DIALIGHT PLC

Interim results for the six months ended 30 June 2008

Dialight plc, the UK based leader in Applied LED Technology, today publishes its Interim results for the six months to 30 June 2008.

Dialight consists of two business segments:-

Highlights

• Group sales up 20% on H1 2007 to £34.5m

• Profit before tax up 68% to £2.1m (2007: £1.3m)

• Basic Earnings per Share increased 68% to 4.2p (2007: 2.5p)

• Signals/IIlumination up 28% on H1 2007 in both Sales and Orders, driven by demand for energy efficient lighting solutions

• Electromagnetic Components sales up 18% on H1 2007 driven by increased demand in the US Advanced Meter Infrastructure market

• Indication Business disposal project suspended

• Interim Dividend increased by 10% to 2.1p (2007: 1.9p)

Chairman and Chief Executive's Statement

Financial Results

We are pleased to report on a period of significant progress and increasing growth, particularly in our key Signals/Illumination business.

Driven by the increasing demand for energy efficiency and reduced carbon footprints, Group revenues for the six months ended 30 June 2008 increased by 20% to £34.5m (2007: £28.9m). Operating profit was up by 104% to £2.0m (2007: £1.0m) and profit before tax rose by 68% to £2.1m (2007: £1.3m). Basic earnings per share increased to 4.2p from 2.5p in 2007.

The Group has generated net cash inflows from operations of £2.3m (2007: £3.5m) representing 116% (2007: 358%) of operating profit. During the first half the Group paid the final dividend to shareholders of £1.2m (2007: £1.1m) and income tax amounting to £1.0m (2007: £1.1m received).

On 30 June 2008 the Company redeemed 2,695,120 of the remaining B Shares in issue. The redemption reduced cash by £2.0m and debt carried on the balance sheet by a corresponding amount.

As at 30 June 2008, following the redemption of the B Shares, the Group had a cash balance of £3.5m (December 2007: £6.6m, June 2007: £7.0m). 

Dividend 

The Board is pleased to declare an interim dividend of 2.1 pence per share (2007: 1.9 pence). The interim dividend is covered 2.0 times by profit after taxation (2007: 1.3 times). The interim dividend is payable on 18 September 2008 to shareholders whose names are on the Register of Members at close of business on 8 August 2008.

Business Review 

Signals/Illumination

The Signals/Illumination segment addresses the increasing demands for Energy Efficient Lighting solutions. Through the use of high brightness LEDs and utilisation of a number of associated technologies we create and deliver compelling value propositions to our customers. In the view of the Board, this segment is a significant driver for growth as new applications gain increased relevance in a society which is ever more conscious of the potential scarceness of energy and harm to the environment.

In the first six months of 2008, all sectors of this business have delivered strong growth as LED adoption has accelerated and a number of Dialight's new products were accepted in the market. Our strategy of identifying and servicing sizeable regulated niche markets remains unchanged. The Company will continue to work closely with LED developers to identify and bring to market Solid State Lighting and Signalling Products which deliver value to its customers through savings in energy and significantly improved product lifetimes and reliability.

Some of the raw materials used in this segment have been subject to commodity price inflation but through both re-engineering and resourcing, the effects of this inflation have been offset and our margins have held firm.

Traffic Lights

Overall, sales of Traffic Lights grew by over 25% against H1 2007 with both North America and Europe contributing strongly. Enhanced by sales to Miami Dade County of over $3m, North American sales posted a healthy increase over the same period in 2007. The largest potential market for Traffic Signals growth is in Europe where the adoption of LED technology lags significantly behind North America and the Company saw an increase of over 40% in sales versus prior year. This was achieved through an increase in the customer and geographical base as well as maintaining our existing relationships with Traffic Systems OEMs. In particular, the Company continues to be a significant supplier to Siemens both in Germany and several other European countries.

Obstruction Lights

Obstruction Lights demonstrated continued excellent growth with sales up over 40% from 2007 H1. These products comprise a range of warning lights for installation on tall structures throughout the world to alert approaching aircraft to their presence. Key markets for these products are towers for broadcast, cell phones and wind turbines and products are supplied to national and international standards. 

Sales of red products have been driven by the increase in installation of wind turbines in the North American market and Dialight has been successful in winning a major share of this business with its energy efficient, GPS synchronised beacon.

The North American Cell Tower market requires, in many instances, a white strobe light of which Dialight is the only supplier. Sales of this strobe, although only at the beginning of its life cycle, helped contribute to growth. Our expectations are that this product will help sustain growth in this market over the coming years as there exists a sizeable installed base of conventional strobes which potentially will be replaced by this LED product.

Transportation

Sales in this sector are primarily to the US Transit Bus market where Dialight supplies exterior marker, stop and tail lights. More recently Dialight has introduced white LED lights for interiors, step wells and engine compartments which have contributed to growth, although another major contributing growth factor here has been sales into the military vehicle market where the long life and ruggedness of our products brings significant value to our customers. Our sales grew by 27% versus 2007 H1.

Lighting

Sales to the Lighting market grew by over 40% against 2007 H1, albeit from a relatively small base. Our sales to the architectural market demonstrated pleasing growth as we continued to extend our network of lighting partners in Europe, and in the USA an agreement with Juno Lighting represents our first major signing of an OEM partnership.

Sales through distributors are also important as they "seed "the market and we are experiencing good traction through this channel which should lead us to future customers. Particularly significant were sales of the "Safesite" product for Hazardous and Industrial applications. Shipments of these lights met management expectations in this first full half of availability. We continue to expand the applications for these products into a wider range of industries and the product is being received with enthusiasm as a result of its energy saving characteristics, long life and ruggedness.

