Dialight Plc · LSE:DIA
Dialight — FY2018 Earnings Presentation
31 slides from Dialight's earnings presentation, Feb 25, 2019
Slide 1: 2018 Full Year Results
2018 FULL YEAR RESULTS 25 FEBRUARY 2019
Slide 2: Key Points
KEY POINTS Results in line with revisedText expectations Here All product assembly now back in-house, full exit from 02 Text Here Former manufacturing partner by end of H1 2019 Expanded 03 market opportunity,Text 3 new products in 2019 Here 04 development centres Regional Text Here 05manufacturing f
Slide 3: Financial Review
FINANCIAL REVIEW Fariyal Khanbabi
Slide 4: Financial Summary
FINANCIAL SUMMARY Revenue Underlying EBIT Statutory PBT £181.0m £169.6m £9.7m £7.4m £8.0m £3.0m 2017 2018 2017 2018 2017 2018 36% £2.9m 16.4p Underlying Net debt Statutory EPS gross margin (2017: Net cash £12.8m) (2017: 4.8p) (2017: 37%) Private and confidential 4
Slide 5: Underlying EBIT Bridge
UNDERLYING EBIT BRIDGE Impact of revenue decrease (£2.0m) (£0.7m) £3.1m Gross margin (£2.1m) £9.7m £8.0m Operating costs 8.0 $ Foreign exchange £ 2017 2018 Private and confidential 5
Slide 6: Lighting
LIGHTING Lighting Reported currency Constant currency £m 2018 2017 Variance 2017 Variance Revenue 125.0 137.5 (9%) 133.0 (6%) Gross Profit 47.1 54.3 (13%) 52.4 (10%) Gross margin 37.6% 39.5% 39.4% Overheads (38.6) (43.1) 11% (41.7) 8% EBIT 8.5 11.2 (24%) 10.7 (21%) Gross margin bridge Raw material I
Slide 7: Lighting Order Intake
LIGHTING ORDER INTAKE The Americas • Operational issues impacted lead times • Large projects not bid for (14%) • Lower distributor inventory due to supply constraints EMEA • Narrow product range served from inventory on hand Order intake • Project driven business (15%) • Increased distribution partn
Slide 8: Signals and Components
SIGNALS AND COMPONENTS Revenue Gross margin Underlying EBIT £44.6m 30% £4.5m £43.5m 29% £3.9m 2017 2018 2017 2018 2017 2018 3% 100 bps 15% Revenue growth Improvement in gross margin Improvement in EBIT 6% 23% At constant currency At constant currency Private and confidential 8
Slide 9: Cash Bridge
CASH BRIDGE Operating cash (£19.6m) £3.9m Inventory increase £12.8m Inventory increase, mainly raw material, due to termination of manufacturing partnership (£2.9m) Expect to unwind in 2019 as utilised 2017 2018 Private and confidential 9
Slide 10: 2019 Planning Assumptions
2019 PLANNING ASSUMPTIONS Net interest Broadly in line with 2018 INCOME STATEMENT Tax rate c25% c.£8-10m new facilities Capex c.£8-9m product development CASH FLOW Working capital Inventory levels to unwind in 2019 H2 weighting as in previous years Private and confidential 10
Slide 11: Business Review
BUSINESS REVIEW Marty Rapp
Slide 12: Our Priorities
OUR PRIORITIES INCREASED SCALEABLE MARKET CAPACITY FOR OPERATIONS EXPANSION NEW PRODUCT DEVELOPMENT Private and confidential 12
Slide 13: Operational Highlights
OPERATIONAL HIGHLIGHTS • All final assembly in house • Manufacturing partnership terminated on 27 September 54% 2018 % improvement in level of late • Machinery to be transferred orders by end of H1 2019 • New plants in Mexico and 1 Malaysia 70%* • Remaining inventory at 1 48% former manufacturing pa
Slide 14: Operational Improvements
OPERATIONAL IMPROVEMENTS New plant in Tijuana, Mexico, augmenting Ensenada New plant in Penang, Malaysia Upgraded leadership Hybrid model - local sub-assembly supply, internal assembly Enhanced global supply chain management Establish new plant and distribution centre in Europe in the future Private
Slide 15: Hybrid Manufacturing in Place
HYBRID MANUFACTURING IN PLACE External/Internal Regional suppliers to support sub-assembly requirements: • Suppliers expertise in specific process/products • Competitive prices Cables PCBAS Machining & painting • Risk Managed supply chain Internal • Regional assembly facilities • Global purchasing w
Slide 16: Operational Footprint
OPERATIONAL FOOTPRINT Roxboro, US Copenhagen, Denmark Injection molding Obstruction and wind ⁻ 79,000 sq ft systems ⁻ All products Tijuana, Mexico Europe (proposed) Distribution, molding, CNC New facility for final & Painting assembly, molding, CNC & 100,000 sq ft painting & distribution All product
Slide 17: Our Priorities: Market Expansion
OUR PRIORITIES MARKET EXPANSION Private and confidential 17
