Rakon HY2019 Preliminary Results Announcement

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Results for announcement to the market
Date: 15 November 2018
Rakon Limited (RAK)

Rakon Limited
Results for announcement to the market
Reporting period 6 months to 30
th
September 2018
Previous reporting period 6 months to 30
th
September 2017

Unaudited Amount NZ$000 % Change
Revenue from ordinary activities 53,309 +10%
Underlying EBITDA
c
(Earnings before interest, tax, depreciation,
amortisation, impairment, employee share schemes, non-controlling
interests, adjustments for associates and joint ventures share of
interest, tax & depreciation and other cash & non-cash items)
5,879
a
+55%
Profit/(loss) from ordinary activities after tax
attributable to security holders
9,199
b
+913%
Net profit/(loss) attributable to security holders 9,199
b
+913%
Note a: includes share of Underlying EBITDA from associates and joint ventures of $1,190,000
(September 2017: $488,000).
b: includes equity accounted earnings from associates and joint ventures of $570,000
(September 2017: -$543,000).
c: Further information regarding the disclosure and use of non-GAAP financial information is
disclosed at Note B1 (Notes to the Unaudited Consolidated Interim Financial Statements) in
this results announcement.


Amount per security Imputed amount per security
Interim / Final Dividend Nil dividend proposed Nil dividend proposed
Record Date Not Applicable Not Applicable
Dividend Payment Date Not Applicable Not Applicable

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COMMENTS

15 NOVEMBER 2018 (RAK)

Strong first half performance
Global high tech company Rakon Limited (‘Rakon’) continues its positive performance, having posted
a net profit after tax of $9.2m
1
(HY2018: $0.9m) and Underlying EBITDA of $5.9m (HY2018: $3.8m) for
the six months to 30 September 2018. Included in net profit after tax is a one off gain of $7.2m from
a change in the classification of the company’s investment in Thinxtra Pty Limited (‘Thinxtra’).
Managing Director Brent Robinson said that, disregarding the Thinxtra gain, it was pleasing to see the
growth in Rakon’s core business with higher sales and margin from the Telecommunications and
Defence market segments.
Mr Robinson noted, in particular, the increase in forecast demand from the Telecommunications
market with the continuing roll out of 4/4.5G and 5G infrastructure. The challenge for Rakon is to
capture the demand and deliver to customers’ requirements.
“The acquisition of Centum Rakon India (‘CRI’) which is a key part of the Group’s manufacturing
strategy, was completed in May 2018 and it was pleasing to see the turnaround in its profit
performance under Rakon’s control,” he said.
Net debt was $3.9m at 30 September 2018 with increases in inventory and capital expenditures. These
increases have been predominantly to:
 meet higher forecast demand from the Telecommunications market
 enable the launch of key new products for the Telecommunications market
 put in place infrastructure to allow CRI to operate independently from Rakon’s previous joint
venture partner
 purchase electronic components to mitigate supply risk due to industry shortages
Mr Robinson said the appointments of a new Chair, Director and Company Secretary have refreshed
the leadership and governance group.
In June 2018 the accounting treatment of Rakon’s investment in Thinxtra changed with the effect
that it is now recognised at fair value. Fair value was calculated on the basis of an independent
external valuation report, resulting in the one-off gain of $7.2m.
The company reports total equity of $96.0m and net asset backing per share of $0.42.
The Directors confirm that the HY2019 preliminary results announcement is based on unaudited
results.


1
All amounts are in NZD unless otherwise indicated.


-ends-

Contact: Media Enquiries:
Brent Robinson (CEO) Louise Howe (Media Liaison)
09 571 9201 021 206 0985

Anand Rambhai (CFO)
09 571 9225

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About Rakon
Rakon is a global high technology company that designs and manufactures world-leading frequency
control and timing solutions. Its products enable connectivity for a wide range of applications. The
company’s three core markets are telecommunications, global positioning and space & defence.
Rakon has a global footprint including five manufacturing plants, six research and development
centres and 16 customer support locations. Rakon is proud of its New Zealand heritage; it was
founded in Auckland in 1967. It is a public company listed on the New Zealand stock exchange, NZSX,
ticker code RAK.

www.rakon.com

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Unaudited Consolidated Interim Statement of Comprehensive Income
For the period ended 30 September 2018



