Q2 2026 Light Science Technologies Holdings PLC Earnings Call
Speaker #1: Questions are encouraged to be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Please just simply type in your questions and press send.
Speaker #1: Before we begin, I'd like to submit the following poll. And I'd like to hand you over to Simon Deacon, CEO. Good morning, sir.
Speaker #2: Thank you very much. And good morning, everybody. Welcome to our half-year 2026 results and post-period trading update. I'd like to just remind you, fresh memory, of the management team today with us is Andrew Hempsall, Chief Operating Officer.
Speaker #2: Jim Snooks, CFO and company secretary, and myself, Simon Deacon, Chief Executive Officer. Me and Jim will be going through the presentation and, at the end, Andrew will support with the questions going through.
Speaker #2: Thank you, Andrew. So, Group Operating Highlights. Passive fire protection has been incredibly busy in the last 6 months. We've increased the number of building safety regulation BSR applications within InjectaClad being specified.
Speaker #2: And really, within the passive fire protection, being specified really gives us starts giving us that visibility. We've been accelerating the BSR approvals, notes towards the end of half-year of 2026, underpinning expectations for the significant improvement in H2.
Speaker #2: The government has given $6 billion pledged funding towards remediation work, and this has really good to see and is being used. There's over a billion pounds of that now being used, and that continues to be so.
Speaker #2: InjectaClad's had around 160 buildings now with remedial work put into it, so that's really good to see. We're seeing that increase: more buildings, more tower blocks, commercial, residential going through around the country.
Speaker #2: In our contract electronics manufacturing sector, the CEM, we've positioned the business really to focus and move into higher-margin defense and medical and healthcare markets.
Speaker #2: And while doing this, we've won 4 new clients, which has really taken the potential and generating up to a further $1 million of revenue in the next 12 months.
Speaker #2: And some of those clients that we've taken on board are within health sector and also security. And what that really shows is more visibility once you enter in with these clients: you normally get the consistency with those clients rolling through the years as we go forward, evolving with other clients.
Speaker #2: So that's proving a really good traction moving forward. In the ag tech, we've just completed Nottingham Trent University project, a smart agricultural centre. This is one of the largest projects we've done, and it was really interesting to do from a design-build purpose of we normally get involved just in the technology, but we actually design the facility, built the facility, and also put the technology into it, which has really gives us a really strong case study moving forward for growers internationally, but also can come to this facility and see all of our technology in operation.
Speaker #2: We were awarded a $300,000 project with a Welsh university, so you can see we've always worked with universities, but these projects are starting to get larger.
Speaker #2: As we move forward, and this is really good to see because there's a lot of educational piece going now into food security and training the university students up to get more technology to grow our crops as we get more severe weathers across the world.
Speaker #2: We've also done an awful lot of, in ag tech, maintenance and refurbishment as well. And I'll highlight that a bit further on in the slides.
Speaker #2: Group highlights: we raised proceeds of £6.6 million with our funding round for 3 strategic acquisitions. And which has really strengthened the group's balance sheet moving forward.
Speaker #2: Following a strong close-year half-year of 2026, the group is positioned for high-margin profitable growth in the second half of the year. So looking at group post-period highlights, and this is really worth focusing on.
Speaker #2: We had a slower half-year, but what we're really seeing now is that momentum that we've been talking about for H2. And we've done just over a million a month, just over 2 million pounds in June and July.
Speaker #2: So you can start to see the momentum building for our year-end. Which is really encouraging to see that the hard work now is translating into that revenue.
Speaker #2: We also got a strong £3 million current group forward order book. And that's booked orders. So that really gives us that bit more visibility of revenue we've done, already, also prior period, post-period, and now the booked forward order book.
Speaker #2: And so that's really encouraging to see that we've got that key visibility that we all look for and gives the management that confidence. We've also got 10 PFP passive fire protection installation network projects in progress at the moment around the country.
Speaker #2: That's a lot of projects going on around the country, and buildings being remedial work going on with the InjectaClad material. And we only see this from the pipeline growing as we really get down to the nitty-gritty of acquiring InjectaClad and understanding the installer base.
Speaker #2: Our current group quoted sales pipeline is £50 million, and we're seeing that converting. So over the years, we've always had a strong quoted pipeline, which has been growing.
Speaker #2: We're now seeing a really good, strong, in all divisions, of that being converted now into orders and then revenue. Really good to see is that our cash position, group cash, at the end of the half-year was £2.7 million.
Speaker #2: But what I'm really pleased to see is that it's increasing. So at the end of July, it moved up to £2.9 million, £2.9 million of group cash, and undrawn working facilities.
Speaker #2: So that's a directory going in the right direction as the orders come through, cash generation is moving up. I'm going to hand you over to Jim, who's going to go over the financial numbers for the half-year.
Speaker #3: Thank you, Simon. So as Simon indicated, we knew that the year's performance would be second half weighted. Over on the right-hand side, the block graph there shows the historic half-year revenues and the full-year revenue for last year on the far right-hand side.
Speaker #3: The table below shows the divisional splits and the group as a total for revenue. And the respective gross profit margins that we delivered over those periods.
Speaker #3: So we knew it was going to be second half weighted. And that meant that group revenue for the first half reduced to £3.7 million, from the year before, the half-year for '25, which was £5.1 million.
Speaker #3: And where's that reduction come from? Well, it's the hangover of the building safety regulator blockages in the passive fire protection division. We've written about that quite extensively.
