On the cusp of growth and profits

LST has 3 divisions including a rapidly growing passive fire safety division (PFP) retrofitting specialist cavity closers to solve Grenfell Tower type risks, an Agtech division selling comprehensive solutions to food growers and a printed circuit board business providing bespoke products at relatively low volumes. The latter has effectively been a cash cow that has helped keep the lights on and offered steady growth post IPO, whilst the more recently acquired fire safety business offers huge growth potential with tens of thousands of buildings legally required to be made safe over the next few years and relatively few accredited competitors. Their system of retrofitting an expanding foam cavity closer is usually way cheaper (and quicker) than scaffolding a huge building and replacing all the cladding, so it is not outlandish to assume that a decent percentage of their large quoted pipeline will convert to contracts at healthy margins.

The Agtech division has hitherto been frustrated by high energy and building costs in the UK that have somewhat stymied a previous move toward vertical farming, not helped by constant changes of government policy that prefers to offshore our carbon foot print. Nevertheless, LST has persevered with this division, formed new partnerships to improve distribution and invested in developing a full suite of sensors, lights, software and controls to optimise growing conditions and reduce energy, water and nutrient use for growers. I anticipate climate change, pressure on water resources and increasing input costs will result in this business coming good over a 2 to 3 year term.

The last set of results saw positive cash flow generated and losses reduce to close to break even so hopefully there will be no need for cash raises near term in the absence of a compelling purchase. Note that the CEO, Chairman and directors have a lot of "skin in the game", so its hardly in their interest.

Cash flow from the (PFP) fire safety division may be lumpy due to the nature of relatively few, high-value contracts, whilst the electronics business will likely struggle to find significant growth in the current market uncertainties. Still, I expect the PFP division to deliver the goods making the company cash flow positive and profitable in the current year - in a position to make more accretive, bolt-on acquisitions as it has managed in the past.

I am a shareholder and plan to add, particularly if the wider market sells off and an opportunity presents as the shares appear increasingly tightly held. But do your own due diligence as always.