LightwaveRF PLC Preliminary Results (7853U)

TIDMLWRF

RNS Number : 7853U

LightwaveRF PLC

23 January 2017

23 January 2017

LightwaveRF plc

(AIM: LWRF)

Preliminary Results for the Year Ended 30 September 2016

LightwaveRF plc ("LightwaveRF" or the "Company"), the proprietary IOT and connected devices specialist enabling the remote control and monitoring of light, heat, power and security through just one App, is pleased to present its final results for the year ended 30 September 2016.

WHAT WE DO

LightwaveRF plc ("LightwaveRF" or the "Company") pioneered smart home automation with the development of the first internet enabled devices in 2008. Today, the Company offers a market leading proprietary Internet of Things ("IoT") platform together with applications and connected devices, which provide fully integrated remote control and monitoring of light, heat, power and security. We are dedicated to making everyone's lives easier and more fulfilled through world leading smart home technology.

FINANCIAL HIGHLIGHTS

   --           Revenue for the year of GBP1.44 million (2015: GBP2.10 million); 
   --           Gross profit GBP0.47 million (2015: GBP0.67 million); 
   --           Gross margin 32.5% (2015: 31.9%); 
   --           Loss before and after taxation at GBP0.84 million (2015: GBP0.23 million, restated); 
   --           Investment in research and development GBP0.62 million (2015 GBP0.54 million); 
   --           Fundraisings during the financial year GBP0.21 million (2015: GBP1.55 million); 
   --           GBP1.1 million working capital facility in place through Santander; 

-- Post year end fundraising, completed December 2016, of GBP2.2 million strengthening the balance sheet net assets to GBP2.03 million.

   --           Order book as at 20 January 2017 exceeds GBP1.2 million at current exchange rates; 

HIGHLIGHTS

Marketing

-- Increased awareness and brand recognition as measured by substantially increased levels of press coverage, social media activity and LightwaveRF website traffic;

-- First to achieve widespread market recognition for high quality voice-controlled smart home capability; and currently averaging a 4.5 stars rating (out of a maximum of 5 stars) for our Amazon Alexa integration.

Sales and Distribution

-- Expansion and further reorganisation of UK distribution capability resulting in the appointment of two additional distributors;

   --           Global installations 40,000 (2015: 35,000); 
   --           Connected devices on LightwaveRF cloud-based platform 300,000 (2015: 200,000); 
   --           Temperature and energy data points 60 million (2015: 56 million) per month. 

Technology

-- Significant enhancement made to cloud capabilities and cloud-based IoT platform; successfully integrated with Amazon Alexa, Google Nest and IFTTT;

   --        Product range now 90 devices . 

For further information:

 
 Contacts: 
 
 LightwaveRF Plc                            www.lightwaveRF.com 
                                                   +44 (0) 1902 
 Mike Lord, CEO                                         500 562 
 
 LightwaveRF Plc                            www.lightwaveRF.com 
                                                   +44 (0) 1902 
 Tom Sykes, CFO                                     500 562 
 WH Ireland Limited                        www.wh-ireland.co.uk 
 Mike Coe/Ed Allsopp (Corporate                     +44 (0) 117 
  Finance)                                             945 3470 
                                                [phone] 
 Jasper Berry (Institutional Sales)                        0473 
 

Chairman's statement

I am pleased to present my statement and to report on the progress being achieved at your company.

Overview

There have been a number of highlights during the financial year and subsequently. These culminated in the successful and oversubscribed fundraising completed in December 2016. New and existing investors have followed the developments made, realise the market opportunity and have offered their backing for the company to move to the next level.

We completed the first investment round with Committed Capital, the Mayfair based venture capital investor just before the 2015 financial year end. We then concentrated on improving market awareness, distribution led sales and ensuring the LightwaveRF technology continues to develop. While pursuing these objectives we recognise and seek to manage the inevitable tension between achieving short-term visible progress and the objective to build shareholder value over the medium and longer-term.