Speaker #3: There was a change in that department structure that took effect at the start of the year. And we see the fruit being born from that now.
Speaker #3: Towards the end of the first half, we really have started to see a much heavier conversion of the passive fire pipeline. And that takes us through the second half in a much stronger position.
Speaker #3: As we foresaw. The other part of the reduction was reflected at a settling down of the CEM division's largest customer in the pest controls sector.
Speaker #3: In the second half of last year, they brought to an end-of-life one of their main products that we supply to them. And that's flushed through.
Speaker #3: That flushed through. So we've had next to no revenue from that particular product. And really, we see that client now is still an important client for the business.
Speaker #3: They're settled down into a business-as-usual state there. And are performing in line with our expectations. Turning to group gross profits, we saw a reduction to £30.5% for first half group profits, down from £36.3 in the first half of 2025.
Speaker #3: And that was born of a couple of things. Firstly, we ran a project in the PFP installation division that delivered thinner margins than we would normally expect.
Speaker #3: And the reason for that was that this particular client, quite a substantial estate, that needs remediation. And we saw this as a testbed to sample a form of a cookie-cutter design and to make sure that we learned from those experiences as we roll out to remediate as and when they give us those further projects.
Speaker #3: The other part was the Agtex NTU project. It was £600,000. Simon says it's been delivered now. And again, we see that very much as a testbed for rollout in the future to other universities.
Speaker #3: That's been a really sort of key project for us, running design through to install through to fit out and commissioning. But it did produce thinner margins than we would normally expect within the Agtex division.
Speaker #3: And finally, the inherent delays that I mentioned above from passive fire reducing revenue contribution and therefore fixed cost elements of gross profit had a dilutive effect for that period.
Speaker #3: The good news, as I say, we see a setting of the CEM's main customer and an unblocking of the PFP pipeline. So what we see for the second half is that scaling of revenue.
Speaker #3: But as importantly, those margins moving upwards with it. At the bottom table and graph on the right-hand side show our adjusted loss before tax position.
Speaker #3: We've continued to control very tightly our overheads. And during the first half, we saw only a 1.7 year-on-year increase in administrative cost overheads. That's the big chunk of overhead cost in our P&L.
Speaker #3: From to 1.84 million from a 1.81 million prior half-year period. In spite of ongoing inflationary pressures, particularly around energy, which is obviously well-versed. So our adjusted loss before tax was 0.8 million for the first half compared to 0.2 million for the first half of '25.
Speaker #3: And that really was representative of that contribution at the top part, the revenue and the gross margin delivering down at lower levels. As I say, it was expected and we expected a very heavily weighted second half, which we are starting to see very healthily now.
Speaker #3: So we have a clear momentum as we move through H2 for that strong revenue delivery. At those improved margins, with that continued overhead cost control, so we see a very much more profitable and cash-generative period as we flow through to the end of the year.
Speaker #3: Thank you, Andrew. Looking at the balance sheet, there's obviously with having done a 6.6 gross fundraise and three strategic acquisitions, we've seen a reshaping of the balance sheet.
Speaker #3: Just to give the headlines on that, we've seen an increasing goodwill of 1.2 million. That was from the inject cloud acquisition. And 3.2 millions' worth of increase in intangible assets, which really are the IP, the test data, and also the distributor installer relationships there that we fare value.
Speaker #3: So sets us up very, very, very strongly with the control of the value chain and the intellectual property for that inject cloud solution. And as Simon will say in further slides, very much benefiting the PFP installation side as well with the project flow we can control that now.
Speaker #3: We've also acquired acquisition of the remaining 10% interest minority interest in CEM division. And the remainder of the Manchester property. Further strengthening the balance sheet.
Speaker #3: And providing as importantly with full operational control for that division with our move into higher margins work like defence and healthcare. It was important that we had that operational control to make the improvements and the investments to get us into those new sectors.
Speaker #3: In terms of inventories, slightly elevated at the half-year point, just under a million. From the three-quarters of a million for the previous half-year. And that's mainly due to the CEM division gearing up for its new customer in the healthcare sector.
Speaker #3: And inventory is predominantly allocated to specific customer orders. Looking at cash, Simon's touched on it on his previous slide. At the half-year point, we had 2.7 million total cash and undrawn working capital facility availability.
Speaker #3: Cash being 2.4 and facilities being 0.3. That compared to the previous half-year point of 1.8 in total. And we saw a significantly improved year-on-year net cash debt position from a previous half-year of negative 0.66 to a half-year point of 1.2 million at the 31st of May '25.
Speaker #3: Thank you, Andrew. So moving on post-period, where does this leave us? We feel that we've got the ingredients for a very strong H2 trading performance.
Speaker #3: In June and July, we booked revenue of over 2.1 million. That's 58% coverage of the entire first half's revenue in just those two months.
Speaker #3: We've got a committed forward order book that stands at over 3 million, with 80% roughly of that expected to be recognised in the second half.
Speaker #3: We've got incremental inject cloud material revenues expected to be delivered in the second half. And I think this is a really important point to understand.
Speaker #3: We have the installer database there. The installer network. And there's over 10 projects that are in progress at the moment. And what installers typically do is those projects are running month on month.
Speaker #3: They give us the orders because they don't want to order it all upfront, obviously. But they're under contract to supply that installation. So we know that they need inject cloud to see that project through from start to end.
