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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Dialight Plc | LSE:DIA | London | Ordinary Share | GB0033057794 | ORD 1.89P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 159.00 | 152.00 | 166.00 | 7,500 | 08:00:26 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Semiconductor,related Device | 169.7M | 400k | 0.0121 | 131.40 | 52.78M |
From Apr 2019 to Apr 2024
TIDMDIA
RNS Number : 8419X
Dialight PLC
27 February 2017
27 February 2017
Dialight plc
Full Year results 2016
Positioned for long-term sustainable growth
Dialight plc ("Dialight" or "the Group"), the leading LED lighting technology company, today announces its Preliminary Results for the year ended 31 December 2016.
Hot Features
Premium
2016 2015
Financial highlights GBPm GBPm
------------------------- ------- -------
Revenue 182.2 161.4
Underlying gross profit 69.5 56.2
Underlying(1) operating
profit 13.1 6.1
Underlying(1) basic
EPS 26.9p 13.3p
Statutory loss from
operating activities (3.3) (3.4)
Statutory loss before
tax (3.8) (3.9)
Statutory EPS (8.4)p (6.4)p
Net cash/(debt) 8.0 (3.8)
------------------------- ------- -------
Progress with plan to 'rebuild, lead and grow'
-- Rebuild phase largely complete -- Growth initiatives underway -- Higher quality sales teams with broader international presence
-- Three automation partnerships in progress, broadening our channels to market and value proposition
-- Investment in product roadmap: 37 new products launched -- Revenues diversified, by sector and geography
Financial highlights
-- Revenue up 13% (2% at constant currency) -- Lighting division order intake(3) up 8% at constant currency
-- Underlying profit growth reflecting management action to reduce cost base and improve operating model
-- Profit in Lighting and Signals & Components grew by GBP6.7m and GBP2.2m respectively
-- Operating model changes reflected in non-underlying items charge of GBP16.4m; additional GBP2 - GBP3m final costs in 2017
-- Strong balance sheet supported by good working capital management and new five-year credit facility
Michael Sutsko, Group Chief Executive, said:
"2016 was a year of change for Dialight. We are making good progress with our three-year plan to return to sustainable profit growth. Phase one of the plan, to rebuild our operating model, is largely complete. The sustainability benefits of reduced energy usage, lower carbon emissions, reduced maintenance and improved safety offer real value to our customers. This progress underpinned our encouraging financial performance in challenging market conditions.
Phase two of the plan - growth initiatives to capture the long-term opportunity in LED lighting - is underway, and on track to deliver against our strategic plan. We remain confident of the Group's prospects for 2017 and over the medium to long-term, based on current FX rates."
Results presentation:
A presentation to analysts and investors will be held today at 10.00 GMT at Investec Bank Plc's offices at, 2 Gresham Street, London EC2V 7QP, United Kingdom. The presentation and an audiocast will be made available on the company's website, www.dialight.com.
Contacts:
Dialight Plc
Michael Sutsko - Group Chief Executive
Tel: +44 (0)203 058 3542
Fariyal Khanbabi - Group Finance Director
Tel: +44 (0)203 058 3542
MHP Communications
Tim Rowntree / Jamie Ricketts
Tel: +44 (0)20 3128 8100
About Dialight:
Dialight (LSE: DIA.L) is a global leader in energy efficient LED lighting for industrial applications. Dialight's LED products and solutions enable sustainability for our customers through lower energy usage, carbon dioxide emissions and maintenance requirements, as well as improving safety.
The company is headquartered in the UK with operations in the USA, UK, Denmark, Germany, Malaysia, Singapore, Australia, Mexico and Brazil. www.dialight.com.
Notes:
1. Underlying operating profit (Underlying EBIT) is defined as profit before interest, tax and non-underlying items.
2. The financial information for the year ended 31 December 2016 has been derived from the audited financial statements of Dialight plc for that year.
3. Order intake is the value of orders received in a given period
4. 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 is 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.
OVERVIEW
We have executed phase one of our plan to rebuild, lead and grow Dialight to capture the industrial LED market opportunity. This strategy is progressing well and has fundamentally improved the Group's operating model, positioning it for long term sustainable growth. This progress is reflected in our financial results.
The need for enhanced light and energy management - via controls and sensors - drives demand for our products. This plays to Dialight's strengths and differentiators: proven technology and a market leading position in industrial markets built over a decade as a group purely focused on LED lighting.
In the year, we delivered an increase in underlying profit and cash flow on revenue growth of 13% (2% at constant currency). This was a particularly encouraging result in the context of uncertain market conditions. Group revenue was GBP182.2m (2015: GBP161.4m), including a favourable currency exchange impact of GBP17.9m. The US and Europe, which generate the majority of our revenues, were broadly flat on a constant currency basis. Underlying operating profit increased to GBP13.1m (2015: GBP6.1m), including a favourable exchange impact of GBP1.5m. Our lighting order intake for 2016 was up 8% to GBP139.8m (at constant currency) over 2015, reflecting early signs of progress in our strategic initiatives. Non-underlying costs totalled GBP16.4m (2015: GBP9.5m); further details are provided in the Financial Review section.
The first phase of our plan - to rebuild Dialight - is almost complete. Our operating model supports scalable and cost efficient production. By switching to 'platform engineering' (standardising the design of our product parts to be used as the foundation for all of our finished products), we have fundamentally improved supply chain management and streamlined our operations. Platform engineering our products reduces the number of discrete product lines, which in turn has improved forecast accuracy for manufacturing planning and reduced inventory. During 2016, 10 out of 12 product groups moved to platform engineering. The remaining two will follow in mid-2017.
The shift to platform engineering has enabled us to secure a manufacturing partnership with Sanmina (a Fortune 500 company with 44,000 employees worldwide based in 25 countries), giving us greater focus on our design capability. This first phase of the switch to a manufacturing partnership is progressing well, and supports our drive for scalable operations. Three product lines were transferred during 2016, with the balance to be completed by during 2017. We have closed our factory in Newmarket, UK and are in the process of scaling back the facilities in Mexico.
Innovation in the LED industrial market is increasingly combining lighting systems with network sources, into a single platform. This moves beyond energy and cost savings to providing meaningful improvements in safety and productivity. Dialight is capturing this trend by adding industrial automation systems and enabling the "Internet of Things" into its product portfolio. This allows factory owners to control individual systems within their plants via a single platform, and to collect data as part of the evolution towards smart buildings.
Three automation partnerships are now underway with Rockwell Automation, Honeywell Tridium and INEM (controls and maintenance system for Obstruction Lighting allowing connectivity with network operations centres).
Further growth initiatives are underway. With continued expansion of our distributor coverage, 47 new distributors were added in 2016. We have also continued to invest in our product roadmap to maintain our technological lead; 37 new products were launched. We have refocused our commercial teams to diversify our sector and geographic exposure and increase the sales to strategic accounts. This has seen a reduction in the reliance on the oil and gas sector from 24% of revenue in 2015 to 16% in 2016. We have a higher quality sales team with broader international experience which has increased our revenue per sales head from GBP1.2m in 2014 to GBP1.5m in 2016 (at constant currency).
