Dialight plc 2010

Preliminary Results14 February 2011

Agenda

● Business review and outlook

● Financial results

● Q&A

Highlights

● Profit before tax of £11.3m (2009: £5.3m)

● Full year Revenues grew 28.3% to £99.2m (2009: £77.3m)

● Signals/Illumination segment revenues increased to £61.1m (2009: £46.4m)

● Lighting sales more than doubled to £11.6m (2009: £5.5m)

● Two international initiatives completed

● Strong operating cash flow leading to net cash of £10.4m (2009: £9.1m)

● Final dividend of 5.2 pence (2009 Second Interim: 4.3 pence)

Revenues

2010 2009

Revenue £99.2m £77.3m

Signals/Illumination £61.1m £46.4m

Electromagnetic Components £14.6m £13.3m

LED Indication Components £23.5m £17.6m

Contribution Margins

2010 2009

Signals/Illumination 42.2% 38.8%

Electromagnetic Components 17.2% 23.8%

LED Indication Components 52.9% 52.7%

LED Indication Components

● Niche with over 15,000 customers – strong profit and cash

generator

● Revenues increase over 33% versus 2009

● Strong growth in H1 with consequent inventory build up

● Slower H2 as predicted

● Fundamentals of the business unchanged

● Margins good

● Expect flat performance in 2011 with sales to rise or fall with

the general market

Electromagnetic Components

● Revenues up £1.3m versus 2009 with growth coming from US

smart meter manufacturers selling to US utilities

● New contract win expected to drive higher future growth with

100m US homes still to adopt smart meters

● Rest of the world is also moving towards mass conversion to

smart metering

● Prospects for Disconnect still promising but on thin margins and

lumpy by nature

Signals/Illumination

Revenue

2010 2009

Revenue: £61.1m £46.4m

Traffic £27.4m £23.6m

Obstruction £12.3m £7.0m

Transportation £9.8m £10.2m

Lighting £11.6m £5.5m

Signals - Traffic

● European traffic up 34% with strong performance both in the UK

and the rest of Western Europe

● US Traffic up 9% in spite of no large projects

● Margins improved

● Some interest in street lights from customers in both US and

Europe

Obstruction Lighting

Telecom Markets

• Cellular

• Private Microwave

networks

• Private Pager networks

Wind Markets

• Onshore

• Offshore

Broadcast Market

• 500-2,200 Ft. Towers

Utilities

• Stacks, Chimneys &

Cooling Towers

• Catenary Systems

Marine

• Offshore Platforms

• Fixed & Seasonal Aids

Tall Structures

• Buildings

• Bridges

• Cranes

Global Markets Served

Signals - Obstruction

● 76% year on year growth – 50% excluding BTI acquisition

● Margin improvement driven by new Beacon and Strobe designs

● More than 2400 White Strobes supplied to US Cell Tower

market in 2010 – 76000 to go!

● Sales to 8 of the top 10 tower operators in 2010

● Acquisition of BTI to address European Offshore Wind Market

High Intensity Strobe (270,000 cd) Catenary Strobe System

Onshore Wind Tall Turbine Market

(100,000 cd)W-ROT Beacon

New Products

100m mast

Demonstration of 100,000cd High

Intensity LED Light in Sweden

Visibility Meter

Marine Lantern Power

Supply and Alarm Monitor

Aviation Obstruction Lightingand

Marine Aids to Navigation

Fog Signal Power Supply

and Controller

Flood Light

Contactor

MarkerLight

Controller

Main Power Supply Controller and Battery Back-up

Obstruction Light Power Supply

Controller and MonitorGPS

Receiver

Photocell

Detector

Fog Signal

Marine Lanterns

Radar Reflectors

Floodlights and Spootlights

Tower and Sign Lighting

Low Intensity Marker Lights

Medium Intensity Obstruction Lights

Offshore Wind Turbine - Typical Set-up

Antenna Photocell

WW Growth Offshore Wind Farms

Source: EWEA 2009

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

Meg

aw

att

s

Asia

North America

Europe

Illumination

● Revenues up over 100%

● 20,000 Industrial White Lights shipped

● High Bay Light major success

● Winner of Techmark and Elektra awards

● Sales to over 300 customers in 2010

● Pipeline of new/improved products

● 2011 starting strongly

LED Developments – Canaccord view

● Very high rate of LED adoption up to 60% by 2020 – growing the LED cumulative revenue to $313bn – taking the equivalent of nearly 600 power stations from the world grid by 2020 –equivalent to the emissions of all passenger cars in the world today

