REL: 0941 HRS Rakon Limited
HALFYR: RAK: Rakon Limited: Half Year 09 Results
Auckland, NZ: 14th November, 2008
RAKON HALF YEAR 09 RESULTS
Technology company Rakon Limited (RAK) remains confident despite the global
economic environment and a corresponding slowdown in consumer spending.
Rakon Managing Director Brent Robinson said the drop in consumer spending was
not unexpected and Rakon's diversification into telecom infrastructure and
aerospace sectors would allow the company to remain strong.
"We still see great opportunities for Rakon in the GPS and Mobile Phone
space, even with the current economic climate. Also our investments in
businesses in the UK, France and India have given us diversification into new
infrastructure markets and added new opportunities for us to grow through
significantly increasing our market share."
Acquisition of the FCP business in 2007 broadened Rakon's market exposure
into infrastructure related business, complementing its largely
consumer-focused NZ business. Mr. Robinson said this, along with strategic
decisions to move production from France to India and signing a Chinese JV to
complement the NZ production facility, provided Rakon with a sound and secure
position to build on.
Rakon today posted its half year figures, which sees sales revenue for the
first half of its 08/09 financial year at $79.4m with EBITDA $10.4m. This is
down 12% and 16% respectively on the same period last year, and is linked to
the current global economic situation. An increase in depreciation and
financing costs plus a higher effective tax rate (due to French operating
losses) mean net profit after tax was $2.0 million for the first half.
Operating cash flow rose by $15.2 million to $9.1 million when compared to
the first half of last year.
Sales volumes increased by 3% from the consumer GPS products focussed NZ
business, but revenues were down 10%, due to a slowdown in consumer spending
that impacted the growth Rakon had anticipated in the second quarter of this
Mr Robinson said Rakon's larger leading customers had shown good growth but
this was at the expense of smaller second tier customers who were struggling
to compete in the difficult environment.
"Sales prices for our high volume IT products were in line with our
projections, down 15% on the same period last year, but percentage margins
were consistent with last year, due to good management which saw cost
reductions and productivity gains offsetting any sales price reductions.
Currency movements had little impact on the results as the average US$/NZ$
exchange rate for the first half, inclusive of hedging gains, was essentially
the same rate as the first half of the prior year."
Rakon's balance sheet remains strong with net debt of $10 million and a
recent significant increase in facilities with the ASB which provide
substantial headroom in the form of unused facilities.
Mr Robinson said given the current global climate the company was now moving
with caution in commencing construction of its new facility in China and did
not expect to start work until the next financial year.
UK REVENUES UP
Rakon UK operations posted an increase in revenue on the back of an increased
proportion of sales being for the company's high specification, high value,
Pluto TCXO (temperature compensated crystal oscillators).
"We are seeing good growth in a range of applications because of the
specifications and price point of the Pluto TCXO," Mr Robinson said. "We are
also delivering improved margins, thanks to Improvements in manufacturing
cost and a richer product mix."
FRENCH RESTRUCTURING COMPLETE AND INDIA PROVIDES WORLD LEADING COST BASE
Rakon's sale of the European trading business in May, and lower OCXO sales
from the company's French facility meant the overall European result was
slightly down on last year.
"We noted a particularly buoyant period when the infrastructure investment
prior to the Beijing Olympics generated exceptionally high demand. Now, sales
have dropped back, which has allowed us to complete the transfer of
manufacturing capability to our Indian joint venture without any impact on
customer deliveries," said Mr Robinson.
Rakon is well placed to grow its market share in the traditional
telecommunications market. In addition to the company's profitable UK
facility, the formation of a joint venture with Indian based Centum
Electronics (February 2008) has provided the company with a world leading
cost base that will be supported by French engineering design and technical
"The transfer of the manufacturing capability for volume OCXOs from France is
largely complete and the Bangalore facility is operating well. The
transition of France to a business focused on research and development and
very high specification but low volumes manufacturing is also progressing
well and we are confident that the next financial year will deliver a strong
turnaround in financial results for the OCXO business," Mr. Robinson said.
RAKON POSITIONED AS WORLD LEADER
Mr. Robinson said Rakon was soundly placed in the personal navigation device
market and whilst leading customers' focus on reducing inventories would have
a short term impact, he expected the market to rebound with strong growth.
"And, importantly, recognition of Rakon's GPS leadership position has us well
placed as the adoption of GPS in mobile phones finally begins to gather
momentum," he said. "We have some excellent prospects in this market. The
level of engagement with a number of influential customers and potential
partners is very strong; our team have been making excellent progress."
"The opportunity for Rakon in this market is significant: whilst mobile
handset sales may fall in totality we expect sales of GPS enabled handsets to
increase. Handset manufacturers are continuing to look for ways to increase
performance which suits Rakon's expertise well."
Mr. Robinson said the company's joint venture arrangements with Timemaker,
announced earlier this year, reflected the company's commitment to becoming a
global force in supplying to the mobile phone market.
Mr. Robinson said he was excited at the potential for growth in new emerging
technologies, such as femtocells, which offered great opportunities for
"Rakon's combination of product performance and cost gives us a real
competitive edge in these markets. We regard some independent projections as
somewhat optimistic as regards timing of demand; nevertheless these are
markets that we continue to invest in with confidence."
He said the current uncertainty and volatility in customer orders and
forecast, and the short lead times Rakon operates in, made it difficult to
forecast a result for the second half of FY 2009. However, Mr. Robinson
expected the second half result to be in line with, or slightly below that
achieved in the first half of this year.
Marketing Manager, Rakon Limited
Ph: +64 (9) 571 9323
End CA:00172861 For:RAK Type:HALFYR Time:2008-11-14:09:41:17