TIDMDIA
RNS Number : 1581H
Dialight PLC
02 August 2021
Dialight plc
("Dialight" or "the Group")
Half year results 2021
Dialight plc (LSE: DIA.L), the global leader in sustainable LED
lighting for industrial applications, announces its half year
results for the period ended 30 June 2021.
H1 2021 H1 2020
Financial summary GBPm GBPm
========================================= ======== ========
Revenue 60.2 55.2
Underlying profit (loss) from operating
activities 1.5 (5.7)
Profit (loss) from operating activities 0.8 (5.5)
Profit (loss) for the period 0.1 (3.1)
Statutory EPS - basic 0.2p (9.5)p
Net debt (12.0) (18.0)
----------------------------------------- -------- --------
Key points
-- Order growth of 23% at constant currency, order book higher
-- Revenue growth of 17% at constant currency driven by MRO
activity, project activity remains subdued although seeing more
quoting activity. Reported revenue growth of 9%
-- Returned to underlying operating profit, GBP1.5m in H1 2021
-- New product pipeline strengthening, two launches scheduled for H2 2021
-- Ongoing robust operational performance, despite material and logistical constraints
-- Net debt at GBP12.0m, GBP0.6m higher than 31 December 2020
despite GBP4.0m inventory build to maintain uninterrupted
supply
-- H2 2021 has started well with substantial order book
-- Expectations for full year currently unchanged
Fariyal Khanbabi, Group Chief Executive, said:
"The first half of 2021 has been encouraging with a significant
improvement in order intake, revenue and a return to profit
combined with ongoing cash flow discipline. We expect our markets
to continue to recover, albeit at varying rates, while
acknowledging that there are potential ongoing headwinds including
currency, inflation, and supply chain constraints. We have a good
pipeline of projects for the second half of the year, but our
expectations remain unchanged at this stage.
Longer term, our sales pipeline, ongoing product development,
team strengthening, and operational performance mean we are
strongly positioned to deliver significant growth as end market
conditions normalise. Our customers are increasingly seeking more
environmentally friendly products to help meet their net zero
commitments and as market leader we are at the forefront of
providing their solution."
Full year results presentation
A pre-recorded video of the interim results 2021 presentation
can be found at:
http://ir.dialight.com/reports-presentations-and-results/results-presentation/
The slides of the interim results 2021 presentation can be found
at:
http://ir.dialight.com/reports-presentations-and-results/reports-and-presentations/
Contacts:
Dialight plc
Tel: +44 (0)203 058 3542
Fariyal Khanbabi - Group Chief Executive
Clive Jennings - Interim Chief Financial Officer
About Dialight :
Dialight (LSE: DIA.L) is a global leader in sustainable LED
lighting for industrial applications. Dialight's LED products are
providing the next generation of lighting solutions that deliver
reduced energy consumption and create a safer working environment.
Our products are specifically designed to provide superior
operational performance, reliability, and durability, reducing
energy consumption and ongoing maintenance, and achieving a rapid
return on investment.
The company is headquartered in the UK, with operations in the
USA, UK, Mexico, Malaysia, Singapore, Australia, Germany and Dubai.
To find out more about Dialight, visit www.dialight.com .
Notes:
1. Net debt excludes lease liabilities under IFRS 16
2. Constant currency impact is calculated by re-translating the
prior year numbers at the exchange rate prevailing in the current
year.
3. Cautionary Statement: This announcement contains certain
statements, statistics and projections that are or may be
forward-looking. The accuracy and completeness of all such
statements, including, without limitation, statements regarding the
future financial position, strategy, projected costs, plans and
objectives for the management of future operations of Dialight plc
and its subsidiaries is not warranted or guaranteed. These
statements typically contain words such as 'intends', 'expects',
'anticipated', 'estimates' and words of similar import. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future. Although Dialight plc believes that the
expectations will prove to be correct. There are a number of
factors, many of which are beyond the control of Dialight plc,
which could cause actual results and developments to differ
materially from those expressed or implied by such forward-looking
statements. This announcement contains inside information on
Dialight plc.
Overview
Dialight's first half performance demonstrates the progress that
we have made in building a higher quality technology-based Group.
With strong order growth in the first half of the year, the Group
remains on track to deliver year on year growth and a return to
profitability.
We are pleased to report Group revenue growth of 17% at constant
currency which reflects some recovery in our end markets and
ongoing reclaiming of market share. The decisive actions that we
undertook during 2020 by streamlining our cost base, increasing our
liquidity, developing stronger sales and supply chain platforms
have benefited us in the year-to-date. This is despite the impact
of component shortages, extended lead times and logistical
challenges.
Our primary goal is to accelerate growth across our global
industrial markets. We believe that the combination of our
products, strong ESG credentials, people and culture differentiates
us from our peers. We continue to focus on developing new routes to
market as well as continuing to lead the market in innovation. Our
next generation of technology is heavily focused on the
sustainability needs of our customers. Our customers are
increasingly seeking more environmentally friendly products to help
meet their net zero commitments and as market leader we are at the
forefront of providing their solution.
Results
Overall group revenues in H1 2021 were 17% higher than the prior
year (at constant currency) and 9% higher at reported currency.
Revenue growth reflects some recovery in our end markets, but we
also believe it represents ongoing reclaiming of market share. We
have seen a significant increase in MRO activity; we are yet to see
much of a recovery in capex projects although quoting activity is
improving.
We are pleased to report an EBIT of GBP1.5m for H1 2021 compared
to a loss of GBP5.7m in H1 2020. This was driven by increased
revenue and gross margins improving to 35% compared with 2020 where
gross margins were 27%. Lighting gross margins rose to 37% in H1
2021 showing strong year on year progress. Our focus on strong cost
controls continues.
Total orders in H1 2021 were 23% higher than the prior year on a
constant currency basis. Lighting order growth was 15%. The
majority of Lighting order growth was generated in our core US
market which had an increase of 18% (constant currency basis)
compared to the prior period. We have seen various upgrade projects
changing from capex to MRO, which means they will be completed over
time rather than as a one-time project.
Orders in our EMEA business were 9% ahead on a constant currency
basis compared to the prior period. Our APAC region was 3% ahead on
a constant currency basis driven by a strong performance in
Australia offset by the continued lockdowns in Asia making the
first half challenging for this region.
Signals and Components is a high-volume business operating
within highly competitive markets. The resurgence of this division
that we saw in H2 2020 continued in the first half with order
growth of 41% (constant currency). Within this division,
opto-electronic component sales have been strongly fuelled by
increased demand in the electronics market related to home-working.
In addition, demand for Traffic Lighting has continued to be
strong. Raw material shortages have impacted conversion of orders
to revenue but the division enters the second half with a strong
order book.
Our operational performance remains good. Our focus in the first
half has centred on managing our supply chains. World-wide
shortages of key components such as semiconductors, LEDs and
specialist cables have impacted production across the Group. A
number of our suppliers have still not fully recovered their own
operations from COVID-19 impacts and we are seeing increased delays
in shipping from Asia.
We enter the second half with an order book higher than usual
due to the supply constraints, but we have been able to maintain
on-time delivery at 80%. The supply constraints are not expected to
significantly improve this year. To mitigate the impact of on-going
challenges of the availability of raw materials coupled with
extended lead times, we increased our inventory of critical
components by GBP4.0m (constant currency) during H1 2021. Further
actions are underway to reduce underlying stock levels, however, we
will continue to maintain above average raw material and finished
good safety stocks until shipping and lead times for raw materials
return to more normal levels.
