Light Science Technologies Holdings plc

("LSTH", the "Company" or the "Group")

Interim Results

Light Science Technologies Holdings plc (AIM: LST), the controlled environment agriculture ("CEA") technology and contract electronics manufacturing ("CEM") group, is pleased to announce its unaudited interim results for the six months ended 31 May 2023 (the "Period").

Highlights:

·    Revenue for the Period, up by 22% to £4.4m (H1 2022: £3.6m)

·    Margins were flat at 20.9% (H1 2022: 20.9%) and up from 17.7% for the full prior year

·    Loss before Tax down 37% to £0.8m (H1 2022: £1.3m)

·    CEM division continued to deliver strong revenue growth with gross margin returning to normalised levels

·    Realigned cost base and focused on broadening market reach of CEA division to help mitigate impact of sales cycle fluctuations

·    Raised £1.45m in new funds, which will be used, amongst other areas, for product development and intellectual property protection within the Group's CEA division

Commenting on the results and prospects, Simon Deacon, Chief Executive Officer of Light Science Technologies, said:

"We continue to be excited by the growth potential across both divisions. With the CEM division continuing to be our predominant revenue generator, and the CEA division continuing to develop and market solutions to the unprecedented pressures affecting the agricultural sector, we are well placed to take advantage of growth opportunities. Daily discourse regarding food security and supply highlights the ongoing challenges and impacts of unreliable harvests and labour shortages and we believe that our solutions will help mitigate these issues."

For additional information please contact:

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, Light Science Technologies Ltd ("Light Science Technologies"), and 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.

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.

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.

Chief Executive's Report

Financial & Operating review

I am pleased to announce Group revenue for the six months to 31 May 2023 is up by 22.4% to £4.4m (HY22: £3.6m), compared to the equivalent period last year. Group performance reflected the benefits of operational improvements undertaken to improve gross margins, which grew to 20.9% from 17.7% for the full prior year (FY22).

The Contract Electronics Manufacturing ("CEM") division continues to predominantly generate Group revenue, and it is very pleasing to see market conditions gradually improving, with reduced supply chain constraints, although the division is still experiencing more trade friction than historically in pre-pandemic times. This division is now the manufacturing arm of sister company Light Science Technologies - with the first production batch of SensorGROW successfully running through the UK Circuits' facility during the Period.

The Controlled Environment Agriculture ("CEA") division continues to experience an elongation of the sales cycle, particularly in the UK and certain European countries. This is due to a number of factors, most notably ongoing input inflation experienced by growers, whereby growers' costs cannot be passed on fully to their customers and consequently delays on capital expenditure commitments have continued, specifically impacting LED lighting projects.

The Group's broader strategy is to create global partnerships, to continue developing its client portfolio and potential market reach into different sectors. In parallel, the Group is focussed on growers who are less impacted by high input costs, in the UK this includes cut flowers, bedding plants and medicinal plants, and globally in regions where growers have been heavily impacted by the extreme weather conditions, such as the US and UAE. Additionally, the division continues to invest in its energy and waste saving, all-in-one SensorGROW product, this will include the addition of Nitrous Oxide sensing which will enable the extension of the product into outdoor (broad acre) growing. The work we have completed on the software and AI elements of the product will also be enhanced following the results of the air zone field trials, to give the growers greater control over their environments and leverage further savings in labour and material inputs.

In view of the pervading market conditions, the Board took the decision to implement various strategies in the prior and current year to significantly lower overheads, which are proving successful and have resulted in a 20% reduction compared with the equivalent period last year, with ongoing savings continuing in the second half of 2023. This, coupled with the increased gross profit, led to a reduction in loss before tax for the six months to 31 May 2023 by 37% to a loss of £0.8m (HY22: loss of £1.3m).

Inventories increased slightly on the prior year end position by £0.3m to £1.8m but have stabilised in the near term around this level, so as not to compromise customer service levels. This stock is predominantly allocated to specific customer orders received and if component shortages and inflationary pressures continue to ease in the medium term as expected, it is anticipated these levels will reduce.

