Rakon Limited 2018 Annual Report
Rakon Limited
Annual Report 2018
2
2
Table of Contents
Directors’ Report _______________________________________________________________________________ 3
Statement of Comprehensive Income ______________________________________________________________ 4
Statement of Changes in Equity ___________________________________________________________________ 5
Balance Sheet _________________________________________________________________________________ 6
Statement of Cash Flows ________________________________________________________________________ 7
Notes to the Financial Statements_________________________________________________________________ 9
Independent Auditor’s Report ___________________________________________________________________ 49
Shareholder Information _______________________________________________________________________ 56
Corporate Governance Report ___________________________________________________________________ 60
Directory ____________________________________________________________________________________ 66
3
3
Directors’ Report
The Directors are responsible for ensuring that the financial statements present fairly the financial position of the Group as at 31 March
2018 (FY2018) and their financial performance and cash flows for the year ended on that date.
The Directors consider that the financial statements of the Company and the Group have been prepared using appropriate accounting
policies, consistently applied and supported by reasonable judgements and estimates and that all relevant financial reporting and
accounting standards have been followed.
The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the
financial position of the Company and the Group and facilitate compliance of the financial statements with the Financial Markets Conduct
Act 2013.
The Directors consider they have taken adequate steps to safeguard the assets of the Company and the Group and to prevent and detect
fraud and other irregularities.
The Directors note that there were no material changes in the nature of the business undertaken by the Company and the Group in the past
year. Following balance date, the Company announced that it had completed a full buy-out of the shares of Centum Rakon India Pte. Limited.
The Directors present the financial statements set out in pages 4 – 48, of Rakon Limited and subsidiaries for the year ended 31 March 2018.
The Board of Directors of Rakon Limited authorised these financial statements for issue on 17 May 2018.
Financial results
Rakon Limited has reported a full year net profit after tax of $10.0 million (2017: net loss after tax of $13.6 million).
Sales revenue for the year was $101.1 million, up $6.4 million or 7% on the prior year. The Group’s sales revenue increased as a result of
gains in revenue across its space & defence and global positioning markets. Gross profit for the year was $43.3 million, up $9.6 million or
29% on the prior year. Gross profit increased as a result of the mix of business in products and markets. Operating expenses for the year of
$41.6 million are down $0.3 million compared to the prior year. In addition to improved trading performance, the profit result increased as
a result of a number of reporting events that include a gain from the sale of the Group’s property in France, the partial gain on sale of shares
in Thinxtra Limited and a net dilution gain on Thinxtra shares.
During the year the Company moved from a net debt position (31 March 2017: $4.5 million) to a net cash position of $7.4 million as at
balance date. Cash increased as a result of the generation of operating cash flow and also proceeds from the sale of the France property.
As at 31 March 2018 Rakon’s shareholders’ equity stood at $87.1 million, funding 77% of total assets.
The Board maintains a dividend policy, such that a dividend will be paid of up to 50% of the after tax profit, if considered fiscally appropriate
by the Directors. The Board has determined that no dividend will be paid for FY2018.
Donations and audit fees
The Group made donations totalling $5,000 during the year. Amounts paid to PricewaterhouseCoopers for audit and other services are
shown in section B2 d) of the financial statements.
Other statutory information
Additional information required by the Companies Act 1993 is set out in the Shareholder Information section.
On behalf of the Directors
B W Mogridge
Chairman
B J Robinson
CEO, Managing Director
4
4
Statement of Comprehensive Income
For the year ended 31 March 2018
The accompanying notes form an integral part of these financial statements.
20182017
Note $000s$000s
Continuing operations
RevenueB2 a)101,12794,738
Cost of sales(57,828)(61,063)
Gross profit43,29933,675
Other operating incomeB2 b)2,4214,363
Operating expensesB2 d)(41,626)(41,888)
Other gains – netB2 c)4,624439
ImpairmentD1 a)(120)(6,594)
Operating profit/(loss)8,598(10,005)
Finance incomeD1 c)33
Finance costsD1 c)(504)(1,435)
Share of loss of associa tes a nd joint ventureB4 b)(1,915)(2,054)
Net dilution gain on Thinxtra sharesB4 d)4,815-
Profit/(loss) before income tax10,997(13,491)
Income tax expenseD1 d)(998)(6 7 )
Net profit/(loss) for the year9,999(13,558)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
(Decrease)/increase in fair value cash flow hedges(372)1,018
Increase/(decrease) in fair value currency translation differences2,766(3,567)
Income tax relating to components of other comprehensive income10440
Other comprehensive income/(losses) for the year, net of tax 2,498(2,509)
Total comprehensive income/(losses) for the year12,497(16,067)
Profit/(losses) attributable to equity holders of the Company9,999(13,558)
Total comprehensive profit/(losses) attributable to equity holders of the Company12,497(16,067)
Earnings per share for continuing operations attributable to the equity holders of the
C ompany
CentsCents
Basic profit/(losses) earnings per shareD10 a)4.4 (6.9)
Diluted profit/(losses) earnings per shareD10 b)4.3 (6.8)
5
5
Statement of Changes in Equity
For the year ended 31 March 2018
The accompanying notes form an integral part of these financial statements.
Share capital
Re tained
earningsOther reservesTotal equity
Note$000s$000s$000s$000s
Balance at 31 Mar ch 201 6
173,881 (69,660) (20,793)
83,428
Net l os s a fter ta x for the yea r ended 3 1 Ma r c h 2 0 17
- (13,558) - (13,558)
Currency translation differences
D5 - - (3,567) (3,567)
Ca s h fl ow hedges , net of ta x
D5 - - 1,058 1,058
Total comprehensive losses for the year
- (13,558) (2,509) (16,067)
Contri buti on of equi ty net of tra ns a cti on cos tsD6 a)
7,154 - - 7,154
Empl oyee s ha r e s c hemes
Va l ue of empl oyee s er vi c esD5
- - 42
42
Balance at 31 Mar ch 201 7
181,035 (83,218) (23,260)
74,557
Net pr ofi t a fter ta x for the yea r ended 3 1 Ma rc h 20 1 8
- 9,999 - 9,999
Currency translation differences
D5 - - 2,766 2,766
Ca s h fl ow hedges , net of ta x
D5 - - (268) (268)
Total comprehensive profit for t he year
- 9,999 2,498
12,497
Contri buti on of equi ty net of tra ns a cti on cos ts
D6 a) (11) - - (11)
Empl oyee s ha r e s c hemes
Va l ue of empl oyee s er vi c esD5
- - 8 8
Balance at 31 Mar ch 201 8
181,024 (73,219) (20,754)
87,051
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6
Balance Sheet
As at 31 March 2018
The accompanying notes form an integral part of these financial statements.
20182017
Note$000s$000s
Asse ts
Current assets
Cash and cash equivalentsD2 a)10,3643,305
Trade and other receivablesB3 b)28,39528,249
Assets classified as held for saleB2 c)-1,969
Derivatives – held for tradingD2 b)2112
Derivatives – cash flow hedgesD2 b)1,078179
InventoriesB5 a)24,17124,286
Current income tax asset14696
Total current assets64,36558,086
Non-current assets
Derivatives – cash flow hedgesD2 b)334115
Trade and other receivablesB3 b)2,7161,365
Property, plant and equipmentD3 a)13,48112,745
Intangible assetsB5 b)9,1159,467
Investment in associate B4 b)14,64012,004
Interest in joint ventureB4 b)2,8763,722
Deferred tax assetD45,9066,692
Total non-current assets49,06846,110
Total assets113,433104,196
Liabilities
Current liabilities
Bank overdraftD2 e)2,8243,229
BorrowingsD2 e)984,530
Trade and other payablesD2 d)19,10715,246
Derivatives – held for tradingD2 b)911
Derivatives – cash flow hedgesD2 b)144225
ProvisionsD3 b)961910
Deferred revenue – SiwardB2 b)1012,534
Total current liabilities23,32626,675
Non-current liabilities
Derivatives – cash flow hedgesD2 b)78-
BorrowingsD2 e)-31
ProvisionsD3 b)2,7342,909
Deferred tax liabilitiesD424424
Total non-current liabilities3,0562,964
Total liabilities26,38229,639
Net assets87,05174,557
Equity
Share capitalD6 a)181,024181,035
Other reservesD5(20,754)(23,260)
Accumulated losses(73,219)(83,218)
Total equity87,05174,557
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7
Statement of Cash Flows
For the year ended 31 March 2018
The accompanying notes form an integral part of these financial statements.
20182017
Note
$000s$000s
Operating activities
Cash provided from
Receipts from customers101,69198,179
Income tax refund-231
R&D grants received1,7261,327
Siward technology license agreement-6,877
Other income received341
103,420106,655
C ash was appl ie d to
Payment to suppliers and others(57,998)(54,112)
Payment to employees(36,735)(41,174)
Interest paid(536)(1,449)
Income tax paid(247)(417)
(95,516)(97,152)
Net cash flow from operating activities7,9049,503
Investing activities
C ash was provi de d from
Net proceeds from sale of Thinxtra shares3,178-
Sale of property, plant and equipment4,7548
7,9328
C ash was appl ie d to
Purchase of property, plant and equipment(3,236)(2,586)
Purchase of intangibles(840)(1,157)
Investment in shares and associates-(4,629)
(4,076)(8,372)
Net cash flow from investing activities3,856(8,364)
Financing activities
C ash was provi de d from
Issuance of share capital-7,195
Proceeds from borrowings-6,911
-14,106
C ash was appl ie d to
Share issuance cost(11)(4 1 )
Repayment of principal on borrowings(4,500)(14,411)
Finance lease payments(31)-
Cash was applied to financing activities(4,542)(14,452)
(4,542)(346)
Net increase/ (decrease) in cash and cash equivalents7,218793
Effects of exchange rate changes on cash and cash equivalents246(156)
Cash and cash equivalents at the beginning of the year76(561)
Cash and cash equivalents at the end of the period7,54076
Composition of cash and cash equivalents
Cash and cash equivalentsD2 a)10,3643,305
Bank overdraftD2 e)(2,824)(3,229)
Total c ash and c ash e qui val e nts7,54076
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8
Statement of Cash Flows
For the year ended 31 March 2018
Net debt reconciliation
An analysis of net debt and the movements in net debt for each of the periods is presented below.
The accompanying notes form an integral part of these financial statements.
20182017
Note
$000s$000s
Reconciliation of net profit/(loss) to net cash flows from operating activities
Reported net profit/(loss) after tax9,999(13,558)
Following adjustments:
Depreciation expenseD3 a)2,5043,491
Amortisation expenseB5 b)1,8382,118
ImpairmentD1 a)1206,594
Increase/(decrease) in estimated doubtful debts7(6 9 )
Provision for restructureD3 b)1593,043
Employee share based expenseD1 b)842
Movement in foreign currency(590)418
Monetised cash flow hedge, net of taxB2 c)(1,096)1,096
Deferred revenue ̶ Siward technology license agreementB2 b)(2,351)2,534
Share of losses from joint venture and associatesB4 b)1,9152,054
Deferred tax382294
(Gain)/loss on disposal of property, plant and equipmentB2 c)(2,155)330
Gain on sale of shares in ThinxtraB2 c)(1,852)-
Net dilution gain on Thinxtra sharesB4 d)(4,815)-
Total items cash flow adjusted for(5,926)21,945
Impact of changes in working capital items
Trade and other receivables(146)363
Provision for restructure(645)(2,402)
Inventories1155,544
Trade and other payables4,557(2,505)
Tax provisions(50)116
Total impact of changes in working capital items3,8311,116
Ne t c ash fl ow from ope rating ac ti vit ie s7,9049,503
Othe r asse t
Cash/ bank
overdraft
Ot he r
borrowing
due within
1 ye ar
Othe r
borrowing
due after
1 ye ar
Bank
borrowing
due within
1 ye ar
Bank
borrowing
due after
1 ye arTotal
$000s$000s$000s$000s$000s$000s
Bal anc e as at 1 A pr il 2 0 1 6(561)(1 5 )--(12,000)(12,576)
Ca s h flows793--(4,500)12,0008,293
Acquistions – finance leases-(15)(31)--(4 6 )
Foreign exchange changes(156)----(156)
Bal anc e as at 3 1 M arc h 2 0 1 776(30)(31)(4,500)-(4,485)
Ca s h flows7,218-314,500-11,749
Foreign exchange changes246(1)---245
Bal anc e as at 3 1 M arc h 2 0 1 87,540(3 1 )---7,509
Liabilities from financing activities
Net debt reconciliation
8
Statement of Cash Flows
For the year ended 31 March 2018
Net debt reconciliation
An analysis of net debt and the movements in net debt for each of the periods is presented below.
The accompanying notes form an integral part of these financial statements.
20182017
Note
$000s$000s
Reconciliation of net profit/(loss) to net cash flows from operating activities
Reported net profit/(loss) after tax9,999(13,558)
Following adjustments:
Depreciation expenseD3 a)2,5043,491
Amortisation expenseB5 b)1,8382,118
ImpairmentD1 a)1206,594
Increase/(decrease) in estimated doubtful debts7(6 9 )
Provision for restructureD3 b)1593,043
Employee share based expenseD1 b)842
Movement in foreign currency(590)418
Monetised cash flow hedge, net of taxB2 c)(1,096)1,096
Deferred revenue ̶ Siward technology license agreementB2 b)(2,351)2,534
Share of losses from joint venture and associatesB4 b)1,9152,054
Deferred tax382294
(Gain)/loss on disposal of property, plant and equipmentB2 c)(2,155)330
Gain on sale of shares in ThinxtraB2 c)(1,852)-
Net dilution gain on Thinxtra sharesB4 d)(4,815)-
Total items cash flow adjusted for(5,926)21,945
Impact of changes in working capital items
Trade and other receivables(146)363
Provision for restructure(645)(2,402)
Inventories1155,544
Trade and other payables4,557(2,505)
Tax provisions(50)116
Total impact of changes in working capital items3,8311,116
Ne t c ash fl ow from ope rating ac ti vit ie s7,9049,503
Othe r asse t
Cash/ bank
overdraft
Ot he r
borrowing
due within
1 ye ar
Othe r
borrowing
due after
1 ye ar
Bank
borrowing
due within
1 ye ar
Bank
borrowing
due after
1 ye arTotal
$000s$000s$000s$000s$000s$000s
Bal anc e as at 1 A pr il 2 0 1 6(561)(1 5 )--(12,000)(12,576)
Ca s h flows793--(4,500)12,0008,293
Acquistions – finance leases-(15)(31)--(4 6 )
Foreign exchange changes(156)----(156)
Bal anc e as at 3 1 M arc h 2 0 1 776(30)(31)(4,500)-(4,485)
Ca s h flows7,218-314,500-11,749
Foreign exchange changes246(1)---245
Bal anc e as at 3 1 M arc h 2 0 1 87,540(3 1 )---7,509
Liabilities from financing activities
Net debt reconciliation
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Notes to the Financial Statements
A. General information _____________________________________________________________________ 10
B. Calculation of key numbers ________________________________________________________________ 10
B1. Segment information ___________________________________________________________________ 10
B2. Profit & loss information _________________________________________________________________ 12
B3. Financial assets and liabilities_____________________________________________________________ 15
B4. Interests in associates and joint venture ____________________________________________________ 17
B5. Non-financial assets & liabilities ___________________________________________________________ 21
C. Risk ___________________________________________________________________________________ 23
C1. Critical accounting estimates and assumptions _______________________________________________ 23
C2. Financial risk management _______________________________________________________________ 25
C3. Capital management ___________________________________________________________________ 29
D. Other information _______________________________________________________________________ 30
D1. Other profit and loss information __________________________________________________________ 30
D2. Other financial assets and liabilities ________________________________________________________ 32
D3. Other non-financial assets and liabilities ____________________________________________________ 34
D4. Deferred income tax ____________________________________________________________________ 38
D5. Other reserves _________________________________________________________________________ 39
D6. Contributed equity _____________________________________________________________________ 39
D7. Contingencies _________________________________________________________________________ 40
D8. Commitments _________________________________________________________________________ 40
D9. Related party information _______________________________________________________________ 41
D10. Earnings per share ____________________________________________________________________ 42
D11. Share based payments ________________________________________________________________ 43
D12. Summary of other significant accounting policies ___________________________________________ 44
D13. Imputation balances __________________________________________________________________ 47
D14. Principal subsidiaries __________________________________________________________________ 47
10
10
A. General information
Rakon Limited (‘the Company’) and its subsidiaries (‘the Group’) design and manufacture frequency control solutions for a wide range of
applications. Rakon has leading market positions in the supply of crystal oscillators to the telecommunications, global positioning and space
& defence markets. The Company is a limited liability company incorporated and domiciled in New Zealand. It is registered under the
Companies Act 1993 with its registered office at 8 Sylvia Park Road, Mt Wellington, Auckland.
The financial statements of the Group have been presented in New Zealand dollars unless otherwise indicated.
The financial statements have been approved for issue by Rakon’s Board of Directors (‘the Board’) on 17 May 2018.
B. Calculation of key numbers
B1. Segment information
The chief operating decision maker assesses the performance of the operating segments based on a non-GAAP measure of ‘Underlying
EBITDA’ defined as:
“Earnings before interest, tax, depreciation, amortisation, impairment, employee share schemes, non-controlling interests, adjustments for
associates and joint ventures’ share of interest, tax & depreciation, loss on disposal of assets and other cash and non-cash items (Underlying
EBITDA).”