Dialight has a strong balance sheet supported by good working capital management and a new five-year credit facility. The Group's continued focus on working capital management delivered net cash from operations of GBP16.3m (2015: GBP8.7m). We continued to invest in long-term growth with net investment in capital expenditure of GBP3.9m (2015: GBP3.3m). The critical part of our strategy to rebuild for long-term growth resulted in non-underlying costs of GBP16.4m. These costs were predominately non-cash with GBP5.1m relating to intangible assets. Further details are in the Financial Review. We finished the year with net cash of GBP8.0m and the Group refinanced its existing revolving credit facility of GBP25.0m with HSBC for a further 5 years ensuring significant financial flexibility.
Board changes
The Board is committed to the delivery of the Group's strategy. In light of the Group's plan for future growth, we reviewed the composition of the Board to ensure that it has the correct balance of skills, experience and knowledge. As a result we are pleased to appoint David Thomas, Martin L. Rapp and Gaelle Hotelier.
Market conditions
The Group has the world's largest installed base in heavy industrial LED lighting, with over 750,000 LED fixtures worldwide. Dialight fixtures have contributed to a reduction of 1.1 billion kWh of energy consumption. There is 97% of the industrial lighting market available for conversion to LED. The US and global industrial markets continued to be challenging, led by the oil and gas sector. To counter this, Dialight's efforts to develop new opportunities have been successful and we have seen an 8% increase at constant currency in the lighting order intake compared to 2016. There was continued growth in non-US markets with Australia up 15% and Brazil up 129%.
Growth prospects
We have demonstrated success in rebuilding the Group's operational capabilities. We now expect growth to be driven by
-- greater adoption of LED lighting by industrial firms globally; -- innovative solutions that increase the return on investment for our customers;
-- focus on additional ways to add value by integration with automation controls and building deeper relationships with end customers.
Outlook
2016 was a year of change for Dialight. We are making good progress with our three-year plan to return to sustainable profit growth. Phase one of the plan, to rebuild our operating model, is largely complete. The sustainability benefits of reduced energy usage, lower carbon emissions, reduced maintenance and improved safety offer real value to our customers. This progress underpinned our encouraging financial performance in challenging market conditions.
Phase two of the plan - growth initiatives to capture the long-term opportunity in LED lighting - is underway, and on track to deliver against our strategic plan. We remain confident of the Group's prospects for 2017 and over the medium to long-term, based on current FX rates.
FINANCIAL REVIEW
In the year, we delivered an increase in underlying profit and cash flow on revenue growth of 13% (2% at constant currency). This was in the context of challenging market conditions. Group revenue was GBP182.2m (2015: GBP161.4m), including a favourable currency exchange impact of GBP17.9m. The US and Europe, which generate the majority of our revenues, were broadly flat on a constant currency basis. Underlying operating profit increased to GBP13.1m (2015: GBP6.1m), including a favourable exchange impact of GBP1.5m. Our Lighting order intake for 2016 was up 8% (at constant currency) over 2015, reflecting early signs of progress in our strategic initiatives.
The significant increase in the Group's underlying profit was a result of the fundamental shift in Dialight's operating model, which has reduced costs and enabled scalable, efficient production:
-- Procurement programmes resulting in GBP2.7m improvement in cost of sales
-- Production efficiencies of GBP1.7m from lower operating costs at the Mexico plant including direct labour savings of GBP0.5m
-- Freight cost savings of GBP1.0m due to a new freight contract being negotiated at the start of the year
-- Headcount savings of GBP1.6m due to the headcount reduction programme of 2015
Currency impact
Dialight reports its results in Sterling. Our major trading currency is the US Dollar with 70% of revenue denominated in US Dollars. The Group has both translational and transactional currency exposure. Translational exposures arise on the consolidation of overseas company results into Sterling and this is the major currency exposure. Transactional exposure is more limited with natural hedging on revenue and purchases mitigating the majority of the currency risk.
The strengthening of the US dollar in the second half of the year has been the main driver for the currency impact. The average rate for the US Dollar against Sterling has moved from 1.53 in 2015 to 1.36 in 2016.
The performance of each business segment is reviewed individually below. Allocation of overheads in each segment was based on directly attributed costs plus an allocation based on segmental revenue.
Lighting segment
2016 2015 Variance
Lighting GBPm GBPm
----------------- ------- ------- ---------
Revenue 136.6 120.6 +13%
Gross profit 57.4 48.3 +19%
Gross profit % 42% 40% +200bps
Overheads (43.9) (41.5) (6%)
----------------- ------- ------- ---------
Underlying EBIT 13.5 6.8 +99%
----------------- ------- ------- ---------
The Lighting segment represented 75% of the Group's revenue and 73% of the Group's underlying segmental EBIT.
Revenues were 2% higher (at constant currency) compared to the prior year. Overall there has been a rise in order intake of 8% compared to last year (at constant currency). There was continued growth in non-US markets with Australia up 15% and Brazil up 129% compared to the prior year. We have increased market penetration within key vertical markets and the top three market verticals now account for 42% of revenue compared to 54% in the prior year.
Gross margin increased to 42% with operational inefficiencies from 2015 being eliminated and better commodity management lowering our input costs. Overheads were in line with the prior year. This resulted in the overall underlying EBIT in the Lighting segment being doubled.
Signals and components
2016 2015 Variance
Signals and Components GBPm GBPm
------------------------ ------ ------ ---------
Revenue 45.6 40.8 +12%
Gross profit 12.1 7.9 +53%
Gross profit % 27% 19% +800bps
Overheads (7.2) (5.2) (38%)
------------------------ ------ ------ ---------
Underlying EBIT 4.9 2.7 +81%
------------------------ ------ ------ ---------
Signals and Components are high-volume businesses operating within highly competitive markets. There is significant competition
from low-cost producers but margins improved by 8% as traffic production was relocated from the US to Mexico. There was
some increase in overheads due to impairment of development costs as product lines became obsolete. Overall there was an
improvement in underlying EBIT of GBP2.2m (81%).
Central overheads
Central overheads are not allocated to these segments. In 2016 they amounted to GBP5.3m, an increase of GBP1.9m from 2015. The main increases related to management incentives and Board transition costs.
Non-underlying costs
The Group incurs costs and earns income that is non-underlying in nature or that is otherwise considered to not be reflective of the underlying performance of the business. In the assessment of performance of the components of the Group, management examines underlying performance which removes the impact of non-underlying costs and income. The table below presents the components of non-underlying profit or loss recorded within cost of sales and administrative expenses.
