Rakon shares rose 9.6 per cent after the telecommunications component maker reported better than expected earnings and said the outlook, while murky, was generally positive.

The company reported underlying earnings before interest, tax, depreciation and amortisation of $14.8 million in the 12 months ended March 31, beating its guidance for ebitda of $12m to $14m.

While that was up 11 per cent from a year earlier, changes to accounting standards shifted $3.1m into depreciation. Net profit rose to $4m from $3.4m a year earlier, with revenue up 4.4 per cent at $119m.

The shares rose 2.5 cents to 28.5 cents in early afternoon trading.


Managing director Brent Robinson said the manufacturer had come through the Covid-19 lockdowns largely unscathed, with a brief short-term hit when its New Zealand and Indian facilities were temporarily restricted.

"But all three of our operations are now back to normal production capacity," he told an analysts' briefing.

Rakon has been putting a greater emphasis on its telecommunications business, where it's making inroads in providing components needed for mobile networks.

Robinson said the Covid-19 pandemic is increasing demand for global telecommunications, not just building new 5G infrastructure, but also in upgrading existing 4G networks to support that shift.

A new product – XMEMS – has shown "unprecedented" performance in using 5G bandwidth and has a potential market of hundreds of millions of dollars over the next five years, Robinson said.

About 80 per cent of Rakon's products are now customised for their clients, which has helped improve gross margin, he said. When Rakon's focus was on supporting smartphones and GPS devices in the past, about 80 per cent of its product suite was generic.

The ongoing tensions between the US and China continued to inject uncertainty for Rakon. Robinson said the White House's targeting of a "certain customer" – referring to Chinese telecommunications firm Huawei Technologies – could have a significant impact.

Robinson told analysts that the company has a two-year plan to try to strip costs out of the business.


Dividends are subject to its lender's approval and none was declared, but the company retains a dividend policy of paying out 50 per cent of net profit if fiscally appropriate.

Net debt increased to $7.9m from $7.7m a year earlier, with Rakon completing the acquisition of its Indian joint venture.

It generated operating cash inflows of $9.4m in the year, compared to a $1.8m cash outflow a year earlier.

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