REG - Light Science Tech. - Acquisition of Injecta Fire Barrier trade & assets

Light Science Technologies HoldingsAnnouncement

21/11/2023 07:00

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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 £50
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

·    £5.1 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 £7 million quoted pipeline of potential sales opportunities and
forward order book of c.£600,000

 

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 £5.1 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 (https://injectafirebarrier.com/coming-soon/)
.

 

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.£790,000 in sales. It currently has a quoted pipeline of
potential sales opportunities worth c.£7 million and a forward order book
worth c.£600,000.

 

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 £12 billion - with £2 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 £1.75 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.£790,000 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.£75,000. 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 £5 billion to replace dangerous cladding - a figure that is expected to
increase significantly, with some contractors suggesting that a figure closer
to £50 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)
(https://www.theconstructionindex.co.uk/news/view/estimators-price-cladding-replacement-at-10-times-government-budget)

**Economic and social cost of fire - GOV.UK (www.gov.uk)
(https://www.gov.uk/government/publications/economic-and-social-cost-of-fire/economic-and-social-cost-of-fire)

*** 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 plc                    www.lightsciencetechnologiesholdings.com

                                                          (http://www.lightsciencetechnologiesholdings.com/)

 Simon Deacon, Chief Executive Officer                      via Walbrook PR

 Jim Snooks, Chief Financial Officer

 Andrew Hempsall, Chief Operating Officer

 Strand Hanson Limited (Nominated & Financial Adviser)      Tel: +44 (0) 20 7409 3494
 Ritchie Balmer / James Harris / Rob Patrick

 Oberon Capital (Broker)
 Mike Seabrook / Nick Lovering                              Tel: +44 (0) 203 179 5300

 Walbrook PR Ltd (Media & Investor Relations)               Tel: +44 (0)20 7933 8780 or lst@walbrookpr.com (mailto: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
(http://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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