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Dialight Plc - Trading update and Directorate changes

Trading update and Directorate changes

Dialight plc, the global leader in LED lighting for heavy industrial applications today publishes a trading update for the year ending 31 December 2019, ahead of its half year results to be published on 5 August 2019.


Key points

·      FY19 underlying operating profit expected to be within the range of £10-£13m.

·      Increased costs incurred to expedite exit from former outsource partner. This will result in a non-underlying charge in FY19.

·      Good progress continues to be made in addressing operational performance.

·      Increasing our development of new products to continue to expand our addressable market.

·      Marty Rapp to step down as CEO after the interim results roadshow to resume his retirement.

·      Fariyal Khanbabi, CFO, stepping in as interim CEO.


Current trading and outlook


We have seen a weakening in order intake in the second quarter.  These trends may continue for the remainder of the year.


After a very strong year in 2018, our Signals & Components business has weakened due to market uncertainty and high levels of inventory in the distribution channel.

Given the potential impact on order intake, referred to above, we now expect our underlying operating profit for the year ending 31 December 2019 to be within the range of £10-£13m. This is before incurring c£4m of non-underlying costs.

The Board believes the Group is increasingly well positioned for FY20, with a stronger operational base, expanded product offering and a wider addressable market.


Operational performance


Since the Group's full year 2018 results announcement on 25 February 2019, Dialight has continued to focus on addressing its operational issues and has achieved significant progress. The operational performance of Ensenada is back to acceptable levels of service. Lighting production in our new Penang facility is still in ramp up phase but production volumes continue to increase each week. We have removed all of our equipment from Sanmina. The CNC machines are now installed and we are in the process of installing our paint line in our facility in Tijuana.


To facilitate our exit from Sanmina we have taken more inventory than we had previously anticipated which has impacted the group in three ways. Firstly, our current inventory levels are higher than expected. Secondly, we have incurred c£4m of additional costs relating to these items in the form of markup, freight and handling charges. These costs will be treated as non-underlying. Thirdly, we expect to have a small net debt position at year end to reflect these additional inventory and non-underlying costs.

We have initiated settlement discussions with Sanmina to address the costs related to the inventory transferred to us and compensation for additional costs incurred during the relocation period.

New product development

We continue to execute on our strategy to address an expanded industrial LED market by increasing our capacity to develop new products. In May we launched the first of our new platform level products; this product is our Reliant highbay which is designed to specifically meet the requirements of EMEA and APAC markets and sales are expected to build over the following quarters.  The next significant new product line launch is due shortly and a third new platform-level product launch in the forthcoming months. 


CEO to step down

Martin (Marty) Rapp, who had been a Non-Executive Director since April 2016, came out of retirement to become CEO of Dialight in January 2018 to lead the company through the difficult transition away from Sanmina, which is largely completed. He has also worked with the Board to reset the strategy of the Group, with an increased focus on new product development and expansion of the markets for Dialight products which is well underway.

As part of succession planning, Marty and the Board have agreed that now is the time for the Group to recruit a new CEO for the longer term.  The Board has commenced a search process and Marty will step down as CEO and leave the Board with effect from 9 August 2019 (following the interim results roadshow). Marty will remain as an adviser to the Group for a period of 6 months to ensure a smooth transition.


Fariyal Khanbabi, currently CFO of the Group, will assume the additional role of Deputy-CEO immediately and become Interim CEO from 9 August 2019.  The Board believes Fariyal is well placed to continue to progress the Group's recovery plans. 


The Board wishes to thank Marty for his leadership of the Group during this critical period and wishes him all the very best as he resumes his retirement.