Underlying EBITDA is a non-GAAP measure that has not been presented in accordance with GAAP. The Directors present Underlying EBITDA
as a useful non-GAAP measure to investors, in order to understand the underlying operating performance of the Group and each operating
segment, before the adjustment of specific cash and non-cash items and before cash impacts relating to the capital structure and tax
position. In 2018 underlying EBITDA includes the gain on sale from the Argenteuil, France property (refer note B2 c) and the gain from the
sale of shares in Thinxtra (refer note B4 c), this is considered by the Directors to be part of underlying operating performance. EBITDA is
considered to be the closest measure of how each operating segment within the Group is performing. Management uses the non-GAAP
measure of Underlying EBITDA internally, to assess the underlying operating performance of the Group and each operating segment.
Underlying EBITDA as non-GAAP financial information has been extracted from the financial statements for the period. Except for Underlying
EBITDA, other information provided to the chief operating decision maker is measured in a manner consistent with GAAP. The Directors
provide a reconciliation of Underlying EBITDA to net profit or loss for the year, refer note B1 c).
B1 a) Accounting policy
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the Managing Director, Sales and Marketing Director and Chief Financial Officer.
B1 b) Segment results
NZUKFr anc e
China –
T' make r
1
India –
Centum
Rakon
2
Australia ̶
Thi nxt ra
7
Ot he r
3
Total
$000s$000s$000s$000s$000s$000s$000s$000s
Sales to external customers63,812-37,315----101,127
Inter-segment sales163-5---33201
Segment revenue63,975-37,320---33101,328
Underlying EBITDA
6
7,6111,5911,3342,115(9)(430)(118)12,094
Depreciation and amortisation2,5175081,408---(91)4,342
Impairment120------120
Income tax (expense)/credit(623)(129)29---(275)(998)
Total assets
4
51,8193,25537,3269,3502,8765,2903,517113,433
Investment in associates---9,350-5,290-14,640
Investment in joint venture----2,876--2,876
Additions of property, plant,
equipment and intangibles
2,4634411,255---44,163
Total liabilities
5
11,98746213,459---47426,382
31 March 2018
11
11
1
Includes Rakon Limited’s 40% share of investment in Chengdu Timemaker Crystal Technology Co. Limited and Shenzhen Taixiang Wafer
Co. Limited, refer note B4 b).
2
Includes Rakon Limited’s 49% share of investment in Centum Rakon India Private Limited, refer note B4 b).
3
Includes investments in subsidiaries, Rakon Financial Services Limited, Rakon UK Holdings Limited, Rakon Investment HK Limited, and
Rakon HK Limited.
4
The measure of assets has been disclosed for each reportable segment as it is regularly provided to the chief operating decision maker
and excludes intercompany balances eliminated on consolidation.
5
The measure of liabilities has been disclosed for each reportable segment as it is regularly provided to the chief operating decision maker
and excludes intercompany balances eliminated on consolidation.
6
This includes one off restructure costs in New Zealand of nil (2017: $817,000) and in France of nil (2017: $2,242,000) (refer note B2 d) and
income from a technology license agreement with Siward of $2,351,000 (2017: $4,343,000 (refer note B2 c). This is also in the New Zealand
segment.
7
Rakon Limited’s 21.5% (2017: 42%) interest in Thinxtra Limited refer note B4 c).
B1 c) Reconciliation of Underlying EBITDA to net profit/(loss) for the year
NZUKFr anc e
China –
T'maker
1
India –
Centum
Rakon
2
Australia ̶
Thi nxt ra
7
Other
3
Total
$000s$000s$000s$000s$000s$000s$000s$000s
Sales to external customers61,297-33,441----94,738
Inter-segment sales111-7---(23)95
Segment revenue61,408-33,448---(23)94,833
Underlying EBITDA
6
6,6791,952(4,149)1,101956(2,100)(407)4,032
Depreciation and amortisation3,4846381,646---(159)5,609
Impa irment789160635-3,164-1,8466,594
Income tax (expense)/credit313(264)28---(144)(67)
Tota l a s s e t s
4
52,2926,45230,2487,9303,7224,074(522)104,196
Investment in associates---7,930-4,074-12,004
Investment in joint venture----3,722--3,722
Additions of property, plant,
equipment and intangibles
2,795449569----3,813
Total liabilities
5
18,9184328,241---2,04829,639
31 March 2017
20182017
Continuing operations$000s$000s
Underlying EBITDA12,0944,032
Depreciation and amortisation(4,342)(5,609)
One off cash gains realised on derivatives closed out1,096(1,096)
Employee share schemes(8 )(4 2 )
Finance costs – net(501)(1,432)
Adjustment for associates and joint venture share of interest, tax & depreciation(1,751)(2,079)
Net dilution gain on Thinxtra shares4,815-
Impairment(120)(6,594)
Loss on asset sales/disposal(25)(296)
Other non-cash items(261)(375)
Profit/(loss) before income tax10,997(13,491)
Income tax expense(998)(6 7 )
Net profit/(loss) for the year9,999(13,558)
12
12
B2. Profit & loss information
B2 a) Revenue
Accounting policy
Revenue comprises the fair value of amounts received and receivable by the Group for goods and services supplied in the ordinary course
of business. Revenue is stated net of goods and services tax (or value added tax) collected from customers. Revenue from the sale of goods
is recognised in the statement of comprehensive income when the significant risks and rewards of ownership have been transferred to the
buyer and the amount can be measured reliably. Revenue from services rendered is recognised in the statement of comprehensive income,
in proportion to the stage of completion of the transaction at the balance date.
Breakdown of revenue by goods and services
Revenue from all sources is as follows:
Breakdown of revenue by region
The Group’s trading revenue is derived in the following regions. Revenue is allocated based on the country in which the customer is located.
2018
$000s
2017
$000s
Asia 41,330 41,465
North America 23,940 18,530
Europe 33,069
32,814
Others 2,788 1,929
Total revenue by region 101,127 94,738
Breakdown of revenue by market segment
2018
$000s
2017
$000s
Telecommunications 40,457 41,698
Global Positioning 25,999 23,944
Space and Defence 27,984
21,616
Other 6,687
7,480
Total revenue by market segment 101,127 94,738
Prior year balances have been restated to align with the current year mapping of customers to segments.
B2 b) Other operating income
Breakdown of other operating income
Accounting policy
Dividend income is recognised when the right to receive payment is established. Royalty income is recognised on an accruals basis in
accordance with the substance of the relevant agreements.
20182017
$000s$000s
Sales of goods99,91693,283
Revenue from services1,2111,455
Total revenue101,12794,738
20182017
$000s$000s
Dividend income11
Other income6919
Income from technology license agreement with Siward2,3514,343
Total other operating income2,4214,363
13
13
Investment by Siward Crystal Technology Company Limited (‘Siward’) and attribution of proceeds
Siward is a Taiwan based crystal manufacturer which is listed on the Taiwan Stock Exchange. In February 2017 Siward paid US$10m cash in
return for 38,016,681 new fully paid ordinary shares of Rakon and rights arising from a technology license agreement. Siward has taken up
one new appointment to Rakon’s Board.
During 2018 a further $2.4m (31 March 2017: $4.3m) is recognised on the basis of further work completed with a remaining deferred
revenue balance at 31 March 2018 of $0.1m.
Critical accounting estimates and assumptions – prior year
Apportionment of proceeds
Of the US$10m proceeds received in February 2017, NZ$7.2m was attributed to new fully paid ordinary shares based on an independent
valuation report. The balance of NZ$6.9m was allocated to the technology license agreement. Key judgements and assumptions included:
Rakon’s volume weighted average share price immediately before the agreement was executed $0.18
Premium to reflect the ability of Siward to influence strategy and direction 5% – 10%
Recognition of technology license agreement revenue
The implied royalty rate of 5.2% for the technology license agreement is close to the median royalty rate for licensing of GPS and tracking
technologies.
The $6.9m attributed to the technology license agreement was recognised as revenue on the basis of the stage of completion of the
transaction. This involves judgement in assigning value to each of the four key technologies to be transferred and allocation of these
between technology transfer and deployment.
This resulted in 99% (2017: 63%) being completed by 31 March 2018 and revenue of $2,351,000 (2017: $4,343,000) recognised during 2018
(refer note D6).
B2 c) Other gains – net
1
During the year the sale of land and buildings at Argenteuil, France was completed and gain on sale of $2.1m recognised. The land and
buildings were previously classified as ‘held for sale’.
2
During December 2017 Thinxtra undertook an additional capital raising (Series B). During this capital raising Rakon sold 199,763 shares for
A$3.0m to applicants who missed out on a Series B allotment which resulted in a gain of NZ$1.9m, refer also B4 c).
3
During the prior year derivatives were closed out to take advantage of favourable exchange rates with total cash of $2.0m being received
in that year. Derivatives closed out which related to forecast sales expected to occur during 2018 resulted in a gain of $1,096,000 (2017:
$905,000) which was recognised in the statement of comprehensive income during 2018.
3
Includes realised and unrealised gains/(losses) arising from accounts receivable and accounts payable. Hedge accounting is adopted on
the initial sale of goods and purchase of inventory with subsequent movements recognised in trading foreign exchange.
20182017
$000s$000s
Gain/(loss) on disposal of property, plant, equipment, and intangibles
1
2,155(330)
Gain from sale of shares in Thinxtra
2
1,852-
4,007(330)
Foreign exchange gains/(losse s) – ne t
Forward foreign exchange contracts
Held for trading122798
Gains/(losses) on revaluation of foreign denominated monetary assets and liabilities
3
495(2 9 )
Total foreign exchange gains – net617769
Total othe r gains – net4,624439
14
14
B2 d) Operating expenses
Prior Year – restructure costs
Significant reorganisations which took place during the prior year are explained below:
A reorganisation of the New Zealand operation, including a reduction in headcount. Restructure costs of $817,000 were incurred
and paid out by 31 March 2017
A proposal for reorganisation was discussed with the Work Inspection Administration and Workers Council in France and
communicated to the employees of Rakon France SAS as a plan to restructure. Restructure related costs of $2,242,000 were
incurred, refer also note D3 b).
20182017
$000s$000s
Operating expense by function
Selling and marketing9,9058,723
Research and development9,7129,947
General and administration22,00923,218
Total operating expenses41,62641,888
Operating expenses include
Depreciation – inclusive of depreciation included in cost of sales (note D3 a)2,5043,491
Amortisation (note B5 b)1,8382,118
Research and development expense11,77112,045
Research and development government grant(739)(858)
Research and development tax credit(1,320)(1,240)
Restructure costs – inclusive of restructure costs included in cost of sales (note D3 b)1593,043
Rental expense on operating leases2,2682,172
Costs of offering credit
Bad debt recoveries/(write-offs)19(8)
Governance expenses
Directors' fees390321
Auditors' fees
Principal auditor's fees537446
Breakdown of fees:
Audit fees for current year 460352
Half year financial statements procedures2322
Government R&D credits reviews2147
Annual Shareholders' Meeting procedures8-
Treas ury advisory s ervices 2525
Audit services other auditors2320
Sundry expenses
Donations54
15
15
B3. Financial assets and liabilities
B3 a) Financial instruments
Financial instruments comprise of cash and cash equivalents, trade and other receivables, trade and other payables, borrowings and
derivative financial instruments (forward foreign exchange contracts, collar options, interest rate swaps). Refer also note D12 b).
Financial instruments by category
The line items in the tables above only include financial instruments. Trade and other receivables in note B3 b) and trade and other payables
in note D2 d) include both financial and non-financial items.
31 March 2018
Cash and
re c e ivable s
A t fai r val ue
through profit
and l oss
De ri vati ve s
use d for
hedgingTo t al
A ssets pe r bal anc e she e t$000s$000s$000s$000s
Derivative financial instruments (note D2 b)-2111,4121,623
Trade and other receivables 30,159--30,159
Cash and cash equivalents (note D2 a)10,364--10,364
Total assets per balance sheet40,5232111,41242,146
31 March 2018
Liabilities at
fair value
through the
profit and loss
De ri vative s
used for
hedging
Other financial
liabilities
To t al
Liabilities per balance sheet$000s$000s$000s$000s
Borrowings--2,9222,922
Derivative financial instruments (note D2 b)91222-313
Trade and other payables--12,80012,800
Total liabilities per balance sheet
9122215,72216,035
31 March 2017
Cash and
re c e ivable s
A t fai r val ue
through profit
and l oss
De ri vati ve s
use d for
hedgingTo t al
A ssets pe r bal anc e she e t$000s$000s$000s$000s
Derivative financial instruments (note D2 b)-2294296
Trade and other receivables 28,527--28,527
Cash and cash equivalents (note D2 a)3,305--3,305
Total assets per balance sheet31,832229432,128
31 March 2017
Liabilities at
fair value
through the
profit and loss
De ri vative s
used for
hedging
Other financial
liabilities
To t al
Liabilities per balance sheet$000s$000s$000s$000s
Borrowings--7,7907,790
Derivative financial instruments (note D2 b)1225-226
Trade and other payables--9,1759,175
Total liabilities per balance sheet
122516,96517,191
16
16
B3 b) Trade and other receivables
Accounting policy
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. A provision
for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts
due, according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and
the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the
statement of comprehensive income.
Breakdown of trade and other receivables
1
Other receivables include research and development tax credits and government grants.
The fair values of trade and other receivables are equivalent to the carrying values.
Ageing
Included in trade and other receivables are the below amounts which were past due but not impaired. These relate to a number of
customers for whom there is no recent history of default.
As of 31 March 2018, trade receivables of $64,000 (2017: $79,000) were impaired and provided for. These receivables mainly relate to
customers who are in financial difficulty or dispute.
Currencies
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
The maximum exposure to credit risk at balance date is the carrying value of each class of receivable mentioned above. The Group does not
hold any collateral as security.
20182017
$000s$000s
Trade receivables25,93225,271
Less: provision for impairment of tra de receivables(64)(7 9 )
Net trade receivables25,86825,192
Prepayments952767
GST/VAT re ce i va bl e-320
Receivables from related parties (note D9 b)307214
Other receivables
1
3,9843,121
Total trade and other receivables31,11129,614
Less non-current other receivables
1
2,7161,365
Current trade and other receivables28,39528,249
20182017
$000s$000s
Up to 3 months4,4754,327
3 to 6 months1,522518
Ove r 6 months167265
Total overdue trade receivables6,1645,110
20182017
$000s$000s
NZD6061,521
USD17,25017,956
EUR12,3969,726
GBP837366
Othe r2245
Total trade and other receivables31,11129,614
17
17
B4. Interests in associates and joint venture
B4 a) Accounting policy
Associates are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially
recognised at cost.
Joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and
obligations of each investor, rather than the legal structure of the joint arrangement. The Group’s joint venture is accounted for using the
equity method.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s
share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive
income of the investee. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying
amount of the investment. When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity,
including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates and joint ventures are
eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary
to ensure consistency with the policies adopted by the Group. The carrying amount of equity-accounted investments is tested for
impairment in accordance with the policy described in note D12 e).
The carrying amounts of the investment in CRI is reviewed at each balance date to determine whether there is any indication of impairment.
If any such indication exists, the asset’s recoverable amount is estimated being the higher of an asset’s fair value less costs to sell and the
asset’s value in use. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.
Impairment losses are recognised in the statement of comprehensive income.
B4 b) Breakdown of interest in associates & joint venture
Set out below are the associates and joint venture of the Group. The entities listed below have share capital consisting solely of ordinary
shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of business, and the
proportion of ownership interest is the same as the proportion of voting rights held.
1
The Group has a 40% interest in two related companies: Chengdu Timemaker Crystal Technology Co. Limited and Shenzhen Taixiang Wafer
Co. Limited, which provide products and services to the frequency control products industry, refer also to note B4 e) for details of merger
within the group during 2018.
2
The Group has a 49% interest in Centum Rakon India Private Limited (‘CRI’), a joint venture which provides products and services to the
frequency control industry.
3
The Group has a 21.5% interest in Thinxtra Pty Limited (‘Thinxtra'), an 'Internet of Things' business, refer note B4 c).
B4 c) Partial sale of investment in Thinxtra
Thinxtra Limited (‘Thinxtra') is an 'Internet of Things' (or ‘IoT’) business that started in 2016. Thinxtra's focus is on establishing an IoT network
in Australia, New Zealand and Hong Kong and providing products, services and solutions enabling connectivity of devices to the network.
Thinxtra’s business model is based on subscription for access to the network, platform solutions and the sale of IoT products. Further
information is available at www.thinxtra.com. The Group commenced equity accounting its investment in Thinxtra from December 2015.
During 2017 Thinxtra undertook additional capital raising (Series B). Following the capital raising Rakon sold 199,763 shares for A$3.0m in
November 2017 to applicants who missed out on a Series B allotment. A resultant gain of NZ$1.9m was realised with Rakon owning 21.5%
of Thinxtra immediately after the sale, refer note B2 c).
Nature of Measurement2018201720182017
20182017relationshipmethod$000s$000s$000s$000s
Chengdu Shen-Timemaker
Crystal Technology Co. Ltd
1
China40%40%AssociateEquity method-5,370
Chengdu Timemaker Crystal
Technology Co. Ltd
1
China40%40%AssociateEquity method8,9252,157
Shenzhen Taixiang Wafer Co.