● Traditional lighting companies to move increasingly into LED

● Huge growth in LED capacity – prices rapidly declining driving further adoption

● Cost and size decreasing – break even lowering

● Need for up to 4700 MOCVD tools (Metal Organic chemical disposition)

● Availability shortages based on natural resources – need for sapphire industry to grow from $200m to $2bn by 2020

LED Performance

● Cree, Philips and Nichia all supplying high performance devices

● Typical lumens/watt 135

● Device output possible to 235 lumens

● LED cost per fixture reduced by 50% in the year

● More LED suppliers entering the market

Evolution of Energy Efficient Lighting

T8 Fluorescent

LED

T5 HO Fluorescent

High Pressure Sodium

Metal Halide Pulse Start

Metal Halide

T8 Fluorescent

LED

T5 HO Fluorescent

High Pressure Sodium

Metal Halide Pulse Start

Metal HalideXPE

114 LPW

XPG130 LPW

XM161 LPW

186 LPW

200+ LPW

REBEL100 LPW

200

180

160

140

120

100

0

20102009 2011 2012

Lu

me

ns /

Wa

tt

Lumens per watt

Advantage for Dialight

● More lumens/watt means

1. Less LEDs

2. Less power

3. Less heat

4. Smaller power supply

5. Less thermal management

6. More applications for our products….

…if we work with short product life cycles…

….not typical for the Lighting Industry !

Solid State Lighting

2010 Global Projection: $75 billion

Residential

23%

Portable

18%

Commercial

21%

Outdoor

17%

Parts &

Accessories

18%

Industrial7%

Residential

23%

Portable

18%

Commercial

21%

Outdoor

17%

Parts &

Accessories

18%

Industrial7%

2010 Global Industrial Sales: $5.25 billionSource: Freedonia / IMS

Lighting Market Sizing

Market Sizing:Hazardous Lighting

2010 Estimated Global Sales: $900+ Million

Growth projections 7%+ CAGR 2011 - 2015Source: Freedonia

Americas – Markets Currently Served

Industrial Hazardous Markets

● Oil & Gas

● Pipelines

● Petrochemical & Chemical

● Pharmaceuticals

● Mining (Surface)

● Waste Treatment

● Pulp & Paper

● Food Processing

Public Infrastructure

● Military

● Government–Federal/Municipal

● Prisons

Industrial Markets

● Water Treatment

● Power Plants & Utilities

● Manufacturing

● Automotive

● Freezers, Cold Storage

● Food Processing

● Specialty – Nuclear

Other Markets

● Warehousing

Progress to date – Customers/Segments

Oil & Gas, Petrochemical & Pharmaceutical

AESAlyeska Pipeline Services Co.Arkema ChemicalsBaxterBaxter Caribe Inc.BP OffshoreBP Refineries (6 locations)CenexChevronCoffeyville Resources Ref. / Nitrogen PlantConocoPhillips (5 locations)Degussa Engineered CarbDow ChemicalDow CorningDuPont – NJ PlantExxon Mobile (4 locations)FMC Alcoy

Proctor & GambleRain CII Carbon LLCRed Cedar GatheringReichart ChemicalsReichart Petroleoum PlantRohm HaasSaint Gobain PlasticsSartomerSasol North AmericaSasol North AmericaShell Oil WS RefinerySolvay ChemicalsSun ProductsSunoco (3 location)TamecoThatcher ChemicalValero (2 locations)

