REG - Dialight PLC - Half-year Report
25/11/2024 07:00
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RNS Number : 4827N Dialight PLC 25 November 2024
Dialight plc
("Dialight" or the "Group")
Unaudited interim results for the 6-month period ended 30 September 2024
Dialight plc (LSE: DIA.L), a global leader in sustainable LED lighting for
industrial applications, announces its interim results for the 6-month period
ended 30 September 2024.
Financial summary 6-month period ended 6-month period ended
30 September 2024 30 September 2023
US $m US $m
(unaudited) (unaudited)
Revenue 90.3 91.0
Underlying profit/(loss) from operating activities* 0.9 (2.5)
Loss from operating activities (19.3) (4.5)
Loss before tax for the period (20.8) (6.6)
Loss after tax for the period (18.2) (5.2)
Statutory loss per share - basic and diluted (45.8) cents (15.8) cents
Net bank debt - excluding IFRS 16 lease liabilities (15.4) (27.3)
*Underlying profit/(loss) from operating activities is reconciled in note 1
below.
Key points for the 6-month period ended 30 September 2024
· Revenue broadly unchanged from comparable 6-month period.
· Underlying operating profit from operating activities improved to
US $0.9m (6-month period to 30 September 2023: loss of US $2.5m) reflecting
stronger gross margins and strong control of operating costs.
· Non-underlying costs of US $25.4m charged during the period; US
$22.3m reflects costs of Sanmina litigation; including a US $19.5m provision
recognised at 30 September 2024 in relation to the Board's best estimate of
the settlement of damages. Additional charge of US $3.1m recognised relating
to transformation project.
· Positive net cash flows of US $5.6m generated from underlying
operating activities after tax and interest with a further US $5.2m cash
inflow from the gain on disposal of the Traffic business; net bank debt
reduced to US $15.4m (31 March 2024: US $16.4m).
· Good progress achieved in executing the transformation plan with
focus on streamlining the Group, accelerating growth, and improving
profitability.
Commenting on the results, Steve Blair, CEO, said:
"The current state of the economies in which we operate provides a cautious
outlook for capital expenditures across various sectors. High underlying
inflation and ongoing labour shortages are major constraints, causing delays
in project timelines and deferring investment decisions. The petrochemical
industry, in particular, faces additional uncertainty due to fluctuating
demand and unpredictable energy prices. There is added hesitation and
increased uncertainty following the recent US election as businesses
anticipate potential policy changes, further delaying capital commitments.
However, the relentless focus by management on executing the Transformation
Plan is beginning to show positive results and provides a solid foundation to
achieve our medium-term ambitions. With this background, the Board is
confident that further progress will be made in the second half of the year."
Contacts
Dialight plc
Tel: +44 (0)203 058 3542
Steve Blair - Group Chief Executive
Neil Johnson - Chairman
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
(http://www.dialight.com/) .
Registered company number: 02486024
Notes
1. Underlying profit/(loss) from operating activities is reconciled as
follow:
6-month period ended 30 September 2024 6-month period ended 30 September 2023
US $m US $m
(unaudited) (unaudited)
Underlying profit/(loss) from operating activities 0.9 (2.5)
Non-underlying costs (25.4) (2.0)
Gain on disposal of business 5.2 -
Loss from operating activities (19.3) (4.5)
2. Net bank debt excludes lease liabilities recognised under IFRS 16.
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 are 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.
CHIEF EXECUTIVE OFFICER REVIEW
Group revenues for the 6-months ended 30 September 2024 were US $90.3m, which
was broadly unchanged from the comparable period last year. A reduction of
2.1%, US $1.4m, was reported in the Lighting segment with business continuing
to be impacted by challenging market conditions as capital projects were
deferred. This was partly offset by increased revenues of 3.1%, US $0.7m, in
Signals & Components. Demand continues to remain soft with overall Group
orders down 7.0% versus the 6-month comparable period and Lighting orders down
11%. Lighting orders have decreased in all regions.
Group gross margins for the 6-month period increased to 33.0% from 30.8% in
the comparable period, with improvements in material costs and operational
efficiencies offsetting increased labour rates and lower fixed overhead
absorption.
We continue to maintain our strong focus on cost control, which led to a
reduction in underlying selling, general and administrative (SG&A) costs
of US $1.6m.
This combination of improved gross margins and lower underlying operating
costs contributed to an increase in Group underlying operating profit from
operating activities to US $0.9m from an underlying operating loss of US $2.5m
in the prior period. Non-underlying costs for the 6-month period were US
$25.4m and included US $22.3m of costs related to the Sanmina litigation and
US $3.1m in charges related to the Transformation plan. Finance costs were US
$1.5m compared to US $2.1m in the comparable period. The Group sold the
Traffic business on 29 July 2024 for proceeds and a gain on net book value of
US $5.2m.
The statutory loss before tax for the 6-month period ended 30 September 2024
was US $20.8m compared with a statutory loss before tax of US $6.6m in the
comparable period.
Lighting represented c.74% of revenues in the 6-month period (H1 FY24: c.75%).
Lighting orders fell 11% driven by continued weakness in all markets. Our core
US market saw orders decline by 3% with the continued deferment of capex
orders. EMEA Lighting orders saw a decline of 54%, while Asia and Australia
orders were down 31% and 11%, respectively.
The majority of our large US customers and target customers require a
"preferred supplier agreement" to be in place with their corporate Head
Office, before any sale can be confirmed at the plant level. We continue to
develop our strategic accounts team who are working closely with our field
sales team to address this opportunity.
Signals & Components is a high-volume business operating within highly
competitive markets. Within this division, strong Vehicle sales were offset by
weaker demand in OE (opto-electronic). OE orders in H1 FY25 were 5% below
prior period and inventory levels in the channel remain high. Market
conditions are expected to remain challenging.
Operations and supply chain management remained a key focus for the Group in
2025, with a gradual shift from maintaining security of supply to focusing on
price renegotiation, as material availability improved for some components. We
continue to see some short-term impact from material shortages within the
market but remain committed to maintaining short lead times and c.90% on time
delivery within Lighting and Signals & Components, which has been critical
in supporting our MRO orders.
Cash generated from underlying operations was US $7.8m (H1 FY24: US $11.7m),
with underlying net operating cash inflows of US $5.6m after tax and interest,
benefitting from a reduction in inventory and accounts receivable (H1 FY24: US
$9.0m).
We continued to invest in new and improved product development with US $5.2m
spent in H1 FY25 (H1 FY24: US $2.9m). The main areas of investment were Backup
Battery for ProSite Floodlight, Next Generation Linear, New Street Light for
industrial applications, value added product accessories, Power Supply
upgrades for simplification and automation, product simplification products
for SKU reduction, and product cost reduction.
The Group had net bank debt of US $15.4m at 30 September 2024 (H1 FY24: US
$27.3m).
Transformation plan
The Group has continued to execute on its transformation plan, which is
focused on streamlining the Group, accelerating growth, and improving
profitability. The plan focuses on unlocking value within the Group, whilst
growing the core Lighting business with an ambition to deliver above market
revenue growth and mid-teens ROS in the medium term generating sustainable
cash conversion above 80%, funded by net bank debt less than 1.5x EBITDA.
Implementation of the plan will require a relentless focus on execution
excellence. To reach the ambition set out above, certain additional
investments will be required in the short term, which will deliver the
improved financial returns assumed over the medium term. To ensure successful
delivery and clear strategic oversight, the Board has established a formal
Board Committee, which meets regularly with senior executives.
Reducing cost through consolidation and automation
Dialight operates from four principal manufacturing sites across Mexico, the
US and Malaysia. This footprint helps to support the international nature of
our customer base, but also gives rise to inefficiency at both a site and
network level. Reducing complexity in our site network forms a key component
of streamlining the business, but also provides the potential for cost
reduction through consolidation. Progress has been made in the transformation
of our Malaysia operations and we have moved to a new smaller production
facility in Penang, Malaysia.
