Rakon full-year loss widens on 16% sales drop, impairment of Indian JV

Rakon managing director Brent Robinson said Rakon continued to suffer from reduced demand from equipment makers in the telco sector (photo: Tinaz Karbhari)
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Rakon posted a wider full-year loss after sales fell 16 percent and the company recognised an impairment against its Centrum Rakon India joint venture.

The net loss widened to $13.6 million in the 12 months ended March 31, from $1.7 million a year earlier. Sales fell to $94.7 million from $112.7 million, while cost of sales recorded a more modest decline to $61 million from $64.8 million.

The latest results include impairments of about $6.6 million, of which $3.2 million was against the carrying value of its 49 percent-owned Centrum Rakon India Private Ltd JV, which Rakon said reflected value-in-use calculations based on future forecasts that "did not support the full value of this investment being retained". As revenue declined the company also increased inventory obsolescence provisions during the year by $4.2 million, it said. Restructuring costs amounted to $3 million and among other one-time items was a $1.9 million impairment of goodwill.

The decline in sales reflected a 16 percent drop revenue from telecommunications, it said. Positives in the year included a reduction in net debt to $4.5 million from $12.6 million and an increase in positive operating cash flow to $9.5 million from $7.3 million, it said.

Managing director Brent Robinson said Rakon continued to suffer from reduced demand from equipment makers in the telecommunications sector "as major global network operators had continued to delay infrastructure investment."

"While we experienced a lift in business in the telecommunication market in the final quarter, it was not enough to recover the reduced demand that had negatively affected revenue in the first three quarters," he said. Key priorities in the latest year were reducing operating costs and balance sheet risk, he said.

"Although the result for FY2017 is very disappointing, there has been a number of achievements in the year that provide Rakon a stronger position from which improved results can be achieved in the coming year," Robinson said.

Rakon shares fell 7 percent to 19.5 cents and have fallen 29 percent in the past 12 months.


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There comes a time when management have to admit they can't solve Rakon's problems, and they invite a friendly takeover. At least that way shareholders can get some cash back and the business can hopefully thrive under new ownership.

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I absolutely love this time of year. Know why? Because we get to go back and pick out all the optimistic quotes with 0 foundation the Robinson family have thrown out, year after year, and see how drastically they have failed, year after year. Let's begin!

2013 - Mr Robinson said the increase reflected fourth quarter growth in the telecommunications market, where Rakon's exceptionally strong product offering in 4G and market positioning were starting to show the early signs of growth that Rakon had been expecting for some time from the telecommunications infrastructure market."

2014 - "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".

2015 - "Today we announce a turnaround in our
results with a return to profit. It is pleasing that the impact of our
significant structural realignment programme during FY2014-FY2015 has
resulted in this improvement in our financial results... Rakon is optimistic for prospects in FY2016 with the Company now benefiting from the change in strategy."

2016 - "Rakon has strong relationships with both network equipment and original design manufacturers, meaning it was well-placed to benefit from an upturn in infrastructure investment... Mr Robinson said the increasing usage of GPS technology in a whole range of industries was generating significant opportunities for Rakon."

And finally...

2017 - "Although the result for FY2017 is very disappointing, there has been a number of achievements in the year that provide Rakon a stronger position from which improved results can be achieved in the coming year. The Company has lowered its operating cost base and has reduced risk as a result of the debt reduction and the partnership formed with Siward. Engagement with key customers is strong due to interest around new Rakon designs."

Meanwhile, back in the cold, harsh reality of the market, since it's post-float high of $6.00 in 2007, Rakon has been the epitomy of shareholder wealth destruction, losing 97% of it's value.

The sooner the Robinson's pack up and leave, the better!

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Yet another glorious example of governance management dysfunction that is corporate NZ.

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Siward Crystal Technology will take over Rackon. Rakon has a lot of IP, Siward will want to get hold of this and move manufacturing oversea's.
Tseng is now RAKON director, whatever happens to RAKON's fortunes I suspect their will be a take over bid.

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The Moose couldn't have provided a better summary of Brent Robinson's false prophecies of Rakon's future prospects. How is it conscionable for the Robinsons, who have already taken a personal fortune out of shareholder investment in their company when it was listed, to continue to pay themselves such generous salaries in the wake of continuously disappointing results? Shouldn't the size of remuneration at least reflect some level of performance?

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