Rakon coming back home, but at a cost

Rakon, fresh from receiving a government grant, has revealed plans to close its Lincoln, UK plant and shift the manufacturing of products made there to its New Zealand plant.

The move will carry some cost provisions and is likely to result in a larger loss for the 2014 financial year, although the company remains confident of its targeted $10-15 million earnings guidance for the 2015 financial year.

The decision follows a review by Rakon’s board of directors finding duplicate overheads and manufacturing capability between the Lincoln and New Zealand operations.

The listed electronics components maker says its UK employees have been told of the proposal but said there is no fixed timeline for the closure.

Rakon [NZX: RAK], whose shares have shed more than three quarters of their value in the past three years, says should the proposal be confirmed in the current financial year, there is expected to be further restructure provisions reported.

That would result in a change to previous earnings guidance for the 2014 financial year with earnings before interest, tax, depreciation and amortisation (ebitda) expected to trade in the range of negative $8 to negative $5 million, compared to previous guidance of negative $3 million to zero.

A net loss after tax of $59-55 million is expected compared to previous guidance of a $54 million loss.

The proposal does not impact on Rakon’s target to reduce bank borrowings to below $12 million, by March 31, 2014.

Rakon’s target of returning to an ebitda profitability range of $10 million to $15 million in 2015 remains intact, the company says.

 

Earlier this week Rakon was named as one of 31 tech companies awarded R&D growth grants from Callaghan Innovation, the government's high-tech development body set up in 2012.

The grants provide a 20% contribution to a firm's annual R&D spend, capped at $5 million a year.

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