TIDMLWRF
RNS Number : 0411K
LightwaveRF PLC
11 December 2018
11 December 2018
LightwaveRF plc
(AIM: LWRF)
Final Results for year ended 30 September 2018
LightwaveRF plc ("LightwaveRF", the "Company" or the "Group"),
the leading smart home solutions provider, announces its audited
final results for the year ended 30 September 2018.
HIGHLIGHTS
Financials
-- Revenue of GBP2.81 million (2017: GBP3.03 million) due to weak first half performance.
-- Strong last quarter with revenue run rate up 50% on previous three quarters.
-- Gross profit GBP0.83 million (2017: GBP1.08 million).
-- Gross margin 29.3% (2017: 35.5%).
-- Underlying gross margin broadly maintained at 35.3% (2017: 35.8%).
-- Loss before and after taxation GBP2.54 million (2017: GBP0.85 million).
-- Investment in research and development GBP1.60 million (2017: GBP0.88 million).
-- Post year end, GBP300,000 loan drawn down against R&D tax credit receivable.
Technology and Products
-- The Lightwave Smart Series technology range launched, with
further planned products to follow.
-- Global installations and connected devices up by 55% and 53% respectively.
-- European range launched.
-- Further cloud control enhancements and integration with the
key voice platforms of Google, Amazon and Apple.
-- Manufacturing in Asia and mainland Europe now augmented with UK capability.
Marketing
-- Significant marketing investment with an absolute focus on customer acquisition.
-- Major improvements in eCommerce capability.
-- Rebrand of Generation 1 to Connect Series and Generation 2 to Smart Series.
Sales and Distribution
-- Further development of four primary sales channels: direct to
consumer, premium retailers, online retailers and trade.
-- Lightwave Euro dimmers on sale online and in selected Apple
stores in Belgium, France, Germany, Holland and Sweden.
Outlook
-- Revenue run rate for first two months of the 2019 financial
year, up a further 25% on strong last quarter of 2018 financial
year.
Jason Elliot, Chief Executive of LightwaveRF, commented:
"I have been greatly encouraged by the sales performance since I
joined Lightwave in July 2018, with the monthly revenue run rate up
significantly on where it was previously. This jump in sales has
gone hand-in-hand with the improvements made to our marketing,
customer engagement and distribution channels. With the business
strengthened and our retail partner network expanded, I am excited
by the very real opportunity for Lightwave to achieve significant
UK and international scale, and the prospect of becoming a leading
smart home brand in 2019."
LightwaveRF plc www.lightwaveRF.com
Jason Elliott, CEO +44 (0) 121 250 3625
Kevin Edwards, CFO
Stockdale Securities Limited www.stockdalesecurities.com
Tom Griffiths/Edward Thomas +44 (0) 20 7601 6100
Yellow Jersey PR www.yellowjerseypr.com
Charles Goodwin +44 (0) 7747 788 221
About LightwaveRF
LightwaveRF plc is the UK's only fully integrated home
automation company.
New customers typically buy a starter pack of Link Plus hub and
smart dimmer which has Apple HomeKit compatibility, 2-way
communication and built-in energy monitoring. Later adding other
easy to install devices from the Lightwave range enables further
in-home control, monitoring and automation of lighting, heating and
power.
Devices may be operated manually, by smartphone or tablet-based
apps and also through Google Assistant and Amazon Alexa voice
control.
Leading tech industry publication 9to5 Mac described Lightwave
as "the best UK HomeKit solution for smart lighting" and Trustpilot
rates Lightwave 4 star.
Chairman's statement
Overview
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.
The lack of step change progress in revenue is disappointing but
we have been prepared to examine what has needed to change and
taken all necessary steps to raise the pace. 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. The commitment required to
design and develop the Euro dimmers and sockets within some short
timeframes should also not be underestimated but the Company is now
meeting the exacting requirements. So, in short, while the Company
has made lots of progress the issue has been one of pace. Taking
too long to make changes to technology and sales related
developments has delayed the pace of revenue growth.
