Shares in LED lighting and opto-electronic components maker Dialight (LON:DIA) leapt on CEO Steve Blair’s optimistic comments. Blair said the firm had started H2 with a strong outlook and had the potential ‘to significantly exceed current market expectations’ for FY net income.

Optimism over FY outlook

The CEO made the comments after the firm posted a 9.3% increase in revenue for H1 to September and a 150% increase in operating profit. Growth was driven by improved price discipline in Lighting and 37.5% underlying growth in Component revenue. Excluding Traffic, which was disposed of in the prior year, revenue increased by almost 20%.

Thanks to management actions, the gross margin jumped to 48.7% from 35.3% a year ago. Also, strong cash generation meant the firm ended H1 with a small net cash position after reducing its debt significantly.

‘We are continuing to deliver profitable sales growth and strong cash generation, and reaching a positive net cash position is an important milestone’, said the CEO. ‘We enter the second half with a strong outlook and are targeting continued sales growth and gross margins meeting our upgraded guidance.’

Dialight H1 Results (all £ millions)

Source: Company accounts

Major transformation

Over the past year, Dialight has accelerated its trandformation plan across both Lighting and Components. In Lighting, it has increased pricing, imporved its sales capability and created a global engineering, procurement and contracting team.

In Components, for a long time the ‘junior’ division, it invested in new product development and additional sales and marketing. The result is a ‘transformed outlook’ with increased sales win rates and closer links with Asian contract equipment makers.

Dialight is a five-bagger after today’s rally, having risen from under 100p in early 2025 to over 600p intraday. This has been accompanied by an improvement in profit from a loss of £10 million to EBIT of around £3 million last year.

For this year the forecast is £18 million of EBIT, although CEO Steve Blair says the company could ‘significantly exceed’ current market expectations. The question is, how much have investors already factored into the share price and have they ‘travelled and arrived’.

From the sound of it, the internal transformation programme has been arduous but worthwhile. The group is leaner, with a sharper commercial edge, and a clearer idea of where margins should be. On that basis the shares should command a higher mutiple than in the past, so the rally might not be over just yet.

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