Our key strategic initiative to enable our IoT platform to operate with other cloud-based platforms is being delivered. We are now in the position of having our own proprietary platform, applications and devices as well as being able to integrate seamlessly with Amazon Alexa, Google Nest and IFTTT (If This Then That). The LightwaveRF integration with Amazon Alexa, with a market leading average of 4.5 star reviews (out of a possible maximum 5 stars) has in particular raised our profile.

We are continuing to invest in the data collection and data service provision within our IoT platform and are now providing real time temperature and energy usage information to our end user customers.

We have continued to further develop our distribution and have also begun to develop a direct to market offering through technically supported projects.

Financials

Revenue for the 2016 financial year is at GBP1.44 million, down on last year (2015: GBP2.10 million) held back as distribution was further re-organised and developed. Gross margins firmed to 32.5% (2015: 31.9%) as we continued to build on our experience and optimise our operational effectiveness. Administrative expenses were up to GBP1.49 million (2015: GBP1.07 million) reflecting planned spend on marketing and expensed research costs. The Group capitalised development expenditure of GBP0.51 million (2015: GBP0.40 million) in accordance with IAS38. The loss before and after tax was GBP0.84 million (2015: GBP0.23 million restated). The increased loss arises as a result of two thirds increased administration costs and one third reduced gross profit directly related to the revenue shortfall.

Our balance sheet has now been considerably strengthened through our post financial year end fundraising, giving a strong and stable foundation upon which to develop our business. The pro-forma group statement of equity after this fundraising is as follows:

 
                                                Net 
                                  2016        funding       2016 
                               As reported    proceeds    Pro forma 
                                                GBP 
                              GBP million     million    GBP million 
 
 Total shareholders equity       (0.17)        2.20         2.03 
                             =============  ==========  ============ 
 

I remarked last year about the importance of the board determining priorities and ensuring choices are made to ensure management time and resources are appropriately focussed. This is very much the dynamic of a technology business such as LightwaveRF plc. We recognise the enthusiasm, capability and commitment of the executive team and the relatively small support and development staff which delivers on these. As well there is in place a close knit group of key suppliers who continue to share the vision and have enabled so much to be achieved. Our thanks are due to them all.

Outlook

For a small company LightwaveRF plc continues to make significant progress to being able to build real value for shareholders. We look forward to further exploit our position in a very large market, both in terms of our own proprietary IoT platform, applications, devices and through linking with current and future cloud-based smart home platforms. So as the technology continues to develop, market awareness increase and distributor relationships build the opportunities open up still further.

Barry Gamble

Chairman

Chief Executive Officer's statement

LightwaveRF plc offers a proprietary IoT platform, applications and connected devices which together provide fully integrated remote control and monitoring of light, heat, power and security. Through just one app, LightwaveRF can integrate and coordinate our own comprehensive range of devices and further enhance the smart home experience for our users by linking to other IoT platforms.

Business Model

The current business model allows us to generate revenues from the sale of a comprehensive and continually expanding range of smart home devices. We currently have 90 distinct devices in the marketplace, and will launch more. We plan to continue our outsourced product manufacturing, cloud-based platform hosting, and concentrate our internal resources on marketing, sales, hardware and software product design and development. We see opportunities to pursue embedding LightwaveRF technology into partner products. We also see an opportunity to introduce incremental new revenue streams from data services.

The Group sells primarily via a complementary group of distribution partners. The Group also maintains direct relationships with end users, who are connected to the LightwaveRF cloud-based platform, which in addition to data services provision also offers technical support and information about related products and services. The Group also operates a direct to market strategy focussed on bespoke commercial solutions and installed consumer propositions.

2016 Results

The revenues for the year were GBP1.44 million (2015: GBP2.10 million), held back by the further reorganisation of our distribution channels. Gross profit decreased to GBP0.47 million (2015: GBP0.67 million) directly related to the revenue shortfall. Gross margin increased to 32.5% (2015: 31.9%) despite provisions being made for slow moving stock. Administration expenses increased to GBP1.49 million (2015: 1.07 million) as the company invested further in marketing, sales, research and development. Amortisation of intangible assets during the year also increased to GBP0.1 million (2015: zero). The Group capitalised GBP0.51 million (2015: GBP0.4 million) of development costs during the year. Pre-tax and post-tax losses were GBP0.84 million (2015: GBP0.23 million, restated). At at 20 January 2017 the current order book exceeded GBP1.2 million at current exchange rates.