Speaker #3: So if you like, these are latent orders that aren't included in our current committed forward order book. But that are going to deliver significant revenue contribution as those installers order to fulfil their projects.
Speaker #3: And that would be through the remainder of the second half and beyond. We're working quite hard on capturing more and more information from the installers and working with them to gain more and more information on their own pipeline and also on project progress.
Speaker #3: And again, Simon will talk through some developments that we're looking at for in software where we can capture some of this data later on.
Speaker #3: So we've got more than 10 installations currently in progress. They're all going to require inject cloud material to complete their projects. That's falling on top of our committed forward order book.
Speaker #3: We've got four new clients in the CEM division that we've acquired in the first half. That's going to deliver up to 1 million annual revenue once those supply transitions are complete.
Speaker #3: We're seeing more visible revenues in the second half at strengthened gross profit margins, particularly from PFP ag tech also we see at higher margins and, as I mentioned earlier, the CEM division is showing a strong increase in its margin delivery.
Speaker #3: We've got healthy working capital position. We have 2.9 million at the end of July, cash and undrawn working capital facilities compared to two months before of 2.7.
Speaker #3: So we've got a good base, financially. We've got a strengthened balance sheet. We've got a converted, strongly converting pipeline. We've got good revenue delivery for the first two months of the second half.
Speaker #3: So we feel that we're in a very strong position to deliver a full-year performance that reflects all that hard work that we undertook in the first half.
Speaker #3: So if I can hand back to Simon, to look at the market opportunities and drivers.
Speaker #1: Thank you, Jim. So this just reminds ourselves of the company's market opportunities and drivers here and if any of them have changed. In passive fire protection, the market opportunity for us in remedial work or cavity barriers is a circular of 4 billion pounds.
Speaker #1: And that work will take 15 to 20 years to complete. And there's a real push by the government to get these high-rise buildings tall buildings complete within timescale.
Speaker #1: So there's a real push to do that. There's 40,000 buildings alone in the UK requiring remedial work. And the legislation is really driving those.
Speaker #1: We've got a quoted pipeline in this sector, which continues to get converted and topped back up of circular of 20 million pounds. And as Jim just explained, the inject cloud installers we haven't got the full visibility of those orders currently that they're already working on those projects.
Speaker #1: So you can see that can expand quite slide how we're going to get that information so that we've got better visibility moving forward. Looking at what routes to market in passive fire, it's very much fire engineers and architects and contractors and building owners.
Speaker #1: Those are routes to market. And we continue to focus on those. In contractor electronics manufacture, market opportunity in electronics is of scale of 21 billion.
Speaker #1: Our current quoted pipeline is 1 million. And the reason it's much lower in this sector, our conversion rate is much higher when we do a quote to conversion to order is much quicker.
Speaker #1: And normally takes between five or six weeks to from a quote that we do to becoming an actual order. So the quoted pipeline is always a lot less in this division.
Speaker #1: Drivers here really are ensuring procurement starts at home. The Prime Minister has just announced that. And we're seeing a lot of onshoring over the last few years.
Speaker #1: And that continues today. And our focus really is, as you know, moving into defence, medical, and healthcare and the government's circular of 300 billion spend on defence over the next four years and we're very much getting ourselves ready for that.
Speaker #1: So that we got the right accreditations moving through to win those contracts and those orders. Routes to market, primary through contracts supply chains, building long-term relationships.
Speaker #1: We've done that over the years with some of our customers being with us 15, 20 years and having that repeat business. And providing that turnkey solution, we've got a great facility up in Manchester and providing that turnkey solution for an electronic board design, electronic board to finish product.
Speaker #1: In ag tech, the market opportunity here is 12.7 billion. And 30 million in our current quoted pipeline. Really seeing a real shift in more technology being put into commercial glasshouses.
Speaker #1: And this is really down to food security. They're extreme weather patterns we see globally. The climate is changing. We can't ignore it. The summer that we're in currently is extraordinary.
Speaker #1: And to grow crops outdoors is becoming harder and unpredictable. The cost of materials as Phil continues to increase. So using technology that we provide reduces those inputs and we continue to do that through various commercial glasshouses that we supply.
Speaker #1: Routes to market, agronomists, growers, and resellers. Thank you, Andrew. So moving on a bit more detail within the passive fire protection division. We've got 11 injected installers across the UK since doing the acquisition, which was completed mid-April.
Speaker #1: So we've got 11 installers with the more than 10 of them with active projects. So we've got 10 active projects out there. Of three of those projects, we are installing with our own installation team Liverpool, East Yorkshire, and Birmingham.
Speaker #1: And there's a lot more to follow with future announcements coming up. We've created the new Northern base up in Manchester, establishing a warehouse for the inject cloud material to be distributed from.
Speaker #1: And we've also implemented an MRP system so that we're controlling all of what's going on, serial numbers, et cetera, and stock being distributed. Increasing number of BSR applications, being specified with inject cloud.
Speaker #1: This is one of our key targets, being specified within other work that we do. I've mentioned earlier there's 40,000 buildings across the UK which require remedial work.
Speaker #1: And that really spans from hospitals, so government buildings, to student accommodations, schools, hotels, commercial buildings. It is broad. And there's a lot to do.
Speaker #1: The government's led a pledge of 6 billion as I mentioned for remedial work. And that's currently being spent and being used. And some of the projects that we're on are funded by the government pledge.
