Oceanics BASF Petronas (5 locations) Baxter Baxter Caribe Inc. Bayer CropScience Berquist & Knobelsdorff BP Offshore BP Refineries (6 locations) Bristol Myers Caltex Cenex Citgo Chevron (3 locations) Chevron (Gorgon Gas) CPC Corporation Coffeyville Resources ConocoPhillips (6 locations) Degussa Engineered Carb Dow Chemical (5 locations) Dow Corning (2 locations) Dubai Petroleum DuPont (3 locations) ENI Blacktip Gas Exxon Mobile (4 locations) Flexsys Chemicals FMC Alcoy Formosa Plastic GlaxoSmithKline Great Salk Lake Minerals GPN Total HB Rentals Hess (2 locations) Holcim‐Apasco Huntsman Tioxide Indolex Chemical Co. Ineos (3 locations) Innoveox ISP Chemicals Kaneka Malaysia Sdn Bhd Lubrizol Painseville Lyondell Bassell (6 locations) Marathon Gas (2 locations) Marathon Oil (4 locations) Merck & Co. Molet Nexen Gas National Oilwell Shanghai Oil Tanking Optimal Chemicals Oxbow (2 locations) Oxy Chemical Pfizer (2 locations) Pioneer Drilling Co. Philips Chevron Polyolefin Company Polyplastics Asia Pacific (2 locations) Pride International Proctor & Gamble (2 locations) Questar Gas Pride International (ENCSO) Propisol PT Badak NGL Rain CII Carbon LLC Red Cedar Gathering (6 locations) Reichart Chemicals (2 locations) Roquette Rohm Haas Sabic Saint Gobain Plastics Sanofi Pasteur Sartomer Sasol North America Schering Plough Shell Eastern Petroleum Singapore Refining Company Shell Oil (2 locations) Solvay Chemicals (2 locations) Sun Products Sunoco (3 locations) Synthomer Sdn Bhd Talisman Energy Tameco Taminco Technip Tesoro Thatcher Chemical Trans Canada Natural Gas Total Gas Valero (2 locations) Viking Pipeline Vopak Westlake Chemical Wesvaco Williams Energy Gas Plant 2011 New Business 15 Progress to date – Customers / Segments Mining & Power Generation 3M Accelor Mittal Arch Black Thunder Coal Mine Barrick Gold BHP Billiton (2 locations) Chamming Electric Chesapeake Energy (3 Locations) Climax Molybdenum Coal Peers Colstrip PP&L Consumers Energy Corteau Mines Colorado Springs Utilities Connectiz Coteau Covanta Energy (2 locations) Delta Electricity DTE Energy Eco Electrica Power Plant Elite Energy Enogex Entergy Nuclear (3 locations) Envirolight Excel Energy Eraring Energy (2 locations) Fairmont Minerals Freeport McMoRan Copper & Gold (3 locations) GE Power & Water Genting Sanyen Power Gerdau Steel Great Basin Gold Great River Energy Hibbing Taconite Idaho Power Corporation IES Utilities, Inc OGS Iluka Resources Integra Coal La Mancha Gold Intrepid Potash Mining Jacobs Ranch Mine Kaneka Eperan Kansai Power Electric Kapar EnergyLine Power Merrit Energy Midwest Generation Mississippi Phosphates Corp. Mitsui Copper Foil Montana Power (PPL) Colstrip Mountain Coal Newmont Gold Nucor Steel Oxbow Carbon and Minerals PCS Phosphate Peabody (2 locations) Pilbara Iron Portland General Electric Public Service New Mexico Red Path Mining Rio Tinto (6 locations) Rocky Mountain Power (2 locations) Rohr Rytway Scottish & Southern Energy Sembawang Sebago Segari Energy Venture Snowey Hydro Southwest Generation Spectra Energy (2 locations) Steel Dynamics Tata Teck‐Cominko Tenaga Nasional Berhad Toledo Edison Tucson Electric Power TVA (3 locations) Unico Mining US Steel (2 Locations) Vectron Energy Verve Energy Western Energy Westmore Coal WI Industrial Sand & Gravel Wisconsin Power & Light Xcel Energy Xstrata Coal 2011 New Business 16 Progress to date – Customers / Segments Water, Waste Water, Processing & Food Plants ADM Corn Processing ADM Wallhalla AG Processing Allen Can American Crystal Sugar Appert’s Food Arbiti Bowater Bar‐S Foods (2 locations) Baxter Soups BNS Fererro British Sugar Cavendish Carmel Clay Township Cargill City of Philadelphia City of Reno, NV Clearbrook Rice Cook Hams Darigold Del Monte Diageo Diamond Crystal Dip Abitibi Bowater Drayton Foods Driscoll’s Berries Galvin Gary Waste Water Gilbertson & Page Goderich Elevator Golden Plump Chickens GS Dunn Hatfield Quality Meats Hayes Lemmerz Henry’s Food Heinz Henkel Henry Bell Huntington Alloys Idaho Power IFFCO Al Ain Interbrew Jennie O Turkeys Kapstone Kraft Paper Co Kellogg's Kenko Mayonnaise Gotenba LA Water & Power Martisa McDonalds McCain Foods Michigan Sugar Mermaid Marine Monterey Gourmet Foods Nabisco Nestle‐Stouffer Noranda Alumina North Dakota Mill Noyon Passaic Valley Sewage Paulaner Brauerei GmbH & Co KG Patrick Cudahy Pepsi Port Stevens Council Primo Foods (2 locations) PUB Quantum Foods Riverview Dairy Farm Seneca Foods Sherwin Alumina Simplot Potatoes SSAB Steel Alabama Inc. Sugar Beet Plant Tecnologia Intercontinental Temple Island Tyson Foods Twin Lakes Regional Waste District United Farms Valassis Foods Vion Foods Wallhalla Bean Plant WhiteWave Wild Flavors Wispak 2011 New Business 17 Progress to date – Customers / Segments Industrial ‐ Warehouse, Manufacturing & Cold Storage 3E ‐ Electrical Eng & Equipment Co. Aisin AW Alcoa Allsteel Panel Al Tayer Motors Anderson Anderson Auto Archer Daniels Midland Corp. Automation & Electronics BMW Brikmakers Buckman Labs Bunge CDS Hackner GmbH Charter Freightlines Chris Hayter City of Kalgoorlie Boulder City of Phoenix City of Toronto City of Wichita Concord Phillips Conectiv Edgemoor Dalmore Danisco Davisco Int’l Daiwan Kasei Delta Clothes DHL/Danzas DMI Industries DOT Warehouse DTE Energy‐St. Clair PP E‐Leather Eco Lighting Services & Tech Emerson Compressor ExCeL Conference Centre FedEx Flexicon Inc Firestone Building Products Frontline Int. Galavan Industries Galores Logistica General Machinery General Motors (2 locations) Glenadale Complex Graphic Packaging Int’l Hamlet Healthstore Henrico County Holcium USA Honda (2 locations) *Honeywell Huhtamaki Huntsmann I/O Solutions & Controls Indiana Department of Assets Indiana Department of Corrections Industrial Automation Controls Jesco John Deere (2 Locations) KEW Incorporated C/O Gerrie Kimberly Clark Klockner Pentaplast Kuehne + Nagel Lafarge Letts Diaries Logix London Underground McDermott Internatonal Inc. Medsafe Meng Xue Song Metal Container Miller/Coors Mozel Inc. Multi Packaging Solutions National Starch Noctur Norbert Dentressangle Norboard NSK Bearings Oakley Olympus Keymed Oregon Department of Corrections (2 locations) PADOT Salt Sheds Pilkington North America Pip Shin Chubu Logistics Phillip Morris Powder Solution PPG Port Moresby Port Hedland PT Holcim Cement RAF Hendon Rexam Rittenhouse Electric Rockline Industries Saint Gobain San Francisco Municipal Transit Sea Chill SEPTA Sesco Smurfit Kappa Steffen Inc. Swann TECOT Dover Branch Transfers Tesco The Baltimore Sun Timken David SIPE Toyota Steel UNAM