Dialight Plc · LSE:DIA
Dialight — H1 2019 Earnings Presentation
32 slides from Dialight's earnings presentation, 2019
Slide 1: Half Year Results
HALF YEAR RESULTS Dialight felelslels less AR Ary
Slide 2: Key Points
| KEY POINTS Dialight H1 2019 financial results were disappointing Physical separation from contract manufacturer now complete Mexico facilities performing well Penang operations relocated to new facility and expected to be fully operational within next two months 2 of 3 platform-level new products
Slide 3: Financial Review
FINANCIAL REVIEW
Slide 4: Financial Summary
_ FINANCIAL SUMMARY Revenue 34% Underlying gross margin (H1-18: 35%) Hae * All prior year numbers restated to exclude the European wind business | Private and confidential Underlying EBIT Dialight Underlying EPS H1-18 H1-19 £11.0m Net debt (Dec-2018: Net debt £2.9m) H1-18 £2.7m Non Underlying (H1-18
Slide 5: Underlying EBIT Bridge
eocccccccccccs UNDERLYING EBIT BRIDGE Dialight Impact of revenue decrease Gross margin Operating costs H1-19 (£1.1m) £0.7m 1-18 Private and confidential 5
Slide 6: Lighting
LIGHTING Dialight Lighting Reported currency Constant currency £m H1-19 H1-18 Variance H1-18 Variance Revenue 56.4 56.9 (1%) 59.4 (5%) Gross Profit 19.6 21.1 (7%) 21.6 (9%) Gross margin 35% 37% -200bps 36% -100bps Overheads (17.7) (17.9) 1% (18.5) 4% EBIT 19 3.2 (41%) 3.1 (38%) Gross margin bridge 3
Slide 7: Non Underlying Costs
NON UNDERLYING COSTS Dialight Reported currency fm H1-19 H1-18 SS Freight and handling costs 19 Removal costs 0.8 Total 2.7 = Cash impact 20 - Private and confidential (— >) Freight & Handling (£1.9m) - Handling charges for materials purchased from Sanmina - Cost to move materials from Sanmina to ou
Slide 8: Lighting Order Intake
LIGHTING ORDER INTAKE The Americas APAC OBSTRUCTION Order intake ® a €) @) (7%) (17%) (9%) 2% * Impact of operational issues reduced ' £59m ! * Confidence in delivery returning slower than expected ¢ Large customers deferred orders ¢ New products H2 focused H1-18 H1-19 * Delays on start-up of produc
Slide 9: Signals and Components
eocccccccccccs _ SIGNALS AND COMPONENTS Dialight H1-18 H1-19 H1-18 H1-19 H1-18 H1-19 5% 100 bps 9% Revenue reduction Improvement in gross margin reduction in EBIT Private and confidential 9
Slide 10: Net Debt Bridge
NET DEBT BRIDGE Dialight £m ( *) £3.3m new facilities Net debt at 31 December 2018 (2.9) £2.8m new product development Underlying EBITDA 3.0 \ “ Inventory (3.8) ( q Receivables/payables 24 £3.8m inventory S J Capex (6.1) f- Y Non-underlying costs (2.7) £2.7m Non-Underlying costs Interest & other (0.
Slide 11: Inventory Levels
INVENTORY LEVELS Dialight Current actions * Stricter purchasing controls implemented Safety New stock | 4.0m | products Ez * Consignment inventory programs in | £2.0m_| negotiation ¢ H2 weighting will assist consumption of excess raw material £31.4m* * Sales teams targeting slow moving finished good
Slide 12: 2019 Planning Assumptions
_ 2019 PLANNING ASSUMPTIONS Diglight INCOME STATEMENT Capex CASH FLOW Working capital Private and confidential 12
Slide 13: Slide 13
Slide 14: Scaleable Operations
_Diglight SCALEABLE OPERATIONS ' Private and confidential 14
Slide 15: Operational Timeline
OPERATIONAL TIMELINE Dialight eocccccccccccs All equipment removed from Sanmina Q2 2019 H Exit from ‘ Sanmina contract Sept 2018 New Penang facility fully operational Sept 2019 > > Q4 2018 Aug 2019 } All manufacturing All CNC machines moved to and paint line Ensenada, Mexico operational in : Tijuana
Slide 16: Lead Times & On Time Delivery %
eocccccccccccs LEAD TIMES & ON TIME DELIVERY % Dialight Pre Sanmina Sanmina Post Sanmina 4 weeks 12-18 weeks 3 weeks D =p = =a Lead Time * =b 76% 53% 82% ; ; 2016 2019 “ontime delivery % (cael | 2 | * Lead times are for all lighting products Private and confidential 16
Slide 17: Ensenada
_ ENSENADA Dialight 55% Jan 19 Jun 19 2 2 2 2 2 2 Jan 19 Jun 19 PP PP PP LY Ss FF eK Qe =v 60% increase in weekly Overdue units equal to one os ; . “ 27% improvement production day production capacity * On time delivery for June 2019 Private and confidential 17
Slide 18: Penang
