("Dialight" or "the Group")
Dialight Plc (LSE: DIA.L), the global leader in LED lighting for heavy industrial applications today publishes a trading update for the year ending 31 December 2019, ahead of its full year results to be published on 16 March 2020.
Current trading and outlook
We remain in recovery mode with a strong focus on rebuilding customer and distributor confidence and continued investment in distinctive and competitive products. We have seen early signs of recovery but this has been hampered by the slowdown in the global markets. With our exposure to US markets, the uncertainty of the trading relationship with China continues to be a significant headwind as we enter our traditionally busiest period. As a result, the timing of orders is difficult to predict and after very weak results in October, we now expect our full year EBIT to be in the range of £5m to £8m after adjustment for non-underlying costs of c.£6m in addition to those reported in August.
The Signals and Components business has had a difficult year, with market conditions remaining weak. We expected some recovery in the second half of the year, however market conditions remain weak and recovery is not anticipated until the second half of 2020.
Our operational recovery and delivery to our end customers continues to improve. Our current lead times are better than they were prior to outsourcing to Sanmina, with both of our factories performing strongly. As we go into 2020, we have overcome the operational challenges of the past few years and we have a leaner organisation that is focused on protecting our core markets.
Whilst adoption of a hybrid manufacturing model was key in ensuring a rapid and controlled exit from Sanmina, this has come at a significant cost to the business. The costs of using external vendors during the exit from Sanmina have been treated as non-underlying costs. We have now moved to a more vertically integrated supply chain which gives us the flexibility to respond to our customers' needs and enables us to drive costs down. This will enable gross margins for the lighting business to return to historic levels.
During our recovery we have continued to increase finished goods inventory to demonstrate our operational recovery to our customers. These are high running lines that are able to be shipped in a matter of days. Accordingly, our inventory unwind is likely to take longer than originally anticipated resulting in a higher net debt than current market forecasts, however well within covenant levels. We have undertaken a detailed review of our inventory and we are satisfied that the obsolescence risk is low and that current inventory levels are an investment in our recovery.
To date, we have been unable to reach a compensation settlement with Sanmina and we are now exploring all options to recover costs related to the performance of, and exit from, Sanmina.
Tel: +44 (0)203 058 3542
Fariyal Khanbabi - Group Chief Executive (interim)
Tel: +44 (0)203 058 3542
Ronan Sheehy - Group Finance Director (interim)
Tel: +44 (0)20 3128 8570
Tim Rowntree, Guy Featherstone, Pete Lambie
The person responsible for arranging the release of this announcement on behalf of Dialight is Fariyal Khanbabi.
Dialight (LSE: DIA.L) is a global leader in sustainable LED lighting for industrial applications. Dialight's LED products are providing the next generation of lighting solutions that deliver reduced energy consumption and create a safer working environment. Our products are specifically designed to provide superior operational performance, reliability and durability, reducing energy consumption and ongoing maintenance and achieving a rapid return on investment.
The company is headquartered in the UK with operations in the USA, UK, Germany, Malaysia, Singapore, Australia, Mexico, Dubai and Brazil. www.dialight.com.
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.
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