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LightwaveRF – full-year results, it was cash crunch ahoy & “building a great company”?

By Steve Moore | Friday 15 December 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.

Previously writing on LightwaveRF (LWRF) I noted, despite it stated on a £5 million discounted fundraising “the new funds will support further product development and bolster our sales and marketing activity, as we continue to scale up the business and strengthen our position as a leading player in the Smart Home market”, what about that it was seemingly cash crunch ahoy? The company has now announced results for its year ended 30th September 2017…

These show, on revenue more than doubled to £3 million, a slightly increased loss of £0.85 million. After also particularly £0.40 million of investment spending more than depreciation+amortisation and a net £0.31 million working capital outflow, even after £2.22 million of new equity, net debt was only reduced by £0.62 million to £0.4 million and a net current liability position by £0.79 million to a still negative £14,285. Gross cash was £0.22 million. I.e. cash crunch ahoy!

The company notes key steps for 2018 include “undertaking a rolling launch of a comprehensive range of new Generation 2 devices” and “launching an international device range, following an indication from Apple that they are actively considering offering our Generation 2 sockets and switches to their online and retail customer base in 25 European countries” - as March-appointed CEO Andrew Pearson “look(s) forward to building a great company in the rapidly growing smart home market”.

That all sounds encouraging – but, as ever, it will be the ability to generate cash which is key and I note the inclusion of “as we achieve financial progress through our increased revenue and gross profit, we plan to invest more in technology and marketing for the medium to longer term”. This balance will thus be crucial to monitor and, at a current approaching £12 million market cap, I’d suggest at this juncture this at best for watchlists.

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