2016 2015
Non-underlying costs GBPm GBPm
-------------------------------------- ------ ------
Employee severance and restructuring
costs 5.3 1.8
Intangible asset impairment 5.1 1.0
Disposal of tangible assets (0.2) -
Inventory costs 3.7 6.0
Executive director replacement costs - 0.8
Production transfer costs 2.4 -
Settlement of legal case - (0.5)
Other 0.1 0.4
Non-underlying costs recorded in
administrative expenses and cost
of sales 16.4 9.5
-------------------------------------- ------ ------
Total cash impact 4.9 2.4
-------------------------------------- ------ ------
The non-underlying costs in 2016 relating to our strategic initiatives amounted to GBP16.4m with cumulative cost savings of approximately GBP12m expected over the next two years. The strategic initiatives will be completed in 2017 and the final costs relating to this will be GBP3.0m.
The Group is substantially advanced on a programme of product platform re-engineering and transferring lighting product assembly to its manufacturing partner. As part of these programmes the UK production facility was closed in September 2016. It has also been announced that the Mexican production facility will be reduced in scale by mid-2017. The GBP5.3m costs of redundancy relating to staff at both of these plants have been recognised in 2016.
The product lines that were manufactured exclusively in the UK production facility were reviewed to assess the viability of transfer to our manufacturing partner. The review concluded that the European Traffic business was no longer viable and production would cease. This has resulted in a goodwill impairment of GBP4.0m. There has been a full review of all product lines and any development and patent costs associated with obsolete product lines have been impaired, resulting in a further charge of GBP1.1m. The total charge for intangible asset impairment is GBP5.1m, all of which is a non-cash cost.
As part of the fundamental shift in Dialight's operating model, the UK production facility and assets have been sold resulting in a profit of GBP0.2m.
The switch to platform engineering which standardises the design of our product parts to be used as the foundation of all our finished goods has resulted in some of our inventory being obsolete. This amounted to GBP3.7m in the year; we expect a further GBP1.0m of obsolete inventory in 2017.
The transfer of lighting assembly to our manufacturing partner incurred set up costs relating to project management, legal costs, and dedicated engineering time; this amounted to GBP2.4m. The final phase of this will be completed during 2017 and the balance of the costs will be GBP2.0m.
Finance arrangements
The Group re-negotiated its revolving credit facility with HSBC Bank plc during the year. The new facility is for GBP25m with a further GBP25m "accordion" feature and has a five-year term. The Group has no borrowings against the facility at the balance sheet date and is fully compliant with its covenant requirements. This ensures significant financial flexibility.
The Board is not proposing a final dividend payment for 2016 (2015: nil). The Group has a clear capital allocation discipline and is committed to returning any excess funds to our shareholders via either a future dividend or a share repurchase.
Michael Sutsko, Group Chief Executive
Fariyal Khanbabi, Group Finance Director
27 February 2017
Principal Risks and Uncertainties
The Board is responsible for identifying the nature and extent of the risks the Group has to manage in order to successfully pursue its growth strategy and generate shareholder value over the long term.
The Board uses a risk framework which is designed to support the process for identifying, evaluating and managing both financial and non-financial risk. The Group has identified the following key risks. This is not an exhaustive list but rather a list of the most material risks facing the Group. The impact of these risks, individually or collectively, could potentially affect the ability of the Group to operate profitably and generate positive cash flows in the medium to long term. As a result these risks are actively monitored and managed, as detailed below:
STRATEGIC RISK RISK IMPACT MITIGATION
OBJECTIVE CATEGORY DESCRIPTION
----------- ------------- -------------------- -------------------- -------------------------------------
Rebuild Production Production Inability The Group has partnered
capacity capacity to fulfil with a world class manufacturing
needs to demand due partner in order to
be scalable to lack ensure scalability of
in line of product operations on a global
with growth availability scale
Concentration The Group has developed
of Lighting new processes to ensure
production that order fulfilment
at a single will be unaffected.
third party Our manufacturing partner
location has a business continuity
reduces plan in place to deal
control with significant production
and changes disruptions
the order
fulfilment
process
----------- ------------- -------------------- -------------------- -------------------------------------
Operational There is Inability The Group has robust
program a risk that to supply plans and controls to
risk operational existing ensure that changes
capability markets are seamless.
could be on a timely
impacted basis This is monitored and
during the reviewed regularly to
period of Unforeseen ensure milestones are
transformation liabilities being met
of the products
and production
platforms
and changes
to demand
planning
process
----------- ------------- -------------------- -------------------- -------------------------------------
IT systems The Group Inability The Group is continually
uses IT to supply reviewing its IT systems
systems customers to ensure that they
to operate are robust and scalable
and control Loss of in line with the expansion
its business, revenue of the business.
any disruption and significant
to this business There are back-ups built
would have disruption into all Group systems
an adverse and the spread of systems
impact on Loss of offers good protection
the business. commercially from individual events
The Group sensitive
also needs information 3rd party suppliers
to ensure are used to provide
the protection data protection software
and integrity
of its data
----------- ------------- -------------------- -------------------- -------------------------------------
Political The Group's Reduced The Group is preparing
conditions main manufacturing financial contingency plans for
plant is performance alternative production
in Mexico locations in the event
and its Loss of that significant import
main market market share tariffs to North America
is North are introduced
America. Unforeseen
Proposed liabilities The Group is considering
import tariffs production locations
could impact within the EU
the Group's
business
model. Brexit
has introduced
uncertainty
to the level
of tariff
on goods
imported
from Europe
----------- ------------- -------------------- -------------------- -------------------------------------
Lead Succession Group performance Without Group's development
planning is dependent good calibre programmes enhance the
and staff on attracting staff, the skills of executives
calibre and retaining Group will and middle managers
high quality find it
staff across difficult Comprehensive recruitment
all functions to expand process and ongoing
and achieve evaluation assist high-quality
its strategic hiring and development
goals
Considerable time is
spent assessing middle
and senior management
in order to identify
succession plans
----------- ------------- -------------------- -------------------- -------------------------------------
Intellectual Theft or Proprietary All intellectual property
property violation technology is protected by patents
of intellectual used by and potential violations
property competitors are pursued through
(IP) by leading legal process
third parties to loss
or third of market Patent office screening
parties share used to avoid infringing
taking legal existing patents
action for Unforeseen
IP infringement liabilities
----------- ------------- -------------------- -------------------- -------------------------------------
Market To continue Loss of Feedback from customers
trends to lead market share is fed through a product
the market, strategy board to evaluate
the Group Lower margins market intelligence
must be and revenue
able to Internal and external
identify marketing resource are
where customer used to review market
demand is trends and ensure the
trending Group's products remain
and ensure at the forefront of
we have the market
the products
to match.
