Dialight Plc · LSE:DIA
Dialight — FY2019 Earnings Presentation
30 slides from Dialight's earnings presentation, March 2020
Slide 1: 2019 Full Year Results
2019 FULL YEAR RESULTS Dialight
Slide 2: Summary
SUMMARY Operational footprint and performance materially improved with underlying gross margin maintained Technological leadership remains strong with sustainability benefits to our customers even more relevant Sales recovery gaining momentum but challenging markets Strengthened product development
Slide 3: Financial Review
FINANCIAL REVIEW Ronan Sheehy Interim Group Finance Director Private & confidential 3
Slide 4: Financial Highlights
FINANCIAL HIGHLIGHTS Revenue Underlying EBIT * Underlying EPS £169.6m £151.0m £8.0m 17.3p £5.2m 5.8p FY-18 FY-19 FY-18 FY-19 FY-18 FY-19 36% £16.5m £16.5m Underlying gross margin Net debt Non-recurring costs (FY-18: 36%) (FY-18: Net debt £2.9m) (FY-18: £0.4m) * Underlying excludes audited and unaudi
Slide 5: EBIT Bridge
EBIT BRIDGE Lighting revenue £4.1m £8.0m £2.5m £1.2m S&C revenue £5.2m Operating cost savings FY-18 FY-19 Private & confidential 5
Slide 6: Lighting
LIGHTING Lighting Reported currency Constant currency £m FY-19 FY-18 Variance FY-18 Variance Revenue 111.5 125.0 (11%) 128.7 (13%) Underlying gross profit 41.5 47.1 (12%) 48.3 (14%) Gross margin 37% 38% -100bps 38% -100bps Overheads (34.5) (38.6) 11% (39.8) 13% EBIT 7.0 8.5 (18%) 8.5 (18%) • Revenue
Slide 7: Non-Recurring Costs
NON-RECURRING COSTS Reported currency Costs related to exit from outsource £m FY-19 FY-18 manufacturer (£10.2m) Additional costs for 3rd party vendors 6.1 - - Premium for using small local vendors & Freight and handling - inventory 3.2 ramp-up costs for Tijuana Plant (£6.1m) Removal cost - equipment
Slide 8: Signals & Components
SIGNALS & COMPONENTS Revenue Gross margin EBIT 32% £4.3m £44.6m £39.5m 30% £4.5m FY-18 FY-19 FY-18 FY-19 FY-18 FY-19 11% 200 bps 4% Revenue reduction Improvement in gross margin Reduction in EBIT Private & confidential 8
Slide 9: Inventory
INVENTORY £50.0m £6.7m reduction in sub assemblies £46.0m £45.7m and raw materials £29.2m £35.2m £28.5m Increase in finished goods, will be maintained to support growth Continued focus on optimising £17.2m inventory levels £16.8m £14.8m FY 2018 H1 2019 FY 2019 Expecting further progress during Finis
Slide 10: Net Debt
NET DEBT £m Net debt at 31 December 2018 (2.9) Inflows £2.0m - Improvement in working capital Underlying EBITDA 10.1 Net working capital 2.0 12.1 Outflows non recurring £10.2m – Paying 3rd party vendors Cost of exiting outsource manufacturer (10.2) Investment in operating facilities (6.8) (17.0) Oth
Slide 11: 2020 Planning Assumptions
2020 PLANNING ASSUMPTIONS Net Interest Broadly in line with FY-19 INCOME STATEMENT Tax Rate c.26% c.£2m operational capex Capex c.£5m product development CASH FLOW Inventory level targeted at Working capital £38-40m H2 weighting as in previous years Private & confidential
Slide 12: Business Review
BUSINESS REVIEW Fariyal Khanbabi Group Chief Executive Private & confidential 12
Slide 13: 2019 Review
2019 REVIEW • Exited from outsource manufacturer; two new plants in Mexico & Malaysia • Operational performance much improved from Q4, enhanced capability & capacity • Lead times significantly reduced, overdue orders eliminated • Focused on rebuilding customer & distributor confidence • Positive cus
Slide 14: Investment Case
INVESTMENT CASE POSITIONED FOR GROWTH Diverse customer base DIFFERENTIATED Technological leadership INTELLIGENT Integrated controls TRUSTED Long term track record SUSTAINABLE Environmentally friendly SCALABLE Significant capacity Private & confidential 14
Slide 15: Environmental, Social & Governance
