REL: 0908 HRS Rakon Limited
FLLYR: RAK: Rakon 2009 Full Year Result Media Release
27 May, 2009 - Auckland, NZ
Rakon reports solid result
Rakon Limited (NZX: RAK) is reporting a solid result for the year with strong
results from its international operations in a difficult economic climate.
Announcing its financial results for the year ending 31 March 2009, Rakon
reported revenue of NZ$139.5 million and EBITDA of NZ$18.5 million for the
period, down 20% and 27% respectively on the prior year. Net profit after
tax was NZ$4.5 million after accounting for higher depreciation and a higher
effective tax rate (due to composition of Group earnings). A strong focus on
working capital delivered strong operating cash flow of NZ$16.6 million, up
from NZ$1.4 million in the prior year which has enabled Rakon to maintain its
investment in product development for future revenue growth and maintain a
healthy balance sheet with substantial unused debt facilities.
Brent Robinson, Rakon Managing Director said, "We are pleased with what we
have achieved in a very challenging economic environment. Our decision to
diversify into non-consumer markets has helped insulate us from the slowdown
in certain retail sectors and puts us in a strong position as consumer
Over the past two years Rakon has taken significant steps to position itself
as a global business with a competitive manufacturing platform that enables
it to sustain and expand market share in high growth markets. Rakon's
business now comprises wholly owned manufacturing operations and engineering
design centres in New Zealand, the UK and France, as well as joint venture
manufacturing operations and engineering design centres in India and China.
"We have seen strong demand coming from communications infrastructure
customers. We continue to improve our market share, as new technologies and
networks are deployed which our innovative products are specifically targeted
towards and are well suited to."
Mr Robinson said the growth in capturing market share was driven by the
significant technology advantage Rakon has on its competition, through
products specifically designed for those markets.
The European business performed strongly in 2009 with its products having a
stronger focus on industrial and infrastructural markets. It was therefore
less impacted by the sharp decline in consumer spending.
Adjusting for the sale of the trading business in May 2009, European revenue
was up 10% on the prior year as an increase in sales of our high
specification Pluto TCXO offset reduced revenue from other older product
categories. The improvement in product mix plus lower manufacturing costs
(automation, materials and sub contracting) improved the earnings over the
prior year. The transfer of volume manufacturing capability from France to
Rakon's Indian joint venture is now essentially complete and the Joint
Venture recorded a small profit in the final quarter of the 2009 year.
"The strong result from our UK operations is particularly pleasing. March
sales of this year were an all time record for the UK; a tremendous result
given the environment," said Mr. Robinson.
Revenue from the NZ business which is largely focussed on sales into consumer
GPS products was significantly impacted by the global economic climate in the
second half of the year. As a result revenue for the full year was down 27%
to NZ$80 million. Selling prices for high volume products reduced 20% over
the year with half of this concentrated in the final quarter. Total sales
volume was also down 25%. As in previous periods material cost reductions
and productivity improvements partially mitigated the impact of softer
As an early response to the extraordinary reduction in market demand in
October 2008, Rakon reduced its NZ workforce by 10% in November in the areas
of production labour and support staff. As a further step Rakon reduced its
manufacturing capacity by shifting from a 5 day to 4 day week (24 hour shift)
for an eight week period between February and April 2009. Rakon returned to
a 5 day week after Easter to match capacity with increasing demand.
"The actions we took at these times were necessary to ensure our business was
appropriately resourced without jeopardising key projects under development.
The attitude of both those who stayed, and those we had to let go, has been
outstanding and makes me confident of Rakon's ongoing success," said Mr.
Rakon is seeing some demand returning in consumer markets, but Mr Robinson
pointed out the company remains cautious in the current economic climate.
"Sales of consumer GPS were soft in the second half of the financial year,
but we are now seeing some demand returning. We also continue to grow our
presence strongly in the GPS enabled phone handset market."
"This is a highly competitive market and we expect prices and margins to
continue to be under pressure. However, with over half of all cell phones
expected to have GPS functionality by 2014, increased volumes will more than
Rakon remains optimistic but cautious about the 2010 financial year and
believes it is well positioned to take advantage of any upturn in the market.
"We have a diverse product portfolio and an excellent market position. This
enables us to capitalise on the growth in emerging wireless technologies,
such as femtocells, as well as the significant growing demand for GPS. We see
GPS enabled phones and other new applications such as netbooks, as being very
significant for us in the future."
"We are also continuing to investigate further investment in China, to build
upon our 40% stake in Timemaker acquired in June 2008. We consider offshore
manufacturing in China and India as being one of the keys to Rakon's success
in the coming years."
End CA:00180299 For:RAK Type:FLLYR Time:2009-05-27:09:08:19