In addition to site consolidation, the transformation plan is focused on cost
reduction through automation. Today, many of our manufacturing processes are
labour intensive, which has resulted in rapid cost escalation in the last two
years as wage inflation has accelerated. Against this backdrop, automation
represents a significant improvement opportunity. The automation of the power
supply sub-assembly project is well underway, commencing with an investment
during the first half of the year of US $1.4m.
Increasing focus
The transformation plan includes an ongoing review of the Group's business,
with a view to narrowing its focus to Dialight's core competencies. LED
Lighting for industrial applications is the Group's largest business,
representing 74% of revenues in H1 FY25 and where the majority of our
resources are focused. Alongside LED Lighting, the Group has three smaller
businesses focused on niches within the wider lighting market: Components,
Vehicle, and Obstruction (representing 25% of Group revenues). The Group's
Traffic business was disposed of in July 2025 and generated US $5.2m in cash
proceeds.
Accelerating growth
The industrial LED lighting market, with an addressable market of c. US
$10.0b, continues to be very attractive, with the conversion from historic
technologies and increasing focus on safety and sustainability supporting long
term structural growth. Our historic focus on the harsh and hazardous segment
has helped achieve a market leading position in the US, with excellent
customer and distributor relationships. This continues to be enhanced by the
strategic account initiative which has improved penetration of large-scale
customers.
Alongside longer term growth in LED Lighting demand, we are also seeing a
rapid evolution in technology as customers seek ever-increasing levels of
productivity and efficiency from their sites. The integration of monitoring,
safety and productivity features within our lighting fixtures represents an
immediate opportunity to enhance our products and over the longer term we see
the potential for the lighting networks within buildings to play a key role in
industrial connectivity.
The transformation plan seeks to capitalise on this opportunity through two
initiatives; further monetising our technology expertise through selling
component elements, for example power supply topology, into markets where we
do not operate, and developing fixture products with integrated monitoring or
control components for specified higher value customer applications.
Streamlining processes and reducing complexity
As identified during the Board's business review last year, our current
product range is too broad and complex. We have made good progress on
standardising our product offering, with our engineering and operations
functions collaborating to achieve large reductions in SKUs through
standardisation of sub-assemblies and completion of upgrades to low volume
products. This will not only enable more efficient production but will also
support greater material purchasing accuracy and inventory control. We expect
these projects to be completed by March 2025.
Realigning the cost base
In addition to focusing on improvements in our gross profit, the
transformation plan will seek to address our operating cost base with a
realignment to reflect the current organisation. This is being carried out in
phases, with the initial steps taken through restructuring of operating
departments. We conducted a cost analysis study which reviewed all cost layers
by sales region, production sites and administrative functions. We are
reviewing the findings and will make appropriate recommendations to further
realign the cost base.
The second phase of this aspect of the transformation focused on the US sales
function, ensuring this is structured to position Dialight for growth whilst
minimising external sales costs incurred.
Sanmina litigation
As previously announced, the Sanmina trial concluded on 23 September 2024. The
jury rejected Dialight's claims relating to fraudulent inducement and wilful
misconduct (the "Tort Claims"), whilst granting Dialight's claim that Sanmina
had breached the Manufacturing Services Agreement ("MSA") and granting
Sanmina's claims that Dialight had breached the MSA with respect to Sanmina's
accounts receivable ("AR") and 'excess and obsolete' materials ("E&O")
claims. Whilst the jury's verdict on the Tort Claims was disappointing, and
contrary to the general thrust of previous rulings by the judge as it has
limited the scope of damages to which Dialight is entitled (illustrating the
risks inherent in a New York jury trial), Dialight welcomes the confirmation
by the jury of Sanmina's breach of contract (which Sanmina had refused to
acknowledge, despite the overwhelming weight of evidence). The jury awarded
damages of US $0.9m to Dialight in respect of Sanmina's breach of contract,
and awarded c. US $5.3m in damages against Dialight in respect of Sanmina's AR
claim and c. US $3.4m in damages against Dialight in respect of Sanmina's
E&O claim. These awards are, however, subject to further challenge and to
a definitive ruling by the judge that is not expected until Q1 2025.
The initial post-trial motions filed by both Dialight and Sanmina have been
made available on the Company's corporate website at
www.dialight.com/ir/shareholder-information/sanmina-litigation/ and include
motions relating to damages, interest payable on damages, and legal costs.
There are multiple upside and downside variables outlined in these pleadings
and the final potential outcomes in respect of damages range from the c. US
$8.7m of gross damages awarded by the jury to Sanmina through to a net damages
payment by Sanmina to Dialight of c. US $4.8m (if all of Dialight's post-trial
motions are successful). Any awards in respect of interest and legal costs
will, in part, follow the position on damages, though there are further
stand-alone issues relating to the calculation of both interest and the award
of legal costs. These issues will be refined through the current pleadings
process, with final replies by both parties on the various motions due to be
filed by 18 December 2024. The definitive judgment in this matter ("Definitive
Judgment") will be issued at some point after the filing of those final
replies (likely to be in Q1 of 2025), and will crystalise Dialight's
liability, subject to any appeals process. Notwithstanding the wide-range of
potential outcomes, management has taken a best estimate approach to the
quantification of non-underlying litigation costs to be expensed in respect of
the 6-month period to 30 September 2024 (see note 4), with the US $22.3m
expensed including management's best estimate of the net future outflow of
damages, interest and legal costs, along with actual legal costs incurred in
the 6-month period and legal costs committed to be incurred over the next
6-month period. It is possible that the Definitive Judgment could be more or
less than management's quantification. Once management has certainty on the
Definitive Judgment it will decide on the appropriate means and timing of
funding any awards to Sanmina under that Definitive Judgment, which may
include seeking to agree a payment plan with Sanmina and/or new equity
funding. Any awards due under the Definitive Judgment would ordinarily be
payable to Sanmina within 30 days of the publication of the Definitive
Judgment, unless appealed or otherwise agreed with Sanmina. Any appeal process
is likely to require bonding arrangements at least equal to the quantum of any
judgment. Dialight will continue to make any court-filed documents available
on its website and will provide further updates as and when appropriate.
Financial review
Overall performance in H1 FY25 showed improvement with underlying operating
profit of US $0.9m compared to an underlying operating loss of US $2.5m in H1
FY24 (being the 6-month period to 30 September 2023). Revenues decreased by US
$0.7m against the comparable period, largely driven by a US $1.4m reduction in
Lighting, with the business continuing to be impacted by capital projects
being deferred. This was offset by a US $0.7m increase in Signals &
Components revenues.
Group gross margins for the 6-month period improved to 33.0%, a 2.2% increase
in the comparable period. This was driven by operational efficiencies and
improved direct material costs.
First half underlying operating costs decreased by US $1.6m and we continue to
remain focused on strong cost controls.
Group orders in H1 FY25 decreased by 7.0% compared H1 FY24. This was driven by
Lighting orders which were down 11.0%. US Lighting orders were down 3.0% with
EMEA and APAC orders significantly below prior period. This was offset by
strong Signals & Components orders, which were up 5.9% versus prior
period.
From 31 March 2024 net bank debt reduced by US $1.0m from US $16.4m to US
$15.4m as at 30 September 2024.
Lighting segment before unallocated costs
Lighting 6-month period ended 6-month period ended Variance
30 September 2024 30 September 2023
US $m US $m
(unaudited) (unaudited)
Revenue 66.7 68.1 (1.4)
Gross profit 24.2 22.0 2.2
Gross margin 36.3% 32.3% 400bps
Overheads (19.2) (20.7) 1.5
Underlying EBIT before unallocated costs 5.0 1.3 3.7
The Lighting (Lighting & Obstruction) segment represents approximately 74%
of the Group's revenue, and consists of two main revenue streams: large capex
projects and on-going Maintenance, Repair and Operations (MRO) spend. The
segment demand remained weaker than expected with customers continuing to
exercise tight controls over spending, particularly within capex projects.