Formosa PlasticGreat Salk Lake MineralsHess (2 locations)Indolex Chemical Co.ISP ChemicalsLubrizol PainsevilleLyondell Bassell Merck & Co. – VA

plant

Nexen Gas Oxbow Carbon & MineralsOxbow MineralsOxy ChemicalPfizerPioneer Drilling Co.Pride International

Progress to date – Customers / Segments

Mining & Power Generation

Antelope Coal MineArch Black Thunder Coal MineClimax Molybdenum Henderson MineCoal PeersCorteau MinesFairmont MineralsHenderson MineJacobs Ranch MineKiewit Buckskin MiningMississippi Phosphates Corp.Mountain Coal West Elk MineOxbow Carbon and MineralsPeabody (2 locations)PCS PhosphatePilbara IronRed Path Mining

Rio Tinto (4 locations)Teck-Cominko Pogo MineUnico MiningWestern Energy Rose Bud MineWestmore Coal - Abasaloka AndersonChamming Electric

Chesapeake Energy(3 Locations)Coalstrip – PA Light

Colorado Springs UtilitiesConnectizAndersonChamming ElectricChesapeake EnergyCoalstrip – PA LightColorado Springs UtilitiesConnectizCoteauCovanta Energy – DE PlantCovanta Energy – Indy PlantDTE EnergyEco Electrica Power PlantElite EnergyEnogex

Entergy Nuclear(3 locations)EnvirolightExcel EnergyEraring EnergyGreat River EnergyIdaho Power CorporationIES Utilities, Inc OGSKaneka EperanKapar EnergyLine PowerMerrit EnergyMidwest Generation

Montana Power (PPL) Colstrip Power PlantPNM NMPortland General ElectricPublic Service New MexicoRocky Mountain Power Hunter StationRocky Mountain Power Huntington PlantRohrRytwaySebagoSnowey HydroSouthwest GenerationSpectra EnergySpectra EnergyToledo EdisonTucson Electric PowerUnico MiningWestern Energy – Rose BuddWestern Energy Rose Bud MineWestmore Coal - Abasaloka MineWilliams Energy Gas PlantWisconsin Power & LightXcel Energy

Progress to date – Customers / Segments

Water, Waste Water, Processing & Food Plants

ADM Corn ProcessingADM Wallhalla Arbiti BowaterBar-S FoodsBNS FererroCargillCity of PhiladelphiaCity of Reno, NVClearbrook RiceDiamond CrystalDip Abitibi BowaterDrayton FoodsGalvinGary Waste WaterGoderich Elevator

North Dakota MillPassaic Valley SewagePatrick CudahyRiverview Dairy FarmSeneca FoodsSherwin AluminaSimplot PotatoesSSAB Steel Alabama Inc.Sugar Beet PlantTemple IslandTyson FoodsUnited FarmsWallhalla Bean PlantWild FlavorsWispak

Golden Plump ChickensGS DunnHatfield Quality MeatsHeinzHenkelHuntington AlloysIdaho PowerJennie O TurkeysKapstone Kraft Paper CoKellogg'sLA Water & PowerMichigan SugarNestle-Stouffer Noranda Alumina

Progress to date – Customers / Segments

Warehouse & Manufacturing

3E - Electrical Eng & Equipment Co.Aisin – JapanAlcoaAllsteel PanelAndersonAnderson AutoArcher Daniels Midland Corp.Automation & ElectronicsBuckman LabsCity of TorontoConcord PhillipsConectiv EdgemoorDavisco Int’lDMI IndustriesDOT WarehouseDTE Energy-St. Clair PPEco FedExLighting Services & Tech

Flexicon IncFrontline Int.Galavan IndustriesGeneral MachineryGlenadale ComplexGraphic Packaging Int’lHenrico County Holcium USAHuntsmannI/O Solutions & ControlsIndustrial Automation ControlsJescoJohn Deere (2 Locations)KEW Incorporated C/O GerrieKlockner PentaplastLafargeMedsafe Warehouse

