Dialight Plc · LSE:DIA
Dialight — FY2022 Earnings Presentation
31 slides from Dialight's earnings presentation, Mar 26, 2023
Slide 1: Dialight Plc Full Year Results 2022
DIALIGHT PLC FULL YEAR RESULTS 2022
Slide 2: Our Strategy
OUR STRATEGY ORGANIC GROWTH IMPROVE MARGINS INNOVATION Within our core heavy Through continued cost Pushing technological and harsh industrial improvement and boundaries to support markets by expanding manufacturing efficiency our customers routes to market, programmes, supported by environmental ta
Slide 3: Strategy Execution in 2022
STRATEGY EXECUTION IN 2022 ORGANIC GROWTH EXPANDED REACH INNOVATION • Lighting only orders up 28% • 37 new US distributors with • £22.4m orders from new YoY 80 additional locations and products launched in the 22 new EMEA distributors last 2 years • Outperforming US market growth • 30 new contractor
Slide 4: 2022 Financial Highlights
2022 FINANCIAL HIGHLIGHTS STRONG REVENUE GROWTH GROSS MARGINS IMPACTED BALANCE SHEET BY GLOBAL SUPPLY CHAIN • Group revenue up 29% • Delivered successfully to our • High inventory due to lower- (17% ccy) customers December sales • Lighting revenue up 34% • Gross margin reduced by 350bps due to infla
Slide 5: Financial Review
FINANCIAL REVIEW CLIVE JENNINGS
Slide 6: Income Statement
INCOME STATEMENT REVENUE • Revenue up 29% • Lighting up 34% and Signals & Components up 18% • Key US market up 31% Constant Actual currency GROSS MARGIN FY-22 FY-21 FY-21 • Gross margin reduced by 3.5% to 32.2% £m £m £m • H2 hit to a greater extent by supply chain shortages, raw material cost inflat
Slide 7: Gross Profit Bridge (ccy)
GROSS PROFIT BRIDGE (CCY) £9.0m (£6.6m) (£0.9m) (£1.5m) £3.0m £51.6m £54.6m FY-21 REVENUE MATERIAL INBOUND LABOUR PRODUCTION FY-22 INCREASE COSTS FREIGHT COSTS EFFICIENCIES MATERIALS FREIGHT LABOUR • £4.6m impact of purchase price • £0.7m expedited modes incl. air • £1.0m impact of minimum wage vari
Slide 8: Forecast Operating Profit Bridge
FORECAST OPERATING PROFIT BRIDGE £8.0m (£3.7m) £5.3m £5.0m (£1.2m) (£2.2m) (£0.7m) (£1.1m) £0.6m Forecast Revenue Sales mix Material Increased Freight Production OH Operating cost Actual Operating shortfall change inflation E&O / Scrap increases saving savings Operating Profit Profit REVENUE SHORTFA
Slide 9: Lighting Performance
LIGHTING PERFORMANCE £m Constant H2 2022 QUARTER ON QUARTER US LIGHTING Currency FY-2022 FY-2021 Variance FY-2021 ORDERS % INCREASE / DECREASE Revenue 121.0 90.5 +34% 98.8 47% Gross Profit 40.6 33.7 +20% 36.9 21% 14% 16% Gross margin 33.6% 37.2% -360bps 37.3% 12% 4% Overheads (33.7) (28.4) (19%) (31
Slide 10: Signals & Components Performance
SIGNALS & COMPONENTS PERFORMANCE £m (Actual) Constant Currency FY-2022 FY-2021 Variance FY-2021 Revenue 48.7 41.1 +18% 45.7 Gross Profit 14.0 13.3 +5% 14.8 Gross margin 28.7% 32.4% -370bps 32.4% Overheads (8.3) (7.8) (6%) (8.4) Underlying EBIT 5.7 5.5 +4% 6.4 2% 5% VOLUME GROWTH (ccy) PRICE GROWTH (
Slide 11: Inventory