The accompanying notes form an integral part of these financial statements.
Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
Note $000s$000s$000s
Continuing operations
RevenueB1 d)53,30948,278101,127
Cost of sales(28,715)(28,137)(57,828)
Gross profit24,59420,14143,299
Other operating incomeB3 a)16882,421
Other gains – net6454924,624
Re-measurement on change in treatment - Thinxtra sharesB5 c)7,172
--
Net loss from business combinationB4 b)(69)
--
Operating expensesB2(23,492)(19,490)(41,626)
Impairment
--
(120)
Operating profit8,8511,8318,598
Finance income9
-
3
Finance costs(186)(227)(504)
Share of net profits/ (losses) of associates and joint ventureB5 b)570(543)(1,915)
Net dilution gain on Thinxtra shares
--
4,815
Profit before income tax9,2441,06110,997
Income tax expense(45)(153)(998)
Net profit for the period9,1999089,999
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Decrease in fair va lue cash flow hedges(3,454)(313)(372)
Cost of hedging154
--
Increase in fair va lue currency translation differences2,1251,4672,766
Income tax credit relating to components of other comprehensive
income
96788104
Other comprehensive (losses)/income for the period, net of tax (208)1,2422,498
Total comprehensive income for the period8,9912,15012,497
Profit attributable to equity holders of the Company9,1999089,999
Total comprehensive profit attributable to equity holders of the
Company
8,9912,15012,497
Earnings per share for profit attributable to the equity holders of the
Company from continuing operations
CentsCentsCents
Basic earnings per share4.1 0.4 4.4
Diluted earnings per share4.0 0.4 4.3

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Unaudited Consolidated Interim Statement of Changes in Equity
For the period ended 30 September 2018


The accompanying notes form an integral part of these financial statements.
Share capital
Retained
earningsOther reservesTotal equity
$000s$000s$000s$000s
Balance at 31 March 2017
1 8 1 ,0 3 5 (8 3 ,2 1 8 ) (2 3 ,2 6 0 ) 7 4 ,5 5 7
Net profit after tax for the half year ended 30 September
2017
-
9 0 8
-
9 0 8
Contribution of equity, transaction cost
(1 1 )
- -
(1 1 )
Currency translation differences
- -
1 ,4 6 7 1 ,4 6 7
Cash flow hedges, net of tax
- -
(2 2 5 ) (2 2 5 )
Total comprehensive loss for the half year
(1 1 ) 9 0 8 1 ,2 4 2 2 ,1 3 9
Employee share schemes
Value of employee services
- -
8 8
Balance at 30 September 2017
1 8 1 ,0 2 4 (8 2 ,3 1 0 ) (2 2 ,0 1 0 ) 7 6 ,7 0 4
Net profit after tax for the half year ended 31 March 2018
-
9 ,0 9 1 - 9 ,0 9 1
Currency translation differences
- -
1 ,2 9 9 1 ,2 9 9
Cash flow hedges, net of tax
- -
(4 3 ) (4 3 )
Total comprehensive income for the half year
- 9 ,0 9 1 1 ,2 5 6 1 0 ,3 4 7
Balance at 31 March 2018
1 8 1 ,0 2 4 (7 3 ,2 1 9 ) (2 0 ,7 5 4 ) 8 7 ,0 5 1
Net profit after tax for the half year ended 30 September
2018
-
9 ,1 9 9
-
9 ,1 9 9
Currency translation differences
- -
2 ,1 2 5 2 ,1 2 5
Cash flow hedges, net of tax
- -
(2 ,3 3 3 ) (2 ,3 3 3 )
Total comprehensive income for the half year
- 9 ,1 9 9 (2 0 8 ) 8 ,9 9 1
Balance at 30 September 2018
1 8 1 ,0 2 4 (6 4 ,0 2 0 ) (2 0 ,9 6 2 ) 9 6 ,0 4 2

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Unaudited Consolidated Interim Balance Sheet
As at 30 September 2018

