Dialight Dialight plc 2012 Preliminary Results February 2013 1 Agenda Dialight • Highlights and Financials • Business Review and Outlook • Q&A 2 Highlights of 2012 Dialight • Profit before tax from continuing operations increases 26.7% to £19.7m (2011: £15.5m) • 2012 Lighting Revenues increase 72.7% to £45.5m (2011: £26.4m) • Lighting Contribution Margin increased by 8.6 points to 44.3% • Disposal of Utility Switch business complete • Operating cash flow of £22.6m leading to year‐end net cash of £15.0m (2011: £13.7m) • EPS 41.4p on continuing operations excluding £0.7m profit before tax on disposal of Utility Switch (2011: 31.3p) • Final dividend of 9.5p giving a total dividend for the year of 13.5p an increase of 35% 3 Group History Since Introduction of Lighting * 2012 and 2011 Continuing Basis 2012* £m 2011* £m 2010 £m 2009 £m Revenue 115.1 102.5 99.2 77.3 Profit before tax 19.7 15.5 11.3 5.3 Operating Cash flow 22.6 17.7 15.1 11.0 Net Cash 15.0 13.7 10.4 9.1 Net Assets 63.0 54.8 46.2 40.1 Return on Sales % 17.1 15.1 11.4 6.9 Return on Capital % (Exc Cash) 41.0 37.9 31.6 17.1 Dialight 4 Dialight Group Summary Profit and Loss 2012 £m 2011 £m 115.1 102.5 Contribution 53.1 47.0 Contribution % 46.1 45.8 Gross Profit 41.2 33.4 (12.5) (9.1) Administration Cost (9.1) (8.8) Operating profit 19.6 15.5 0.1 ‐ Profit before tax 19.7 15.5 Non underlying 0.1 (0.8) Tax (6.5) (4.8) Profit for the period 13.3 9.9 Revenue Sales & Marketing Cost Net financing cost 5 2012 Financial Result Bridge Dialight £m 2011 Continuing EBIT 15.5 Signals Decreased Contribution from lower sales (2.5) Lighting Increased Contribution Margin both sales and % 10.8 Additional Sales Cost (3.4) Lower Component Contribution (2.1) Currency 0.2 Other 1.1 2012 Continuing EBIT 19.6 6 Balance Sheet Dialight December 2012 £m December 2011 £m Non current assets 30.7 23.8 Cash 15.0 13.7 Other current assets 46.6 38.7 (24.9) (21.0) Non current liabilities (4.3) (0.5) Net Assets 63.0 54.8 Current liabilities 7 Cashflow Dialight 2012 £m 2011 £m Operating cash 22.6 17.7 Working capital (8.4) (2.5) Pension (0.4) (2.8) Tax/financing (4.3) (1.7) Investing activities (4.3) (4.5) Dividend Paid (3.4) (2.7) Exchange (0.5) ‐ 1.3 3.4 Change in net cash 8 Full Year Revenues Dialight 2012 £m 2011 £m 115.1 102.5 Signals 48.1 52.5 Lighting 45.5 26.4 Components 21.5 23.7 Total Revenue 9 Lighting Revenues by Territory Dialight 2012 £m Americas 32.0 Europe 8.8 Asia 4.7 Total 45.5 10 Full Year Segments Signals Revenue Contribution EBIT Dialight 2012 £m 2011 £m Inc / (Dec) 48.1 22.6 11.3 52.5 25.1 11.8 (4)% 45.5 20.2 8.6 26.4 9.4 2.0 323% 21.5 10.3 3.1 23.7 12.4 4.9 (37)% Lighting Revenue Contribution EBIT Components Revenue Contribution EBIT 11 The Future Dialight Dialight 2012 Lighting Leverage 2011 £m Growth £m 2012 £m 26.4 19.1 45.5 Contribution 9.4 10.8 20.2 Contribution Margin 36% Production Cost (2.1) 8% (0.1) Development (0.4) 2% Sales & Marketing (3.9) Administration (1.1) Revenue % of sales % of sales Fixed / Variable (2.2) 5% 90/10 (0.8) (1.2) 3% 0/100 15% (2.9) (6.7) 15% 0/100 4% (0.4) (1.5) 3% 55/45 44% EBIT 2.0 6.6 8.6 EBIT 8% 35% 19% • Operational leverage and maintained/improving contributions will drive the Group’s operating income • What was achieved in 2012? – 35% leverage against target leverage of 30% with overall sales cost fully variable at 15% of total revenue (2011:15%) 12 Dialight Business Overview 13 Components Dialight • Niche with over 15,000 customers – strong profit and cash generator • Revenues £21.5m compared with £23.7m • Profitability impacted by mix and Malaysia start up costs expensed • Business expected to be flat in 2013 • Fundamentals of the business unchanged • Demand driven by Servers, Storage, Cellular Infrastructure and Internet Access 14 Signals Revenues Dialight 2012 £m 2011 £m Total Signals 48.1 52.5 Traffic 21.5 26.5 Obstruction 18.3 17.8 8.3 8.2 Vehicle 15 Signals Dialight • Niche – strong profit and cash generator • Revenues £48.1m compared with £52.5m with weak traffic down 19% and 2% obstruction growth • Contribution margin percent flat • Business expected to be flat to small growth in 2013 16 LED Obstruction Lighting Dialight 17 Signals ‐ Obstruction Dialight • 2% growth to £18.2m • Growth drivers for the future are:‐ 1. US Cell Tower market – 80,000 towers to light, around 10,000 2. 3. 