INVENTORY CLOSING INVENTORY* (ccy) £6.8M INCREASE IN INVENTORY LARGELY THE RESULT OF HIGH PPV & £53.4m DECEMBER SALES MISS £46.5m £18.8m £2.1m RAW MATERIAL REDUCTION £12.0m ACHIEVED DESPITE ADVERSE PPV £9.7m £11.9m NORMAL Q4 SALES UPLIFT DID NOT MATERIALISE RESULTING IN HIGHER £24.8m £22.7m CLOSING
Slide 12: Net Debt
NET DEBT £m UNDERLYING EBITDA • Higher EBITDA, up £1.2m on 2021 Net debt at 31 December 2021 (15.7) Inflows WORKING CAPITAL • Flat net working capital (excluding inventory) Underlying EBITDA 12.3 Net working capital (excl. Inventory) 0.2 12.5 CAPEX Outflows • Continued investment into new products (
Slide 13: 2023 Assumptions
2023 ASSUMPTIONS NET INTEREST Small increase in 2023 INCOME STATEMENT Effective tax rate c.25% TAX RATE c.£6m production capex CAPEX c.£4m product development CASH FLOW WORKING CAPITAL £5m targeted inventory reduction Net debt at 1x EBITDA Results will be H2 weighted as in previous years 13
Slide 14: Business Review
BUSINESS REVIEW FARIYAL KHANBABI
Slide 15: The Lighting Market
THE LIGHTING MARKET THE MACRO-ECONOMIC CORE MARKETS BACKDROP PRESENTS Resource markets expect solid demand in the short-medium term UNCERTAINTY Global energy shortages have led to expansion in oil extraction - US on shore drilling up 60% year over year. INFLATION HIGHEST Mining customers benefitting
Slide 16: Lighting YoY Order Performance
LIGHTING YoY ORDER PERFORMANCE ORDERS AMERICAS • +30% (+17% ccy) • Robust MRO market • Larger capex projects deferred £124m • Growing strategic sales £100m EMEA • +53% (+38% ccy) • Improved performance as restrictions lifted • Benefit from new product launches FY 2021 FY 2022 APAC • +7% (-3%ccy) 23%
Slide 17: Operations Performance
OPERATIONS PERFORMANCE KEY ACHIEVEMENTS OPERATIONS HAVE MADE KEY IMPROVEMENTS & EQUIPMENT EFFICIENCY SUPPORTED REVENUE GROWTH INCREASED TO 80%+ EXPANDED LIGHTING INFLATION ACROSS MATERIALS, LABOUR, LOGISTICS CAPACITY IN PENANG BURN IN REDUCED 8-4 HRS MAJOR COMPONENT SHORTAGES, EXTENDED LEAD TIMES RA
Slide 18: Major Impacts on Gross Profit
MAJOR IMPACTS ON GROSS PROFIT MATERIALS £4.4m negative PPV Brokers & Large scale material shortages, particularly in microchips, required use alternate of alternate vendors and brokers at a premium to safeguard revenue vendors The impact in 2023 is expected to be significantly reduced £2.9m • All br
Slide 19: Gross Margin Improvements
GROSS MARGIN IMPROVEMENTS PRODUCT COST REDUCTIONS STREAMLINING SUPPLY CHAIN PRODUCTION EFFICIENCY FURTHER PRICE INCREASES IMPLEMENTED ACROSS MULTIPLE REGIONS IN Q4 2022 19
Slide 20: Product Cost Reductions
PRODUCT COST REDUCTIONS COMPLETED COST REDUCTION PROJECTS HIGHBAY COST REDUCTION PROJECTS • 50% Weight reduction (480V models) UNDER DEVELOPMENT IN 2023 • 25% Cost reduction SECOND STAGE REDUCTIONS: • HIGHBAY & 60K • AREALIGHT 60K HIGHBAY • 32% Weight reduction FLOODLIGHT GEN II • 25% Cost reduction
Slide 21: Streamlining Supply Chain
STREAMLINING SUPPLY CHAIN PRODUCTION DOWNTIME NEGATIVE PPV PLANNING COMPLEXITY DUAL SOURCING Single sourced components have caused the most disruption in the supply chain 42% of critical components now dual sourced 58% to be completed by Q2 2024 REGIONALISATION Major opportunity identified to insour
