Light Science Technologies Holdings PLC (AIM:LST) said it has agreed to acquire the trade and assets of Injecta Fire Barrier (IFB) under a deferred profit share agreement, with no initial or fixed outlay, from chief executive Simon Deacon.
This means the acquisition is expected to be quickly cash-generative and to be self-funding for the group “from day one”.
IFB has developed a fire-resistant graphite barrier system, Injectaclad, which expands when heated and is used to contain the spread of fire and smoke within building compartments and can quickly be retrofitted to buildings to enable them to comply with new government fire safety regulations.
It is reported to have completed two projects to date, generating circa £790,000 in sales and currently has a forward order book worth around £600,000, with a quoted pipeline of potential sales opportunities worth roughly £7 million.
LSTH will acquire IFB from Deacon’s Fire Barrier International Ltd on a contingent deferred consideration basis for up to £1.75 million over a five-year payout time limit.
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 retention for a proportion of unpaid trade debtor amounts.
The AIM-listed company said the rationale of the acquisition is in line with its plan 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”, and that there are synergies with its Contract Electronic Manufacturing division, which has strong relationships within the fire protection market.
It pointed to the government’s call for urgent action to make buildings safe across the UK and creation of a £5 billion Building Safety Fund to replace dangerous existing cladding at many thousands of hotels, students’ accommodation, apartments, hospitals and government buildings.
Deacon said: “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.”