Speaker #1: Unique platform really too for us. Acquiring inject cloud has given that unique opportunity we've now got the full supply chain. And we're supplying it with a great brand of inject cloud.
Speaker #1: So that's really making us to increase our market share of in that 4 billion and really focuses our mind to be the leading cavity barrier remediation provider.
Speaker #1: And we're really seeing that. You'll see on the right-hand side at the bottom there, we're exhibitioning at various shows. We're educating through we've done 34 CBD sessions where we're educating engineers, architects, fire engineers, surveyors on our product.
Speaker #1: And this is what gets us specified and gets our brand out there. And so we're doing increasing development there. Trials are in progress currently with a priority software.
Speaker #1: To develop a real golden thread. Which is live digital data this is really important because if we roll this out to our installation network of installers, what it will provide us more of an insight of the jobs being logged onto that system than the visibility and the scale of how much product they need.
Speaker #1: So it gives us more information, but it also really critically controls installed correctly. Providing that key golden thread in active all the reports which have gone forward in the past, it's all about.
Speaker #1: The future is making sure all the data is being recorded and will be providing that software for the installation teams so that we then get further visibility through it.
Speaker #1: So it's a really important system. And it's on trial currently at two sites. Building the team, obviously, we're scaling. Massively here. So it's all about building the team and making sure that the brand for the rest of this year moving into 2037, the division continues to scale.
Speaker #1: Also, the government is funding now announcements were made in the last few weeks. Buildings under 11 meters for a period of time. That's really good to see that that's happening.
Speaker #1: So it continued government support. I've mentioned about the education and the buildings across the UK, which is now got inject cloud system in it.
Speaker #1: So we're well established in this field. There's a lot of product gone into buildings. And we're starting to make a difference in the industry.
Speaker #1: Which is pleasing to see. Thank you, Andrew. In contract electronics manufacturer, it's all about repositioning moving into higher margins, defense, medical, and healthcare. And we're already seeing the benefit of doing this.
Speaker #1: We've already won new contracts in healthcare. And security. Which have come on board more recently. Which will produce in the next 12 months around a million pounds worth of revenue.
Speaker #1: But moving forward, some of these clients are spending a couple of million pounds a year so it's really good to see that we're onboarding these clients we're working with them.
Speaker #1: And we're starting to gain more of their business. So that's really exciting development in this sector. Investment continues with new equipment technology. Technology moves fast.
Speaker #1: You would have seen announcements that we've made. Over the last few months of improving our efficiency by buying new equipment. And making sure we've got the right quality standards in there as well to make sure that we're getting the right accreditations to move into defense and the medical side of the business.
Speaker #1: We acquired the remaining 10% minority interest in the business alongside the property facility. This was hugely important for us to do that as part of the three acquisitions we did earlier on in the year.
Speaker #1: And that's made a massive difference to making sure that we can get those accreditations. But also housing the distribution center here in this facility at the contract electronics manufacturing facility.
Speaker #1: The new process and implementing the right accreditations, we've just achieved cyber essentials plus which is really important, especially obviously in defense. And we've managed to achieve that.
Speaker #1: Future developments continue investment in upgrading enhancing the capacity so that we're ready also to continue the scale of the business and defense readiness. We've placed just over 11 million components in the half year.
Speaker #1: It's amazing how much these machines place in a short period of time. Our gross margin in this sector, which is one of the things we've mentioned in the past that we want to keep to improving, in the last half year, it was 27.8% gross margin.
Speaker #1: Now it's 28.5%. So it's really moving up. And that's really important. In this sector, those things are quite hard to do. And they're achieving it.
Speaker #1: So they're really doing a great job. And we also launched a digital factory tour. And this really broadens our base where people can't get to us, but they can see our facility.
Speaker #1: So this is on our website. For UK circuits within this division. And you can have a tour around the factory with a 3D model that also a drone flying through the factory.
Speaker #1: And this broadens the reach to new clients and more international clients as well. Thank you, Andrew. Moving into ag tech division, on the right-hand side there, you'll see a picture which you get to see currently there's a bit of a media blackout on this till it's launched in September.
Speaker #1: But we've just completed the smart agricultural research center. For Nottingham Trent University. And this is the first time we've designed manufactured and put our technology within a facility.
Speaker #1: And you see then the picture below that. It shows the facility inside. With conveyor and units which are all growing chambers. And then within the cubicles going around the outside, you've got vertical growing going on.
Speaker #1: You've got our sensor that you can see in the bottom half. Our lighting and our environment computer bringing all of our technology together. Our three core technologies.
Speaker #1: Which has been a really exciting project. But this really springboards us for the future. With other universities, as I mentioned earlier, more education is going into this because of food security being so important.
Speaker #1: And our climate changing. So this is a real good case study that we'll be able to use for ourselves but also do for others here in the UK and internationally.
Speaker #1: We've also been part of a fund for a PhD student who will be one of the first to use this facility. This smart research facility.
Speaker #1: So we're pleased to announce that. And it's fully backed. Funded. Research from the council which is really good to see. And we're part of that.
Speaker #1: We've also got awarded a 300,000 pound project with a Welsh university comprising of irrigation systems, electric refurbishment, and control and environment computers. So there again, more technology going in.
Speaker #1: We're installing it. And it's at a university. So we're starting to really gain more larger orders through our growing community if it be commercial glasshouses or if it be an educational piece through the universities.