The accompanying notes form an integral part of these financial statements.
Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
Note$000s$000s$000s
Assets
Current assets
Cash and cash equiva lents2,6293,56610,364
Trade and other receiva bles34,97322,82428,395
Financial asset at fair va lue through profit and loss1165211
Deriva tive financial instruments696761,078
Inventories37,44426,28124,171
Current income tax asset82010146
Assets classified as held for sale
-
2,090
-
Total current assets75,94655,51264,365
Non-current assets
Trade and other receiva bles2,9592,1662,716
Property, plant and equipment17,24311,11313,481
Intangible assets10,27610,7809,115
Deriva tive financial instruments278673334
Financial asset at fair va lue through other comprehensive incomeB5 c)12,176
--
Investment in associates B5 b)9,95411,60214,640
Interest in joint ventureB5 b)
-
3,4512,876
Deferred tax asset8,2096,5605,906
Total non-current assets61,09546,34549,068
Total assets137,041101,857113,433
Liabilities
Current liabilities
Bank overdraft6,2011,3622,824
Borrowings2942,52698
Trade and other payables26,16915,65219,107
Deriva tive financial instruments1,550168235
Provisions354464961
Deferred considerationB4 a)1,832
--
Deferred revenue1011,847101
Total current liabilities36,50122,01923,326
Non-current liabilities
Deriva tive financial instruments1,15415978
Borrowings
-
19
-
Provisions3,1002,9222,734
Deferred tax liabilities24434244
Total non-current liabilities4,4983,1343,056
Total liabilities40,99925,15326,382
Net assets96,04276,70487,051
Equity
Share capital181,024181,024181,024
Other reserves(20,962)(22,010)(20,754)
Accumulated losses(64,020)(82,310)(73,219)
Total equity96,04276,70487,051

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Unaudited Consolidated Interim Statement of Cash Flows
For the period ended 30 September 2018

The accompanying notes form an integral part of these financial statements.
Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2018
2017
2018
Note
$000s
$000s
$000s
Operating activities
Cash provided from
Recei pts from cus tomers
54,754
52,124
101,691
Income tax refund
29
-
-
R&D grants recei ved
305
1,405
1,726
Other i ncome recei ved
9
-
3
55,097
53,529
103,420
Cash was applied to
Payment to s uppl i ers and others
(34,598)
(29,622)
(57,998)
Payment to empl oyees
(23,680)
(18,668)
(36,735)
Interes t pai d
(140)
(248)
(536)
Income tax pai d
(107)
(62)
(247)
(58,525)
(48,600)
(95,516)
Net cash flow from operating activities
(3,428)
4,929
7,904
Investing activities
Cash was provided from
Net proceeds from s al e of Thi nxtra s hares
-
-
3,178
Sal e of property, pl ant and equi pment
16
-
4,754
16
-
7,932
Cash was applied to
Purchas e of property, pl ant and equi pment
(2,115)
(255)
(3,236)
Purchas e of i ntangi bl es
(223)
(688)
(840)
Inves tment i n s hares and as s oci ates
(5,848)
-
-
(8,186)
(943)
(4,076)
Net cash flow from investing activities
(8,170)
(943)
3,856
Financing activities
Cash was applied to
Share i s s uance cos t
-
(11)
(11)
Repayment of pri nci pal on borrowi ngs
-
(2,016)
(4,500)
Fi nance l eas e payments
(13)
-
(31)
Cash was applied to financing activities
(13)
(2,027)
(4,542)
(13)
(2,027)
(4,542)
Net (decrease)/increase in cash and cash equivalents
(11,611)
1,959
7,218
Effects of exchange rate changes on cas h and cas h equi val ents
499
169
246
Cas h and cas h equi val ents at the begi nni ng of the year
7,540
76
76
Cash and cash equivalents at the end of the period
(3,572)
2,204
7,540
Composition of cash and cash equivalents
Cas h and cas h equi val ents
2,629
3,566
10,364
Bank overdraft
(6,201)
(1,362)
(2,824)
Total cash and cash equivalents
(3,572)
2,204
7,540

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Unaudited Consolidated Interim Statement of Cash Flows
For the period ended 30 September 2018

The accompanying notes form an integral part of these financial statements.
Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
Note
2018
2017
2018
Reconciliation of net profit to net cash flows from operating activities
Reported net profit after tax
9,199
908
9,999
Following adjustments:
Depreci ati on expens e
1,716
1,336
2,504
Amorti s ati on expens e
1,065
971
1,838
Impai rment
-
-
120
Increas e/(decreas e) i n es ti mated doubtful debts
-
7
7
Provi s i on for res tructure
-
-
159
Empl oyee s hare bas ed expens e
-
8
8
Movement i n forei gn currency
(32)
(16)
(590)
Moneti s ed cas h fl ow hedge, net of tax
-
(941)
(1,096)
Deferred revenue
̶ Si ward technol ogy l i cens e agreement
-
(687)
(2,351)
Share of net profi ts / (l os s es ) of as s oci ates and j oi nt venture
B5 b)
(570)
543
1,915
Deferred tax
-
-
382
(Gai n)/l os s on di s pos al of property, pl ant and equi pment
(16)
12
(2,155)
Thi nxtra s hares - fai r val ue adj us tment
B5 c)
(7,172)
-
(1,852)
Net Di l uti on gai n on Thi nxtra s hares
-
-
(4,815)
Net l os s from bus i nes s combi nati on
B4 b)
69
-
-
Total items cash flow adjusted for
(4,940)
1,233
(5,926)
Impact of changes in working capital items
Trade and other recei vabl es
(2,268)
5,424
(146)
Provi s i on for res tructure
(252)
(420)
(645)
Inventori es
(7,404)
(1,995)
115
Trade and other payabl es
2,278
(307)
4,557
Tax provi s i ons
(41)
86
(50)
Total impact of changes in working capital items
(7,687)
2,788
3,831
Net cash flow from operating activities
(3,428)
4,929
7,904