ENVIRONMENTAL, SOCIAL & GOVERNANCE • Strong health & safety performance • Board diversity • Continue as a group to reduce carbon footprint Dialight now qualifies for the Green Economy Mark and is part of the FTSE4Good Index 15
Slide 16: Market Segmentation
MARKET SEGMENTATION CORE GROWTH NOT TARGETED HIGH TIER MID TIER LOW TIER Hazardous and heavy industrial Light industrial and warehouse Light industrial • Lower price erosion • Lower cost • Lowest cost • Lower volume growth • Low - Med price erosion • High price erosion • Smaller market • Larger mark
Slide 17: Operations
OPERATIONS PRODUCT DEVELOPMENT SALES Private & confidential 17
Slide 18: Operational Performance
OPERATIONAL PERFORMANCE 80% 3 WEEKS 70% On time delivery % Lead time Orders shipped in one day Number of shifts Demand vs Supply (Units 000s) Physical space 2019 2020 Supply chain Supply today annualised Supply With Additional shifts 60% Additional capacity Private & confidential 18
Slide 19: Gross Margin Improvement
GROSS MARGIN IMPROVEMENT 1% 1% 2% 7% Reduced use of hybrid model 40% Product cost reductions 29% Material cost reductions 2019 gross Exiting margin 2020 gross Improved efficiency margin Private & confidential 19
Slide 20: Product Development
OPERATIONS PRODUCT DEVELOPMENT SALES Private & confidential 20
Slide 21: Product Development
PRODUCT DEVELOPMENT Growing our core products Power supply Largest differentiator • Cost reductions Controls & sensors New products are field upgradeable • Performance upgrades New products • Filling portfolio gaps Materials and mechanical New technologies Polymer based materials • For the next gene
Slide 22: Sales
OPERATIONS PRODUCT DEVELOPMENT SALES Private & confidential 22
Slide 23: Lighting Order Intake
LIGHTING ORDER INTAKE AMERICAS (7%) • US market impacted by US/China tariffs • Oil & Gas end market down • US well positioned despite these headwinds EMEA (21%) £123m • New management team led by a member £112m of US team • Establishing stronger distribution network 2018 2019 APAC (8%) • Australia d
Slide 24: Immediate Sales Strategy
IMMEDIATE SALES STRATEGY • Weekly operational and lead • Consistent on time delivery • New product launches time metrics and short lead times • Regionally specific products • Senior management • Continued expansion of engagement routes to market Private & confidential 24
Slide 25: Summary
SUMMARY Operational footprint and performance materially improved with underlying gross margin maintained Technological leadership remains strong with sustainability benefits to our customers even more relevant Sales recovery gaining momentum but challenging markets Strengthened product development
Slide 26: Outlook
OUTLOOK Most of our end markets are likely to remain challenging short-term, exacerbated by the possible impacts of the COVID-19 virus. Nonetheless, in 2020 we continue to target a materially improved trading performance, with a strong focus on sales and new product development, and again with an H2
Slide 27: Appendix
APPENDIX Private & confidential 27
Slide 28: Our Technology Differentiation
OUR TECHNOLOGY DIFFERENTIATION Custom Power Supplies 10 year warranty Latest LEDs & Advanced Optics Better light utilisation, fewer lights to illuminate Integrated Design Reduced installation and maintenance time Sensors & Controls Further value proposition for our customers Private & confidential 2
Slide 29: Vertical Segments
VERTICAL SEGMENTS 2019 2018 Obstruction 3% 10% Food & Beverage 5% 6% Heavy industrial 17% 16% Mining 14% 11% Oil & Gas 24% 22% Power 14% 9% Pulp & Paper 10% 13% Other industrials 13% 13% 100% 100% Private & confidential 29
Slide 30: 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