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Strong revenue growth, lower material costs and a better exchange rate has seen profits rocket nearly 300 per cent at listed technology firm Rakon, keeping it on target for its full-year forecast, the company said yesterday.
The Auckland-based firm - which makes high-performance crystals and oscillators used in
global positioning products - said that after eliminating currency movements, underlying revenue for the six months ending September 30 was up 33 per cent on the same period last year.
Managing director Brent Robinson said the first-half result left Rakon well placed to hit its full-year earnings before interest and tax forecast of $14.8 million - $3 million higher than originally predicted in the firm's May float prospectus.
"Further improvement in earnings above this target will be dependent on the extent of [the] normal seasonal dip over the next couple of months," Robinson said.
"We really have to play a game of wait and see to see how things sell over Christmas to see how strong that last quarter will be."
In January the company would start to get a picture of how the full year would eventually pan out.
Shares in Rakon closed up 2c yesterday at $3.48 - more than double the $1.60 issue price.
ABN Amro Craigs research analyst Mark Lister said it was a good result in line with expectations.
"From what they've said at the AGM and from everything that's come out of that camp it's been fairly obvious that the first half result was going to be a stunner," Lister said.
It was not surprising the company reiterated rather than upgraded the full-year guidance, he added.
Rakon was clearly trying to caution the market from getting ahead of itself because it was a bit unsure about the effect of seasonality, Lister said.
"I think the market would be quietly confident that if there's any risk to them being inaccurate in their [full-year] forecast it's going to be in a good way."
Revenue for the six months was $50.5 million, up from $34.2 million last year, driven by strong sales in the consumer navigation market - primarily automotive products.
Robinson said demand from the cellphone market had pushed out slightly compared to expectations for this year, although there had been a lot of design activity.
"So we believe that yes, the phone market is still happening, but has delayed slightly in our expectations," Robinson said.
Chief financial officer Graham Leaming said material costs had been reduced in line with expectations.
"Just as we're under price pressure from our customers to reduce price, we impart the same sort of pressure on our suppliers to achieve the same outcome," he said.
Rakon was also pretty well covered for the rest of the year against the US dollar at a fraction under 64c, compared to an average exchange rate of closer to 70c in the first half of last year, Leaming added.
A major project undertaken by Rakon was the expansion of so-called "clean-room" manufacturing at the firm's Auckland site.
The project was nearing completion and would expand the manufacture of quartz crystals - currently running at more than two million a month - by up to 40 per cent.
Robinson, whose father started Rakon in the family basement in 1967, said the firm currently bought about half the crystals it needed.
"We would like to make 70 per cent of them, so it's a move in that direction to give us more security as far as the supply of crystals is concerned."