Meng Xue SongMetal ContainerMozel Inc.NocturPilkington North AmericaPotato FactoryPPGProctor & GambleRittenhouse ElectricRockline Industries SEPTASteffen Inc. SwannTECOT Dover Branch TransfersThe Baltimore SunTimken David SIPEVan Meter IndustrialVektra ElectricWichita

Multiplier Effect

● Typical Customer Cycle

− 1 – 10 Small test area

− 10 – 50 Small Application

− 100+ Retrofit process, multiple facilities

● e.g. Sherwin Alumina 10pcs, Multiple 100+pcs, 50/wk Oct – Dec

● e.g. Entergy 5pcs, 3 x 100+pcs, potential 3000pcs

● Average Order Size Today * 10 – 15pcs

Dialight LED Product Differentiators

● All encompassing 5 year Warranty

● T Rating on Dialight fixtures is typically higher

● More Efficient Design/Better Power Consumption

● Wider Operating Temperature Range

● Thermal Protection is Superior

● Power Factor is Superior

● Very Cost Competitive vs Current Technology in

Industrial/Hazardous Application

● Recognized as the Leader in LED Design Expertise

● IP on Optical Design

● Continuous improvement in performance/value

World Lighting Demand by Region

Source: Freedonia

Market Size

Worldwide Expansion

● Majority of Industrial Lighting sales in 2010 were in North

America

● H2 2010 invested in R & D Centre in UK to address IEC

Specifications

● Sales Managers now in UK, Germany, France, Dubai,

Singapore, Australia

● Recruitment planned for Korea, Japan ,Eastern Europe

Primary Oil & Gas Activity

Perth

Singapore

London

Houston

Saudi Arabia

UAE

Primary Oil & Gas Engineering Centres

Paris

Seoul

Australasia 200+ projects, value $325 billion +

Europe 900+ projects, value $971 billion +

Middle East 400+ projects, value $600 billion +

Asia 800+ projects, value $550 billion +

Russia 300+ projects, value $650 billion +

Information Source

Current Oil & Gas Projects & $ Values

Technology Effect / The Future

● Existing industrial markets further enabled

● Contribution margins improved

● Much improved solar packaging ROI’s

● Emergency back up ROI enhanced

● Controls and communications

● Expanded core market opportunities

2010 Outlook from early 2010

● Signals/Illumination positioned for continued growth with stronger margins

● Improved LED efficiency and cost is moving the adoption point

● Pipeline of new and improved White Lighting products

● Continued reengineering and cost reduction

● LED Indication showing recovery and still a strong profit and cash generator

● Group shows excellent prospects for future Revenue Growth and Profitability

2011 Outlook from early 2011

● Signals/Illumination positioned for continued growth with

stronger margins

● Improved LED efficiency and cost is moving the adoption point

● Pipeline of new and improved White Lighting products

● Continued reengineering and cost reduction

● Executive confident in further Revenue Growth and Profitability

Mark FryerGroup Finance Director

Five Year History

2010

£m

2009

£m

2008

£m

2007

£m

2006

£m

Turnover 99.2 77.3 77.9 63.4 52.3

Profit before tax 11.3 5.3 5.6 4.5 5.8

Operating Cash

flow

14.0 11.0 6.0 5.8 2.2

Net Cash 10.4 9.1 4.1 4.4 2.2

Shareholders

Funds

46.2 40.1 37.5 30.8 29.7

Return on Sales

%

11.4 6.9 7.2 7.1 11.1

Return on

Capital % (Exc

Cash)

31.6 17.1 17.7 17.0 21.1

Signals / Illumination Five Year History

2010

£m

2009

£m

2008

£m

2007

£m

2006

£m

Turnover 61.1 46.4 43.3 33.4 28.6

Operating Profit 8.7 3.3 1.7 0.1 (0.5)