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Notes to the Unaudited Consolidated Interim Financial Statements
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 and have been approved
for issue by Rakon’s Board of Directors (‘the Board’) on 15 November 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)”, refer note B1 c).
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. Underlying EBITDA is considered by the Directors 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 period, 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

NZUKFranceIndia
7
China ̶
T'maker
1
India ̶
Centum
Rakon
2
Australia ̶
Thinxtra
6
Other
3
Total
$000s$000s$000s$000s$000s$000s$000s$000s$000s
Sales to external customers32,726-18,6031,980----53,309
Inter-segment sales174-1048,288----8,566
Segment revenue32,900-18,70710,268----61,875
Underlying EBITDA6,186848(3,457)1,2941,355124(289)(182)5,879
Depreciation and amortisation1,138258900484---12,781
Income tax (expense)/credit
-4316----(104)(45)
Total assets
4
56,3233,37332,59121,1779,954--13,623137,041
Investment in associates----9,954---9,954
Investment in joint venture---------
Additions of property, plant,
equipment and intangibles
1,130271547109----2,057
Total liabilities
5
19,63147112,7438,019---13540,999
Unaudited six months ended 30 September 2018

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1
Includes Rakon Limited’s 40% share of investment in Chengdu Timemaker Crystal Technology Co. Limited and Shenzhen Taixiang
Wafer Co. Limited, refer note B5.
2
Included Rakon Limited’s 49% share of investment in Centum Rakon India Private Limited, refer note B5.
3
Includes investments in subsidiaries, Rakon Financial Services Limited, Rakon UK Holdings Limited, Rakon Investment HK Limited, and
Rakon HK Limited, and the reclassified equity investment in Thinxtra Pty 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
On 1 June 2018, share equity investment in Thinxtra Pty Limited was reclassified as financial instrument fair value through other
comprehensive income, now reported under Other, refer to note B5 c).
7
On 2 May 2018, the Group acquired the remaining 51% of the issued shares it did not own in Centum Rakon India Private Limited
(‘CRI’), a previously held joint venture, refer to note B4 b).








NZ
UK
France
India
7
C
h
i
n
a


̶
T
'
maker
1
I
n
d
i
a


̶

Centum
Rakon
2
A
u
s
t
r
a
l
i
a


̶

Thinxtra
6
Other
3
Total
$000s
$000s
$000s
$000s
$000s
$000s
$000s
$000s
$000s
Sales to external customers
32,072
-
16,206
-
-
-
-
-
48,278
Inter-segment sales
90
-
-
-
-
-
-
19
109
Segment revenue
32,162
-
16,206
-
-
-
-
19
48,387
Underlying EBITDA
3,953
815
(1,327)
-
1,389
371
(1,272)
(129)
3,800
Depreciation and amortisation
1,297
251
675
-
-
-
-
84
2,307
Income tax expense
-
(91)
14
-
-
-
-
(76)
(153)
Total assets
4
48,275
3,164
29,828
-
8,798
3,451
5,608
2,733
101,857
Investment in associates
-
-
-
-
8,798
-
-
2,804
11,602
Investment in joint venture
-
-
-
-
-
3,451
-
-
3,451
Additions of property, plant,
equipment and intangibles
690
164
198
-
-
-
-
-
1,052
Total liabilities
5
13,004
482
11,197
-
-
-
-
470
25,153
NZ
UK
France
India
7
C
h
i
n
a


