TIDMLST
RNS Number : 0543U
Light Science Tech. Holdings PLC
21 November 2023
Light Science Technologies Holdings plc
("LSTH", the "Company" or the "Group")
Acquisition of Injecta Fire Barrier trade and assets
Earnings enhancing acquisition of a cash-generative, high-margin
and scalable trade; underpinning wider investment opportunities for
the Group
Light Science Technologies Holdings plc (AIM: LST), the
controlled environment agriculture ("CEA") technology and contract
electronics manufacturing ("CEM") group, is pleased to announce
that it has entered into an asset purchase agreement ("APA") with
Fire Barrier International Ltd ("FBIL"), to acquire its Injecta
Fire Barrier trade and assets ("IFB") (the "Acquisition"). The APA
is structured with the consideration being a deferred profit share
agreement, with no initial or fixed outlays and the Acquisition is
expected to be near term cash generative for the Group.
Highlights
-- Earnings enhancing acquisition
-- Synergies with existing Group's maintenance and installation operations
-- Strong sales pipeline and initial order book
-- High demand sector with significant levels of committed government funding
IFB, which has a proven track record in the passive fire
protection market and a strong sales pipeline in place, has an
agreement with Injectaclad Ltd to retrofit its industry disrupting
fire resistant graphite barrier system ("Injectaclad"), targeting a
UK market that is potentially worth up to GBP50 billion*.
As a high-margin, cash-generative trade, it is expected to
strengthen the wider Group's balance sheet and investment
opportunities.
There are a number of synergies with the Group's existing
operations - especially within the CEM division, which has long
standing relationships within the fire protection market, providing
technology and equipment for the fire safety sector for over 10
years. IFB will also advantage from the additional governance
required under the Group's plc umbrella, which is expected to be a
strong selling point for potential clients. It will further benefit
from the Group's knowledge and knowhow within maintenance and
installation operations.
Rationale
The Acquisition is part of the Group's managed expansion to
create a self-funded cash-backed group that is positioned to take
advantage of the clear opportunities across all of its target
sectors as and when the time is right.
IFB, which will be integrated into the Company's newly
incorporated subsidiary LSTH IFB Limited, has signed a new contract
with Injectaclad Ltd to install Injectaclad, which expands when
heated and is used to contain the spread of fire and smoke within
building compartments, in accordance with UK fire regulations.
-- Growth opportunities driven by UK Government legislation and the Fire Safety Act 2021
-- GBP5.1 billion allocated Government spend on cladding remedial works
-- IFB's management believes that the Injectaclad solution is c. 60% cheaper than alternatives
-- Avoids costs of removing external facades/cladding - also
resulting in reduced waste materials and environmental impact
-- Minimal disruption for building occupants
-- IFB's management believes that installation time is accordingly reduced by up to 75%
-- First independent installer of Injectaclad
-- Over GBP7 million quoted pipeline of potential sales
opportunities and forward order book of c.GBP600,000
Injectaclad offers a functional, cost and time effective
solution to the retrofit fire safety requirements for both public
and private residential, commercial and industrial buildings; an
issue for which the UK government has already allocated GBP5.1
billion and secured commitments with the top 50 UK builders for
them to take responsibility for these issues. It is fitted into
wall and floor cavities and prevents fire and smoke from spreading
rapidly through building compartments.
IFB installs the system by strategically removing bricks from
the exterior of a building and using pumps to fill mesh socks
inserted into the cavities with the fire resistant graphite
material, eliminating the requirement to remove external facades,
which is currently common practice. Please click here to view a
short video of the system .
Injectaclad has been independently tested and approved by
Warringtonfire with UL - EU certification for multiple building
cavity applications and the approved and patented system is
extremely cost effective - offering cost savings as high as 60%
when compared with other methods of remediating defective cavity
fire barriers within existing buildings. It is able to be installed
non-invasively and quicker than alternative options, which cause
significantly higher levels of disruption and waste than
Injectaclad.
Proven track record and strong pipeline
IFB commenced trading in 2022 and currently owns two pumps,
which are capable of generating significant annual revenues. It has
completed two projects to date, generating c.GBP790,000 in sales.
