Rakon Limited 31 March 2012 FY Results

RAK
17/05/2012 10:29
FLLYR

REL: 1029 HRS Rakon Limited

FLLYR: RAK: Rakon Limited 31 March 2012 FY Results

Rakon Limited
Results for announcement to the market
Reporting period Year ended 31st March 2012
Previous reporting period Year ended 31st March 2011

Amount NZ$000 % Change
Revenue from ordinary activities 178,254 -6%
Earnings before interest, tax, depreciation, amortisation & share based
payments 13,086 a -47%
Earnings before interest & tax 480 b -96%
Net (loss)/profit after tax (420) b -105%
Note a: includes share of EBITDA from associates and joint ventures of
NZ$3,024,000 (2011: $5,810,000 ).
b: includes equity accounted earnings of NZ$925,000 (2011: $2,911,000).

Amount per security Imputed amount per security
Interim / Final Dividend Nil Nil
Record Date Not Applicable Not Applicable
Dividend Payment Date Not Applicable Not Applicable

Comments
Rakon Limited (NZX: RAK) has reported a full year revenue of NZ$178m and a
look through EBITDA (including associates) of NZ$13.1m.
This compares with an EBITDA of $24.8m for the previous year, reflecting the
impact of the continuing strength of the NZ$. The company's underlying
revenue is predominantly recorded in US$ and in US$ terms revenue increased
by 4% on the previous year. Brent Robinson, Rakon Managing Director, said
underlying product margins were generally improved on the prior year
reflecting a strong continuing focus on cost reduction across the business.
The company's operating cash flow of NZ$7.9 million reflected improvement in
working capital in the second half of FY12 through reduced inventory levels
and improved terms of trade, an area the company signalled would be monitored
continually to improve efficiencies and costs.
Commenting on the year under review Mr Robinson said this was a year of
significant investment for Rakon, especially in China where Rakon's recently
commissioned JV plant in Chengdu is meeting expectations for the fast growing
Smart Wireless Device market.
Mr Robinson said the company is now very well positioned to take advantage of
this high-growth market, expanding and acquiring new business with the
premier tier one and two manufacturers, particularly in China.
He went on to say "we have never felt better about the business' overall
position, the market opportunity and our customers."
Rakon products are designed into all new technology for mobile data, a market
experiencing explosive growth. He explained, "we are in the devices, and the
connections from handset to network, satellite and undersea cables. Network
infrastructure growth is and will continue to be driven by smart devices."
Revenues from the former Temex business (now Rakon France) are in line with
expectations, with the French company highly regarded as the European leader
for High Precision and High Reliability Frequency Solutions for Space and
Defence Applications.
This year, the telecommunications sector provided lower revenue than
expected, due to continued deferred spending by telecommunications operators.
However, Mr Robinson said Rakon was seeing recent improvement after a
quiet period. He expected this improvement to continue as telcos resumed
investment in infrastructure needed to meet global growth in data traffic,
especially that created by smart wireless devices
Revenues for the past year were impacted by global financial instability
particularly in Europe, along with some impact from the earthquake in Japan,
which saw manufacturers quickly adopt a cautious approach initially, before
relaxing and returning to a business as usual approach.
"We have been accurate in our long term market predictions and have put a lot
of emphasis and continuing R&D into those markets where we had foreseen good
growth," he said. "Early on we identified the underlying markets that we
needed to be in and have worked consistently over the years to meet their
needs and that has contributed to our feeling that Rakon is now 'in the right
place at the right time'.
"That strategy is proving to be a good formula for Rakon, as we see the
results from our expansion into China, and the growth of Smart Wireless
Devices, as well as massive increases in data traffic needs all contributing
to Rakon's strong positions in those markets."
Mr Robinson said that growth had been slower in arriving than first
predicted, reflecting the volatility of new markets. "But when you are
involved in high growth markets, there is always going to be some variability
but eventually they do come to fruition; GPS and the internet itself are good
examples."
"Rakon is well positioned for the expected growth surge in smart wireless
devices and associated network infrastructure globally. Our product range is
world leading and targeted at the lucrative new generation products and
networks. This is backed by our investment in an extremely competitive
manufacturing base which will enable Rakon to continue to capture increased
market share."
Mr. Robinson said Rakon's Chengdu JV had been consistently increasing
production since its commissioning in December, and is now operating 24/7,
with almost 200 employees.

"As part of Rakon's strategic growth plan, the Chengdu plant provides
significant additional capacity, at a lower cost base, for our high volume
consumer products. So now we are focusing on optimising the existing
capacity and also have begun planning further capacity expansion. We are
also investing in expanding capacity and developing new technology in India,
Europe and NZ to meet future demand in telecommunications."
Operating costs were impacted by Rakon's Chinese joint venture in Chengdu and
the full year impact of the former Temex business, but Rakon expects these
two facilities to continue to provide outstanding long-term benefits to the
company's growth strategy.
Mr. Robinson confirmed the company's commitment to continuing innovation, as
well as investment into a strong product range and manufacturing presence in
two of the world's fastest-growing markets would continue to position Rakon
as a global leader in frequency control systems.
Directors Declaration (NZX Listing Rules Appendix 1, 3.1 & 3.2)
The Directors declare that the selected consolidated financial information on
pages 3 to 20 has been prepared in compliance with applicable Financial
Reporting Standards and extracted from audited financial statements. The
auditors have issued an unqualified opinion on the financial statements. The
accounting policies the Directors consider critical to the portrayal of the
company's financial condition and results which require judgements and
estimates about matters which are inherently uncertain are disclosed in note
2.17 of the financial statements that form part of this announcement.

