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PhotonStar has its head in the cloud as light on its legacy business fades

It's not exactly what the Silicon Valley companies would call a "pivot"; it's more of an acknowledgement that lighting solutions have to make full use of the available technology
Dementia ward
In 2018, PhotonStar completed a circadian lighting installation at a dementia ward in London where the dynamically changing light levels are expected to improve patient health.

PhotonStar LED Group PLC (LON:PSL) produces intelligent lighting and intelligent building solutions that are increasingly using the power of the cloud.

In a nutshell, the story of the company is one of a British designer pinning its hopes on new technology as its legacy technology slowly trots off into the sunset.

READ: PhotonStar expecting all business units to make a positive contribution in the second half

The smart LED lighting solutions specialist is in the process of shifting emphasis from its traditional business model, providing LED lighting to the new build market, to one where its state-of-the-art Halcyon Internet of Things (IoT) solution is retrofitted into existing buildings, resulting in lower running costs for the owners of the buildings.

The company has three divisions: PhotonStar LED is the LED lighting fixtures business focussed on the new build market; PhotonStar Technology is responsible for the flagship Halcyon IoT technology; and Camtronics Vale is the division that provides high-quality contract electronics manufacturing services.

In its half-year results, covering the first six months of 2017, underlying losses more than halved as it cut costs in reaction to tightening market conditions.

The Halcyon system has been installed in a number of market sectors, prompting users to ask for a number of enhancements and amendments, which has led to delays in moving from the trial phase to commercial roll-out.

New trials for HalcyonPRO and cloudBMS

The fourth quarter of 2017 saw several new trials for the HalcyonPRO and cloudBMS systems kick off with organisations that have multiple properties in the healthcare, hospitality and housing association sectors.

The Halcyon system for building controls expands on a prior generation of a low-cost, wireless monitoring and control platform that served the retrofit market.

“Our connectivity is ‘retrofitable’ and unique in the sense that wireless is so cheap to install. It is around a fifth of the [cost of the] wired solution,” explained James McKenzie, the chief executive officer of PhotonStar.

The company has included additional functionality, with the ability to regulate heating and cooling, shading and power management as well as the existing lighting and environmental sensor controls.

The group’s Halcyon cloudBMS software, which remotely connects multiple buildings, is built on a partnership with IBM’s Watson IoT platform that segues with the US technology giant’s Maximo and Tririga facilities management systems.

The partnership with IBM was not coincidental; the technology and consulting giant’s systems are embedded with around 80% of building managers worldwide that are also potential customers of PhotonStar.

Being able to remotely control the whole building ecosystem across multiple sites can lead to huge energy savings.

Significant further economies can be garnered from fixing a device before it goes wrong using what’s called predictive maintenance.

The Photonstar boss reckons the group’s service “will be able to save 80% of the trips to site.”

Meanwhile, price-cutting remains the order of the day in the traditional lighting business, to which PhotonStar has responded by focusing more on the top end of the market, where it can maintain margins more easily.

Second half to lift full year results

In the first half of 2017, revenue eased to £2.26mln from £2.53mln the year before.

LED Lighting Fixtures revenues fell by 14% to £1.36mln from £1.59mln the year before, with losses narrowing to £0.05mln from a loss of £0.25mln the year before.

At the Camtronics Vale subsidiary, contract revenues were up 16% year-on-year to £0.79mln from £0.68mln the year before, with the company breaking even in the period.

Halcyon/Light Engine revenues fell 58% to £0.11mln from £0.26mln the year before, resulting in a loss of £0.13mln from £0.10mln the year before.

For the group as a whole, the underlying loss, or LBITDA, was £0.23mln, versus a loss of £0.54mln the previous year.

The pre-tax loss narrowed to £0.60mln from £0.91mln.

Notwithstanding the need to fine tune the Halcyon system as a result of feedback from the paid-for trials, the research and development work on the creation of the system is now largely complete, and future development work will concentrate on improvements and new customer-led solutions.

As for current trading, it continues to be difficult in the LED fixture market, but the company has seen revenue improvements in all of its business units in the current quarter and currently expects the second half of the year to make a positive contribution to the results for the full year.

“Management remain confident about the market potential for the halcyonPRO2 and its halcyon cloudBMS platform. Progress has been slower than anticipated on finalising the cloudBMS product to customer requirements and it is now expected that this will occur in Q4 2017; however, several new trials for the halcyon cloudBMS platform are now underway which should result in further roll out contracts during 2018," said James McKenzie, chief executive of PhotonStar.

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