4. done Remaining market worth over $200m. Competition arrived in 2012 US Broadcast Tower market – 2000+ Towers to light. Market worth over $200m. Dialight sole qualified source Offshore Wind Turbine market – much less than 1 and 2 above but increasing. As turbines get bigger, lights are becoming brighter and more important. Business expected to be flat to small growth in 2013. Any significant growth dependent on award of contract with second largest tower operator. Further penetration of high intensity market expected but still at early stage of adoption. 18 Lighting – The Engine for Growth Dialight 19 Dialight How Big is the Market? • Industrial Lighting Sales Globally estimated to be $5Bn annually (Freedonia study) • Hazardous Lighting is estimated to be 20% of Industrial Lighting (Recent IHS study gives EMEA annual hazardous lighting market size as $425m in 2012) • Dialight addresses the installed base not just new construction • Hazardous Lighting addressable market is estimated to be in excess of $10bn • Penetration is minimal Source: Freedonia IMS 20 Vertically Focused – Hazardous & Industrial Dialight Oil, Gas & Petrochem $3bn • Upstream (exploring & drilling) • Downstream (refining) • Transportation (terminals & pipelines) Heavy Industrial $2.5bn • Steel processing • Pulp & paper • Auto plants • Aircraft plants Power Generation $3bn • Nuclear • Fossil (coal, natural gas, petroleum) • Renewable (wind, solar, geothermal) Chemical & Pharma $1.8bn Mining $1bn • Surface mining Food & Beverage $0.7bn • Food processing • Agricultural • Cold Storage • Food grains 21 Application Review – Refinery Lighting Dialight Scale of opportunity ~ 660 refineries worldwide ~ 6,700 lights per refinery • Total opportunity: $2.5Bn • Opportunity per refinery: $4M Typical Lighting Applications: Process Areas Our Customers: How we calculate: 134,000 BPD = 6,700 light fixtures Steam Rooms Catwalks 22 Application Review – Power Gen Plants Dialight Scale of opportunity Total opportunity for coal and nuclear plants: $2.7Bn ~ 1,700 Coal plants worldwide ~ 2,000 lights per coal plant • Opportunity per coal plant: $1.5M 193 Nuclear plants worldwide ~ 1,100 lights per nuclear plant • Opportunity per nuclear plant: $625K Typical Lighting Applications: Conveyor Belts Our Customers: Coal Bunkers Turbine Decks 23 23 Application Review – Steel Processing Dialight Scale of opportunity ~ 2,300 steel mills worldwide ~ 1,500 lights per mill • Total opportunity: $1.7Bn • Opportunity per steel mill: $750K Typical Lighting Applications: Cranes Our Customers: How we calculate: 643,000 metric tonnes = 1,500 light fixtures Blast Furnaces Process Areas 24 24 Prospect Review – Large Auto Manufacturer Dialight Scale of opportunity 75+ global plants ~ 8,000 fixtures per plant • Total opportunity: $280M • Opportunity per auto plant: $3.75M Typical Lighting Applications: Stamping Engine Transmission 25 Prospect Review – Large Food Manufacturer Dialight Scale of opportunity ~ 470 global facilities ~ 1,300 fixtures per facilities • Total opportunity: $330M • Opportunity food plant: $700K Typical Lighting Applications: Process Cold Storage Quality Packaging 26 Identified EPC Global Capital Projects Dialight Europe 7,532 Projects Asia 17,923 Projects North America 14,763 Projects Middle America 703 Projects South America 5,581 Projects Africa 1,040 Projects Total Projects Estimate ‐ $12,074Bn Total Lighting Estimate ‐ $1.20Bn Oceania 1,343 Projects Dialight Why LED Lighting? • Energy saving up to 60% against conventional efficient lighting • Maintenance – lasts more than ten years in service • Safety – superior light with no failure • Reliability‐ no need to plan shutdowns to replace lights • Control – easy to turn on and off/down with no degradation or start up time Energy Savings Example Dialight • New 300,000 sq ft facility Class II, Div 2 • (221) 50W LED Linears replace (221) 75W T8 Fluorescent • (41) 100W LED Linears replace (41) 150W T8 Fluorescent • (97) 146W LED High Bay Fixtures replace (97) 480W HID Fixtures • Energy cost: $0.136 / kWh • (48) 153W LED High Bay Fixtures replace (48) 480W HID Fixtures • • • Energy savings: $80,000 / yr (79) 100W LED Area Lights replace • Maintenance savings: $25,000+ / yr (79) 300W HID Fixtures • Payback: < 2 years (10) 8W LED RTO Area Lights replace (10) 84W HID Fixtures Energy savings: $80,000 / yr 29 Maintenance Savings Dialight How does maintenance savings affect payback? Expected life • Metal halide bulb = 2 years • LED fixture = 10+ years Scenario • Maintenance costs up to $2,000 per bulb! • $1,000 / yr • Traditional lamps often don’t reach full expected life due to vibration, excessive heat • (100) 153W LED High Bays replace (100) 480W HID High Bays • Hazardous areas require multiple personnel, permitting, scaffolding • Production down time = $$$ Annual Savings: • Maintenance Savings $100,000 / yr Maintenance savings : $100,000 / yr • ~1 year payback 30 Health & Safety Improvements Dialight LED High Pressure Sodium • Major push for safety improvement investments for industrial facilities • Temperature rating (t‐rating) • Color quality improvements = safer at night • No flash lights required • No mercury / hazardous gases 31 LED Controls Dialight Why are the lights on? • No need for 24/7 lighting • No warm up or restrike time • Controls further reduce energy consumption 32 Dialight Why Dialight? • LED only! Almost quarter of a million installed LED lights. • Superior lumens per Watt • Unprecedented comprehensive 10 year warranty • Designed for high shock and vibration environments • Handle extremes of temperature • Always state of the art products – short product lifecycle – always a generation ahead • Vertically integrated manufacturing – control of all the process 33 Superior Lumens per Watt Dialight • 2009 – 53 lumens per Watt • 2012 – 100 lumens per Watt • 2013 – 115 lumens per Watt goal • Surpassed traditional technologies and LED competitors • New power supply topology to increase efficiency by 7% Dialight *Other LED LED High Bay Solutions (avg) Delivered Lumens Total Fixture Wattage Lumens per Watt Metal Halide High Pressure Sodium T5HO Fluorescent 17,500 17,250 36,000 47,500 17,064 172W 202W 480W 480W 250W 102 lm/W 85 lm/W 75 lm/W 99 lm/W 68 lm/W *Average of all DesignLight Consortium qualified LED high bays as of 2/11/13 ranging from 15,000 to 20,000 lumens 34 Unprecedented Comprehensive 10 Year Warranty Dialight • 10 year all inclusive warranty includes fixture housing, power supply, LEDs and finish • Industry average 5 year (with stipulations) • In the harshest environments, our customers can rely on our fixtures to continue operating 10 years of No sudden failures No spot re‐lamping No bulb changes No component replacements No lights out No flickering No hassle 35 Warranty Comparison Dialight Dialight High Bay Competitor 1 Competitor 2 Competitor 3 Competitor 4 Warranty Period 10 7 5 5 5 LEDs √ √ *√ *√ √ Power Supply √ * √ √ *√ Housing √ √ √ √ √ Finish √ √ √ √ ‐ *Power supply not covered *10% of LEDs must fail *Power supply only warranted for 3 years Stipulation *15% of LEDs must fail 36 Designed for High Shock & Vibration Dialight • Dialight fixtures expected to last 10+ years, traditional bulbs may last 1 month or less • Fixtures designed for offshore & mining applications where continual shock and vibration present • Our products pass vibration test of 3G vibration (2,000,000 cycles) • Solid state lighting = no breakable parts ‐ no bulb, no filament 37 Extreme Temperature Capable Dialight From ‐50C.. ..to +70C Dialight’s fixtures are extreme environment capable 38 Dialight State‐of‐the‐Art Products Dialight • Now have largest portfolio of LED lighting fixtures for hazardous environments • Full system design for optimal performance and efficiency • Wireless or powerline communication control options for accurate lighting and additional energy savings • Controls monitoring and reporting • Battery backup options for egress lighting applications • Intelligent thermal management for long life insurance • AC & DC voltage options to accommodate various industrial applications 40 Vertically Integrated Dialight • In‐house power supply design – full quality control over every single component • Improved lead times – Dialight standard is 2 weeks, LED competitors are 4‐8 weeks • Full testing capability – mimic all 3rd party tests to ensure compliance and performance • Superior speed to market time for new fixtures 41 Dialight How do we Continue to Sustain Growth? 42 Lighting Channel to Market Dialight Asia Pacific 19 direct sales personnel Europe / Middle East 17 direct sales personnel US, Canada, Mexico & Brazil 23 direct sales personnel 2012 Lighting sales in 40+ countries and sales people in 20+ countries 43 Prospects Dialight • Growth is all about Lighting • Assume the other segments are broadly flat • Our 30% leverage model is vindicated and exceeded in 2012 and still valid for the future • Dialight recruitment and geographic expansion plans targeted to support Lighting sales growth in excess of market expectations • Dialight product development plans target aggressive improvements in product cost and performance to sustain contribution margin and resist potential competitive pressure • Management confident in 2013 and beyond with 2012 dividend up 35% 44 Dialight Dialight…. It’s all about Lighting! 45