The Group's
sales strategy
is based
on the cumulative
LED adoption
rate
being 6%
in industrial
lighting
markets
by 2019
----------- ------------- -------------------- -------------------- -------------------------------------
Compliance The Group Fines and The Group uses 3rd party
needs to penalties specialists to deal
ensure that for non-compliance with local fiscal requirements
as the business
expands, Requirements on material
proper controls traceability will be
are put provided through our
in place manufacturing partner's
to ensure systems
compliance
with regulatory Training is provided
requirements for all staff on bribery/corruption
relating legislation
to tax,
trade and
general
code of
conduct
----------- ------------- -------------------- -------------------- -------------------------------------
Reputational Corporate Loss of Corporate profile is
profile market share protected using external
and products advisors
need to
retain brand Brand quality is central
equity to the product development
and product build quality
is rigorously imposed
is rigorously imposed
----------- ------------- -------------------- -------------------- -------------------------------------
Grow Competition Failure Loss of The Group continually
to deliver market share invests in research
technologically and development to push
advanced Lower margins the boundaries of product
products and revenue development. The Group
or to execute develops new products
sales strategy based on an ROI process
could result to mitigate the risk
in loss of abortive expenditure
of market
share
----------- ------------- -------------------- -------------------- -------------------------------------
Economic The Group's Reduced The Group's geographic
conditions operations financial diversity limits its
are located performance exposure to economic
across a risk in any one country
number of Loss of
jurisdictions market share The Group does not have
which exposes significant operations,
the Group Unforeseen cash or assets in economically
to a range liabilities uncertain regions
of economic
conditions
----------- ------------- -------------------- -------------------- -------------------------------------
Supply The Group's Unable to The Group has an on-going
chain ability meet customer programme to ensure
to supply demand through that all critical components
high quality failure have dual suppliers
finished of a key and dual components
goods is supply chain specified
dependent partner
on Critical suppliers are
having a Delays in subject to due diligence
robust supply meeting and on-going monitoring
chain customer
demand
----------- ------------- -------------------- -------------------- -------------------------------------
Funding The Group Curtailed The Group has an undrawn
needs to trading GBP25m revolving credit
ensure that facility (RCF) with
it has access Inability an additional accordion
to sufficient to execute feature for another
cash in M&A opportunities GBP25m
order to
fund working
capital
and expansion
----------- ------------- -------------------- -------------------- -------------------------------------
Foreign Foreign Volatile The Group uses natural
exchange currency financial hedging to cover operational
risk is performance exposure as the majority
the most arising of revenue and costs
significant from translation are in US dollars. As
treasury-related of profit the business expands
risk for from overseas geographically, the
the Group. operations use of forward contracts
In times will be reviewed to
of significant Most of limit operational exposure
volatility the Groups on a selected currency
this can profit earned basis
have a material is not in
impact on the reporting Translational exposure
performance currency is not currently hedged
but the Group reports
key financial indicators
on an actual and constant
currency basis
----------- ------------- -------------------- -------------------- -------------------------------------
Consolidated income statement
For the year ended 31 December 2016
Twelve months Twelve months
ended 31 December ended 31
2016 December
2015
========================================== ===============
Non- Non-
Underlying underlying Total Underlying underlying Total
Note GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
======================== ============ ================== ================= ================================== ===================== =================== ===============
Revenue 2 182.2 - 182.2 161.4 - 161.4
------------------------ ------------ --------------------- ------------------- ---------------
Cost of sales (112.7) (3.7) (116.4) (105.2) (6.0) (111.2)
====================================== ================== ================= ================================== ===================== =================== ===============
Gross profit 69.5 (3.7) 65.8 56.2 (6.0) 50.2
-------------------------------------- --------------------- ------------------- ---------------
Distribution costs (32.7) - (32.7) (30.7) - (30.7)
-------------------------------------- --------------------- ------------------- ---------------
Administrative expenses (23.7) (12.7) (36.4) (19.4) (3.5) (22.9)
====================================== ================== ================= ================================== ===================== =================== ===============
Profit/(loss) from
operating
activities 2 13.1 (16.4) (3.3) 6.1 (9.5) (3.4)
======================== ============ ================== ================= ================================== ===================== =================== ===============
Financial income - - - - - -
-------------------------------------- --------------------- ------------------- ---------------
Financial expense (0.5) - (0.5) (0.4) (0.1) (0.5)
====================================== ================== ================= ================================== ===================== =================== ===============
Net financing expense 4 (0.5) - (0.5) (0.4) (0.1) (0.5)
======================== ============ ================== ================= ================================== ===================== =================== ===============
Profit/(loss) before
income
tax 12.6 (16.4) (3.8) 5.7 (9.6) (3.9)
------------------------ ------------ --------------------- ------------------- ---------------
Income tax
(expense)/credit 5 (3.9) 4.9 1.0 (1.3) 3.2 1.9
======================== ============ ================== ================= ================================== ===================== =================== ===============
Profit/(loss) for the
year 8.7 (11.5) (2.8) 4.4 (6.4) (2.0)
======================== ============ ================== ================= ================================== ===================== =================== ===============
Loss for the year attributable
to:
-------------------------------------- -----------------------------------------------------------
Equity owners of the Company (2.8) (2.0)
-------------------------------------- -----------------------------------------------------------
Non-controlling interests - -
====================================== ================== ================= ================================== ===========================================================
Loss for the year (2.8) (2.0)
====================================== ================== ================= ================================== ===========================================================
Earnings per share
-------------------------------------- -----------------------------------------------------------
Basic 7 (8.4p) (6.4p)
------------------------ ------------ -----------------------------------------------------------
Diluted 7 (8.4p) (6.3p)
======================== ------------ ------------------ ----------------- ---------------------------------- -----------------------------------------------------------
Consolidated statement of comprehensive income
For the year ended 31 December 2016
2016 2015
GBP'm GBP'm
================================================= ============== ======
Other comprehensive income
-------------------------------------------------- ------
Items that may be reclassified subsequently to
profit and loss
-------------------------------------------------- ------
Exchange difference on translation of foreign
operations 11.3 2.2
-------------------------------------------------- ------
Income tax on exchange difference on translation
of foreign operations (0.9) (0.4)
================================================== ============== ======
10.4 1.8
================================================== ============== ======
Items that will not be reclassified subsequently
to profit and loss
-------------------------------------------------- ------
Remeasurement of defined benefit pension
liability (1.5) 0.7
-------------------------------------------------- ------
Income tax on remeasurement of defined benefit
pension liability 0.3 (0.1)
================================================== ============== ======
(1.2) 0.6
================================================== ============== ======
Other comprehensive income for the year, net
of tax 9.2 2.4
-------------------------------------------------- ------
Loss for the year (2.8) (2.0)
================================================== ============== ======
Total comprehensive income for the year 6.4 0.4
================================================== ============== ======
Attributable to:
-------------------------------------------------- ------
Owners of the parent 6.4 0.4
-------------------------------------------------- ------
Non-controlling interests - -
================================================== ============== ======
Total comprehensive income for the year 6.4 0.4
================================================== ============== ======
Consolidated statement of changes in equity
For the year ended 31 December 2016
Capital Non-
Share Merger Translation redemption Retained controlling Total
capital reserve reserve reserve earnings Total interests equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Note
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Balance at 1
January
2016 0.6 1.4 5.0 2.2 61.0 70.2 (0.1) 70.1
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Loss (2.8) (2.8) - (2.8)
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Other comprehensive income
----------------------------------------------------------------------------------------------------- -----------
Foreign
exchange
translation
differences,
net of
tax 10.4 10.4 10.4