The Group continues to operate with a high level of focus on
safety at all sites. The extensive range of measures to support and
ensure our teams safety continue to be applied despite many regions
lifting restrictions.
Our focus on product development remains unchanged. We have two
new major product launches in H2 2021, with other developments to
follow.
Strategy
Dialight's core strengths centre around our products which have
a long history of innovation within the industrial lighting
markets. Our products focus on the needs of our customers to
enhance safety and reduce energy costs and going forward help
customers achieve the critical objective of the transition to net
zero carbon.
Dialight products provide the best cost of ownership to
industrial customers with paybacks based on energy savings and
maintenance cost avoidance. Our in-house custom designed power
supply is the key to our market leading 10-year warranty and field
reliability. Our optimised optics ensure improved light
illumination providing uniformity and quality plus enabling our
customers to use fewer lights to illuminate the target area. Their
integrated design significantly reduces the burden of installation
and maintenance. Our products have the ability to withstand extreme
environmental conditions such as very high or low temperatures,
humidity, high vibration and corrosive environments. The addition
of sensors and controls brings an additional element to the value
proposition for our customers.
Our growth strategy is focused on three key objectives.
First, to protect and grow within our core heavy and harsh
industrial markets which has LED conversion rates still below 10%
offering Dialight a significant conversion growth opportunity .
Dialight has a leading position within this space which has been
enhanced by winning back MRO business and combined with the
strength of our highly qualified sales team we will continue to
expand our reach within this space.
Second, we believe that sustainability will be a major driver in
the conversion to LED and this has accelerated post COVID-19. Our
newly formed strategic accounts team is focused on expanding our
market reach, leveraging corporate ESG goals and our differentiated
products . In the first half the team has made progress in
identifying and engaging key accounts in addition to developing new
routes to market. This consists of targeting the EPC/engineering
firms and electrical contractors. We continue working on
strengthening our branding and focusing on vertical market
applications.
Third, we continue to lead the market in innovation so we can
widen our market leading position. The next generation of
technology is heavily focused on building on the sustainability
needs of our customers with the goal to have the first fully
recyclable product. In H2 2021 a number of new products will be
launched. By retaining our focus on innovation, we can extend our
long-term advantage. The timelines for developing new products, and
our ability to quickly react to market requirements will increase
our innovation lead in the market as we continue to develop
advancements.
Our supply chain remains the single biggest factor in ensuring
the Group has market-leading lead-times. We also aim to reduce
inventory levels further over the medium term; reduce costs by
improving operational efficiency; and develop a more flexible cost
structure with more of our costs being variable. This will enable
us to flex up or down dependent on demand.
Purpose and sustainability
At Dialight we are passionate about playing our part in building
a fairer and more resilient world for generations to come.
Underpinning this purpose is the transition to net zero carbon
which is both an opportunity and an obligation for Dialight. Our
products enable our customers to achieve net zero and we are
committed to working with them to achieve their goals.
Dialight itself has committed to being a net zero business by
2040 and have registered our commitment with the Science Based
Targets Initiative (SBTi). We have recently completed a
verification of our carbon footprint under ISO 14064 and using this
as a base, we will work with SBTi to set appropriate interim
targets and report them. We have reported under CDP in July and we
will report our full year results in accordance with the Task Force
on Climate-related Financial Disclosures protocols.
In order to enhance our focus on ESG, we have created an ESG
committee headed by the CEO with relevant VP's participating on
their subject areas. The committee will monitor all aspects of ESG,
evaluate current performance (via feedback from CPD and EcoVadis
ratings), manage improvement and awareness programs internally and
externally. This will include management of the SBTi targets
process and setting the internal targets needed to achieve this and
monitoring progress against those targets.
The committee will also focus on full life cycle impact of
products via the output from our Environmental Product Declarations
(EPD's) that are currently being prepared for all major product
lines. These will then be used to review the impact of material
choices on the whole life emissions related to products including
the end-of life disposal impacts in order to guide R&D
strategy.
We intend to publish our inaugural ESG Report in H2 2021 which
will encompass the output from our 2020 base year carbon footprint
plus an update on other Environmental initiatives together with our
current progress on Social and Governance matters.
Full year guidance for 2021 and longer term
The first half of 2021 has been encouraging with a significant
improvement in order intake, revenue and a return to profit
combined with ongoing cash flow discipline. We expect our markets
to continue to recover at varying rates, while acknowledging that
there are potential headwinds including currency, inflation, and
supply chain constraints. We have made good progress in the first
half with order intake ahead of revenue and a good pipeline of
projects for the second half of the year. Our expectations remain
unchanged at this stage.
Longer term the sales pipeline, product development, team
strengthening, and operational actions will help ensure we are
strongly positioned to sustain significant growth as end market
conditions normalise. We are also seeing the increasing requirement
of our customers for more environmentally friendly products that
help them to meet their net zero commitments and as market leader
we are at the forefront of supporting this.
FINANCIAL REVIEW
The financial performance of the Group improved significantly in
the first half of 2021 with significant revenue growth and a return
to profitability. Operating cashflow of GBP5.1m was generated which
enabled us to fund GBP4.0m of additional inventory needed to combat
material shortages. Net debt was similar to 31 December 2020 and,
as planned, we repaid GBP2.0m of the additional COVID related
funding that we secured in 2020.
Currency impact
Dialight reports its results in Sterling. Our major trading
currency is the US Dollar, which in H1 2021 comprised 83% of the
Group's revenue. The average rate for GBP to USD moved
significantly from 1.26 in H1 2020 to 1.39 in H1 2021. As a result,
we are presenting revenue movements on a constant currency and
actual currency basis to show the business performance without the
impact of FX movements.
Group results
Group revenues of GBP60.2m in H1 2021 were 17% higher than the
prior year (at constant currency) and 9% higher at reported
currency. Gross margin of 35% benefitted from the non-recurrence of
costs associated with factory closures and significant disruption
to production in Q2 2020. The combination of increased revenue and
improved margins enabled the Group to achieve an underlying profit
for H1 2021 of GBP1.5m.
GBPm
Underlying EBIT bridge (unaudited)
============================= ============
Underlying EBIT loss H1 2020 (5.7)
------------
Revenue increase impact 2.4
------------
Gross margin improvement 4.9
------------
Change in SG&A costs (0.1)
------------
Underlying EBIT H1 2021 1.5
============================= ============
There were legal related non-underlying costs of GBP0.7m which
resulted in a statutory EBIT profit of GBP0.8m compared to an EBIT
loss of GBP5.5m in 2020. Financial expenses were higher than prior
year at GBP0.7m (H1 2020: GBP0.5m) following the additional funding
taken out last year (see note 9) resulting in a profit before tax
of GBP0.1m (H1 2020 loss of GBP6.0m).
Lighting segment
H1 2021 H1 2020* Variance H1-20 Constant
GBPm GBPm % at constant currency
currency variance
Lighting GBPm %
----------------- -------- --------- --------- ------------- ----------
Revenue 40.8 39.6 +3.0% 37.1 +10.0%
-------- ---------
Gross profit 15.1 11.3 +33.6% 10.6 +42.5%
-------- ---------
Gross profit % 37.0% 28.5% +850bps 28.6% +840bps
-------- ---------
Overheads (12.8) (14.2) +9.9% (13.3) +3.7%
----------------- -------- --------- --------- ------------- ----------
Underlying EBIT 2.3 (2.9) +179% (2.7) +185%
================= ======== ========= ========= ============= ==========
* 2020 numbers have been re-stated following the disposal of
Dialight Brazil in the prior period
The Lighting segment represented 68% of the Group's revenue, and
consists of two main revenue streams, large retrofit projects and
on-going Maintenance, Repair and Operations (MRO) spend. In the
last 18 months the challenge has been the lack of project-based
revenue as well as Europe and Asia remaining weak given the
on-going lockdowns.
