Light Science Technology LON:LST, published its final results to end-November this morning (18th March), and speaking to The Armchair Trader, chief executive, Simon Deacon said: “We’re really pleased with our progress. We’re in three very different key markets, and the work that we’ve put in in developing our businesses is now starting to come to fruition.”
The company reported record revenues of £12m, up 29.5% year-on-year with gross margins increasing to 30.3%. The company has made big strides towards profitability, £30,000 short of breaking-even, a significant turnaround from losses of £1.14m in 2023.
The company delivered £300,000 of profit before tax in 2H24 and had positive net cash flow from operations of £1.53m, up from £0.18m year-on-year. LST was in a strong financial position with cash and undrawn funds of £1.9m.
The company rebranded its Controlled Environment Agriculture division to AgTech, to better reflect LST’s capabilities in controlled environment agriculture. Deacon believes that AgTech will be the future of the company and its bridgehead into overseas markets, turning the company into a global enterprise.
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Distribution agreement secured
AgTech secured a distribution partnership with Agrolux Nederland, a subsidiary of US multinational horticultural supplies and equipment firm, Scotts Miracle-Gro NYSE:SMG last month. Scotts was founded in 1868 in Ohio and is a constituent of the S&P 400, with a current market cap of $3.6bn. The distribution deal will see Agrolux initially sell LST’s LED lighting products into the UK and Irish markets, but it is hoped that this would blossom into a much-wider distribution agreement.
Deacon commented that LST has also been working with James Dyson’s farming businesses in the UK. Founder of the Dyson Group famed for its cyclonic vacuum cleaners, Dyson has also been a significant investor in agriculture, owning four farms in the UK that have all adopted controlled agriculture environments. Deacon explained that Dyson Farms said it was “excited” about LST’s controlled environment capabilities in a recent presentation to the National Farmers’ Union.
“We’re on the right track working with Dyson Farms and with other organisations that can fund large-scale projects like Sir James,” said Deacon.
The chief executive noted that Dyson Farms was looking at agriculture on a technology- and science-driven basis, moving away from the small-scale, family-run farming of the past. Dyson said: “Farming is not a cottage-industry, or something quaint and nostalgic; efficient, high-technology agriculture holds many of the keys to our future. Sustainable food production and food security are vital to the nation’s health and the nation’s economy, whilst there is also a real opportunity for agriculture to drive a revolution in technology and vice versa.”
Demographic pressures on agriculture
Deacon explained that globally the world is running out of productive farmland, a result of a century of intensive farming where the strategy has been to douse crops with chemicals to stimulate growth and deal with pests and diseases. This, he said, is storing up significant problems for the future, as the population grows, and contemporary agriculture is unable to feed the new mouths coming into the world each year.
“We’re already fighting over the productive agricultural land […] and with a degradation of farmland and water sources this will only get worse. Add to increased population pressure and declining yields from existing agricultural land, you have unpredictable and extreme weather events,” said Deacon, “the only way to deal with these issues, to provide the food the world needs, protect the environment from pollution and conserve energy and resources, is to move to controlled agricultural environments.”
The company is also developing sensors that will track and analyse water pollution from agriculture.
Although conflict might intensify in the coming years over competition for resources such as agricultural land and water, current conflict resolutions might provide opportunity for LST’s AgTech division, with a pressing need to rebuild post-conflict Ukraine and return its mantle of the breadbasket of Europe should current peace negotiations bear fruit.
Fast growing fire safety market
Deacon has also been happy with the performance of LST’s Passive Fire Protection (PFP) division, which has been slowly and sustainably securing contracts, recently securing a follow-up order to install PFP’s Injectaclad cavity remediation to two further Mancunian tower blocks owned by a landlord that gave PFP a £600,000 initial order.
The majority of PFP’s clients and target market are responsible for property portfolios requiring remedial passive fire protection work, highlighting the potential for follow-on contracts within their portfolios. This underscores the significant potential to drive near-term revenues and cash generation at the same time as increasing visibility.
This contract and the order flow seen across the year has underpinned a strong inaugural contribution from the PFP division. Having generated revenues of around £300,000 during 1H24, the contribution from PFP for the full-year was around £1.6m, with the division’s ongoing contracts providing a good level of visibility into the next financial year.
Deacon said: “The average order size [for PFP] is between £500,000 and £1m [and…] there is post-Grenfell a huge stock of buildings that need renovating […] At the moment we have a Government that is pushing to renovate the housing stock nationally as quickly as possible [but given the backlog] this might take 15 to 20 years to put right, and we have a very economic, less-invasive solution for tower block fire protection that will give resident two hours to escape in case of an emergency.”
PFP is well placed to capitalise on the UK’s fast growing fire safety market, which has a potential total value of up to £50bn and is being driven by increasing regulation. PFP has now received orders worth in excess of £2.5m since being established in November 2023.
Light Science Technology contract electronics business
The last part of LST’s Group of companies is its contract electronics business, the division, as previously reported, is where LST can trace its history from. Although the future of LST might be in AgTech and Passive Fire Protection, the Contract Electronics division is still a vital cog in the LST engine, given that it gives the company in-house design and fabrication abilities for its other products.
Contract electronics is a volume business, and LST is not trying to compete with factories in Asia, but is attracting business as European and American firms, spooked by the worsening relations between China and the US and the first salvoes of a new Sino-American Trade War are looking for reliable components suppliers closer to their home markets.
Moreover, as sabres are rattled in Asia, Europe and the Americas, Deacon believes that the contract electronics business should start to see a spike in orders from the Defence and Aerospace industries, specifically the UK Ministry of Defence. Having in-house capability also armour-plates LST’s own supply chains feeding into AgTech and PFP.
Light Science Technology has made remarkable progress, with strong revenue growth, a near break-even performance, and strategic expansion across key divisions. The AgTech business is poised for global growth through partnerships like Agrolux and potential collaborations with Dyson Farms, while the Passive Fire Protection division is capitalising on urgent regulatory demand. With increasing visibility across all its business lines, robust cash flow, and opportunities in contract electronics, LST is well-positioned for sustained momentum in the coming years.