Statements of Comprehensive Income
For the year ended 31 March 2012
GROUP PARENT
2012 2011 2012 2011
Note ($000s) ($000s) ($000s) ($000s)
Continuing operations
Revenue 3 178,254 189,314 88,033 93,737
Cost of sales (126,224) (131,056) (74,479) (76,064)
Gross Profit 52,030 58,258 13,554 17,673

Other operating income 4 5,937 2,525 10,987 6,364
Operating expenses 5 (59,005) (49,599) (27,656) (26,807)
Other gains/(losses) - net 6 593 (1,905) (610) (715)
Operating (loss)/profit (445) 9,279 (3,725) (3,485)
Finance income 222 616 61 422
Finance costs (1,767) (521) (1,692) (429)
Share of profit of associates and joint venture 925 2,911 - -
(Loss)/profit before income tax (1,065) 12,285 (5,356) (3,492)
Income tax (expense)/credit 645 (3,805) 2,827 1,581
Net (loss)/profit after tax (420) 8,480 (2,529) (1,911)

Other comprehensive income:
Cash flow hedges (565) 631 (456) 226
Net investment hedge (651) 508 - -
Currency translation differences (9,514) (1,970) - -
Income tax relating to components of other comprehensive income 353 (333)
128 (68)
Other comprehensive (losses)/income for the period, net of tax (10,377)
(1,164) (328) 158
Total comprehensive (losses)/income for the period (10,797) 7,316 (2,857)
(1,753)

(Loss)/profit Attributable to:
Equity holders of the company (192) 8,826 (2,529) (1,911)
Non-controlling interests (228) (346) - -
(420) 8,480 (2,529) (1,911)

Total comprehensive (losses)/income
attributable to:
Equity holders of the company (10,419) 7,687 (2,857) (1,753)
Non- controlling interests (378) (371) - -
(10,797) 7,316 (2,857) (1,753)

Earnings per share for (loss)/profit attributable to the equity holders of
the Company: Cents Cents
Basic (losses)/earnings per share (from continuing operations) 12 (0.1) 4.7

Diluted (losses)/earnings per share (from continuing operations) 12 (0.1) 4.6

The accompanying notes form an integral part of these financial statements.

Statements of Changes in Equity
For the year ended 31 March 2012
Attributable to owners of parent
Share Capital Retained Earnings Other Equity Non-controlling Interests
Total Equity
GROUP ($000s) ($000s) ($000s) ($000s) ($000s) ($000s)
Balance at 31 March 2010 173,846 31,520 (14,058) 191,308 1,636 192,944
Net profit after tax for the year ended 31 March 2011 - 8,826 - 8,826
(346) 8,480
Currency translation differences - - (1,945) (1,945) (25) (1,970)
Cash flow hedges, net of tax - - 450 450 - 450
Net investment hedge, net of tax - - 356 356 - 356
Total comprehensive income for the year - 8,826 (1,139) 7,687 (371) 7,316
Non-controlling interest on additional investment in subsidiary - - - -
4,082 4,082
- value of employee services - - 624 624 - 624
Balance at 31 March 2011 173,846 40,346 (14,573) 199,619 5,347 204,966
Net loss after tax for the year ended 31 March 2012 - (192) - (192) (228)
(420)
Currency translation differences - - (9,365) (9,365) (150) (9,515)
Cash flow hedges, net of tax - - (394) (394) - (394)
Net investment hedge, net of tax - - (468) (468) - (468)
Total comprehensive loss for the year (192) (10,227) (10,419) (378)
(10,797)
- value of employee services - - 83 83 - 83
- Other - - (20) (20) - (20)
Issue of ordinary shares 35 - - 35 - 35
Balance at 31 March 2012 173,881 40,154 (24,737) 189,298 4,969 194,267

PARENT
Balance at 31 March 2010 173,846 24,214 2,181 200,241 - 200,241
Net loss after tax for the year ended 31 March 2011 - (1,911) - (1,911) -
(1,911)
Cash flow hedges, net of tax - - 158 158 - 158
Total comprehensive (losses) / income for the year - (1,911) 158 (1,753) -
(1,753)
Employee share schemes
- value of employee services - - 624 624 - 624
Issue of ordinary shares 1,350 - - 1,350 - 1,350
Balance at 31 March 2011 175,196 22,303 2,963 200,462 - 200,462
Net loss after tax for the year ended 31 March 2012 - (2,529) - (2,529) -
(2,529)
Cash flow hedges, net of tax - - (328) (328) - (328)
Total comprehensive (losses)/income for the year - (2,529) (328) (2,857) -
(2,857)
Employee share schemes
- value of employee services - - 83 83 - 83
Issue of ordinary shares 35 - - 35 - 35
Balance at 31 March 2012 175,231 19,774 2,718 197,723 - 197,723

The accompanying notes form an integral part of these financial statements.
Balance Sheets
As at 31 March 2012
GROUP PARENT
2012 2011 2012 2011
($000s) ($000s) ($000s) ($000s)
Assets
Current assets
Cash and cash equivalents 15,879 22,775 5,225 1,697
Trade and other receivables 42,467 45,875 23,569 24,618
Derivatives - held for trading 275 199 170 91
Derivatives - cash flow hedges 843 757 532 339
Inventories 49,239 54,924 27,888 33,413
Current income tax asset 6 128 - 128
Total current assets 108,709 124,658 57,384 60,286
Non-current assets
Trade and other receivables 7,897 3,748 1,473 655
Property, plant and equipment 90,411 79,035 32,397 36,469
Intangible assets 31,480 35,955 1,879 4,298
Investments in subsidiaries - - 158,455 139,559
Investment in associates 19,164 19,548 - -
Interest in joint venture 3,744 4,475 - -
Deferred tax assets 6,052 1,674 4,732 1,995
Total non-current assets 158,748 144,435 198,936 182,976
Total assets 267,457 269,093 256,320 243,262
Liabilities
Current liabilities
Bank overdraft 3,445 784 3,445 784
Trade and other payables 30,762 38,991 20,575 20,530
Derivatives - held for trading - - - -
Derivatives - cash flow hedges 682 24 682 24
Current income tax liability 1,835 797 - -
Provisions 281 281 - -
Total current liabilities 37,005 40,877 24,702 21,338
Non-current liabilities
Bank borrowings 33,500 20,000 33,500 20,000
Provisions 2,685 3,250 395 1,462
Deferred tax liabilities - - - -
Total non-current liabilities 36,185 23,250 33,895 21,462
Total liabilities 73,190 64,127 58,597 42,800
Net assets 194,267 204,966 197,723 200,462
Equity
Share capital 173,881 173,846 175,231 175,196
Reserves (24,737) (14,573) 2,718 2,963
Retained earnings 40,154 40,346 19,774 22,303
189,298 199,619 197,723 200,462
Non-controlling interests 4,969 5,347 - -
Total equity 194,267 204,966 197,723 200,462

