Reuters - Hot Stocks

UPDATE 1-UK’s Dialight slashes operating profit forecast; shares sink

* Warns of shortfall in FY revenue due to oil and gas hit

* Expects first-half results to be lower than a year earlier

* Shares slump 39 pct; top losers on LSE (Adds comments from company, analyst; updates share move)

By Esha Vaish

June 10 (Reuters) – British industrial lighting products maker Dialight Plc warned that this year’s underlying operating profit would be significantly below expectations, hurt by a fall in orders at its key lighting unit from the United States and Europe.

Shares in the company, which was once part of the Dutch giant Philips, slumped 39 percent to their lowest in more than four-and-a-half years. The stock was the top percentage loser on the London Stock Exchange on Wednesday.

Dialight said it expected a shortfall in full-year revenue due to a delay in orders since April at its lighting unit, largely by oil and gas customers, and that results for the first half would be lower than a year earlier.

Canaccord Genuity analysts lowered their 2015 forecast for revenue by 11 percent to 174.1 million pounds ($ 268.8 million) and adjusted operating profit by 27 percent to 15.5 million pounds.

The lighting division, which makes energy-efficient LED lighting for industrial and hazardous markets, accounted for nearly 63 percent of the company’s 2014 revenue.

A quarter of the division’s revenue came from the oil and gas projects that includes retrofitting to replace lighting instruments that are reaching the end of their economic life.

“Even though the economics of swapping into LED are very good for operating costs, they do require an upfront investment and most of the oil and gas customers at the moment are very cautious about how they deploy their capital expenditure plans,” Non-Executive Chairman Bill Ronald said on a conference call for analysts and investors.

Oil and gas companies, hurt by a price rout, have cut spending budgets by an average 10-15 percent, put projects on hold and are hesitating to seal new contracts with product and service providers.

“A slowdown in orders since April in the key lighting division is clearly unnerving, given that the benefits of their lighting products haven’t changed and the highlighted connection with the oil and gas sector slowdown is hardly new,” N+1 Singer analyst Trevor Griffiths wrote in a note.

Griffiths put his forecast and recommendation under review.

Dialight said Michael Sutsko, who joined as chief executive on June 1, would lead a strategic review of the business to evaluate the company’s operations, supply chain and product development, and that he would provide an update in the Autumn.

The Newmarket-based company’s shares were down 35 percent at 487 pence at 0939 GMT. ($ 1 = 0.6478 pounds) (Editing by Gopakumar Warrier)


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