̶
T
'
maker
1
I
n
d
i
a


̶

Centum
Rakon
2
Australia -
Thinxtra
6
Other
3
Total
$000s
$000s
$000s
$000s
$000s
$000s
$000s
$000s
$000s
Sales to external customers
63,812
-
37,315
-
-
-
-
-
101,127
Inter-segment sales
163
-
5
-
-
-
-
33
201
Segment revenue
63,975
-
37,320
-
-
-
-
33
101,328
Underlying EBITDA
7,611
1,591
1,334
-
2,115
(9)
(430)
(118)
12,094
Depreciation and amortisation
2,517
508
1,408
-
-
-
-
(91)
4,342
Impairment
120
-
-
-
-
-
-
-
120
Income tax credit/(expense)
(623)
(129)
29
-
-
-
-
(275)
(998)
Total assets
4
51,819
3,255
37,326
-
9,350
2,876
5,290
3,517
113,433
Investment in associates
-
-
-
-
9,350
-
5,290
-
14,640
Investment in joint venture
-
-
-
-
-
2,876
-
-
2,876
Additions of property, plant,
equipment and intangibles
2,463
441
1,255
-
-
-
-
4
4,163
Total liabilities
5
11,987
462
13,459
-
-
-
-
474
26,382
Unaudited six months ended 30 September 2017
Audited year ended 31 March 2018

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B1 c) Reconciliation of Underlying EBITDA to net profit/(loss) for the period



B1 d) Breakdown of revenue by goods and services

B1 e) Breakdown of revenue by market segment

Unaudited six
months ended
30 September
2018
$000s
Unaudited six
months ended
30 September
2017
$000s
Audited year
ended 31
March
2018
$000s
Telecommunications 24,289 21,384 40,457
Global Positioning 11,424 13,065 25,999
Space and Defence 14,204 10,677 27,984
Other 3,392 3,152 6,687
Total revenue by market segment 53,309 48,278 101,127






Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
Continuing operations$000s$000s$000s
Underlying EBITDA5,8793,80012,094
Depreciation and amortisation(2,781)(2,307)(4,342)
One off cash gains realised on derivatives closed out
-
9411,096
Employee share schemes
-
(8)(8)
Finance costs ̶ net(177)(227)(501)
Adjustment for associates and joint venture share of interest, tax and
depreciation
(648)(1,032)(1,751)
Net dilution gain on Thinxtra shares
--
4,815
Impairment
--
(120)
Loss on asset sales/disposal(20)(12)(25)
Remeasurement on change in treatment - Thinxtra shares7,172
--
Other non ̶ cash items(181)(94)(261)
Profit before income tax9,2441,06110,997
Income tax expense(45)(153)(998)
Net profit for the period9,1999089,999
Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2018
2017
2018
$000s
$000s
$000s
Sales of goods
52,783
47,868
99,916
Revenue from services
526
410
1,211
Total revenue
53,309
48,278
101,127

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B1 f) 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.

Unaudited six
months ended 30
September 2018
$000s
Unaudited six
months ended 30
September 2017
$000s
Audited year
ended 31 March
2018
$000s
Asia 25,259 20,390 41,330
North America 12,704 10,809 23,940
Europe 14,030 15,989 33,069
Others 1,316 1,090 2,788
Total revenue by region 53,309 48,278 101,127
B2. Operating expenses



B3. Other operating income
B3 a) Breakdown of other operating income

B4. Business combination – acquisition of Centum Rakon India Private Limited
B4 a) Current period
On 2 May 2018, the Group acquired the remaining 51% of the issued shares it did not own in Centum Rakon India Private Limited
(‘CRI’), a previously held joint venture which provides products and services to the frequency control industry. Consideration was
US$5.5m and the acquisition is part of the Group’s overall manufacturing strategy, providing a low cost manufacturing platform and
in addition, access to the local Indian market in the longer term. Consideration of US$4,125,000 was paid on 2 May 2018 with
US$1,375,000 payable within 18 months of acquisition date. The fair value of the US$1,375,000 was estimated based on a discount
rate of 5.90%.
B4 b) Details of the purchase consideration, the provisional fair value of net assets acquired and
goodwill are as follows:

Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2018
2017
2018
$000s
$000s
$000s
Operating expense by function
Selling and marketing costs
4,945
4,439
9,905
Research and development
5,556
5,292
9,712
General and administration
12,991
9,759
22,009
Total operating expenses
23,492
19,490
41,626
Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2018
2017
2018
$000s
$000s
$000s
Dividend income
-
1
1
Other income
1
-
69
Income from technology license agreement with Siward
-
687
2,351
Total other operating income
1
688
2,421
Purchase Price consideration
$000s
Cash paid5,848
Deferred consideration1,789
Less: deemed settlement of pre-existing net trade payables(1,249)
Total purchase price consideration6,388

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Provisional
fair value
The fair value of the assets and liabilities recognised as a result of the acquisition are as follows $000s
Cash and cash equivalents 1,500
Property, plant and equipment 3,750
Inventories 5,869
Trade and other receivables 5,002
Trade and other payables (4,510)
Overdraft (1,320)
Employee benefit obligations (343)
Net deferred tax assets 1,379
Less deemed settlement of pre-existing net trade balances (1,249)
Net identifiable assets acquired 10,078

As a result of acquisition, the pre-existing 49% share of equity which was acquired on 25 March 2008 was re-measured to fair value
and the currency translation reserve relating to pre-existing 49% share of equity was recycled through profit and loss component of
Statement of Comprehensive Income.




