RAK
22/05/2014 09:16
FLLYR
REL: 0916 HRS Rakon Limited
FLLYR: RAK: RAKON FY2014 Preliminary Results Announcement
Rakon Limited
Results for announcement to the market
Reporting period: 12 months to 31st March 2014
Previous reporting period: 12 months to 31st March 2013
Unaudited Amount NZ$000 % Change
Revenue from ordinary activities 149,951 -15%
Underlying EBITDA c (Earnings before interest, tax, depreciation,
amortisation, impairment, employee share schemes, non-controlling interests,
adjustments for associates and joint ventures share of interest, tax &
depreciation, loss on disposal of assets and other non-cash items) (7,531)a
-249%
(Loss)/profit from ordinary activities after tax attributable to security
holders (79,429)b -149%
Net (loss)/profit attributable to security holders
(79,429)b -149%
Note a: includes share of underlying EBITDA from associates and joint
ventures of NZ$4,487,000 (2013: $4,110,000).
b: includes equity accounted earnings from associates and joint ventures of
$1,647,000 (2013: $1,280,000).
c: Further information regarding the disclosure and use of non-GAAP financial
information is disclosed at Note 3 (Unaudited Notes to the Financial
Statements) in this results announcement.
Amount per security Imputed amount per security
Interim / Final Dividend Nil dividend proposed Nil dividend proposed
Record Date Not Applicable Not Applicable
Dividend Payment Date Not Applicable Not Applicable
Comments
22 MAY 2014 (RAK)
RAKON FY2014 RESULTS: STRUCTURAL AND OPERATIONAL REALIGNMENT WELL UNDERWAY
Rakon Limited (NZX:RAK) ("Rakon" or "the Company") today reports an unaudited
full year net loss after tax for the year ending 31 March 2014 ("FY2014") of
$83.8 million; of the loss $79.4 million is attributable to Rakon equity
holders and $4.4 million is attributable to Non-controlling interests. FY2014
'Underlying EBITDA' was a loss of $7.5 million, within the range of guidance
provided. Net debt was $6.4 million and Bank borrowings $10.9 million at 31
March 2014, thereby achieving the Company's target of reducing bank
borrowings to below $12 million by that date.
Rakon has undertaken a number of structural realignment initiatives
throughout FY2014 to return the company to future profitability. The key
initiatives included:
o A successful 80% equity sale of Rakon Crystal (Chengdu) Co. Limited ("RCC")
to ZheJiang East Crystal Electronic Co. Limited ("ECEC") on 17 October 2013;
and
o A restructure of Rakon France SAS, and associated completion in the
transfer of OCXO component manufacturing from France to Rakon's India joint
venture (Centum Rakon); and
o A decision to close the Lincoln, UK manufacturing plant (Rakon UK), with a
plan currently in progress to transfer all UK manufacturing to New Zealand
during the 2014 calendar year.
Brent Robinson, Rakon CEO, said "the FY2014 financial result is very
disappointing for all shareholders. During the year we have made some
difficult but necessary decisions to restructure the business in order to
return Rakon to future profitability and better margins. Actions have already
been undertaken, our debt repayment target has been achieved, and we are
undergoing a renewed focus".
Following the sale of RCC (renamed ECEC-Rakon ("ERC") following the sale) and
subsequent exit from the smart wireless market, Rakon will continue its focus
on the Telecommunications, Global Positioning and Space & Defence markets
from FY2015. "Rakon's focus and resources are now aligned to markets where we
see higher margins and growth opportunities. Rakon's position as a leading
'frequency control product' supplier to key customers involved in the global
deployment of 4G/LTE networks, provides a brighter outlook".
"We expect FY2015 to be a year where we will start to benefit from the
structural realignment initiatives in which costs are being taken out of the
business. The transfer of manufacturing from Lincoln, UK to New Zealand is a
key project, with significant focus on delivering that successfully", Mr
Robinson said.
Financial Results
Revenues for the year were $150.0 million (FY2013 $176.3 million). The
reduction in revenues compared to FY2013, result mainly from Rakon's exit
from the Smart Wireless market following the RCC sale.
The loss attributed to continuing operations was $50.5 million. Following the
equity sale in RCC, a loss of $33.3 million resulted from discontinued
operations. The remaining value of Rakon's equity investment in ERC was
assessed as having indicators of impairment that result in it being fully
impaired and charged to the loss from discontinued operations.
Costs of $7.2 million relating to restructuring activities were recorded for
FY2014; including a provision for restructure costs relating to the planned
closure of the Lincoln, UK plant.