Half year revenues declined by US $1.4m driven by weakness in the Lighting
Segment. Lighting was US $2.0m unfavourable and was driven by continued
economic uncertainty and delays in capex projects. This was offset by a US
$0.6m increase in Obstruction revenue compared to the comparable period.
Gross margins improved in H1 FY25 to 36.3% from 32.3% in H1 FY24. The
improvements in margin have arisen from favourable material and freight costs
slightly offset by increases in labour costs. Operating costs were US $1.5m
lower compared with H1 FY24 due to lower amortisation of development costs and
a reduction in tariff costs.
Lighting orders were down 11% versus prior year and Obstruction orders were
down 13%, reflecting challenging market conditions and a cautious outlook by
distributors.
The combination of both improved margin and reduced overhead costs resulted in
a US $5.0m underlying EBIT compared to prior period of US $1.3m.
Signals & Components before unallocated costs
Signals & Components 6-month period ended 6-month period ended Variance
30 September 2024 30 September 2023
US $m US $m
(unaudited) (unaudited)
Revenue 23.6 22.9 0.7
Gross profit 5.6 6.0 (0.4)
Gross margin 23.7% 26.2% 250bps
Overheads (3.9) (5.2) 1.3
Underlying EBIT before unallocated costs 1.7 0.8 0.9
Signals & Components is a high-volume business operating within highly
competitive markets. The main elements to this business are Opto-Electronic
(OE) components and vehicle lights. Overall revenue increased by US $0.7m,
driven by Vehicle lights, which was US $0.6m greater than the prior period.
However, this was offset by a softness in the OE market, which was US $0.3m
below prior period. OE H1 FY25 orders declined by 5.3% versus prior period and
distributor Point of Sale data has been slowly trending downward, indicating
weakening demand.
Gross margin in H1 FY25 was 2.5% below prior period due to lower absorption of
fixed production costs and increased labour rates.
Overheads costs for the 6 months were reduced by US $1.3m to US $3.9m from US
$5.2m, resulting in an underlying EBIT of US $1.7m compared with US $0.8m in
the prior period.
Unallocated costs
Unallocated costs comprise costs not directly attributable to a segment and
primarily relate to head office costs and professional fees. Total underlying
unallocated costs increased from US $4.6m to US $5.8m in the 6-month period to
30 September 2024. The key drivers were increases in foreign exchange losses,
staff costs and expenses, and professional fees.
Non-underlying costs (note 4)
Non-underlying costs 6-month period ended 30 September 2024 6-month period ended 30 September 2023
US $m US $m
(unaudited) (unaudited)
Sanmina litigation 22.3 1.3
Transformation project 3.1 0.7
Total non-underlying costs 25.4 2.0
Sanmina litigation
Costs of US $22.3m have been recognised relating to the Sanmina litigation
including management's best estimate of the net future outflow of damages,
interest, and legal costs. Refer to note 4 for further details.
Transformation project
In the 6-month period ended 30 September 2024 the Group has incurred US $3.1m
of non-underlying costs relating to the transformation plan (H1 FY24: US
$0.7m) to reset and realign the Group's cost base. The costs incurred include
severances, consulting costs, legal and professional fees.
Gain on disposal of business
On 29 July 2024 the Group entered into an agreement for the sale of its
business manufacturing signal lights used in traffic, pedestrian and railroad
management in North America (the Traffic Business) to Leotek Electronics USA
LLC realising gross cash proceeds and a gain of US $5.2m.
Tax
The tax credits of US $2.6m for the 6-month period to 30 September 2024 (H1
FY24: US $1.4m) reflect the best estimate of the weighted average annual
income tax rate expected for the full financial year. Non-underlying items
have been taxed using the relevant tax rates where tax deductions are
available.
Cash and borrowings
As at 30 September 2024 the Group had net bank debt of US $15.4m, a decrease
of US $1.0m from March 2024. Net bank debt excludes liabilities recognised
under IFRS 16 Leases, as these are excluded for covenant testing purposes.
The roll forward of net bank debt was as follows:
Net bank debt US $m US $m
Opening balance at 1 April 2024 (16.4)
Underlying cash generated by operations
Underlying operating cash inflows before movements in working capital 5.3
Movements in inventory 2.0
Movements in working capital excluding inventory 1.0
Defined benefit pension contributions (0.5)
Interest and tax paid (2.2) 5.6
Other cash inflows
Proceeds on disposal of business 5.2 5.2
Cash outflows
Non-underlying operating cashflows (3.5)
Capital expenditure including development costs (5.2)
Lease payments (1.2) (9.9)
Foreign exchange movements 0.1
Closing balance at 30 September 2024 (15.4)
Cash 7.4
Borrowings (22.8)
The main factors behind the movement in net bank debt were:
· Underlying operating activities generating cash inflows of US
$5.3m before movements in working capital;
· A further US $2.5m increase attributable to movements in working
capital of which US $2.0m related to inventory;
· The disposal of the traffic business generating US $5.2m of net
cash proceeds;
· Non-underlying cash outflows of US $3.5m relating to the
transformation project and Sanmina litigation; and
· Continued investment into new product development and capital
expenditure of US $5.2m.
Gross bank debt was US $22.8m and offset by cash on hand of US $7.4m. The
interest expense was US $1.5m and is analysed in note 5.
Banking and covenants
The Group's bank facility comprises a revolving credit facility (RCF) of US
$28.8m from HSBC. A balance of US $5.2m was repaid in August 2024 using the
proceeds received from the disposal of the Traffic business after which the
facility was reduced by a corresponding amount from US $34.0m to US $28.8m.
The facility was extended on 14 June 2024 to 21 July 2026 on the same terms as
the original agreement. Aligned with the Group's robust commitment to
environmental, social, and governance principles, the RCF facility operates as
a sustainability-linked loan.
The RCF facility is subject to quarterly covenants comprising maximum leverage
and minimum interest cover. The covenants for the quarter ending 30 September
2023 were temporarily reset from a leverage ratio maximum target of less than
3.0x to 4.5x, and an interest cover minimum covenant target of a 4.0x to
2.5x. The covenants reverted to the original hurdles from quarter ending 31
December 2023 onwards.
The cash flow forecasts to 31 March 2026 show a potential breach in the
12-month rolling interest cover covenant in FY25 Q3 due to the historical weak
trading performance in the final quarter of the financial period ending 31
March 2024. The potential covenant breach has been communicated to HSBC who
have agreed to reduce the interest rate covenant for the third quarter of FY25
(only) to 2.5x. This amendment is subject to legal finalisation at the date of
these interim financial statements.
In the 6-month period to 30 September 2024 the covenants have been complied
with and the outstanding borrowings of US $22.8m have been classified as a
non-current liability as at 30 September 2024 in line with the facility
expiring in July 2026.
Capital management and dividend
The Board's policy is to have 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, which at
30 September 2024 equated to US $45.7m (30 September 2023: US $74.1m). The
Board is not declaring an interim dividend payment for the period (30
September 2023: nil).
Market condition and outlook
The current state of the economies in which we operate provides a cautious
outlook for capital expenditures across various sectors. High underlying
inflation and ongoing labour shortages are major constraints, causing delays
in project timelines and deferring investment decisions. The petrochemical
industry, in particular, faces additional uncertainty due to fluctuating
demand and unpredictable energy prices. There is added hesitation and
increased uncertainty following the recent US election as businesses
anticipate potential policy changes, further delaying capital commitments.
However, the relentless focus by management on executing the Transformation
Plan is beginning to show positive results and provides a solid foundation to
achieve our medium-term ambitions. With this background, the Board is
confident that further progress will be made in the second half of the year.
