Light Science Technologies LON:LST chief executive Simon Deacon was pretty pleased with how the AIM-listed, Derby-based producer of horticulturally-focused lighting and monitoring solutions has performed in the last six months, as he delivered his half-term report.
Speaking to The Armchair Trader Deacon said: “We’re definitely moving in the right direction, and happy with our progress. All three of our divisions [Controlled Environment Agriculture (CEA), Controlled Electronics Manufacturing (CEM) and Passive Fire Protection (PFP)] are doing better than we thought, so we’re really pleased with progress.”
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To the end of May, LST saw its group revenue up 19.3% year-on-year to GBP5.2m with its gross margins increasing to 26.6%, up 27.3% y-o-y. LST was still in loss-making territory, but reduced its losses by 58.4% to GBP300,000.
Deacon said: “We’re starting to move towards becoming a cash-generative business. We have a good cash runway, securing a GBP850,000 new [debt] facility with Close Brothers, which will allow us to invest in R&D, developing new products and for the first time we were EBITDA positive.”
Light Science has a financially sound footing
The company has just over GBP1m in cash in the bank with a further GBP0.5m of the Close Brothers facility still undrawn.
“In the first half of 2024, the structural changes made in the business began to take hold and we are seeing accelerated growth in both revenues and margins. With this progress, our losses are narrowing and therefore we are confident of achieving break even with continued progression across our divisions,” explained Deacon.
The positivity has been driven by a number of key contracts wins across the group. CEM moved into the sports and entertainment sector providing sensor-assisted golfing equipment to Puttshack, an indoor mini-golf themed-bar entertainment business with outlets in the US and UK, with a GBP130,000 order in February, followed-up with another GBP130,000 order in July.
LST moves electronics manufacturing from East to West
The company is also capitalising on a shift from contract electronics being manufactured primarily in Asia to the Western Hemisphere, as equipment manufacturers had to deal with the triple-whammy of Covid shutdowns of factories in Asia, a slowdown in shipping times and then whole shipping lanes being closed off due to geopolitical tensions, and are starting to prefer their components to be manufactured closer to home. Overall CEM revenue was up 4.2% y-o-y and LST continued to benefit from a strong pipeline of orders in its pest control. As previously reported Rentokil LON:RTO is a long-standing client of LST.
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As previously reported LST entered the fire protection market through the acquisition of Injecta at the end of 2023, and in June received an order from an international blue chip property developer in excess of GBP750,000 to install its Injectaclad cavity sealant in a 11-storey student accommodation block in Nottingham. This follows a GBP600,000 deal from November, now over 50% complete. LST’s PFP division’s prospects looks juicy as the fire safety retrofit market is valued at GBP50bn, with LST already having a sales pipeline of GBP10m.
Climate change pushing more growers inside
But the real meat in the sandwich for LST is its controlled agriculture environment. Unpredictable climate is forcing more growers to move production under cover, and LST is a world-leader in controlled growing environment technologies. It recently secured a new distribution agreement with AgriLogiq Technical Systems in South Africa. Although South Africa is a significant agricultural market, it has been afflicted by an uptick in pests, causing many horticultural businesses to move production under cover to protect from insect pests. Weather, too much rain, too much sun, is also forcing many growers in Europe and North America to move under cover, and as energy prices are settling down, many farmers are bringing previously mothballed polytunnels and greenhouses back into operation and taking the opportunity to upgrade their equipment – all good things for LST.
The drive to move agricultural production closer to its end-user market, to reduce food transportation, is a growing trend – especially in the US.
Deacon was also excited at LST’s equipment being used in outside spaces through a collaboration with Dyson, which monitors external environments. Deacon sees the application being moved into urban environments and onto watercourses to monitor pollution and environmental contamination, which he sees as an exciting growth market.
He was also marginally happier with the direction of travel of LST’s share price, which over one-year was up 51% (to the close of the market on 2nd August, pricing at 2.8p/share). Over the year-to-date, shares are up 14.3%. LST has a market cap of GBP9.3m.
However, Deacon still didn’t think that the share price truly reflected the current or future value of the business, especially as LST moves into sustainable revenue generation and edges closer to profitability and given the potential values of its individual markets: controlled environment agriculture, fire protection and safety and electronics manufacture. LST remains ‘One to Watch’.