Slide 18: Expanded Market Opportunity
EXPANDED MARKET OPPORTUNITY Leverage existing sales channel Current market Existing channel partners £0.5 bn to support Target current customer base Focus on lighter duty applications in current customer facilities Expanded market New products for £2.0 bn large niches Reduce need to discount price o
Slide 19: Expanded Addressable Market
EXPANDED ADDRESSABLE MARKET Potential expanded market – per annum Market size by major product £560m £750m £134m £1,023m £324m £42m £521m £305m £210m £780m High bay Linear Flood light Area light Americas APAC EMEA Expanded market Current market 3rd Party Competitive Channel Results Internal SAM Mark
Slide 20: Our Priorities: Increased Capacity for New Product Development
OUR PRIORITIES INCREASED CAPACITY FOR NEW PRODUCT DEVELOPMENT Private and confidential 20
Slide 21: Regional Focus
REGIONAL FOCUS Engineering Installation • Global technology leadership deployed regionally • Dialight design rules Voltage • Increase speed to market Form factor Product management • Globally coordinated • Regionally focused Certification • Regionally specified products Increase capacity for new pro
Slide 22: New Product Development Capacity
NEW PRODUCT DEVELOPMENT CAPACITY Current team New regional External support teams Improve efficiency New teams set up in Use of ODMs and and output by process London and Penang design firms optimisation 22 new platform products targeted over the medium term Investment funded through growth Private a
Slide 23: Summary
SUMMARY • Primary focus on improving service levels to our customers • New facilities in Mexico and Malaysia • Improved go to market approach centred on technical and product innovation regionally • Upgrade of existing products and new product launches to significantly expand served market Private a
Slide 24: Outlook
OUTLOOK 2018 was a challenging year for Dialight but one in which we made considerable progress to address the operational issues we faced at the start of the year, reducing late orders significantly during the year. This improvement is primarily due to moving manufacturing under our hybrid model ba
Slide 25: Disclaimer
DISCLAIMER Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” in respect of the Group’s operations, performance, prospects and/or financial condition. By their nature, forward-looking statements involve a number of risks, unc
Slide 26: Technology Differentiation
TECHNOLOGY DIFFERENTIATION CUSTOM POWER SUPPLIES INTEGRATED DESIGN INTELLIGENT CONTROLS LATEST LEDS AND • Long-life drivers • Longevity in harsh • Flexibility to group, dim ADVANCED OPTICS • Optimised thermal environments and schedule lights • Highly efficient dissipation • Simple installation • Max
Slide 27: Income Statement
INCOME STATEMENT Variance £m Constant 2018 2017 Reported Currency Revenue 169.6 181.0 (6%) (3%) Cost of goods sold (109.3) (114.3) Gross Profit 60.3 66.7 (10%) (6%) Distribution costs (30.4) (34.0) Administrative expenses (21.9) (23.0) Underlying EBIT 8.0 9.7 (18%) (11%) Non-underlying costs (0.4) (
Slide 28: Market Segments
MARKET SEGMENTS 2018 2017 Obstruction 10% 14% Food & Beverage 6% 7% Heavy industrial 16% 14% Mining 11% 10% Oil & Gas 22% 18% Power 9% 10% Pulp & Paper 13% 11% Other industrials 13% 16% 100% 100% Private and confidential 28
Slide 29: Signals and Components
SIGNALS AND COMPONENTS Signal & components Actual currency Constant currency £m 2018 2017 Variance 2017 Variance Revenue 44.6 43.5 3% 42.0 6% Direct costs (31.4) (31.1) (30.1) Gross Profit 13.2 12.4 6% 11.9 11% Gross margin 30% 29% +100bps 28% +200bps Overheads (8.7) (8.5) (2%) (8.3) (4%) EBIT 4.5 3
Slide 30: Cash Flow
CASH FLOW £m Net cash at 31 December 2017 12.8 EBITDA 12.6 Net working capital excluding inventory 0.6 Increase in inventory (19.6) Capex (6.4) Taxes (2.1) Provisions and other movements (0.8) Net debt at 31 December 2018 (2.9) Private and confidential 30
Slide 31: Five Year Track Record
FIVE YEAR TRACK RECORD Revenue Gross margin % £182.2m £181.0m £169.6m £159.8m £161.4m 37.9% 38.1% 36.8% 34.8% 35.6% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Statutory profit before Cash/(net debt) tax £12.8m £15.5m £8.0m £7.4m £3.0m £0.6m £(3.9)m £(3.8)m £(3.8)m £(2.9)m 2014 2015 2016 2017