Light Science Technologies LON:LST, the AIM-listed, Derby-based producer of horticulturally-focused lighting and monitoring solutions, has published a trading update for the 12-month period to the end of November.
It’s been a stop-start year for the agri-equipment manufacturer, the company warned in December 2022 that it would underperform the market and profit would be disappointing going into 2023.
As the year progressed LST and its chief executive, Simon Deacon became progressively more optimistic. By spring, Deacon was still saying trading conditions were tough, but that the company was moving in the right direction and had seen its business grow over 10% in the first five-months of the year.
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Come September the company’s growth had been noticed and LST’s share price had started to catch up with the company’s commercial performance. LST saw its revenue jump 22% to GBP4.4m when 1H23 was compared to 1H22. A large part of this was down to LST improving its margins from 17.7% in 2022 to 20.9%. Deacon said: “[we moved to a situation where we could] pass on all the cost [increases] onto our customers, and [global] component supply is improving, so we’re getting better prices.”
In its latest update, LST saw its revenue increase year-on-year 13% to GBP9.25m, and at the same time managed to shave 20% off its costs year-on-year. The company also saw gross margins increase by 27% to 22.5%.
The company is still in loss-making territory – expecting to report an unaudited loss before tax of GBP1.3m. However, this was a 52% improvement on the losses of GBP2.7m the year previously and Deacon is focussed on soon becoming operationally self-funded and able to take advantage of the clear opportunities across all its target sectors.
Light Science Technologies aims to become self-sufficient
The company said in a statement: “The core focus for the group remains on growing revenue and margin, controlling overhead costs and ultimately becoming operationally cash self-funded. [LST] has a group of businesses that is targeting large growth markets and offers near-to-medium and long-term opportunities.”
LST remains open to R&D funding. In September the company received GBP209,506 of funding from DEFRA (the UK government’s Department for Environment, Food and Rural Affairs) as part of a GBP1.74m, three-year programme to develop reduced input potatoes in commercial farms in England.
LST will contribute Nitrous Oxide sensing equipment as part of an initiative to develop new breeds of disease-resistant potato, new foliar nutrient treatments, trial no-dig/no-till methods including use of mulches as a growing medium and investigate new methods to monitor greenhouse gas emissions from farmers’ fields.
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As previously reported, LST 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. Listed in 2021, the company originated in a UK contract electronics firm, UK Circuits before diversifying into the manufacture of horticultural management systems.
The company has reorganized itself into three divisions: Contract Electronics Manufacturing, Controlled Environment Agriculture and Passive Fire Protection. LST’s contract electronics was the biggest winner in 2023 with sales up 13% with improved margins. The company is operating in a market worth GBP2.3bn. The company has been investing in its factory; automating production so that it is able to handle an increase in volumes in anticipation of UK and European manufacturers switching supply from Asia to component suppliers closer to home.
The Controlled Environment market LST assesses will be worth GBP30bn by 2030, and in 2H22 made the GBP0.5m strategic acquisition of Tomtech, a Lincolnshire-based agritech company which designs and manufactures controlled-environment control systems for polytunnels and greenhouses and is gaining market share in the grow light segment.
Injecta acquisition opens opportunity in fire protection
The company also acquired Injecta Fire Barrier for around GBP1.75m paid over five years at the close of last year, which gave LST entry into what it believes is a GBP50bn fire protection market – especially prescient in the UK as property developers rethink their cladding provision following 2017 Grenfell Tower blaze which claimed 72 lives.
Forward orders in contract manufacturing are starting to recover to pre-Coronavirus pandemic levels the company said, with: “UK Circuits [having] a strong forward order book, with visibility for 1H23, [working] with both existing and perspective customers to build out 2H23 demand.” However, the company expects that its Controlled Environment and Fire Protection subsidiaries will start to deliver more significant shares of revenue, balancing out and diversifying the group’s overall income.
LST’s shares opened the week (15th January) at 2.97p and has fallen some 40% over one-year with its shares ranging between 0.9p and 6p over a 52-week period. The company has a market cap of GBP9.66m.
Deacon has in the past decried the fact that LST’s share price has not been reflective of the company’s progress on the ground. Bridgewise, the AI analyst rates LST as ‘Underperform’ saying: “[…] Light Science’s financials of 2Q23 reflected decent results. It is highly likely that it will be mostly tethered to market performance and sector movements for the near term. We therefore gave Light Science a total score of 62 out of 100 and a ‘Underperform’ recommendation.”
Will 2024 be the year that LST has its breakthrough in share price? The themes that are playing out globally: disruption in supply chains caused by conflict; climate change; a need to develop lower-intensity, localised agricultural systems, would seem to be working in the Derbyshire company’s favour.