In December 2022, the Group agreed a revolving stock loan facility with its funding provider, Close Brothers, to aid the CEM division in managing its working capital requirement, so as not to compromise customer service levels should there be a return to a tightening of the supply chain in the sector, and additionally to help mitigate against ongoing inflationary pressures.

The Group continued its planned programme of investment in the period. Capital and other expenditure in the CEM division has been introduced to automate and expand capacity at the Group's manufacturing site in Manchester and progress to gaining further quality accreditations, to open new market opportunities. Capital expenditure has been underlaid by a finance lease.

In April 2023, the Company issued 158,855,500 new ordinary shares, raising net proceeds of £1.45m, which will be used, amongst other areas, for product development and intellectual property protection within the Group's CEA division.

Outlook

The Group, having implemented its cost-cutting measures, is now wholly focused on delivering top line revenue growth.  As alluded to, whilst we remain confident that those revenue opportunities will crystallise over time, we are unable to determine the exact timing, particularly within the CEA division. We are seeking to mitigate this risk by looking at other opportunities that could bridge any revenue gap that may arise, including acquisitions, and take confidence from the 2023 performance of the CEM division which is expected to exceed 2022's performance.

The Board looks forward to updating you as we progress throughout the rest of the year.

Simon Deacon

Chief Executive Officer

30 August 2023

Consolidated statement of comprehensive income

For the six months ended 31 May 2023

Consolidated balance sheet

As at 31 May 2023

Statements of changes in equity

For the six months ended 31 May 2023

Consolidated cash flow statement

For the six months ended 31 May 2023

Notes to the financial statements

1.   General Information

Light Science Technologies Holdings plc was incorporated in England on 13 January 2020 as a private company limited by shares. On 8 July 2021, the Company re-registered as a public limited company. The company's equity is admitted to trading on AIM.  The address of its registered office is 1 Lowman Way, Hilton, Derby, England, DE65 5LJ.

The principal activity of the Group is the development and manufacturing of electronic boards and the development and manufacturing of lighting and technology products for the Controlled Environment Agriculture ("CEA") sector.

This condensed consolidated half-yearly financial information ("interim results") was approved by the directors for issue on 30 August 2023. 

The financial information in these interim results is that of the holding company and all of its subsidiaries. It has been prepared in accordance with UK-adopted international accounting standards. The accounting policies applied by the Group in the preparation of these consolidated financial statements are consistent with those applied by the Group in its latest audited financial statements for the year ended 30 November 2022, a copy of which can be found here: https://lightsciencetechnologiesholdings.com/investors/.  These policies have been applied consistently to all periods presented.

The financial information presented herein does not constitute full statutory accounts under section 434 of the Companies Act 2006 and was not subject to a formal review by the auditors. The financial information in respects of the year ended 30 November 2022 has been extracted from the statutory accounts which have been delivered to the Registrar of Companies. The Group's Independent Auditor's report on those accounts was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The financial information for the six months ended 31 May 2023 and 31 May 2022 is unaudited.

As further detailed in the Company's Annual report, the Directors believe the principal risks and uncertainties facing the Group over the final 6 months of the year to be the continuing macroeconomic challenges from high input inflation becoming embedded and rising interest rates to combat it. Additionally, the ongoing and potential for new geopolitical uncertainties impacting the global economy and its interconnected supply chains, remains a risk. Whilst these factors present the Group with opportunities in the medium to longer term (with the trend to grow more locally, sustainably and energy efficiently), in the shorter term the Directors see these risks could have the potential to further elongate the sales cycle and impact Group revenue and cash generation. In consideration of these risks and uncertainties, the Company continues implementation of various actions to manage cash flows and discretionary spending.

There are no subsequent events requiring recognition and disclosure in the financial statements.

The Directors do not recommend the payment of an interim dividend for the six months ended 31 May 2023. No dividend has been paid in respect of the year ended 30 November 2022

2.   Going concern

Working capital forecasts have been prepared for the period to 30 November 2024. Based on the forecasts, the Group can meet its day-to-day cash flow requirements and operate within all the terms of its borrowing facilities.