Overall revenue grew by 10% on a constant currency basis with
the split between MRO remaining at 80% and capex projects at 20%.
Gross margins improved to 37%, an increase of 840 bps on 2020. The
main reasons for the improvement in margins are that in H1 2021
there were no factory closures (unlike H1 2020), there was an
increase in production volumes resulting in better fixed overhead
absorption and the benefit from cost saving programmes that were
initiated in 2020.
Operating costs were GBP1.4m lower than prior period mainly due
to lower travel costs and the benefit from headcount reductions in
H2 2020.
This resulted in an underlying EBIT profit of GBP2.3m compared
to a loss of GBP2.9m in 2020.
Signals and Components
H1 2021 H1 2020 Variance H1-20 Constant
GBPm GBPm % at constant currency
currency variance
Signals and Components GBPm %
------------------------ -------- -------- --------- ------------- ----------
Revenue 19.4 15.6 +24.4% 14.2 +36.6%
-------- --------
Gross profit 6.1 3.8 +60.5% 3.3 +84.8%
-------- --------
Gross profit % 31.4% 24.4% +700bps 23.2% +820bps
-------- --------
Overheads (3.8) (3.8) - (3.5) +8.6%
------------------------ ======== ======== --------- ------------- ----------
Underlying EBIT 2.3 - - (0.2) +1250%
======================== ======== ======== ========= ============= ==========
The strong order growth within this division resulted in revenue
increasing by 37% (at constant currency) and by 24% at reported
currency. Opto-electronic component sales have been very strong due
to a higher level of home-working plus more demand from medical
device manufacturers. Sales of traffic lighting has also continued
to be strong. Raw material shortages have impacted conversion of
orders to revenue but the division enters the second half with a
strong order book.
There was a significant recovery in gross margin as it increased
by 700bps from H1 2020. The main drivers were the non-repeat of
factory closure costs and production volumes increases resulting in
better absorption of fixed production costs. Overheads were flat
year on year.
The improved revenue and gross margin resulted in an underlying
EBIT of GBP2.3m compared to break-even in H1 2020.
Central overheads
Central overheads comprise of costs not directly attributable to
a segment and therefore not allocated to these segments. In H1 2021
they were GBP3.1m, an increase of GBP0.3m on the prior period. The
key increases were in salaries as a result of COVID-19 related
salary reductions ceasing.
Inventory
We increased our inventory of critical components by GBP4.0m
(constant currency) during H1 2021 in order to mitigate the impact
of on-going challenges of the availability of raw materials coupled
with extended lead times.
Further actions are underway to reduce underlying stock levels,
however, we will continue to maintain above average raw material
and finished good safety stocks until lead times on both
availability and shipping times for raw materials return to more
normal levels.
Cash and borrowings
The Group ended H1 2021 with net debt of GBP12.0m, a small
increase of GBP0.6m from December 2020. Net debt excludes lease
liabilities related to the adoption of IFRS 16 Leases, as these are
excluded for covenant testing purposes. Gross bank debt was
GBP15.0m offset by cash in hand of GBP3.0m (see note 9 for further
details on bank borrowings).
The roll forward of net debt was as follows:
Net Debt GBPm
========================================= =======
Opening balance 01 January 2021 (11.4)
-------
Underlying EBITDA * 4.5
-------
Inventory Increase (4.0)
-------
Net working capital excluding inventory 2.7
-------
Investment in R&D (1.6)
-------
Maintenance capex/other (0.9)
Non underlying cost (see note 3) (0.7)
Interest paid (0.7)
FX 0.1
----------------------------------------- -------
Closing balance at 30 June 2021 (12.0)
========================================= =======
*EBITDA profit comprises underlying EBIT of GBP1.5m with
depreciation of property, plant, and equipment of GBP1.5m and
amortisation of GBP1.5m added back
The Group generated positive EBITDA of GBP4.5m in the period and
working capital (excluding inventory) was well controlled with a
GBP0.8m reduction in receivables and a GBP1.9m increase in
payables, caused by improved supplier payment terms and the impact
from increased raw material purchases. To date, customers have
continued to pay on-time and we incurred no bad debt. We invested
GBP1.6m in R&D during H1 2021 partly related to two product
launches scheduled for the second half and GBP0.3m in maintenance
capex.
Banking
The Group's financing arrangements consist of a revolving credit
facility with HSBC of GBP25m which matures in February 2023 and has
an option for a two-year extension and a GBP10m facility with HSBC
maturing June 2023 which comprises GBP8m under the COVID-19 Large
Business Interruption Scheme (CLBILS) and a GBP2m commercial loan.
The Group has repaid GBP2m of the GBP10m facility during the half
year in accordance with the terms of the loan. Borrowings under the
CLBILS scheme cannot be re-borrowed so the total borrowing
facilities of the Group are now GBP33m. The remaining GBP8m will be
repaid in equal instalments over the next 24 months.
The Group's banking covenants are tested quarterly and the Group
was fully compliant with its banking covenant during the period.
The covenant tests will revert to a leverage and interest cover
basis from September 2021 and the Group expects to be compliant
with these at year-end.
Tax
There is no tax charge in the current period. The tax credit in
the prior period of GBP2.9m comprised a tax credit of GBP1.6m
(based on the H1 loss before tax of GBP6.0m in the half year and an
expected full year tax rate of 26%) plus a GBP1.3m one-off tax
credit in the USA (from the ability to carry back losses at a
higher tax rate under a COVID-19 related stimulus package under the
Cares Act). For the full year 2021, we expect a Group effective tax
rate of 25%.
Non-underlying costs
Costs of GBP0.7m were incurred in the period in relation to the
ongoing litigation with Sanmina. A further announcement will be
made as and when appropriate.
Capital management and dividend
The Board's policy is to maintain a strong capital base to
maintain customer, investor, and creditor confidence and to sustain
future development of the business. The Board considers
consolidated total equity as capital and at 30 June 2021, this
equated to GBP56.8m (H1 2020: GBP69.4m). The Board is not declaring
an interim dividend payment for 2021 (2020: nil).
