Dialight plc (LON:DIA) recently released Full Year 2022 Results (year ending 31 December 2022) in their 2022 Annual Report. As a UK company, quarterly reporting is not required – only half year and full year reporting (same for companies in the EU and Australia). Dialight announced 2022 revenue of $210M (£m 169.7), up +29% YoY and “underlying” EBIT of $6.2M (£m 5.0), up 11% YoY. The 2022 full year results show a recovery by the company to its 2018 level of revenue in British Pounds Sterling, but still below the USD conversion in 2018 ($229M) as the UK currency has weakened against the US dollar. 87% of Dialight’s revenue is in US dollars stemming from the size of Dialight’s US business and the company’s use of USD for contract currency elsewhere in the world.
Dialight reported that 2022 gross margins were reduced by 3.5% to 32.2% (from 35.7% in 2021), impacted by global supply chain issues including shortages, raw material cost inflation, and shipping delays. Dialight also cited further impact on gross margins by increases in the minimum wage in Mexico of 23%. The full year 2022 presentation notes that higher selling prices only partially mitigated the situation and that a margin improvement plan in place for 2023.
Dialight describes themselves as “a pure LED company”, and operates two divisions: LED Industrial Lighting, and Signals & Components. Dialight’s Lighting Segment serves the following major vertical markets: Mining, Heavy Industry, Oil & Gas, Pulp & Paper, Petrochemical, and Power Generation. In full year 2022 the Lighting segment brought in just over 70% of Dialight’s revenue at $150M (£m 121)
“Underlying EBIT” is a categorization that allows a company to exclude certain one-off gains or losses or exclude unusual income or expenses as a result of events that are not likely to recur. In the case of Dialight’s 2022 reported results, the non-underlying items included expenses of $3.6M (£m 2.9) related to on-going litigation costs with former manufacturing partner Sanmina Corporation. Since December 2019, Dialight and Sanmina have been in legal proceedings against each other. In March 2023, the Court denied Sanmina’s motion to dismiss Dialight’s fraudulent inducement claim and denied a motion for summary judgment on Sanmina’s accounts receivable claim. The Court granted Sanmina’s motion to dismiss Dialight’s willful misconduct claim. Dialight is expensing the legal costs as incurred, with $1.2M(£m 1.0) in litigation costs in 2022. The other significant amount in “underlying” items for 2022 is $1.6M (£m 1.3) after pausing development on a new range of Obstruction products within the Lighting Segment – choosing to go instead with the option to use third party components in the new product suite for faster speed to market. Net profit or EBIT (after the non-underlying costs described above) for full year 2022 was $2.85M (£m 2.3), up +10% versus full year 2021 at $2.5M (£m 2.1)
The split between the business segments – Industrial Lighting versus Signal and Components is not provided geographically, but globally 70% of Dialight’s revenue comes from the Industrial Lighting segment. Dialight’s presentation on 2022 noted Lighting only orders up 28% YoY.
Dialight continues to put significant effort and resources into their Environment, Social and Governance activities – see the link below for details in their 2022 Sustainability Report.
Providing limited guidance on 2023, Group Chief Executive Fariyal Khanbabi said “the markets we operate within became increasingly difficult during the year due to significant price inflation and continued global supply chain disruptions, which impacted our gross margins. Whilst these headwinds remain, we believe that they are in most cases transitory, and we expect to see some alleviation in H2 2023.” An inventory reduction of over $6M is targeted for 2023, part of an effort to reduce the current debt leverage from 1.7x EBITDA down to 1x EBITDA. Dialight’s results have typically been stronger in the second half of the fiscal year.
Go Deeper
Dialight Full Year 2022 Results Press Release: https://www.dialight.com/wp-content/uploads/2023/03/RNS-full-year-V20-FINAL.pdf
Dialight 2022 Annual Report (Full Year ending 31 December 2022): https://www.dialight.com/wp-content/uploads/2023/04/23745_Dialight_AR22-interactive-version.pdf
DIalight plc Full Year 2022 Investor Presentation: https://www.dialight.com/wp-content/uploads/2023/03/2022-FY-V13-FINAL-2.pdf
Dialight 2022 Sustainability Report: https://www.dialight.com/wp-content/uploads/2023/01/Sustainability-Report-2022.pdf