The accompanying notes form an integral part of these financial statements.
Statements of Cash Flows
For the year ended 31 March 2012 GROUP PARENT
2012 2011 2012 2011
($000s) ($000s) ($000s) ($000s)
Operating activities
Cash provided from
Receipts from customers 178,670 172,215 91,606 85,971
Interest received 287 578 8 529
Dividends received from associate 335 - - -
Dividend received from subsidiaries - 3,476 1,660
Other income received 2,027 1,685 1,995 938
Income tax refund 581 1,534 - 1,534
181,900 176,012 97,085 90,632
Cash was applied to
Payment to suppliers and others (114,734) (130,362) (62,314) (71,619)
Payment to employees (52,864) (45,428) (24,838) (23,166)
Interest paid (1,773) (336) (1,692) (301)
Income tax paid (4,679) (3,967) - -
(174,050) (180,093) (88,844) (95,086)
Net cash flow from operating activities 7,850 (4,081) 8,241 (4,454)
Investing activities
Cash was provided from
Sale of intangibles 1,627 - 1,627 -
Sale of property, plant and equipment 52 237 113 462
1,679 237 1,740 462
Cash was applied to
Purchase of property, plant and equipment (26,240) (36,303) (3,098) (10,522)

Refundable duties paid on plant & equipment (3,942) - - -
Purchase of intangibles (1,490) (1,764) (844) (911)
Additional investment in subsidiaries - - (18,707) (43,169)
Business acquisition - (717) - -
Issuance of loan to joint venture - (210) - -
(31,672) (38,994) (22,649) (54,602)
Net cash flow from investing activities (29,993) (38,757) (20,909) (54,140)
Financing activities
Cash was provided from
Issue of ordinary shares - - 35 1,350
Proceeds from borrowings 13,500 20,309 13,500 20,000
Intercompany loans - - - 5,587
13,500 20,309 13,535 26,937
Cash was applied to
Repayment of principals on borrowings - (522) - -
- (522) - -
Net cash flow from financing activities 13,500 19,787 13,535 26,937
Net increase/(decrease) in cash and cash equivalents (8,643) (23,051) 867
(31,657)
Foreign currency translation adjustment (914) (839) - (177)
Cash and cash equivalents at the beginning of the period 21,991 45,881 913
32,747
Cash and cash equivalents at the end of the period 12,434 21,991 1,780 913
Composition of cash and cash equivalents
Cash and cash equivalents 15,879 22,775 5,225 1,697
Bank overdraft (3,445) (784) (3,445) (784)
12,434 21,991 1,780 913

Statements of Cash Flows

For the year ended 31 March 2012 GROUP PARENT
2012 2011 2012 2011
Note ($000s) ($000s) ($000s) ($000s)
Reconciliation of net (loss)/profit to net cash flows from operating
activities
Reported net (loss)/profit after tax (420) 8,480 (2,529) (1,911)

Items not involving cash flow
Depreciation expense 5 8,018 7,641 6,152 6,245
Amortisation expense 5 2,033 1,486 1,364 990
(Decrease)/increase in estimated doubtful debts (64) 45 (24) -
Employee share based payments 83 624 54 503
Movement in foreign currency (416) 283 (42) 179
Share of profit from joint venture & associate (829) (2,911) - -
Deferred tax (4,362) 388 (2,737) 149
(Gain)/loss on disposal of property, plant and equipment (26) (291) (68) -
(Gain)/loss on disposal of intangibles (988) - (988) -
3,449 7,265 3,711 8,066
Impact of changes in working capital items
Trade and other receivables 3,265 (14,193) 976 (7,579)
Inventories 3,829 (11,371) 5,519 (5,150)
Trade and other payables (3,225) 5,871 436 3,746
Tax provisions 952 (134) 128 (1,626)
4,821 (19,827) 7,059 (10,609)
Net cash flow from operating activities 7,850 (4,081) 8,241 (4,454)

The accompanying notes form an integral part of these financial statements.
Notes to the Financial Statements
1. General information
Rakon Limited ("the Company") and its subsidiaries (together "the Group") is
a world leader in the development of frequency control solutions for a wide
range of applications. Rakon has leading market positions in the supply of
crystal oscillators to the GPS, telecommunications network
timing/synchronisation, and aerospace markets.
The Company is a limited liability company incorporated and domiciled in New
Zealand. It is registered under the Companies Act 1993 with its registered
office at One Pacific Rise, Mt Wellington, Auckland. The Company is an
issuer in terms of the Securities Act 1978 and is listed on the New Zealand
Stock Exchange.
These financial statements have been approved for issue by the Board of
Directors on 17 May 2012.
2. Summary of significant accounting policies
2.1. Basis of preparation
These financial statements of the Group and Parent, profit oriented entities,
are for the year ended 31 March 2012. They have been prepared in accordance
with the requirements of the Financial Reporting Act 1993, the Companies Act
1993 and in accordance with New Zealand Equivalents to International
Financial Reporting Standards ("NZ IFRS").
The financial statements have been prepared in accordance with NZ GAAP.
Accounting policies applied in these financial statements comply with NZ IFRS
and New Zealand equivalents to International Financial Reporting
Interpretations Committee ("NZ IFRIC") interpretations issued and effective
or issued and early adopted as at the time of preparing these financial
statements as applicable to Rakon Limited as a profit oriented entity. The
financial statements of the Group and Parent are in compliance with
International Financial Reporting Standards ("IFRS").
The accounting principles recognised as appropriate for the measurement and
reporting of profit and loss and financial position on an historical cost
basis have been applied, except for derivative financial instruments and
available for sale investments, which have been measured at fair value.
The preparation of financial statements in accordance with NZ IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities,
income and expenses. Actual results may differ from these estimates, refer to
note 2.17.
The Group has adopted the following new and amended NZ IFRSs of relevance to
the Group and Company as of 1 April 2011:
NZ IFRIC 13 (revised): Customer Loyalty Programmes (effective for annual
periods beginning on or after 1 January 2011)
The amendments clarify that the fair value of award credits takes into
account the amount of discounts or incentives that otherwise would be offered
to customers that have not earned the award credits.
NZ IFRIC 19: Extinguishing financial liabilities with equity instruments
(effective for annual periods beginning on or after 1 July 2010)
This interpretation addresses the accounting by an entity when the terms of a
financial liability are renegotiated and result in the entity issuing equity
instruments to a creditor of the entity to extinguish all or part of the
financial liability. It does not address the accounting by the creditor.
NZ IAS 27 (amendment): Consolidated and separate financial statements
(effective for annual periods beginning on or after 1 July 2010)
The amendments clarify that the consequential amendments to NZ IAS 21 The
effects of Changes in Foreign Exchange Rates, NZ IAS 28 and NZ IAS 31
resulting from NZ IAS 27 (2008) should be prospectively applied, with the
exception of amendments resulting from renumbering.
NZ IFRS 7 (amendment): Financial Instruments disclosures (effective for
annual periods beginning on or after 1 January 2011)
The amendments add an explicit statement that qualitative disclosure should
be made in the context of the quantitative disclosures to better enable users
to evaluate an entity's exposure to risks arising from financial instruments.
In addition, the IASB amended and removed existing disclosure requirements.

