Dialight shares savaged again
Less than five months after the last profits warning, accident-prone Dialight has issued another.
19th November 2019 14:31
by Graeme Evans from interactive investor
Share on
Less than five months after the last profits warning, accident-prone Dialight has issued another.
The on-off stock market performance of Dialight (LSE:DIA) continued today as another profits warning sent shares in the industrial LED lighting specialist back to the dark days of 2010.
In 2017 the stock was riding high at more than 1,100p, but has fallen sharply since then to below 250p after a move to outsource production in Mexico backfired. While the company has been focused on unwinding the partnership and rebuilding customer and distributor confidence, progress continues to be hampered by unhelpful trading conditions.
In particular, the US-China trade dispute has caused a significant headwind at the start of the company's traditionally busy fourth quarter trading period.
With the timing of orders difficult to predict following "very weak results" in October, the business now thinks full-year underlying earnings will be between £5 million and £8 million, compared with the summer's downgraded range of £10 million and £13 million.
The current market conditions mean the company has pushed back a recovery date to the second half of 2020. That message sent shares down today by over 24% at one stage Tuesday, a level not seen since spring 2010, which is prior to Dialight embarking on a three-year bull run to 1,350p.
Source: TradingView Past performance is not a guide to future performance
Any hopes of a similar recovery this time will not only hinge on economic conditions but how quickly Dialight can draw a line under its ill-fated outsourcing partnership. It is still working on a compensation settlement, while the cost of using external vendors during the exit has created significant one-off costs.
The company hopes that its move to a more vertically integrated supply chain will give it the flexibility to respond to customers' needs and allows it to drive down costs. "This will enable gross margins for the lighting business to return to historic levels," it added.
Dialight is a world leader in LED industrial lighting technology, with over one million LED fixtures installed worldwide. Founded in 1938 in Brooklyn, New York, the company's products have a variety of uses from traffic control to industrial work sites.
It listed on the London Stock Exchange in 1993 as Roxboro Group, before it was renamed as Dialight in 2005, when it sold all other businesses to refocus on the LED industrial market.
The company believes it is well placed, given that its products are an efficient way for clients to reduce energy consumption and create a safer working environment. Case studies of previous work in the UK include with NSG Pilkington and logistics firm Kuehne & Nagel.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.