Without wishing to sound non-committal, it's still too early to fully determine the efficacy of Dialight's (DIA) restructuring programme, but we can say that the signs are encouraging. All but two of the group's lighting product lines have now been transferred as part of the outsourced manufacturing partnership with Sanmina Corporation.
Disregard currency effects and top-line performance at the group's key US and European markets was broadly unchanged. A 200 basis point increase in the lighting division's gross margin suggests that cost benefits are beginning to accrue, underpinning a 24 per cent increase in adjusted group profit on that basis. Additional costs, mainly non-cash, linked to the group's transformation meant that Dialight remains in negative earnings territory, but over the long run should help the group to manage its supply chain and inventory levels far more efficiently.
The next phase of the plan involves reinforcing the group's position in the expanding LED lighting market through improved aftersales services and further focus on integrated solutions for industrial end-users. The lighting division saw an 8 per cent increase in order intake at constant currencies, demonstrating the growth potential.
Investec increased its target price by 26 per cent and guides for respective cash profit and EPS of £26m and 35.4p in 2017, against £20m and 26.5p in 2016.
DIALIGHT (DIA) | ||||
---|---|---|---|---|
ORD PRICE: | 973p | MARKET VALUE: | £314m | |
TOUCH: | 968-973p | 12-MONTH HIGH: | 1,030p | LOW: 420p |
DIVIDEND YIELD: | nil | PE RATIO: | na | |
NET ASSET VALUE: | 238p* | NET CASH: | £8m |
Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2012 | 115 | 19.8 | 42.0 | 13.5 |
2013 | 131 | 11.2 | 26.2 | 14.4 |
2014 | 160 | 15.5 | 29.4 | 15.0 |
2015 | 161 | -3.9 | -6.4 | nil |
2016 | 182 | -3.8 | -8.4 | nil |
% change | +13 | - | - | - |
Ex-div:- Payment:- *Includes intangible assets of £15.4m, or 47p a share |