- Release Date: 07/09/12 16:30
- Summary: ADDRESS: RAK: Rakon Annual Meeting: Managing Director's Address
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RAK 07/09/2012 14:30 ADDRESS REL: 1430 HRS Rakon Limited ADDRESS: RAK: Rakon Annual Meeting: Managing Director's Address Brent Robinson - Rakon Managing Director's speech - Annual Shareholders Meeting - 7th September 2012 Good afternoon and thanks Bryan. I will comment shortly on our strategic position but before I do I will recap on our financial results for the previous financial year and the current market environment. Our 2012 year EBITDA of NZ$13.1 million was below our target and expectation we had when I addressed this meeting 12 months ago. The most significant factor causing this was a slowdown in spending in the Telecommunications sector. As you will know in the middle of last year the economic problems of Europe grew and the forecasted US rebound was slower than projected. As a consequence Telecommunications operators slowed their investment in base stations, fibre and network equipment which in turn reduced demand for our components. This impacted the results of our UK and French businesses and our Indian Joint Venture. Importantly the reduction we have seen is only market related; our position with existing and emerging customers has over this timeframe strengthened. In other segments of our business the contribution was mixed. Revenue derived from the Smart Wireless Device market grew and margins increased as we improved our product cost and product mix. High Reliability revenue and earnings were up on the prior year and in line with expectations as we benefitted from the contribution of a full year from the acquisition of Temex made in the previous year. The now mature GPS Positioning market shrunk slightly as expected due to a reduction in the sales of personal navigation devices and slower demand for emergency beacon products. The contribution from our Timemaker JV was down on the prior year as aggressive customer behaviour squeezed margins. The strength of the NZD continued to also have an impact on Rakon's results. Gains realised from our hedging programme offset some of this impact but with the NZ currency continuing to trade at sustained high levels there is real impact on our earnings. Structurally the best means of managing this risk is to diversify the manufacturing base into lower cost environments to both improve margins and better balance the currency exposures. We have been doing this in India and China and will continue to grow in these markets. Whilst earnings were below our target, underlying revenue increased slightly (up 4%) despite market conditions and improvements in working capital through inventory reduction and improved terms of trade boosted operating cash flow to NZ$7.9 million. Viewed in isolation our recent results clearly need to improve. However it is worth noting Rakon has continued to perform better than most of our peers over the last 5 years. We are currently the seventh largest frequency control products company in the world measured by revenue and I consider we have an enviable platform, product range and team to strengthen our position. In this context, over the last few years Rakon has continued its legacy of product innovation. We have been focussed on providing products and solutions for future generations of communications and positioning technologies and without doubt we have industry leading solutions for all the sectors we are targeting. For the Smart Wireless Device products where cost is so important we have pioneered new technology using a crystal plus a sensor nearly halving the cost of the frequency reference. Rakon has been intimately involved with integrated circuit vendors developing specifications and key solutions. This helped further strengthen our reputation as a key solution provider for frequency control in this industry sector. This coupled with our state of the art low cost manufacturing operation in Chengdu China has attracted world leading phone producers from around the world and also within China to use Rakon. Our market share in this sector continues to grow. Our product innovation has also been strong for the Telco space. Since the release of our Mercury product last year, a world first, we have continued to develop derivative products and the many design wins we have had in next generation networks has been outstanding. These high margin products will be mass produced in both New Zealand and the UK in the near future. In addition to the breakthrough Mercury product, we have also continued to broaden our product offering to Telecom equipment suppliers with industry leading products and specifications. These products have been all targeted at next generation 4G networks and infrastructure. All leading equipment providers have been quick to design these products into their new offerings, the recent deal with Huawei being an example. These products will undoubtedly continue to drive market share growth and although the Telco sector has contracted this year, data growth will soon force Telco operators to invest and I expect Rakon will certainly be a prime beneficiary. In 2010 you will recall we acquired a French Space and Defence business formerly called Temex. Over the past 2 years we have invested in expanding our team with a strong focus on research and development and product management to enhance the performance of our product range. Recently we released a new Ultra Low Noise Oven Controlled Xtal Oscillator designed for Radar applications with absolutely stunning performance and another world first. This product has already been quickly picked up by the industry clearly demonstrating the depth of knowledge and quality of our High Reliability team. In this High Reliability sector we have also further expanded our customer base in Space applications with new contracts to sign with the Chinese Academy of Space Technology, here too I believe our product offering will lead to substantial growth. Before I close I would like to show you a few slides on some of our operations around the globe. (Presentation slide show starts showing photographs and facts about Rakon's global manufacturing and design facilities.) As you can see, we have built a world class design and manufacturing platform to deliver sustained and secure earnings over the long term. As Bryan said we did expect to be further ahead than we are now, however external factors out of our control have influenced recent performance. I feel very confident we have never been better positioned and we will continue our growth well into the future and hence bring the returns we are all looking for. Ends. End CA:00227050 For:RAK Type:ADDRESS Time:2012-09-07 14:30:06
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