Dialight plc announced its audited financial results for the year ended March 31, 2026.
Commenting on the results, Steve Blair, Group Chief Executive Officer, said:
“Despite the Group continuing to operate in a challenging geopolitical environment, I am delighted with our full-year performance which has been underpinned by the completion of the first round of our Transformation initiatives. Following a strategic review, we have reinvigorated our Signals & Components business with investments made in people, new products and partnerships with contract equipment manufacturers. Through delivery on a range of projects, we have successfully driven up Group margins, simplified our business and materially decreased our working capital.
“The outlook is promising as we execute three key production-related transformation projects and drive sales growth through new people, new markets and new products. I expect these to translate into good profit growth and cash generation in the current financial year and beyond”.
CEO REVIEW:
The Group had an excellent year, with underlying operating profit of $10.3m, more than double the $4.2m for the previous year. This performance demonstrates the continuing and growing financial impact of the first four key pillars of the Transformation Plan (winning hearts and minds, sales transformation, operational transformation, and margin improvement and cash generation). This performance has been achieved despite depressed market conditions with tariff uncertainty and higher cost of other materials needed to complete installations (caused by tariff increases) necessitating customers to delay sales orders. Group revenue for the year ended 31 March 2026 was $166.9m, down 9.0% from the prior year. A reduction of 11.5% was reported in the Lighting segment with business continuing to be impacted by challenging market conditions as capital projects were deferred. This was partly offset by increased revenues of 13.7% in Signals & Components (excluding Traffic in both years). The fifth pillar of the Transformation Plan, which is creating a platform for future growth, has made early encouraging progress with order performance much stronger in the fourth financial quarter and a backlog which has increased by over 25% on the previous year.
The geopolitical situation being experienced currently and across the year has been challenging. At the start of the financial year, tariffs were the main concern; by the end of the financial year this had moved to the conflict in the Middle East. All of the Group’s products manufactured in Mexico are currently tariff-free under the United States-Mexico-Canada Agreement (“USMCA”) free trade agreement and have been for almost all of the year. Although some of the Group’s components are imported from outside the US and Mexico and have been subject to tariffs, the overall impact of this has been less than 1% of material cost and this has been offset by supplier price reductions. Towards the end of the financial year, concern moved to the risks of freight cost inflation and supply chain shortages (particularly with semiconductors and components). We continue to keep both under review and have developed alternative plans depending on which scenario plays out. We continue to plan for the worst and hope for the best, while rigorously controlling what we can control.
LIGHTING SALES/SALES TRANSFORMATION
We have been focused on stabilising the business over the last two years, achieving considerable success in returning the business to profitability, generating cash and significantly reducing net bank debt, despite paying back Sanmina Corporation (“Sanmina”) early. Over the last six months we have begun to turn more of our attention to future growth across the business looking at short, medium and long-term strategic opportunities. This will continue to be our focus moving forward, despite the prevailing macroeconomic climate, as the transformation of the operational side of the business transitions to business as usual.
The Group’s sales transformation is still tracking slightly behind the business, financial and operational transformation but has rapidly accelerated its progress in the second half of the year. The Group has introduced a tollgate order tracking and margin approval system. This is working very well and Group CEO or Group CFO approval is required for all bids that are below our required gross margin targets. During the year, we have removed under-performing sales staff and have also implemented a project to optimise sales. We have also re-created the global Engineering, Procurement and Contracting (“EPC”) team, including specifications development capability, employing key, new expertise in this area. We are seeking to return to the levels of sales that the Group used to generate from specified projects that EPCs control. We have also seen a good improvement in pricing discipline and an increased focus on selling the higher-margin products from a more focused number of stock keeping units (“SKUs”).
During the year, there was a re-organisation of the sales team in the US. The sales team is now focused on selling the most profitable products in the most profitable markets whilst continuing to meet our customers’ needs. For the year ahead, we now have an upgraded and enhanced sales team selling the right products and at the right margins. To that end, sales commissions are now based on order profitability not just the sales value of the order. This will pay a higher commission to those individuals that beat their sales target and, more importantly, beat their gross margin target.
Finally, in the year, the Group opened new geographic markets (e.g. Lighting sales in Nigeria and Angola for oil and gas) and launched several new Lighting products. These have included self-developed products, for instance lights for use in hydrogen production and storage environments, as well as, for the first time, source and sell products. This latter group includes lower cost linear lights and high-output floodlights. These source and sell products are still expected to generate returns in line with our three-year gross margin ambitions.