Speaker #1: We want an adopt grant with a partnering with Dyson Farming with a small value circle of 31,000. But working with partners with Dyson Farming is really important the name alone really springboards us into other opportunities.
Speaker #1: And we continue to work with them really pushing forward with our sensor grow product. Environment computer and other areas. Which is really important to keep getting that springboard for future orders coming through and getting recognized alongside them.
Speaker #1: Sensor grow product has been installed UK. Australia, Mexico, Poland, all trials underway with clients. And this really shows how we can really expand the sensor grow product globally around the world to make sure that it's easy to install.
Speaker #1: And you're sending a package. You can switch it on. And you're getting live data straight away. And as we've mentioned with climate changing, this information to growers, it's extremely important.
Speaker #1: We've also just received an order from a Dutch glasshouse builder based here. Doing an installation near Cambridge. For 60,000 pounds. So you can see that there's really good momentum.
Speaker #1: And you can see this because the revenue in this division is increased. It's up 54%. Year on year for the half year. So that's really important to see that growth in this division.
Speaker #1: And all what we've talked about in the past is actually happening, taking place, and creating revenue. The 79 maintenance visits this year and 9 glasshouse refurbishments in the half year as well.
Speaker #1: So we've been very busy in this sector as you can see. Thank you, Andrew.
Speaker #2: Just looking on group communications and events. We're always very busy with our communications. And I hope you see that as investors. We were in Maryland Sunday in the half year.
Speaker #2: We're in the international trade journals across various divisions across the group. We've done over seven proactive interviews which get launched onto their YouTube and our YouTube channels.
Speaker #2: And we've done 19 RNSs or on RNSRs over that period as well. So we're very active. We've been to a lot of trade shows.
Speaker #2: For the various divisions. Making sure that we're increasing brand awareness. Making sure people know what the products do. And really expanding and scaling the business.
Speaker #2: And that's what we see for H2. Thank you very much. So looking at the outlook moving forward. We've still got a very strong quoted pipeline, 50 million.
Speaker #2: We've got a 3 million group four order book which gives us good visibility. And really importantly, cash and undrawn facilities are increasing. Which are 2.9 million.
Speaker #2: And we see the cash continuing to increase as revenues are being driven. Throughout the rest of the year. We're focusing on providing really strong market opportunity for a platform growth here.
Speaker #2: Improving margins. I've talked about that in the past. And we're starting to see and you will see at the end of this financial year a levelling up where contract electronics used to be the largest proportion of our division with revenue.
Speaker #2: But with a lower margin. That margin is increasing. But what you will see, PFP passive fire protection, injector cloud coming through. Revenue rising. And the margins are much better in that sector.
Speaker #2: And I've already shown you in ag tech with 54% up in revenue. And the margins are better there as well. So it's getting its improving.
Speaker #2: It's getting better. All the time. As we scale. And we're really doing what we said that we would do in the past. It's really important to just take a step back and just say there's an awful lot of work goes on within the group, within the divisions.
Speaker #2: Sometimes the number when you're giving results are not what you want them to be. But they're what we expected them to be for the half year.
Speaker #2: And we really do see the rest of this year being very successful. Because we've got that visibility. And we're very excited to see that changing to revenue profitability margin growth.
Speaker #2: And the cash generation moving through. On the right hand side there, you can see some pictures. Passive fire protection on the right going into a building there.
Speaker #2: Very typical building. Through lifts. Contract electronics facility with machinery that's what our manufacturing production lines. Which we keep improving and being more efficient. And at the bottom there, you're seeing a small picture of one of the NTUs and our sensor grow product.
Speaker #2: Inside of one of our those chambers. So you can see overall really moving in the right direction as we scale the business. Getting stronger for future growth and moving into 2027.
Speaker #2: Thank you, Andrew. I'll put to the floor any questions that you might have. Thank you very much.
Speaker #1: Okay. What I'll do is I'll read them out. And feel free to add them into the Q&A part of the chat. So first one for Simon.
Speaker #1: What benefits does the group see from the acquisition of injector cloud? Are our UK? And what are your goals for the acquisitions? And how is this division performed against them?
Speaker #2: The acquisition was extremely important for us to get injector cloud. It gives us that really underpinning underlying key supply chain. We've got our IP.
Speaker #2: We've got the installers across the country. Which really makes that difference. And what we've seen since we've acquired it, which has been circa 16, 17 weeks now, is seeing more visibility of how many jobs are going and happening around the country.
Speaker #2: Which increases that order flow. And you can see the orders flowing through now. The ones that we have announced more recently. But also moving forward starting to get that more visibility.
Speaker #2: So it's made a big impact. But also it gives us the opportunity to talk directly with fire engineers, architects, surveyors. And these individuals and companies are the ones who are going to specify us within tool buildings.
Speaker #2: And those 40,000 buildings which need doing. And that's what we're doing. So it's given us access to that by acquiring injector cloud as well as having that IP.
Speaker #2: So very exciting. Position to be in. And I'm pleased we got it across the line.
Speaker #1: Thanks, Simon. I can take this one. How has government regulation regarding BSR affected PFP sales and injector cloud installations? I think sort of pretty typically injector fire barriers last trading year.
Speaker #1: The previous year. The delays and the movement of the BSR from the health and safety executive into the new body. Had a massive impact across all 11 contractors that work on it.