Fariyal Khanbabi, Group Chief Executive
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the period ended 30 June 2021
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
(unaudited) (unaudited
restated) (audited)
============================== ==== ============= ===================== ================
Note Total Total Total
GBP'm GBP'm GBP'm
============================== ==== ============= ===================== ================
Revenue 2 60.2 55.2 119.0
------------- ---------------------
Cost of sales (39.0) (40.1) (85.0)
============================== ==== ============= ===================== ================
Gross profit 21.2 15.1 34.0
------------- ---------------------
Distribution costs (10.2) (11.0) (20.8)
------------- ---------------------
Administrative expenses (10.2) (9.6) (22.0)
============================== ==== ============= ===================== ================
Profit (loss) from operating
activities 2 0.8 (5.5) (8.8)
============================== ==== ============= ===================== ================
Underlying profit (loss)
from operating activities 1.5 (5.7) (6.4)
Non underlying items 3 (0.7) 0.2 (2.4)
============================== ==== ============= ===================== ================
Profit (loss) from operating
activities 0.8 (5.5) (8.8)
============================== ==== ============= ===================== ================
Financial expense 4 (0.7) (0.5) (1.3)
============================== ==== ============= ===================== ================
Profit (loss) before tax 0.1 (6.0) (10.1)
Income tax credit 5 - 2.9 2.3
============================== ==== ============= ===================== ================
Profit (loss) for the period 0.1 (3.1) (7.8)
============================== ==== ============= ===================== ================
Profit (loss) for the period
attributable to:
============================== ==== ============= ===================== ================
Equity owners of the Company - (3.1) (7.9)
------------- ---------------------
Non-controlling Interests 0.1 - 0.1
============================== ==== ============= ===================== ================
Profit (loss) for the period 0.1 (3.1) (7.8)
============================== ==== ============= ===================== ================
Earnings per share
Profit (loss) per share basic
and diluted 6 0.2p (9.5)p (24.0)p
============================== ==== ============= ===================== ================
H1 2020 has been restated following the disposal of Dialight
Brazil in 2020.
The accompanying notes form an integral part of these interim
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2021
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
(unaudited) (unaudited) (audited)
GBP'm GBP'm GBP'm
========================================= ============= ====================== ===================
Other comprehensive (expense) income
========================================= ============= ====================== ===================
Exchange difference on translation
of foreign operations (0.8) 4.9 (1.8)
------------- ----------------------
Income tax on exchange differences
on transactions of foreign operations - (0.4) (0.3)
----------------------------------------- ------------- ---------------------- -------------------
(0.8) 4.5 (2.1)
========================================= ============= ====================== ===================
Items that will not be reclassified
subsequently to profit and loss
Remeasurement of defined benefit pension
liability - - (1.3)
Income tax on remeasurement of defined
benefit liability - - 0.3
----------------------------------------- ------------- ---------------------- -------------------
- - (1.0)
========================================= ============= ====================== ===================
Other comprehensive (expense) income
for the period, net of tax (0.8) 4.5 (3.1)
========================================= ============= ====================== ===================
Profit (loss) for the period 0.1 (3.1) (7.8)
========================================= ============= ====================== ===================
Total comprehensive (expense) income
for the period (0.7) 1.4 (10.9)
========================================= ============= ====================== ===================
Attributable to:
------------- ----------------------
* Owners of the parent (0.8) 1.4 (11.0)
------------- ----------------------
* Non-controlling interest 0.1 - 0.1
========================================= ============= ====================== ===================
Total comprehensive (expense) income
for the period (0.7) 1.4 (10.9)
========================================= ============= ====================== ===================
The accompanying notes form an integral part of these interim
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2021 and 30 June 2020
(unaudited)
Capital Non-
Share Merger Translation redemption Retained controlling Total
capital reserve reserve reserve earnings Total interests Equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
========================== ======== ======== =========== =========== ========= ====== ============ =======
Balance at 1 January
2021 0.6 0.5 9.3 2.2 44.3 56.9 0.4 57.3
------
Profit for the
period - - 0.1 0.1
Other comprehensive
expense:
------ -------
Foreign currency
translation differences,
net of taxes - - (0.8) - - (0.8) - (0.8)
------ -------
Remeasurement of - - - - - - - -
defined benefit
liability, net
of taxes
-------------------------- -------- -------- ----------- ----------- --------- ------ ------------ -------
Total other comprehensive
expense - - (0.8) - (0.8) - (0.8)
========================== ======== ======== =========== =========== ========= ====== ============ =======
Total comprehensive
(expense) income
for the period - - (0.8) - - (0.8) 0.1 (0.7)
========================== ======== ======== =========== =========== ========= ====== ============ =======
Transactions with
owners, recorded
directly in equity:
------ -------
Share-based payments - - - - 0.2 0.2 - 0.2
========================== ======== ======== =========== =========== ========= ====== ============ =======
Total transactions
with owners - - - - 0.2 0.2 - 0.2
========================== ======== ======== =========== =========== ========= ====== ============ =======
Balance at 30 June
2021 0.6 0.5 8.5 2.2 44.5 56.3 0.5 56.8
========================== ======== ======== =========== =========== ========= ====== ============ =======
Capital Non-
Share Merger Translation redemption Retained controlling Total
capital reserve reserve reserve earnings Total interests Equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
========================== ======== ======== =========== =========== ========= ====== ============ =======
Balance at 1 January
2020 0.6 0.5 11.6 2.2 52.6 67.5 0.3 67.8
------
Loss for the period - - - - (3.1) (3.1) - (3.1)
Other comprehensive
income:
------ -------
Foreign currency
translation differences,
net of taxes - - 4.5 - - 4.5 - 4.5
------ -------
Total other comprehensive
income - - 4.5 - 4.5 - 4.5
========================== ======== ======== =========== =========== ========= ====== ============ =======
Total comprehensive
income (expense)
for the period - - 4.5 - (3.1) 1.4 - 1.4
========================== ======== ======== =========== =========== ========= ====== ============ =======
Transactions with
owners, recorded
directly in equity:
------ -------
Share-based payments,
net of tax - - - - 0.2 0.2 - 0.2
========================== ======== ======== =========== =========== ========= ====== ============ =======
Total contributions - - - - - - - -
by and distributions
to owners
========================== ======== ======== =========== =========== ========= ====== ============ =======
Balance at 30
June 2020 0.6 0.5 16.1 2.2 49.7 69.1 0.3 69.4
========================== ======== ======== =========== =========== ========= ====== ============ =======
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020 (audited)
Capital Non-
Share Merger Translation redemption Retained controlling Total
capital reserve reserve reserve earnings Total interests Equity
-------------------------- -------- -------- ----------- ----------- --------- ------ ------------ -------
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------------- -------- -------- ----------- ----------- --------- ------ ------------ -------
Balance at 1 January
2020 0.6 0.5 11.6 2.2 52.6 67.5 0.3 67.8
-------------------------- -------- -------- ----------- ----------- --------- ------ ------------ -------
Loss for the year - - - - (7.9) (7.9) 0.1 (7.8)
========================== ======== ======== =========== =========== ========= ====== ============ =======
Other comprehensive
(expense) income:
Foreign exchange
translation differences,
net of taxes - - (2.1) - - (2.1) - (2.1)
Disposal of Subsidiary - - (0.2) - 0.2 - - -
Remeasurement of
defined benefit pension
liability, net of
taxes - - - - (1.0) (1.0) - (1.0)
========================== ======== ======== =========== =========== ========= ====== ============ =======
Total other comprehensive
expense - - (2.3) - (0.8) (3.1) - (3.1)
========================== ======== ======== =========== =========== ========= ====== ============ =======
Total comprehensive
(expense) income
for the year - - (2.3) - (8.7) (11.0) 0.1 (10.9)
========================== ======== ======== =========== =========== ========= ====== ============ =======
Transactions with
owners, recorded
directly in equity:
Share-based payments - - - - 0.4 0.4 - 0.4
========================== ======== ======== =========== =========== ========= ====== ============ =======