It currently has a quoted pipeline of potential sales opportunities
worth c.GBP7 million and a forward order book worth
c.GBP600,000.
IFB receives deposits before work is commenced, with all work
commitments signed off and approved using an integrated software
system that provides drawings and photos of the completed
works.
Looking forward, there is significant potential for IFB to add
to its pump fleet and take advantage of the growing fire safety
retrofit market in the UK.
Operating in a Growth Market
There is strong backing for reliable and cost-effective passive
fire protection solutions given the increasing economic costs of
fire. In the year ending March 2020, the estimated total economic
and social cost of fire in England was GBP12 billion - with GBP2
billion coming from property damage**.
The Fire Safety Act 2021 and current Building Safety Bill will
lead, in the Board's view, to Government pressuring developers,
building owners, housing associations etc. to undertake remediation
works, and this is now being seen by Injectaclad quotations
becoming live projects for approved installers.
Given the significant scalability and growth opportunities, the
Group believes that IFB will be a strong addition to its portfolio
and that the cash-generative nature of the business will provide a
solid foundation for further growth and investment across the
Group. As an existing business, it has a proven track record with
accreditations from the Association for Specialist Fire Protection
("ASFP"), The Contractors Health and Safety Scheme ("CHAS") and is
a certified member of IFC and ConstructionLine.
Terms of the Acquisition and Related Party Transaction
FBIL is currently wholly owned by LSTH's CEO, Simon Deacon. LSTH
will acquire IFB from FBIL on a contingent deferred consideration
basis as described below, with no initial or guaranteed deferred
consideration payments. Total maximum consideration payable is
GBP1.75 million over a five year payout time limit (subject to
suspension in the event of certain force majeure events).
Contingent consideration is calculated monthly as 50% of net
profit after tax, excluding intra-group charges and non-cash
acquisition accounting adjustments. Consideration is payable 30
days after the end of the month to which it relates, subject to a
retention for a proportion of unpaid trade debtor amounts.
The Acquisition constitutes a related party transaction for the
purposes of the AIM Rules for Companies, as Simon Deacon is a
Director and Substantial Shareholder of the Company and is the sole
owner of FBIL. The directors independent*** of the Acquisition,
being Andrew Hempsall, Rob Naylor and Myles Halley, having
consulted with the Company's nominated adviser, Strand Hanson
Limited, consider that the terms of the Acquisition to be fair and
reasonable insofar as shareholders are concerned.
Schedule Four Disclosure
Separate accounts do not exist for IFB, which is being bought
out of FBIL, as FBIL provided other services alongside that offered
by IFB. IFB has completed two projects since September 2022,
generating c.GBP790,000 in revenue and a gross profit margin of
c.60 per cent. On the Group's balance sheet, it is anticipated that
tangible assets for IFB will be recorded at c.GBP75,000. The value
of intangible assets related to the Acquisition is subject to
verification with the Group's auditors for the accounts relating to
30 November 2023.
Simon Deacon, Chief Executive Officer of LSTH, commented : "The
Government has called for urgent action to make buildings safe
across the UK, and there are over 40,000 buildings in UK* which
need urgent attention. These include hotels, students'
accommodation, apartments, hospitals, government buildings. Fire
safety is paramount - the Government has already allocated over
GBP5 billion to replace dangerous cladding - a figure that is
expected to increase significantly, with some contractors
suggesting that a figure closer to GBP50 billion would be
appropriate.
"We believe that with our knowledge in the industry and our
installation teams across the Group, this new division, in a
growing market with high demand, resolves a significant problem
quickly and cost effectively - and more importantly keeps people
safe.
"The cash-generative nature of the business will be valuable as
we grow, and the synergies with existing operations make it a
strong fit as part of our managed expansion. We are excited by the
continued opportunities across the CEM and CEA divisions and, given
wider government legislation and need for protective solutions,
believe that IFB will be a strong addition that will be
self-funding from day one."