Results
While revenue of GBP2.81 million is below that of last year
(2017: GBP3.03 million), the quality has markedly improved, with
almost all being directly to an end customer rather than
distributor stocking. Direct to consumer revenue of GBP1.24 million
(2017: GBP0.35 million) has provided some real mitigation to the
effects of the disruptions in distributor channels. Following last
year's fundraising, we have pressed on with the investment in
technology, sales and marketing, which has resulted in the
substantial increase in administrative expenses and related capital
expenditure. Considerable resources have been invested to
strengthen management throughout the business as the transition to
real scalability continues. Although this has given rise to a
substantial loss for the year, the Company is better positioned for
the future through the investment which has been made.
Board
The decision to consider replacing the Company's Chief executive
had to be weighed very carefully. The Board recognised that such
disruptions have short term costs but have to look through to the
longer-term sustainability. The July appointment of Jason Elliott
as Chief executive has started to have a real impact across every
aspect of the Company's operations from design, development,
manufacturing, marketing, distribution and aspects of revenue
generation; through to finance, corporate communication and
messaging. Following a full review of the business, he has
instigated a number of changes which we feel are starting to show
evidence of the pace we are seeking to set.
Staff
During the year, we recruited a number of new employees to
strengthen the existing team of staff and contractors. I would like
to thank all staff, specialist contractors and our key suppliers
for their continuing commitment to the success of the Company.
Outlook
Following on from the successful launch of Euro compatible
dimmers online and in selected Apple stores in five countries, the
Euro sockets are on schedule for release early in 2019. As well as
a strong relationship with Apple, Lightwave has seen good take up
with Amazon and Google as the market for Smart Home devices is
better defined. Our improved marketing messaging, widespread
product endorsements and direct to consumer sales underpin the
reorganised channel distribution success we now anticipate. I am
confident we have the team in place to deliver and realise the
potential so now apparent in this market place.
Barry Gamble
Chairman
10 December 2018
Chief executive's report
Introduction
I joined as Chief executive on 2 July 2018, the start of the
last quarter of the financial year. The Board agreed with my
decision to undertake an immediate full review of the business and
to instigate changes needed as soon as practicable. It was clear
from my review that Lightwave's technology is very highly rated by
consumers and industry commentators and is well positioned to
exploit growing UK and European demand.
Technology and Products
We design and develop a range of smart home products and
software applications to control lighting, heating, power and
security devices through one App. The range is now maturing, with
the completion of the development of our Smart Series products.
Manufacturing continues to be outsourced to Asia and mainland
Europe. Following some initial problems with one UK manufacturer,
we have recently established an alternative supplier to provide
reliable UK based production for some components. Our technology
team has been enhanced to enable us to successfully launch multiple
products including the new range for the European market.
Consumer uptake and use of our integrations with partner
products such as Apple HomeKit, Amazon Echo and Google Home has
continued. A significant number of Lightwave customers now use
voice control as their primary means of system access.
We have over 10 years of engineering knowhow providing us with
an increasing amount of intellectual property. We also have 2
patents filed and 7 patents pending, to provide further protection
to our technology.
Marketing
Lightwave has recruited its first Chief marketing officer, who
is leading a small dedicated team fully focused on customer
acquisition. Building on last year's launch of the Company's new
website, we have recently upgraded the online ordering capability
to enhance the overall customer eCommerce experience. In addition,
we have implemented improved processes and tools to capture and
process customer feedback and to make it easier to give direct
reviews. Marketing led demand creation for our direct sales
channels has recently become much more effective.
We are targeting an investment in digital marketing, to directly
generate sales demand, with an emphasis on consumer messaging and
education. This is supported by comprehensive media relations
programmes.