The goodwill is attributable to synergies expected to arise. None of the goodwill is expected to be deductible for tax purposes.
Deferred tax asset of $530,000 has been recognised in relation to the fair value adjustments.
The acquisition accounting has been determined on provisional basis. If new information obtained within one year of the date of
acquisition about facts and circumstances that existed at the date of acquisition identifies adjustments to the above amounts, or any
additional provisions that existed at the date of acquisition, then the accounting for the acquisition will be revised.
Acquisition-related costs
Acquisition-related costs of $205,000 are included in administrative expenses in profit or loss.

Unaudited six
months ended
30 September
2018
Re-measurement of previously held 49% equity interest
$000s
Carrying value of equity interest prior to acquisition
2,994
Gain on re-measurement
1,944
Re-measured previously held equity interest
4,938
Net loss in business combination on previously held equity interest
Gain on re-measurement of previously held equity interest
1,944
Loss on reclassification of currency translation reserve
(2,013)
Net loss in business combination on previously held equity interest
(69)
Goodwill on acquisition
$000s
Net assets acquired
10,078
Less
previously held 49% equity interest
(4,938)
Goodwill on acquisition
1,248
Total purchase consideration
6,388

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Revenue and profit contribution
The acquired business contributed revenues of $1,980,000 and net profit of $780,000 to the Group for the period from 2 May 2018 to
30 September 2018. If the acquisition had occurred on 1 April 2018, consolidated revenue and consolidated profit after tax for the
half-year ended 30 September 2018 would have been $2,130,000 and $660,000 respectively. For April 2018, the Group recorded
$76,000 equity accounted profit for the owned 49% equity interest.

B5. Interests in associates and joint venture
B5 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 in other comprehensive income. 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.
B5 b) Breakdown of associates and 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.

Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
Chengdu Timemaker Crystal
Technology Co. Ltd
1
AssociateChina40%40%40%
Shenzhen Taixiang Wafer Co. Ltd
1
AssociateChina40%40%40%
Thinxtra Pty Limited (ceased being an
associate June 18)
3
AssociateAustralia
-
33%21.5%
Centum Rakon India Private Ltd
(ceased being a joint venture May 18)
2
Joint
venture
India
-
49%49%
Unaudited sixUnaudited sixAudited yearUnaudited sixUnaudited sixAudited year
months endedmonths endedendedmonths endedmonths endedended
30 September30 September31 March30 September30 September31 March
201820172018201820172018
$000s$000s$000s$000s$000s$000s
Chengdu Timemaker Crystal
Technology Co. Limited
1
9,5318,3838,925
Shenzhen Taixiang Wafer Co. Limited
1
423416425
Total Timemaker Group9,9548,7999,350781769908
Thinxtra Pty Limited
3
-
2,8035,290(287)(1,271)(2,273)
Total carrying amount of associates9,95411,60214,640494(502)(1,365)
Centum Rakon India Private Limited
2
-
3,4512,87676(41)(550)
Total carrying amount of equity
accounted associates and joint venture
9,95415,05317,516570(543)(1,915)
Name of entity
% of ownership interest
Net investment
Equity accounted profits/(losses)
Country of
incorporation
Nature of
relationship