The Directors are satisfied that the Group has sufficient financing in place to continue to meet its liabilities as they fall due for a period of at least 12 months from the date of approval of this report, the 30 August 2023, and hence have prepared the financial statements on a going concern basis.

The Directors acknowledge that the current economic environment creates material uncertainty over the level of future revenues and there would be a probable need to raise additional funding to support Group requirements in the second half of 2024, should the Group's expectations for revenue generation over the coming 12 months not materialise as expected. The Directors note that this material uncertainty may cast significant doubt on the group's ability to continue as a going concern.

In response to these matters the Group has implemented a variety of actions to manage cash flows and discretionary spending, including a reduction in the costs of the Board and related salaries, offsetting purchasing cycles with customers deposits and reducing other costs within the business.

The financial statements do not include any adjustments that would result if the company were unable to continue as a going concern.

3.   Revenue and segmental reporting

The total revenue of the Group for the period has been derived from its principal activity wholly undertaken in the United Kingdom.

Revenue is in respect of supply of hardware and is recognised at a point in time at the point of customer collection or dispatch. Revenue in respect of laboratory services is recognised at a point in time when project gateways are completed, the level of revenue is immaterial so has not been separately disclosed. As new products and services are launched within the Controlled Environment Agriculture segment, the revenue accounting policy and point of recognition will develop.

During the six months to 31 May 2023 one customer represented 60.2% of total revenue (HY22: 55.4%; 2022: 54.3%).

The Group has two operating segments 'Contract electronics manufacture' relating to the development and manufacturing of electronic boards; and 'Controlled environment agriculture' relating to the development and manufacturing of lighting and technology products for the Controlled Environment Agriculture (CEA) sector. This is consistent with the presentation in the last financial statements. The Chief Operating Decision Maker (CODM) has been determined to be the Board. The performance of the two reportable segments is based upon a review of profits and segmental assets/liabilities.

4.       Taxation

The tax credit is made up as follows:

The tax charge in the six month periods have been calculated based on the estimated tax rate that is expected to apply to the full year.

5. Borrowings

In October 2020, the Group entered into a term loan with a principal of £975,000 payable in 54 equal instalments of £18,056 and interest payable at 5.5% plus base rate with the first six months payment free. The loan was provided by Close Brothers under the Government backed Coronavirus Business Interruption Loan Scheme (CBILS). The loan with Close Brothers is secured by fixed and floating charges over the Group, including all property and intellectual property. This is linked to the Group's invoice discounting facility noted below. The balance for the CBILS term loan at 31 May 2023 was £505,556 (HY22: £722,222; 2022: £613,889).

The Group has in place ongoing invoice discounting facility arrangements provided by Close Brothers. Interest is payable on the invoice discounting facility at 2% plus base rate. The invoice discounting facility with Close Brothers is secured by fixed and floating charges over the Group, including all property and intellectual property, as well as the trade receivables of the subsidiary, UK Circuits and Electronics Solutions Limited.

The Group agreed a stock loan facility in December 2022 with Close Brothers. Interest is payable on the stock loan facility at 3.25% plus base rate. This facility provides up to £750,000 working capital secured by fixed and floating charges over the Group, including all property and intellectual property, as well as the inventories of the subsidiary, UK Circuits and Electronics Solutions Limited.

6. Issued equity capital

During the month of April 2023, an aggregated total of 158,855,500 new ordinary shares were issued at a price of £0.01 per share equating to the nominal value of those shares.

The share premium account is shown net of £133,768 of share issuance costs in connection with this.

7. Loss per share

Basic loss per share is calculation on the loss for the period after taxation attributable to the owners of the parent of £770,938 and on 200,624,470 ordinary shares, being the weighted number in issue during the period excluding shares held by the Employee Benefit Trust (EBT). Unexercised options over the ordinary shares are not included in the calculation of diluted loss per share as they are anti-dilutive. Share options over a total of 1,400,000 shares have lapsed since the end of the last financial statements.

Diluted Earnings Per Share

Basic and diluted loss per share are equal as where a loss is incurred the effect of outstanding share options and warrants is considered anti-dilutive and is ignored for the purpose of the loss per share calculation.