Steve Blair
Group Chief Executive
25 November 2024
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the 6-month period ended 30 September 2024
Note 6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
Revenue 2 90.3 91.0 226.0
Cost of sales (60.5) (63.0) (158.9)
Gross profit 29.8 28.0 67.1
Distribution costs (14.7) (15.0) (36.8)
Administrative expenses (34.4) (17.5) (60.5)
Loss from operating activities 2 (19.3) (4.5) (30.2)
Underlying profit/(loss) from operating activities 0.9 (2.5) (4.6)
Non-underlying costs 4 (25.4) (2.0) (25.6)
Gain on disposal of business 4 5.2 - -
Loss from operating activities (19.3) (4.5) (30.2)
Financial expense 5 (1.5) (2.1) (4.1)
Loss before tax (20.8) (6.6) (34.3)
Income tax credit 6 2.6 1.4 1.8
Loss for the period (18.2) (5.2) (32.5)
Loss for the period attributable to:
Equity owners of the Company (18.2) (5.2) (32.5)
Non-controlling Interests - - -
Loss for the period (18.2) (5.2) (32.5)
Earnings per share
Loss per share - basic and diluted 7 (45.8) cents (15.8) cents (91.1) cents
All results arise from continuing operations.
The accompanying notes on pages 18 to 33 form an integral part of these
condensed interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6-month period ended 30 September 2024
6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
Other comprehensive (expense)/income
Exchange difference on translation of foreign operations (0.1) (0.2) 0.4
Income tax on exchange differences on transactions of foreign operations - - -
(0.1) (0.2) 0.4
Items that will not be reclassified subsequently to profit and loss
Remeasurement of defined benefit pension liability - - (0.5)
Income tax on remeasurement of defined benefit liability - - 0.1
- - (0.4)
Other comprehensive (expense)/income for the period, net of tax (0.1) (0.2) -
Loss for the period (18.2) (5.2) (32.5)
Total comprehensive expense for the period (18.3) (5.4) (32.5)
Attributable to:
- Owners of the parent (18.3) (5.4) (32.5)
- Non-controlling interests - - -
Total comprehensive expense for the period (18.3) (5.4) (32.5)
The accompanying notes on pages 18 to 33 form an integral part of these
condensed interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 6-month period ended 30 September 2024 (unaudited)
Share capital Merger Translation Capital redemption Share premium Own shares Retained Total Non-controlling interests Total equity
US $m reserve reserve reserve US $m US $m Earnings US $m US $m US $m
US $m US $m US $m US $m
Balance at 1 April 2024 1.2 1.0 12.6 4.3 13.0 (1.2) 32.8 63.7 0.2 63.9
Loss for the period - - - - - - (18.2) (18.2) - (18.2)
Other comprehensive income:
Foreign exchange translation differences, net of taxes - - (0.1) - - - - (0.1) - (0.1)
Total comprehensive expense for the period - - (0.1) - - - (18.2) (18.3) - (18.3)
Transactions with owners, recorded directly in equity:
Share-based payments - - - - - - 0.1 0.1 - 0.1
Total transactions with owners - - - - - - 0.1 0.1 - 0.1
Balance at 30 September 2024 1.2 1.0 12.5 4.3 13.0 (1.2) 14.7 45.5 0.2 45.7
The accompanying notes on pages 18 to 33 form an integral part of these
condensed interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 6-month period ended 30 September 2023 (unaudited)
Share capital Merger Translation Capital redemption Share premium Own shares Retained Total Non-controlling interests Total equity
US $m reserve reserve reserve US $m US $m Earnings US $m US $m US $m
US $m US $m US $m US $m
Balance at 1 April 2023 1.0 1.0 11.7 4.3 1.2 (1.1) 60.7 78.8 0.2 79.0
Loss for the period - - - - - (5.2) (5.2) - (5.2)
Other comprehensive income:
Foreign exchange translation differences, net of taxes - - (0.2) - - - - (0.2) - (0.2)
Total comprehensive expense for the period - - (0.2) - - - (5.2) (5.4) - (5.4)
Transactions with owners, recorded directly in equity:
Share-based payments - - - - - - 0.6 0.6 - 0.6
Re-purchase of own shares - - - - - (0.1) - (0.1) - (0.1)
Total transactions with owners - - - - - (0.1) 0.6 0.5 - 0.5
Balance at 30 September 2023 1.0 1.0 11.5 4.3 1.2 (1.2) 56.1 73.9 0.2 74.1
The accompanying notes on pages 18 to 33 form an integral part of these
condensed interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 15-month period ended 31 March 2024 (audited)
Share capital Merger Translation Capital redemption Share premium Own shares Retained Total Non-controlling interests Total equity
US $m reserve reserve reserve US $m US $m Earnings US $m US $m US $m
US $m US $m US $m US $m
Balance at 1 January 2023 1.0 1.0 12.2 4.3 1.2 (1.1) 64.2 82.8 0.2 83.0
Loss for the period - - - - - - (32.5) (32.5) - (32.5)
Other comprehensive income:
Foreign exchange translation differences, net of taxes - - 0.4 - - - - 0.4 - 0.4
Remeasurement of defined benefit pension liability, net of taxes - - - - - - (0.4) (0.4) - (0.4)
Total comprehensive income/(expense) for the period - - 0.4 - - - (32.9) (32.5) - (32.5)
Transactions with owners, recorded directly in equity:
Issue of share capital (notes 12 and 13) 0.2 - - - 12.7 - - 12.9 - 12.9
Transaction costs (note 13) - - - - (0.9) - - (0.9) - (0.9)
Share based payments - - - - - - 1.5 1.5 - 1.5
Re-purchase of own shares - - - - - (0.1) - (0.1) - (0.1)
Total transactions with owners 0.2 - - - 11.8 (0.1) 1.5 13.4 - 13.4
Balance at 31 March 2024 1.2 1.0 12.6 4.3 13.0 (1.2) 32.8 63.7 0.2 63.9
The accompanying notes on pages 18 to 33 form an integral part of these
condensed interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2024
Note 30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
Assets
Property, plant, and equipment 14.3 15.1 12.7
Right of use assets 9.6 10.1 8.8
Intangible assets 3 8.4 24.9 8.1
Deferred tax assets 8.3 4.0 5.8
Defined benefit pension assets 5.9 5.5 5.4
Other receivables 0.7 6.2 5.9
Total non-current assets 47.2 65.8 46.7
Inventories 9 47.1 58.6 49.1
Trade and other receivables 30.9 30.9 32.3
Income tax recoverable 0.5 0.4 0.8
Cash and cash equivalents 7.4 2.5 11.5
Total current assets 85.9 92.4 93.7
Total assets 133.1 158.2 140.4
Liabilities
Trade and other payables (31.0) (38.3) (34.3)
Provisions 11 (21.7) (0.8) (1.2)
Tax liabilities (0.7) (2.0) (1.4)
Lease liabilities (2.5) (2.1) (2.0)
Borrowings 10 - - (27.9)
Total current liabilities (55.9) (43.2) (66.8)
Provisions 11 (0.7) (1.7) (1.6)
Borrowings 10 (22.8) (29.8) -
Lease liabilities (8.0) (9.4) (8.1)
Total non-current liabilities (31.5) (40.9) (9.7)
Total liabilities (87.4) (84.1) (76.5)
Net assets 45.7 74.1 63.9
Equity
Issued share capital 12 1.2 1.0 1.2
Merger reserve 1.0 1.0 1.0
Share premium 13 13.0 1.2 13.0
Other reserves 15.6 14.6 15.7
Retained earnings 14.7 56.1 32.8
45.5 73.9 63.7
Non-controlling interests 0.2 0.2 0.2
Total equity 45.7 74.1 63.9
The accompanying notes on pages 18 to 33 form an integral part of these
condensed interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6-month period ended 30 September 2024
Note 6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
Operating activities
Loss for the period (18.2) (5.2) (32.5)
Adjustments for:
Non-underlying costs 4 25.4 2.0 25.6
Financial expense 5 1.5 2.1 4.1
Income tax credit 6 (2.6) (1.4) (1.8)
Share-based payments 0.1 0.6 1.5
Gain on disposal of business 4 (5.2) - -
Depreciation of property, plant, and equipment 1.4 2.0 4.3
Depreciation of right of use assets 1.3 1.3 3.0
Amortisation of intangible assets 3 1.6 3.0 7.7
Underlying operating cash inflow before movements in working capital 5.3 4.4 11.9
Decrease in inventories 9 2.0 3.8 12.7
Decrease in trade and other receivables 1.5 1.4 5.2
(Decrease)/increase in trade and other payables (0.1) 2.1 (10.9)
Decrease in provisions (0.4) (0.1) (0.2)
Pension contributions to defined benefit pension scheme (0.5) 0.1 0.1
Cash generated by underlying operations 7.8 11.7 18.8
Income taxes paid (0.7) (0.6) (2.6)
Interest paid (1.5) (2.1) (4.1)
Net cash generated by underlying operations 5.6 9.0 12.1
Cash used in non-underlying operations (3.5) (2.0) (5.5)
Net cashed generated by operations 2.1 7.0 6.6
Investing activities
Profit on disposal of business 5.2 - -
Purchase of property, plant, and equipment (3.4) (0.8) (1.4)
Additions to intangible assets 3 (1.8) (2.1) (5.4)
Net cash used in investing activities - (2.9) (6.8)
Financing activities
Proceeds on issue of shares - net of issue costs 12, 13 - - 12.0
Drawdown of bank facility 10 - 0.5 6.2
Repayment of bank facility 10 (5.2) (1.3) (5.9)
Re-purchase of own shares - - (0.1)
Repayment of lease liabilities (excluding payments of interest) (1.2) (1.5) (2.9)
Net cash (used in)/generated from financing activities (6.4) (2.3) 9.3
Net (decrease)/increase in cash and cash equivalents (4.3) 1.8 9.1
Cash and cash equivalents at beginning of period 11.5 0.6 2.0
Effect of exchange rates 0.2 0.1 0.4
Cash and cash equivalents at end of period 7.4 2.5 11.5
The accompanying notes on pages 18 to 33 form an integral part of these
condensed interim financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the period ended 30 September 2024 (unaudited)
1. Basis of preparation and principal accounting policies
Dialight plc (the Company) provides 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 60 Petty France, London, England, SW1H 9EU.