Return on Sales

%

14.2 7.1 3.9 0.3 n/a

% of Group

Profit

77.7 62.2 30.4 2.2 n/a

Summary Profit & Loss

2010 £M 2009 £M

Revenue 99.2 77.3

Gross Profit 27.3 18.7

Gross Profit % 27.7 24.2

Overhead costs (16.5) (13.2)

Operating profit 11.2 5.5

Net financing

income / (cost)

0.1 (0.2)

Profit before tax 11.3 5.3

Tax (3.8) (2.0)

Net Profit 7.5 3.3

Adjustment to profit - 2.1

Retained profit 7.5 5.4

2010 Segment Result

Emech

Components

£M

LED

Indication

£M

Signals/

Illumination

£M

Total £M

Revenue 14.6 23.4 61.1 99.2

Contribution 2.5 12.4 25.8 40.7

Contribution % 17.2 52.9 42.2 41.0

Overheads (2.4) (6.8) (17.2) (26.4)

Segment profit 0.1 5.6 8.6 14.3

Taxation

● Reduced effective tax rate in 2010 was 34.0%,

reduced from 37.5% in 2009 and 38.5% in 2008

● Profit in high tax locations

● Increased mix of lower tax UK profit going forward

● Lower UK corporate tax rates

● Continue to marginally lower effective tax rate

Dividends and Earnings Per Share

2010 2009

Dividends per share 8.0p 6.6p

Basic EPS 23.8p 17.5p

Dividend cover 3.0 times 2.7 times

Underlying EPS 23.8p 10.6p

Adjusted Dividend cover 3.0 times 1.5 times

Summary Balance Sheet

2010 £M 2009 £M

Non current

assets

21.9 17.8

Cash 10.4 9.1

Other current

assets

28.0 27.3

Current

liabilities

(12.2) (12.1)

Non current

liabilities

(1.9) (2.0)

Net Assets 46.2 40.1

2010 £M

Inc BTI

2010 £M

Exc BTI

2009 £M

Inventories 9.2 8.6 9.2

Trade and

other

receivables

18.9 18.4 18.2

Trade and

other

payables

(11.3) (10.9) (11.0)

Working

Capital

16.8 16.1 16.4

Working Capital

Summarised Cash flow

2010 £M 2009 £M

Operating cash 15.1 8.3

Working capital 0.2 4.0

Pension

contribution

(1.3) (1.3)

Cash from

operations

14.0 11.0

Tax/financing (4.7) (1.6)

Investing

activities

(3.9) (2.5)

Dividend (2.2) (1.9)

Acquisition (2.1) -

Net cash

generated

1.1 5.0

Cash Flow

● Inventory – effective inventory management

● Almost 15 days out of receivables days

● Working capital constant excluding BTI

● Cash - Continuing strong cash flow from Operations with debt

free balance sheet

Pensions

● Group deficit increased from £0.9m to £1.4m

● US deficit constant at £1.8m

● UK surplus £0.4m

● IAS 19 deficit smaller than ongoing or termination deficit

● Termination basis would increase US deficit to over £3.0m

● Contributions of £1.3m in 2010 (£1.1m in US) – addition

administration costs and management time

● Buyout US scheme H1 2011

● Premium paid tax allowable – c 18month payback depending

on member election

Banking

● Transferred 2011 banking relationship to Barclays

● £10m initial facilities with fees paid for £3m overdraft only

● Discussions with regard to additional £13m facility

● £33m of cash and potential facilities for corporate initiatives

excluding equity funding

● SME Eurofinance and Capital One arrangements for Europe

and US to finance customer orders with no Group guarantee

Summary and outlook

● High growth across all segments and territories

● Strong signals and illumination performance

● High H2 2010 investment in overhead to support 2011 growth

although seasonality and growth mean H2 strength over H1

● Profitable business (both return on sales and net assets %) in

mixed market conditions

● High R&D investment to take advantage of technology timing

● Reducing tax rate

● Cash generative

● Debt free balance sheet

● Banking facilities and customer financing

● Confident platform for 2011 and beyond

Q&A