-------------- ----- ---------------- ---------------- ------------ ---------- ---------------- -----------
Remeasurement
of defined
benefit
pension
liability,
net of tax (1.2) (1.2) (1.2)
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Total other
comprehensive
income 10.4 (1.2) 9.2 9.2
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Total
comprehensive
income for
the year 10.4 (4.0) 6.4 6.4
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Transactions with owners, recorded directly
in equity
----------------------------------------------------------------------------------------------------- =========== ----------- ============
Share-based
payments,
net of tax 0.6
-------------- ----- ---------------- ---------------- ------------ ---------- ---------------- -----------
Dividends 0.6 0.6
===================================================================================================== =========== =========== ============
Total
contributions
by and
distributions
to owners 0.6 0.6 0.6
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Balance at 31
December
2016 0.6 1.4 15.4 2.2 57.6 77.2 (0.1) 77.1
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Balance at 1
January
2015 0.6 1.4 3.2 2.2 65.5 72.9 (0.1) 72.8
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Loss - - - - (2.0) (2.0) - (2.0)
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Other comprehensive income
----------------------------------------------------------------------------------------------------- -----------
Foreign
exchange
translation
differences,
net of
tax - - 1.8 - - 1.8 - 1.8
-------------- ----- ---------------- ---------------- ------------ ---------- ---------------- -----------
Remeasurement
of defined
benefit
pension
liability,
net of tax - - - - 0.6 0.6 - 0.6
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Total other
comprehensive
income - - 1.8 - 0.6 2.4 - 2.4
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Total
comprehensive
income for
the year - - 1.8 - (1.4) 0.4 - 0.4
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Transactions with owners, recorded directly
in equity
----------------------------------------------------------------------------------------------------- -----------
Share-based
payments,
net of tax - - - - 0.1 0.1 - 0.1
-------------- ----- ---------------- ---------------- ------------ ---------- ---------------- -----------
Dividends 6 - - - - (3.2) (3.2) - (3.2)
============== ===== ================ ================ ============ ========== ================ =========== =========== ============
Total
contributions
by and
distributions
to owners - - - - (3.1) (3.1) - (3.1)
============== ===== ================ ================ ============ ========== ================ =========== =========== ============ Balance at 31 December 2015 0.6 1.4 5.0 2.2 61.0 70.2 (0.1) 70.1 ============== ===== ================ ================ ============ ========== ================ =========== =========== ============
At 31 December 2016 the number of shares held by the Group through the Dialight Employees' Share Ownership Plan Trust ("ESOT") was nil (2015: 9,606). The market value of these shares at 31 December 2016 was GBPnil (2015: GBP43,227)
Consolidated statement of total financial position
At 31 December 2016
2016 2015
Note GBP'm GBP'm
============================== ====== ============== ======
Assets
-------------------------------------- ------
Property, plant and equipment 15.9 16.1
------------------------------ ------ ------
Intangible assets 15.4 20.0
------------------------------ ------ ------
Deferred tax assets 3.5 0.1
============================== ====== ============== ======
Total non-current assets 34.8 36.2
====================================== ============== ======
Inventories 31.4 26.9
------------------------------ ------ ------
Trade and other receivables 40.0 35.5
------------------------------ ------ ------
Asset held for sale 2.0 -
------------------------------ ------ ------
Cash and cash equivalents 9 8.0 5.5
============================== ====== ============== ======
Total current assets 81.4 67.9
====================================== ============== ======
Total assets 116.2 104.1
====================================== ============== ======
Liabilities
-------------------------------------- ------
Trade and other payables (31.3) (22.9)
------------------------------ ------ ------
Provisions 8 (3.8) (0.8)
------------------------------ ------ ------
Tax liabilities (1.9) (0.3)
-------------------------------------- ------
Borrowings - (9.3)
============================== ====== ============== ======
Total current liabilities (37.0) (33.3)
====================================== ============== ======
Employee benefits (1.3) (0.1)
------------------------------ ------ ------
Provisions 8 (0.8) (0.6)
============================== ====== ============== ======
Total non-current liabilities (2.1) (0.7)
====================================== ============== ======
Total liabilities (39.1) (34.0)
====================================== ============== ======
Net assets 77.1 70.1
====================================== ============== ======
Equity
-------------------------------------- ------
Issued share capital 0.6 0.6
------------------------------ ------ ------
Merger reserve 1.4 1.4
------------------------------ ------ ------
Other reserves 17.6 7.2
-------------------------------------- ------
Retained earnings 57.6 61.0
====================================== ============== ======
77.2 70.2
-------------------------------------- ------
Non-controlling interests (0.1) (0.1)
====================================== ============== ======
Total equity 77.1 70.1
====================================== ============== ======
Consolidated statement of cash flows
For the year ended 31 December 2016
2016 2015
Note GBP'm GBP'm
================================================= ====== ============== ==============
Operating activities
--------------------------------------------------------- --------------
Loss for the year (2.8) (2.0)
--------------------------------------------------------- --------------
Adjustments for:
--------------------------------------------------------- --------------
Financial income 4 - -
------------------------------------------------- ------ --------------
Financial expense 4 0.5 0.5
------------------------------------------------- ------ --------------
Income tax credit 5 (1.0) (1.9)
------------------------------------------------- ------ --------------
Share-based payments 0.6 0.1
--------------------------------------------------------- --------------
Depreciation of property, plant and equipment 3.1 2.8
------------------------------------------------- ------ --------------
Amortisation of intangible assets 4.0 3.1
------------------------------------------------- ------ --------------
Impairment losses on intangible assets and goodwill 5.1 1.0
--------------------------------------------------------- --------------
Gain on disposal of tangible assets (0.2) -
------------------------------------------------- ------ --------------
Legal settlement 1.3 -
========================================================= ============== ==============
Operating cash flow before movements in working
capital 10.6 3.6
--------------------------------------------------------- --------------
(Increase)/decrease in inventories (0.2) 6.4
--------------------------------------------------------- --------------
(Increase)/decrease in trade and other receivables (1.5) 3.1
--------------------------------------------------------- --------------
Increase/(decrease) in trade and other payables 5.0 (4.1)
--------------------------------------------------------- --------------
Increase in provisions 8 2.9 0.2
------------------------------------------------- ------ --------------
Pension contributions in excess of the income
statement (0.5) (0.5)
================================================= ====== ============== ==============
Cash generated from operations 16.3 8.7
========================================================= ============== ==============
Income taxes received/(paid) 0.3 (3.9)
--------------------------------------------------------- --------------
Interest paid 4 (0.5) (0.4)
================================================= ====== ============== ==============
Net cash generated from operating activities 16.1 4.4
========================================================= ============== ==============
Investing activities
--------------------------------------------------------- --------------
Contingent consideration - (0.3)
------------------------------------------------- ------ --------------
Capital expenditure (3.9) (3.3)
------------------------------------------------- ------ --------------
Sale of fixed assets 0.9 -
------------------------------------------------- ------ --------------
Capitalised expenditure on development (2.1) (2.5)
================================================= ====== ============== ==============
Net cash used in investing activities (5.1) (6.1)
========================================================= ============== ==============
Financing activities
--------------------------------------------------------- --------------
Dividends paid 6 - (3.2)
------------------------------------------------- ------ -------------- (Repayment)/drawdown of bank facility (9.5) 2.4 --------------------------------------------------------- -------------- Payment of upfront loan facility costs - - ========================================================= ============== ============== Net cash (used in)/generated from financing activities (9.5) (0.8) ========================================================= ============== ============== Net (decrease)/increase in cash and cash equivalents 1.5 (2.5) --------------------------------------------------------- -------------- Cash and cash equivalents at beginning of year 5.5 7.9 --------------------------------------------------------- -------------- Effect of exchange rates on cash held 1.0 0.1 ========================================================= ============== ============== Cash and cash equivalents at end of year 9 8.0 5.5 ================================================= ====== ============== ==============
Notes to the consolidated financial statements
For the year ended 31 December 2016
1. Basis of preparation
The financial statements have been prepared on the historical cost basis except for certain financial instruments which are carried at fair value.