Van Meter Industrial Vektra Electric Wilkinsons Yahoo 2011 New Business 18 Case Study: Kuehne + Nagel Before (High Pressure Sodium High Bay) 150W Dialight LED High Bay 400W HPS High Bay After (Dialight LED High Bay) Project Overview • (136) 250W & (100) 400W HID vs (126) 150W LED • £42,000 (>500,000 kWh) Energy Savings/yr • 271 tons CO2 Reduced Payback = 1.1 years 19 Case Study: Oregon Correctional Facility Project Overview • (464) 400W HID vs. (464) 150W LED • >£90,000 (1,340,000 kWh) Energy Savings / yr • 1,150 tons CO2 Reduced • 24/7 operation ‐ £0.05 energy rate Payback = 1.25 years 20 Case Study: Top US Refinery Current Project Overview (5% conversion) • (169) 150W High Bay replacing (169) up to 400W HID • (176) 100W SafeSite Area Light replacing (176) up to 250W HID • (30) 8W SafeSite Area light replacing (30) up to 150W Incandescent • 500,000 kWh Energy Savings / yr • 425 tons CO2 Reduced Total Plant Opportunity (20,000+ fixtures) • 19 TWh Energy Savings / yr • 16,000 tons CO2 Reduced • Equivalent savings of powering 2,000 households and removing 2,750 cars from the road 21 Case Study: Red Cedar Natural Gas HPS LED Project Overview • (44) 400W HID vs. (48) 150W LED • £2,000 (125,000 kWh) Energy Savings / yr • £15,000 Lifetime Maintenance Savings • 105 tons CO2 Reduced 22 Case Study: Large Data Center in Asia New Installation: Singapore Project Overview • New Installation • Minimal energy consumption • Instant on allows for lights only on when required • Zero maintenance ‐‐ • (200) 150W LED High Bays • $0.14 kWh rate 23 Dialight LED Lighting Product Portfolio High Bay Power Consumption: 150W Replaces: 400W HID Energy Savings: 65% Low Bay Power Consumption: 80W Replaces: 150W HID Energy Savings: 45% Area Light Power Consumption: 70W Replaces: 250W HID Energy Savings: 70% Linear Fixture Power Consumption: 50W / 100W Replaces: up to 200W Fluor Energy Savings: 50% Area Light Power Consumption: 9W Replaces: 65W Incan Energy Savings: 85% Wallpack / Bulkhead Power Consumption: 22W Replaces: 70W HID Energy Savings: 70% General Purpose Fixture Power Consumption: 50W Replaces: 72W Fluor Energy Savings: 30% Roadway Sign Light Power Consumption: 70W / 100W Replaces: Up to 250W HID Energy Savings: 70% 24 Outlook 2011 & Beyond ● Signals/Illumination positioned for continued growth with stronger margins. Potential growth :Transportation flat Traffic high single digit Obstruction 30-50% Lighting 100% ● LED efficiency and cost improvement supports customer value proposition and Dialight margin growth ● Strong pipeline of new and improved White Lighting products with continuous reengineering and cost reduction ● Executive confident in continued Revenue Growth and Profitability Guidance re-iterated for 2011 and 2012 25 Challenging the status quo in the Lighting Industry! 