Sales and Distribution
We have developed capability in four primary sales channels:
direct to consumer through our online presence and telesales team;
sales through premium retailers such as Apple, John Lewis and
Selfridges; sales through online retailers such as Amazon, BT Shop,
Dixons Carphone and screwfix.com; and trade sales focusing on
supply to electrical contractors and installers.
Direct to consumer online and tele-sales are intended to be a
significant contributor to total revenue. Retail and trade sales
are facilitated through distribution partnerships such as Exertis.
Building upon the success of our supply into Apple UK stores and
Apple online, we have now commenced the sale of our Smart Series
product via Apple online in 22 European countries and in selected
Apple stores in Belgium, France, Germany, Holland and Sweden.
2018 Results
Revenue is marginally below last year at GBP2.81 million (2017:
GBP3.03 million). Although weak first half sales performance was
not fully addressed until the last quarter of the financial year,
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. For the full year
44.1% (2017: 11.6%) of total revenue came from these direct
sales.
Gross profit was below last year at GBP0.83 million (2017:
GBP1.08 million). Although stated gross margin was at 29.3% below
the previous year (2017: 35.5%) underlying gross margin, before a
provision movement of GBP0.17 million (2017: GBP0.01 million) taken
on some aged stock, was broadly maintained at 35.3% (2017:
35.8%).
As part of the programme to further scale the business, the
Group's administrative expenses increased substantially to GBP3.74
million (2017: GBP2.12 million) from further planned investment in
technology, marketing and sales. Capitalised development costs
under IAS38 increased to GBP1.47 million (2017: GBP0.69 million)
driven mostly by the further development of the Smart Series
technology specifically for the European market. The related
amortisation of these intangible assets doubled to GBP0.61 million
(2017: GBP0.30 million). We recognise this is a significant expense
charge, but to amortise the platform over three years reflects a
prudent view of forward revenues. However, we believe a much
longer-term view could be taken as our position in the market
becomes more established and our revenues become more
predictable.
Research and development tax credits of GBP0.41 million (2017:
GBP0.25 million) were recognised as other income before stated pre
and post-tax losses of GBP2.54 million (2017: GBP0.85 million).
Cash absorbed by operations increased to GBP2.95 million (2017:
GBP0.89 million) in line with both increased losses and increased
working capital, particularly inventories, to enable us to better
manage demand for direct sales. Cash invested, almost all in the
development of our technology, doubled to GBP1.53 million (2017:
GBP0.72 million). Cash balances at 30 September 2018 were GBP0.47
million (2017: GBP0.22 million).
Post year end, the Company has drawn down a GBP0.30 million loan
from Finstock Capital Limited, secured against, and repayable from,
Research and Development tax credits receivable.
Key Performance Indicators
The Group monitors revenue, gross margin, operating cash and
also uses the following key indicators to measure the performance
of the business in terms of progress against key strategic
objectives:
2018 *2017
Global installations 46,500 30,000
Connected devices 400,000 261,000
Monthly temperature and energy data
points 61 million 41 million
Investment in research and development GBP million GBP million
* Expensed 0.13 0.19
* Capitalised 1.47 0.69
------------ ------------
1.60 0.88
------------ ------------
*after removing third party server hosting connected customers
in Europe
Principal risks and uncertainties
The Company is exposed to a variety of risks in the conduct of
normal business operations. Whilst it is not possible to either
completely record or to quantify every material risk, our aim is to
continually improve the management of risks and reduce them to
acceptable levels. The Company continues to develop and maintain
management systems to enable the identification, assessment and
management of risks and make decisions based on a comprehensive
view of the reward-to-risk balance.
The level of risk control is balanced by the continued
encouragement of enterprise and innovation.
Those risks that the Directors believe are most significant to
the Group's business and could have a material impact on future
performance, causing it to differ materially from expected or
historic achieved results, are as follows:
Customer concentration and relationships
By increasing the number of distributors, the Group seeks to
mitigate this risk. The increase in direct consumer sales also
reduces reliance on distributors.
