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Reorganisation costs mask Dialight's self-help progress

The benefits of the industrial lighting specialist's reorganisation programme aren't immediately obvious, but it is becoming a more streamlined, commercially viable entity
August 2, 2016

It will be midway through next year before Dialight's (DIA) restructuring programme is complete. But if you look beyond its reported figures at the half-year mark, it's clear that we're going to be left with a more streamlined proposition, both in terms of its organisational structure and its industrial lighting product lines.

IC TIP: Hold at 580p

Fixed costs are on the way down, but that isn't immediately obvious as restructuring costs are still working their way through the numbers, distorting the bottom line. Nevertheless, gross profit ticked up 6 per cent to £28.8m on improved margins. And it's worth noting that the company has moved into a net cash position from its debtor status at the end of last year, representing an £11m turnaround on the back of healthy cash flows and some minor tax recoveries.

As part of its outsourced manufacturing partnership with Sanmina Corp, Dialight has been standardising and actively reducing the number of parts that are used within its range of high-specification lighting products. This supports cost-efficient production by reducing inventory levels and simplifying the production process, effectively reducing Dialight's capital intensity, while feeding through into greater flexibility on pricing points. For now, management admitted that some end markets remain challenging.

Investec anticipates cash profit of £16.4m and EPS of 19.6p for the December year-end, rising to £23.9m and 34.6p in 2017 (from £12m and 13.1p in 2015).

DIALIGHT (DIA)
ORD PRICE:580pMARKET VALUE:£189m
TOUCH:550p-580p12-MONTH HIGH:707pLOW: 380p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:214p*NET CASH:£7.2m

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2015 (rebased)80.6**-0.1nil
201679.8-7.1-14.4nil
% change-1---

Ex-div:-

Payment:-

*Includes intangible assets of £17m, or 53p a share **Pre-tax profit at break-even level