Growth in Solid State Lighting will be driven by more efficient LEDs and the increasing requirement to save more energy and to reduce carbon emissions. Dialight is ideally placed to service this demand by firstly identifying those areas where a strong energy efficient value exists and then bringing innovative products to market early to satisfy that growing demand.

Components

Indication Business

Sales of these products are primarily to Electronics OEMs for status indication. Dialight has a prime position in this market niche and is on the Vendor Lists of most of the world's major OEMs in the professional electronic equipment market and also sells through a number of major Electronic Distributors.

Sales were up 6% over H1 2007 and to date the market appears to be steady although perhaps nervous of a further slowdown in the economy. In the present environment it is difficult to predict market trends, but our Distributor "Point of Sale" data, which is considered to be a good indicator of the state of this market, has remained steady.

Overall margins have remained strong and stable for the past several years, but the well publicised material price inflation had a minor effect on one of our product lines. We have implemented price increases which will take effect in the second half of this year.

Electromagnetic Disconnects

For some years the US Advanced Meter Infrastructure market has been poised to deliver significant growth for our Electromagnetic Disconnect products. Driven by the need to manage energy resources more carefully, this market has uplifted our sales by 18% against H1 2007. In the half we made our first significant shipments of our new 200 amp switch. In the period we booked over £2.5 million in orders for meter manufacturers in the United States. Dialight is well positioned in this US Advanced Meter Infrastructure market and we expect to take a sizeable share of this rapidly growing demand over the next few years.

Indication Business Disposal Project

The Board has explored in recent months the possibility of divesting the LED Indication Components business, with a view to realising the Board's view of appropriate shareholder value. We have received a number of indicative offers for the business, against a background of exceptional financial market turmoil. The Board and our advisers remain convinced of the high quality and value of this business and given its strong earnings and cash flow characteristics and potential, we do not believe it is in the interest of our shareholders to consider these offers further at this time.

Current trading and outlook

As businesses and consumers struggle with the high cost of energy and strive to reduce their carbon footprints, we believe that Dialight and our Solid State Lighting offering are ideally placed to exploit the resultant opportunities.

Our strategy for growth, first outlined in 2005, has delivered a further period of strong double digit growth in Signals/Illumination and the Board is encouraged by the increased adoption of our Solid State applications and the good reception for our new products. 

In addition to the strong performance in Signals/Illumination, our Disconnect business is at last beginning to show strong growth in the US Utility market, driven by adoption of the Advanced Meter Infrastructure.

Whilst the uncertainty of the global economic situation gives rise to some caution in the outlook for sales of Indication Components, the energy efficient nature of our Signals/Illumination products and our position in our chosen markets give the Board confidence of further growth. 

CONSOLIDATED INCOME STATEMENT

For the period ended 30 June 2008 (unaudited)

The accompanying Notes form an integral part of these Interim Financial Statements

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the period ended 30 June 2008 (unaudited)

The accompanying Notes form an integral part of these Interim Financial Statements

CONSOLIDATED BALANCE SHEET

As at 30 June 2008 (unaudited)

CONSOLIDATED CASH FLOW STATEMENT

For the period ended 30 June 2008 (unaudited)

Notes to the Financial Statements

For the period ended 30 June 2008 (unaudited)

1)    Basis of Preparation and Principal Accounting Policies

Dialight Plc (the "Company") is a company domiciled in the UK. The condensed set of financial statements as at, and for, the six month period ended 30 June 2008 comprises the Company and its subsidiaries (together referred to as the "Group").

The Group financial statements as at, and for, the year ended 31 December 2007 prepared in accordance with IFRSs as adopted by the EU and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, are available upon request from the Company's registered office at 2B Vantage Park, Washingley Road, Huntingdon PE29 6SR.

In respect of the Defined Benefit plans no actuarial gains or losses were recognised in the period. There will be a full review performed at the year end and any actuarial gains and losses arising will be recognised through the statement of recognised income and expense at that date. 

The comparative figures for the year ended 31 December 2007 are not the Company's statutory accounts for that year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified (ii) did not include any reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

The condensed set of financial statements for the six month ended 30 June 2008 is unaudited but has been reviewed by the auditors. The Independent Review Report is set out on page xx.

Statement of Compliance

The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The condensed set of financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's financial statements as at, and for the year ended 31 December 2007.

This condensed set of financial statements was approved by the Board of Directors on 29 July 2008. 

Significant Accounting Policies

The accounting policies applied by the Group in this condensed set of financial statements are the same as those applied by the Group in its financial statements as at, and for the year ended 31 December 2007.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the year ending 31 December 2008 but have no material impact to the Group.

IFRIC 11,IFRS 2- Group and Treasury Share Transactions, effective for annual periods beginning on or after 1 March 2007.

IFRIC 14 IAS 19-The limit on a defined Asset Minimum Funding Requirements and their Interaction. IFRIC 14 has yet to be adopted by the EU.

Estimates and Judgements

The preparation of a condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of uncertainty were the same as those applied to the Group financial statements as at 31 December 2007.

2)    Segmental reporting

Business segments

The Group comprises the following business segments: -

• Signals/Illumination which includes Traffic and Rail Signals, Obstruction Lights and Solid State Lighting products.
• Components comprising the indication businesses and electromagnetic components.

Business segments