Ltd
1
China40%40%AssociateEquity method425403
Total Timemaker Group9,3507,93090824
Thinxtra Pty Limited
3
Australia21.5%42%AssociateEquity method5,2904,074(2,273)(2,123)
14,64012,004(1,365)(2,099)
Centum Rakon India Private Ltd
2
India49%49%Joint Venture Equity method2,8763,722(550)45
17,51615,726(1,915)(2,054)Total carrying amount of equity accounted associates and joint venture
Equity accounted
(loss)/profit
Country of
incorporation
% of ownership
interest
Total c arrying amount of associates
Net investment
Name of entity
18
18
B4 d) Recognition of net dilution gain in Thinxtra
Critical accounting estimate
During the year Thinxtra issued convertible preference shares. As at 31 March 2018 and during the year, Rakon held only ordinary Shares
in Thinxtra. In calculating Rakon’s share of the net assets of its investment in Thinxtra, the Directors have determined that the convertible
preference shares dilute Rakon’s investment in Thinxtra.
The key judgement applied is that the Directors have concluded that the rights attached to the convertible preferences shares over and
above the ordinary shares are protective and not substantive in nature. Therefore, the percentage ownership Rakon holds in Thinxtra is
based on their proportion of shares including all convertible preference shares, as these shares hold the same voting rights as ordinary
shares.
Supporting the above judgement is the fact that Rakon sold ordinary shares during the year, shortly after the convertible preference share
issue, at the same price as convertible preference shares were issued.
Should the protective rights attached to the convertible preference shares be triggered, these shareholders would be entitled to up to 1.2
times the issue price of the convertible preference shares, potentially reducing the net assets available to ordinary shareholders. As noted
above the Directors judge these to be protective rights that are not substantive as at the date of these financial statements.
Net dilution gain
During the year Thinxtra issued new fully paid shares at a price in excess of what Rakon purchased shares at which resulted in a significant
increase to its net assets. The increased number of shares diluted Rakon’s shareholding percentage. For Rakon, the gain from Rakon’s share
of new capital invested outweighed the loss from the dilution in shareholding. A net gain of $4.8m was recognised in the current year (2017:
nil).
B4 e) Merger within the Timemaker Group
In June 2017 Chengdu Shen-Timemaker Crystal Technology Co. Limited and Chengdu Timemaker Crystal Technology Co. Limited were
merged with the merged entity being Chengdu Timemaker Crystal Technology Co. Limited.
B4 f) Subsequent event – acquisition of remaining shares in CRI
On 27 April 2018 Rakon acquired the remaining 51% of shares in CRI for US$5.5m. US$4.125m was paid on 2 May 2018 with the US$1.375m
balance payable within 18 months of when the agreement was signed. The acquisition allows Rakon to leverage CRI’s high quality low cost
operation, allows alignment of the international operations and provides access to the Indian market.
The subsequent accounting for the acquisition, (including fair value assessment of assets acquired) was not completed until after these
financial statements were signed. This was due to the time frame between the acquisition and the issue of these financial statements.
B4 g) Prior year impairment of investment in CRI
In the prior year the future cash flow projections for the products manufactured in India were lower than at the time of the previous review.
This was due to the long range revenue forecasts which had reduced as a result of expected technology replacement resulting in products
being manufactured in other cash generating units (CGUs) within the Group. This resulted in an impairment of $3,164,000 in the prior year.
The carrying value is equivalent to the recoverable amount determined on a value in use basis.
B4 h) Commitments and contingent liabilities in respect of associates and joint venture
There are no other commitments or contingent liabilities in respect of the Group’s investment in associates and the joint venture.
Joint venture
CRI has received income tax assessments which are in dispute. The Directors of CRI believe the positions are likely to be upheld and
accordingly no provision was made in CRI’s financial statements. The below summarises the potential impacts on CRI’s tax balances if the
assessments are upheld:
2009/10 – a decrease in tax losses of $1.0m (tax value $346,000)
2011/12 – an increase in taxable income of $1.0m (tax value $346,000)
2013/14 – an increase in taxable income of $0.6m (tax value $194,000)
B4 i) Summarised financial information for associates and joint venture
The tables below provide summarised financial information for the associates and joint venture of the Group. The information disclosed
reflects the amounts presented in the financial statements of the relevant associates and joint venture and not the Group’s share of those
amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including fair value
adjustments and modifications for differences in accounting policy. Figures for the total Timemaker group are an aggregate of Chengdu
Timemaker Crystal Technology Co. Limited and Shenzhen Taixiang Wafer Co. Limited.
19
19
2018201720182017
$000s$000s$000s$000s
Summarised balance sheet
Curre nt asse t s
Cash & cash equivalents1,1593,13111,1173,792
Other current assets11,72110,4162,0911,586
Total current assets12,88013,54713,2085,378
Non-c urre nt asse ts5,5186,46810,5096,058
Current liabilities
Financial liabilities (excluding trade payables)2,1572,843149341
Other current liabilities3,6452,9721,4002,059
Total current liabilities5,8025,8151,5492,400
Non-current liabilities
Other non-current liabilities26 91 4 6 - -
Total non-current liabilities269146 - -
Ne t asse ts12,32714,05422,1689,036
Centum Rakon India Private LtdThinxtra Pty Ltd
2018201720182017
$000s$000s$000s$000s
Summarised statement of comprehensive income
Revenue14,95115,523615369
Interest Income1301373731
Depreciation and amortisation(1,340)(2,044)(1 )55
Interest expenses(118)(102)--
(Loss)/profit for the period(1,121)97(7,642)(4,586)
Centum Rakon India Private LtdThinxtra Pty Ltd
2018201720182017
$000s$000s$000s$000s
Reconciliation of net assets to carrying amount
Rakon's share in %
49%49%21.5%42%
Rakon's share of associates' and joint venture's net assets6,0406,8864,7753,821
Goodwill--515960
Translation movement---(40)
Gain on share price dilution not recognised---(667)
Cumulative impairment(3,164)(3,164)--
Carryi ng amount2,8763,7225,2904,074
Movement in carrying amount
Opening net assets 1 April3,7226,7984,0741,626
Equity accounted (loss)/profit(550)45(2,273)(2,123)
Foreign e xchange movement(296)43-(58)
Gain on share price dilution recognised--4,815-
Additional capital contribution during the year---4,629
Reduction in carrying value from sale of shares during the year--(1,326) -
Impairment booked for the year-(3,164)--
Net carrying amount 2,8763,7225,2904,074
Centum Rakon India Private LtdThinxtra Pty Ltd
20
20
20182017201820172018201720182017
$000s$000s$000s$000s$000s$000s$000s$000s
Summarised balance sheet
Current assets
Cash & cash equivalents--3,1381,947223,1401,949
Other current assets-13,33915,4509,9821,1351,11316,58524,434
Total current assets
-13,33918,58811,9291,1371,11519,72526,383
Non-curre nt asse t s
-1,38924,20018,068-124,20019,458
Current liabilities
Financial liabilities (excluding trade
payables)
--8,4346,621--8,4346,621
Other current liabilities
-1,30310,36417,4107310910,43718,822
Total current liabilities
-1,30318,79824,0317310918,87125,443
Non-current liabilities
Other non-current liabilities--1,678---1,678-
Total non-current liabilities--1,678---1,678-
Ne t asse t s-13,42522,3125,9661,0641,00723,37620,398
Total Time make r
Group
Chengdu Timemaker
Crystal Technology Co.
Ltd
Shenzhen Taixiang
Wafer Co. Ltd
Chengdu Shen-
Ti me make r Crystal
Technology Co. Ltd
20182017201820172018201720182017
$000s$000s$000s$000s$000s$000s$000s$000s
Summarised statement of
comprehensive income
Revenue-95924,48118,692--24,48119,651
Depreciation and amortisation(74)(640)(1,809)(1,388)--(1,883)(2,028)
Interest expenses-(15)(1,017)(629)--(1,017)(644)
(Loss)/profit for the period(166)(2,413)2,4692,445--2,30432
Tot al Time make r
Group
Chengdu Shen-
Timemaker Crystal
Technology Co. Ltd
Chengdu Timemaker
Crystal Technology Co.
Ltd
Shenzhen Taixiang
Wafer Co. Ltd
20182017201820172018201720182017
$000s$000s$000s$000s$000s$000s$000s$000s
Reconciliation of net assets to carrying
amount
Rakon's share in %
40%40%40%40%
40%
40%40%40%
Rakon's sha re of associa tes' and joint
venture's net assets
-5,3708,9262,3864254039,3508,159
Other comprehensive income prior
year adjustment
---(229)---(229)
Goodwill
--------
Carrying amount
-5,3708,9262,1574254039,3507,930
Move me nt i n c arrying amount
Opening net assets 1 April7,9308,689
Equity accounted profit90824
Foreign exchange movement512(783)
Carrying amount9,3507,930
Chengdu Shen-
Timemaker Crystal
Technology Co. Ltd
Chengdu Timemaker
Crystal Technology Co.
Ltd
Shenzhen Taixiang
Wafer Co. Ltd
Tot al Time make r
Group
21
21
B5. Non-financial assets & liabilities
B5 a) Inventories
Accounting policy
Inventories are stated at the lower of cost (weighted average cost) or net realisable value. Cost comprises direct materials, direct labour
and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating
capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and
selling expenses.
Breakdown of inventories
Obsolescence
An inventory obsolescence provision of $4,584,000 (2017: $8,181,000) is included in the inventory figures above. Significant judgements
made in determining the provision include:
Ageing of inventory
Forecast revenue and likely consumption of inventory
Historical revenue and actual consumption of inventory
Specific identification of items of inventories for which the net realisable value is deemed to be lower than cost.
During the year inventory of $5,141,000 (2017: $2,077,000) was scrapped of which $5,141,000 (2017: $1,618,000) was provided for. The
net amount included in cost of sales from an increase in the obsolescence provision was $1,292,000 (2017: $3,645,000).
B5 b) Intangible assets
Accounting policy
Amortisation
Amortisation is charged to the statement of comprehensive income on a straight line basis over the estimated useful lives below:
Goodwill Nil
Patents 20 years
Software 2 – 10 years
Product development 5 – 10 years
Assets under course of construction Nil
Software assets and capitalised costs of developing systems are recorded as intangible assets and amortised unless they are directly related
to a specific item of hardware, and in that case are recorded as property, plant and equipment.
Patents and software
Identifiable intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific
asset to which it relates. All other expenditure is expensed as incurred.
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is
recognised in the statement of comprehensive income as an expense as incurred. Any research and development taxation credits and
government grant funding for research and development are recognised when eligibility criteria have been met and treated as a reduction
in expenses.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially
improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has
sufficient resources to complete development. Other development expenditure is recognised in the statement of comprehensive income
as an expense as incurred.
20182017
$000s$000s
Raw materials8,7677,167
Work in progress10,89612,551
Finished goods4,5084,568
Total inventories24,17124,286
22
22
Total capitalised research and development costs are $7.9m (2017: $8.2m) made up of product development assets and assets under
construction.
Impairment
During the year specific product development projects and projects in progress were reviewed for recoverability based on the expected
cash flows to be generated by the projects. The expected cash flows supported the carrying values and no impairment was noted.
During the prior year specific product development projects and projects in progress were reviewed for recoverability. This was based on
the expected cash flows to be generated by the projects. It was found the expected cash flows had reduced and were unlikely to support
the carrying values. As a result, these specific projects were fully impaired. The impairment was within the New Zealand and France cash
generating units. Impairment of goodwill which relates to the same subset of products manufactured in India for the telecommunications
market segment is outlined in note B4 g).
Breakdown of intangible assets
GoodwillPatentsSo ft ware
Product
development
Assets under
constructionTotal
At 31 March 2016
$000s$000s$000s$000s$000s$000s
Cos t 2,3353,4098,5849,4863,98827,802
Accumulated amortisation &
impairment
-(2,871)(7,620)(2,461)-(12,952)
Net book value2,3355389647,0253,98814,850
Year ended 31 March 2017
Opening net book value 2,3355389647,0253,98814,850
Foreign exchange differences(489)(80 )(27)(866)(280)(1,742)
Additions – acquired
separately
--26--26
Additions – internally
developed
--141291,0611,231
Disposals--(5)(534)-(539)
Amortisation charge--(498)(1,620)-(2,118)
Amortisation reversal on
disposals
--5424-429
Impairment(1,846)--(824)-(2,670)
Tra ns fe rs--154822(976)-
Closing net book amounts-4587604,4563,7939,467
At 31 March 2017
Cos t 1,8462,9008,7808,7813,79326,100
Accumulated amortisation &
impairment
(1,846)(2,442)(8,020)(4,325)-(16,633)
Net book value-4587604,4563,7939,467
23
23
C. Risk
C1. Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the
related actual results. The estimates and assumptions that involved a higher degree of judgement or complexity, and of items which are
more likely to be materially adjusted due to estimates and assumptions turning out to be wrong are included in section B and C. Specifically
these are:
Calculation of inventory obsolescence (note B5 a)
Estimated useful life of intangible assets (note B5 b)
Recognition of net dilution gain in Thinxtra (note B4 d)
Estimate and judgements not included above are detailed below.
C1 a) Impairment of assets
The Group, as required by NZ IFRS, has assessed as at 31 March 2018 whether any indicators of impairment exist. In doing so management
and the Directors have considered factors including the current profitability of the Group and the market capitalisation value of the
Company in comparison to the Group's net asset value. Detailed assessments were conducted for inventory (note B5 a), intangible assets
(note B5 b), trade and other receivables (note B3 b) and property, plant and equipment (note D1 a). A minor impairment was noted in
relation to spare parts within property, plant and equipment (refer note D1 a). The Directors consider the net asset value of the Group to
be appropriate.
Critical accounting estimates and assumptions
The Group tests annually for indicators of impairment, in accordance with the accounting policy stated in note D12 e). The recoverable
amounts of cash generating units have been forecasted based on value-in-use calculations. These calculations require the use of estimates.
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections
based on financial forecasts covering a five year period due to product life cycles, pricing trends and longer term expected currency trends.
GoodwillPatentsSo ft ware
Product
development
Assets under
constructionTotal
$000s$000s$000s$000s$000s$000s
Year ended 31 March 2018
Opening net book value -4587604,4563,7939,467
Foreign exchange differences-463751242637
Additions – acquired
separately
--13--13
Additions – internally
developed
---114763877
Disposals--(248)(41)-(289)
Amortisation charge--(403)(1,435)-(1,838)
Amortisation reversal on
disposals
--248--248
Tra ns fe rs--28898(926)-
Closing net book amounts-5044354,5043,6729,115
At 31 March 2018
Cos t 1,8462,9468,61010,2643,67227,338
Accumulated amortisation &
impairment
(1,846)(2,442)(8,175)(5,760)-(18,223)
Net book value-5044354,5043,6729,115
24
24
Key assumptions used in value-in-use calculations
CGU Assumption Range 5 Year CAGR
New Zealand Annual sales growth rate
1
5% to 11% 7.5%
Gross margin %
2
50% to 52% n/a
France Annual sales growth rate
1
5% to 12% 7.7%
Gross margin %
2
35% n/a
China Annual net profit growth rate
3
3% to 81% 22%
Free cash flow
3
-403% to 163% 7.6%
India Annual net profit growth rate
4
4% to 161% 33%
Free cash flow
4
-2% to 182% 29%
Free cash flow is used in the above table as the China and India assets are held through Rakon’s investment in associates and joint venture.
1
Sales growth – Management has forecasted sales to grow over the period of the cash flow projection, due to a combination of factors
including industry forecasts for the key market segments in which Rakon operates, future product innovation and estimations of its own
share of the market, reflective of the quality of its product range and technology advantages. Management has forecast a future increase
in revenues for the NZ and France CGUs specifically as a result of its product positioning, which is expected to meet the future increased
technology specification that will be demanded in the telecommunications segment.
2
Gross margin – Management forecasted gross margin based on past performance and its expectations of market development also taking
into account gradual decline in average selling prices. Anticipated industry trends, product innovations, manufacturing efficiency and raw
material cost improvements have also been factored into these gross margin assumptions.
3
China, net profit – Management forecasted net profit based on a combination of factors including industry forecasts for the key market
segments, future product innovation and estimations of its own share of the market reflective of the quality of its product range and
technology advantages.
4
India, net profit – Management forecasted net profit based on a combination of factors including industry forecasts for the key market
segments, future product innovation and estimations of its own share of the market reflective of the quality of its product range and
technology advantages.
These assumptions have been used for the analysis of each CGU within the business segment. The discount rates used are pre-tax and
reflect specific risks relating to the relevant segments.
Significant estimate: impact of possible changes in key assumptions
New Zealand CGU
If the sales volumes used in the value-in-use calculation had been 2.5% lower than management’s estimates, no impairment would result.
If the gross margin percentage used in the value-in-use calculation had been 1.5% lower than management’s estimates, the Group would
have recognised an impairment against the carrying amount of net assets of $1.1m.
If the pre-tax discount rate applied to the cash flow projections was 16.4% instead of 14.0%, the recoverable amount of the CGU would
equal its carrying amount.
France CGU
The recoverable amount is estimated to be $30m (2017: $14.4m). This exceeds the carrying amount of the CGU at balance date by $4.4m
(2017: $4.4m).
If the sales used in the value-in-use calculation had been 2.5% lower than management’s estimates the Group would have recognised an
impairment against the carrying amount of net assets of $3.9m.
If the gross margin percentage used in the value-in-use calculation had been 1.5% lower than management’s estimates the Group would
have recognised an impairment against the carrying amount of net assets of $9.0m.
If the pre-tax discount rate applied to the cash flow projections was 14.2% instead of 13.0%, the recoverable amount of the CGU would
equal its carrying amount.
