Dialight Share Discussion Threads

[frazboy] 03/1/2018 18:15

Anyone got a feel for what 2017 H2 sales will actually be?

In the Trading update the company stated that EBIT for 2017 would be no less than £9.0m. Which is fine, but EBIT in H1 was £9.1m. So, what they're actually saying is that EBIT in H2 (the stronger half?) will actually be approximately zero.

So, assuming that overheads decline by say 10% (due to the lower sales) and a reduction in the Gross Margin of 750 bps, then you need approximately a 20% decline in sales (in sterling terms) in H2 vs. H1 to get a zero EBIT for H2...

Furthermore, are we to assume that non-recurring item (of £6m) is a cash compensation for customers who didn't get their deliveries?

Thoughts welcomed on the above.

Edit: I think this explains £4.4m of the £6.0m of non-recurring cost: “In the first half, we incurred costs of £2.4m relating to the transfer of lighting assembly to our manufacturing partner. These related to set-up costs, project management and dedicated engineering time. This transition has suffered some delays due to the quantum of the transfer but is still expected to be completed in the year. We expect further costs of up to £2m to be incurred in the second half.”

[ledguy] 14/12/2017 17:22

Dialight will continue to decline with the current outsourcing strategy. Gross margins will continue a downward spiral as they outsource production. Wait for big dips in price and hope they get bought by one of the larger competitors for a nice payday.

[frazboy] 14/12/2017 13:47

ouch...

the current share price is only at approximately the level following on from the last profits warning. you can understand why investors may be less than 100% confident in the medium and long term projections of the board

[ledguy] 11/12/2017 20:50

Typical erratic small volume bs. Company is in trouble and running out of time to change course.

[9degrees] 11/12/2017 20:28

small volume but big rise ??!!

[napoleon 14th] 27/11/2017 10:51

DIA sounds like "dire"!
Used to be in these but DIA has lost its' way
& I agree with those who say it's overvalued.
AVOID.

[beeezzz] 23/11/2017 21:27

I don't think it matters whether he is good guy, there are plenty of good people. More importantly can he run a hitec company that is the ?.

I have my doubts, when other LED companies are moving to China, Dia is moving to California, maybe a good strategy if US keeps it policy of buy home made for principalities.

[ledguy] 01/11/2017 22:38

He seems like a good guy but he decided a strategy and then used data to support his plan. Shocked that the Board allowed him three years in a market that is growing like gangbusters. They may miss the market completely. Strongly agree with other post that the bigger competition is coming back strong with broad line. Dialight needs to change direction fast or they will be uncompetitive. Can’t outsource production and improve margins unless they have bloated costs and they don’t. Dislight produces in Mexico now.

[beeezzz] 01/11/2017 22:00

I bet the CEO is an accountant....as the saying goes, accountants know the price of everything and the value of nothing..

[koreaman] 31/10/2017 22:33

exactly ledguy that is correct.
In addition the big players are coming up as competition.
What many investors don't understand is that DIA is just a niche player in the market for explosion protected equipments.
They were just a boiler and PC board LED and Traffic light company only a few years ago before they ventured into explosion protected lighting.
They disrupted the market at the time, when the big players were not yet ready with LED lighting products
But that has changed dramatically and is getting continuously worse for DIA
Players like STAHL, Eaton, Glamox all coming to the market with COMPLETE product portfolios
i held DIA for a couple years becsuse i figured they would surely be a takeover target. Then the incoming CEO shocked the market with obscure messages about the business model of the company and the stock price tanked. i got out. some investors may have applauded that talk as decisiveness. i just saw it as a trick for him to shine in apparently, repeat apparently, rebuilding and improving the company. He has been spinning the news ever since. But truth will reveal itself. Mark my words: DIA will not grow

[koreaman] 31/10/2017 22:30

exactly ledguy that is correct.
In addition the big players are coming up as competition.
What many investors don't understand is that DIA is just a niche player in the market for explosion protected equipments.
They were just a boiler and PC board LED and Traffic light company only a few years ago before they ventured into explosion protected lighting.
They disrupted the market at the time, when the big players were not yet ready with LED lighting products
But that has changed dramatically and is getting continuously worse for DIA
Players like STAHL, Eaton, Glamox all coming to the market with COMPLETE product portfolios
i held DIA for a couple years becsuse i figured they would surely be a takeover target. Then the incoming CEO shocked the market with obscure messages about the budiness model of the company and the stock price tanked. i got out. some investors may have applauded that talk as decisiveness. i just saw it as a trick for him to shine in apparently, repeat apparently, rebuilding and improving the company. He has been spinning the news ever since. But truth will reveal itself. Mark my words: DIA will not grow

[ledguy] 31/10/2017 15:00

Outsourcing strategy is going to kill the company. You can't outsource and improve margins or respond quickly to market demand. They make 10,000 skus in low to moderate volumes. This is a disaster unfolding slowly in a fast paced market. If demand for LED lighting wasn't so strong, they'd die faster. Just wait until Sanmina starts raising prices once they have a lock on production.

