New direction puts Rakon back in black

  • 19/11/2015

By Tina Morrison

Rakon, the high-tech components maker, turned to a first-half profit and reiterated that it expects to post flat full-year earnings.

The Auckland-based company posted a profit of $1.08 million, or 0.6 cents a share, in the six months ended Sept. 30, from a loss of $3.34m, or 1.7 cents, in the year earlier period, it said.

Revenue slipped 5.5 percent to $58m, while operating expenses declined 3.7 percent to $23.3m following the closure of its Lincoln plant in the UK.

Rakon has restructured its business, closing manufacturing facilities in France and the UK and shifted its plants to New Zealand and India, reducing its global workforce and cutting operating costs.

The company turned its focus to the telecommunications sector and away from the lower margin smart wireless device market, however it said telecommunications had slowed in the latest period as network operators delayed investment decisions in next generation infrastructure, crimping earnings.

The reduced telecommunications spend hit Rakon's 49 percent owned Centum Rakon India Private unit, which contributed a net loss after tax of $243,000 in the first half, from a profit of $1.7m in the year earlier period, it said.

The company affirmed its previous forecast for annual earnings to be similar to last year's underlying earnings before interest, tax, depreciation and amortisation of $15.4m and net profit of $3.2m.

Its shares gained 1.9 percent to a two-week high of 26.5 cents.

Rakon turned to positive net cash flow of $5.3m in the first half, compared with a negative $30,000 in the year earlier period, helping it reduce net debt to $9.7m, from $13.4m at the end of the 2015 financial year.

The company didn't declare a dividend.