Cash absorbed from operations of GBP0.63 million (2015: GBP0.09 million) was mainly due to the loss incurred in the year. The cash invested in capitalised research and development costs comprise three elements: the platform integration for a leading device manufacturer for which work was originally announced in 2015, next generation lighting and power control devices, and cloud-based platform developments.

The Balance Sheet at the year end reflect the loss with only a small fundraising of GBP0.21 million during the year. The business used the funds from the 2015 fundraising and the recovered overdue debt to fund the investment in research and development and increased sales and marketing. Loans and borrowings GBP0.99 million (2015: GBP1 million) although unchanged would have been reduced if not for the weakening of UK sterling. Total shareholders' equity showed net liabilities of GBP0.17 million (2015: net assets of GBP0.43 million). The Group also has GBP1.1 million of working capital facilities in place through Santander. After the post year end fundraising the pro forma shareholders' equity were net assets of GBP2.03 million.

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 and associated targets;

 
                                                  2016         2015 
 Global installations                           40,000       35,000 
 Connected devices                             300,000      200,000 
 Temperature and energy data points 
  per month                                 60 million   56 million 
 Expenditure on research and development       GBP0.62      GBP0.54 
                                               million      million 
                                           ===========  =========== 
 

Patents

The Group has filed some patent applications and is progressing with this protection.

Marketing

Our marketing is currently focused around consumer ready messages using "One home. One App. Control lighting, heating, power and more from your smartphone. From anywhere". We operate a consumer focused web site and undertake various digital marketing activities to generate attention and build market awareness. We use PR and media relations programmes to seek coverage in both specialist and generalist media. We have seen increased awareness and brand recognition as measured by substantially increased levels of press coverage, social media activity and LightwaveRF website traffic. After the UK launch of Amazon Echo and Alexa in autumn 2016 LightwaveRF worked closely with Amazon to achieve voice control of the full product range. This was achieved and launched to the user base by mid November. The response by our customers to the LightwaveRF Alexa skill has been extremely positive and achieved 4.5 stars rating (out of a maximum of 5 stars), significantly higher than any of our competitors. Since the Alexa launch LightwaveRF user registration has been running at double the rate of the previous year.

Sales and Distribution

The Group's UK sales and distribution strategy focuses on specific go to market approaches. Following some further reorganisation we have added two new distributors. We now have ERA Home Security, part of Tyman plc, Megaman, ICON Heating and for the new home build sector Deta Electrical in place as distributors accessing distinct market segments. Consumer markets are served via certain high street stores such as Maplin and online retailers such as Smart Shop and Response Electronics.

New house build and contract markets are served via electrical and plumbing wholesale and multi occupancy domestic and light commercial building management projects via specialist resellers or direct sales. The Group is working with industry majors to develop effective go to market approaches and whilst we are yet to realise a return from these activities we believe they are essential to future revenues. We are also targeting utility, insurance and telecoms companies, seeking both sell-to and sell-through opportunities.

Development Strategy

Our development strategy has four elements: Platforms, Applications, Devices and Data.

1.Platforms

The Group categorises software development, such as firmware, cloud-based server software, data collection and data management as a set of platform assets supporting the operation of a full range of hardware devices and end user applications. We have developed and provided to market a set of APIs which allow us to interoperate with our business partners.

2. Applications

We launched a new iOS app providing an enhanced user experience and functionality, and continue to provide an Android based app. We are unique in the market in our ability to control light, power and heating in one app. We continue to invest in our data management capabilities and now offer web based graphs, charts and other tools to allow users to see temperature, energy and other usage.

3. Devices

Our strategy here is to create a broad range of aesthetically well designed devices that are easily retrofittable and intuitive to operate, either manually or remotely. We give the user complete control of their home or workspace using one app. An increasing proportion of our devices now support bi-directional communication which we plan in time to be across our entire device range.

Lighting

The lighting control range is now well established and continues to evolve. We improved this range further in the year with the launch of our Smart Dimmer to serve the rapidly expanding LED lighting market.

