Light Science
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Light Science Technologies Holdings plc (LST)
Light Science Technologies designs, procures, and manufactures contract electronics manufacturing products. It offers printed circuit boards, used in various sectors, including audio, automotive, electronics, gas detection, lighting, and pest control. The company was incorporated in 2020 and is headquartered in Derby.
Investment Case
LST is developing and marketing advanced lighting and sensors to improve the energy efficiency of vegetables growing under cover. It was formed from an existing electronics assembly business, adding expertise in plant health and nutrition. The September 2023 Tomtech acquisition has considerably widened their product offering in horticulture and floriculture and brought them skilled staff and an established client base. The Injecta purchase in November 2023 created a third division for “passive fire protection”.
Long-term sectoral transformation in indoor farming is necessary to meet the UN sustainability goals, with modernising farming practices, reducing energy and other inputs, reducing environmental impacts (including food miles), and increasing productivity, all government priorities in the UK (as witnessed by the March grant). However, current revenues indicate that this remains potential rather than actual business.
LST claim that their key advantage is the ability to offer a full-service solution: from comprehensive design and proprietary products to ongoing consultancy services to optimise plant growth as well as full-time remote monitoring/control/maintenance for growers seeking high levels of automation. The business is pursuing a recurring revenue model by building long term partnerships with its customers obtaining revenues from upfront design and installation, ongoing monitoring and maintenance, as well as data analytics and software licensing. Higher energy prices should ultimately drive demand, though in the short term they are hitting potential customers’ ability to invest.
The share price roughly trebled after the last raise to around 3p, and reached that level again after the January trading statement- at the current 2.9p it has a market cap of £8.8m. The value of the business will depend on their ability to expand the client base of their components business and to integrate and grow the acquisitions. Given the continuing but now diminishing impact of high energy prices on growers, the pace of this is very hard to project. The original UK Circuits business, with around £800,000 of divisional EBITDA in the year to November 2023, is large enough to justify a significant proportion of the current market cap on its own: the business it most closely resembles is AIM-listed Solid State (at an earlier stage of Solid State’s growth). Management subscribed for part of the most recent raise and own about 30% of the company.
The company has not provided any guidance for 2024, but has commented that “we remain excited by the potential for growth across all parts of the business.”
Recent Developments
Last Updated: 08/05/2024
November 2023 results announced on 8 May contained no surprises: revenues at £9.3m were up almost 14%, 23.4% gross margins were a material improvement on 17.7% in 2022, and the company commented that the CCEA (component) business showed good growth. The strengthening of the agtech business through the Tomtech acquisition has broadened the product line but not yet made a material difference to the numbers. The purchase of Injecta Fire Barrier on 20 November came only days before the year end. They have subsequently announced a £600,000 contract for the division, and commented that legislative change will drive remediation work to buildings.
On May 9 the company announced an exclusive distribution agreement for its Growtech product for South Africa with AgriLogiq Technical Systems. No numbers were disclosed. The company said this was an important first step in the development of its global partnerships strategy, facilitating entry in high-growth markets on a low-cost basis.
On 22 March the company announced that they had been awarded a £188,000 government grant as part of a project they are leading to develop their SensorGROW plant growing technology platform to help increase food security and crop yields, with Bridge Farm, a leading UK horticultural expert, and UK grower Zenith Nurseries part of the consortium. LST announced a £130,000 order in the “Sports Entertainment” sector on 8 February for their contract electronic manufacturing (CEM) division-and at the same time they mentioned that they had secured £1.4m of orders in pest control, presumably from core customer Rentokil, for delivery in their second quarter.
In early March the company appointed Dr Graham Cooley, who ran the fuel cell company ITM for some years, as Non-Executive Chairman, replacing the previous incumbent, and also replaced one of the non-executive directors. Cooley has built up a 7.12% stake in the company.
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