SIGNALS & COMPONENTS
The Group has made good progress during the year with Signals & Components. We have conducted a thorough strategic review of our opto-electronics (“OE”) product line. This has, for a long time, been the “junior” product line that has been flat to marginally declining over the last decade. The OE product line generates good gross margins above the average Group return on sales. We have decided to reinvigorate and to invest in this product line. This will include recruiting new salespeople, investing in new product development and SKU reductions. We are reducing lead times, have a more aggressive sales outlook, increasing sales win rates and partnering with Asian contract equipment manufacturers. This should stimulate growth in this product line which has a direct correlation to the growth in data centres and artificial intelligence (“AI”), as our OE products are used on servers and equipment. The results of this have been that the overall segment excluding Traffic in both years has seen a 13.7% increase in revenue.
The Group’s Traffic business, disposed of in the prior year but for which the Group had an assembly commitment through to the end of October 2025, has now ceased production. Sales to 31 March 2026 were $8.2m compared to $13.3m in the prior year. The Group’s Traffic business has historically been loss making although a small exit profit of $0.3m was made in the year. A substantial amount of the inventory associated with this business has been successfully sold (and collected) with a reduction of almost $4.0m in the year.
With the exit from Traffic, overall Signals & Components revenue declined by 1.5% to $44.8m (2025: $45.5m).
SALES GROWTH
The Group is confident that after several years of revenue decline, revenue should return to growth (excluding the impact of the disposal of the Traffic business) moving forward. The reasons for this confidence are multifaceted and include: a significantly larger opening backlog of won orders from the prior year; a significant strengthening in the quality of the Lighting sales team; investment in the new global EPC team; the introduction of a revised volume and margin-based commission scheme for the Lighting sales team tied to achieving profitable revenue growth; growth in Signals & Components sales from data centres and AI; and investment in new products to grow into a number of contract equipment manufacturers.
OPERATIONAL TRANSFORMATION
Our Operations function has delivered on a number of projects in the year. Following on from the success of the reduction in sub-assembly SKU numbers, finished goods SKUs have reduced by around one-third. Cost reductions and purchase price variances have not only offset tariff pressure but increased gross margin. Our factory in Ensenada has been right-sized and several new products have been introduced. This group has led (through cross-functional teams) the product portfolio optimisation, business simplification, inventory reduction (inventory has reduced by 36% to $30.0m in the last year), right-sizing the manufacturing facilities and SKU reductions.
During the year, the Group successfully moved certain key lighting products from Ensenada, Mexico to our new facility in Penang, Malaysia. This move was conducted flawlessly by the respective teams and has reduced our lead times and tariffs into the Asian market. The continued delivery of efficiencies associated with the implementation of the Transformation Plan, as well as the move of Asian lighting to Malaysia, SKU reduction and discontinuing loss-making products, has resulted in the Group conducting four reductions in workforce in the year. The overall headcount reduction has been almost 300 direct, indirect and salaried staff.
The cost of redundancy of $3.2m has been treated as non-underlying. The ongoing annual cost saving from these reductions is almost $5m. Overall, the Group headcount in our main location (Mexico) has reduced by just under 30% in the year to just over 750 heads. Despite these right-sizing actions, the Group has maintained the flexibility in the workforce to materially step-up production when the Group Lighting sales return to growth.
Historically, the Group engineering function continued to work through the Covid-19 pandemic. The US Internal Revenue Service allowed an Employee Retention Credit (“ERC”) to compensate such companies that continued investing in people and growth. The Group submitted two claims totalling $2.9m and these were both paid in the first half of the financial year. These have been credited to other operating income but are not included in underlying operating profit as this income is a one off with no more claims to follow.
PROFIT PERFORMANCE
Underlying operating profit before interest and tax has more than doubled to $10.3m compared to the $4.2m in the prior year. The primary factors for the increased underlying operating profit are increased gross margin and reduced overheads.
Gross margin overall has increased to 39.0% from 35.6% in the prior year. This increase has added over $5m to operating profit. The increase has been driven by sales pricing, reduction in sub-assembly SKUs, reduction in finished goods SKUs, cost reduction, right-sizing direct labour, reduction in gross to net sales adjustments, reduced sales commission, procurement savings and freight optimisation.
The overall underlying Group overhead of $54.8m has reduced by $6.3m compared to the prior year. This has been achieved by reduced headcount, lower legal and professional fees and better overall control of costs. All businesses in the Group now have monthly cost centre cost report analyses with appropriate delegated authority levels to improve overall control of costs.