China CGU
The recoverable amount is estimated to be $13.1m (2017: $23.1m). This exceeds the carrying amount of the CGU at balance date by $3.8m
(2017: $15.5m).
If free cash flow was 5.0% lower than management’s estimates, no impairment would result.
If the pre-tax discount rate applied to the cash flow projections was 16.7% instead of 14.2%, the recoverable amount of the CGU would
equal its carrying amount.
India CGU
The recoverable amount is estimated to be $5.9m (2017: $3.7m). This exceeds the carrying amount of the CGU at balance date by $3.0m
(2017: $3,000).
If free cash flow was 5.0% lower than management’s estimates, no impairment would result.
25
25
If the pre-tax discount rate applied to the cash flow projections was 48.9% instead of 24.2%, the recoverable amount of the CGU would
equal its carrying amount.
Cash flows beyond the five year period are extrapolated using the estimated growth rates stated below.
Growth rate Discount rate
2018
2017
2018
2017
New Zealand 2.5%
2.5%
14.0%
15.7%
United Kingdom 2.5%
2.5%
11.1%
12.7%
France 2.5%
2.5%
13.0%
14.0%
China 2.5%
2.5%
14.2%
15.3%
India 2.5%
2.5%
24.2%
27.0%
Prior year impairment
In the prior year, the future cash flow projections for the specific products manufactured in India for the France CGU were lower than at
the time of the previous review. This was due to revenue forecasts from these specific products being reduced, as they were replaced by
newer technology products which were expected to be manufactured in other locations within the Group. This resulted in an impairment
to goodwill of $1,846,000 (being the carrying value of goodwill as at 31 March 2017).
The investment in CRI was also impaired by $3,164,000, refer note B4 g).
C1 b) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision
for income taxes and recognition of deferred tax assets in relation to losses. There are many transactions and calculations for which the
ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such
determination is made.
C2. Financial risk management
The Group has exposure to the following risks:
Credit risk
Liquidity risk
Market risk
This section presents information about the Group’s exposures to each of the above risks including the Group’s objectives, policies,
processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included
throughout these consolidated financial statements.
The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has
established the Audit and Risk Management Committee, which together with the Board, is responsible for developing and monitoring the
Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and
controls and to monitor risk adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a
disciplined and constructive control environment in which all employees understand their roles and obligations.
The Board and Audit and Risk Management Committee oversees how management monitors compliance with the Group’s risk management
policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
C2 a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s receivables from customers.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s
customer base, including the default risk of the industry and country, in which customers operate, has less influence on credit risk. The
Group’s most significant customer accounts for 10% (2017: 10%) of external revenue with the next most significant customer accounting
for 7% (2017: 8%) of external revenue. The Group’s most significant customer accounts for $10m (2017: $9.5m) revenue, is in the global
positioning segment and is supplied out of New Zealand.
The Group has established credit policies under which each new customer is analysed individually for creditworthiness before payment and
delivery terms and conditions are agreed. The Group’s review includes trade references and external ratings, where appropriate and in
some cases bank references. Purchase limits are established for each customer, which represents the maximum open amount; these limits
are reviewed periodically. Customers that fail to meet the Group’s benchmark creditworthiness, may transact with the Group only on a
prepayment basis.
26
26
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables
and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures
and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.
Credit quality of financial assets
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 March is set
out below other than for derivatives which is shown in note D2 b).
The maximum exposure to credit risk for trade receivables at 31 March by currency of denomination is set out in note B3 b).
C2 b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including
the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such
as natural disasters. In addition, the Group maintains the following lines of credit:
Current year
On 9 May 2018 the facilities with ASB were renewed and have an expiry date of 31 May 2019, refer also note D2 e).
$1.7m cash advance facility with ASB. The interest rate is reset every 30 – 90 days and interest is payable based on the bank bill
rate for that interest period, the term funding premium and the applicable margin.
$9.8m overdraft limit. Interest is payable at the ASB Corporate Indicator Rate plus applicable margin. Also refer to note D2 e).
The $2.0m increase compared to the previous facility relates to additional working capital for the CRI business and requires the
release of securities held by CRI’s current banks within four months of the date of the acquisition date (refer note B4 f).
Facilities are secured by a general security deed over all the present and future assets and undertakings of the Group and the Group has
agreed to certain capital requirements, restrictions on dividend distributions and capital expenditure. The financial covenants include net
tangible assets to total tangible assets, net debt to EBITDA and EBITDA to interest. Interest is based on wholesale market interest rates,
bank margin and applicable line fee. The Company was in compliance with all required financial covenants during the year.
During the year the Company reduced its cash advance facilities after application of proceeds from the partial sale of its investment in
Thinxtra (refer note B4 c) and sale of the Argenteuil, France property (refer note B2 c).
Prior year
$6.2m cash advance facility with ASB. The interest rate is reset every 30 – 90 days and interest is payable based on the bank bill
rate for that interest period, the term funding premium and the applicable margin. The drawn down balance at balance date
was $4.5m and the facility expiry date is May 2018.
$7.8m overdraft limit. Interest is payable at the ASB Corporate Indicator Rate plus applicable margin. Also refer to note D2 e).
During the prior year the Company reduced its cash advance facilities after application of proceeds from the investment by Siward. Refer
note B2 c) and note D6.
The following table shows the contractual undiscounted cash flow maturities of financial liabilities, including interest payments and
excluding the impact of netting agreements:
20182017
$000s$000s
Financial assets at fair value through profit or loss (note D2 b)2112
Trade and other receivables (note B3 b)31,11129,614
Cash and cash equivalents (note D2 a)10,3643,305
Forward exchange contracts and collar options used for hedging (note D2 b)1,412294
Total exposure to credit risk43,09833,215
Carrying amount
27
27
C2 c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, whilst optimising the return on risk.
The Group enters into derivatives in the ordinary course of business and also incurs financial liabilities, in order to manage market risks. All
such transactions are carried out within the guidelines set by the Board and Audit and Risk Management Committee. Generally, the Group
seeks to apply hedge accounting in order to manage volatility in the statement of comprehensive income.
Currency risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional
currencies of the Group’s entities, primarily New Zealand Dollars (NZD), Sterling (GBP) and the Euro (EUR). The currencies in which these
sales and purchases transactions are primarily denominated are US Dollars (USD), Japanese Yen (JPY), NZD, GBP and EUR.
The Group uses foreign currency forward exchange contracts and collar options to hedge its currency risk. Under the Group’s Treasury
Management Policy, minimum hedging of 50% and 25% of estimated foreign currency exposure in respect of forecast sales and purchases
is required over the next 0 – 12 and 13 – 24 months respectively, subject to any variation approved by the Board. At 31 March 2018, 81%
and 25% of currency exposures over the next 0 – 12 and 13 – 24 months respectively are hedged, with outstanding foreign currency forward
exchange contracts and collar options.
Exposure to currency risk
The table below summarises the foreign exchange exposure on the net monetary assets of each group entity against its respective functional
currency, expressed in NZD.
31 March 2018
Carrying
amount
6 months or
le ss6 – 12 months1 – 2 years2 – 5 ye ar s
$000s$000s$000s$000s$000s
Financial liabilities
Derivatives (note D2 b)313(99)(10 )(78)(126)
Trade and other payables (note D2 d)19,107(19,107)---
Bank overdraft (note D2 e)2,824(2,824)---
Finance leases (note D2 e)31(15)(16 )--
Total financial liabilities22,275(22,045)(26 )(78)(126)
31 March 2017
Carrying
amount
6 months or
le ss6 – 12 months1 – 2 years2 – 5 ye ar s
$000s$000s$000s$000s$000s
Financial liabilities
Secured bank loans (note D2 e)4,5004,558---
Derivatives (note D2 b)226(42)(39)(145)-
Trade and other payables (note D2 d)15,246(15,246)---
Bank overdraft (note D2 e)3,229(3,229)---
Finance leases (note D2 e)61(30)-(31)-
Total financial liabilities23,262(13,989)(39)(176)-
USDEURGBPJPY
31 March 2018$000s$000s$000s$000s
Ra kon Limited 15,082850153(602)
Rakon UK Limited----
Rakon France SAS1,073-12(15)
Rakon Group16,155850165(617)
USDEURGBPJPY
31 March 2017$000s$000s$000s$000s
Ra kon Limited 13,017229370(1,550)
Rakon UK Limited(47)10-2
Rakon France SAS7,039-(223)(390)
Rakon Group20,009239147(1,938)
28
28
The following significant exchange rates applied during the year:
Sensitivity analysis
Underlying exposures
A 10% weakening of the NZD against the following currencies at 31 March would have increased (decreased) equity and profit or loss by
the amounts shown below. Based on historical movements, a 10% increase or decrease in the NZD is considered to be a reasonable estimate.
This analysis assumes that all other variables, in particular interest rates remain constant. The analysis was performed on the same basis
for 2017.
31 March 2018
Equity
$000s
Profit or loss
$000s
USD 1,795
1,795
EUR 94 94
GBP 18 18
JPY (69) (69)
31 March 2017
Equity
$000s
Profit or loss
$000s
USD 2,223 2,223
EUR 27
27
GBP 16 16
JPY (215) (215)
A 10% strengthening of the NZD against the above currencies at 31 March would have had the equal but opposite effect on the above
currencies to the amount shown above, on the basis that all other variables remain constant.
Forward foreign exchange contracts
A 10% weakening of the purchased currencies below against the forward foreign exchange contracts outstanding at 31 March, would have
increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
interest rates, remain constant. The analysis is performed on the same basis for 2017.
31 March 2018
Fair value
$000s
Equity
$000s
Profit or loss
$000s
Forward foreign exchange contracts – cash flow hedges
Net buy NZD sell USD 1,294 (2,719) -
Forward foreign exchange contracts – held for trading
Net buy NZD sell USD 159
(353)
(353)
Net buy NZD sell EUR (91) (472) (472)
31 March 2017
Fair value
$000s
Equity
$000s
Profit or loss
$000s
Forward foreign exchange contracts – cash flow hedges
Net buy NZD sell USD
211
(2,534)
-
A 10% strengthening of the purchased currencies below, against the forward foreign exchange contracts outstanding at 31 March would
have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
interest rates remain constant. The analysis is performed on the same basis for 2017.
31 March 2018
Fair value
$000s
Equity
$000s
Profit or loss
$000s
Forward foreign exchange contracts – cash flow hedges
Net buy NZD sell USD
1,294
2,225
-
Forward foreign exchange contracts – held for trading
Net buy NZD sell USD
159 288 288
NZD2018201720182017
USD0.71490.70220.72770.7017
EUR0.61180.65670.58580.6504
GBP0.53980.56870.51340.5647
JPY79.209679.306576.840077.9300
A ve rage rateReporting date rate
29
29
31 March 2018
Fair value
$000s
Equity
$000s
Profit or loss
$000s
Net buy NZD sell EUR
(91) 386 386
31 March 2017
Fair value
$000s
Equity
$000s
Profit or loss
$000s
Forward foreign exchange contracts – cash flow hedges
Net buy NZD sell USD
211
2,074
-
Interest rate risk
Under the Group’s Treasury Management Policy, a minimum of 50% of term debt is required to be on fixed interest rates. The Group adopts
a policy to manage its exposure to interest rates by considering fixed rate interest rate swap agreements.
Profile
At the 31 March the interest rate profile of the Group’s interest bearing financial instruments was:
Variable rate instruments
2018
$000s
2017
$000s
Financial assets (note D2 a)
10,364
3,305
Financial liabilities (2,824) (3,229)
Net variable rate instruments 7,540
76
Fixed rate instruments
Financial assets -
-
Financial liabilities (224)
(206)
Net fixed rate instruments (224) (206)
Sensitivity analysis
An increase of 100 basis points in interest rates at 31 March would have increased (decreased) equity and profit or loss by the amounts
shown below. This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. The analysis for 2018 was
performed on the same basis as 2017.
31 March 2018
Equity
$000s
Profit or loss
$000s
Variable rate instruments (28)
(28)
Fixed rate instruments 58 58
31 March 2017
Variable rate instruments 1
1
Fixed rate instruments 85 -
A decrease of 100 basis points in interest rates at 31 March would have the opposite impact to what is shown above.
C3. Capital management
The Board’s policy is to maintain a capital base (made up of debt and equity) so as to sustain future development of the business. There
were no changes to the Group’s approach to capital management during the year.
C3 a) Current year
For the year ended 31 March 2018 the Group reported a net profit after tax for the year of $10.0m (2017: loss of $13.6m) and net operating
cash inflows of $7.9m (2017: inflow of $9.5m). As at 31 March 2018 the Group had net assets of $87.1m (2017: $74.6m), working capital of
$41.0m (2017: $31.4m) and cash balances of $7.5m (2017: $76,000).
The Group is reliant on its bank facility (refer note D2 e) and equity as the principal sources of capital management. The ability of the Group
to remain in compliance with its banking covenants has been considered by the Directors in the adoption of the going concern assumption
during the preparation of these financial statements.
C3 b) Prior year
In the prior year the Group was adversely impacted by a challenging market, particularly reduced spend in telecommunications
infrastructure resulting in a decline in revenues of $10.8m in the telecommunication segment. The Group results were also adversely
impacted from restructures that were carried out in the New Zealand and France cash generating units. This resulted in non-recurring costs
negatively impacting earnings.
30
30
The Group ensured funding was in place to assist with operational cash requirements and the ongoing strategic plan for the business through
the arrangement of bank facilities and an equity injection from Siward of $7.2m.
C3 c) Renewal of bank facilities
On 9 May 2018 the facilities with ASB were renewed and have an expiry date of 31 May 2019, refer note C2 b).
Facilities are secured by a general security deed over all the present and future assets and undertakings of the Group and the Group has
agreed to certain capital requirements, restrictions on dividend distributions and capital expenditure. The financial covenants include net
tangible assets to total tangible assets, net debt to EBITDA and EBITDA to interest. Interest is based on wholesale market interest rates,
bank margin and applicable line fee.
Compliance with bank covenants is dependent on the Group’s financial performance. The Directors have approved a five year forecast and
business valuation impairment model. The Directors forecast that the Group will trade at levels appropriate to manage its working capital
requirements and meet its bank covenants for the period of 12 months from the date of authorisation of these financial statements, under
its new facility agreement signed on 9 May 2018 as detailed in note D2 e). The Directors have considered the achievability of the assumptions
underlying those forecasts, including forecast sales and positioning the business for the future. Forecasts indicate that the Group will meet
all covenants and net cash requirements for the 12 months from the date of authorisation of these financial statements and that there is
sufficient headroom to allow for downward sensitivities, should the actual revenue and margin levels be lower than forecast.
D. Other information
D1. Other profit and loss information
D1 a) Summary of impairments
The Group, as required by NZ IFRS, has assessed as at 31 March 2018 whether any indicators of impairment exist. In undertaking such an
assessment, no indicators of impairment were identified in the current year.
2018
$000s
2017
$000s
Property, plant & equipment (note D3 a) 120 760
Intangible assets excluding goodwill (note B5 b) - 824
Goodwill - 1,846
Investment in CRI (note B4 g) - 3,164
120 6,594
Property, plant & equipment
During the year specific equipment spare parts were deemed to be no longer useful due to technical obsolescence or age. As a result, these
spare parts were fully impaired. These spare parts are included in the plant and equipment category and form part of the New Zealand cash
generating unit, refer also note D3 a).
Prior Year
In the prior year the above impairments were made which are described below.
Property, plant & equipment
During the prior year specific equipment spare parts were deemed to be no longer useful due to technical obsolescence or age. As a result,
these spare parts were fully impaired. These spare parts are included in the plant and equipment category and form part of the New Zealand
cash generating unit, refer also note D3 a).
Intangible assets excluding goodwill
During the prior year specific product development projects and projects in progress were reviewed for recoverability. This was based on
the expected cash flows to be generated by the projects. It was found the expected cash flows on specific items had reduced and were
unlikely to support the carrying values. As a result, these specific projects were fully impaired. The impairment was within the New Zealand
and France CGUs.
Goodwill and investment in CRI
The future cash flow projections for the specific products manufactured in India were lower than at the time of the previous review. This
was due to revenue forecasts from these specific products reducing as they are replaced by newer technology products which were
expected to be manufactured in other locations within the Group. This resulted in an impairment of goodwill held in the France CGU and
an impairment to the Group’s investment in CRI (refer note B4 g).
Following these impairment assessments, the Directors considered the net asset value of the Group to be appropriate.
31
31
D1 b) Employee benefits expenses
Accounting policy
Employee entitlements to salaries, wages and annual leave to be settled within 12 months of balance date represent present obligations
resulting from employees’ services provided up to the balance date. These are calculated at undiscounted amounts based on remuneration
rates that the entity expects to pay.
Breakdown of employee benefits expenses
D1 c) Net finance (costs)/income
Accounting policy
Interest income is recognised in the statement of comprehensive income as it accrues, using the effective interest method.
Breakdown of finance (costs)/income
D1 d) Income tax expense
20182017
$000s$000s
Wages and salaries37,21637,223
Contributions to defined contribution plans570583
Decrease in liability for French retirement indemnity plan (note D3 b)(23)(74)
Increase in liability for long service leave (note D3 b)11415
Redundancy cost (note D3 b)1593,043
Employee share scheme (note D5)842
Total employee benefits expenses38,04440,832
20182017
$000s$000s
Financial income
Interest income33
Financial expenses
Interest expense on bank borrowings(492)(1,416)
Unwinding of provision discount(12)(1 9 )
Total financial expenses(504)(1,435)
Net finance costs(501)(1,432)
20182017
$000s$000s
Current tax(616)(525)
Deferred tax (expense)/credit (note D4)(382)458
Income tax expense(998)(67)
32
32
The weighted average applicable tax rate was 9% (2017: -0.5%).