NZ IAS 24 Related party disclosures (Revised 2009) (effective for annual
periods beginning on or after 1 January 2011)
The amendment simplifies the definition of a related party and provides a
partial exemption from the disclosure requirements for government-related
entities.
The adoption of these amendments has not resulted in material accounting or
disclosure changes for the Group or Company.

2.2. Consolidation
2.2.1. Subsidiaries
Subsidiaries are entities that are controlled, either directly or indirectly,
by the Group. Control exists when the Group has the power, directly or
indirectly, to govern the financial and operating policies of an entity so as
to obtain benefits from its activities. In assessing control, potential
voting rights that presently are exercisable or convertible are taken into
account. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until
the date that control ceases.
Business combinations are accounted for using the acquisition method. The
consideration transferred in a business combination shall be measured at fair
value, which shall be calculated as the sum of the acquisition date fair
values of the assets transferred by the Group, the liabilities incurred by
the Group to former owners of the acquire and the equity issued by the Group,
and the amount of any non-controlling interest in the acquire either at fair
value or at the proportional share of the acquiree's identifiable net assets.
Acquisition related costs are expenses as incurred, and included in other
gains/(losses) - net.
All material transactions between subsidiaries or between the Parent Company
and subsidiaries are eliminated on consolidation.
Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the group
2.2.2. Associates
Associates are entities over which the Group has significant influence but
not control, generally accompanying a shareholding of between 20% and 50% of
the voting rights. Investments in associates are accounted for using the
equity method of accounting and are initially recognised at cost. The
Group's investment in associates includes goodwill identified on acquisition,
net of any accumulated impairment loss.
The Group's share of its associates' post-acquisition profits or losses is
recognised in the statement of comprehensive income, and its share of
post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the carrying
amount of the investment. When the Group's share of losses in an associate
equals or exceed its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are
eliminated to the extent of the Group's interest in the associates.
Unrealised losses are also eliminated unless the transaction provides
evidence of impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the
policies adopted by the Group.
2.2.3. Joint ventures
The Group's interests in jointly controlled entities are accounted for using
the equity method of accounting and are initially recognised at cost. The
Group's investment in jointly controlled entities includes goodwill
identified on acquisition, net of any accumulated impairment loss.
The Group's share of its joint ventures' post-acquisition profits or losses
is recognised in the statement of comprehensive income, and its share of
post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the carrying
amount of the investment.
Unrealised gains on transactions between the Group and its joint ventures are
eliminated to the extent of the Group's interest in the joint venture.
Unrealised losses are also eliminated unless the transaction provides
evidence of impairment of the asset transferred. Accounting policies of
joint ventures have been changed where necessary to ensure consistency with
the policies adopted by the Group.

2.3. Foreign currency translation
2.3.1. Functional and presentation currency
Items included in the financial statements of each entity in the Group are
measured using the currency that best reflects the economic substance of the
underlying events and circumstances relevant to that entity (the "functional
currency"). The consolidated financial statements are presented in New
Zealand dollars, (the "presentation currency"), which is the functional
currency of the Parent.
2.3.2. Transactions and balances
Transactions in foreign currencies are translated at the foreign exchange
rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated to
New Zealand dollars at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the statement
of comprehensive income, within other gains/(losses) - net, except when
deferred in other comprehensive income as qualifying cash flow hedges and
qualifying net investment hedges. Non-monetary assets and liabilities that
are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction. Non-monetary assets
and liabilities denominated in foreign currencies that are stated at fair
value are translated to New Zealand dollars at foreign exchange rates ruling
at the dates the fair value was determined.
2.3.3. Group companies
The assets and liabilities of all of the Group companies (none of which has a
currency of a hyper-inflationary economy) that have a functional currency
that differs from the presentation currency, including goodwill and fair
value adjustments arising on consolidation, are translated to New Zealand
dollars at foreign exchange rates ruling at the balance sheet date. The
revenues and expenses of these foreign operations are translated to New
Zealand dollars at rates approximating to the foreign exchange rates ruling
at the dates of the transactions.
Exchange differences arising from the translation of foreign operations are
recognised in the foreign currency translation reserve and of borrowings and
other currency instruments designated as hedges of such investments, are
taken to shareholders' equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and are
translated at the foreign exchange rates ruling at the balance sheet date.
2.4. Share capital
Ordinary shares and redeemable ordinary shares are classified as equity.
Partial payments received in respect of redeemable ordinary shares issued
under the Rakon Share Growth Plan are classified as liabilities in the
financial statements. When employees exercise their conditional rights to the
redeemable ordinary shares, these shares convert to ordinary shares with the
proceeds credited to equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
Where any group company purchases the company's equity share capital (Rakon
Restricted Share Plan), the consideration paid, including any directly
attributable incremental costs (net of income taxes) is deducted from equity
attributable to the company's equity holders until the shares are cancelled
or reissued. Where such ordinary shares are subsequently reissued, any
consideration received, net of any directly attributable incremental
transaction costs and the related income tax effects, and is included in
equity attributable to the company's equity holders.