* Estimators price cladding replacement at 10 times government
budget (theconstructionindex.co.uk)
** Economic and social cost of fire - GOV.UK (www.gov.uk)
*** Jim Snooks' spouse is engaged to provide services to FBIL
and therefore abstained from providing the opinion
For additional information please contact:
Light Science Technologies Holdings www.lightsciencetechnologiesholdings.com
plc
Simon Deacon, Chief Executive Officer via Walbrook PR
Jim Snooks, Chief Financial Officer
Andrew Hempsall, Chief Operating
Officer
Strand Hanson Limited (Nominated Tel: +44 (0) 20 7409 3494
& Financial Adviser)
Ritchie Balmer / James Harris /
Rob Patrick
Oberon Capital (Broker)
Mike Seabrook / Nick Lovering Tel: +44 (0) 203 179 5300
Walbrook PR Ltd (Media & Investor Tel: +44 (0)20 7933 8780 or
Relations) lst@walbrookpr.com
Nick Rome / Paul McManus
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No. 596/2014, as
it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018, as amended.
About Light Science Technologies Holdings plc (
www.lightsciencetechnologiesholdings.com )
Light Science Technologies Holdings plc is the holding company
of the Group's controlled environment agriculture ("CEA") division,
comprising Light Science Technologies Ltd ("Light Science
Technologies") and Tomtech (UK) Limited ("Tomtech"), alongside its
contract electronics manufacturing ("CEM") division, UK Circuits
and Electronics Solutions Limited ("UK Circuits").
Controlled Environment Agriculture
Light Science Technologies was founded in 2019 and is the
Company's grow lights and sensor technology business, providing
bespoke recipes and technologies tailored to customers' needs -
with key targets including indoor, vertical, glasshouses,
polytunnels and medicinal farming markets. The all-in-one CEA
solution will include analysing customers' crop growing
requirements to provide bespoke, low-energy and sustainable
equipment. Tomtech, which was acquired in September 2023, further
broadened the Group's portfolio with its control systems usable
across multiple crops in glasshouses and other horticultural
environments. Additionally, it generates long-term recurring
revenues via maintenance, servicing, and software contracts.
Market drivers include food and water shortages in many parts of
the world; growing global population; UK and other government
policy encouraging sustainable and efficient growth methods;
increased scrutiny of the effect of food production on climate
change and the continuing transition away from processed foods.
sensorGROW
sensorGROW was launched in June 2022 and its technology will
enable farmers to monitor the following key air zone growing
factors in real-time: carbon dioxide levels, humidity, light,
oxygen - and in the future: air speed, plant disease, soil,
temperature and water pH levels. By monitoring these key growing
factors, farmers can save money through better management of
resources: water, nutrients, fertilisers and energy - while
increasing yields and producing healthier crops.
nurturGROW
nurturGROW is a sustainable grow lighting product range,
offering an innovative, high-performance and cost-effective
solution for indoor farming, covering greenhouses, vertical
farming, polytunnels and medicinal plants.
Created with four core component parts, the nurturGROW range is
made of high quality, durable materials to give growers the ideal
balance between strength and optimal performance, minimising the
amount of materials needed to drastically cut down on waste and
reduce carbon footprint.
Tomtech
Tomtech was established in 1986 as a sole trader and
incorporated as Tomtech (UK) Limited in 2011. Since then, it has
become a UK leader in control systems for commercial greenhouses
and polytunnels. Since launching its first product over 35 years
ago, it has been at the forefront of the sector, providing
innovative and effective products and solutions.
It now provides comprehensive solutions to customers helping
them create, monitor and maintain an optimised cultivating
environment within glasshouses and other horticultural spaces. Its
sensors monitor temperature, humidity, light, carbon dioxide, pH,
nutrients and more - whilst its intelligent systems help control
irrigation, fertigation, dosing, ventilation, light and more.
Its highly adaptive systems are used throughout the UK and
Ireland to optimise growing conditions for multiple types of crops
grown within commercial greenhouses and other horticultural
environments.
Contract Electronics Manufacturing
UK Circuits is the Company's CEM focussed division, profit
making with strong revenues. The Group designs, procures, and
manufactures high-quality CEM products, specialising in Printed
Circuit Boards, which are used in a range of sectors including
audio, automotive, electronics, gas detection, lighting, pest
control, telecommunications and, more recently, the CEA market.
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