D2. Other financial assets and liabilities
D2 a) Cash and cash equivalents
Accounting policy
Cash and cash equivalents comprise of cash balances, call deposits, other short term highly liquid investments with original maturities of
three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value
and bank overdrafts. Bank overdrafts are shown separately from borrowings on the balance sheet.
Breakdown of cash and cash equivalents
D2 b) Derivative financial instruments
Trading derivatives are classified as a current asset or liability. The full fair value of a hedging derivative is classified as a non-current asset
or liability if the remaining maturity of the hedged item is more than 12 months or as a current asset or liability if the maturity of the hedged
item is less than 12 months.
20182017
Reconciliation of income tax expense $000s$000s
P ro fi t/(l os s ) b e fo re t a x 10,997(13,491)
Tax calculated at domestic tax rates applicable to profits in the respective countries(2,943)3,904
Foreign exchange difference in income tax calculation15(8)
Expenses not deductible(73)(119)
Non-taxable income1,890157
Expenses deductible for tax purposes18-
Prior year adjustment296(193)
Associate and joint venture results reported net of tax(541)(586)
Recognition and utilisation of previously unrecognised tax losses610-
Tax losses for which no deferred income tax asset was recognised(270)(3,222)
Income tax expense(998)(67)
The tax on the Group's result before tax differs from the theoretical amount that would arise using the weighted average tax
rate applicable to the results of the consolidated entities.
20182017
$000s$000s
Cash at bank and on hand10,3643,305
Cash, cash equivalents and bank overdrafts include the following for the purposes of the cash
flow statement
Cash and cash equivalents10,3643,305
Bank overdrafts (note D2 e)(2,824)(3,229)
Total cash and cash equivalents7,54076
2018201820172017
AssetsLiabilitiesAssetsLiabilities
$000s$000s$000s$000s
Interest rate swaps – cash flow hedge-126-145
Forward foreign exchange contracts – held for trading2119121
Forward foreign exchange contracts – cash flow hedges1,242-211-
Forward foreign exchange collar option – cash flow hedges170968380
Total derivative financial instruments1,623313296226
Less: non-current forward foreign exchange – cash flow hedges33478115-
Current - derivative financial instruments1,289235181226
33
33
Forward foreign exchange contracts
The notional principal amounts of the outstanding forward foreign exchange contracts at 31 March 2018 were $33,624,000 (2017:
$23,087,000).
The hedged highly probable forecast transactions denominated in foreign currency are expected to occur at various dates during the next
24 months. Gains and losses recognised in the hedging reserve in equity on forward foreign exchange contracts as of 31 March 2018 will be
recognised in the statement of comprehensive income, in the period or periods during which the hedged forecast transaction affects the
statement of comprehensive income.
Interest rate swap contracts
At balance date one interest rate swap was in place with $3m of borrowings fixed at 7.17%, expiring June 2020. The interest rate swap, with
a fair value of -$126,000 (2017: -$145,000), is exposed to fair value movements if interest rates change.
D2 c) Recognised fair value measurements
The Group considers the below methods in estimating the fair value of a financial instrument:
Level 1 – the fair value is calculated using quoted prices in active markets
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices)
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
Investments in unlisted equity shares for which there is currently no active market are valued at cost less impairment.
For financial instruments not quoted in active markets, the Group uses valuation techniques such as present value techniques, comparison
to similar instruments for which market observable prices exist and other relevant models used by market participants. These valuation
techniques use both observable and unobservable market inputs.
If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. The Group’s foreign
exchange contracts, collar options and interest rate swaps are Level 2 at 31 March 2018 and 31 March 2017.
2018 2017
$000s $000s
Financial assets – derivative instruments
Foreign exchange contracts and collar options – held for trading 211 2
Foreign exchange contracts and collar options – cash flow hedges 1,412 294
1,623 296
Financial liabilities – derivative instruments
Interest rate swaps 126 145
Foreign exchange contracts and collar options – held for trading
91 1
Foreign exchange contracts and collar options – cash flow hedges 96 80
313 226
Specific valuation techniques include the fair value of forward foreign exchange contracts and collar options determined using forward
exchange rates at the balance date, with the resulting value discounted back to present value.
There were no transfers between categories during the year.
D2 d) Trade and other payables
Accounting policy
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
Breakdown of trade and other payables
The carrying amounts of trade and other payables are assumed to be the same as their fair values due to their short term nature.
20182017
$000s$000s
Trade payables7,0154,418
Amounts due to related parties (note D9 b)1,8743,287
Employee entitlements7,8035,978
Accrued expenses1,8391,563
GST/VAT pa ya ble576-
Total trade and other payables19,10715,246
34
34
D2 e) Borrowings
Accounting policy
Interest bearing borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequent to initial recognition, interest
bearing borrowings are measured at amortised cost with any difference between the proceeds (net of transaction costs) and the redemption
amount, recognised in the statement of comprehensive income over the period of the borrowings, using the effective interest method.
Arrangement fees are amortised over the term of the loan facility.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12
months after balance date.
Breakdown of borrowings
Bank borrowings
During the year the Company reduced its bank borrowings after application of proceeds from the partial sale of its investment in Thinxtra
(refer note B4 c) and sale of the Argenteuil, France property (refer note B2 c).
Prior to expiry, the facilities were renewed on similar terms and conditions (refer note C2 b). The average interest rate during the year on
this facility was 5.97%.
Bank overdrafts and borrowings are secured by first mortgage over all the undertakings of Rakon Limited and any other wholly owned
present and future subsidiaries.
The exposure of the Group’s bank borrowings to interest rate changes and the contractual re-pricing dates at the balance dates are as
follows:
Prior year
During the prior year the Company reduced its borrowings after application of proceeds from Siward. Refer note D6.
D3. Other non-financial assets and liabilities
D3 a) Property, plant and equipment
Accounting policy
Initial recording and subsequent measurement
Items of property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses. The cost of purchased
property, plant and equipment is the value of the consideration given to acquire the assets and the value of other directly attributable costs,
which have been incurred in bringing the assets to the location and condition necessary for their intended service. Where parts of an item
of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant or equipment.
20182017
$000s$000s
Current
Obligations under finance lease3130
Other borrowings67-
Bank overdrafts2,8243,229
Bank borrowings-4,500
Current borrowings2,9227,759
Non-current
Obligations under finance lease-31
Bank borrowings--
Non-current borrowings-31
20182017
$000s$000s
6 months or less2,9227,759
6 – 12 months --
1 – 5 years-31
Ove r 5 ye a rs--
Total bank borrowings including overdraft2,9227,790
35
35
Subsequent costs
The Group recognises in the carrying amount of an item of property, plant or equipment the cost of replacing part of such an item when
that cost is incurred, only when it is probable that the future economic benefits embodied with the item will flow to the Group and the cost
of the item can be measured reliably. All other costs are recognised in the statement of comprehensive income as an expense when incurred.
Depreciation
Depreciation of property, plant and equipment, other than freehold land, is calculated on a straight line basis so as to expense the cost of
the assets to their expected residual values over their useful lives as follows:
Land Nil
Buildings 15 – 20 years
Leasehold improvements 3 – 25 years
Computer hardware 1 – 10 years
Plant and equipment 1 – 20 years
Furniture and fittings 3 – 20 years
Assets under course of construction Nil
The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each balance date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘other
gains/(losses) – net’ in the statement of comprehensive income.
Impairment
During the year specific equipment spare parts were deemed to be no longer useful due to technical obsolescence or age. As a result, these
spare parts were fully impaired. These spare parts were included in the plant and equipment category and form part of the New Zealand
cash generating unit. A similar exercise was performed in the prior year.
36
36
Breakdown of property, plant and equipment
Land and
buildings
Leasehold
improve -
ments
Plant and
equipment
Computer
hardwareOt he r
Asse ts
under
construct-
ionTotal
$000s$000s$000s$000s$000s$000s$000s
At 31 March 2016
Cos t 7,30410,11682,2515,1322,6543,331110,788
Accumulated depreciation &
impairment
(4,619)(8,234)(73,665)(4,768)(2,268)-(93,554)
Ne t book val ue2,6851,8828,5863643863,33117,234
Year ended 31 March 2017
Opening net book value 2,6851,8828,5863643863,33117,234
Foreign exchange differences(164)(25)(10)174217(123)
Additions-64085818077282,413
Disposals-(38)(1,566)(89)(130)-(1,823)
Assets classified as held for sale(1,969)-----(1,969)
Depreciation charge(23)(554)(2,579)(266)(69)-(3,491)
Depreciation reversal on disposals-191,05561129-1,264
Impairment-(10)(736)-(14)-(760)
Tra ns fe rs-1411,9386-(2,085)-
Closing net book amounts5292,0557,5462733511,99112,745
At 31 March 2017
Cos t 4,88710,28182,0835,1192,3761,991106,737
Accumulated depreciation &
impairment
(4,358)(8,226)(74,537)(4,846)(2,025)-(93,992)
Ne t book val ue5292,0557,5462733511,99112,745
.
Year ended 31 March 2018
Opening net book value 5292,0557,5462733511,99112,745
Foreign exchange differences-82173201782374
Additions-1211,1593241621,5073,273
Disposals-(3,061)(3,243)(434)(76)(13)(6,827)
Depreciation charge-(398)(1,809)(250)(47)-(2,504)
Depreciation reversal on disposals-2,8903,15843458-6,540
Impairment--(94)--(26)(120)
Tra ns fe rs-27553111(592)-
Closing net book amounts5291,7167,4433784662,94913,481
At 31 March 2018
Cos t 4,8877,45080,7255,0402,4802,975103,557
Accumulated depreciation &
impairment
(4,358)(5,734)(73,282)(4,662)(2,014)(26)(90,076)
Ne t book val ue5291,7167,4433784662,94913,481
37
37
D3 b) Provisions for other liabilities and charges
Accounting policies
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and
it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
where appropriate, the risks specific to the liability.
Retirement provision
The Group’s net obligation in respect of the French retirement indemnity plan is the amount of future benefit that employees have earned
in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is
discounted to its present value and the fair value of any related assets is deducted. The French retirement indemnity plan entitles permanent
French employees to a lump sum on retirement. The payment is dependent on an employee’s final salary and the number of years of service
rendered.
French employees are entitled to a retirement pay-out once they have met specific criteria. This is a one off payment based on service time
at retirement date. A provision has been created to recognise this cost taking in consideration of the time served, probability of attainment
and discount rates. An actuarial valuation was performed at 31 March 2018.
Long service leave
The Group’s net obligation in respect of long service leave is the amount of future benefit that employees have earned in return for their
service in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present
value.
New Zealand employees are entitled to long service leave after the completion of 10 years’ continuous service, in the form of special holidays
and allowance. A provision has been created to recognise this cost, taking into consideration the time served, probability of attainment and
discount rates.
Lease make good
Rakon is required to restore the leased premises at Mt Wellington, Auckland, New Zealand to their original condition at the end of the
respective lease terms. A provision has been recognised for the present value of the estimated expenditure required to remove any
leasehold improvements. These costs have been capitalised as part of the cost of leasehold improvements and are amortised over the lease
terms.
Restructure provision
France restructure
In September 2013 the proposal for reorganisation was accepted by the Work Inspection Administration and the Workers Councils in France
and communicated to the employees of Rakon France SAS as a plan to restructure.
During 2017 a proposal for re-organisation was discussed with the Work Inspection Administration and Workers Council in France and
communicated to the employees of Rakon France SAS as a plan to restructure. Restructure related costs of $2,242,000 were incurred.
At 31 March 2018 the balance of the restructuring provision represents the estimated costs to complete the Rakon France September 2013
and November 2016 plans to restructure.
Breakdown of provisions for other liabilities and charges
Retirement
provision
Long service
l e ave
Restructure
provision
Lease make
good
Total
$000s$000s$000s$000s$000s
At 31 March 20162,109474192-2,775
Charged/(credited) to the statement of comprehensive
income(74 )153,0436283,612
Used during the year(94)(72)(2,402)-(2,568)
At 31 March 20171,9414178336283,819
Charged/(credited) to the statement of
comprehensive income
(23 )11415912262
Used during the year(109)(61)(645)-(815)
Foreign exchange337-92-429
At 31 March 20182,1464704396403,695
Represented by
Current portion95427439-961
Non-current portion2,05143-6402,734
Total provisions for other liabilities and charges2,1464704396403,695
38
38
D4. Deferred income tax
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and current tax
liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances
within the same jurisdiction, is as follows:
1
Includes deferred tax arising from financial arrangements and inventory provisioning.
At balance date Rakon Limited had total tax losses of $29,266,000 (2017: $32,834,00) of which $9,396,000 (2017: $10,782,000) are
recognised in deferred income tax assets. Accordingly, $19,901,000 (2017: $22,081,000) of tax losses have not been recognised in deferred
income tax assets. Rakon Limited’s tax losses have no expiry date.
During the year Rakon Limited recognised tax losses of $2,180,000 (2017: $1,819,000) which were not previously recognised in deferred
income tax assets. These were fully utilised against current year taxable income. Deferred income tax assets are recognised for tax losses
to the extent the related tax benefit is expected to be realised through future taxable profits.
During the prior year a New Zealand IRD tax audit was completed for the years 2011 to 2015 resulting in the forfeiture of $4,101,000 of tax
losses.
20182017
$000s$000s
Deferred tax assets
4,7085,340
1,1981,352
Total de fe rre d tax asse ts5,9066,692
Deferred tax liabilities
(209)(19 )
(3 5)(5 )
Total deferred tax liabilities(244)(2 4 )
Net deferred tax asset5,6626,668
20182017
$000s$000s
The gross movement in the deferred income tax account is as follows:
At 31 March 20176,6686,504
Foreign exchange differences112(186)
Losses transferred to subsidiaries(389)(148)
Deferred tax on cash flow hedge(347)40
Income statement (expense)/credit (note D1 d)(382)458
At 31 March 20185,6626,668
Deferred tax assets to be recovered after more than 12 months
Deferred tax assets to be recovered within 12 months
Deferred tax liabilities to be recovered after more than 12 months
Deferred tax liabilities to be recovered within 12 months
Property,
plant &
equipmentIntangibles
Employee
benefitsOthe r
1
Future
i nc ome tax
benefitTotal
$000s$000s$000s$000s$000s$000s
At 31 March 2016
687-5382,0973,1826,504
(Charged)/credited to income statement
(464)-(124)1,061(1 5)458
Losses transferred to subsidiaries
----(148)(148)
Charged to equity
---40-40
Foreign exchange difference
---(186)-(186)
At 31 March 2017223-4143,0123,0196,668
(Charged)/credited to income statement
(180)-88(291)1(382)
Losses transferred to subsidiaries
----(389)(389)
Charged to equity
---(347)-(347)
Foreign exchange difference
5--107-112
At 31 March 201848-5022,4812,6315,662
39
39
D5. Other reserves
D6. Contributed equity
D6 a) Share capital
Accounting policy
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as
a deduction, net of tax, from the proceeds.
Breakdown of share capital
Number of
shares
Ordinary shares
$
$ per share
At 1 April 2016 191,038,591 173,881,000 $0.91
Shares issued
Ordinary shares – cash 38,016,681 7,154,000 $0.19
At 31 March 2017 229,055,272 181,035,000 $0.79
Shares issued
Ordinary shares – cash - (11,000) -
At 31 March 2018 229,055,272 181,024,000 $0.79
At 31 March 2018 the total number of ordinary shares, including treasury shares, is 229,055,272 shares (2017: 229,055,272) made up as
follows:
226,961,983 are fully paid shares (2017: 226,961,983)
321,972 unpaid ordinary shares were on issue and held in trust on behalf of participants in the Rakon Share Plan (2017: 321,972)
1,771,317 unpaid ordinary shares were on issue and held by Rakon ESOP Trustee Limited for future allocation to participants
(2017: 1,771,317).
Fore ign
currency
translation
reserve
He dging
reserve
Share option
reserveTotal
$000s$000s$000s$000s
At 31 March 2016(23,911)1043,014(20,793)
Cash flow hedges
Fair value gains/(losses) in year-999-999
Tax on fair value gains -45-45
Transfers to sales-19-19
Tax on transfers to income tax expense-(5)-(5)
Currency translation differences
Subsidiaries(4,365)--(4,365)
Associates and joint venture798--798
Other
Fair value of share options issued--4242
At 31 March 2017(27,478)1,1623,056(23,260)
Cash flow hedges
Fair value gains/(losses) in year-(930)-(930)
Tax on fair value losses -260-260
Transfers to sales-558-558
Tax on transfers to income tax expense-(156)-(156)
Currency translation differences
Subsidiaries2,982--2,982
Associates and joint venture(216)--(216)
Other
Fair value of share options issued--88
At 31 March 2018(24,712)8943,064(20,754)
40
40
Prior Year
Investment by Siward
Siward is a Taiwan based crystal manufacturer which is listed on the Taiwan Stock Exchange. In February 2017 Siward paid US$10m cash in
return for 38,016,681 new fully paid ordinary shares of Rakon and rights arising from a technology license agreement. Siward has taken up
one new appointment to Rakon’s Board. Refer also note B2 c).