Speaker #1: And I mean, we didn't have a good year. And we did it probably 30% of all the installations across that network. And what we're really seeing now is that there's a whole clump of projects or 10 or 11 projects that have been released almost within a couple of months.
Speaker #1: And so we're now starting to see those sort of come through. Which is good news. The BSR is not where it wants to be.
Speaker #1: It wants to be at eight weeks. And it's still well above that. But it is prioritizing high risk buildings which is good. And there's further legislation coming out called PAS 9980.
Speaker #1: Which really works quite nicely for us. Because it's about a risk based And that was due for reading in July. It's moved back a couple of months because of the change in Prime Minister.
Speaker #1: And that's now due to be heard second reading in September. So that'll be good news as well. One for gym next. Has trading in H2 begun to show that the group is returning to profitable growth?
Speaker #2: Sure. I mean, in the first two months we've done 2.15 million. And with that strong committed forward audible plus that latent order. Book that we've got from the injector cloud material installer network.
Speaker #2: All of that is giving us confidence that that sort of growth through the second half will continue. And from the margins. Because passive fire delivers those strong margins.
Speaker #2: Ag tech is probably next down in level of margin delivery. And then CEM is moving from what was the mid 20s up to towards the 30% mark.
Speaker #2: So taking all of that. That incremental revenue delivery with stronger margins. Continuing close control over overhead costs. We do see profitable delivery through the second half.
Speaker #2: And beyond.
Speaker #1: Thanks, Jason. While you're at it. How has the revenue mix shifted across the PFP CM and AGT divisions?
Speaker #2: Yeah. So historically when we floated four or five years ago. Pretty much. All of our revenue was CEM. It's at the half year point.
Speaker #2: It was the mid 60s. And what we're seeing and Simon touched on it is a rebalancing of divisional contribution to revenue. So ag tech stepped up at the first half year.
Speaker #2: Passive fire reduced slightly because of the blockages. But what we really see in the second half is passive fire coming starting to level up.
Speaker #2: And balancing that historic CEM reliance with ag tech sort of coming alongside. So definitely we see the profile. It has changed. Historically. And we see that continuing to change through the second half.
Speaker #2: And beyond into further financial years. Future financial years.
Speaker #1: Thanks, Jim. I can take this one. How much actual revenues are expected from injector cloud material in the remaining months of the second half?
Speaker #1: Obviously we can't give you exact figures as such we're not allowed to. But as we've sort of Jim explained. There's 10 or 11 projects.
Speaker #1: On the way. And there's two reasons. That they order as they go along. One. You're very rarely have space on sites. You're working in a you've got a compound area that's often quite small.
Speaker #1: Car park or somewhere like that. So there's literally don't have the room to store too much material. And the other one is obviously for the cash flows.
Speaker #1: That does sometimes work in our favor. We had the 400,000 pound order that came through for the project in East Yorkshire. In one go because the main contractor wants to invest the materials.
Speaker #1: The title to those materials. So it meant the sale went through. All in one go. And it's really handy then that we've got space in our warehouse in Manchester to sort of store a lot of that material for them as well.
Speaker #1: It gives us both options really. And I would say another one is how in PFP how closely to winning say a single 5 to 10 million pound order.
Speaker #1: An individual building wouldn't be worth 5 million. I've seen a couple at 3 million. But what you do get is you get the kind of cookie cutter design.
Speaker #1: So there's one at the moment which would be significant where testing starts in October November. To effectively get like a type approval for that construction.
Speaker #1: We saw it with injector fire barrier as well in the past where we're kind of doing 9 or 10 buildings for one person. So it's kind of gradually now.
Speaker #1: We've done the one offs. We're now getting the kind of repeat business. And the project we're doing at Liverpool at the moment is the third project we've done for that particular contractor.
Speaker #1: So that's the way that it will come through. So this one for Simon. In ag tech when will the results from the university trials be used to win larger orders from farms rather than further orders from universities?
Speaker #2: Oh. They already are. I mean, we've been doing trials with various products. With universities or Dyson farming or our partners. For a number of years.
Speaker #2: And what comes out of that is then they once the trials are done they go out to market. And sometimes go straight and get orders from it.
Speaker #2: Or you get trials with customers. So it depends what product it is. But the reality is it's already happening.
Speaker #1: Okay. Thank you. Another one. Inventory elevation is stated as mainly driven by the CEM division. Are there expected an increase in inventories for the PFP division too?
Speaker #1: Given the step change in activity post half year. Why have inventories in PFP not been elevated as of the end of May in advance of this increased activity?
Speaker #1: So I can answer that one. What we do there is a very fast turnaround of the stock. So what I've got is I mean, we've got about 180,000 pounds worth of injector cloud stock.
Speaker #1: So that has been partly of it. But what we do mainly is I've got at least 200,000 pounds of orders sitting and stock sitting in suppliers.
Speaker #1: So a big order would go straight from the supplier wouldn't even come into the warehouse in Manchester. Go straight from the supplier to the site.
Speaker #1: On a big order. Other than that I just draw it in and say 50,000 pound lots at a time. So that's why the stock hasn't gone up.
Speaker #1: So it's.
Speaker #2: If I could just add to that Andrew. In our report we said that the predominant increase in CEM is absolute fair question. And it's right that there was an element of increase within PFP there.