Total transactions
with owners - - - - 0.4 0.4 - 0.4
========================== ======== ======== =========== =========== ========= ====== ============ =======
Balance at 31 December
2020 0.6 0.5 9.3 2.2 44.3 56.9 0.4 57.3
========================== ======== ======== =========== =========== ========= ====== ============ =======
CONDENSED CONSOLIDATED STATEMENT OF TOTAL FINANCIAL POSITION
As at 30 June 2021
30 June 30 June 31 December
2021 2020 2020
(unaudited) (unaudited) (audited)
Note GBP'm GBP'm GBP'm
============================================================================================ ============ ============ ===========
Assets
------------
Property, plant, and equipment 11.5 15.6 12.8
------------ ------------
Right of use assets 9.3 11.8 9.8
------------ ------------
Intangible assets 21.0 24.0 21.2
------------ ------------
Deferred tax assets 2.2 1.7 1.4
------------ ------------
Employee Benefits 1.1 2.4 1.1
------------ ------------
Other Receivables 4.6 4.8 5.0
============================================================================================ ============ ============ ===========
Total non-current assets 49.7 60.3 51.3
============================================================================================ ============ ============ ===========
Inventories 8 36.0 41.5 32.5
------------ ------------
Trade and other receivables 19.3 21.4 19.9
------------ ------------
Income tax recoverable 1.0 3.6 1.0
------------ ------------
Cash and cash equivalents 3.0 15.8 5.3
-------------------------------------------------------------------------------------------- ------------ ------------ -----------
Total current assets 59.3 82.3 58.7
============================================================================================ ============ ============ ===========
Total assets 109.0 142.6 110.0
============================================================================================ ============ ============ ===========
Liabilities
Trade and other payables (23.2) (23.9) (21.5)
Provisions (1.1) (1.0) (1.5)
Tax liabilities (1.4) (0.8) (1.5)
Lease liabilities (1.8) (1.6) (1.4)
Borrowings 9 (8.0) - (4.0)
Total current liabilities (35.5) (27.3) (29.9)
============================================================================================ ------------ ------------ -----------
Provisions (1.2) (1.6) (1.2)
Borrowings 9 (7.0) (33.8) (12.7)
Lease liabilities (8.5) (10.5) (8.9)
Total non-current liabilities (16.7) (45.9) (22.8)
============================================================================================ ============ ============
Total liabilities (52.2) (73.2) (52.7)
============================================================================================ ============ ============ ===========
Net assets 56.8 69.4 57.3
============================================================================================ ============ ============ ===========
Equity
------------ ------------
Issued share capital 0.6 0.6 0.6
------------ ------------
Merger reserve 0.5 0.5 0.5
------------ ------------
Other reserves 10.7 18.3 11.5
------------ ------------
Retained earnings 44.5 49.7 44.3
============================================================================================ ============ ============ ===========
56.3 69.1 56.9
------------ ------------
Non-controlling interests 0.5 0.3 0.4
============================================================================================ ============ ============ ===========
Total equity 56.8 69.4 57.3
============================================================================================ ============ ============ ===========
The accompanying notes form an integral part of these interim
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 30 June 2021
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
(unaudited) (unaudited) (audited)
GBP'm GBP'm GBP'm
============================================ ============ ============ ============
Operating activities
------------ ------------
Profit (loss) for the period 0.1 (3.1) (7.8)
------------ ------------
Adjustments for:
------------ ------------
Financial expense 0.7 0.5 1.3
------------ ------------
Income tax credit - (2.9) (2.3)
------------ ------------
Share-based payments 0.2 0.2 0.4
------------ ------------
Depreciation of property, plant, and
equipment 1.5 1.7 3.1
------------ ------------
Depreciation of right of use assets 1.1 1.0 2.0
------------ ------------
Amortisation of intangible assets 1.5 1.0 3.0
------------ ------------
Impairment losses on intangible assets - - 0.3
Loss on disposal of business - - 1.1
-------------------------------------------- ------------ ------------ ------------
Operating cash flow before movements
in working capital 5.1 (1.6) 1.1
------------ ------------
(Increase) decrease in inventories (4.0) 7.0 12.6
------------ ------------
Decrease in trade and other receivables 0.8 4.5 2.7
------------ ------------
Increase (decrease) in trade and other
payables 1.9 (6.3) (6.3)
------------ ------------
(Decrease) increase in provisions (0.4) 0.4 0.5
------------ ------------
Pension contributions in excess of
the income statement charge (0.2) (0.1) (0.1)
============================================ ============ ============ ============
Cash generated by operations 3.2 3.9 10.5
------------ ------------
Income taxes (paid) received (0.2) (0.2) 2.9
------------ ------------
Interest paid (0.7) (0.5) (1.3)
============================================ ============ ============ ============
Net cash generated by operations 2.3 3.2 12.1
============================================ ============ ============ ============
Capital expenditure (0.3) (0.4) (0.8)
------------ ------------
Capitalised expenditure on development
costs (1.6) (2.2) (3.4)
Purchase of software and licenses - - (0.3)
Net cash used in investing activities (1.9) (2.6) (4.5)
============================================ ============ ============ ============
Financing activities
------------ ------------
Drawdown of bank facility 0.4 15.8 10.0
Repayment of bank facility (2.0) - (10.3)
Repayment of lease liabilities (1.2) (1.0) (1.7)
============================================ ============ ============ ============
Net cash (outflow) generated from financing
activities (2.8) 14.8 (2.0)
============================================ ============ ============ ============
Net (decrease) increase in cash and
cash equivalents (2.4) 15.4 5.6
============================================ ============ ============ ============
Cash and cash equivalents at beginning
of period 5.3 0.5 0.5
------------ ------------
Effect of exchange rates 0.1 (0.1) (0.8)
============================================ ============ ============ ============
Cash and cash equivalents at end of
period 3.0 15.8 5.3
============================================ ============ ============ ============
The accompanying notes form an integral part of these interim
financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the period ended 30 June 2021 (unaudited)
1. Basis of preparation and principal accounting policies
Dialight plc (the Company) provide sustainable, energy efficient
and intelligent LED lighting technologies driving towards a net
zero economy. Its primary market is North America, with smaller
operations in EMEA and the rest of the world.
The Company is listed on the London Stock Exchange and is
incorporated and domiciled in England and Wales under registration
number 2486024. Its registered office is at Leaf C, Level 36, Tower
42, 25 Old Broad Street, London EC2N 1HQ.
This condensed consolidated interim financial information was
approved for issue on 1(st) August 2021 and has not been
audited.
Statement of compliance
This condensed consolidated interim financial information for
the six months ended 30 June 2021 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with International Accounting Standard 34 'Interim
Financial Reporting' (IAS 34), as adopted by the European Union.
The condensed consolidated interim financial information should be
read in conjunction with the financial statements for the 12-month
period ended 31 December 2020, which have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
and International Financial Reporting Interpretations Committee
(IFRIC) interpretations, as adopted by the European Union.
This condensed consolidated interim financial information for
the period ended 30 June 2021, and the comparative information in
relation to the period ended 30 June 2020, do not comprise
statutory accounts within the meaning of Section 434 of the
Companies Act 2006. Statutory accounts for the 12-month period
ended 31 December 2020 were approved by the Board of Directors on
29 March 2021 and delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain a
statement under Section 498 of the Companies Act 2006.
Going concern
In adopting the going concern basis for preparing the financial
information, the Directors have considered the issues impacting the
Group during the period as detailed in the business review and have
reviewed the Group's projected compliance with its banking
covenants.
The uncertainty as to the future impact on the financial
performance and cashflows of the Group because of the ongoing
COVID-19 pandemic has been considered as part of adopting the going
concern basis in the preparation of the consolidated financial
information. In particular, the Directors have considered the
Group's banking facilities and have prepared various scenarios
incorporating the continuing impact of COVID-19 based disruptions
as set out below.