The Directors have a reasonable expectation that the Company has sufficient resources to continue in existence for a period no shorter than 12 months from the date of this report. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2016 or 2015 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the registrar of companies, and those for 2016 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Full financial statements for the year ended 31 December 2016, will be posted to shareholders on 17 March 2017, and delivered to the registrar after the Annual General Meeting on 20 April 2017.
Use of estimates, judgements and assumptions
In the process of applying the Group's accounting policies, management has made a number of judgements. The process of preparing the Group's financial statements inevitably requires the Group to make estimates and assumptions concerning the future and the resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and judgements that have the most significant effect on the amounts included in the consolidated financial statements are as follows:
Goodwill
Each year the Group reviews the carrying values of its goodwill balances by carrying out impairment tests. These tests require estimates and judgements to be made of the value in use of its cash generating units ("CGUs") which are dependent on key assumptions such as future cash flows and future growth rates of the CGUs, and discount rates.
Uncertainties associated with the current economic environment or the Group's ability to carry out its strategic plans could impact
key assumptions made as part of this review. Where these uncertainties present a material risk to the carrying value of goodwill,
sensitivity analysis is carried out on the relevant CGUs.
Development and patent costs
The Group capitalises development costs and patents provided they meet all criteria set out in the respective accounting policy. Costs are only capitalised where management is satisfied as to the ultimate commercial viability of the projects concerned based on available information. The capitalised costs are amortised over the useful economic life, which is determined based on the reasonable commercial prospects for the resultant product.
Inventory provision
The Group operates in an environment of technological change, presenting the risk of obsolete inventory. Inventory is reviewed by operational and financial management on a regular basis, product by product, and the level of provision required is assessed against
historical and forecast use for that product.
Other
Warranty
The Group offers performance warranties on many of its products. A provision is made for the expected costs of future warranty claims relating to past product sales. This provision is estimated based on historical trends for returns, internal knowledge of product performance characteristics and the expected costs of remedying warranty-returned products. This information is reviewed by management regularly. Actual returns may be materially higher or lower than these estimates, which may have a material impact on the adequacy of the provision for warranty claims.
Changes in accounting policies
Except for the changes below, the Group has consistently applied the accounting policies set out in this note to all periods presented in these consolidated financial statements.
The Group has adopted a number of standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2016. There was no material impact on the financial performance or position of the Group.
Adoption of new and revised standards
A number of new standards, amendments to standards and interpretations, including IFRS 9 Financial Instruments, and IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning after 1 January 2018) and IFRS 16 Leases (effective for annual periods beginning after 1 January 2019) have not been applied in preparing these consolidated financial statements.
The Group is currently assessing the impact of IFRS 9, IFRS 15 and IFRS 16 but believes that none of these will have a material impact on the financial statements, but may require some further disclosure. Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.
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.
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 and 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.
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 include share-based payments.
There are no individual customers representing more than 10% of revenue.
Reportable segments
Signals
Lighting and Components Total
2016 GBP'm GBP'm GBP'm
============================ ========== =========================== ==============
Revenue 136.6 45.6 182.2
============================ ========== =========================== ==============
Underlying gross profit 57.4 12.1 69.5
============================ ========== =========================== ==============
Overheads (43.9) (7.2) (51.1)
============================ ========== =========================== ==============
Segment results 13.5 4.9 18.4
----------------------------
Unallocated expenses (5.3)
============================ ========== =========================== ==============
Underlying operating profit 13.1
----------------------------
Non-underlying expense (16.4)
============================ ========== =========================== ==============
Operating loss (3.3)
----------------------------
Net financing expense (0.5)
============================ ========== =========================== ==============
Loss before tax (3.8)
----------------------------
Income tax expense 1.0
============================ ========== =========================== ==============
Loss after tax (2.8)
============================ =======================================================
Signals
Lighting and Components Total
2015 GBP'm GBP'm GBP'm
============================ =========== =========================== ================
Revenue 120.6 40.8 161.4
============================== ========== =========================== ==============
Underlying gross profit 48.3 7.9 56.2
============================== ========== =========================== ==============
Overheads (41.5) (5.2) (46.7)
============================== ========== =========================== ==============
Segment results 6.8 2.7 9.5
------------------------------ ---------- --------------------------- --------------
Unallocated expenses (3.4)
============================== ========== =========================== ==============
Underlying operating profit 6.1
------------------------------ ---------- --------------------------- --------------
Non-underlying expense (9.5)
============================== ========== =========================== ==============
Operating loss (3.4)
------------------------------ ---------- --------------------------- --------------
Net financing expense (0.5)
============================== ========== =========================== ==============
Loss before tax (3.9)
------------------------------ ---------- --------------------------- --------------
Income tax expense 1.9
============================== ========== =========================== ==============
Loss after tax (2.0)
------------------------------ ---------- --------------------------- --------------
Other segmental data
2016 2015
=================== =============== ========= ========== =============== =======
Signals Signals
Lighting and Components Total Lighting and Components Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
=============================== =================== =============== ========= ========== =============== =======
Depreciation 2.3 0.8 3.1 2.2 0.6 2.8
------------------------------- ---------- --------------- -------
Amortisation 3.3 0.7 4.0 2.5 0.6 3.1
------------------------------- ---------- --------------- -------
Gain on disposal of tangible
assets (0.2) - (0.2) - - -
------------------------------- ---------- --------------- -------
Impairment losses on intangible
asset write-down 1.1 4.0 5.1 0.7 0.3 1.0
=============================== =================== =============== ========= ========== =============== =======
Geographical segments
The Lighting and Signals and Components segments are managed on a worldwide basis but operate in four principal geographical areas: North America, UK, Europe and 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 sales of goods.