Speaker #2: Because we acquired the division. So there was PFP stock values there. But we didn't go into the full detail. But the predominant part of it was that gearing up for this CEM to new customer in healthcare.
Speaker #2: But definitely a part of it was PFP stock taking.
Speaker #1: So another one here for probably Jim. Or Simon. Hi there. Hi all. Thanks for the presentation. And clearly there's a positive momentum across the business.
Speaker #1: So there's somewhat arbitrary timing of the half year obscure as what seems to be a strong ramp up in PFP particularly. Do you see that 1 million a month continuing?
Speaker #1: Can we think of that as a sustainable level of revenue? How did this post period revenue mix break down by division compared to the rest of page one?
Speaker #2: So yes. I mean, if you look at the average of June, July. That is averaging over 1 million a month. What I'd say to that is on top of that we have got the strong committed board.
Speaker #2: And the latent orders in the installer network in passive fire. Hand on heart. I think it's a little early to be saying that we're going to average a million a month.
Speaker #2: But we're working on gleaning this data from the passive fire protection installation installer network. And I think we are certainly heading towards being able to get that sort of information.
Speaker #2: We're in a much stronger position than we were a year ago. In regards to that. There's certain areas of our business that are lumpy.
Speaker #2: So like some of the ag tech projects. So it does make for a difficult we're going to do a million a month. But we are in a lot stronger position for visibility than we were a year ago.
Speaker #2: Through the group. And I would say that it's not going to be so long before we can have that sort of reliance upon a level of platform revenue for the group.
Speaker #1: And another one which I could take. Thinking ahead on the CEM division and the folks on defense healthcare applications and users. How is progress going here for the CAPEX needed to refit some of the manufacturing capabilities?
Speaker #1: Same too with certifications. Trying to get a feel for when we can expect this high margin work to come through in CEM. So we've got a 5 point plan from an operational perspective of implementation.
Speaker #1: And we are in sort of about halfway through phase two. And we've actually already started on some elements in phase three as well. And the whole idea is then we've scoped for example the AOI equipment that we would need.
Speaker #1: From a quality perspective. And we've done all the design work for the changes to the building that required. So we're looking at those at the moment.
Speaker #1: So but it's never been a case of we don't want to just go and spend all this money and get to the end of stage five and go right we're ready and stick a hand up.
Speaker #1: What we will do is we're starting at the lower tiers of the supply chain. So we don't start at the top. We work our way up.
Speaker #1: As progress kind of goes through. And that's really been the case with the healthcare orders that we've already got through. And the more of those that you build up the easier it's going to be to get that work when we get through all those stages.
Speaker #1: And when we start working with tier two we're going to have to be probably at the end of stage five. But we can work lower down in the meantime.
Speaker #1: Got one here. One for Simon. What is the typical profile of customer to which CEM's capabilities particularly appeals?
Speaker #2: It's quite broad. The CEM manufacturing division UK circuits is in a lot of different markets. Because it's for us it's focusing on car industry is not of an interest for example.
Speaker #2: Just because the margins are so low. So what we look for is medium volume. Obviously higher volume. It tends to get attracted either abroad or with lower margins attached to it.
Speaker #2: So we look for those one boards which are a little bit more complex. Still have volume attached to them. But can give us those higher margins.
Speaker #2: And where there's onshoring if it be like events or healthcare other areas where they want it to be more secure. Obviously we look for those markets too.
Speaker #2: So we've been working with scanning companies. Security companies. Drone manufacturers as an example. And healthcare providers. For NHS and other international hospitals. So those are sort of customers that we look for rather than what you'd probably typically see trying to go for and competing with somebody like the car industry.
Speaker #1: Yeah. Another one which is probably more of a comment. But saying worth emphasizing that LST focuses on solving problems at the bottom end of Maslow's hierarchy of needs.
Speaker #1: Yeah. I guess if you're not fed you don't feel safe in a safe building for example. Then yeah. That's the kind of biggest need that you would have at any point.
Speaker #1: So then yeah. That's really what we look at when we're looking at the kind of drivers in the market of each of them. They're all very strongly driven by macro events.
Speaker #1: So yeah. And regulatory then. Someone that's new. An investor that's new to LST. Why is sales significantly declined versus comparable prior year period? Probably one for Jim there.
Speaker #2: Yeah. So resulting from in the passive fire protection division the BSR blockages which have unblocked towards the end of the second half and conversion levels.
Speaker #2: Have increased significantly. And the second part is the contract electronics where the large customer in the pest control sector brought to end of life one of its products in the second half of last year.
Speaker #2: That revenue is flushed through now. And their business withers is now operating as steady state again. And there's still a very important customer. But those two chunked together were really the reduction in the year on year half year revenue.
Speaker #1: One asking about the outlook of dividends. We're definitely not a dividend share. We're really a growth share. We're invested in the business and grow the business.
Speaker #1: But another one for Jim. When does LST expect to return to capital markets? And if not when will LST become cash flow positive?
Speaker #2: Well through the second half we're expecting to be cash flow positive. Because we're converting pipeline to orders and converting that to revenue. At stronger margins than that conversion has significantly gone up.
Speaker #2: We're working on elevating margins within the CEM division. The passive fire division is strong margins. And it's a very simple sort of model. In terms of profit to cash generation.
Speaker #2: Because it's not CAPEX intensive. There's not massive stock holdings or all those sort of pulls on cash that you would get in other types of businesses.