The Group has a five-year unsecured GBP25m multi-currency
revolving credit facility, of which GBP7m was drawn at 30 June
2021, GBP6.4m in CLBILS and a GBP1.6m term loan (further details
are included in note 9). As part of the facility, the original
banking covenants of net debt to EBITDA ratio and interest cover
have been replaced by a new test based on exceeding a 12-month
rolling EBITDA level that was derived from a COVID-impacted
business plan as agreed with HSBC, for the testing periods of June
2020 to June 2021 inclusive. The Group was fully compliant with its
revised banking covenant as at 30 June 2021.
Based on the Group's cashflow forecasts and operating budgets,
and assuming that trading does not deteriorate considerably from
current levels, the directors believe that the Group will generate
sufficient cash to meet its requirements for at least 12 months
from the date of approval of the interim financial information and
will comply with all its banking covenants. Accordingly, the
adoption of the going concern basis remains appropriate for the
reasons stated below.
Sensitivity analysis
In assessing going concern, the Directors have prepared various
scenarios using the latest Group forecast for 2021 that incorporate
the continuing impact of COVID-19 based disruptions. These include
impact from government restrictions on our operations in countries
where we operate, the potential time period for these disruptions,
the timescale to recover from them, challenges on raw material
availability and increased freight costs and delays. The scenario
modelling also includes the mitigating actions that can be taken to
reduce the impact on the Group from these risks, as well as the
potential for a negative outcome from ongoing litigation.
In the base case scenario, consistent with current trading
patterns, our factories which have all been granted "essential
business" status will remain in operation, albeit with reduced
capacity in accordance with current local guidelines.
In a severe but plausible downside scenario, the Directors have
assumed a renewed adverse impact from the on-going global pandemic
along with continued challenges in raw material availability and
continued high input prices. In particular, the scenario assumes
that the revenue recovery seen to date is replaced by a revenue
decline and that expected reductions in material and freight costs
do not materialise.
In both scenarios, the Group has concluded mitigating actions
can be put in place swiftly, including various temporary and
permanent cost and cash reductions. Under both scenarios, the
Directors consider that the Group will continue to operate within
its available committed facilities with sufficient headroom and
meet its financial covenant obligations.
Taxation
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to total expected annual
earnings.
Adoption of new and revised standards
The accounting policies adopted in the preparation of these
unaudited condensed financial statements are consistent with the
policies applied by the Group in its consolidated financial
statements for the year ended 31 December 2020.
There are no new or amended standards or interpretations that
became effective in the period from 1 January 2021 which have had a
material impact upon the values or disclosures in the interim
financial information. The Group has not early adopted any
standard, interpretation or amendment that has been issued but is
not yet effective.
Estimates and judgements
In preparing these condensed financial statements, management
has made judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income, and expense. Actual results may differ
from these estimates. The significant judgements made by management
in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applicable to the
consolidated financial statements as at and for the year ended 31
December 2020.
2. Operating segments
The Group comprises two reportable operating segments. These
segments are based on internal information that is supplied
regularly to the Group's Chief Operating Decision Maker for the
purposes of assessing performance and allocating resources. The
Chief Operating Decision Maker is the Group's Chief Executive.
The two reportable operating segments are:
a) Lighting, which develops, manufactures and supplies highly
efficient LED lighting solutions for hazardous and industrial
applications in which lighting performance is critical and includes
anti-collision obstruction lighting; and
b) Signals and Components, which develops, manufactures and
supplies status indication components for electronics OEMs,
together with niche industrial and automotive electronic components
and highly efficient LED signaling solutions for the traffic and
signals markets.
All revenue relates to the sale of goods. Segment gross profit
is revenue less the costs of materials, labour, production and
freight that are directly attributable to a segment. Overheads
comprise operations management, selling costs plus corporate costs,
which include share-based payments. There are no individual
customers representing more than 10% of revenue and there is no
inter-segment revenue.
Segment assets and liabilities are not reported internally and
are therefore not presented below.
Lighting Total
6 months ended 30 June 2021 (unaudited) Note GBP'm Signals and Components GBP'm GBP'm
Revenue 40.8 19.4 60.2
======================================== ============== ======== ============================ ======
Gross profit 15.1 6.1 21.2
Overhead costs (12.8) (3.8) (16.6)
======================================== ============== ======== ============================ ======
Segment operating profit 2.3 2.3 4.6
-------- ---------------------------- ------
Unallocated overhead (3.1)
======================================== ============== ======== ============================ ======
Underlying operating profit 1.5
-------- ---------------------------- ------
Non-underlying items 3 (0.7)
======================================== ============== ======== ============================ ======
Profit from operating activities 0.8
-------- ---------------------------- ------
Financial expense 4 (0.7)
======================================== ============== ======== ============================ ======
Profit before tax 0.1
-------- ---------------------------- ------
Income tax -
======================================== ============== ======== ============================ ======
Profit for the period 0.1
======================================== ============== ======== ============================ ======
Other segmental data
======================================================== ======== ============================ ======
Depreciation of property, plant and equipment 1.0 0.5 1.5
Depreciation of right of use asset 0.7 0.4 1.1
Amortisation 1.0 0.5 1.5
-------------------------------------------------------- -------- ---------------------------- ------
Reporting segments
Lighting Total
6 months ended 30 June 2020 (unaudited, restated) Note GBP'm Signals and Components GBP'm GBP'm
Revenue 39.6 15.6 55.2
================================================== =============== ======== ============================ ======
Gross profit 11.3 3.8 15.1
Overhead costs (14.2) (3.8) (18.0)
================================================== =============== ======== ============================ ======
Segment operating loss (2.9) - (2.9)
-------- ---------------------------- ------
Unallocated overhead (2.8)
================================================== =============== ======== ============================ ======
Underlying operating loss (5.7)
-------- ---------------------------- ------
Non-underlying items 3 0.2
================================================== =============== ======== ============================ ------
Loss from operating activities (5.5)
-------- ----------------------------
Financial expense 4 (0.5)
================================================== =============== ======== ============================ ======
Loss before tax (6.0)
-------- ---------------------------- ------
Income tax credit 2.9
================================================== =============== ======== ============================ ======
Loss for the period (3.1)
================================================== =============== ======== ============================ ======
Other segmental data
=================================================================== ======== ============================ ======
Depreciation of property, plant, and equipment 1.2 0.5 1.7
Depreciation of right of use asset 0.7 0.3 1.0
Amortisation 0.9 0.1 1.0
=================================================================== ======== ============================ ======
Lighting Total
Year ended 31 December 2020 (audited) Note GBP'm Signals and Components GBP'm GBP'm
Revenue 81.7 37.3 119.0
====================================== =============== ======== ============================ ======
Gross profit 23.7 10.3 34.0
Overhead costs (26.8) (7.7) (34.5)
====================================== =============== ======== ============================ ======
Segment operating (loss) / profit (3.1) 2.6 (0.5)
-------- ---------------------------- ------
Unallocated overhead (5.9)
====================================== =============== ======== ============================ ======
Underlying operating loss (6.4)
-------- ---------------------------- ------
Non-underlying items 3 (2.4)
====================================== =============== ======== ============================ ======
Loss from operating activities (8.8)
-------- ---------------------------- ------
Financial expense 4 (1.3)
====================================== =============== ======== ============================ ======
Loss before tax (10.1)
-------- ---------------------------- ------
Income tax credit 2.3
====================================== =============== ======== ============================ ======
Loss for the period (7.8)
-------------------------------------- --------------- -------- ---------------------------- ------
Lighting Total
Other segmental data GBP'm Signals and Components GBP'm GBP'm
======================================================= ======== ============================ ======
Depreciation of property, plant, and equipment 2.1 1.0 3.1
Depreciation of right of use asset 1.4 0.6 2.0
Amortisation 2.1 0.9 3.0
Impairment of intangible assets 0.3 - 0.3
======================================================= ======== ============================ ======
Geographical segments
The Lighting and Signals & Components segments are managed
on a worldwide basis but operate in three principal geographic
areas: North America, EMEA and Rest of World. The following table
provides an analysis of the Group's sales by geographical market,
irrespective of the origin of the goods. All revenue relates to the
sale of goods.