Technological risk
The Directors recognise that the technology in the Internet of
Things field is evolving rapidly which could pose competitive and
other risks to the Group. The Directors continue to evaluate
competitors and changes in the industry to mitigate this risk where
possible. The Directors also recognise that the Group faces cyber
threat-based risks. We actively monitor and assess these risks and
undertake a continuous investment programme to seek to prevent
adverse events and to mitigate any unforeseen events.
Brexit
Brexit presents additional risks for the Group: the uncertain
economic conditions impacting its ability to grow and the specific
risks to tariffs, shipping delays and foreign currency fluctuations
are all in consideration. The general uncertainty surrounding
Brexit makes it difficult to take any mitigating steps currently,
but the Group will work to mitigate the impact of trading issues
arising from Brexit when these are known.
Strategy and business model
Our business model is based on developing innovative technology
so as to generate revenue from making and selling devices operating
on the platform and with other systems, corporate partnerships and
data management. The key challenge remains the prioritisation of
opportunities so that the management team operates within
acceptable bandwidth.
I am excited by the very real opportunity for Lightwave to
achieve significant UK and international scale, and the prospect of
becoming a leading smart home brand. Lightwave is at the heart of
the market where we are continuing to educate the consumer about
the benefits of smart home products, with a unique capability that
provides consumers with not only a world class smart lighting,
power and heating control solution, but also the ability to get the
most from their other smart home purchases by integrating them with
Lightwave products.
Our plan now is to continue our drive into the smart home market
by significantly increasing the resources deployed on our sales and
marketing efforts. This will be undertaken whilst strengthening
business processes to support the growth that we now
anticipate.
The key elements of this plan are as follows:
Technology
-- Further develop our customer focused product strategy,
ensuring that our developments and product releases are aligned
with customer needs.
Marketing
-- Invest heavily in our marketing and key campaign activity
increasing investment to build our brand, utilising product and
customer focused approaches; and
-- Launch our international device range, via well-established European distribution channels.
Sales
-- Expand our direct sales function, focusing not only on
inbound sales but outbound customer acquisition;
-- Invest in sales capability and expertise in key vertical
markets such as homebuilders and energy retailers;
-- Manage our distribution partners better and ensure that we
satisfy the needs of the end customer via retailers; and
-- Build on our new, enhanced eCommerce platform ensuring that
we give a world class online customer experience.
Business processes
-- Improve our business support systems to enable seamless and sustainable business growth.
Outlook
Following the strengthening of our management team in all areas
during the latter part of the 2018 financial year, we are now well
positioned to execute in this rapidly developing market.
We continue to attract interest from the best premium retail
partners and are now seeing the benefits of this through more
predictable direct and indirect sales. I am 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.
Consumer awareness of the benefits of smart home technology
continues to rise. Our relationship with Apple is a significant
asset that supports our growth in all markets. In addition, further
strategic relationships are starting to develop that should ensure
Lightwave is well positioned to execute on a number of fronts.