eocccccccccccs _ PENANG Dialight * High bay _ products running at 87% on time delivery with stabilised production * On time delivery % is not representative of performance when production is ramping Q418 Qi 19 Q2 19 2 © © 2 © #% * Stabilisation in supply High Bay mi Other SF Kt chain for Stainless S
Slide 19: Operational Focus for H2
eocccccccccccs _ OPERATIONAL FOCUS FOR H2 Dialight Inventory reduction Localised supply chain management Vendor managed inventory Supply chain cost reductions Private and confidential 19
Slide 20: Revenue Recovery & Market Expansion
alight REVENUE RECOVERY & MARKET EXPANSION Private and confidential 20
Slide 21: Regaining Market Share
eocccccccccccs _ REGAINING MARKET SHARE Dialight Private and confidential Weekly operational and lead time calls, senior management engagement with customers and sales team Build distribution partner confidence with consistent on time delivery and short lead times Continued expansion of routes to ma
Slide 22: Expanded Market Opportunity
eocccccccccccs > Reliant round hm High Bay Reliant US - High Bay _ EXPANDED MARKET OPPORTUNITY Dialight Remaining expanded market opportunity £1.2bn WD Products launching in 2019 address £0.8bn of expanded market Private and confidential 22
Slide 23: Increased Capacity for New Product Development
| Private and confidential eecccecccccoce INCREASED CAPACITY FOR NEW PRODUCT DEVELOPMENT 23
Slide 24: New Product Development Capacity
_ NEW PRODUCT DEVELOPMENT CAPACITY Legacy team Capacity to handle 3 new projects by the New Jersey team Capacity to handle two new projects by the team in London Dialight eocccccccccccs Additional hires Add capacity to handle a further two projects by H2 2020 22 new platform products targeted over t
Slide 25: Reliant High Bay (EMEA & APAC)
_ RELIANT HIGH BAY (EMEA & APAC) Dialight Easy to install with single-point hook mounting All units are controls enabled with plug and play occupancy senor Exclusive in-house designed power supply and thermal management system Replacement parts offered (including lenses, power supplies and surge pro
Slide 26: Reliant High Bay (US)
RELIANT HIGH BAY (US) Private and confidential Dialight Next generation polymeric housing 10,000-72,000 lumens with up to 100ft mounting heights Exclusive in-house designed power supply and thermal management system All units are controls enabled with plug and play occupancy senor Replacement parts
Slide 27: H1 2019 financial results were disappointing
¢ H1 2019 financial results were disappointing ¢ Physical separation from contract manufacturer now complete * Mexico facilities performing well * Penang operations relocated to new facility and expected to be fully operational within next two months * 2 of 3 platform-level new products launched and
Slide 28: Disclaimer
DISCLAIMER Dialight Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” in respect of the Group's operations, performance, prospects and/or financial condition. By their nature, forward-looking statements involve a number of r
Slide 29: Technology Differentiation
TECHNOLOGY DIFFERENTIATION Dialight c3 CUSTOM POWER SUPPLIES ¢ Long-life drivers * Optimised thermal dissipation | * Protection against environmental contaminants * Protection from vibration related failures Private and confidential INTEGRATED DESIGN Longevity in harsh environments Simple installati
Slide 30: Income Statement
INCOME STATEMENT Dialight Variance £m Constant H12019 H12018 Reported Currency ' Revenue 76.1 77.7 (2%) (7%) Cost of goods sold (50.4) (50.3) Hl Gross Profit 25.7 27.4 6% 9% Distribution costs (14.1) (14.6) Administrative expenses (10.7) (10.0) Underlying EBIT 0.9 2.8 (68%) (83%) Non-underlying cost
Slide 31: Market Segments
MARKET SEGMENTS Dialight H1 2019 12018 Obstruction 9% 10% Food & Beverage 6% 8% Heavy industrial 17% 14% Mining 10% 11% Oil & Gas 21% 21% Power 10% 8% Pulp & Paper 14% 10% | Other industrials 13% 18% 100% 100% Private and confidential 31
Slide 32: Signals and Component
SIGNALS AND COMPONENT Dialight Signal & components Actual currency Constant currency £m H1 2019 H1 2018 Variance H1 2018 Variance Revenue 19.7 20.8 (5%) 22.2 (11%) Direct costs (13.6) (14.5) 6% (15.5) Gross Profit 6.1 6.3 (3%) 6.7 (9%) Gross margin 31% 30% +100bps 30% +100bps Overheads (4.1) (4.1) -