- Release Date: 17/05/12 12:29
- Summary: FLLYR: RAK: Rakon Limited 31 March 2012 FY Results
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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 attributable to investment in joint venture and sale of intangibles, plant and equipment - (129) - - Costs attributable to investments in associates and subsidiaries - (100) - (100) Bargain purchase gain on acquisition (note 33) - 1,226 - - Acquisition costs - (721) - - 1,014 276 1,057 (100) Foreign exchange (losses)/gains - net Forward foreign exchange contracts - held for trading 205 70 90 80 (Losses)/gains on revaluation of foreign denominated monetary assets and liabilities1 (626) (2,251) (1,757) (695) (420) (2,181) (1,666) (615) 593 (1,905) (610) (715) 1 Includes realised and unrealised gains/(losses) arising from accounts receivable and accounts payable. Hedge accounting is sought on the initial sale of goods and purchase of inventory, subsequent movements are recognised in trading foreign exchange. Other Information A. Dividends (NZX Listing Rules Appendix 1: 2.3(d)) Rakon Limited currently has adopted a policy that there will not be any dividend payments made for the foreseeable future and surplus funds will be used for immediate and future growth opportunities. B. Net Tangible Assets per Security (NZX Listing Rules Appendix 1: 2.3(f)) 31 March 2012 31 March 2011 Net tangible assets $000 162,787 169,011 Number of ordinary securities 000 191,039 191,039 Net tangible asset backing per ordinary security $ 0.85 0.88 C. Control gained and lost over Entities (NZX Listing Rules Appendix 1: 2.3(g)) Rakon Limited has acquired the following entities during the period: nil D. Associates & Joint Ventures (NZX Listing Rules Appendix 1: 2.3(h)) 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 $386,000 (prior year $479,000). The contribution of Shenzhen Timemaker, Chengdu Timemaker and Shenzhen Taixiang to Rakon Limited's net results from ordinary activities is a net profit after tax of $538,000 (prior year $2,432,000). E. Audit (NZX Listing Rules Appendix 1: 1.3(l)) The financial statements have been audited and will not be subject to any qualification. 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:00222948 For:RAK Type:FLLYR Time:2012-05-17 10:29:40
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