2.5. Property, plant and equipment
2.5.1. Initial recording
Items of property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. The cost of purchased property, plant
and equipment is the value of the consideration given to acquire the assets
and the value of other directly attributable costs, which have been incurred
in bringing the assets to the location and condition necessary for their
intended service. Where parts of an item of property, plant and equipment
have different useful lives, they are accounted for as separate items of
property, plant or equipment.
2.5.2. Subsequent costs
The entity recognises in the carrying amount of an item of property, plant or
equipment the cost of replacing part of such an item when that cost is
incurred only when it is probable that the future economic benefits embodied
with the item will flow to the entity and the cost of the item can be
measured reliably. All other costs are recognised in the statement of
comprehensive income as an expense as incurred.
2.5.3. Depreciation
Depreciation of property, plant and equipment, other than freehold land, is
calculated on a straight line basis so as to expense the cost of the assets
to their expected residual values over their useful lives as follows:

Land Nil
Buildings 5 - 10%
Leasehold improvements 20 - 36%
Computer hardware 36%
Plant and equipment 5 - 10%
Motor vehicles 20 - 25%
Furniture and fittings 6 - 50%
Assets under course of construction Nil

The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance date.
Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognised within "other gains/(losses) - net" in
the statement of comprehensive income.

2.6. Leases
The entity is the lessee
Leases where the lessor retains substantially all the risk and rewards of
ownership are classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) are charged to the
statement of comprehensive income on a straight-line basis over the period of
the lease.

2.7. Intangible assets
2.7.1. Goodwill
Goodwill acquired in a business combination is initially measured at cost of
the business combination being the excess of the consideration transferred
over the fair value of the Group's net identifiable assets acquired and
liabilities assumed. If this consideration transferred is lower than the
fair value of the net identifiable assets of the acquired subsidiary,
associate or joint venture, the difference is recognised in profit or loss.
Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill on acquisition of associates and joint ventures is included in
"investment in associates/interest in joint ventures" and is tested for
impairment as part of the overall balance.
Separately recognised goodwill is tested annually for impairment and carried
at cost less accumulated impairment losses. Impairment losses on goodwill are
not reversed. Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment
testing. The allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the business
combination in which the goodwill arose.
2.7.2. Patents, trademarks, licenses and software
Identifiable intangible assets that are acquired by the Group are stated at
cost less accumulated amortisation and impairment losses. Subsequent
expenditure on intangible assets is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it relates.
All other expenditure is expensed as incurred.
Expenditure on internally generated goodwill and brands is recognised in the
statement of comprehensive income as an expense as incurred.
Amortisation is charged to the statement of comprehensive income on a
straight-line basis over the estimated useful lives of intangible assets
unless such lives are indefinite. Acquired patents and licenses are
amortised over their anticipated useful lives of 5-10 years.
Software assets, licences and capitalised costs of developing systems are
recorded as intangible assets and amortised over a period of 3-5 years unless
they are directly related to a specific item of hardware and recorded as
property, plant and equipment.
2.7.3. Research and development
Expenditure on research activities, undertaken with the prospect of gaining
new scientific or technical knowledge and understanding, is recognised in the
statement of comprehensive income as an expense as incurred. Any research
and development taxation credits are recognised when eligibility criteria
have been met and are treated as a reduction in expenses. Government grant
funding for research and development is recognised when eligible criteria
have been met and is recognised as other operating income.
Expenditure on development activities, whereby research findings are applied
to a plan or design for the production of new or substantially improved
products and processes, is capitalised if the product or process is
technically and commercially feasible and the entity has sufficient resources
to complete development. Other development expenditure is recognised in the
statement of comprehensive income as an expense as incurred.

2.8. Inventories
Inventories are stated at the lower of cost (weighted average cost) or net
realisable value. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and
selling expenses.

2.9. Impairment of non-financial assets
The carrying amounts of the Group's non-financial assets are reviewed at each
balance sheet date to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable amount is
estimated being the higher of an asset's fair value less costs to sell and
the asset's value in use. An impairment loss is recognised whenever the
carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised in the statement of
comprehensive income.
For goodwill the recoverable amount is estimated at each balance sheet date.
Impairment losses recognised in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill allocated to
cash-generating units (group of units) and then, to reduce the carrying
amount of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.

2.10. Financial instruments
Financial instruments comprise cash and cash equivalents, trade and other
receivables, trade and other payables, borrowings and derivative financial
instruments (forward foreign exchange contracts, forward foreign exchange
options, zero cost collars).
Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group becomes a party to the contractual provisions of
the instrument. Financial assets are derecognised when the rights to receive
cash flows from the investments have expired or have been transferred and the
group has transferred substantially all risks and rewards of ownership.
2.10.1. Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits, other short
term, highly liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities on the
balance sheet.

