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LightwaveRF – full-year results. “Considerable progress”, right?

By Steve Moore | Wednesday 12 December 2018

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.

LightwaveRF (LWRF) has announced results for its year ended 30th September 2018, including Chairman Barry Gamble stating “your company continues to make considerable progress on a number of fronts. Excellent product endorsements, such as being described as ‘the best UK (Apple) Homekit solution for smart lighting’, amply demonstrate our proven technology, even as the company presses ahead with further developments and more international variants”. So why do the shares remain depressed, below 7p?

The balance sheet shows net current assets of £1.5 million – though that including inventories of approaching £1 million and receivables of £0.7 million against revenue for the year of just £2.8 million and net cash of just £45,658. Also, “post year end, the company has drawn down a £0.30 million loan from Finstock Capital Limited, secured against, and repayable from, Research and Development tax credits receivable”.

Indeed, the revenue was down from more than £3 million in the prior year as the company admitted “establishing the best distribution channels has taken longer than we expected and making the necessary changes needed has held back revenues. Achieving increased direct to consumer revenue has also required more meticulous attention to detail than was at first apparent. Our technology launches have also taken longer and required more resources than had been anticipated”. “Considerable progress”, hey?

CEO Jason Elliot though has “been greatly encouraged by the sales performance since I joined Lightwave in July 2018” – this with “the revenue run rate for the last quarter was up 50% on that for the previous three quarters. Revenue growth in the last quarter benefitted from a combination of recent improvements made to retail distribution channels and, following a number of process improvements, from much stronger direct sales… encouraged that the revenue run rate for the first two months of the 2019 financial year is up a further 25% on a strong last quarter of the 2018 financial year”.

However, this is from a base which delivered a full-year loss of £2.5 million and, with particularly also £0.8 million of capitalised development spend more than depreciation & amortisation, a net cash outflow before new financing of more than £4 million. It argues it “is better positioned for the future through the investment which has been made” but, at least until I start seeing some clear cash flow evidence of that, my stance remains bargepole / sell.

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