Total impairment charges were $19.9 million including an impairment charge
against goodwill of $15.0 million as previously announced by Rakon on 8 May
2014. The goodwill impairment relates to the carrying amount of UK goodwill.
Following the annual testing for impairment of goodwill undertaken at the
FY2014 financial year end, the value-in-use calculation for the New Zealand
cash generating unit does not support the carrying amount of UK goodwill once
transferred.
Further to the FY2014 financial year end testing for impairment, certain
Property, Plant & Equipment assets were assessed as having a reduced useful
life which resulted in an acceleration of depreciation of $7.4 million being
brought forward into FY2014. The impact of accelerated depreciation results
in a reduction in gross profit in the Statement of Comprehensive Income.
Balance Sheet
Following the reorganisation of Rakon's debt during FY2014, the company has
entered a renewed arrangement with ASB Bank until 31 May 2015 to increase
borrowings up to $22.0 million. Mr Robinson said that "the renewal of the
facility gives the company balance sheet the necessary flexibility for its
strategic actions such as providing funding to cover restructuring activity
whilst ensuring there is adequate headroom for the operating requirements of
the business". The increase in funding is a bridging requirement with future
inflows expected from property sales of the Lincoln, UK and Argenteuil,
France sites. Once completed, the Board expects borrowings to be below
current levels.
The Directors confirm that this FY2014 preliminary results announcement is
based on unaudited results, with the audit in progress.
-ends-
Contact:
Brent Robinson
Chief Executive Officer
Rakon (09) 571 9216 / 021 206 0985
www.rakon.com
Directors Declaration (NZX Listing Rules Appendix 1, 3.1 & 3.2)
The Directors declare that the selected consolidated financial information on
pages 4 to 24 have been prepared in compliance with applicable Financial
Reporting Standards and extracted from the unaudited annual financial
statements. The financial statements are in the process of being audited and
are not likely to be subject to qualification or be materially different to
those presented on pages 4 to 24. 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.
Other Information
A. Dividends (NZX Listing Rules Appendix 1: 1.3(d))
During the period the Rakon Limited Board of Directors resolved to update its
dividend policy. This was noted to the market in the Chairman's address at
the Annual Shareholders Meeting on 6 September 2013:
From the completion of the year ending 31 March 2015, Rakon intends to begin
paying a dividend of up to 50% of the after tax profit, if considered
fiscally appropriate.
B. Net Tangible Assets per Security (NZX Listing Rules Appendix 1: 1.3(g))
31 March 2014 31 March 2013
Net tangible assets $000 68,148 132,063
Number of ordinary securities 000
191,039 191,039
Net tangible asset backing per ordinary security $
0.36 0.69
C. Control gained and lost over Entities (NZX Listing Rules Appendix 1:
1.3(h))
Rakon Limited has gained or lost control over the following entities during
the period:
On 17 October 2013, Rakon HK Limited (a subsidiary of Rakon Limited with an
85.4% equity interest) completed the sale of an 80% equity interest in its
subsidiary Rakon Crystal (Chengdu) Co. Limited ("RCC"). Control of "RCC" was
lost on 17 October 2013. The Statement of Comprehensive Income contained in
the Financial Statements to this Results Announcement, reports and discloses
the contribution from the "RCC" entity as Discontinued Operations with
further details at Note 8 of the Financial Statements.
D. Associates & Joint Ventures (NZX Listing Rules Appendix 1: 1.3(i))
Rakon Limited has the following associate entities and joint venture
arrangements.
Shareholding
Centum Rakon India Private Limited 49%
Shenzhen Timemaker Crystal Technology Co, Limited 40%
Chengdu Timemaker Crystal Technology Co, Limited 40%
Shenzhen Taixiang Wafer Co, Limited 40%
The contribution of Centum Rakon to Rakon Limited's net results from ordinary
activities is a net profit after tax of $1,995,000 (prior year $1,731,000).
The contribution of Shenzhen Timemaker, Chengdu Timemaker and Shenzhen
Taixiang to Rakon Limited's net results from ordinary activities is a net
loss after tax of -$295,000 (prior year -$451,000).
E. Audit (NZX Listing Rules Appendix 1: 1.3(l))
The financial statements are in the process of being audited and are not
likely to be subject to qualification or be materially different to those
presented on pages 4 to 24.
F. Business Changes (NZX Listing Rules Appendix 1: 1.3(m))
There have not been any major changes or trends in Rakon's business
subsequent to year end.
End CA:00250736 For:RAK Type:FLLYR Time:2014-05-22 09:16:48
