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Dialight blows a fuse as it warns on weaker orders for 2019, CEO exits

In an unscheduled update, the lighting firm said weakening order intake and "market uncertainty" in its second quarter had forced it to cut its full-year forecasts

Blown light bulb
The firm also said it will take a £4mln charge to expedite its exit from outsourcing partner Sanmina

Lighting firm Dialight PLC (LON:DIA) was decidedly dimmer on Tuesday after the group issued a warning that weakening order intake in its second quarter may continue for the rest of the year.

In a trading update, the group said its signals & components business had weakened due to “market uncertainty” as well as high levels of inventory in its distribution channel.

As a result, the company said it was cutting its underlying operating profit expectations for the full year to between £10mln-£13mln, excluding £4mln in underlying costs.

Dialight also said its chief executive, Marty Rapp, who had come out of retirement in 2018 to lead the company through its transition away from US electronics group Sanmina Corp (NASDAQ:SANM), would be stepping down from the role with effect from 9 August and would be replaced by current chief financial officer Fariyal Khanbabi until a permanent successor was found.

While the group did believe it was “increasingly well positioned” for its 2020 financial year despite the ongoing issues, investors were less than optimistic as the shares tumbled 29.7% to 348p in late-morning trading.

Analysts at Peel Hunt were also unimpressed, cutting their target price for the group to 350p from 410p and saying the group had “taken a step back in its hopes of regaining credibility” and investors were right to penalise the firm.

The broker also retained its ‘hold’ rating on the stock and cut their forecasts for year end profits to the lower end of Dialight’s new estimates, having previously estimated a figure of £13.7mln.

“In time, if a successful manufacturing transition becomes clear through orders and margins, if new products can be developed and delivered as intended, and if a new CEO with the right marketing/industrial balance can be found then the shares are cheap. But these are a lot of ifs, and we see no need to rush in”, Peel Hunt said.

Quick facts: Dialight Plc

Price: 341.5 GBX

LSE:DIA
Market: LSE
Market Cap: £111.12 m
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