Light Science Technologies Holdings PLC (AIM:LST) CEO Simon Deacon talked with Proactive about its encouraging half-year results. Deacon highlighted the company's robust performance across its three key divisions: controlled environment agriculture, contract electronics manufacturing, and passive fire protection.
Proactive: I'm joined by Simon Deacon, the CEO of Light Science Technologies. Simon, good to speak with you. You're out with your half-year results. Can you give us a summary? Because they look very encouraging.
Simon Deacon: Yeah. Hello, Stephen. Yeah. The half-year results are strong. This week we have shared a strong set of half-year results which further demonstrate the continuing progress within all three key divisions, which are controlled environment agriculture, contract electronics manufacturing, and passive fire protection. So yeah, we're really pleased with the half-yearly results.
Simon Deacon: Revenues were up by 19.3%. Committed group forward orders are at £5.2 million. Gross profit, which is really key in our strategy to focus on, is up to 26.6% from 20.9%. So really good strong increase there. Our quoted pipeline continues, for the group, at £51 million and that's the quoted work. More recently, we signed our first distribution agreement in South Africa to grow the controlled environment agriculture and to be able to sell our products globally.
Simon Deacon: And that's part of our strategy to do that in Australia, the Middle East, the Americas, and South Africa. So very pleased to get that first one signed up moving forward. Our cash has also increased. We've got £1.5 million of availability of cash. We've also enhanced the group debt facility with a further £850,000 across the group, which helps us develop products as we move forward.
Simon Deacon: This is key with the sensor group product that we're developing. We also had two new board members: Dr Graham Cooley, who's our non-executive chairman, and Richard Mills, who is a non-executive director. So really important roles have come on with great experience in the market. So really pleased with the last six months.
Proactive: I think going back to those key metrics, Simon, what underpinned the positive trends and can we expect more in the second half?
Simon Deacon: Yeah, absolutely. We’ve seen an increase in inquiries in the controlled environment agriculture, which we're really pleased with. The acquisition that we did with Tomtech in that field has brought revenue into the group, with over a 30-year business and their experience in providing control systems, irrigation, lighting, and sensors into glasshouses, vertical farms, and polytunnels, has really helped strengthen the group in the controlled environment agriculture.
Simon Deacon: So really pleased with that progress. But also, we've seen an increase in the contract electronics side of the business. That's still going very strong, opening up new markets, which has been important in sports entertainment. As we see more reshoring going on in manufacturing in Europe and the UK, our clients have decided to do more manufacturing here.
Simon Deacon: So we see that continuing going forward. I think this year will be our strongest year yet. So really pleased with the acquisitions and the organic growth. With the passive fire protection, we're now seeing orders coming through, and being completed. New sites and new orders have taken place since June.
Simon Deacon: There’s a huge market opportunity for us with over £50 billion market opportunity in the UK in passive fire protection. We’re seeing strong growth there. What we're seeing with the group is more of a levelling up with the group in revenue. So it's not just CEM, it's CEA, and the passive fire protection starting to level up and also bring in more profit margin to the business, which creates that cash generative position.
Proactive: Does the recent investment in the passive fire protection division reflect expectations that you're only at the start of the growth curve?
Simon Deacon: Absolutely, it does. There have been identified 11,000 buildings which are high risk, over 11 meters in height. Those need tackling first, with the average price of an order between £300,000 and £400,000. You can imagine there's an awful lot of work out there. With our injector-clad product that we install, it is really significant, lowering costs because you don't need to take the facade down of the building.
Simon Deacon: It's easy to put in, you don’t have to take the tenants out, and it's much easier and quicker to install. It causes less disturbance and is a lot more cost-effective for the customer. So we see that moving forward. There are over 33,000 buildings under 11 meters that will also need dealing with at some point in time.
Simon Deacon: So as you can imagine, that's a large market for us to go after, and the government has created a £5 billion fund to support that. We're seeing that coming through as well. We're really pleased with the passive fire protection division. We expect to put our technology in there with our sensors. We've been doing fire sensors for over 15 years in the contract electronics manufacturing side, and to be able to put sensors into cavities.
Simon Deacon: So you're detecting fire within the cavity before it gets into the core of the building is really important. That will create a recurring revenue stream for us.
Proactive: Simon, can you elaborate on the relationship with Dyson and talk about the CEA trial?
Simon Deacon: Yes. The Dyson trial is going well. It's in open agriculture, so not enclosed. The sensor grow product we've been developing is to do numerous things within an enclosed environment. So in the enclosed environment, we're looking at CO2, temperatures, moisture in the air, and nutrients in the ground.
Simon Deacon: But in open agriculture, the trial is about greenhouse gases, particularly nitrous oxide (N2O). It's really important to detect how we're applying fertilizers across open ground because a lot of fertilizer gets wasted. It's extremely expensive today, and it goes into our watercourses causing pollution. It's important to detect this to stop the wastage of fertilizers and protect the environment, which government policies are really pushing through with sensor development.
Simon Deacon: We're seeing a broader picture for the sensor grow product because methane is also very critical. Nitrous oxide (N2O) is 273 times worse than CO2. Many people don’t realize this, so it's really important to be able to detect it. We're also developing sensors for methane (CH4), which is 27 to 30 times worse than CO2, and ammonia (NH3), whose excessive runoff causes water pollution.
Simon Deacon: Ammonia production consumes a lot of energy, around 4% of the world's energy. Detecting how it's used and feeding that back can help take action. Big data is a really important part of our process. We're getting some interesting results from the Dyson trial.
Proactive: What opportunities are there in the CEM division, Simon?
Simon Deacon: CEM, the contract electronics manufacturing division, has seen more reshoring back to manufacturing in Europe and the UK. Our clients, who are large global companies, have decided to manufacture more in the UK due to shipping lanes, carriage costs, and world uncertainties.
Simon Deacon: We've also opened up new markets in the sports entertainment sector. Over the last six months, we've received two orders worth over £260,000 for electronics within golf balls to monitor how many times they’re hit. Electronics are in everything, offering huge growth and opportunity. We're really pleased with how that division is developing and continuing to grow. It is cash generative.
Proactive: Simon, what should investors expect from Light Science Technologies going forward? Why is now a good time to look at the stock?
Simon Deacon: We are a growing company. We’ve demonstrated year-on-year profit margin increases. We've brought two acquisitions into the group: one in controlled environment agriculture, strengthening that division, and one in passive fire protection, adding an extra layer and market for our sensor technology.
Simon Deacon: These areas are very profitable due to strong margins. It's a good time to invest in Light Science Technologies Holdings PLC (AIM:LST). There is significant growth in our sensor grow product, not only in enclosed and open agriculture but also in cities and towns for pollution detection as environmental concerns are on the global agenda.
Simon Deacon: Our goal is to become cash-generative by 2025, and we are progressing strongly. These are strong half-year results for the market. We hope people see the great opportunity in front of us. Our focus is to become a £100 to £200 million revenue business, and we are moving towards that.
Proactive: Simon, I hope you'll keep us updated with any progress. Thank you very much for speaking with us today.