Power

The range is more comprehensive than competitor offerings with a wide range of relays to complement our power sockets. Developments and additions to the range will continue in the year ahead.

Heating

The heating range has continued to mature during the year with significant firmware updates to improve functionality and battery life. The addition of "call for heat", allowing a TRV to operate the boiler as required has now been added.

Security

We still plan to launch a range of LightwaveRF security products.

4. Data

We recognise there is significant value to be derived from the data arising from our technologies and devices. We now have over 300,000 devices connected that generate 60 million temperature and energy data points per month. We are actively pursuing opportunities to monetise this data through offerings in both B2C and B2B settings.

Principal Risks and Uncertainties

The Group is exposed to a variety of risks in the conduct of its normal business operations. Whilst it is not possible to either completely record or to quantify every material risk to which the Group might be exposed, 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 company seeks to mitigate this risk. The increase in direct project sales will start to reduce further reliance on any one distributor.

Technological risk

The directors recognise that the technology in the IoT 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 we undertake a continuous investment program to seek to prevent adverse events and to mitigate any unforeseen events.

On behalf of the board

Mike Lord

Chief Executive Officer

Consolidated statement of comprehensive income for the year ended 30 September 2016

 
                                         Notes      2016          2015 
                                                                restated* 
                                                     GBP           GBP 
 
 REVENUE                                           1,443,091     2,100,932 
 
 Cost of sales                                     (973,737)   (1,430,907) 
 
 GROSS PROFIT                                        469,354       670,025 
 
 Other Income                                        211,372       187,436 
 Administrative expenses                         (1,489,106)   (1,070,043) 
 
 OPERATING LOSS                                    (808,380)     (212,582) 
 
 Finance expense                                    (33,074)      (18,551) 
 
 LOSS BEFORE TAXATION                              (841,454)     (231,133) 
 
 Taxation                                                  -             - 
 
 LOSS FOR THE YEAR ATTRIBUTABLE 
  TO EQUITY SHAREHOLDERS OF THE 
  PARENT                                           (841,454)     (231,133) 
 
 Other comprehensive income                                -             - 
 
 LOSS AND TOTAL COMPREHENSIVE INCOME 
  ATTRIBUTABLE TO EQUITY SHAREHOLDERS 

  OF THE PARENT                                    (841,454)     (231,133) 
                                                ============  ============ 
 
 Basic loss per share                      2           4.37p         1.73p 
                                                ============  ============ 
 
 Diluted loss per share                    2           4.37p         1.73p 
                                                ============  ============ 
 

Group statement of financial position as at 30 September 2016

 
                                       2016          2015 
                                       GBP            GBP 
 ASSETS 
 Non-current assets 
  Intangible assets                     820,094       403,039 
 Property, plant & equipment             17,094        38,359 
                                        837,188       441,398 
                                  =============  ============ 
 Current assets 
 Inventories                            102,527             - 
 Trade and other receivables            319,026       639,483 
 Cash and cash equivalents                2,116     1,043,828 
 Corporate tax recoverable              189,000       116,272 
                                        612,669     1,799,583 
                                  =============  ============ 
 
 Total assets                         1,449,857     2,240,981 
                                  =============  ============ 
 
 Equity & liabilities 
 
 Shareholders equity 
 Issued share capital                 1,028,737       943,542 
 Share premium                        4,153,002     4,031,813 
 Reverse acquisition reserve          (100,616)     (100,616) 
 Share based payment reserve             51,893        23,076 
 Profit and loss reserve            (5,304,587)   (4,463,133) 
 Total shareholders equity            (171,571)       434,682 
                                  =============  ============ 
 
 Current liabilities 
 Trade and other payables               628,460       801,247 
 Loans and borrowings                   787,279       624,911 
 Total current liabilities            1,415,739     1,426,158 
                                  =============  ============ 
 
   Non current liabilities 
 Loans and borrowings                   205,689       380,141 
 Total non-current liabilities          205,689       380,141 
                                  =============  ============ 
 
 Total equity & liabilities           1,449,857     2,240,981 
                                  =============  ============ 
 

Group statement of cash flows for the year ended 30 September 2016

 
                                              2016           2015 
                                                           restated 
                                              GBP             GBP 
 