This condensed consolidated interim financial information was approved for
issue on 25 November 2024 and has not been audited nor reviewed.
Statement of compliance
This condensed consolidated interim financial information for the 6-month
period ended 30 September 2024 has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct Authority and with
UK-adopted International Accounting Standard 34 'Interim Financial Reporting'
(IAS 34). The condensed consolidated interim financial information should be
read in conjunction with the financial statements for the 15-month period
ended 31 March 2024, which have been prepared in accordance with UK-adopted
International Accounting Standards in conformity with the requirements of the
Companies Act 2006.
This condensed consolidated interim financial information for the 6-month
period ended 30 September 2024, and the comparative information in relation to
the 6-month period ended 30 September 2023, do not comprise statutory accounts
within the meaning of Section 434 of the Companies Act 2006. Statutory
accounts for the 15-month period ended 31 March 2024 were approved by the
Board of Directors on 29 July 2024 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, and
did not contain a statement under Section 498 of the Companies Act 2006. The
report drew attention by way of emphasis to a material uncertainty related to
going concern.
Going concern
At 31 March 2024 the Group had US $28.8m of multicurrency revolving credit
facilities of which US $22.8m was drawn with US $7.4m of cash on hand. Net
bank debt has decreased from US $16.4m as at 31 March 2024 to US $15.4m as at
30 September 2024.
The facility was extended on 14 June 2024 to 21 July 2026 on the same terms as
the original revolving credit facility agreement. The covenants are tested
quarterly and are as follows:
Ratio Calculation Threshold
Leverage ratio Net bank debt : Proforma unaudited EBITDA <3.0x
Interest cover Proforma unaudited EBITDA : Interest expense >4.0x
Further details of borrowings are included in note 10.
In assessing the going concern assumptions, the Directors have prepared an
18-month forecast through to 31 March 2026.
Whilst the Directors continue to believe the Group will be able to deliver on
its transformation plan, generate forecast organic sales growth and realise
cost reductions within the next 18 months, the Directors recognise that the
transformation plan is in its early stages and, as such, a reliable history of
its effectiveness is not yet available. In the 18-month forecast the Directors
have assumed a 5% year on year increase in FY26 through organic growth and
price increases. Whilst the Group believe this to be realistic target, market
conditions continue to be challenging and the economic impact of the recent US
election remains to be seen.
1. Basis of preparation and principal accounting policies (continued)
The cash flow forecasts to 31 March 2026 show a potential breach in the
12-month rolling interest cover covenant in FY25 Q3 due to the historical weak
trading performance in the final quarter of the financial period ending 31
March 2024. The potential covenant breach has been communicated to HSBC who
have agreed to reduce the interest rate covenant for the third quarter of FY25
(only) to 2.5x. This amendment is subject to legal finalisation at the date of
these interim financial statements.
Further, the legal claim against the Company by Sanmina, which is explained
further in note 4 represents an adverse outcome outside of the Group's control
which may result in a material cash outflow for which a provision of US $19.5m
has been recognised as at 30 September 2024.
At the balance sheet date the Group does not have sufficient liquidity to
settle the provision without taking mitigating actions or securing additional
funding within the going concern period which may include seeking to agree a
payment plan with Sanmina and/or new equity funding. The amount, timing, and
receipt of any such funding is uncertain at the date of the approval of the
interim financial statements.
These circumstances give rise to material uncertainty, which may cast
significant doubt on the entity's ability to continue as a going concern,
meaning it may be unable to realise it assets and discharge its liabilities in
the normal course of business. Notwithstanding this material uncertainty, the
Directors consider it remains appropriate to continue to adopt the going
concern basis in the preparation of the financial statements.
Taxation
The tax charge/credit reflect the best estimate of the weighted average annual
income tax rate expected for the full financial year.
Uncertainties under income tax treatment
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 these
condensed financial statements.
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 15-month period ended
31 March 2024.
During the period the Group has adopted the following new and revised
standards and interpretations which have had no impact on these condensed
consolidated financial statements:
• Amendments to IAS 1 Presentation of Financial Statements-
Classification of Liabilities as Current or Non-current;
• Amendments to IAS 1 Presentation of Financial Statements-
Non-current Liabilities with Covenants; and
• Amendments to IFRS 16 Leases-Lease Liability in a Sale and
Leaseback.
Consolidated statement of cash flows
Non-underlying costs have been separately presented for within operating
activities in the consolidated statement of cash flows in order to present
underlying cash generated by operations. An adjustment for non-underlying cash
outflows has been made to present total cash generated by operations.
Comparatives have been restated where applicable.
1. Basis of preparation and principal accounting policies (continued)
Estimates and judgements
The preparation of the condensed consolidated interim financial information
requires management to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities,
income and expenses. These estimates, judgements and assumptions are based on
historical experience and other factors that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates. The
areas which require the most use of management estimation and judgement are
set out below.
Judgements
Development and patent costs
The Group capitalises development costs and patent costs provided they meet
all criteria in the respective accounting policy. Costs are only capitalised
when management applies judgement that is satisfied as to the ultimate
commercial viability of the projects based on review of the relevant business
case. The capitalised costs are amortised over the expected useful economic
life, which is determined based on the reasonable commercial prospects of the
product and a comparison to similar products being sold by the Group. The
Group has US $7.8m (31 March 2024: US $7.4m) of development and patent costs
that relate to the current product portfolio of new products expected to
launch over the next one to two years.
Inventory reserve - disposal of Traffic business
Following the decision by management to dispose of the Traffic business a
judgement was made to make a specific provision for Traffic related inventory
given the inventory remained the property of the Group at the date of
completion and that there is no obligation by the acquirer to purchase any
such inventory subsequent to completion. While under the sales and purchases
agreement the acquirer has the right to acquire all or part of the related
inventory, at the date of the approval of these financial statements the
intention of the acquirer is not known. The provision totals $3.0m as at 30
September 2024 and 31 March 2024.