26 Appendix 27 Highlights of First Half 2011 ● Operating Profit of £6.2m up 17% (2010: £5.2m) ● Half year Revenues grew 12% to £51.7m (2009: £46.1m) ● Signals/Illumination segment revenues increased by 30.7% to £34.1m (2010: £26.1m) ● Obstruction sales increased 52.1% to £7.3m (2010: £4.8m) ● Lighting sales increase 161% to £10.4m (2010: £4.0m) ● Two international initiatives completed - Dialight Japan and Dialight Australia ● US pension scheme successfully bought out ● Dividend increased 17.9% to 3.3 pence (2010 2.8 pence) 28 Summary Profit and Loss H1/2011 £M H1/2010 £M Revenue 51.7 46.2 Gross Profit 14.8 12.6 Gross Profit % 28.6 27.3 Overhead costs (8.6) (7.3) Operating profit 6.2 5.3 (0.7) (0.1) 5.5 5.2 (2.0) (1.9) 3.5 3.4 Net financing cost inc non-underlying Profit before tax Tax Retained Profit 29 2011 Interim Financial Result Bridge £m 2010 H1 EBIT 5.3 OE Volume – exceptional Q1 2010 (0.4) Switch – Copper & Silver impact sales (0.3) Signals and Illumination – Volume Growth * 4.1 Signals and Illumination – Margin Growth * 1.0 Foreign Currency Translation (0.5) Recruitment (0.5) Investment in additional Development Costs (0.7) Investment in additional Sales and Marketing (0.7) Additional BTI overhead / amortization of intangibles (0.6) Increased Bonus Provision (0.3) Increased Share Option Charge (IFRS2) (0.1) 2011 H1 EBIT 6.2 30 Cashflow 2011 H1 £M 2010 H1 £M Operating cash 7.0 6.7 Working capital (4.6) (2.5) Disposal of US Pension Fund (2.4) - 0.0 4.2 Tax/financing (0.2) (1.6) Investing activities (2.0) (3.7) Dividend Paid (1.6) (1.4) Change in net cash (3.9) (2.5) Cash from operations 31 Balance Sheet JUNE 2011 £M JUNE 2010 £M DEC 2010 £M 22.0 21.0 21.9 6.2 7.0 10.4 37.0 34.1 28.0 (16.9) (15.7) (12.2) Non current liabilities (0.5) (1.9) (1.9) Net Assets 47.8 44.5 46.2 Non current assets Cash Other current assets Current liabilities 32 Working Capital ● Working capital requirements increased due to growth in business ● Inventory – strategic purchasing to protect growth and from Japan risk ● Small improvement in receivables days outstanding compared with H1 2010 ● Payables days outstanding consistent with H1 2010 ● Cash - Continuing operating cash flow despite pension buyout, inventory build and acquisitions. Debt free balance sheet 33 Dividend and EPS 2011 2010 Interim dividend per share 3.3p 2.8p Basic EPS 11.2p 10.8p 3.4x 3.9x 12.6p 10.8p Dividend cover times Adjusted EPS (before pension disposal) 34 Tax ● ● ● ● ● Effective tax rate in FY 2008 was 38.5% Effective tax rate in FY 2009 was 37.5% Effective tax rate in FY 2010 was 34.0% Effective tax rate in H1 2010 was 36.0% Effective tax rate in H1 2011 is 36.0% which we hope to marginally reduce by year-end 35 Contribution Margin 2011 2010 Signals/Illumination 44.9% 42.0% Electromagnetic Components 17.4% 18.3% Indication Components 55.6% 54.6% 36 LED Indication ● Niche with over 15,000 customers – strong profit and cash generator ● H1/11 Revenues £11.2m compared with strong H1 2010 at £12.5m. ● Currency translation impact reduced 2011 sales by £0.7m and EBIT by £0.3m. ● Business up sequentially from H2 2010 ● Fundamentals of the business unchanged ● Margins solid ● Demand driven by Servers, Storage, Cellular Infrastructure and Internet Access 37 Electromagnetic Components ● H1 Revenues down £1.1m (15%) versus 2010 ● Copper and silver pricing has negatively impacted ● Traditional business flat ● Prospects for Disconnect still promising but on thin margins and very lumpy ● Smart Metering starting to proliferate throughout the world ● Qualified for UK market 38 Signals/Illumination 2011/H1 2010/H2 2010/H1 Revenue £34.1m £35.0m £26.1m Traffic £12.2m £15.1m £12.3m Obstruction £7.3m £7.5m £4.8m Transportation £4.2m £4.8m £5.0m £10.4m £7.6m £4.0m Lighting 39