After further positive guidance in April, Delignit’s H119 earnings shortfall (EBITDA down 16%) and full-year profit warning are all the more disappointing. In mitigation, the company has arguably been a victim of its own successful Automotive OEM business in ramping up for special call-offs that may yet materialise, while incurring higher costs than planned for a still potentially transformative motor caravan order. Management now expects 2019 revenue of €64m (ahead of last year but below the original forecast of €70m) and an EBITDA margin between 6% and 7% (originally 9.3%, as in 2018). Its confidence in Delignit’s strategic direction and long-term prospects appears to remain undimmed.
H119 was notable both for initially ‘very pronounced’ growth in light commercial vehicles (LCV) largely from special call-offs from OEM customers and a new serial supply order for motor caravan equipment. Subsequent delays aside, this drove a 20% rise in revenue by Automotive, the principal division, which all but matches 2018’s impressive rate of growth. Indeed overall H119 revenue was up 10% despite a further softening by Technological Applications (down 21%), particularly in railway solutions. In terms of profit, the outturn was less positive (EBITDA and EBIT down 16% and 36% respectively) mainly owing to a ‘high six-figure loss’ by the start-up caravan order (excluding this, the EBITDA margin was c 9% vs 9.9% y-o-y) and capacity adjustments for anticipated special call-offs.
The guidance for 2019 has been revised, as described, in the light of persistent company pressures, as in H1, and more cautious market forecasts. EBITDA is now expected to be €3.8–4.5m (based on 6% to 7% margin forecast), compared with previous guidance of c €6.5m. This equates to an H2 EBITDA setback of between a quarter and a half. Encouragingly, management confirms medium- and long-term prospects are positive. Its longstanding ‘vision’ is for €100m+ revenue at 10%+ EBITDA margin by 2022, driven by successful business model transition.
Even after c 25% price decline post-profit warning, revised guidance for 2019 gives EV/EBITDA of 9.8x to 11.6x, which is a marked premium to peer groups (average c 6x), thereby suggesting a discounting of assumed strong long-term prospects.
