High-tech components maker Rakon lifted full-year earnings 10 per cent, meeting guidance, as 4.5/5G telecommunications infrastructure demand continues to grow. But profits were down on last year and debt soared.
Underlying earnings before interest, tax, depreciation and amortisation were $13.3 million in the year to March 31, versus $12.1 million in the prior period and in line with its guidance of between $12 million and $14 million, the Auckland-based company said.
Sales were $114 million, up 13 per cent on the prior year, with increased revenue across the telecommunications and space and defence markets offsetting lower revenue in the global positioning market, it said.
Although net profit tumbled 66 per cent to $3.4 million, or 1.5 cents a share, Rakon noted the prior year's $10 million profit included $8.8 million of gains recognised from the sale of property in Argenteuil, France.
The prior year profit was also bolstered by a dilution gain and sale of shares in 'internet of things' start-up Thinxtra. The value of Rakon's investment in Thinxtra changed from $5.3 million in March 2018 to $4.5 million at the end of the current financial year.
"When the one-off gains are excluded it was pleasing to see the year-on-year growth in core net profit on the back of stronger 4.5/5G telecommunications infrastructure demand and continuing growth in the defence segment," said managing director Brent Robinson.
"The roll-out of 5G continues to be our biggest opportunity and challenge. Rakon is well positioned with a good share of business awarded by tier 1 customers. The challenge for Rakon is to meet existing demand and continue to bring to market new products which meet the higher specifications demanded by 5G applications."
No dividend will be paid but Rakon said its policy is to pay a dividend of up to 50 per cent of the after tax profit "if considered fiscally appropriate."
Robinson said a key event during the year was the May 2018 acquisition of the remaining 51 per cent of its previous joint venture Rakon India Private.
"With Rakon now having full decision-making control of India's low-cost manufacturing operation, it was pleasing to see India's positive contribution to the group's full-year result," he said.
The company went from a net cash position of $7.4 million on March 31, 2018 to a net debt position of $7.7 million on March 31 this year, largely due to the purchase of the remaining stake in Rakon India and investment in inventory and equipment to meet growing demand.
Rakon shares recently fell 1.5 per cent to 32 cents, and have lifted 8.3 per cent so far this year.