Speaker #2: So yeah. The expectation is through the second half that we generate revenues that's profitable. And beyond.
Speaker #1: Okay. Could you provide a competitor overview? I mean they've been obviously very different in the three divisions. I don't think we'd have a competitor if you took our three divisions as a holdings company.
Speaker #1: But breaking them down. In the passive fire side up we see the competitor is either removing the external facade of the building. Or our solution.
Speaker #1: So it's kind of one or the other. And obviously the other one is a lot more cost waste and intrusion for residents. On the contract manufacturing side.
Speaker #1: There are a lot of companies that are doing the same thing in that one. It's quite commoditized. Really really try to get that ran that by being as agile as possible.
Speaker #1: And that really works in COVID and the shortage global shortages of components. We really tried to offer alternatives and to lead times and prices and things like that.
Speaker #1: And managed to secure a lot of work from those competitors. On the ag tech side you've got the lighting side. Which again is heavily commoditized.
Speaker #1: And what we tried to do there is but we've got the patent for the short circuit board that allows us to effectively build any length and color range of lights.
Speaker #1: Very quickly. So a standard operator like Philips we've been aware of sort of two to three year lead times for a change of product.
Speaker #1: We can do that in six weeks. So we know we're not going to rock up and start producing lights cheaper than Philips. We've got to go about it another way.
Speaker #1: So we can generally provide less lights than them. Because we can tune the ingredient. So the light price might be more expensive. But we need less of them.
Speaker #1: On the other side of it. The sensors. Again that's a patented product. There is no one else offering an all in one sensor with that amount of sensors on it.
Speaker #1: For that sort of same market if you like. So again that kind of takes that there. But yeah. There are lots of sensor companies.
Speaker #1: But most of them do one or two. And specialize in a particular area. But what we found with the sensor is we're working on the Dyson project.
Speaker #1: And the measuring nitrous oxide. And the alternative product only measures nitrous oxide. Because we've got eight other environmental sensors on ours. Actually that environmental monitoring was able to kind of show them why the nitrous oxide was peaking.
Speaker #1: At different times. Whereas the other one couldn't. So yeah. So that's the kind of competitive landscape if you like. Would there be any one for Simon.
Speaker #1: Would there be any benefit in sharing SMT machinery with CAPEX limited. Given the growing cooling connection. He's our chairman for those that don't know.
Speaker #2: I've met Lars. And I understand that the CAPEX and their product range and where they're at. Machinery we couldn't share. Because obviously making their product is very different from what we do.
Speaker #2: But it is interesting. And it's good to keep tabs. And understand where they're going in the future. And we'll have to wait and see what happens in the future.
Speaker #1: Okay. Another one by Simon. Are you targeting agricultural colleges for agritech?
Speaker #2: Yes. Yeah. We're targeting agricultural colleges. As well. But also other universities who haven't been in that sector. And schools who are actually opening up into that marketplace.
Speaker #2: So yes we are.
Speaker #1: Okay. I think you've answered the other one about different divisions offering to existing competitors. Jim do you expect to meet market expectations for 2026?
Speaker #1: Not you and your own Jim. Sorry I mean.
Speaker #2: Well we've got all the ingredients there. I think we've talked through in the presentation. That massive ramp up towards the end of the first half.
Speaker #2: It was expected that it would be second halfway to. We all three divisions are performing well. Strong margins. Passive fire's got that very very significant potential.
Speaker #2: And we're seeing better visibility than we ever had before. I think that's one of the key things. It's been very hard for us historically with kind of nascent divisions.
Speaker #2: Apart from the CEM. To forecast. Particularly as I said earlier with some of that business being lumpy. So we believe we've got a very strong momentum going.
Speaker #2: And the ingredients to do what we need to do.
Speaker #1: So probably lastly then. Because we're going to run out of time. What is CEM developing for drones Simon?
Speaker #2: So we some stuff I can't talk about. But we've done stuff for drone blockers. For obvious reasons. And that continues. You would have seen a lot of things in the past.
Speaker #2: In the newspaper. About airports and drones going across. Or drones going into prisons. And obviously it's huge now in defense. And so we continue moving further into that marketplace.
Speaker #2: As well as defense.
Speaker #1: Thank you. I think we should perhaps ask some closing comments from you now Simon. Thank you.
Speaker #2: Thank you Andrew. I'd just like to say. We are really scaling this business for the H2. We've got the visibility that we've all talked about.
Speaker #2: And a need. So we are confident of what the forecasts are out in the market. We're excited about the future. We've got a great opportunity.
Speaker #2: We had a very successful funding round to do the three acquisitions. We do have the IP. For the passive fire which is a very big market.
Speaker #2: And is expanding. And will help us scale the business for our future expansion plans. But in a medium term to get the business up to 50 million revenue.
Speaker #2: At the moment the focus is controlling overheads. Making sure that we become profitable and growing that cash generation. Moving forward while we do that.
Speaker #2: And so we believe we're in a strong position to scale our group. And I'd like just to say thank you for your support. And continue to support.
Speaker #2: Thank you very much.
Speaker #1: Thank you. Perfect. Thank you guys for updating investors today. Could you please ask investors not to close this session? As you now be automatically redirected to provide your feedback.
Speaker #1: Would you have the company better understand your views and expectations? On behalf of the management team of Light Science Technologies Holdings PLC. We would like to thank you for attending today's presentation.