Estimates
Sanmina litigation
As previously announced, the Sanmina trial concluded on 23 September 2024. The
jury rejected Dialight's claims relating to fraudulent inducement and wilful
misconduct (the "Tort Claims"), whilst granting Dialight's claim that Sanmina
had breached the Manufacturing Services Agreement ("MSA") and granting
Sanmina's claims that Dialight had breached the MSA with respect to Sanmina's
accounts receivable ("AR") and 'excess and obsolete' materials ("E&O")
claims. The jury awarded damages of US $0.9m to Dialight in respect of
Sanmina's breach of contract, and awarded c. US $5.3m in damages against
Dialight in respect of Sanmina's AR claim and c. US $3.4m in damages against
Dialight in respect of Sanmina's E&O claim. These awards are, however,
subject to further challenge and to a definitive ruling by the judge that is
not expected until early 2025.
The initial post-trial motions filed by both Dialight and Sanmina include
motions relating to damages, interest payable on damages, and legal costs.
There are multiple upside and downside variables outlined in these pleadings
and the final potential outcomes in respect of damages range from the c. US
$8.7m of gross damages awarded by the jury to Sanmina through to a net damages
payment by Sanmina to Dialight of c. US $4.8m (if all of Dialight's post-trial
motions are successful). Any awards in respect of interest and legal costs
will, in part, follow the position on damages, though there are further
stand-alone issues relating to the calculation of both interest and the award
of legal costs. These issues will be refined through the current pleadings
process, with final replies by both parties on the various motions due to be
filed by 18 December 2024.
Based on the wide-range of potential outcomes, a provision of $19.5m (note 11)
has been recognised as at 30 September 2024 representing management's best
estimate of the net future outflow of damages, interest and legal costs, along
with actual legal costs incurred in the 6-month period and legal costs
committed to be incurred.
Inventory reserve
The total value of the inventory provision for all categories of inventory
over which judgement has been exercised was US $7.7m (31 March 2024: US $6.6m)
and this represents 14.0% (31 March 2024: 11.8%) of the gross inventory value.
Inventory reserve - raw materials and sub-assemblies
All raw and sub-assembly inventory that is over 24-months old at the balance
sheet date is provided for. This basis for estimate reduces estimation
subjectivity, whilst allowing for the adverse impact from component shortages
that have led to high inventory levels and some components being held for
longer than expected. Two years has been assessed to be appropriate as the
components have a long shelf life, continue to be used in production and the
product demand mix between project and MRO business continues to be skewed as
a result of COVID-19. Management believes that any reasonably possible change
in the assumption would not cause any significant change in the provision
estimate for raw materials and sub-assemblies in the next financial year.
Inventory reserve - finished goods
The review of finished goods inventory was based on all inventory over 365
days old. Inventory on hand was compared to historical sales, current orders,
sales pipeline and whether the product had been recently launched. Management
judgement was then applied to determine whether there was a reasonable
probability that the inventory would be sold, with a provision being required
for any inventory that failed this assessment. Management believes that any
reasonably possible change in the assumption would not cause any significant
change in the provision estimate for finished goods.
2. Operating segments
The Group has two reportable operating segments. These segments have been
identified based on the 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
considered to be the Group Chief Executive Officer.
The two reportable operating segments are:
· 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
· Signals & Components, which develops, manufactures, and
supplies status indication components for electronics OEMs, together with
niche industrial and automotive electronic components and highly efficient LED
signalling solutions for the traffic and signals markets.
There is no inter-segment revenue and there are no individual customers that
represent more than 10% of revenue.
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 includes share‑based payments.
Costs relating to the administration of the PLC holding company are not
allocated to an operating segment and disclosed as unallocated.
Segmental assets and liabilities are not reported internally and are therefore
not presented below.
2. Operating segments (continued)
6-month period ended 30 September 2024 (unaudited) Lighting Signals & Components Unallocated Total
US $m US $m US $m US $m
Revenue 66.7 23.6 - 90.3
Gross profit 24.2 5.6 - 29.8
Overhead costs (19.2) (3.9) (5.8) (28.9)
Underlying profit/(loss) from operating activities 5.0 1.7 (5.8) 0.9
Non-underlying costs (note 4) (23.1) - (2.3) (25.4)
Gain on disposal of business - 5.2 - 5.2
(Loss)/profit from operating activities (18.1) 6.9 (8.1) (19.3)
Financial expense - - (1.5) (1.5)
(Loss)/profit before tax (18.1) 6.9 (9.6) (20.8)
Taxation - - 2.6 2.6
(Loss)/profit after tax (18.1) 6.9 (7.0) (18.2)
Other segmental data
Depreciation of property, plant, and equipment 1.0 0.4 - 1.4
Depreciation of right of use asset 1.0 0.3 - 1.3
Amortisation of intangible assets 1.6 - - 1.6
Impairment of property, plant and equipment 0.4 - - 0.4
6-month period ended 30 September 2023 (unaudited) Lighting Signals & Components Unallocated Total
US $m US $m US $m US $m
Revenue 68.1 22.9 - 91.0
Gross profit 22.0 6.0 - 28.0
Overhead costs (20.7) (5.2) (4.6) (30.5)
Underlying profit/(loss) from operating activities 1.3 0.8 (4.6) (2.5)
Non-underlying costs (note 4) (1.4) - (0.6) (2.0)
(Loss)/profit from operating activities (0.1) 0.8 (5.2) (4.5)
Financial expense - - (2.1) (2.1)
(Loss)/profit before tax (0.1) 0.8 (7.3) (6.6)
Taxation - - 1.4 1.4
(Loss)/profit after tax (0.1) 0.8 (5.9) (5.2)
Other segmental data
Depreciation of property, plant, and equipment 1.5 0.5 - 2.0
Depreciation of right of use asset 1.0 0.3 - 1.3
Amortisation of intangible assets 3.0 - - 3.0
2. Operating segments (continued)
15-month period ended 31 March 2024 (audited) Lighting Signals & Components Unallocated Total
US $m US $m US $m US $m
Revenue 171.1 54.9 - 226.0
Gross profit 57.6 12.5 - 70.1
Overhead costs (50.8) (12.3) (11.6) (74.7)
Underlying profit/(loss) from operating activities 6.8 0.2 (11.6) (4.6)
Non-underlying costs (note 4) (20.6) (3.6) (1.4) (25.6)
Loss from operating activities (13.8) (3.4) (13.0) (30.2)
Financial expense - - (4.1) (4.1)
Loss before tax (13.8) (3.4) (17.1) (34.3)
Taxation - - 1.8 1.8
Loss after tax (13.8) (3.4) (15.3) (32.5)
Other segmental data
Depreciation of property, plant and equipment 3.3 1.0 - 4.3
Impairment of property, plant and equipment 1.1 - - 1.1
Depreciation of right-of-use assets 2.3 0.7 - 3.0
Amortisation of intangible assets 7.7 - - 7.7
Impairment of goodwill 11.2 - - 11.2
Impairment of other intangible assets 4.1 0.5 - 4.6
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
the 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-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
North America 76.3 74.7 183.7
EMEA 5.0 6.3 18.3
Rest of World 9.0 10.0 24.0
Revenue 90.3 91.0 226.0
3. Intangible assets
Patents, Software Development Total
licenses, and licenses costs US $m
trademarks US $m US $m
US $m
Net book value at 1 April 2024 1.6 0.7 5.8 8.1
Additions 0.4 - 1.4 1.8
Amortisation (0.5) (0.2) (0.9) (1.6)
Foreign exchange movements - 0.1 - 0.1
Net book value at 30 September 2024 1.5 0.6 6.3 8.4
Additions to development costs and patents, licenses, and trademarks relate to
the development of new products and include direct costs of material, direct
labour and directly attributable overheads. Costs are only capitalised once
the initial research phase has been completed and the business case has been
approved by management. Further the costs must be reliability measurable, the
product and process is technically and commercially viable, future economic
benefits are probable, the Group has intention and sufficient resource to
complete the development and intends to use or sell the asset.
