Final Results

11 March 2016

LIGHTWAVERF PLC

 (AIM: LWRF)

Preliminary Results for the Year Ended 30 September 2015

LightwaveRF plc ("LightwaveRF" or the "Company"), the creator of the LightwaveRF Smart Home Platform and products for the Internet of Things enabling households and businesses to remotely operate and control lighting, power, heating and security using smartphones, tablets, PC and MAC applications, is pleased to present its final results for the year ended 30 September 2015.

FINANCIAL HIGHLIGHTS

· Revenue for the year of £2.10 million (2014: £3.04 million)

· Gross profit £0.67 million (2014: £1.03 million)

· Gross margin 31.9% (2014: 33.9%)

· Pre-tax losses at £0.42 million (2014: £0.30 million)

· Post-tax losses at £0.23 million (2014: £0.14 million)

· Current order book approaching £1 million at current exchange rates

· Total loans and borrowings reduced by £0.19 million (2014: £0.46 million)

· Successful fundraisings totalled £1.55 million (2014: £0.39 million)

OPERATIONAL HIGHLIGHTS

Sales and distribution

· Onward sales of LightwaveRF product by distribution partner were up 24% on the previous year

· Cumulative global installations up 40% to 35,000 (2014: 25,000) users now connected to the LightwaveRF platform

· Total internet addressable devices on LightwaveRF cloud platform over 200,000 and increasing by around 8,000 devices per month

· The group is now recording over 56,000,000 temperature and energy data points each month

· Entry to the new home build sector with the appointment of Deta Electrical as the first UK OEM distributor

· Appointment of Havells as distributor for India and Power Diverter in Australia

Technical

· Addition of a thermostatically controlled electric panel switch to the heating solutions range

· Patent applications lodged for Boiler Energy Monitoring, Super Smart TRV and Smart Windows

· Launch of the LightwaveRF Building Management Solutions software for single and multisite operations

· Continued progress with the Warwick University Innovate UK energy management project confirming significant energy savings

For further information:

The Company confirms that the Annual Report and Accounts for the year ended 30 September 2015 will be sent to shareholders shortly and will be available on the Company's website: www.lightwaveRF.com 

Chairman's statement

I am pleased to present my first statement as Chairman of LightwaveRF and to report on the progress achieved during the year.

Results

The overall results were pretax losses at £0.42 million (2014: £0.30 million) and post-tax losses at £0.23 million (2014: £0.14 million). This was achieved with revenues at £2.10 million being down on last year (2014: £3.04 million) due to initial stocking orders benefitting 2014 and distribution issues on some key lines during the latter part of the financial year which have now been resolved. The gross profit percentage was marginally reduced to just under 32%.

Administrative expenses were £1.07 million (2014: £1.28 million). Underlying cash costs were as expected higher particularly post the fundraising, although the reported administrative expenses show a reduction. This is because we have capitalised £0.40 million of research and development expenditure in accordance with IAS38.

The balance sheet has strengthened significantly year-on-year due to the equity fundraising in July 2015 which increased cash and cash equivalents to £1.04 million (2014: £0.22 million), a reduction of £0.19 million in loans and borrowings and through the capitalisation of certain research and development expenditure.

Operations

As the highlights describe, good progress has been made with onward sales by our UK distributors, global installation numbers, data recording and further distribution channels.

 We have also introduced a number of technical innovations and improvements which we are seeking to protect with some patent applications.

Strategy for growth

LightwaveRF is an innovative company that is taking advantage of the increased interest in and demand for smart home technology. The suite of control and monitoring devices it has developed and the technical protocols it has adopted are starting to achieve brand awareness and build market recognition.

The market for the Internet of Things is at long last defining itself and it is against this background that your company continues to manage a significant transition. While further product refinement and development will be a constant for a technology company the emphasis has now shifted to marketing and communication in support of establishing distribution and sales channels.

The company took the opportunity to raise further capital during the year to support this shift in strategic emphasis. The funds raised are being applied to accelerate market awareness, product sales and further related technology development.

As well as my assumption of the role of chairman during the year I am delighted that Steve Harris, CEO of Committed Capital and representative of our new shareholder (Mainspring Nominees (8) Ltd), has joined the board as a non-executive director. We are seeking to bring the necessary balance of constructive challenge to the executive team while at the same time doing everything we can to champion and further the company's cause.

The small executive team and staff energetically led by CEO Mike Lord have continued to work effectively and flexibly as needs have changed. This flexibility has been well demonstrated by the company's charismatic founder, John Shermer, who during the year stepped up from the operating board to resume his place on the plc board.

It is important for the board of a small public company such as LightwaveRF plc to realise that priorities have to be determined and choices made. As a result development and promotional expenditure is being put under constant scrutiny to ensure capital and management resources are properly applied. The group has foregone short-term sales growth in the latter part of the year while it better positioned itself for renewed revenue growth in the future.

We have expanded our product portfolio and are now starting to see sales traction both in the UK and internationally with the recent addition of India and Australia to our distributor outlets.

Outlook

Although we continue to remain alert to how we pursue our strategy in detail much has been achieved now to position the company for the future.

Our technology is well established but also being refined where necessary. Distribution channels are now more visibly in place and being supported by a renewed emphasis on marketing and communication. This is already reflected in the current order book of approaching £1 million at current exchange rates and with more consistent reorder patterns now established with our UK distributors. With the additional UK and international customers and prospects now in place and further prospects identified, we expect to see good progress in 2016.