[beeezzz] 25/10/2017 17:32

Beginning of the year optimism evaporates - These three turn around is certainly draining the coffers, £16.5m + £5m redundancies. CEO like most of them are greedy and try to run before they can walk, how much business has been lost to competitors due to problems with manufacturing.

[...]

[dangersimpson2] 24/10/2017 08:52

bbbbb,

1H18 results were always going to be the key for me on this stock (once they had migrated production and we could see the impact of this and the other growth drivers).

Seems high risk to me - H1 is historically the weaker half so if the production issues continue to 18H1 at all then 18H1 is likely to be below 17H1 - particularly since the FX tailwind in 17H1 looks like being a headwind in 18H1.

Remember that the trading statement yesterday was warning on EBITDA which is a measure companies have a lot of freedom to report e.g. it excludes both capitilised development & ammortisation of capitilised development! Given the history of the company in asking investors to use heavily adjusted figures in their analysis of EBITDA it seems the cookie jar really was empty this time.

So what happens if 18H1 comes in below 17H1 and the market sees this as a declining trend?

If the company lost it's growth rating and returned to a EV/EBITDA of say 5 that would be a shareprice of around £2. Say however they return to growth and the shareprice increases 50%. That would require a multiple expansion to a further 25x EV/EBITDA. This is the sort of rating of the likes of Ocado, Abcam & Zoopla.

To me that risk reward of hoping for a 18H1 rebound doesn't look good.

[koreaman] 24/10/2017 02:53

The way i see it this CEO has been spinning the results all along.

Separating out "non-core expenses", "core profit" etc. etc. they have used every accounting trick in the book to make the business look profitable.

But You can only do that so long. Truth catches up with You in the end.

Truth is major competitors Eaton, Stahl, Appleton, Glamox etc. are all developing better and better LED lighting for hazardous areas, and have significant synergies with non-lighting portfolios

Truth is also that production outsourcing to Sanmina makes You depend on that company and gives away control of the production operation and profits

I know this industry and the company. The stock will drop to less than LBP 4 and the CEO will move on in another year or two, mark my words

[bbbbb] 23/10/2017 22:04

He has transitioned before in previous role which makes these delays that bit more disappointing. The dividend restoration comets are the attempt to reassure the markets that this is short term and they remain confident.

[beeezzz] 23/10/2017 21:12

Has the CEO made the right decision, regarding manufacturing changes, has quality been compromised. He needs to reassure the market he knows what he is doing, this is a solid business...

Looks like many small investors were stopped out today.

[walbrock82] 23/10/2017 14:56

Share price maybe down 16%, but the market is still valuing the business highly. Here’s why:

Investors may not realise this, but between 2000 and 2004, their average market capitalisation was £50m when average profit was £10.5m.
Contrast this to the past four years, their average market capitalisation is £230m with an average profit of £3.5m.
So, between 2000-04, Dialight average PER is 5 times, whereas 2012-2016 gives a PER of 75 times.

For more and other companies’ analysis, click

[bbbbb] 23/10/2017 13:39

1H18 results were always going to be the key for me on this stock (once they had migrated production and we could see the impact of this and the other growth drivers).

This announcement is disappointing and whilst they have made progress with production migration since August I note that they are no longer saying it will complete by y/e ('in coming months' - which is a bit 'slack', to say the least) so it's possible, if not likely that these issues may also impact on 1H18.

We knew there were issues with the migration and it's not rocket science which makes it worse. What I don't know is whether there is any legal redress against Sanmina (if that's where the issue lies) or how much the true impact of these issues is reflected in the EBIT numbers.

All may not be lost however as the announcement comes on the day one of their major product lines, which has recently migrated, is made available for 'fast-ship' from their REXCEL distribution channel, so we could yet see a pick up between now and y/e in the numbers.

[meijiman] 23/10/2017 12:16

Got to agree with that view.

[dangersimpson2] 23/10/2017 11:26

Profit warning today:



EBITDA £13.5-15.5m. Taking the mid point of £14.5m I reckon that means underlying PAT of around £9m compared to consensus of £11.4m.

It means that 17H2 PBT will likely be below 17H1 and well below 17H2 where H2 is usually seasonally stronger.

Even after today's fall this puts it on 16x adjusted EBITDA & 25 P/E. Still seesm to high to me since:

- no growth in adjusted PBT.
- exceptional costs & provisions excluded from these figures
- they capitilise a lot of development expense
- main historic cash flow form working capital management not trading.

The potential of a small dividend doesn't overcome the high rating for a company not growing profits imo.

[chasbas] 06/10/2017 15:55

Share price is weak. Anybody think of any reason? OK, rating maybe a little high for 2017 but 2018 prospects look strong. No interesting newsflow that I can see though they are presenting at exhibitions etc.

[beeezzz] 08/9/2017 17:33

Wonder if they are in cahoots with Ennismore....looks rather suspicious, target price is low for new coverage....

[bbbbb] 08/9/2017 14:53

echo that Chad..