D7. Contingencies
It is not anticipated that any material liabilities will arise from the contingent liabilities.
D8. Commitments
D8 a) Capital commitments
Capital expenditure contracted for at the balance date but not yet incurred is as follows:
D8 b) Leases
Accounting policy
The Group is the lessee. Leases where the lessor retains substantially all the risk and rewards of ownership are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive
income on a straight line basis over the period of the lease.
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised
at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease
payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges are recognised in finance costs in profit or loss.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable
certainty that the Group will obtain ownership by the end of the lease term.
Finance lease – Group as lessee
The Group has one finance lease for photocopiers with a carrying amount of $31,000 (2017: $65,000). This lease contract expires in 2019.
Operating lease commitments – Group as lessee
The Group leases various factories, offices and warehouses under non-cancellable operating lease agreements. The lease terms are between
1 and 8 years and the majority of lease agreements are renewable at the end of the lease period at market rate.
The Group also leases motor vehicles under operating lease agreements. The lease terms are for 3 years. The lease expenditure charged to
the statement of comprehensive income during the year is disclosed in note B2 c).
20182017
$000s$000s
Property, plant and equipment32698
Intangible assets10736
Total capital commitments433134
20182017
$000s$000s
No later than 1 year3130
Later than 1 year and no later than 5 years-31
Total minimum lease payments3161
Less amounts representing finance charges(1)(3)
Present value of minimum lease payments3058
Included in the financial statements as
Current borrowings (note D2 e)3130
Non-current borrowings (note D2 e)-31
Total finance lease included in borrowings3161
41
41
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
D9. Related party information
No amounts owed by a related party have been written off or forgiven during the year. Related party transactions were transacted at arms
length.
D9 a) Key management compensation
2018
2017
$000s
$000s
Salaries and other short term employee benefits 3,437
3,081
Share based payments 15 26
3,452 3,107
D9 b) Year end balances arising from sale/purchases of goods/services and plant, equipment and intangibles
20182017
$000s$000s
No later than 1 year2,1551,755
Later than 1 year and no later than 5 years5,9044,566
Later than 5 years1,6402,228
Total non-cancellable operating leases9,6998,549
20182017
$000s$000s
Intangible, plant and equipment sales to joint venture, Centum Rakon India Private Limited-4
Sales to joint venture, Centum Rakon India Private Limited125297
Purchases from joint venture, Centum Rakon India Private Limited(13,204)(13,534)
Purchases from associate, Chengdu Shen-Timemaker Crystal Technology Co. Limited(243)(189)
Engineering support charges to joint venture, Centum Rakon India Private Limited4768
Net income statement impact(13,275)(13,354)
Receivables from joint venture, Centum Rakon India Private Limited, to
Ra kon Limited1414
Rakon France SAS5048
Total receivables from joint venture, Centum Rakon India Private Limited6462
Receivables from joint venture, Rakon HK Limited, to
Ra kon Limited89148
Rakon Investment HK Limited44
Total receivables from joint venture, Rakon HK Limited93152
Payables to joint venture, Centum Rakon India Private Limited, from
Ra kon Limited5-
Rakon France SAS1,8533,256
Total payables to joint venture, Centum Rakon India Private Limited1,8583,256
Payables to associate, Chengdu Shen-Timemaker Crystal Technology Co. Limited, from
Ra kon Limited-31
Total payables to associate, Chengdu Shen-Timemaker Crystal Technology Co. Limited-31
42
42
Refer also to note B2 b) for explanation of the investment by Siward and attribution of proceeds.
D10. Earnings per share
D10 a) Basic
Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Group, by the weighted average
number of ordinary shares on issue during the year. During the prior year 38,016,681 ordinary shares were issued, refer note D6 a) and note
D6.
D10 b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of
all dilutive potential ordinary shares. The Group has two categories of dilutive potential ordinary shares: restricted ordinary shares and
share options. During the prior year 38,016,681 ordinary shares were issued, refer note D6.
20182017
$000s$000s
Sales190-
Purchases(174)-
Engineering support services115-
Net income statement impact131-
Receivables from, Siward Crystal Technology Co. Limited, to
Rakon Limited1501
Total receivables, Siward Crystal Technology Co. Limited
1501
Payables to, Siward Crystal Technology Co. Limited, from
Rakon Limited9-
Ra kon Fra nce SAS7-
Total payables to, Siward Crystal Technology Co. Limited
16-
Following are sales and purchases to/from Siward Crystal Technologies Co. Limited
20182017
$000s$000s
Weighted average number of ordinary shares on issue (note D6 a)226,962195,281
Continuing operations
Earnings/(loss) attributable to equity holders of the Group9,999(13,558)
Basic earnings/(losses) per share (cents per share)4.4(6.9)
20182017
$000s$000s
Weighted average number of ordinary shares on issue (note D6 a)226,962195,281
Adjustments for dilutive potential ordinary shares (restricted ordinary shares and share
options)
3,6223,622
Weighted average number of ordinary shares for diluted earnings per share230,584198,903
Continuing operations
Earnings/(loss) attributable to equity holders of the Group9,999(13,558)
Diluted earnings/(losses) per share (cents per share)4.3(6.8)
43
43
D11. Share based payments
D11 a) Accounting policy
The Group’s management awards qualifying employees’ bonuses, in the form of share options and conditional rights to redeemable ordinary
shares, from time to time, on a discretionary basis. These are subject to vesting conditions and their fair value is recognised as an employee
benefit expense with a corresponding increase in other reserve equity over the vesting period. The fair value determined at grant date
excludes the impact of any non-market vesting conditions, such as the requirement to remain in employment with the Group. Non-market
vesting conditions are included in the assumptions about the number of options that are expected to vest and the number of redeemable
ordinary shares that are expected to transfer. At each balance date the estimate of the number of options expected to vest and the number
of redeemable ordinary shares expected to transfer is revised and the impact of any change in this estimate is recognised in the statement
of comprehensive income with a corresponding entry to equity. The proceeds received net of any directly attributable transaction costs are
credited to share capital when the options are exercised, or the conditional rights to redeemable ordinary shares are transferred.
D11 b) Rakon Share Plan
In March 2006, Rakon Limited established a share plan to enable selected employees of Rakon Limited to acquire shares in the Company
through the plan trustee, Rakon ESOP Trustee Limited.
Under the terms of the share plan, 2,759 ordinary shares were issued at deemed market value at that time to Rakon ESOP Trustee Limited
to hold on behalf of the participating employees. Following a share split on 13 April 2006, the resulting number of shares under this plan
was 859,137. All shares issued to Rakon ESOP Trustee Limited have been allocated. The shares rank equally in all respects with all other
ordinary shares issued by the Company. The outstanding loan balance provided by Rakon Limited to participating employees in respect of
these shares totals $195,000 (2017: $195,000). Loans are provided on an interest free basis and the employee may repay all or part of the
loan at any time. No repayments were due at 31 March 2018 (2017: nil). The Trust Deed makes provision for the Company to require
repayment of the loans in certain circumstances.
As at 31 March 2018, 321,972 (31 March 2017: 321,972) shares were held by Rakon ESOP Trustee Limited.
Shares issued under the share plan are held on trust by Rakon ESOP Trustee Limited. A participating manager may request the trustee to
transfer the relevant shares to him or her, provided the loan to that manager has been repaid in full.
The Company may remove and appoint trustees at any time. The Directors and shareholders of Rakon ESOP Trustee Limited are Bryan
Mogridge and Bruce Irvine.
Shares held by the share plan represent approximately 0.14% of the Company's total shares on issue as at balance date (2017: 0.14%).
D11 c) Rakon Employee Share Option Scheme (2015)
In July 2014 Rakon Limited established an employee share option scheme with 4,800,000 options issued to selected employees. Each option
granted will convert to one ordinary share on exercise. A participant may exercise up to half of his or her options any time after the second
and third anniversaries, subject to the weighted average share price on the 10 days preceding the date of exercise, exceeding a benchmark
share price. Options lapse on their fourth anniversary.
Share options outstanding at 31 March 2018 and expiring in the year to 31 March 2019:
The weighted average fair value of options granted of $0.018 per option was determined using the Black-Scholes valuation model. The
significant inputs into the model were the following: weighted average share price of $0.25 at the grant date, exercise price shown above,
volatility of 15%, dividend yield of 0%, an average expected option life of 2 years and an annual risk-free interest rate of 4.0%. The volatility
was measured at the standard deviation of continuously compounded share returns, based on statistical analysis of daily share prices from
the 12 months preceding July 2014.
During the year no options were cancelled due to participants ceasing employment (2017: 1,400,000). There have been no allocations since
July 2014.
Option
pr ice
2018
Number of
options
2017
Number of
options
Opening balance-3,300,0004,700,000
Gr a nted 0.25 --
Ca nc el l ed0.25-(1,400,000)
Balance outstanding 0.25 3,300,0003,300,000
Exercise
pr ice
Benchmark
pr ice
2018
Number of
options
2017
Number of
options
Year ended 31 March 20190.250.303,300,000 3,300,000
44
44
D12. Summary of other significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements have been set out in sections B to
D along with the associated sections. Additional relevant policies are detailed below and have been consistently applied to all the years
presented, unless otherwise stated.
D12 a) Basis of preparation
The Company is registered under the Companies Act 1993 and is a FMC reporting entity under Part 7 of the Financial Markets Conduct Act
2013. The financial statements of the Group have been prepared in accordance with the requirements of Part 7 of the Financial Markets
Conduct Act 2013 and the New Zealand Stock Exchange (NZX) (Main Board) Listing Rules.
These consolidated financial statements for the year ended 31 March 2018 have been prepared in accordance with New Zealand Generally
Accepted Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZ
IFRS), other New Zealand accounting standards and authoritative notices that are applicable to entities that apply NZ IFRS. The consolidated
financial statements also comply with International Financial Reporting Standards (IFRS). The Group is a profit-oriented entity for the
purposes of complying with NZ GAAP. These financial statements comprise Rakon and its subsidiaries.
The financial statements have been prepared on a historical cost basis, except for: derivative financial instruments – measured at fair value,
and assets held for sale – measured at cost.
The preparation of financial statements in accordance with NZ IFRS requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from
these estimates, refer to section C1.
D12 b) Financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual
provisions of the instrument. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or
have been transferred and the Group has transferred substantially all risks and rewards of ownership.
Fair value estimates
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement, or for disclosure purposes.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a
variety of methods and makes assumptions that are based on market conditions existing at each balance date. Techniques, such as
estimated discounted cash flows, are used to determine fair value for financial instruments. The fair value of forward exchange contracts
and collar options is determined using forward exchange market rates at the balance date.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The
fair value of financial liabilities for disclosure purposes, is estimated by discounting the future contractual cash flows at the current market
interest rate that is available to the Group for similar financial instruments.
Classification of financial assets
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss or loans and receivables.
The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its
financial assets at initial recognition and re-evaluates this designation at each reporting date.
Financial assets at fair value through profit or loss
This category has two subcategories: financial assets held for trading and those designated at fair value through profit or loss on initial
recognition. For accounting purposes, derivatives are categorised as held for trading unless they are designated as hedges. Assets in this
category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance
date.
Financial assets at fair value through profit and loss are carried at fair value. Realised and unrealised gains and losses arising from changes
in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the statement of comprehensive income,
in the period in which they arise.
The Group establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions,
involving the same instruments or other instruments that are substantially the same and discounted cash flow analysis.
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired.
Impairment testing of trade receivables is described in note B3 b).
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They
arise when the Group provides money, goods or services directly to a customer with no intention of selling the receivable. They are included
in current assets, except for those with maturities greater than 12 months after the balance date which are classified as non-current assets.
The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the balance sheet.
Purchases and sales of financial assets are recognised on trade date (the date on which the Group commits to purchase or sell the asset).
Loans and receivables are carried at amortised cost using the effective interest method.
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45
Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks. The Group does not hold
or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted
for as trading instruments.
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are re-measured
at their fair value at subsequent reporting dates. The method of recognising the resulting gain or loss, depends on whether the derivative
is designated as a hedging instrument and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of
a particular risk associated with a recognised liability or a highly probable forecast transaction (cash flow hedge).
The Group documents at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its
risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in cash flows of hedged items.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is
more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
Trading derivatives are classified as a current asset or liability.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the statement of comprehensive
income within other gains/(losses) – net.
Amounts accumulated in equity are recycled in the statement of comprehensive income in the periods when the hedged item affects profit
or loss (for example, when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate
swaps hedging variable rate borrowings, is recognised in the statement of comprehensive income within finance costs. The gain or loss
relating to the effective portion of forward foreign exchange contracts hedging export sales, is recognised in the statement of
comprehensive income within sales. The gain or loss relating to the effective portion of forward foreign exchange contracts hedging raw
materials purchases, is recognised in the statement of comprehensive income.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or
loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the statement
of comprehensive income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in
equity, is immediately transferred to the statement of comprehensive income within other gains/(losses) – net.
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not
qualify for hedge accounting are recognised immediately in the statement of comprehensive income within other gains/(losses) – net.
D12 c) Changes in accounting policy and disclosures
New standards, amendments and interpretations adopted by the Group as of 1 April 2018
There are no new standards, amendments and interpretations adopted by the Group as of 1 April 2018.
New standards, amendments and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2018 reporting periods
and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out
below.
NZ IFRS 9 Financial instruments
NZ IFRS 9 addresses the classification, measurement and de-recognition of financial assets and financial liabilities, introduces new rules for
hedge accounting and a new impairment model for financial assets.
Management has yet to assess the financial impact of applying the new standard on the Group’s financial statements however have
identified the following areas that will be affected:
Financial assets not in a hedge relationship appear to satisfy the conditions for classification as fair value through profit or loss
and hence there would be no change to the accounting for these.
Financial assets in a hedge relationship would continue to be accounted for under the hedge accounting rules.
Financial liabilities not in a hedge relationship appear to satisfy the conditions for classification as fair value through profit or loss
or amortised cost and hence there would be no change to the accounting for these.
Financial liabilities in a hedge relationship would continue to be accounted for under the hedge accounting rules.
There is no change to the Balance Sheet.
The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than only
incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortised cost, debt instruments
measured at fair value through other comprehensive income, contract assets under IFRS 15 Revenue from Contracts with
Customers, lease receivables, loan commitments and certain financial guarantee contracts.
The new hedge accounting rules will align the accounting for hedging instruments more closely with the Group’s risk management practices.
As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based
approach.
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46
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature
and extent of the Group’s disclosures about its financial instruments, particularly in the year of the adoption of the new standard.
NZ IFRS 9 must be applied for financial years commencing on or after 1 January 2018.
NZ IFRS 15 Revenue from contracts with customers
The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods and services
and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a
good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the
adoption.
Management has yet to assess the effects of applying the new standard on the Group’s financial statements.
NZ IFRS 16 Leases
NZ IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between
operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay
rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change.
The new standard must be applied for financial years commencing on or after 1 January 2019. At this stage, the Group does not intend to
adopt the standard before its effective date. The standard will affect primarily the accounting for the Group’s operating leases with the
main impact increasing lease assets and increasing financial liabilities. Management has yet to assess and quantify the effects of applying
the new standard on the Group’s financial statements.
There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future transactions.
D12 d) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic
substance of the underlying events and circumstances relevant to that entity (‘the functional currency’). The consolidated financial
statements are presented in New Zealand dollars, (‘the presentation currency’), which is the functional currency of the parent.
Transactions and balances
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance date are translated to New Zealand dollars at the foreign exchange rate ruling
at that date. Foreign exchange differences arising on translation are recognised in the statement of comprehensive income, within other
gains/(losses) – net, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment
hedges. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair
value, are translated to New Zealand dollars at foreign exchange rates ruling at the dates the fair value was determined.
Group companies
The assets and liabilities of all of the group companies (none of which have a currency of a hyper-inflationary economy) that have a
functional currency that differs from the presentation currency, including goodwill and fair value adjustments arising on consolidation, are
translated to New Zealand dollars at foreign exchange rates, ruling at the balance date. The revenues and expenses of these foreign
operations are translated to New Zealand dollars, at rates approximating to the foreign exchange rates ruling at the dates of the
transactions.
Exchange differences arising from the translation of foreign operations are recognised in the foreign currency translation reserve.
Borrowings and other currency instruments designated as hedges of such investments are taken to shareholders’ equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and are translated at the foreign exchange rates ruling at the balance date.
D12 e) Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets are reviewed at each balance date to determine whether there is any indication
of impairment. If any such indication exists, the asset’s recoverable amount is estimated being the higher of an asset’s fair value less costs
to sell and the asset’s value in use. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit
exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income.
For goodwill, the recoverable amount is estimated at each balance date. Impairment losses recognised in respect of cash generating units
are allocated first to reduce the carrying amount of any goodwill allocated to cash generating units (group of units) and then, to reduce the
carrying amount of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Refer also note C1 a).
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47
D12 f) Employee entitlements
Superannuation schemes
The Group’s New Zealand and overseas operations participate in their respective government superannuation schemes whereby the Group
is required to pay fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions
if the fund does not have sufficient assets to pay all employees the benefits relating to the employee service in the current and prior periods.
The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee
benefit expense when they are due.
D12 g) Income tax
Income tax on the profit or loss for the years presented, comprises current and deferred tax. Income tax is recognised in the statement of
comprehensive income except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is
recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance
date and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are
not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor
taxable profit and differences relating to investments in subsidiaries, associates and joint venture to the extent that they will probably not
reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance date.