 Cash flow from operating activities 
 Loss for the year                           (841,454)       (231,133) 
 
 Adjusted for: 
 Depreciation and amortisation                 123,078          23,953 
 Interest expense                               33,074          18,551 
 Share based payments                           28,817          23,076 
 Other income                                (211,372)       (187,436) 
 Foreign exchange loss on convertible 
  loan                                          90,911          31,109 
 Increase in inventories                     (102,527)               - 
 Decrease/(Increase) in trade and 
  other receivables                            320,457       (294,693) 
 (Decrease)/Increase in trade and 
  other payables                             (172,788)         308,314 
 
                                             (731,804)       (308,259) 
 
 Tax credits in respect of R&D                 138,644        225,710 
 Finance costs paid                           (33,074)         (4,979) 
 
 Cash absorbed by operations                 (626,234)        (87,528) 
                                         =============  ============== 
 
 
 Cash flows from investing activities 
 Purchase of property, plant &                 (4,378)               - 
  equipment 
 Deferred development expenditure            (514,489)       (403,039) 
                                             (518,867)       (403,039) 
                                         =============  ============== 
 
 Cash flows from financing activities 
 Net proceeds from issue of shares             206,384       1,545,385 
 Repayment of bank borrowings                        -         (4,675) 
 Advances in respect of invoice                 53,791               - 
  discounting arrangements 
 Repayment of convertible loan                (15,394)               - 
  note 
 Repayment of other loan                     (141,392)       (228,977) 
                                               103,389       1,311,733 
                                         =============  ============== 
 
 Net (decrease)/ increase in cash 
  and cash equivalents                     (1,041,712)         821,166 
 
 Cash and cash equivalents at 1 
  October 2015                               1,043,828         222,662 
 
 Cash and cash equivalents at 30 
  September 2016                                 2,116       1,043,828 
                                         =============  ============== 
 

Statement of changes in equity for the year ended 30 September 2016

 
 
                                                                   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 
   2015                    943,542     4,031,813     (100,616)    23,076    (4,463,133)          434,682 
 
 Loss for the year               -             -             -         -      (841,454)        (841,454) 
 Share based payments            -             -             -    28,817              -           28,817 
 Shares issued              85,195       132,051             -         -              -          217,246 
 Share issue costs               -      (10,862)             -         -              -         (10,862) 
 
  As at 30 September 
   2016                  1,028,737     4,153,002     (100,616)    51,893    (5,304,587)        (171,571) 
                        ==========  ============  ============  ========  =============  =============== 
 
 
                                                                   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 
   2014                    605,060     2,824,910     (100,616)         -    (4,232,000)      (902,646) 
 
 Loss for the year               -             -             -         -      (231,133)      (231,133) 
 Share based payments            -             -             -    23,076              -         23,076 
   Shares issued           338,482     1,302,568             -         -              -      1,641,050 
   Share issue costs             -      (95,665)             -         -              -       (95,665) 
 
  As at 30 September 
   2015                    943,542     4,031,813     (100,616)    23,076    (4,463,133)        434,682 
                        ==========  ============  ============  ========  =============  ============= 
 
 
   1.          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 2016, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered shortly.

   2.          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 2016.

 
                                            2016         2015 
                                            No.          No. 
 
 Numerator 
 Loss used for calculation of basic 
  and diluted earnings per share            841,454      231,133 
 
 The weighted average number of 
  shares were: 
 
 Denominator 
 Weighted average number of ordinary 
  shares used in basic and diluted 
  EPS                                    19,272,323   13,372,339 
 
 Weighted average number of ordinary 
  shares 
 Basic loss per share                      GBP0.044     GBP0.017 
 Diluted loss per share                    GBP0.044     GBP0.017 
 

At 30 September 2016, there were 1,010,000 (2015: 1,010,000) of potentially issuable shares which are anti-dilutive; such shares may become dilutive in future periods.

   3.          ANNUAL REPORT 

The Annual Report will be available from the Company's website www.lightwaveRF.com and will be posted to shareholders shortly.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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January 23, 2017 02:00 ET (07:00 GMT)