Barry Gamble

Chairman​

Chief executive report

The Group continues to develop its LightwaveRF connected home devices and platform exploiting the growth in demand for the Internet of Things (IoT). The strategy is to offer a complete range of devices, which monitor and control domestic or commercial light, power, heat, and security on one App.

Business model

The business, while continuing to develop its technology, is equally focussed on expanding its sales, marketing and distribution network. It continues to outsource product manufacturing and server hosting. In country expert distribution serves its various channels to market whilst the company maintains a close direct relationship with key customers. The company maintains a direct contact with the users who are connected to the LightwaveRF cloud to provide technical support and information about products and services.

Results

After an encouraging first half of the year revenues for the full year came in at £2.10 million (2014: £3.04 million). This was as a result of distribution issues in the UK which have since been fully resolved. Onward like-for-like sales of LightwaveRF products by our distribution partner increased by 24%. The gross profit decreased to £0.67 million due to the decrease in sales. Gross margin was 31.9% (2014: 33.9%).

The pre-tax losses were £0.42 million (2014: £0.3 million). The group capitalised £0.40 million of research and development costs during the year recognising for the first time the market penetration of the product range supported by the LightwaverRF cloud platform. This is in accordance with IAS38 now that the Group expects continuing economic benefits to be derived from this expenditure. The post-tax losses were £0.23 million (2014: £0.14). This is after taking into account a research and development tax credit of £0.12 million (2014: £0.15 million).

The balance sheet reflects a much improved position driven by fundraising in the year of £1.55 million, the repayments of loans of £0.22 million and the capitalisation of certain research and development expenditure. Net assets as at 30 September 2015 were £0.43 million (2014: net liabilities of £0.90 million).

Cash absorbed by operations £0.09 million (2014: generated 0.31 million) was mainly due to an increase in our trade debtor position at the year end. These balances either have been settled or are being settled within agreed terms. Cash overall increased by £0.82 million principally due to the fundraising. The capitalised research and development costs have been subdivided into two areas our new smart dimmer switch and the new LightwaveRF cloud platform. The platform capitalisation has three distinct subcategories which will be amortised from the completion date of the individual projects.

Key performance indicators

The Company monitors revenue, gross profit margin, pre-tax profit, cash generated from operations and also uses the following non-financial key performance indicators to measure the performance of the business and progress against key strategic objectives:

2015 2014

Number of global installations (cumulative) 35,000 25,000

Total number of devices connected 200,000 not available

Total number of data points recorded per month 56,000,000 not available

These measures show how the business is penetrating the IoT market and capturing data. Currently the business is adding around 8,000 IoT connected devices to its cloud platform each month.

Sales and distribution

The Company's UK strategy is to focus on specific market channels; consumer retrofit via mainstream retail and

wholesale, new home build, commercial building management solutions, utility companies and insurance.

The Company also plans to grow internationally through replication of this UK business model using in country master distributors to create global awareness of the LightwaveRF Smart Home platform. We have already significantly expanded our distribution base with the addition of Deta Electrical for new home build in the UK and Havells for India and Power Diverter for Australia.

Development strategy

Our development strategy has four strands; Products, Platforms, Big Data and Licensing.

1. Products

Our product strategy is to create a broad range of aesthetically designed devices that are easily retrofittable and intuitive to operate, either conventionally or remotely. We give the user complete control of their home or workspace using only one App.

Lighting

The lighting control range is now well established but continues to evolve. We are improving this range further in the year with the launch of our Smart dimmer in 2016 to serve the rapidly expanding LED market.

Power

The power solutions we offer now have a comprehensive programmable 13amp relay. There is a big opportunity for this technology in the commercial market, where our solution can offer savings through increased control and data visibility, for a significantly lower cost than current commercial solutions.

Following the reduction in Feed in Tariffs (FITs) for domestic solar electrical generation we are integrating the LightwaveRF protocol directly in to a power diverter. This will allow homeowners to automatically turn on high power usage devices such as immersion heaters, washing machines and dishwashers during the day when the power is available from solar generation.

Heating

Our heating system has been in the market for a year. A home and away button, smart window switches and a thermostatically controlled electric radiator switch were all added to the range during the year, together with the boiler switch, thermostat and smart TRV this offers a comprehensive solution.

Security

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

2. Platforms

The company categorises software development, such as firmware, server software and user apps, as a Platform asset essential to support the operation of the full range of hardware devises. We have launched a new generation iOS App providing a much improved user experience and functionality. We believe we remain unique in controlling heating, power and light in one App. We continue to develop our Building Management Systems Software.

3. Big data

We recognise there is significant value to be derived from the data arising from our systems. We now have over 200,000 devices connected which generate 56,000,000 data points per month. We are actively pursuing the opportunity to monetise this data.

4. Licensing

We continue to pursue the scope for embedding LightwaveRF technology into partner products. Our first licensing deal has been signed with Power Diverter for the Australian market.

Mike Lord

Chief Executive Officer

Consolidated statement of comprehensive income for the year ended 30 September 2015

Group statement of financial position as at 30 September 2015

Group statement of cashflows for the year ended 30 September 2015

Statement of changes in equity for the year ended 30 September 2015

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 preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the company's accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in the note below.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2015, but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 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 2015.

At 30 September 2015, there were 1,010,000 (2014: 360,000) 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.