Slide 22: Production Efficiency
PRODUCTION EFFICIENCY WE CONTINUED TO SEE HIGH LEVELS OF MINIMUM WAGE INFLATION IN MEXICO, WITH A 23% INCREASE IN 2022 A FURTHER 20% INCREASE HAS BEEN ANNOUNCED IN 2023, WHICH WE INTEND TO OFFSET WHILST IMPLEMENTING LONGER TERM ACTIONS EFFICIENCY PRODUCTION INVESTMENT IN IMPROVEMENTS TRANSFER AUTOMA
Slide 23: Signals & Components
SIGNALS & COMPONENTS THE MARKET STRATEGIC FOCUS • Opto-Electronic (OE) market has normalised after 2 years of exceptional growth • Increase NPD – 7 launched and 10 • Vehicle market flat on low demand from key bus market under evaluation • Traffic down due to lack of major projects bids • Increase di
Slide 24: Environmental Performance
ENVIRONMENTAL PERFORMANCE Emissions (excluding usage of lights) Tonnes m’s Scope 1 & 2 0.006 Scope 3 0.120 Total 0.126 Emissions related to usage of lights Scope 3** 1.099 Total per GHG protocol 1.225 Customer Emissions** Tonnes m’s - if they did not switch to Dialight (3.2) - Actual emissions (Dial
Slide 25: Social Responsibility
SOCIAL RESPONSIBILITY Our people • Long service awards for staff with 5 to 50 years service across various sites • Continued focus on safety • Dialight Foundation hardship fund supported vulnerable staff Supply Chain • First survey of Top 30 suppliers as part of on-going ESG surveillance • Broad div
Slide 26: Key Messages
KEY MESSAGES Our markets are underpinned by long term sustainability, safety and regulatory drivers The strong growth in Lighting orders demonstrates the increasing relevance of our products as energy efficiency became more urgent We strengthened our competitive position as we executed on our strate
Slide 27: Appendix
APPENDIX
Slide 28: Overview
OVERVIEW LED INDUSTRIAL LIGHTING SIGNALS & COMPONENTS MARKET PENETRATION OVERVIEW • Dialight current serviceable addressable market • Dialight has operated in these well-established estimated at £2.0bn markets since 1938 • LED conversion in this market at c. 20% • Sales channels comprise of six in-h
Slide 29: Segments
SEGMENTS Lighting Actual currency Constant currency £m FY-2022 FY-2021 Variance FY-2021 Variance Revenue 121.0 90.5 +34% 98.8 +23% Gross Profit 40.6 33.7 +20% 36.9 +10% Gross margin 33.6% 37.2% -360bps 37.3% -370bps Overheads (33.7) (28.4) (19%) (31.2) (8%) EBIT 6.9 5.3 +30% 5.7 +21% Signal and Comp
Slide 30: Product Strategy
PRODUCT STRATEGY EXPANSION/ REDUCTION OF CORE PRODUCT ADDITIONAL ADJACENT CARBON COST/SIMPLIFICATION APPLICATIONS VERTICALS FOOTPRINT Area Light 90° Bracket SafeSite Bulkhead – ProSite Floodlight – Source & sell products Zone 1 & 2 Zone 2 30
Slide 31: Sustainable Business
SUSTAINABLE BUSINESS 100% green revenue – Revenue FTSE Russell No mercury or hazardous Products substances Focus on safety and fair People treatment Business Integrity and values Operations Sustainability linked RCF Financing with intensity reduction targets 31