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Light Science Technologies supply issues hit margins

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Light Science Technologies [AIM:LST] the AIM-listed, Derby-based producer of horticulturally-focused lighting and monitoring solutions published a trading update this morning.

The company reported a sales pipeline of more than GBP60m of which GBP18m was forward orders and contracts.

As previously reported, the company manufactures lighting and electronic controls for the controlled-environment-agriculture sector, which includes hydroponic and vertical farms, and commercial greenhouses and polytunnels engaged in food production and horticulture.

The company explained that key to contributing to the strong sales pipeline is the pressing need for food security and to grow more produce locally, sustainably and energy efficiently.


Revenue growth

Group revenue grew by 10.5% for the year to 30th November, but the company warned that its positive pipeline has been negated by an elongation of the sales cycle, predominantly driven by input inflation experienced by growers which cannot currently be passed on to customers, leading to growers delaying capital expenditure.

LST has also been affected by supply-chain issues. The company said in a statement this morning: “…gross margins at the group’s [contract electronics manufacturing] division have been diluted through the second half of the year, driven by significant price volatility in the global electronics component market. The group was anticipating certain revenue streams materialising before 30th November 2022, which would have delivered financials in line with market forecasts for the period. However, for the reasons mentioned above, these have been delayed.”

Likely to underperform

The company said that it hoped that these revenues would materialise by 30th November 2023 but this surfeit in income meant that LST will likely underperform market expectations by around 13% and the company also said that profit before tax will likely disappoint too, with losses likely to be at least GBP850,000 more than predicted.

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LST hope that the new sales wins would contribute to an improved performance in the year to 30th November 2023 and hoped that next year the company would return to more-normal gross margins.

The company sounded a note of optimism and hoped that given the 10.5% increase in revenues that it would be able to springboard from this year’s position and have a stronger 2023.

The company’s shares opened trading today (2nd December) at 4.17p fell to 3.9p, but within the first hour of trading had recovered to 4.4p. LST’s shares have tracked in the range of 3.9p to 23.6p over a 52-week period. The company was listed in October 2021. LST has offered a year-to-date return of -74.4% and a one-year return of -80.4% giving the company a market capitalisation of GBP7.4m.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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