A deferred tax asset shall be recognised for the carry forward of unused tax losses and unused tax credits, to the extent that it is probable
that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.
D13. Imputation balances
D14. Principal subsidiaries
D14 a) Accounting policy
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be
measured at fair value, which shall be calculated as the following: the total of the acquisition date fair values of the assets transferred by
the Group, the liabilities incurred by the Group to former owners, the equity issued by the Group and the amount of any non-controlling
interest in the acquiree either at fair value or at the proportional share of the acquiree’s identifiable net assets. Acquisition related costs
are expensed as incurred.
All material transactions between subsidiaries or between the parent company and subsidiaries are eliminated on consolidation. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost,
with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently
accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities.
This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
20182017
$000s$000s
Imputation credit available for use in subsequent periods11,20211,202
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48
D14 b) Subsidiaries at balance date:
Cou ntry of
incorporation
Bal anc e
date
20182017
Rakon America LLCMarketing supportUSA31-Mar100100
Rakon Singapore (Pte) LimitedMarketing supportSingapore31-Mar100100
Rakon Financial Services LimitedFinancingNew Zealand31-Mar100100
Rakon International LimitedMarketing supportNew Zealand31-Mar100100
Rakon UK Holdings LimitedHolding companyUnited Kingdom31-Mar100100
Rakon UK LimitedResearch and developmentUnited Kingdom31-Mar100100
Rakon France SAS R&D, manufacturing and sales France31-Mar100100
Rakon HK LimitedHolding companyHong Kong31-Mar5050
Rakon (Mauritius) LimitedHolding companyMa urit i us3 1 -Ma r100100
Rakon Investment HK Limited Holding companyHong Kong31-Mar100100
Rakon Crystal Electronic
International Limited
Marketing supportChina31-Mar100100
% interest held by group
Name of e ntit yPrincipal activities
49
50
51
52
53
54
55
56
56
Shareholder Information
Directors
Non-executive directors receive fees determined by the Board on the recommendation of the Remuneration Committee plus reasonable
travelling, accommodation and other expenses incurred in the course of performing duties or exercising powers as directors. Shareholders
approved a total pool of $360,000 for the remuneration of non-executive directors in September 2012. Annual directors’ fees were set at
$120,000 for the Chairman and $60,000 for each non-executive director with effect from 1 April 2017.
Brent Robinson and Darren Robinson (ceased as a director 16 September 2016) are employed by Rakon as Managing Director and Sales &
Marketing Director respectively and receive salary and other remuneration and benefits in respect of their employment. Darren Robinson
ceased as a director on 16 September 2016 and continues to be employed as Rakon’s Sales & Marketing Director.
The following people held office as Directors and received the following remuneration including benefits during the year:
Remuneration
Name Category 2018 2017
Bryan Mogridge Independent Chairman $120,000 $120,000
Bruce Irvine Independent
$60,000 $60,000
Keith Oliver
1
Independent
$60,000 $3,548
Brent Robinson Executive $725,902 $688,692
Yin Tang Tseng
1
Non-Executive
$60,000 $3,548
Roger Yao
2
Non-Executive (Alternate Director of Yin Tang
Tseng)
- -
Lorraine Witten
1
Independent
$60,000 $3,548
Warren Robinson
3
Non-Executive $30,000 $60,000
Darren Robinson
4
Executive - $558,286
Herbert Hunt
5
Independent
- $15,645
Sir Peter Maire
6
Non-Executive
- $55,000
1
Appointed as a Director effective 10 March 2017
2
Appointed by Yin Tang Tseng as his Alternate Director effective 27 June 2017
3
Ceased as a Director of Rakon Limited effective 17 August 2017
4
Ceased as a Director of Rakon Limited effective 16 September 2016
5
Resigned as a Director of Rakon Limited effective 4 July 2016
6
Resigned as a Director of Rakon Limited effective 22 February 2017
Directors of subsidiaries
Directors of the Company’s subsidiaries do not receive any remuneration or other benefits in respect of their appointments. The
remuneration and other benefits of any such Directors (not being Directors of Rakon Limited) who are employees of the Group totalling
$100,000 or more during the year ended 31 March 2018 are included in the relevant bandings for remuneration disclosed on page 58 of
this Annual Report.
The following people held office as Directors of subsidiary companies at 31 March 2018:
Entity Director (or Authorised Representative where noted)
Rakon America LLC John Mundschau (authorised representative)
Rakon Singapore (Pte) Limited Brent Robinson, Darren Robinson, Warren Robinson, Damian Boon
Rakon Financial Services Limited Brent Robinson, Darren Robinson
Rakon International Limited Brent Robinson
Rakon UK Holdings Limited Brent Robinson, Darren Robinson, Sinan Altug, Philip Davies
Rakon UK Limited Brent Robinson, Darren Robinson, Sinan Altug, Philip Davies
Rakon France SAS Brent Robinson
Rakon (Mauritius) Limited
Brent Robinson, Darren Robinson, Neernaysingh Madhour, Kamalam Pillay
Rungapadiachy
Rakon Investment HK Limited Brent Robinson
Rakon Crystal Electronic International Limited Daryoush Shahidi (authorised representative)
Rakon HK Limited Brent Robinson, Darren Robinson, Zhuzhi Ye, Rongguo Chen
Rakon ESOP Trustee Limited Bryan Mogridge, Bruce Irvine
Rakon PPS Trustee Limited Bryan Mogridge, Bruce Irvine
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57
Directors’ interests
As permitted by the Companies Act 1993 and the Company’s constitution, the Company has granted certain indemnities to the Directors
and specified employees of the Company or any related company in respect of liability and legal costs incurred by those Directors and
specified employees in their capacity as Directors and/or employees of the Company or any related company. As permitted by the
Companies Act 1993 and the Company’s constitution, the Company has arranged a policy of Directors’ and officers’ liability insurance, which
insures those persons indemnified for certain liabilities and costs.
The Company maintains an interests register in accordance with the Companies Act 1993 and the Financial Markets Conduct Act 2013. The
following are particulars of entries made in the Company’s interests register for the year 1 April 2017 to 31 March 2018:
Bryan William Mogridge
Shareholder in:
Beneficial interest in 61,616 ordinary shares in Thinxtra Limited following the purchase of 1,616 shares by the Mogridge Family
Trust on 10 November 2017 for a total consideration of $27,624.
Bruce Robertson Irvine
Director of:
Resigned as Director of Christchurch City Holdings Limited on 1 April 2017.
Appointed as Director of Amaia Day Spa Limited on 2 June 2017.
Appointed as Director of USC Investments Limited on 3 November 2017.
Appointed as Director of J.S. Ewers Limited on 1 December 2017.
Appointed as Director of Cowes Bay Holdings (NZ) Limited on 26 April 2018.
Keith William Oliver
Director of:
Appointed as Director of Vigil Nominees No.2 Limited on 19 December 2017.
Brent John Robinson
Director of:
Resigned as Director of Thinxtra Pty. Limited on 22 September 2017.
Warren John Robinson
Director of:
Ceased as Director of Rakon Limited on 17 August 2017.
Lorraine Mary Witten
Director of:
Resigned as Director of Kordia Group Limited on 30 April 2017.
Appointed as Director of TIL Logistics Group Limited on 6 December 2017.
Resigned as Director of Wellington Regional Economic Development Agency on 31 December 2017.
Directors’ shareholdings
Directors’ shareholdings are shown as at balance date.
Name Category 2018
Bryan Mogridge shares held with beneficial interest 2,015,926
shares held with non-beneficial interest
1
2,093,299
Brent Robinson shares held with beneficial interest 34,846,237
held by associated persons 10,339,845
Warren Robinson shares held with beneficial interest 24,930,823
held by associated persons 20,255,259
Bruce Irvine shares held with beneficial interest 454,278
shares held with non-beneficial interest
1
2,093,299
shares held with non-beneficial interest 289,824
1
Bryan Mogridge and Bruce Irvine jointly hold the same parcel of 2,093,299 ordinary shares as trustees of the Rakon ESOP Trustee
Limited
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58
Employees’ remuneration
During the year the number of employees or former employees of Rakon Limited and its subsidiaries, not being Directors of Rakon Limited
received remuneration including the value of other benefits in excess of $100,000 in the following bands:
Remuneration
Number of
employees
Remuneration
Number of
employees
$100,000 – $110,000 26 $230,001 – $240,000 1
$110,001 – $120,000 9 $240,001 – $250,000 2
$120,001 – $130,000 11 $250,001 – $260,000 2
$130,001 – $140,000 11 $260,001 – $270,000 2
$140,001 – $150,000 8 $280,001 – $290,000 2
$150,001 – $160,000 6 $290,001 – $300,000 1
$160,001 – $170,000 8 $310,001 – $320,000 1
$170,001 – $180,000 5 $350,001 – $360,000 1
$180,001 – $190,000 6 $370,001 – $380,000 1
$190,001 – $200,000 5 $460,001 – $470,000 1
$200,001 – $210,000 2 $540,001 – $550,000 1
$210,001 – $220,000 7 $590,001 – $600,000 1
$220,001 – $230,000 3
The remuneration above includes the fair value attributable to employee share schemes.
Substantial security holders
The following information is given pursuant to Section 293 of the Financial Markets Conduct Act 2013.
According to the notices given under the Financial Markets Conduct Act 2013 (or its predecessor the Securities Markets Act 1988), the
following persons were substantial product holders in the Company as at 31 March 2018 in respect of the number of voting securities below.
As at 31 March 2018, the Company had one class of shares on issue, comprising of 229,055,272 voting shares:
Name Shareholding Shareholding %
Siward Crystal Technology Co. Limited beneficial relevant interest
38,016,681
16.60
Trusts Limited non-beneficial relevant interest
24,930,823
10.88
Warren John Robinson beneficial relevant interest
24,930,823
10.88
Brent John Robinson direct beneficial relevant interest 9,915,414 4.33
beneficial relevant interest 24,930,823 10.88
Darren Paul Robinson direct beneficial relevant interest 9,914,180 4.33
beneficial relevant interest 24,930,823 10.88
Spread of security holders as at 26 April 2018
Size of shareholding
Number of
holders
%
Total number
held
%
1 – 99 15 0.32 792 0.00
100 – 199 54 1.16 7,028 0.00
200 – 499 197 4.22 60,139 0.03
500 – 999 283 6.07 185,063 0.08
1,000 – 1,999 662 14.19 863,669 0.38
2,000 – 4,999 1,164 24.95 3,591,618 1.57
5,000 – 9,999 701 15.02 4,573,198 2.00
10,000 – 49,999 1,204 25.80 23,844,200 10.41
50,000 – 99,999 172 3.69 11,472,946 5.01
100,000 – 499,999 177 3.79 32,680,606 14.27
500,000 – 999,999 15 0.32 10,116,194 4.42
1,000,000 – 99,999,999 22 0.47 141,659,819 61.85
Total 4,666 100.00 229,055,272 100.00
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59
Largest security holders as at 26 April 2018
Name Shareholding %
Siward Crystal Technology Co. Limited 38,016,681 16.60
Warren John Robinson & Trusts Limited 24,930,823 10.88
New Zealand Central Securities Depository Limited 19,408,211 8.47
Brent John Robinson 9,915,414 4.33
Darren Paul Robinson 9,914,180 4.33
JBWere (NZ) Nominees Limited (52093 A/C) 8,753,630 3.82
Tahia Investments Limited 5,441,945 2.38
Etimes Group International Limited 3,697,716 1.61
Iconic Investments Limited 2,358,192 1.03
Rakon ESOP Trustee Limited 2,093,289 0.91
Michael Walter Daniel & Nigel Geoffrey Ledgard Burton & Michael Murray
Benjamin (Wairahi A/C)
2,000,000 0.87
Fergus David Elliott Brown 1,837,484 0.80
Craig John Thompson 1,734,829 0.76
HLR Holdings Company Limited 1,584,736 0.69
Stuart Robert Kidd 1,529,000 0.67
F B Trustee Limited 1,507,435 0.66
Trevor John Logan 1,500,000 0.65
Han Meng Tee & Nuanla Or Sodrung 1,255,000 0.55
Pat Redpath O'Connor & Kay O'Connor & Robert Norman Burnes (Hillview A/C) 1,072,430 0.47
Ling Te Hu 1,058,824 0.46
New Zealand Central Securities Depository Limited (NZCSD) is a depository system that allows electronic trading of securities to members.
As at 26 April 2018, the eight largest shareholdings in the Company held through NZCSD were:
Name Shareholding
Accident Compensation Corporation 10,397,262
BNP Paribas Nominees (NZ) Limited 6,391,658
HSBC Nominees (New Zealand) Limited 1,306,235
JPMorgan Chase Bank NA NZ Branch 679,739
Citibank Nominees (New Zealand) Limited 265,080
BNP Paribas Nominees (NZ) Limited 195,079
Public Trust Class 10 Nominees Limited 106,977
ANZ Custodial Services New Zealand Limited 66,181
Waivers
The Company had no NZX waivers granted or published by NZX within or relied upon within the 12 months ending 31 March 2018.
Credit rating
The Company does not currently have an external credit rating status.
Donations
In accordance with section 211(1)(h) of the Companies Act 1993, the Company records that it donated a total of $5,000 to various charities
in the 12 months ended 31 March 2018. The Company’s subsidiaries did not make any donations in the 12 months ended 31 March 2018.
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60
Corporate Governance Report
The Board of Rakon Limited (Rakon) is committed to conducting business in the right way and maintaining the highest standards of corporate
behaviour and accountability. Rakon’s Board regularly reviews the corporate governance framework and supports best practice reporting.
The Board considers that its corporate governance framework is in line with the NZX Corporate Governance Code released in 2017 (NZSX
Code), except as stated within this report. In this regard, there are several items which Rakon is progressing to ensure compliance with the
NZX Code. The information in this report is current as at the date of release of this Annual Report and has been approved by the Board of
Rakon.
The key corporate governance documents referred to in this report are available on Rakon’s website at
http://www.rakon.com/corporate/investor/ir-gov
Rakon is listed on the NZX’s Main Board and is subject to regulatory control and monitoring by both the NZX and the Financial Markets
Authority (FMA).
Principle 1 Code of Ethical Behaviour
Directors should set high standards of ethical behaviour, model this behaviour and hold management accountable for these standards
being followed throughout the organisation.
Rakon is committed to ensuring the highest ethical standards are maintained by Directors, staff and suppliers in all activities conducted by
or in the interests of the Company.
These standards, as well as guiding principles, are set out in Rakon’s Business Code of Conduct which is available on the Company’s website
and was last reviewed in August 2015. The Code will be reviewed again in FY2019. Additional guidance for Directors is provided in the Board
Charter which was last reviewed in March 2018.
The Code of Conduct requires Directors and employees to promptly report material breaches of the Code. A separate Whistle Blowing Policy
will be developed by the Board in FY2019.
Rakon has in place processes to enable training for all new and existing employees to ensure awareness and understanding of the Business
Code of Conduct.
Rakon has a Financial Product Trading Policy to mitigate the risk of insider trading in Rakon securities by employees and Directors. A copy
of this is available on Rakon’s website. This was last reviewed and updated in March 2018. Additional trading restrictions apply to Restricted
Persons including Directors and certain employees. Details of Directors’ share dealings are on page 57 of the 2018 Annual Report.
Principle 2 Board Composition and Performance
To ensure an effective Board, there should be a balance of independence, skills, knowledge, experience and perspectives.
The Rakon Board has ultimate responsibility for the strategic direction of Rakon and oversight of the management of Rakon, with the aim
of increasing shareholder value and ensuring the obligations of the Company are met.
Rakon’s Board operates under a written Charter which sets out the structure of the Board; the procedures for the nomination, resignation
and removal of Directors; outlines the responsibilities and roles of the Chairman and Directors; and identifies procedures to ensure that the
Board meets regularly, conducts its meetings in an efficient and effective manner and that each Director is fully empowered to perform his
or her duties as a Director of the Company and to fully participate in meetings of the Board.
Day to day management of Rakon is undertaken by the executive teams under the leadership of the Managing Director, through a set of
delegated authorities that are reviewed regularly.
In discharging their duties, Directors have direct access to and may rely upon Rakon’s senior management and external advisers. Directors
have the right, with the approval of the Chairman or by resolution of the Board, to seek independent legal or financial advice at the expense
of Rakon for the proper performance of their duties.
Board Composition and Appointment
The number of elected Directors and the procedure for their retirement and re-election at Annual Shareholders’ Meetings are set out in the
Constitution of the Company.
While the nomination process for new Director appointments is the responsibility of the whole Board, the Nomination Committee is
responsible for identifying and recommending candidates, taking into account such factors as it deems appropriate, including tenure,
capability, skill sets, experience, diversity, qualifications, judgement and the ability to work with other Directors.
At each Annual Shareholders’ Meeting, one-third of the current Directors retire by rotation and are eligible for re-election. Any Directors
appointed since the previous annual meeting must also retire and are eligible for election. In accordance with the Constitution, the Board
has resolved that the Managing Director will not be required to retire by rotation.
The Board supports the separation of the roles of Chairman and CEO and the appointment of an independent chairman.
In compliance with the new NZX Code, Rakon will provide written agreements to existing and new Directors in FY2019.
The Board currently comprises of six Directors: an independent Chairman, three independent Directors, one non-executive Director and the
Managing Director. In order for a director to be independent, the Board has determined that he or she must not be an executive of Rakon
and must have no disqualifying relationships. The Board follows the guidelines of the NZX Listing Rules.