Jason Elliott
Chief executive officer
10 December 2018
Consolidated statement of comprehensive income
for the year ended 30 September 2018
Notes 2018 2017
GBP GBP
REVENUE 2 2,813,997 3,032,268
Cost of sales (1,988,426) (1,954,942)
GROSS PROFIT 825,571 1,077,326
Other Income 3 410,848 248,000
Administrative expenses (3,735,662) (2,121,559)
OPERATING LOSS (2,499,243) (796,233)
Finance expense (45,407) (49,079)
LOSS BEFORE TAXATION (2,544,650) (845,312)
Taxation - -
LOSS FOR THE YEAR ATTRIBUTABLE TO EQUITY
SHAREHOLDERS OF THE PARENT (2,544,650) (845,312)
Other comprehensive income - -
LOSS AND TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE
TO EQUITY SHAREHOLDERS OF THE PARENT (2,544,650) (845,312)
=============== ============
Loss per share - basic 4 3.80p 2.39p
=============== ============
Loss per share - diluted 4 3.80p 2.39p
=============== ============
Group statement of financial position
as at 30 September 2018
2018 2017
GBP GBP
ASSETS
Non-current assets
Intangible assets 2,070,485 1,210,074
Property, plant and equipment 50,132 25,766
2,120,617 1,235,837
Current assets
Inventories 992,991 388,012
Trade and other receivables 677,887 468,697
Cash and cash equivalents 469,550 221,933
Corporate tax recoverable 410,848 248,000
2,551,276 1,326,642
Total assets 4,671,893 2,562,479
Equity & liabilities
Shareholders' equity
Share capital 3,578,632 1,938,452
Share premium 8,726,774 5,462,804
Reverse acquisition reserve (100,616) (100,616)
Share based payment reserve 88,340 70,811
Profit and loss reserve (8,694,549) (6,149,899)
Total shareholders' equity 3,598,581 1,221,552
Current liabilities
Trade and other payables 615,860 752,623
Loans and borrowings 423,892 588,304
Total current liabilities 1,039,752 1,340,927
Provisions
Warranty provision 33,560 -
Total equity & liabilities 4,671,893 2,562,479
The Financial Statements were approved and authorised for issue
by the Board of Directors on 10 December 2018 and were signed on
its behalf by:
Jason Elliott Kevin Edwards
Chief executive officer Chief financial officer
Group statement of cashflows
for the year ended 30 September 2018
2018 2017
GBP GBP
Cash flow from operating activities
Loss for the year (2,544,650) (845,312)
Adjusted for:
Depreciation and amortisation 646,849 323,121
Finance expense 45,407 49,079
Share based payments 17,529 18,918
Other income 3 (412,794) (248,000)
Foreign exchange loss/(profit) on convertible
loan 14,019 (11,781)
Increase in inventories (604,979) (285,485)
Increase in trade and other receivables (194,140) (149,671)
(Decrease)/increase in trade and other
payables (118,253) 124,163
(3,151,012) (1,024,968)
Research and development tax credits received 249,946 189,000
Finance costs paid (45,407) (49,079)
Cash absorbed by operations (2,946,473) (885,047)
============ ============
Cash flows from investing activities
Purchase of property, plant and equipment (59,905) (28,533)
Development expenditure (1,471,724) (693,237)
(1,531,629) (721,770)
============ ============
Cash flows from financing activities
Proceeds from issue of shares 5,248,579 2,361,172
Costs associated with issue of shares (344,429) (141,655)
Invoice discounting repaid (8,341) (45,450)
Repayment of convertible loan note (49,975) (69,859)
Repayment of other loan (120,115) (277,574)
4,725,719 1,826,634
============ ============
Net increase in cash and cash equivalents 247,617 219,817
Cash and cash equivalents at 1 October
2017 221,933 2,116
Cash and cash equivalents at 30 September
2018 469,550 221,933
============ ============
Group statement of changes in equity
for the year ended 30 September 2018
Share
Issued Reverse Based Retained
Share Share Acquisition Payment Earnings/ Total
Capital Premium Reserve Reserve (Losses) Equity
GBP GBP GBP GBP GBP GBP
As at 1 October 2017 1,938,452 5,462,804 (100,616) 70,811 (6,149,899) 1,221,552
Loss for the year - - - - (2,544,650) (2,544,650)
Share based payments - - - 17,529 - 17,529
Shares issued 1,640,180 3,608,399 - - - 5,248,579
Share issue costs - (344,429) - - - (344,429)
As at 30 September
2018 3,578,632 8,726,774 (100,616) 88,340 (8,694,549) 3,598,581
========== =========== ============ ======== ============= ============
Share
Issued Reverse Based Retained
Share Share Acquisition Payment Earnings/ Total
Capital Premium Reserve Reserve (Losses) Equity
GBP GBP GBP GBP GBP GBP
As at 1 October 2016 1,028,737 4,153,002 (100,616) 51,893 (5,304,587) 171,571
Loss for the year - - - - (845,312) (845,312)
Share based payments - - - 18,918 - 18,918
Shares issued 909,715 1,455,541 - - - 2,365,256
Share issue costs - (145,739) - - - (145,739)
As at 30 September
2017 1,938,452 5,462,804 (100,616) 70,811 (6,149,899) 1,221,552
========== =========== ============ ======== ============= ============
1. ACCOUNTING POLICIES
Basis of preparation of the financial statements
The principal accounting policies adopted in the preparation of
the Financial Statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
These Financial Statements have been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRSs)
issued by the International Accounting Standards Board (IASB), as
adopted by the European Union ("adopted IFRSs"). The Financial
Statements have also been prepared in accordance with those parts
of the Companies Act 2006 applicable to companies preparing
Financial Statements in accordance with IFRS.