The amortisation expense is recognised within administrative expenses.
4. Non-underlying costs and gain on disposal of business
Non-underlying costs
The Group incurs cost and earns income that is non-recurring in nature or
that, in the Director's judgement, should be separately disclosed 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 represents the components of non-underlying items recognised
in the income statement. All costs are recognised within administrative
expenses unless otherwise stated.
6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
Transformation project 3.1 0.7 4.5
Business disposal costs - - 3.5
Sanmina litigation 22.3 1.3 2.3
Impairment of goodwill - - 11.2
Impairment of other intangible assets (excluding business disposal impairment) - - 4.1
Non-underlying costs 25.4 2.0 25.6
Transformation project
In the 6-month period ended 30 September 2024 the Group has incurred US $3.1m
of non-underlying costs relating to the transformation plan (6-month period
ended 30 September 2023: US $0.7m). This is a significant multi-year change
programme for the Group which is designed to address legacy issues associated
with excess cost and complexity within the organisation, whilst at the same
time focusing more resources on the most attractive growth opportunities
within its core industrial LED lighting market. The multi-year transformation
plan is a material, infrequent programme and is not considered to be part of
the underlying performance of the business. Implementation of the plan is
expected to be complete by 31 March 2026. The costs incurred in the 6-month
period to 30 September 2024 relate to resetting and realigning the Group's
cost base including severances, consulting costs, and related legal and
professional fees.
Sanmina litigation
During the 6-month period to 30 September 2024 costs of US $22.3m have been
expensed (6-month period ended 30 September 2023: US $1.3m) in connection with
Company's legal action taken against Sanmina.
As previously reported, Dialight sought to reach a negotiated conclusion of
various outstanding matters and performance issues following the termination,
in 2018, of the manufacturing services agreement (MSA) with its former
manufacturing partner, Sanmina Corporation ("Sanmina").
The trial between the Group and Sanmina commenced on 9 September 2024 and
concluded on 23 September 2024. The jury rejected Dialight's claims relating
to fraudulent inducement and wilful misconduct, whilst granting Dialight's
claim that Sanmina had breached the Manufacturing Services Agreement ("MSA")
and granting Sanmina's claim that Dialight had breached the MSA with respect
to Sanmina's accounts receivable ("AR") and 'excess and obsolete' materials
("E&O") claims.
The jury awarded damages of US $0.9m to Dialight in respect of Sanmina's
breach of contract, and awarded c. US $5.3m in damages against Dialight in
respect of Sanmina's AR claim and c. US $3.4m in damages against Dialight in
respect of Sanmina's E&O claim.
The expense incurred in the 6-month period to 30 September 2024 of US $22.3m
includes managements best estimate of the future outflow of the damages
awarded against Dialight, less the damages awarded to Dialight and the
write-off of an escrow account held by the Company at 31 March 2024 in
relation to the Sanmina litigation. Legal costs incurred by the Company in
during the 6-month period to 30 September 2024, together with an estimate of
those legal costs committed to be incurred over the next 6-month period in
concluding this litigation have also been included in this charge, together
with management's best estimate of the potential costs that may be awarded
against the Company in respect of interest accrued on the damages awarded to
Sanmina and on meeting Sanmina's legal costs associated with this litigation.
It is anticipated that, following the jury verdict, the judge will issue her
final judgement on this litigation, including any award of interest costs and
reimbursement of the defendant's legal costs within the next six months.
Refer to note 11 for details of the provision recognised in the period.
Gain on disposal of business
On 29 July 2024 the Group entered into an agreement for the sale of its
business manufacturing signal lights used in traffic, pedestrian and railroad
management in North America (the Traffic Business) to Leotek Electronics USA
LLC realising gross cash proceeds of US $5.2m.
5. Financial expense
6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
Net interest income on defined benefit pension asset - - (0.3)
Interest expense on financial liabilities, except lease liabilities 1.1 1.6 3.3
Facility arrangement fee expense 0.1 - 0.4
Interest expense on lease liabilities 0.3 0.5 0.7
Financial expense 1.5 2.1 4.1
6. Income tax expense
The tax credits of US $2.6m for the 6-month period to 30 September 2024 and of
US $1.4m for the 6-month period to 30 September 2023 reflect the best estimate
of the weighted average annual income tax rate expected for the full financial
year. Non-underlying items have been taxed using the relevant tax rates where
deductions are available.
7. Earnings per share (EPS)
Basic earnings per share
The calculation of the basic EPS for the 6-month period ending 30 September
2024 was based on a loss for the period of US $18.2m (6-month period to 30
September 2023: US $5.2m loss) and a weighted average number of ordinary
shares outstanding during the 6 months ended 30 September 2024 of 39,828,141
(6 months ended 30 September 2023: 33,186,149).
The calculation of the basic EPS for the 15-month period ending 31 March 2024
was based on a loss for the period of US $32.5m and a weighted average number
of ordinary shares outstanding during the period of 35,603,515.
6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
(unaudited) (unaudited) (audited)
Loss for the period (US $m) (18.2) (5.2) (32.5)
Weighted average number of shares (000s) 39,828 33,186 35,604
Basic loss per share (45.8) cents (15.8) cents (91.1) cents
Diluted earnings per share
Where a loss has been recognized the same number of shares are used in both
the basic and diluted loss per share calculation as there is no dilutive
effect when the Group is in a loss-making position.
6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
(unaudited) (unaudited) (audited)
Loss for the period (US $m) (18.2) (5.2) (32.5)
Weighted average number of shares (000s) 39,828 33,186 35,604
Diluted loss per share (45.8) cents (15.8) cents (91.1) cents
8. Dividends
There were no dividends declared or paid in the 6-month period ended 30
September 2024 (6-month period ended 30 September 2023: nil).
The Directors have not declared an interim dividend for 2024 (2023: nil).
9. Inventories
30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
Raw materials and consumables 19.5 23.9 18.8
Work in progress 10.4 15.1 13.4
Finished goods 17.0 19.4 16.7
Spare parts 0.2 0.2 0.2
Total 47.1 58.6 49.1
In the 6-month period to 30 September 2024 inventories to the value of US
$33.8m (30 September 2023: $36.8m) were recognised as an expense. The
inventory reserve at the balance sheet date was US $7.7m (30 September 2023:
$3.5m, 31 March 2024: $6.6m), which represents 14.0% of gross inventory (30
September 2023: 5.6%, 31 March 2024: 11.8%). The reserve increased from 31
March 2024 by US $1.1m due to additions of US $1.9m driven by an increase in
ageing of stock on hand offset by utilisation of stock previously provided for
totalling US $0.8m.
10. Borrowings
The Group's bank facility comprise a revolving credit facility (RCF) of US
$28.8m from HSBC. A balance of US $5.2m was repaid in August 2024 using the
proceeds received from the disposal of the Traffic business after which the
facility was reduced by a corresponding amount from US $34.0m to US $28.8m.
The facility was extended on 14 June 2024 to 21 July 2026 on the same terms as
the original agreement. Aligned with the Group's robust commitment to
environmental, social, and governance principles, the RCF facility operates as
a sustainability-linked loan.
The RCF facility is subject to quarterly covenants comprising maximum leverage
and minimum interest cover. The covenants for the quarter ending 30 September
2023 were temporarily reset from a leverage ratio maximum target of less than
3.0x to 4.5x, and an interest cover minimum covenant target of a 4.0x to 2.5x.
The covenants reverted to the original hurdles from quarter ending 31 December
2023 onwards.
The cash flow forecasts to 31 March 2026 show a potential breach in the
12-month rolling interest cover covenant in FY25 Q3 due to the historical weak
trading performance in the final quarter of the financial period ending 31
March 2024. The potential covenant breach has been communicated to HSBC who
have agreed to reduce the interest rate covenant for the third quarter of FY25
(only) to 2.5x. This amendment is subject to legal finalisation at the date of
these interim financial statements.