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Information on each Director is available on the Rakon website and on page 56 of the 2018 Shareholder Information which accompanies
the 2018 Annual Report. Director’s interests are disclosed on page 57 of the 2018 Annual Report.
The Company encourages all Directors to undertake appropriate training and education so that they may best perform their duties. This
includes attending presentations on changes in governance, legal and regulatory frameworks; attending technical and professional
development courses; and attending presentations from industry experts and key advisers. In addition, updates are provided to the Board
on relevant industry and Company issues. A number of Rakon’s Directors are members of the Institute of Directors.
The Board regularly considers individual and collective performance, together with the skill sets, training and development and succession
planning required to govern the business. An evaluation of Board performance will be undertaken in FY2019.
Diversity
Rakon recognises the value of diversity of thinking and skills. This can arise through a number of different characteristics including but not
limited to the following; gender, ethnic background, religion, age, marital status, culture, disability, economic background, education,
language, physical appearance and sexual orientation. Different backgrounds, communication styles, life-skills and interpersonal skills are
also considered of value in building diverse teams.
In FY2019, Rakon will look to develop a formal Diversity and Inclusion Policy and will set objectives for promoting diversity and inclusion
within the Company.
As at 31 March 2018, females represented 14% (FY17: 14%) of Directors and officers of the Company. Officers are defined as being the Chief
Executive Officer and specific direct reports of the CEO having key functional responsibility.
31 March 2018 31 March 2017
Directors
Females
1 1
Males
5 6
Officers
Females 1 1
Males 7 6
Board Meetings and Attendance
The Board meets as often as it deems appropriate, including sessions to review the performance of the business versus plans and to consider
the strategic direction of Rakon and its forward-looking business plans. Video and/or phone conferences are also used as required.
The table below sets out Director attendance at Board and committee meetings during FY2018. In total, there were thirteen Board meetings,
two Audit and Risk Management Committee meetings, three Remuneration Committee meetings and two Nomination Committee
meetings.
Board
Meetings
Audit & Risk
Management
Committee
Remuneration
Committee
Nomination
Committee
Total number of meetings held 13 2 3 2
Bryan Mogridge 13 2 3 2
Bruce Irvine 12 2 - -
Keith Oliver 13 - 3 2
Brent Robinson 13 - - -
Warren Robinson
1
5 1 - -
Lorraine Witten 11 - 3 2
Roger Yao: Alternate director appointment for
Yin Tang Tseng
2
12 - - -
1
Ceased as Director of Rakon Limited 17 August 2017.
2
Roger Yao was appointed by the Board as alternate director for Yin Tang (Tony) Tseng in June 2017. He attends Rakon Board meetings and
provides support for Tony, who continues to be actively engaged in the activities of the Board. Tony is the current Chairman of Siward
Crystal Technology Co. Limited, a substantial shareholder (16.6%) in Rakon.
Principle 3 – Committees
The Board should use committees where this will enhance its effectiveness in key areas, while still retaining Board responsibility.
The Board has delegated a number of its responsibilities to committees to assist in the execution of the Board’s responsibilities.
The Board committees review and analyse policies and strategies that are within their terms of reference. They examine proposals and,
where appropriate, make recommendations to the full Board. Committees do not take action or make decisions on behalf of the Board
unless specifically mandated by prior Board authority to do so.
The committees meet as required and have terms of reference (Charters), which are approved and reviewed by the Board. Copies of
committee Charters are on the Rakon website.
Minutes of each committee meeting are forwarded to all members of the Board, who are all entitled to attend any committee meeting.
Each committee is empowered to seek any information it requires from employees in pursuing its duties and to obtain independent legal
or other professional advice.
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The membership and performance of each committee is to be evaluated as part of the Board performance evaluation, to be undertaken in
FY2019.
The current committees of the Board are the Audit and Risk Management Committee (ARMC), the Remuneration Committee and the
Nomination Committee.
From time to time, special purpose committees may be formed to review and monitor specific projects with senior management.
In the case of a takeover offer, Rakon will form an Independent Takeover Committee to oversee disclosure and response, and engage expert
legal and financial advisors to provide advice on procedure.
Audit and Risk Management Committee
The Audit and Risk Management Committee is responsible for overseeing the risk management (including treasury and financing policies),
insurance, accounting and audit activities of Rakon; and for reviewing the adequacy and effectiveness of internal controls, meeting with
and reviewing the performance of external auditors, reviewing the consolidated financial statements and making recommendations on
financial and accounting policies.
The Committee must be comprised solely of Directors of Rakon, have a minimum of three members, have a majority of independent
Directors and have at least one Director with an accounting or financial background. The makeup of the current members of this committee
complies with this recommendation.
Members as at 31 March 2018 were Bruce Irvine (Chair), Bryan Mogridge, and Lorraine Witten. The committee Chair is not the Chair of the
Board.
Management may attend meetings only at the invitation of the Committee and the Committee routinely has committee-only time with the
external auditors without management present.
Remuneration Committee
The Remuneration Committee is responsible for overseeing management succession planning, establishing employee incentive schemes,
reviewing and approving the compensation arrangements for the executive Director and senior management, and recommending to the
full Board the compensation of Directors. Management may attend meetings only at the invitation of the Committee.
Members as at 31 March 2018 were Bryan Mogridge (Chair), Keith Oliver, and Lorraine Witten.
Nomination Committee
The Nomination Committee is responsible for ensuring the Board is composed of Directors who contribute to the successful management
of the Group, ensuring formal review of the performance of the Board, individual Directors and the Board’s committees, and ensuring that
effective induction and training programmes are in place for new and existing Directors. Management may attend meetings only at the
invitation of the Committee.
The members of the Nomination Committee as at 31 March 2018 were Bryan Mogridge (Chair), Keith Oliver and Lorraine Witten.
Principle 4 – Reporting and Disclosure
The Board should demand integrity in financial and non-financial reporting, and in the timeliness and balance of corporate disclosures.
Rakon’s Directors are committed to keeping investors and the market informed of all material information about the Company and its
performance, in a timely manner. Rakon has a Continuous Disclosure Policy to ensure that material information is identified, reported,
assessed and, where required, disclosed to the market in a timely manner. This was adopted by the Board in March 2018.
In addition to all information required by law, Rakon also seeks to provide sufficient meaningful information to ensure stakeholders and
investors are well informed, including financial and non-financial information.
Financial Information
Rakon’s business management teams are responsible for implementing and maintaining appropriate accounting and financial reporting
principles, policies, and internal controls designed to ensure compliance with accounting standards and applicable laws and regulations.
The Board’s Audit and Risk Management committee oversees the quality and integrity of external financial reporting, including the accuracy,
completeness, balance and timeliness of financial statements. It reviews Rakon’s full and half year financial statements and makes
recommendations to the Board concerning accounting policies, areas of judgement, compliance with accounting standards, stock exchange
and legal requirements, and the results of the external audit. All matters required to be addressed and for which the committee has
responsibility were addressed during the reporting period.
For the financial year ended 31 March 2018, the Directors believe that proper accounting records have been kept that enable the
determination of the Company’s financial position with reasonable accuracy, and facilitate compliance of the financial statements with the
Financial Markets Conduct Act 2013. The Chief Executive Officer and Chief Financial Officer have confirmed in writing to the Board that
Rakon’s external financial reports present a true and fair view in all material aspects.
Rakon’s full and half year financial statements are available on the Company’s website.
Non-financial information
Rakon discusses its strategic objectives and its progress against these in the Chair and CEO’s commentary in shareholder reports.
Rakon is committed to ensuring the protection of the world's environment and natural resources. As part of this commitment, Rakon has
achieved ISO14001 certification at the following sites: Auckland ‒ New Zealand, Pont Sainte Marie – France and Bangalore ‒ India.
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Across its global facilities, Rakon is integrating an Environmental Management System (EMS) to deliver continuous improvement in this
area.
Details of Rakon’s commitment to a clean green environment and human rights can be viewed on the Company’s website at
http://www.rakon.com/corporate/about/corp-policies. This includes the Company’s policy on the restriction of hazardous substances
(RoHS/RoHS2); and Rakon’s positions on Conflict Minerals and Slavery and Human Trafficking.
The Company also invests in a number of social responsibility initiatives that support staff, customers and the communities in which it
operates.
Principle 5 – Remuneration
The remuneration of Directors and executives should be transparent, fair and reasonable.
Remuneration of Directors and senior executives is the key responsibility of the Remuneration Committee. External advice is sought on a
regular basis to ensure that remuneration is benchmarked to the market for senior management, Director and Board positions. While Rakon
has established guidelines in place in regard to remuneration, it will look to develop a formal Remuneration Policy in FY2019.
Director Remuneration
The total remuneration available for Directors is fixed by shareholders. The Board determines the level of remuneration paid to Directors
from the approved collective pool. Directors also receive reimbursement for reasonable travelling, accommodation and other expenses
incurred in the course of performing their duties.
The annual fee pool limit is $360,000 and was approved by shareholders at the Annual Shareholders’ Meeting in September 2012. There
have been no increases in the individual amounts paid for Board roles since 2008. The only increases have been to the annual pool to allow
for the appointment of an increased number of Directors.
Any proposed increases in non-executive Director fees and remuneration will be put to shareholders for approval. If independent advice is
sought by the Board, it will be disclosed to shareholders as part of the approval process.
Board Role Approved Remuneration
Chairman $120,000
Non-executive Director $60,000
Executive Director -
Details of individual Directors’ remuneration are detailed on page 56 of the 2018 Annual Report.
Executive Remuneration
In general, executive remuneration comprises a fixed base salary and an at-risk short-term incentive payable annually. Some executives also
receive fringe benefits and/or a long term incentive in the form of a share plan that has been made available to participating executives and
senior managers. At-risk incentives are paid against targets agreed with executives at the commencement of the period and are based on
financial measures including earnings targets and progress against objectives related to the strategic plan and other personal objectives.
Executives’ remuneration and entitlements are detailed under Employees Remuneration information on page 58 of the 2018 Annual Report.
CEO Remuneration
The review and approval of the CEO’s remuneration is the responsibility of the Board.
External advice is sought on the remuneration of the CEO and was last obtained in 2016.
The CEO’s remuneration comprises a fixed base salary, fringe benefits, and an at-risk short-term incentive payable annually. At-risk
incentives are paid against targets agreed with the CEO, and are based on financial measures including earnings targets and progress against
objectives related to the strategic plan and other personal objectives.
Salary
Benefits
Subtotal
At Risk Incentive
Total
Remuneration
STI
1
% STI against
maximum
FY2018
$619,358
$33,044
$652,402
$73,500
40%
$725,902
FY2017
$656,053
$32,639
$688,692
-
0%
$688,692
1
STI (short term incentive) is based on payments made in the period but relates to assessment of performance in the prior period.
Principle 6 – Risk Management
Directors should have a sound understanding of the material risks faced by the issuer and how to manage them. The Board should
regularly verify that the issuer has appropriate processes that identify and manage potential and material risks.
The Board has overall responsibility for the Company’s system of risk management and internal control. The Board delegates day to date
management of the risk to the Chief Executive Officer. In addition, the Audit and Risk Management Committee provides an additional and
more specialised oversight of Company risks in addition to the oversight provided by the Board. The Audit and Risk Management
Committee’s Charter details the specific responsibilities of the Committee in regard to risk assurance.
The executive team and senior management are required to regularly identify the major risks affecting the business and develop structures,
practices and processes to manage and monitor these risks. Each half year the Chief Financial Officer also reports on other risks including
fraud, and on internal control and insurances.
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The Board is satisfied that major risks are reviewed and also intends to implement a more detailed risk management framework in FY2019.
Rakon maintains insurance policies that it considers adequate to meet its insurable risks.
More details of Rakon’s financial risk management are available on pages 25 to 29 of the 2018 Annual Report.
Health and Safety
The Rakon Board recognises that effective management of health and safety is essential for the operation of a successful business, and its
intent is to prevent harm and promote wellbeing for employees, contractors and customers. The Board is responsible for ensuring that the
systems used to identify and manage health and safety risks are fit for purpose, being effectively implemented, regularly reviewed and
continuously improved.
Rakon has a number of operational subsidiary businesses in New Zealand, France and the UK, each of which is responsible for managing its
own health and safety framework. Each business prepares monthly reports which are submitted to Rakon’s General Manager People &
Capability, and a monthly report to the Board provides an update on Key Performance Indicators, activities and key events. The Board is
satisfied that there is a comprehensive health and safety system and processes in place.
Incident rates is a key measure reported to the Board for the operational subsidiary businesses. The Company has achieved a low level of
Lost Time Injuries with only one incurred in the year to 31 March 2018.
Rakon is currently formalising a Health & Safety Policy to ensure consistency of behaviour, processes and expectations across all subsidiary
businesses.
Principle 7 – Auditors
The Board should ensure the quality and independence of the external audit process.
The Rakon Board is committed to ensuring audit independence, both in fact and appearance, so that Rakon’s external financial reporting is
viewed as being highly objective and without bias.
The Audit and Risk Management Committee (ARMC) reviews the quality and cost of the audit undertaken by the Company’s external
auditors and provides a formal channel of communication between the Board, senior management and external auditors.
The Committee meets regularly with the external auditor to approve its terms of engagement, audit partner rotation (at least every five
years) and audit fee, and to review and provide feedback in respect of the annual audit plan. A comprehensive review and formal assessment
of the independence and effectiveness of the external auditor is undertaken periodically. The Committee routinely has time with the
external auditor without management present. The ARMC also assesses the auditor’s independence on an annual basis.
For the financial year ended 31 March 2018, PricewaterhouseCoopers (PwC) was the external auditor for Rakon Limited. PWC was re-
appointed under the Companies Act 1993 at the 2017 Annual Meeting. The last audit partner rotation was in 2016.
All audit work at Rakon is fully separated from non-audit services, to ensure that appropriate independence is maintained. Other services
provided by PWC in FY2018 were the review of the Callaghan Innovation Growth Grant claim and other
non-audit related services that
involved the provision of advice rather than recommendations. These were deemed to have no effect on the independence or objectivity
of the auditor in relation to audit work. The amount of fees paid to PWC for audit and non-audit work are identified on page 14 of the 2018
Annual Report. An External Auditor Independence Policy will be prepared in FY2019 to formally set out the services that may or may not be
performed by the external auditor.
PWC has provided the ARMC with written confirmation that, in its view, it was able to operate independently during the year.
PWC attends the Annual Shareholders’ Meeting, and the lead audit partner is available to answer questions from shareholders at that
meeting. PwC attended the 2017 Annual Shareholders’ Meeting.
Rakon has a number of internal controls overseen by the ARMC and/or the Board. These include controls for computerised information
system, cyber risk and information security, business continuity management, insurance, health and safety, conflicts of interest, and
prevention and identification of fraud. The Company does not have an internal audit function.
Principle 8 – Shareholder Rights and Relations
The Board should respect the rights of shareholders and foster constructive relationships with shareholders that encourage them to
engage with the issuer.
The Board is committed to open and regular dialogue and engagement with shareholders. Rakon seeks to ensure that investors understand
its activities by communicating effectively with them and giving them access to clear and balanced information.
Rakon has a calendar of communications and events for shareholders, including but not limited to:
Annual and Interim Reports
Market announcements
Annual Shareholders’ Meeting
Ad hoc investor presentations to institutional investors and retail brokers
Easy access to information through the Rakon website www.rakon.com
Access to management and the Board via a dedicated email address investors@rakon.com.
Shareholders are actively encouraged to attend the Annual Shareholders’ Meeting and may raise matters for discussion at this event, and
may vote on major decisions that affect Rakon. Voting is by poll, upholding the ‘one share, one vote’ philosophy.
In accordance with the Companies Act 1993, Rakon’s Constitution and the NZX Main Board Listing Rules, Rakon refers major decisions that
may change the nature of the Company to shareholders for approval.
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All shareholders are given the option to elect to receive electronic communications from the Company.
In addition to shareholders, Rakon has a wide range of stakeholders and maintains open channels of communication for all audiences,
including brokers, the investing community, the New Zealand Shareholders’ Association, regulators, staff, customers and suppliers.
Exercise of disciplinary powers
No disciplinary action has been taken by either the NZX or the FMA against the Company during the financial year ended 31 March 2018.
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Directory
Registered Office
Rakon Limited
8 Sylvia Park Road
Mt Wellington
Auckland 1060
Telephone: +64 9 573 5554
Facsimile: +64 9 573 5559
Website: www.rakon.com
Mailing Address
Rakon Limited
Private Bag 99943
Newmarket
Auckland 1149
Directors
Bruce Irvine
Bryan Mogridge
Keith Oliver
Brent Robinson
Roger Yao
Yin Tang Tseng
Lorraine Witten
Principal Lawyers
Bell Gully
PO Box 4199
Shortland Street
Auckland 1140
Auditors
PricewaterhouseCoopers
Private Bag 92162
Auckland 1142
Share Registrar
Computershare Investor Services Limited
Private Bag 92119
Victoria Street West
Auckland 1142
Managing Your Shareholding Online:
To change your address, update your payment instructions
or view your investment portfolio including transactions, please visit:
www.investorcentre.com/nz
General enquiries can be directed to:
enquiry@computershare.co.nz
Telephone: +64 9 488 8777
Facsimile: +64 9 488 8787
Bankers
ASB Bank
PO Box 35
Shortland Street
Auckland 1140
www.rakon.com
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.