Sales revenue by geographical market
Reconciliations of reportable segment profit or loss
2016 2015
GBP'm GBP'm
===================================== ============== ======
Total profit for reportable segments 18.4 9.5
------------------------------------- ------
Unallocated amounts:
------------------------------------- ------
Overheads (5.3) (3.4)
------------------------------------- ------
Non-underlying expense (16.4) (9.5)
------------------------------------- ------
Net financing expense (0.5) (0.5)
===================================== ============== ======
Loss before tax (3.8) (3.9)
===================================== ============== ======
3. Non-underlying income/(expense)
The Group incurs costs and earns income that is non-recurring in nature or that is otherwise considered to not be reflective of the underlying performance of the business. In the assessment of performance of the business units of the Group, management examines underlying performance, which removes the impact of non-underlying costs and income.
The table below presents the elements of non-underlying profit or loss recorded within cost of sales:
2016 2015
GBP'm GBP'm
=============================================== ============== ======
Inventory costs (3.7) (6.0)
=============================================== ============== ======
Non-underlying costs recorded in cost of sales (3.7) (6.0)
=============================================== ============== ======
The table below presents the elements of non-underlying profit or loss recorded within administrative expenses:
2016 2015
GBP'm GBP'm
================================================ ============== ======
Employee severance and restructuring costs (5.3) (1.8)
------------------------------------------------ ------
Intangible asset impairment (5.1) (1.0)
------------------------------------------------ ------
Disposal of tangible assets 0.2 -
------------------------------------------------ ------
Production transfer costs (2.4) -
------------------------------------------------ ------
Executive Director replacement costs - (0.8)
------------------------------------------------ ------
Settlement of legal case - 0.5
------------------------------------------------ ------
Other (0.1) (0.4)
================================================ ============== ======
Non-underlying costs recorded in administrative
expenses (12.7) (3.5)
================================================ ============== ======
The non-underlying costs in 2016 relating to our strategic initiatives amounted to GBP16.4m with cumulative cost savings of approximately GBP12m over the next two years. The strategic initiatives will be completed in 2017 and the final costs relating to this will be GBP3.0m.
The Group is substantially advanced on a programme of product platform re-engineering and transferring lighting product assembly to its manufacturing partner. As part of these programmes the UK production facility was closed in September 2016. It has also been announced that the Mexican production facility will be reduced in scale by mid-2017. The GBP5.3m costs of redundancy relating to staff at both of these plants have been recognised in the year.
The product lines that were manufactured exclusively in the UK production facility were reviewed to assess the viability of transfer to our manufacturing partner. The review concluded that the European Traffic business was no longer viable and production would cease. This has resulted in a goodwill impairment of GBP4.0m. There has been a full review of all product lines and any development and patent costs associated with obsolete product lines have been impaired, resulting in a further charge of GBP1.1m. The total charge for intangible asset impairment is GBP5.1m which is a non-cash cost.
As part of the fundamental shift in Dialight's operating model, the UK production facility and assets have been sold resulting in a profit of GBP0.2m
The switch to platform engineering which standardises the design of our product parts to be used as the foundation of all our finished goods has resulted in some of our inventory being obsolete. This amounted to GBP3.7m in the year, we expect a further GBP1.0m of obsolete inventory in 2017.
The transfer of lighting assembly to our manufacturing partner incurred set up costs relating to project management, legal costs, and dedicated engineering time; this amounted to GBP2.4m. The final phase of this will be completed by mid-2017 and the balance of the costs will be GBP2.0m.
The table below presents the components of non-underlying profit or loss recorded within finance income/(expense):
2016 2015
GBP'm GBP'm
================================================= ============== ======
Net interest on defined benefit liability - (0.1)
================================================= ============== ======
Non-underlying costs recorded in finance expense - (0.1)
================================================= ============== ======
4. Net financing (expense)/income
Recognised in profit and loss
Year ending 31 December 2016 Year ending 31
December 2015
===========================================================
Non- Non-
Underlying underlying Total Underlying underlying Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
================ ============ =========== ============ ===================== =================== ===============
Net interest on
defined
benefit
liability (0.2) - (0.2) - (0.1) (0.1)
================ ============ =========== ============ ===================== =================== ===============
Interest expense
on financial
liabilities (0.3) - (0.3) (0.4) - (0.4)
================ ============ =========== ============ ===================== =================== ===============
Net financing
expense
recognised
in the
consolidated
income
statement (0.5) - (0.5) (0.4) (0.1) (0.5)
================ ============ =========== ============ ===================== =================== ===============
5. Income tax (income)/expense
Current tax expense
Recognised in the income statement
2016 2015
GBP'm GBP'm
=================================================== ============== ======
Current tax (income)/expense
--------------------------------------------------- ------
Current year 3.3 (0.7)
--------------------------------------------------- ------
Adjustment for prior years (0.3) (0.9)
=================================================== ============== ======
3.0 (1.6)
--------------------------------------------------- ------
Deferred tax (income)/expense
--------------------------------------------------- ------
Origination and reversal of temporary differences (2.1) (0.4)
--------------------------------------------------- ------
Adjustment for prior years (1.7) -
--------------------------------------------------- ------
Reduction in tax rate (0.2) 0.1
--------------------------------------------------- ------
Recognition of previously unrecognised losses - -
--------------------------------------------------- ------
Change in recognised deductible timing differences - -
=================================================== ============== ======
Income tax income (1.0) (1.9)
=================================================== ============== ======
Reconciliation of effective tax rate
2016 2016 2015 2015
% GBP'm % GBP'm
============================================= ====== ====== ====== ============
Loss for the year (2.8) (2.0)
============================================= ============== ====================
Total income tax income (1.0) (1.9)
============================================= ============== ====================
Loss excluding income tax (3.8) (3.9)
============================================= ============== ====================
Income tax using the UK corporation
tax rate (20.0) (0.8) (19.6) (0.8)
--------------------------------------------- ------ ------------
Effect of tax rates in foreign jurisdictions 23.7 0.9 12.8 0.5
--------------------------------------------- ------ ------------
Increase/(reduction) in tax rate (5.3) (0.2) (7.9) (0.3)
--------------------------------------------- ------ ------------
Non-deductible expenses 36.8 1.4 17.1 0.7
--------------------------------------------- ------ ------------
Current year losses for which no deferred
tax is recognised - - (1.8) (0.1)
--------------------------------------------- ------ ------------
Recognition of tax effect of previously
unrecognised losses (7.9) (0.3) (7.7) (0.3)
--------------------------------------------- ------ ------------
Adjustment for prior years (52.6) (2.0) (24.3) (1.0)
--------------------------------------------- ------ ------------
Non-taxable income 5.6 0.2 - -
--------------------------------------------- ------ ------------
Research and development credits (2.6) (0.1) (3.4) (0.1)
--------------------------------------------- ------ ------------
Other (2.6) (0.1) (12.7) (0.5)
============================================= ====== ====== ====== ============
(24.9) (1.0) (47.5) (1.9)
============================================= ====== ====== ============
The effective tax rate credit for the Group is 24.9%, a reduction on the prior year tax credit of 47.5%. The prior year tax credit was positively impacted by losses allowed in the year giving rise to the inflated tax credit. The tax credit for 2016 was in line with the Group distribution of profit/(loss) and the tax charge/(credit) associated to the jurisdiction they operate in. The rate in the year has been reduced by non tax deductible items relating to the impairment of goodwill offset by previously unrecognised losses and accelerated capital allowances.