2.10.2. Trade and other receivables
Trade and other receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method,
less provision for impairment.
Collectability of trade receivables is reviewed on an ongoing basis. Debts
which are known to be uncollectable are written off. A provision for
impairment of trade receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according
to the original terms of receivables. The amount of the provision is the
difference between the asset's carrying amount and the present value of
estimated future cash flows, discounted at the effective interest rate. The
amount of the provision is recognised in the statement of comprehensive
income.
2.10.3. Classification of financial assets
The Group classifies its financial assets in the following categories:
financial assets at fair value through profit or loss, loans and receivables.
The classification depends on the purpose for which the financial assets
were acquired. Management determines the classification of its financial
assets at initial recognition and re evaluates this designation at each
reporting date.
1. Financial assets at fair value through profit or loss
This category has two sub categories: financial assets held for trading, and
those designated at fair value through profit or loss on initial recognition.
For accounting purposes, derivatives are categorised as held for trading
unless they are designated as hedges. Assets in this category are classified
as current assets if they are either held for trading or are expected to be
realised within 12 months of the balance sheet date.
2. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise
when the Group provides money, goods or services directly to a customer
with no intention of selling the receivable. They are included in current
assets, except for those with maturities greater than 12 months after the
balance sheet date which are classified as non-current assets. The Group's
loans and receivables comprise 'trade and other receivables' and 'cash and
cash equivalents' in the balance sheet.
Purchases and sales of financial assets are recognised on trade-date - the
date on which the Group commits to purchase or sell the asset. Financial
assets at fair value through profit and loss are carried at fair value.
Loans and receivables are carried at amortised cost using the effective
interest method. Realised and unrealised gains and losses arising from
changes in the fair value of the 'financial assets at fair value through
profit or loss' category are included in the statement of comprehensive
income in the period in which they arise.
The Group establishes fair value by using valuation techniques. These
include reference to the fair values of recent arm's length transactions,
involving the same instruments or other instruments that are substantially
the same, and discounted cash flow analysis.
The Group assesses at each balance date whether there is objective evidence
that a financial asset or group of financial assets is impaired. Impairment
testing of trade receivables is described above.
2.10.4. Trade and other payables
Trade and other payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
2.10.5. Interest bearing borrowings
Interest bearing borrowings are recognised initially at fair value, net of
transaction costs incurred. Subsequent to initial recognition, interest
bearing borrowings are measured at amortised cost with any difference between
the proceeds (net of transaction costs) and the redemption amount recognised
in the statement of comprehensive income over the period of the borrowings
using the effective interest method. Arrangement fees are amortised over the
term of the loan facility. General and specific borrowing costs directly
attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time
to get ready for their intended use, are added to the cost of those assets
until such time as the assets are substantially ready for their intended use.
Other borrowing costs are expensed when incurred.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the balance sheet date.
2.10.6. Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to
foreign exchange and interest rate risks. The Group does not hold or issue
derivative financial instruments for trading purposes. However, derivatives
that do not qualify for hedge accounting are accounted for as trading
instruments.
Derivative financial instruments are initially recognised at fair value on
the date a derivative contract is entered into and are re-measured at their
fair value at subsequent reporting dates. The method of recognising the
resulting gain or loss depends on whether the derivative is designated as a
hedging instrument and, if so, the nature of the item being hedged. The
Group designates certain derivatives as hedges of a particular risk
associated with a recognised liability or a highly probable forecast
transaction (cash flow hedge).
The Group documents, at the inception of the transaction, the relationship
between hedging instruments and hedged items, as well as its risk management
objectives and strategy for undertaking various hedging transactions. The
Group also documents its assessment, both at hedge inception and on an
ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows of
hedged items.
The full fair value of a hedging derivative is classified as a non-current
asset or liability when the remaining maturity of the hedged item is more
than 12 months; it is classified as a current asset or liability when the
remaining maturity of the hedged item is less than 12 months. Trading
derivatives are classified as a current asset or liability.
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges is recognised in other
comprehensive income. The gain or loss relating to the ineffective portion is
recognised immediately in the statement of comprehensive income within other
gains/(losses) - net.
Amounts accumulated in equity are recycled in the statement of comprehensive
income in the periods when the hedged item affects profit or loss (for
example, when the forecast sale that is hedged takes place). The gain or loss
relating to the effective portion of interest rate swaps hedging variable
rate borrowings is recognised in the statement of comprehensive income within
finance costs. The gain or loss relating to the effective portion of forward
foreign exchange contracts hedging export sales is recognised in the
statement of comprehensive income within sales. The gain or loss relating to
the effective portion of forward foreign exchange contracts hedging raw
materials purchases is recognised in the statement of comprehensive income
within cost of sales.
When a hedging instrument expires or is sold, or when a hedge no longer meets
the criteria for hedge accounting, any cumulative gain or loss existing in
equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the statement of comprehensive
income. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is immediately
transferred to the statement of comprehensive income within other
gains/(losses) - net.
Certain derivative instruments do not qualify for hedge accounting. Changes
in the fair value of any derivative instrument that does not qualify for
hedge accounting are recognised immediately in the statement of comprehensive
income within other gains/(losses) - net.

2.11. Fair value estimates
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement or for disclosure purposes.
The fair value of financial instruments that are not traded in an active
market is determined using valuation techniques. The Group uses a variety of
methods and makes assumptions that are based on market conditions existing at
each balance date. Techniques, such as estimated discounted cash flows, are
used to determine fair value for financial instruments. The fair value of
forward exchange contracts is determined using forward exchange market rates
at the balance sheet date.
The nominal value less estimated credit adjustments of trade receivables and
payables are assumed to approximate their fair values. The fair value of
financial liabilities for disclosure purposes is estimated by discounting the
future contractual cash flows at the current market interest rate that is
available to the Group for similar financial instruments.

2.12. Employee entitlements
2.12.1. Long term employee benefits
The Group's net obligation in respect of long service leave and the French
retirement indemnity plan is the amount of future benefit that employees have
earned in return for their service in the current and prior periods. The
obligation is calculated using the projected unit credit method and is
discounted to its present value and the fair value of any related assets is
deducted. The French retirement indemnity plan entitles permanent French
employees to a lump sum on retirement. The payment is dependent on an
employee's final salary and the number of years of service rendered.
2.12.2. Short term employee benefits
Employee entitlements to salaries and wages and annual leave, to be settled
within 12 months of the reporting date represent present obligations
resulting from employee's services provided up to the reporting date,
calculated at undiscounted amounts based on remuneration rates that the
entity expects to pay.
2.12.3. Share based plans
The Group's management awards qualifying employees bonuses in the form of
share options and conditional rights to redeemable ordinary shares, from time
to time, on a discretionary basis. These are subject to vesting conditions
and their fair value is recognised as an employee benefit expense with a
corresponding increase in other reserve equity over the vesting period. The
fair value determined at grant date excludes the impact of any non-market
vesting conditions, such as the requirement to remain in employment with the
entity. Non-market vesting conditions are included in the assumptions about
the number of options that are expected to vest and the number of redeemable
ordinary shares that are expected to transfer. At each balance sheet date
the estimate of the number of options expected to vest and the number of
redeemable ordinary shares expected to transfer is revised and the impact of
any change in this estimate is recognised in the statement of comprehensive
income with a corresponding entry to equity. The proceeds received net of
any directly attributable transaction costs are credited to share capital
when the options are exercised or the conditional rights to redeemable
ordinary shares are transferred.
2.12.4. Superannuation schemes
The Group's NZ and overseas operations participate in their respective
government superannuation schemes whereby the Group is required to pay fixed
contributions into a separate entity. The Group has no legal or constructive
obligations to pay further contributions if the fund does not have sufficient
assets to pay all employees the benefits relating to the employee service in
the current and prior periods. The Group has no further payment obligations
once the contributions have been paid. The contributions are recognised as
employee benefit expense when they are due.

