Dialight Drops as Falling Signal Sales Hurt Profit: London Mover

Dialight Plc, a maker of light-emitting diode fittings used at the London Olympics, fell the most in almost five years after saying first-half profit will miss estimates amid lower sales in its signals unit.

The shares fell as much as 16 percent, the biggest intraday drop since October 2008, and were down 13 percent to 1,158 pence at 12:10 p.m. in London, paring this year’s gain to 8.9 percent. The volume of shares traded was about nine times the three-month daily average.

The Newmarket, England-based company, which sells directly to the mobile phone tower market, said the timing on the roll-out of contracts in that segment is hard to predict.

“Contracts in the obstruction tower business need to be won, and soon, for 2013 not to disappoint,” Andrew Shepherd-Barron, an analyst at Peel Hunt LLP, wrote in a note to clients. “We see this as a timing issue and with the core lighting revenues growing at about 60 percent believe there is enough growth elsewhere to compensate in future years.”

Pretax profit may miss estimates by 2 million pounds ($3.1 million) if not enough of the 10 contracts being bid for by the obstruction tower lighting business come through in time, Shepherd-Barron said. Winning either of the two largest would be enough to secure current year forecasts, he said.

Buy Ratings

Still, analysts at Peel Hunt, Canaccord Genuity Ltd. and Nomura Code Securities kept their buy rating on the stock and their 12-month share-price estimate in expectation that the company will win lighting orders for mobile phone masts in the second half.

The trading statement reinforced Canaccord’s “strongly positive view” of Dialight’s lighting business, analyst Bob Liao said in a note to clients. Liao maintained his full-year estimate for earnings before interest, taxes and amortization at 25 million pounds.

If a large obstruction tower order fails to close this year, Ebita may only reach 23 million pounds, he estimated. That compares with 19.8 million pounds last year, he said.

Profit for 2013 will be “broadly in line with expectations” with results weighted toward the second half, Dialight said in the statement. First-half revenue in its lighting unit will rise more than the company’s previous forecast of 50 percent and will exceed 50 percent for the year as a whole, the company said.

Peel Hunt estimated a 65 percent increase in first-half revenue at the unit.

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