Good morning, it's Paul here with the SCVR for Weds.

Estimated timings - there's not a great deal of small cap news today, so I should be finished by 1pm.

Today's report is now finished.


Dialight (LON:DIA)

Share price: 199p (up 10% today)
No. shares: 32.6m
Market cap: £64.9m

Trading statement

Dialight plc (LSE: DIA.L), the global leader in sustainable LED lighting for industrial applications, is today issuing the following update relating to its manufacturing footprint further to its announcement on 21 April 2020.

Today's update comes just 8 days after its last update, so I need to look back at that first. I'll summarise the 21 April update below;

21 April update - summary of key points -

  • Temporarily suspended production in Mexican & Malaysian factories - applied for "essential business" orders
  • Order intake normal until softening in late March
  • Order by region - USA (largest market) resilient, EMEA "significantly impacted" by lockdowns, APAC "more resilient"
  • Cost cutting - usual stuff e.g. suspending capex & discretionary spending, furlough (number not stated) & pay cuts
  • Board - taking 20% pay cut, Chairman waiving fees for now (impressive leadership/commitment, good for him!)
  • Net debt slightly down from 31 Dec 2019. Now £16.2m - unwinding working capital (worth noting, as once business improves, likely to suck cash back into receivables & inventories)
  • Bank - £25m facility to Feb 2023. Talking to bank about enlarging facility & relaxing covenants
  • Expectations for 2020 significantly reduced (no figures given). Confident about longer term

That all sounds fairly much as I would expect. The funding position looks potentially problematic, if bank not prepared to be flexible. Dialight has not performed very well in recent years, hence bank support may not necessarily be a given, if things get seriously bad in 2020. Depends if it is able to qualify for a Govt loan guarantee scheme? Clearly that would help greatly.

29 April update (today) - summary -

  • Mexican factory can now re-open, in phases starting today
  • Malaysian factory also re-starting (underway)
  • This means all facilities will be operating, albeit at reduced capacity

Balance sheet - at end 2019 looks OK, but inventories look too high.

My opinion - it's impossible to value at this stage, as there's no visibility on sales/losses.

Relying on bank support for now is OK, but Dialight would probably need to raise fresh equity once business is recovering, to fund increased…

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