In the 6-month period to 30 September 2024 the covenants have been complied
with and the outstanding borrowings of US $22.8m have been classified as a
non-current liability as at 30 September 2024 in line with the facility
expiring in July 2026.
6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
Borrowings at the beginning of the period 27.9 30.4 27.4
Facility drawdown (RCF) - 0.5 6.2
Facility repayment (RCF) (5.2) - (3.4)
Facility repayment (CBILS) - (1.3) (2.5)
Foreign exchange movements 0.1 0.2 0.2
Borrowings at the end of the period 22.8 29.8 27.9
11. Provisions
Warranty and claims Lease dilapidations Sanmina Total
US $m US $m litigation US $m
US $m
Balance at 1 April 2024 2.2 0.6 - 2.8
Additions - 0.5 22.3 22.8
Net transfer from other liabilities and other receivables - - (0.9) (0.9)
Utilisation - (0.5) (1.9) (2.4)
Foreign exchange movements - 0.1 - 0.1
Balance at 30 September 2024 2.2 0.7 19.5 22.4
Of which:
Current 2.2 - 19.5 21.7
Non-current - 0.7 - 0.7
Warranty and claims
The warranty provision relates to sales made over the last nine years and has
been estimated based on historical warranty data for similar products.
Lease dilapidations
Lease dilapidations relate to obligations to restore leased premises back to
the original condition. During the period to 30 September 2024 lease
restoration costs of US $0.5m were incurred in relation to the old Malaysian
facility with US $0.5m of costs provided for in relation to the new Malaysian
facility and new head office in London.
Sanmina litigation
Refer to note 4 for details of the Sanmina litigation provision.
12. Share capital
6-month period ended 6-month period ended 6-month period ended 6-month period ended
30 September 2024 30 September 2024 30 September 2023 30 September 2023
Number US $m Number US $m
(unaudited) (unaudited) (unaudited) (unaudited)
Authorised:
Ordinary shares of 1.89p each 39,828,141 1.2 33,192,884 1.0
Issued and fully paid:
Share capital at the beginning of the period 39,828,141 1.2 32,946,371 1.0
Issued during the period - - 246,513 -
Share capital at the end of the period 39,828,141 1.2 33,192,884 1.0
15-month period ended 15-month period ended
31 March 2024 31 March 2024
Number US $m
(audited) (audited)
Authorised:
Ordinary shares of 1.89p each 39,828,141 1.2
Issued and fully paid:
Share capital at the beginning of the period 32,946,371 1.0
Issued during the period 6,881,770 0.2
Share capital at the end of the period 39,828,141 1.2
On 5 April 2023 a total of 246,513 new ordinary shares of 1.89 pence each in
the capital of the Company were issued.
On 31 October 2023 a total of 6,635,257 new ordinary shares of 1.89 pence each
in the capital of the Company have been allotted to raise gross proceeds of
approximately US $12.7m. Share issue costs of US $0.9m have been netted off
against the share premium arising on the new share issue (see note 13).
13. Share premium account
6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
US $m US $m US $m
(unaudited) (unaudited) (audited)
Share premium at the beginning of the period 13.0 1.2 1.2
Issued during the period - - 12.7
Share issue costs - - (0.9)
Share premium at the end of the period 13.0 1.2 13.0
14. Principal exchange rates
6-month period ended 6-month period ended 15-month period ended
30 September 2024 30 September 2023 31 March 2024
(unaudited) (unaudited) (audited)
Average for the period
Pound sterling 0.7815 0.7944 0.8010
Euro 0.9201 0.9183 0.9240
Canadian dollar 1.3666 1.3422 1.3491
Mexican peso 18.0464 17.3735 17.5790
30 September 2024 30 September 2023 31 March 2024
(unaudited) (unaudited) (audited)
At balance sheet date
Pound sterling 0.7479 0.8237 0.7925
Euro 0.8952 0.9490 0.9264
Canadian dollar 1.3449 1.3515 1.3540
Mexican peso 19.4581 17.6017 16.5558
15. Related party transactions
The ultimate parent company of the Group is Dialight plc. Transactions between
the Company and its subsidiaries have been eliminated on consolidation.
There have been no changes in the nature of related party transactions from
those described in the March 2024 Annual Report that could have a material
effect on the financial position or performance of the Group in the period to
30 September 2024.
16. Principal and emerging risks
The Board has conducted a robust assessment of the Company's principal and
emerging risks. The risks outlined in this section are the principal risks
that the Board have identified as material to the Group. They represent a
"point-in-time" assessment, as the environment in which the Group operates is
constantly changing and new risks may always arise.
The principal risks and uncertainties affecting the business activities of the
Group for the six months ended 30 September 2023 remain substantially
unchanged as those disclosed in the March 2024 Annual Report.
Risks are considered in terms of probability and impact and are based on
residual risk rating of: high, medium and low. Mapping risks in this way helps
not only to prioritise the risks and required actions but also to direct the
required resource to maintain the effectiveness of controls already in place
and mitigate further where required.
The risks outlined in this section are not set out in any order of priority,
and do not include all risks associated with the Group's activities.
Additional risks not presently known to management, or currently deemed less
material, may also have an adverse effect on the business.
· Intellectual property - Intellectual property infringement risk -
by Dialight or against Dialight. Security of protectable intellectual
property.
· Growth (Current offering, customer requirements and markets) -
Risk of stagnation of addressable market of current product portfolio, product
portfolio management efficiency, and execution risk on current sales/route to
market. Understanding customer requirements regarding product function and
price. Risk from failure to recognise emerging markets and focus concentrated
on North America.
· 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 and/or
workforce 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 bank debt position and there is a
significant risk related to liquidity. The Group has not paid a dividend since
2015. In light of the litigation against Sanmina, the Group has a potentially
large cash outflow in settlement of damages that have been awarded against the
Company.
· Cyber and data integrity - Disruption to business systems would
have an adverse impact on the Group if our systems suffered cyber-attacks
(including ransomware, phishing, DDOS attack). The Group also needs to ensure
the protection and integrity of its data. There can be additional risk if
internal data management processes are not mapped and continually improved.
With the Group's dispersed international footprint, increasing automation
there is greater risk of impact on IT infrastructure/communications between
employees.
· Talent and diversity - Group performance is dependent on
attracting and retaining high-quality staff across all functions. Risk in the
labour market hardening in all markets (especially Mexican wage inflation
risk) and age profile of key staff increasing.
· Geo-political and macro-economic impacts - There is risk
attaching to macroeconomic performance in North America. Risk of
macro-economic shocks (including interest rates) have increased globally, and
geopolitical risk has increased across Europe, Middle East and Asia. Following
the results of the US election in November 2024 there is an increased risk in
relation to the Group's Mexican facilities arising from the outcome of any
decision to renew the United States-Mexico-Canada Agreement in July 2026 and
to the imposition of tariffs by the new US administration.
16. Principal and emerging risks (continued)
· Product risk - Risk relating to commercial obligations (including
warranty), legal, product recall and reputational risks arising from
under-performance or non-performance of product against contracted
specification and/or product malfunction.
· Product development strategy - Inability to translate market
requirements into profitable products. Failure to deliver technologically
advanced products and to react to disruptive technologies. Emerging pressure
to innovate ESG-friendly and less carbon-dense products.
· Production capacity and supply chain - The Group operates a
complex international supply chain (both inbound and outbound) which can be
impacted by a range of risk factors including political disruption, border
frictions, logistics challenges and other compliance issues. Supply chain
challenges can in turn impact production capacity and efficiency - as well as
other factors including investment in capacity, labour-supply issues and costs
of production.
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 2024 and beyond.
DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared in accordance
with UK-adopted IAS 34 'Interim Financial Reporting';
b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events and their impact during
the first six months and description of principal risks and uncertainties for
the remaining six months of the year); and
c) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).
On behalf of the Board,
Steve Blair
Group Chief Executive
25 November 2024
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 under IFRS are 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.
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