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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. In June 2017, Chengdu Shen-
Timemaker Crystal Technology Co. Limited, a company in the Timemaker Group, was merged with Chengdu Timemaker Crystal
Technology Co. Limited.
2
On 2 May 2018, the Group assumed full ownership of Centum Rakon India Private Limited (‘CRI’) by acquiring the remaining 51%
interest of shares, refer note B4. Prior to the acquisition, CRI, was a joint venture.
3
Due to loss of significant influence, on 1 June 2018, the Group has reclassified the investment in Thinxtra Pty Limited (‘Thinxtra'), as
a financial asset at fair value through other comprehensive income, refer note B5 c).
B5 c) Investment in Thinxtra
Thinxtra Pty 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 and ceased this treatment on 31 May 2018.
On 1 June 2018, Rakon irrevocably waived its right to appoint a director to Thinxtra’s board and concurrently Rakon’s appointed
director resigned. Accordingly, it was concluded that Rakon lost significant influence in Thinxtra on 1 June 2018 and therefore ceased
equity accounting the investment. On this day, the investment was measured at to fair value in accordance with NZ IAS 28 Investments
in Associates and Joint Ventures. The fair value was determined by an independent valuation report that provided a price range per
share. The lowest price in the range was used to measure the investment to fair value which resulted in a gain of $7,172,000 being
recognised in the profit and loss component of the Statement of Comprehensive Income. The fair value of Rakon’s 21.4% of equity
holding as at 1 June 2018 is $12,176,000. The Directors have determined that the fair value has not materially changed between 1 June
2018 and 30 September 2018.
To provide an indication about the reliability of the inputs used in determining fair value, the Group classified the fair valuation of
Thinxtra investment as a level 3 investment. This is the prescribed method of grouping under the accounting standards which states
that the instruments are classified as level 3 only if one or more of the significant inputs for the valuation is not based on observable
market data. The valuation of Thinxtra was based on an independent valuation report which included the following key judgement and
assumptions:
 In October 2017 Thinxtra undertook a significant capital raising where demand exceeded supply
 In November 2017 Rakon sold 199,763 shares for A$3.0m to applicants who missed out on the October 2017 capital
raising
 The outlook for Thinxtra between October 2017 and June 2018 has not materially changed
 A new capital raising is expected to take place in late 2018.

Further, effective 1 June 2018, the Group elected to present subsequent changes in fair value of its investment in Thinxtra in other
comprehensive income, refer B8 a) for accounting policy, NZ IFRS 9 Financial Instruments.
A 10% strengthening of the fair value of investment will result in an increase in other comprehensive income component of the
Statement of Comprehensive Income by $1,217,600. A 10% weakening will have a equal but opposite effect.
B6. Contingencies
It is not anticipated that any material liabilities will arise from the contingent liabilities.
B7. Events after reporting date
There have been no other subsequent events after 30 September 2018.
B8. Basis of preparation
The Company is registered under the Companies Act 1993 and is a Financial Markets Conduct reporting entity under Part 7 of the
Financial Markets Conduct Act 2013. The interim 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 NZX (Main Board) Listing Rules.
These consolidated interim financial statements for the half year reporting period ended 30 September 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, in particular IAS 34 Interim Financial Reporting. 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 the following:
 available-for-sale financial assets, financial assets and liabilities (including derivative instruments) – measured at fair value,
and
 assets held for sale – measured at fair value less cost of disposal.

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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. This interim financial report does not include all the notes of the type normally included in an annual
financial report. Accordingly, this report should be read in conjunction with the annual report for the year ended 31 March 2018 and
any public announcements made by the Company during the interim reporting period. The accounting policies applied are consistent
with those of the annual report for the year ended 31 March 2018.
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period,
except for the adoption of new and amended standards as set out below.

B8 a) New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period and the Group had to change its
accounting policies:
 NZ IFRS 9 Financial Instruments, and
 NZ IFRS 15 Revenue from Contracts with Customers.
The Group has performed the assessment and concluded that there is no material adjustment from adoption of these standards and
no retrospective adjustments are required in the consolidated interim financial statements.
NZ IFRS 9 Financial Instruments
Classification
From 1 January 2018, the Group classifies its financial assets in the following measurement categories:
 those to be measured subsequently at fair value (either through other comprehensive income (OCI), or through profit and
loss), and
 those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments
that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition
to account for the equity investment at fair value through other comprehensive income (FVOCI).
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair
value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or
loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as
other income when the Group’s right to receive payments is established. Changes in the fair value of financial assets at FVPL are
recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses)
on equity investments measured at FVOCI are not reported separately from other changes in fair value.
Derivatives and hedging
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the
cash flow hedge reserve within equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss,
within other income (expenses). When option contracts are used to hedge forecast transactions, the Group designates only the intrinsic
value of the options as the hedging instrument. Until 31 March 2018, the Group classified foreign currency options as held-for-trading
derivatives and accounted for them at FVPL. Gains or losses relating to the effective portion of the change in intrinsic value of the
options are recognised in the cash flow hedge reserve within equity. The changes in the time value of the options that relate to the
hedged item (‘aligned time value’) are recognised within OCI in the costs of hedging reserve within equity. When forward contracts
are used to hedge forecast transactions, the Group generally designates only the change in fair value of the forward contract related
to the spot component as the hedging instrument. Gains or losses relating to the effective portion of the change in the spot component
of the forward contracts are recognised in the cash flow hedge reserve within equity. The change in the forward element of the contract
that relates to the hedged item (‘aligned forward element’) is recognised within OCI in the costs of hedging reserve within equity. In
some cases, the entity may designate the full change in fair value of the forward contract (including forward points) as the hedging
instrument. In such cases, the gains or losses relating to the effective portion of the change in fair value of the entire forward contract
are recognised in the cash flow hedge reserve within equity.
Amounts accumulated in equity are reclassified in the periods when the hedged item affects profit or loss, as follows:
Where the hedged item subsequently results in the recognition of a non-financial asset (such as inventory), both the deferred hedging
gains and losses and the deferred time value of the option contracts or deferred forward points, if any, are included within the initial
cost of the asset. The deferred amounts are ultimately recognised in profit or loss as the hedged item affects profit or loss (for example
through cost of sales).
The gain or loss relating to the effective portion of the interest rate swaps hedging variable rate borrowings is recognised in profit or
loss within finance cost at the same time as the interest expense on the hedged borrowings.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction

