FULL YEAR RESULTS 2017 26 FEBRUARY 2018 KEY POINTS 2017 - - PowerPoint PPT Presentation

26 FEBRUARY 2018

FULL YEAR RESULTS 2017

KEY POINTS 2017

STABILISE OPERATIONS OPERATIONAL CHALLENGES ACTIONS UNDERWAY

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COMPLETE FOCUS ON DELIVERING A ROBUST OPERATIONAL PLATFORM

STRENGHTENING OUR CAPABILITIES

OUR PRIORITIES

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CREATE AND CAPTURE VALUE REINFORCE OUR FOUNDATIONS

FINANCIAL REVIEW

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FARIYAL KHANBABI

FINANCIAL SUMMARY

37%

Underlying gross margin

17.9p

Underlying EPS

£9.4m

Underlying profit before tax

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£182.2m £181.0m 2016 2017 £13.1m £9.7m 2016 2017 £8.0m £12.8m 2016 2017

Revenue Underlying EBIT Net cash

EBIT BRIDGE

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Revenue decrease Freight costs to expedite Investing in sales Operating costs

£13.1m £9.7m (£0.4m) (£2.4m) (£1.6m) £1.0m 2016 2017

LIGHTING REVENUE

7

2017 2016 Obstruction 14% 12% Food & Beverage 7% 8% Heavy industrial 14% 16% Mining 10% 9% Oil & Gas 18% 16% Power 10% 10% Pulp & Paper 11% 7% Other industrials 16% 22% 100% 100%

The Americas 2017: £103m

2016: £100m

EMEA 2017: £20m

2016: £23m

APAC 2017: £15m

2016: £14m

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SEGMENTAL RESULTS

SIGNAL ALS & CO COMPONE ONENTS TS

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£136.6m £137.5m 2016 2017

LIGHTING GHTING

Revenue Operating profit Revenue Operating profit

£13.5m £11.2m 2016 2017 £45.6m £43.5m 2016 2017 £4.9m £3.9m 2016 2017

NON-UNDERLYING COSTS

9

£m 2017 2016 Employee severance and restructuring costs (0.3) 5.3 Intangible asset impairment 1.2 5.1 Tangible asset impairment and disposals 0.9 (0.2) Inventory write down

• 3.7

Production transfer costs 4.6 2.4 Other

• 0.1

Non-underlying costs 6.4 16.4 Total cash impact 5.2 4.9

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CASH

10

£m 2017 Net cash at 31 December 2016 8.0 EBITDA (underlying) 13.6 Net working capital 5.9 Capex (4.9) Non-underlying (5.2) Taxes & other (3.7) Foreign exchange impact (0.9) Net cash at 31 December 2017 12.8

Cash conversion 143%

Working capital reduced by

14 days

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£8.7m £7.4 m £31.4m £24.6m 2016 2017 Inventory Net receivables

2018 PLANNING ASSUMPTIONS

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INCOME STATEMENT

Net interest Broadly in line with 2017 Tax rate c23%

CASH FLOW

Capex c.£6m for plant upgrades, IT & product development Working capital Broadly in line with 2017

c.23%

Group tax rate

c.£6m

Capital investment

£1m - £2m

Savings in cash tax costs

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BUSINESS REVIEW

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MARTY RAPP

SHORT TERM PRIORITIES

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STABILISE

Build a more robust component supply base Ensure highly efficient manufacturing process Return to normal on- time-delivery

CURRENT MANUFACTURING ISSUES

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Materials

• Planning and forecasting
• Supply chain agility
• Industry shortages

Production

• Cycle of learning
• Small batch size
• “Tribal knowledge”

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CURRENT MANUFACTURING ACTIONS

IMPROVEMENTS

PEOPLE

• Additional Dialight resources; to manage

material requirements and production planning

PROCESS

• Complex and lower volume products

returned to in house manufacturing

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RECOVERY INDICATORS – LIGHTING ONLY

Order growth Gross margin On time delivery

£151m £145m 2016 2017 42% 40% 2016 2017 74% 48% 2016 2017

2017: (4%) 2017: (200bps) 2017: (26%)

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OPERATIONS

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Reduce cost of goods sold Increase production capacity and geographic footprint Reduce

• perational risk

Improve forecast accuracy Optimise inventory and working capital

IMPROVE ON TIME DELIVERY AND LEAD TIME

DIALIGHT DIFFERENCE

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Cost effective

Low maintenance integrated design, high efficiency, and an industry leading warranty

