Dialight (DIA) calls itself ‘a global leader in sustainable LED lighting for industrial applications.’
What it does is design new energy efficient lighting systems that go into vast factories, warehouses, distribution centres and the like. It also supplies warning lights slapped on to tall buildings, mobile masts and wind turbines, among other things, designed to stop planes and helicopters crashing in to them at night.
LEDs are brighter and about 10-times as energy efficient as normal light bulbs, so there are large energy bill savings to be had for big users.
MANUFACTURING HEADACHES
The company is in the process of outsourcing most of its manufacturing, and that’s causing headaches.
Because of what it calls ‘short-term production challenges,’ stemming from transferring manufacturing to its outsourcing partner Sanmina, Dialight has warned that ‘we now expect EBIT (earnings before interest and tax - effectively operating profit) for the year ending 31 December 2017 to be in the range of £13.5m to £15.5m.
Market forecasts had been anticipating £17m EBIT this year, so it’s a big downgrade that counts as a profit warning.
Needless to say, investors do not like that. Shares in the company have slumped nearly 20% on Monday, falling from 815p to 660p.
Apparently, its outsourced manufacturing partner Sanmina, a Silicon Valley-based US company, has had difficulties with on time delivery against orders caused by component shortages.
SHORT-TERM BLINDNESS
‘Given the largest single volume product range (high bay) has just moved across, there is a significant loss of visibility for the short term,’ spell out analysts at N+1 Singer today.
The broker had been expecting £19.5m of pre-tax profit this year on £195m of revenue before today’s news. Analysts had £25.6m and £212m respectively pencilled in for 2018 but they have had to pull those estimates while they remain in the dark.
‘We expect to reduce our estimates accordingly. This should be relatively temporary, but there are clearly issues in the transfer of manufacturing to Sanmina,’ says analyst Trevor Griffiths.
There is at least the brighter news that dividends may soon be back on the agenda.
‘We expect to end the current financial year with a strong net cash position and the board is considering reinstating dividend payments,’ Dialight says. That at least chimes with a Shares feature suggesting as much last week.