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occurs, resulting in the recognition of a non-financial asset such as inventory. When the forecast transaction is no longer expected to
occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to profit or
loss.
B8 b) Impact of standards issued but not yet applied
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 standard will affect primarily the accounting for the Group’s operating leases. Although the full impact of this standard has not yet
been determined, it will result in additional assets and liabilities when the current operating leases are brought on to the balance
sheet; with interest and depreciation replacing the current operating lease expense when the standard is adopted.
The standard is mandatory for first interim periods within annual reporting periods beginning on or after 1 January 2019. The Group
does not intend to adopt the standard before its effective date.

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Other Information
A. Dividends (NZX Listing Rules Appendix 1: 2.3(d))
The Board of Directors has declared that no dividend is to be paid for the interim period to 30
September 2018.
Rakon maintains a dividend policy such that residual cash flows after investment will be available
for distribution to shareholders on the basis that net debt remains at a level viewed as comfortable
by the Board, following distribution. Any declaration and payment of dividends including the
amount, will be at the discretion of the Board of Directors.
B. Net Tangible Assets per Security (NZX Listing Rules Appendix 1: 2.3(f))

30 September 2018 30 September 2017
Net tangible assets $000 85,766 65,924
Number of ordinary securities 000 229,055 229,055
Net tangible asset backing per ordinary
security $
0.37 0.29
C. Control gained and lost over Entities (NZX Listing Rules Appendix 1: 2.3(g))
Rakon Limited has gained or lost control over the following entities during the period:
On 2 May 2018, Rakon Limited gained control of Centum Rakon India Private Limited “CRI”
through acquiring the remaining 51% of the issued shares it did not own. CRI was previously
held as a joint venture. CRI contributed net profit after tax of $856,000 to the Group (30
September 2017: net loss after tax of $41,000).
During the period Rakon did not gain or lose control over any other entities.
D. Associates & Joint Ventures (NZX Listing Rules Appendix 1: 2.3(h))
Rakon Limited has the following associate entities and joint venture arrangements.

Shareholding
Chengdu Timemaker Crystal Technology Co. Limited 40%
Shenzhen Taixiang Wafer Co, Limited 40%
The contribution of Chengdu Timemaker Crystal Technology Co. Limited and Shenzhen Taixiang
Wafer Co, Limited to Rakon Limited’s net results from ordinary activities is a net profit after tax
of $781,000 (30 September 2017: $769,000).
For the period to 31 May 2018 Thinxtra Pty Limited (‘Thinxtra’) was an associate entity. From 1
June 2018 Thinxtra ceased to be an associate entity and the investment was re-measured to fair
value accordingly. The contribution of Thinxtra to Rakon Limited’s net results from ordinary
activities is a net loss after tax of $287,000 for the two months to 31 May 2018 (30 September
2017: loss $1,271,000).
E. Audit (NZX Listing Rules Appendix 1: 1.3(l))
The financial statements are unaudited.

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F. Business Changes (NZX Listing Rules Appendix 1: 1.3(m))
There have been no major changes or trends in Rakon Limited’s business subsequent to the half
year end.

G. Directors Declaration (NZX Listing Rules Appendix 1, 3.1 & 3.2)
The Directors declare that the selected consolidated financial information on pages 4 to 17 have
been prepared in compliance with applicable Financial Reporting Standards and extracted from
the unaudited interim financial statements. The accounting policies the Directors consider
critical to the portrayal of the company’s financial condition and results which require
judgements and estimates about matters which are inherently uncertain are disclosed in each
note of the unaudited consolidated interim financial statements that form part of this
announcement.