The consolidated financial statements have been prepared on a
historical cost basis.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 30 September 2017
and 30 September 2018. Statutory accounts for the years ended 30
September 2017 and 30 September 2018 have been reported on by the
Independent Auditor. The Independent Auditor's Report on the Annual
Report and Financial Statements for 2018 and 2017 were unqualified,
did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act
2006. Statutory accounts for the year ended 30 September 2017 have
been filed with the Registrar of Companies and will be filed in due
course for the year ended 30 September 2018.
Going concern
The Directors, having made suitable enquiries, analysis and
judgements, consider that the Group has adequate resources to
continue in business for the foreseeable future. For this reason,
the directors continue to adopt the going concern basis in
preparing the financial statements. In making this assessment, the
board has considered the group budgets, routinely updated forward
forecasts for revenue, costs and cashflow and applied sensitivities
thereto. In addition, it has also considered the availability of,
and access to, debt and equity finance. Committed Capital Ltd,
which holds 23.99% of the Company's issued share capital, has also
confirmed its continued willingness, if required, to invest further
funds into the Company in support of its strategy.
2. REVENUE
Operating segments are identified in a manner consistent with
the internal reporting provided to the Chief operating decision
maker, identified as the Chief executive officer. The Directors
consider that the Group has only one operating segment which is the
one principal activity of the Group.
Geographical analysis of revenue is as follows:
Group Group
2018 2017
GBP GBP
United Kingdom 2,764,612 3,011,352
Asia - 2,396
Middle East 49,385 5,367
Rest of Europe - 13,153
2,813,997 3,032,268
========== ==============
Revenues of GBP625,922 related to one distributor customer
(2017: GBP954,683).
3. OTHER INCOME
Group Group
2018 2017
GBP GBP
Research and development tax credits receivable 410,848 248,000
410,848 248,000
======== ========
4. LOSS PER SHARE
The basic loss per share is calculated by dividing the loss for
the financial year attributable to shareholders by the weighted
average number of shares in issue. The remaining securities in
issue are not dilutive as at 30 September 2018.
2018 2017
Numerator
Loss used for calculation of basic and diluted
earnings per share GBP2,544,650 GBP845,312
Denominator
Weighted average number of ordinary shares used
for the calculation of basic and diluted EPS 66,952,179 35,343,621
pence pence
Loss per share- basic 3.80 2.39
Loss per share- diluted 3.80 2.39
At 30 September 2018, there were 3,954,000 (2017: 2,310,000) of
potentially issuable shares which are anti-dilutive; such shares
may become dilutive in future periods.
5. POST BALANCE SHEET EVENT
Since the financial year end, the Company has drawn down a
GBP300,000 loan secured against, and repayable from, research and
development tax credits receivable.
6. ANNUAL REPORT
A copy of this announcement is available, and the Annual Report
from which it is extracted will be available later today, on the
Company's website www.lightwaveRF.com. The Annual Report will be
posted to shareholders shortly.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR URUURWVAUAUA
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