Tax recognised directly in equity
2016 2015
GBP'm GBP'm
================== ============== ======
Employee benefits (0.3) (0.1)
------------------ ------
Other 0.9 (0.4)
================== ============== ======
The UK tax authorities have reduced the UK rate of Corporation Tax from 1 April 2017 to 19% and by a further 2% to 17% from 1 April 2020. No further UK corporation tax rate reductions have been announced. As such, the UK timing differences have been recognised at the rate at which the timing differences are expected to unwind. The Groups effective tax rate will continue to be impacted by the tax rates enacted in the various jurisdictions in which it operates. The deferred tax assets/(liabilities) have now all been recognised with previously unrecognised losses being utilised in the year. The deferred tax asset at 31 December 2016 have been calculated based on a rate of 17%. There are no deferred tax assets/(liabilities) that have not been recognised.
6. Dividends
After the balance sheet date no dividends were proposed by the Directors and there are no income tax consequences for the Company.
2016 2015
Final proposed dividend GBP'm GBP'm
============================================== ============== ======
Nil pence per ordinary share (2015: nil pence) - -
============================================== ============== ======
During the year the following dividends were paid:
2016 2015
GBP'm GBP'm
================================================== ============== ======
Final - nil pence (2014: 9.8 pence) per ordinary
share - 3.2
-------------------------------------------------- ------
Interim - nil pence (2015:nil pence) per ordinary - -
share
================================================== ============== ======
- 3.2
-------------------------------------------------- ------
Dividends accrued on shares awarded under the - -
PSP and deferred share scheme but not yet vested
================================================== ============== ======
Total (amount shown in the consolidated statement
of changes in equity) - 3.2
================================================== ============== ======
7. Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 December 2016 was based on a loss for the year of GBP2.8m (2015: loss of GBP2.0m) and the weighted average number of ordinary shares outstanding during the year of 32,503,348 (2015: 32,503,258).
Diluted earnings per share
The calculation of diluted earnings per share at 31 December 2016 was based on a loss for the year of GBP2.8m (2015: loss of GBP2.0m) and the weighted average number of ordinary shares outstanding during the year of 32,777,907 (2015: 32,731,992) calculated as follows:
Weighted average number of ordinary shares (diluted)
2016 2015
'000 '000
===================================================== ========== ============
Weighted average number of ordinary shares 32,503 32,503
----------------------------------------------------- ------------
Effect of share options in issue 275 229
===================================================== ========== ============
Weighted average number of ordinary shares (diluted) 32,778 32,732
===================================================== ========== ============
Underlying earnings per share is highlighted below as the Directors consider that this measurement of earnings gives valuable information on the performance of the Group.
2016 2015
Per Per
share share
============================= ========= =============
Basic earnings (8.4p) (6.4p)
----------------------------- -------------
Underlying basic earnings* 26.9p 13.3p
============================= ========= =============
Diluted earnings (8.4p) (6.3p)
----------------------------- -------------
Underlying diluted earnings* 26.7p 13.2p
============================= ========= =============
* Underlying earnings excludes non-underlying items as explained in note 10 and allocates tax at the appropriate rate (see note 5).
8. Provisions
Warranty Restructuring Total
GBP'm GBP'm GBP'm
GBP'm
===================================== ========== =============== =======
Balance at 1 January 2016 1.4 - 1.4
------------------------------------- ---------- --------------- -------
Effects of foreign exchange movement 0.2 0.1 0.3
------------------------------------- ---------- --------------- -------
Provisions made during the year 1.4 5.0 6.4
------------------------------------- ---------- --------------- -------
Provisions used during the year (1.2) (2.3) (3.5)
===================================== ========== =============== =======
Balance at 31 December 2016 1.8 2.8 4.6
===================================== ========== =============== =======
The warranty provision relates to sales made over the past five years. The provision has been estimated based on historical warranty data with similar products. The Group expects to settle the majority of the liability over the next two to three years. The restructuring provision relates to redundancy costs and production transfer costs (see note 3) and will all be utilised within one year.
Total Total
2016 2015
GBP'm GBP'm
=============================== =========== ==========
Due within one year 3.8 0.8
------------------------------- ----------
Due between one and five years 0.8 0.6
=============================== =========== ==========
4.6 1.4
=============================== =========== ==========
The warranty provision is based on estimates made from historical warranty data associated with similar products.
9. Cash and cash equivalents
2016 2015
GBP'm GBP'm
=========================================== ============== ======
Cash and cash equivalents in the statement
of total financial position 8.0 5.5
=========================================== ============== ======
Cash and cash equivalents in the statement
of cash flows 8.0 5.5
=========================================== ============== ======
10. Reconciliation to non-gaap performance measures
2016 2016
GBPm GBPm
======================================================= ========== ==========
Gross profit 65.8 50.2
------------------------------------------------------- ---------- ----------
Non-underlying items (see note 3) 3.7 6.0
======================================================= ========== ==========
Underlying gross profit 69.5 56.2
------------------------------------------------------- ---------- ----------
Loss from operating activities (3.3) (3.4)
------------------------------------------------------- ---------- ----------
Non-underlying items (see note 3) 16.4 9.5
------------------------------------------------------- ---------- ----------
Underlying operating profit/Underlying EBIT 13.1 6.1
------------------------------------------------------- ---------- ----------
Loss from operating activities (3.3) (3.4)
------------------------------------------------------- ---------- ----------
Non-underlying items (see note 3) 16.4 9.5
------------------------------------------------------- ---------- ----------
Depreciation of property, plant and equipment 3.1 2.8
------------------------------------------------------- ---------- ----------
Amortisation of intangible assets 4.0 3.1
------------------------------------------------------- ---------- ----------
Adjusted underlying EBITDA 20.2 12.0
------------------------------------------------------- ---------- ----------
Loss from operating activities (3.3) (3.4)
------------------------------------------------------- ---------- ----------
Non-underlying items (see note 3) 16.4 9.5
------------------------------------------------------- ---------- ----------
Depreciation of property, plant and equipment 3.1 2.8
------------------------------------------------------- ---------- ----------
Amortisation of intangible assets 4.0 3.1
------------------------------------------------------- ---------- ----------
Net movement on working capital (Inventories,
trade and other receivables, trade and other
payables) per Consolidated statement of cash
flows 3.3 5.4
------------------------------------------------------- ---------- ----------
Movements in working capital related to non-underlying (2.5) (1.7)
------------------------------------------------------- ---------- ----------
Adjusted operating cash flow 21.0 15.7
======================================================= ========== ==========
This information is provided by RNS
The company news service from the London Stock Exchange
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(END) Dow Jones Newswires
February 27, 2017 02:00 ET (07:00 GMT)
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