2.13. Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to settle the
obligation. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate,
the risks specific to the liability.

2.14. Revenue
2.14.1. Goods sold and services rendered
Revenue comprises the fair value of amounts received and receivable by the
Group for goods and services supplied in the ordinary course of business.
Revenue is stated net of Goods and Services Tax collected from customers.
Revenue from the sale of goods is recognised in the statement of
comprehensive income when the significant risks and rewards of ownership have
been transferred to the buyer and the amount can be measured reliably.
Revenue from services rendered is recognised in the statement of
comprehensive income in proportion to the stage of completion of the
transaction at the balance sheet date.
2.14.2. Interest income
Interest income is recognised in the statement of comprehensive income as it
accrues, using the effective interest method.
2.14.3. Dividend income
Dividend income is recognised when the right to receive payment is
established.
2.14.4. Royalty income
Royalty income is recognised on an accruals basis in accordance with the
substance of the relevant agreements.
2.14.5. Government grants
Government grants related to an expense item are recognised as income when
the right to receive payment has been met. The income is recognised within
other operating income in the statement of comprehensive income.

2.15. Income tax
Income tax on the profit or loss for the periods presented comprises current
and deferred tax. Income tax is recognised in the statement of comprehensive
income except to the extent that it relates to items recognised directly in
other comprehensive income, in which case it is recognised in other
comprehensive income.
Current tax is the expected tax payable on the taxable income for the period,
using tax rates enacted or substantially enacted at the balance sheet date,
and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
taxation purposes. The following temporary differences are not provided for:
goodwill not deductible for tax purposes, the initial recognition of assets
or liabilities that affect neither accounting nor taxable profit, and
differences relating to investments in subsidiaries, associates and joint
ventures to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance
sheet date.
A deferred tax asset is recognised only to the extent that it is probable
that future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
2.16. Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The chief
operating decision maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the
Managing Director, Marketing Director and the Chief Operating Officer.

2.17. Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, rarely equal the related
actual results. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below.
2.17.1. Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in note 2.9. The recoverable
amounts of cash-generating units have been determined based on value-in-use
calculations. These calculations require the use of estimates. Refer note
22.
2.17.2. Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant
judgement is required in determining the worldwide provision for income
taxes. There are many transactions and calculations for which the ultimate
tax determination is uncertain during the ordinary course of business. The
Group recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
2.17.3. Provisions for inventory obsolescence
The Group makes estimates and assumptions regarding the value of inventory
obsolescence, these are based on the existing available information. Refer
note 16.

2.18. New accounting standards and IFRIC interpretations
(a) Standard and Interpretations early adopted by the Group
The Group and Company have not early adopted any new accounting standard and
IFRIC interpretations in the current financial period.
(b) Standards, amendments and interpretations to existing standards that are
relevant to the Group, not yet effective and have not been early adopted by
the Group
At the date of authorisation of these financial statements, the following
standards and interpretations were on issue but not yet effective but which
the Group and Company have not early adopted:
NZ IFRS 7 (amendment): Financial Instruments disclosures - Transfer of
Financial Assets (effective for annual periods beginning on or after 1 July
2011)
The amendments require additional disclosures about transfer of financial
assets to enable users of financial statements
- to understand the relationship between transferred financial assets that
are not derecognised in their entirety and the associated liabilities; and
- to evaluate the nature of, and risks associated with, the entity's
continuing involvement in derecognised financial assets.
The amendment is not expected to have a material impact on the Group or
Company's financial statements and will be adopted in the financial
statements for the annual reporting period ending 31 March 2013.
FRS 44 New Zealand Additional Disclosures and Harmonisation Amendments
(effective for annual periods beginning on or after 1 July 2011)
FRS 44 sets out New Zealand specific disclosures for entities that apply NZ
IFRSs. These disclosures have been relocated from NZ IFRSs to clarify that
these disclosures are additional to those required by IFRSs. The
Harmonisation Amendments amends various NZ IFRSs for the purpose of
harmonising with the source IFRSs and Australian Accounting Standards.
The new standard and amendments are not expected to have a material impact on
the Group or Company's financial statements and will be adopted in the
financial statements for the annual reporting period ending 31 March 2013.
NZ IFRS 10 Consolidated Financial Statements, NZ IFRS 11 Joint Arrangements,
NZ IFRS 12 Disclosure of Interests in Other Entities, revised NZ IAS 27
Separate Financial Statements and NZ IAS 28 Investments in Associates and
Joint Ventures (effective for annual periods beginning on or after 1 January
2013)
NZ IFRS 10 replaces all of the guidance on control and consolidation in NZ
IAS 27, and NZ IFRIC 12. The core principle that a consolidated entity
presents a parent and its subsidiaries as if they are a single economic
entity remains unchanged, as do the mechanics of consolidation. However, the
standard introduces a single definition of control that applies to all
entities. The Group does not expect the new standard to have a significant
impact on its composition.
NZ IFRS 11 introduces a principles based approach to accounting for joint
arrangements, focusing on how rights and obligations are shared by the
parties to the joint arrangement rather than on the legal structure. A joint
arrangement will be classified as either a joint operation or joint venture.
Joint ventures are accounted for using the equity method, and the choice to
proportionately consolidate will no longer be permitted. Parties to a joint
operation will account for their share of revenues, expenses, assets and
liabilities in much the same way as under the previous standard. The Group
does not expect this standard to alter the accounting for its existing joint
venture.
NZ IFRS 12 sets out the required disclosures for entities reporting under the
two new standards, NZ IFRS 10 and NZ IFRS 11, and replaces the disclosure
requirements currently found in NZ IAS 28. Application of this standard by
the Group will not affect any of the amounts recognised in the financial
statements, but will impact the type of information disclosed in relation to
the Group's investments.
NZ IAS 27 is renamed Separate Financial Statements and is now a standard
dealing solely with separate financial statements. Application of this
standard by the Group and Company will not affect any of the amounts
recognised in the financial statements, but may impact the type of
information disclosed in relation to the parent's investments in the separate
parent entity financial statements.
Amendments to NZ IAS 28 provide clarification that an entity continues to
apply the equity method and does not re-measure its retained interest as part
of ownership changes where a joint venture becomes an associate, and vice
versa. The amendments also introduce a "partial disposal" concept. The Group
is still assessing the impact of these amendments.
The Group expects to adopt these new standards in the financial statements
for the annual reporting period ending 31 March 2014.
NZ IFRS 13 Fair Value Measurement (effective for annual periods beginning on
or after 1 January 2013)
NZ IFRS 13 aims to improve consistency and reduce complexity by providing a
precise definition of fair value and a single source of fair value
measurement and disclosure requirements for use across IFRSs. The Group has
yet to determine which, if any, of its current measurement techniques will
have to change as a result of the new guidance. It is therefore not possible
to state the impact, if any, of the new rules on any of the amounts
recognised in the financial statements. However, application of the new
standard will impact the type of information disclosed in the notes to the
financial statements. The Group and Company expect to adopt the new standard
in the financial statements for the annual reporting period ending 31 March
2014.
NZ IAS 1 Amendments Presentation of Items of Other Comprehensive Income
(effective for annual periods beginning on or after 1 July 2012)
The amendment requires entities to separate items presented in other
comprehensive income into two groups, based on whether they may be recycled
to profit or loss in the future. This will not affect the measurement of any
of the items recognised in the balance sheet or the profit or loss in the
current period. The Group and Company expect to adopt the amendment in the
financial statements for the annual reporting period ending 31 March 2014.

