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LightwaveRF – UK Distribution Agreement announcement, but a ‘dump’ on the way?

By Steve Moore | Monday 11 September 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

An “Expanded UK Distribution Agreement” announcement from LightwaveRF (LWRF) – and the shares currently approaching 10% higher in response, to 28p. Let’s take a look…

The announcement is of an expanded agreement with UK electrical wholesale market supplier Deta Electrical, with LightwaveRF CEO Andrew Pearson noting “we have been working with Deta for two years, focusing on the new build sector and we are looking forward to expanding the relationship… Deta's sales team will allow us to significantly scale up our coverage across the electrical wholesale sector”. Hmmm, but what does this likely mean in financial terms?

Unlike many such announcements, there is actually something provided in this respect; “Deta has placed an initial £350,000 order with the company and it has committed to placing a minimum of £2,000,000 worth of orders during the first year of the agreement”.

LightwaveRF reported revenue of £1.17 million for its half year ended 31st March 2017, so the latest looks good in that respect. However, revenue is of course vanity – it’s net cash which matters. And in the latter respect the noted previous results showed, after particularly a net £0.67 million working capital outflow, a pre-financing activities £1.19 million net cash outflow – and just a £0.05 million net cash position.

Current assets over current (and total) liabilities were £0.82 million, with then only little in the way of tangible non-current assets. With also the appointment of a new broker in July, this makes me continue to question discounted fundraising ahoy? It thus currently remains re. this stock, bargepole ahoy.

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