WINNING HEARTS AND MINDS
We have a people-first culture and strive to keep our employees safe at all times. We take health and safety extremely seriously with monthly reporting on health and safety performance across the Group to the Board, including individual site data on improving accident near-miss statistics.
We have a clear and coherent strategy. Our employees are invested in the Transformation Plan to improve Dialight and make it a better place to work with a more certain future. Through the year, we have had around a dozen cross-functional teams with representation from every department looking to simplify and improve our business. It is testament to our staff and these teams that the positive progress reported here has occurred. The result of this work is reflected in the increased profit and cash generation. From this, for the first time, in July we paid a bonus to all eligible employees not already participating in a bonus or commission scheme as a statement of gratitude and thanks. The management bonus also paid out for the first time in several years.
During the year, we conducted a Group-wide employee survey. The results of this showed that we are making good progress but also that there are plenty of improvements still to come. These recommendations are now being worked on by each department.
Lynn Brubaker, our Chair of the Remuneration Committee and Non-Executive Director (“NED”), has continued a wide-ranging series of employee engagements including at Ensenada, New Jersey and London in her role as our Workforce Engagement NED.
CASH FROM OPERATIONS AND NET BANK DEBT
I am delighted by the success of the Group’s cash performance. Overall cash generated by operations has increased to $35.4m in the year (2025: $12.4m). This has been achieved through underlying EBITDA for the year of $19.8m and a $17.4m reduction in working capital.
After capital expenditure of $4.8m (2025: $8.0m), of which more than half is internally capitalised development costs, interest paid of $1.9m (2025: $2.8m), tax paid of $2.2m (2025: $1.7m), Sanmina payments (see below) of $7.7m (2025: $4.0m) and other cash outflows of $2.9m (2025: inflow of $2.7m), the overall increase in cash (before bank debt cashflows) is $15.9m (2025: $1.4m decrease) which has seen net bank debt reduce from $17.8m to $1.9m. On 22 April 2026, HSBC UK Bank plc (“HSBC”), our Group bankers, signed up to a new up to three-year revolving credit facility (“RCF”) of £15.0m on attractive terms with a further £10.0m accordion and an option to extend for up to a further two years at the lender’s discretion.
SANMINA SETTLEMENT
In December 2025, the Group paid Sanmina $5.7m (a reduction of $0.3m over what would otherwise have been paid) in full and final settlement of all legal claims. This brought the total paid in the year to $7.7m and removes this strategic uncertainty from the Group. I would once again like to thank Jure Sola, chair, and Jon Faust, chief financial officer, of Sanmina for their patience and grace in agreeing this settlement. We are now working with Sanmina to see how we might grow our Components sales to them. This hopefully can deliver a true “win-win” for both organisations.
NEXT STEPS
Following our successful first stage Transformation initiatives (product simplification, supply chain, inventory, factory efficiency and labour optimisation, sales transformation, re-alignment of our Component business and divestment of Traffic), we have now commenced the next stage, where our focus is on consolidation and optimisation of our manufacturing footprints to increase profit, capacity and flexibility. The following three items are key initiatives in order of importance:
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transfer of manufacturing from Roxboro, North Carolina to our factories in Mexico;
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Transfer of the remaining Component assembly from Ensenada, Mexico to Penang, Malaysia – most of our OE manufacturing is already done in Penang and was implemented in the first stage of re-organisation; and
- Hybrid manufacturing (internal manufacture and use of contract manufacturers) of power supplies and select commodity moulded parts – the hybrid model will bring cost saving, labour saving and flexibility to increase capacity in a quick and cost-effective manner.
We expect to complete these initiatives within 18 months. These initiatives and plans were agreed and communicated to the respective teams before the end of March 2026. The successful completion of project item 1) will result in the closure of our Roxboro factory which has been provided for at 31 March 2026 and will result in a cash outflow of approximately $0.3m.
OUTLOOK
For the current financial year, we continue to expect to deliver strong and tangible progress benefitting from annualisation of savings and improvements from the first stage of the Transformation Plan, and we will implement stage two as detailed above, which will bring further annualisation benefits to 2028 and beyond. We also expect to start growing both Lighting and Component sales which have a strong flow through to profitability. So, despite the difficult geopolitical headwinds, we are confident in our focus to continue to achieve steady sales growth, achieve strong profit growth and eliminate bank debt in the year, with further progress thereafter.
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