Dialight finals

Supplier of light emitting diode (LED) solutions for industrial users. Applying leading edge LED technology, it produces retro-fittable lighting fixtures designed specifically for hazardous locations, obstruction signals and traffic signalling.  I have a holding in my growth portfolio (epic code: DIA). 

Dialight announced full year results today and marginally missed their guidance of PBT not to be below £14.5m, issued in their trading update of 8 January see here.


The company has undertaken an assessment, assisted by an independent consultant, of their forecasting and performance process; which has highlighted a number of process improvements, that they have started to implement.  Management believe, that as a result of this, they will have a much more robust and focused system of internal control.  This explains the sudden departure in January of the CFO and the immediate replacement by an interim.


Results showed that revenue from continuing operations had grown by 14% to £131.2m, although underlying profit from continuing operations at £14.5m declined compared to the £19.6m last year.  Underlying PBT was £14.4m, below the guidance of PBT "...to be not less than £14.5m..."


Basic underlying EPS was 30.8p, down 26.1% with statutory diluted EPS of 25.9p below last year by 37.3%.  The final dividend was maintained, so the full year dividend was 14.4p up 6.7% on last year and covered 1.8x.


Net cash on the balance sheet declined from £15m to £8.8m, due to free cash flow declining from a positive £2.5m last year to a negative -£4.6m in 2013.


The Lighting segment continues to show excellent growth at 50.5% and now represent 52% of group sales.


The Signals segment, the cause of disappointment since the second half of 2012 when a major US reseller of Dialight's equipment became a competitor, declined by 13.1%; however, the second half showed a reversal of the decline and was 6.9% up on the first half .


With respect to the current year management state that they expect "...to drive strong Lighting growth for 2014 and the years to come. This, combined with a stabilization of the Signals business leads the Board to expect a return to earnings growth in 2014..."


A disappointing result, but action has been taken with respect to their internal controls and it would appear that the Signals business has halted its decline, allowing the Lighting's performance to show thorough in future years.