Sales revenue by geographical market
6 months 6 months
ended ended 12 months
30 June 30 June ended
2021 2020 31 December
GBP'm GBP'm 2020
(unaudited) (unaudited GBP'm
restated) (audited)
============== ============ =========== ============
North America 44.9 41.1 89.8
------------ -----------
EMEA 4.8 4.9 9.9
------------ -----------
Rest of World 10.5 9.2 19.3
============== ============ =========== ============
Revenue 60.2 55.2 119.0
============== ============ =========== ============
3. Non-underlying items
The Group incurs cost and earns income that is non-recurring in
nature or that, in the Director's judgement, need to be separately
disclosed in order for users of the consolidated financial
statements to obtain a full understanding of the financial
information and the best indication of the underlying performance
of the Group. The table below presents the components of
non-underlying profit or loss recorded within cost of sales and
administrative expenses.
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'm GBP'm GBP'm
(unaudited) (unaudited, (audited)
restated)
----------------------------------------- ============= ============= =============
Non-underlying items
Redundancy costs - - 0.9
(Profit) loss on disposal of subsidiary - (0.2) 0.8
Litigation costs 0.7 - 0.7
Non-underlying costs recorded in
administrative expenses 0.7 (0.2) 2.4
========================================= ============= ============= =============
Litigation costs of GBP0.7m relates to legal fees for potential
claims for and against the Group.
The loss on disposal in 2020 relates to Dialight Brazil. The
year to date profit of GBP0.2m at 30 June 2020 has been restated to
be in non-underlying items as the business was sold in H2-20 and a
loss on sale of GBP0.8m recognised in the full year results.
4. Financial expense
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'm GBP'm GBP'm
(unaudited) (unaudited) (audited)
========================================== ============ ============ ============
Interest expense on lease liabilities 0.3 0.3 0.6
Interest expense on financial liabilities 0.4 0.2 0.6
Net interest on defined benefit pension
liability - - 0.1
========================================== ============ ============ ============
Financial expense 0.7 0.5 1.3
========================================== ============ ============ ============
5. Income tax expense
There is no tax charge in the current period as taxable profits
are de minimis. The Group has an effective tax rate of 25%
resulting from the USA (tax rate 24%) contributing the majority of
Group profit, with the remaining profit coming from countries with
an average tax rate of 28%
6. Earnings per share (EPS)
The calculation of basic EPS at 30 June 2021 was based on a
profit for the period of GBP0.1m (2020: loss of GBP(3.1)m) and a
weighted average number of ordinary shares outstanding during the
six months ended 30 June 2021 of 32,598,135 (2020: 32,548,429).
Weighted average number of ordinary shares
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
'000 '000 '000
=================================== ======== ======== ============
Weighted average number of shares 32,598 32,548 32,555
-------- --------
Dilutive effect of share options 298 - -
=================================== ======== ======== ============
Diluted weighted average number of
shares 32,896 32,548 32,555
----------------------------------- -------- -------- ------------
Underlying earnings per share are provided below as the
Directors consider that this measurement of earnings per share
gives valuable information on the performance of the Group.
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Per share Per share Per share
(unaudited) (unaudited) (audited)
==================================== ============ ============ ============
Basic and diluted profit (loss) per
share 0.2p (9.5)p (24.0)p
Underlying basic and diluted profit
(loss) per share* 1.8p (9.5)p (18.4)p
==================================== ============ ============ ============
*Underlying EPS excludes non-underlying items as explained in
note 3 and allocates tax at the appropriate rate (see note 5).
7. Dividends
There were no dividends declared or paid in the six months ended
30 June 2021. The Directors have not declared an interim dividend
for 2021 (2020: nil).
8. Inventories
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'm GBP'm GBP'm
(unaudited) (unaudited) (audited)
============================== ============ ============ ============
Raw materials and consumables 16.9 16.2 13.5
Work in progress 7.3 10.7 6.1
Finished goods 11.5 14.2 12.6
Spare parts 0.3 0.4 0.3
------------------------------ ============ ============ ============
Total 36.0 41.5 32.5
============================== ============ ============ ============
Inventories to the value of GBP25.8m (30 June 2020: GBP26.4m)
were recognised as expenses in the period. The inventory reserve at
the balance sheet date was GBP2.3m, which represents 6.1% of
inventory (31 December 2020 7.0%).
The increase in inventory during the period was driven by a
decision to increase the holdings of raw materials given current
world-wide shortages of certain products and delays in shipping. We
had substantially completed orders at 30 June 2021 valued at
GBP2.5m which were awaiting delayed final components to complete
them. We also had GBP0.7m of pre-purchased components for the new
Floodlight product that will be launched in Q3. A number of our
suppliers have still not fully recovered their own operations from
COVID-19 impacts and we are seeing lengthening lead times for some
raw materials, which are compounded by increased delays to shipping
from Asia. Our finished goods inventory reduced by GBP1.1m in the
period as the MRO (Maintenance, Repair and Operations) sales
remained strong and we focused on selling available product
lines.
9. Borrowings
The Group's financing arrangements consisted of a revolving
credit facility with HSBC of GBP25m which matures in February 2023
and has an option for two extensions of one year each, with the
approval of the bank. In order to ensure the availability of
sufficient liquidity, the Group increased its banking facility with
HSBC on 15 June 2020 by adding a further GBP10m facility on a
3-year basis by utilising a combination of GBP8m under COVID-19
Large Business Interruption Scheme (CLBILS) and a GBP2m term loan.
The remaining facility fees of GBP0.2m are amortised over the
tenure of the facility until February 2023.
The GBP10m loan is currently being repaid in equal instalments
over 3 years, which started on the 15th January 2021. The GBP2.0m
facility repayment in the period relates solely to this loan.
