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Rakon more than doubles loss to $84m

Rakon [NZX: RAK], whose shares have shed 86 percent of their value in the past five years, more than doubled its annual loss after writing down the value of assets and spending more on restructuring ailing businesses.

The Auckland-based company made a loss of $83.8 million in the 12 months ended March 31, from a loss of $32.8 million a year earlier, making it the manufacturer's worst loss and the fourth in five years. Excluding minority interests, the loss was $79.4 million, or 41.3 cents per share, compared to $31.8 million, or 16.6 cents.

Rakon took a $33 million loss on the sale of its Chinese investment, and a further $19.9 million in impairment charges, the bulk of which were in writing down the value of its UK business. The company also faced costs of $7.2 million restructuring its business as it shifts manufacturing back to New Zealand from the UK and recognised $15.4 million in depreciation.

"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," chief executive Brent Robinson said in a statement. "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."

Earlier this month Rakon had flagged widening losses,after writing down goodwill and depreciating plant and equipment. The shares were unchanged at 22 cents, valuing the former darling of the stock market at $42 million.

The company made a loss before interest, tax, depreciation and amortisation and other write-downs of $7.5 million, near the top of its forecast range between $5 million and $8 million. Underlying Ebitda was $5.1 million a year earlier.

Revenue dropped 15 percent to $150 million in the year on Rakon's exit from the smart wireless device market following the sale of its stake in a Chinese factory.

Rakon generated more cash than it spent from operations in 2014, with an inflow of $12.5 million compared to an outflow of $2.7 million in 2013. As at March 31, it held cash and equivalents of $4.8 million.

The company held bank debt of $10.9 million at the end of the financial year, down from $36.1 million a year earlier, and will lift its total facility to $22 million to help fund its restructuring.

Rakon's result is still being audited, but the directors said they "are not likely to be subject to qualification or be materially different to those presented."


Comments and questions

Simply amazing that one month out from this appalling result they still couldn't forecast correctly.

They are trying to play an optimistic tune though - but its so very couched in possibilities and conditions.

"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."

"expect" - meaning they think but aren't 100% sure it will happen
"start to benefit" - meaning it will have minimal impact in FY2015.
"costs are being taken out" - Rakon don't have a cost problem. They have a revenue problem. They are amputating limbs when they need to be growing muscle.

This company will be gone in 2-3 years.

At this rate, I wouldn't even give them 2-3 years...

Still quite a bit of bank debt , increasing to fund restructuring , what a load of hogwash , they need to start with a board clean out , first one to go should be Mogridge , they need to decrease debt not increase it, monkeys turn into gorillas , when the debt gets close to market cap of the company youve got a problem.Their forecasting has been bordering on criminal they would be better to say as least as possible rather than try to talk it up all the time.

On its way to a penny dreadful for a back door listing (name change advisable)