NZ IAS 12 Recovery of Underlying Assets (effective from 1 January 2012)
The amendment requires the measurement of deferred tax assets or liabilities
to reflect the tax consequences that would follow from the way management
expects to recover or settle the carrying of the relevant assets or
liabilities, that is through use or through sale and introduces a rebuttable
presumption that investment property which is measured at fair value is
recovered entirely by sale. The amendment is not expected to have a material
impact on the Group or Company's financial statements. The Group and Company
expect to adopt the amendment in the financial statements for the annual
reporting period ending 31 March 2014.
NZ IFRS 9: Financial instruments (effective for annual periods beginning on
or after 1 January 2015)
NZ IFRS 9 addresses the classification, measurement and recognition of
financial assets and financial liabilities and replaces the parts of NZ IAS
39 relating to classification and measurement of financial instruments. NZ
IFRS 9 requires financial instruments to be classified into two measurement
categories: amortised cost and fair value. The determination is made at
initial recognition. All equity investments are measured at fair value. A
debt instrument is measured at amortised cost only if the entity is holding
it to collect contractual cash flows and the cash flows represent principal
and interest. Otherwise it is measured at fair value through profit or loss.

For financial liabilities the standard retains most of the NZ IAS 39
requirements. The main change is that, in cases where the fair value option
is taken for financial liabilities, the part of a fair value change due to an
entity's own credit risk is recorded in other comprehensive income rather
than the income statement, unless this creates an accounting mismatch.
The new standard is not expected to have a material impact on the Group or
Company's financial statements. The Group and Company have not yet decided
when to adopt NZ IFRS 9.

3. Segment information
The chief operating decision maker assesses the performance of the operating
segments based on a measure of adjusted earnings before interest, tax,
depreciation and amortisation (EBITDA). Interest income and expenditure are
not included in the result for each operating segment that is reviewed by the
chief operating decision maker. Except as noted below, other information
provided to the chief operating decision maker is measured in a manner
consistent with that in the financial statements.
During the current period EBITDA for reportable segments was expanded to
separate Rakon's share of EBITDA from associates and joint venture. The
EBITDA for the year ended 31 March 2011 has been restated to align with this
change.

Breakdown of the revenue from all sources is as follows:

2012
($000s) 2011
($000s)
Sales of goods 176,693 187,691
Revenue from services 1,561 1,623
178,254 189,314
The Group's trading revenue is derived in the following regions.
Total Revenues by destination 2012
($000s) 2011
($000s)
Region
Asia 87,975 96,651
North America 34,857 33,948
Europe 51,812 53,709
Others 3,610 5,006
178,254 189,314
Revenue is allocated above based on the country in which the customer is
located.
4. Other operating income
GROUP PARENT
2012 2011 2012 2011
($000s) ($000s) ($000s) ($000s)
Dividend income 3 2 3,476 1,662
Management fees/royalties received from subsidiaries - - 3,539 2,420
Government grants - research and development 5,316 2,219 3,970 2,219
Government grants - business support, China 592 - - -
Other income 26 304 2 63
5,937 2,525 10,987 6,364

5. Operating expenses
GROUP PARENT
2012 2011 2012 2011
($000s) ($000s) ($000s) ($000s)
Operating expense by function:
Selling and marketing costs 15,459 15,260 7,739 9,033
Research and development 14,738 13,177 6,730 6,328
General and administration 28,808 21,164 13,187 11,446
59,005 49,599 27,656 26,807

Operating expenses include:
Net loss/(gain) on sale of property, plant and equipment - 29 - (22)
Depreciation - inclusive of depreciation included in cost of sales (note 18)
8,018 7,641 6,152 6,245
Amortisation (note 19) 2,033 1,486 1,364 990
Research and development expense 15,696 14,482 6,730 6,328
Research and development taxation credit (958) (1,305) - -
Rental expense on operating leases 2,340 2,219 1,639 1,486

Costs of offering credit
Impairment write back on trade receivables (101) (26) (25) -
Bad debt write-offs 20 71 1 12
Governance expenses
Directors' fees (note 35) 300 300 300 300

Auditors' fees
Audit services for current year - principal auditors 594 537 180 198
Share registrar audit - principal auditors 3 3 3 3
Audit services - other auditors 55 - - -
Advisory services in relation to disposal of Proprietary software - principle
auditors 105 - 105 -
Sundry expenses
Donations 7 62 3 52
Prior year
General and administration costs and cost of sales have been decreased and
increased respectively by Group $4,511,000 and Parent $4,111,000 in order to
more accurately reflect the classification of these cost in a manner
consistent with the current year.
6. Other gains/(losses) - net
GROUP PARENT
2012 2011 2012 2011
($000s) ($000s) ($000s) ($000s)
Gain on disposal of property, plant, equipment and intangibles 1,014 1,057
Costs attributa