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'm GBP'm GBP'm
(unaudited) (unaudited) (audited)
==================================== ============ ============ ============
Borrowings at the beginning of the
period 16.7 17.0 17.0
------------ ------------
Facility drawdown 0.4 15.8 10.0
Facility repayment (2.0) - (10.3)
Impact of revaluing USD borrowings (0.1) 1.0 -
==================================== ============ ============ ============
Borrowings at the end of the period 15.0 33.8 16.7
==================================== ============ ============ ============
10. Principal exchange rates
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
======================= ======== ======== ============
Average for the period
--------
US Dollar 1.39 1.26 1.28
-------- --------
Canadian Dollar 1.73 1.72 1.72
-------- --------
Euro 1.15 1.14 1.12
-------- --------
Mexican Peso 28.00 27.22 27.51
======================= ======== ======== ============
30 June 30 June 31 December
2021 2020 2020
================ ======= ======= ===========
Spot rate
-------
US Dollar 1.38 1.23 1.36
------- -------
Canadian Dollar 1.71 1.68 1.74
------- -------
Euro 1.16 1.10 1.11
------- -------
Mexican Peso 27.47 28.44 27.14
================ ======= ======= ===========
11. Contingencies
As previously reported, we have sought to reach a negotiated
conclusion of various outstanding matters following the termination
of the manufacturing services agreement with our former outsource
manufacturer, Sanmina Corporation. On 20th December 2019, both
parties issued legal proceedings against the other. The parties are
therefore in formal litigation, with no conclusion expected before
2022 at the earliest. The basis of the claim filed by Sanmina
Corporation relates to outstanding invoices and to residual
inventory, which they allege that they purchased for Dialight. The
claim filed by Dialight is more complex in nature and relates to
significant costs and losses suffered as a direct consequence of
Sanmina Corporation not performing in accordance with the terms of
the manufacturing services agreement. The Group has sought external
legal advice and is paying for the legal costs as and when it
occurs. As at 30 June 2021, the Group has not made any provision
for future legal costs.
The Group remains confident of the merits of our legal position,
however in the unlikely event that Sanmina's claim is successful,
the range of outcomes could be a cost of GBP0 - GBP8m, including
legal fees.
The claim filed by Dialight alleges that Dialight suffered
significant costs and losses with total damages exceeding GBP190m
suffered as a result of: (a) Sanmina's fraudulent inducement of
Dialight to enter into a manufacturing services agreement (MSA);
(b) Sanmina breaching the terms of the MSA in a wilful and/or
grossly negligent manner (for example in respect of their failure
to appropriately manage supply chain and inventory levels and to
deliver product on time and free of workmanship defects); and, (c)
Sanmina's gross negligence and/or wilful misconduct.
During 2011, the Roxboro UK Pension Fund (the "Scheme") was
closed to future accrual. This Scheme is included within pension
asset. As part of the negotiations regarding closure, the Company
agreed to grant a parent company guarantee in respect of all
present and future obligations and liabilities (whether actual or
contingent and whether owed jointly or severally and in any
capacity whatsoever) of Dialight Europe Limited, the principal
employer, to make payments in the Scheme up to a maximum amount
equal to the entire aggregate liability, on the date on which any
liability under the guarantee arises, of every employer (within the
meaning set out in Section 318 of the Pensions Act 2004 and
regulations made thereunder) in relation to the Scheme, were a debt
under Section 75(2) of the Pensions Act 1995 to have become due on
that date. No provision has been made in relation to this
contingency.
The Group operates in certain jurisdictions that are unstable or
have changing political conditions, giving rise to occasional
uncertainty over the tax treatment of items of income and expense.
In addition, from time to time certain tax positions taken by the
Group are challenged by the relevant tax authorities, which carry a
financial risk as to the final outcome. The Directors have
considered the potential impact arising from these uncertainties
and risks, on the Group's tax assets and liabilities, both
recognised and unrecognised, and believe that they are not material
to the Financial Statements.
The Group has received two claims from former employees in
France and, whilst recognising the inherent risks of
employee-related litigation in France, the Directors believe that
these two claims are without merit and are being robustly defended,
and are not considered likely to result in any material outflow of
funds from the Group.
12. Related party transactions
There have been no changes in the nature of related party
transactions from those described in the 2020 Annual Report that
could have a material effect on the financial position or
performance of the Group in the period to 30 June 2021.
13. Principal and emerging risks
The principal risks and uncertainties affecting the business
activities of the Group for the next six months of 2021 remain as
listed on pages 38 to 40 of the Annual Report for the year ended
31st December 2020 (which can be found at www.dialight.com ).
A summary of the principal risks and uncertainties is set out
below:
-- Organic growth - Growth of the business has stagnated over
the past few years driven by the impact of outsourcing production
(reduced supply) and also the COVID-19 impact on demand. If this
continues, we will see further erosion of shareholder value. Growth
needs to be stimulated by having compelling technologies that
hasten the adoption of LED by utilising our products.
-- Environmental and geological - The Group's main manufacturing
centre is in Mexico and its main market is North America. Any
impediment to raw materials getting into Mexico or restrictions on
finished goods entering North America related to natural disasters
could have a large impact on profitability. Disruption to global
markets and transport systems arising from geological, biological,
economic and/or political events may impact the Group's ability to
operate and the demand for its products.
-- Funding - The Group has a net debt position and there is a
risk related to liquidity. The Group has not paid a dividend since
2015. The Group reports in Sterling; however, the majority of its
revenues and its cost base are in US Dollars. Fluctuations in
exchange rates between Sterling and US Dollar could cause profit
and balance sheet volatility.
-- Production capacity and supply chain - Disruption to
production capacity due to impact of bio-hazards or supply chain
disruption. Disruption to supply chain from border friction,
tariffs or impacts on logistics related to biohazards.
-- Cyber and data systems - Disruption to business systems would
have an adverse impact on the Group. The Group also needs to ensure
the protection and integrity of its data. With significantly more
employees working from home, there is greater risk of systems being
compromised as well as significant reliance on platforms such as
Zoom and Microsoft Teams in order to operate the business.
-- Product development strategy - Inability to translate market
requirements into profitable products. Failure to deliver
technologically advanced products and to react to disruptive
technologies.
-- Product risk - The Group gives a ten-year warranty on
Lighting products which are installed in a variety of high-risk
environments. Risks could arise in relation to product failure and
harm to individuals and damage to property.
-- Talent and diversity - The Group performance is dependent on
attracting and retaining high-quality staff across all
functions.
-- Intellectual property - Theft or violation of intellectual
property by third parties or third parties taking legal action for
IPR infringement.
The identification of risks and opportunities, the development
of action plans to manage the risks and maximise the opportunities,
and the continual monitoring of progress against agreed key
performance indicators (KPIs) are integral parts of the business
process and core activities throughout the Group.
These will continue to be evaluated, monitored, and managed
through the remainder of 2021.
Directors' responsibilities
The Interim Report complies with the Disclosure and Transparency
Rules (DTR) of the United Kingdom's Financial Conduct Authority in
respect of the requirement to produce a half-yearly financial
report. The Interim Management Report is the responsibility of, and
has been approved by, the directors.
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34;
-- the Interim Management Report includes a fair review of the
important events during the first six months and description of the
principal risks and uncertainties for the remaining six months of
the year, as required by DTR 4.2.7R;
-- the Interim Management Report includes a fair review of
disclosure of related party transactions and changes therein, as
required by DTR 4.2.8R.
The directors are required to prepare financial statements for
the Group in accordance with International Financial Reporting
Standards (IFRS).
International Accounting Standard 34 (IAS 34), defines the
minimum content of an interim financial report, including
disclosures, and identifies the accounting recognition and
measurement principles that should be applied to an interim
financial report.
Directors are also required to:
-- select suitable accounting policies and then apply them
consistently; present information, including accounting policies,
in a manner that provides relevant, reliable, comparable and
understandable information; and
-- provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. They have a general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
The directors are also responsible for the maintenance and
integrity of the corporate and financial information included on
the Company's website.
Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
On behalf of the Board
Fariyal Khanbabi
Chief Executive Officer
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END
IR UPURPRUPGGMG
(END) Dow Jones Newswires
August 02, 2021 02:00 ET (06:00 GMT)
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