LightwaveRF (LON:LWRF) has announced strong results for the six-month period to end-March 2019. Revenue more than doubled, accompanied by an uplift in gross margin, reflecting the evolution of the company’s routes to market. The efforts to expand the distribution base and retail presence plus the focus on direct-to-consumer sales are paying dividends. Direct sales doubled during the period, while a number of new distribution agreements have been announced, adding Rexel in the UK and, notably, Tech Data on a Europe-wide basis. New and upgraded product launches continue, including ranges for markets beyond the UK designed to support the growing distribution in new markets.
1H’19 results: Revenue for the period was £2.50m, up 120% YoY from £1.13m in 1H’18. The 1H’19 outturn is in excess of 90% of the revenue reported for the whole of 2018. Gross profit also more than doubled to £0.95m, representing an increased gross margin of 37.9%, up from 35.3% reported for FY’18. Heavy reinvestment in product and sales and marketing resulted in a pre-tax loss of £1.35m.
Strategy: Central to the transformation of Lightwave’s growth trajectory has been the strategic emphasis on broadening the retail base. Apple sells Lightwave products across Europe, while retail stockists include Screwfix, John Lewis, Currys, AO, B&Q, and many other specialist electrical online and physical retailers.
Distribution channels: These have been similarly strengthened with a constant flow of new agreements. Recent months have seen the addition of Rexel, a nationwide UK distributor and Tech Data, one of the largest global IT distributors for its pan-European network. The high level of interest reflects both the favourable trends in the smart home market and Lightwave’s recognised position as a leading vendor.
Direct-to-consumer focus: Alongside the third-party agreements, extensive effort and resources have gone into the direct-to-consumer segment, which has the highest gross margin profile. Social media and other online marketing have been a focus in terms of investment, alongside enhancements to customer support.
Risks: Lightwave will need to remain innovative with respect to competitive trends to maintain strong brand recognition vs. larger players in the market. The product refresh programme remains ambitious as further upgrades to the first-generation products are rolled out; execution will need to be strong.