Convenient

Designed with no field replacement parts for the lifespan of the fixture and easy retro-fit kits

Intelligent

Controlled lighting solutions integrate with existing factory automation and building management systems

Sustainable

Environmentally friendly LED technology

Trusted

Deep expertise exclusively in LED lighting technology with the largest installed base of industrial LED fixtures

Safe

Solutions designed for the world’s most demanding industrial environments

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STRONG SALES PLATFORM

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Ford saves enough energy every year from Dialight LED lighting to power a large assembly plant. 150,000 mwh Energy (£8m) 110,000 maintenance hours (£9m) 100,000 metric tons

• f CO2

SUMMARY

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• Operational issues significantly improved by end of H1 2018
• Significant order backlog to reduce as delivery performance

improves

• Benefits starting to be realised in H2 2018
• Industrial LED market opportunity largely untapped
• Compelling market proposition with sustainability benefits
• Market leader in technology
• Strong balance sheet and cash flow

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Questions

Private and confidential

DISCLAIMER

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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, uncertainties and assumptions and actual results

• r events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be

given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. No responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this presentation should be construed as a profit forecast. This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares or other securities in the company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares and other securities of the company. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser. Statements in this presentation reflect the knowledge and information available at the time of its preparation. Liability arising from anything in this presentation shall be governed by English Law. Nothing in this presentation shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.

INCOME STATEMENT

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Variance £m 2017 2016 Reported Constant Currency

Revenue 181.0 182.2 (1%) (4%) Cost of goods sold (114.3) (112.7) Gross Profit 66.7 69.5 (4%) (9%) Distribution costs (34.0) (32.7) Administrative expenses (23.0) (23.7) Underlying EBIT 9.7 13.1 (26%) (33%) Non-underlying costs (6.4) (16.4) Finance expense (0.3) (0.5) Profit/(Loss) before tax 3.0 (3.8) Tax (1.7) 1.0 Profit/(Loss) after tax 1.3 (2.8) Underlying EPS 17.9 26.9p

SEGMENTAL RESULTS

Private and confidential 24 Note: Segmental EBIT excludes unallocated overheads of £5.4m.

Lighting

£m 2017 2016 Variance

Revenue 137.5 136.6 1% Direct costs (83.2) (79.2) (5%) Gross Profit 54.3 57.4 (6%) Gross margin 40% 42% (2%) Overheads (43.1) (43.9) 2% EBIT 11.2 13.5 (17%)

Signal & components

£m 2017 2016 Variance

Revenue 43.5 45.6 (5%) Direct costs (31.1) (33.5) 7% Gross Profit 12.4 12.1 3% Gross margin 29% 27% 2% Overheads (8.5) (7.2) (18%) EBIT 3.9 4.9 (20%)

CASE STUDY

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Pilkington Automotive - 17% Energy savings, dramatic visibility improvement from upgrade to Dialight LED fixtures

• Existing HID fixtures provided unsatisfactory

visibility and difficult to access fixtures

• Controls package added complete flexibility
• Delivered 17% energy cost savings
• At least a decade of zero maintenance

OUTLOOK

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2017 was a disappointing year, in which operational issues hampered our ability to deliver orders to our

• customers. We are taking corrective action and

establishing a clearer structure to optimise our strong technology and engineering. We are seeking to improve the efficiency and profitability of our

• perations. In the near term, we are wholly focused on

these manufacturing challenges. Our results, and the H2 weighting previously stated, for 2018 will reflect the successful resolution of these issues. Our market proposition remains very compelling with the sustainability benefits of reduced energy usage, lower carbon emissions, reduced maintenance and improved safety offering real value to our customers. We remain excited by the Group’s prospects over the medium to long term and are confident of delivering future growth.”

2017 was a disappointing year, in which

• perational issues hampered our ability to deliver
• rders to our customers. We are taking corrective action

and in the near term are wholly focused on the manufacturing challenges which will continue to impact our result in H1. As a consequence our results for 2018 will be heavily weighted to H2 reflecting the successful resolution of these issues. Our market proposition remains compelling with the sustainability benefits of reduced energy usage, lower carbon emissions, reduced maintenance and improved safety

• ffering real value to our customers. We remain excited by the

Group’s prospects over the medium to long term and are confident of delivering future growth.