Rakon Limited Interim Report (Half Year 2019)

Rakon Limited Interim Report
September 2018

1
1
Table of Contents
Unaudited Consolidated Interim Statement of Comprehensive Income __________________________________ 2
Unaudited Consolidated Interim Statement of Changes in Equity ______________________________________ 3
Unaudited Consolidated Interim Balance Sheet _____________________________________________________ 4
Unaudited Consolidated Interim Statement of Cash Flows ____________________________________________ 5
Notes to the Unaudited Consolidated Interim Financial Statements ____________________________________ 7
Directory ____________________________________________________________________________________ 16

2
2
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 incomeB316882,421
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 venture
B5 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 value cash flow hedges(3,454)(313)(372)
Cost of hedging154--
Increase in fair value 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
3
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 c apital
Retained
earningsOther reservesTotal equity
$000s$000s$000s
$000s
Balance at 31 March 2017
181,035 (83,218) (23,260) 74,557
Net profit after tax for the half year ended 30 September
2017
- 908 - 908
Contribution of equity, transaction cost
(1 1 ) - - (1 1 )
Currency translation differences
- - 1,467 1,467
Cash flow hedges, net of tax
- - (225) (225)
Total comprehensive loss for the half year
(11) 908 1,242 2,139
Employee share schemes
Value of employee services
- - 8 8
Balance at 30 September 2017
181,024 (82,310) (22,010) 76,704
Net profit after tax for the half year ended 31 March 2018
- 9,091 - 9,091
Currency translation differences
- - 1,299 1,299
Cash flow hedges, net of tax
- - (4 3 ) (4 3 )
Total comprehensive income for the half year
- 9,091 1,256 10,347
Balance at 31 March 2018
181,024 (73,219) (20,754)
87,051
Net profit after tax for the half year ended 30 September
2018
-
9,199 - 9,199
Currency translation differences
- - 2,125 2,125
Cash flow hedges, net of tax
- - (2,333) (2,333)
Total comprehensive income for the half year
- 9,199 (208) 8,991
Balance at 30 September 2018
181,024 (64,020) (20,962) 96,042

3
2
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 incomeB316882,421
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 venture
B5 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 value cash flow hedges(3,454)(313)(372)
Cost of hedging154--
Increase in fair value 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
3
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 c apital
Retained
earningsOther reservesTotal equity
$000s$000s$000s
$000s
Balance at 31 March 2017
181,035 (83,218) (23,260) 74,557
Net profit after tax for the half year ended 30 September
2017
- 908 - 908
Contribution of equity, transaction cost
(11) - - (11)
Currency translation differences
- - 1,467 1,467
Cash flow hedges, net of tax
- - (225) (225)
Total comprehensive loss for the half year
(11) 908 1,242 2,139
Employee share schemes
Value of employee services
- - 8 8
Balance at 30 September 2017
181,024 (82,310) (22,010) 76,704
Net profit after tax for the half year ended 31 March 2018
- 9,091 - 9,091
Currency translation differences
- - 1,299 1,299
Cash flow hedges, net of tax
- - (43) (43)
Total comprehensive income for the half year
- 9,091 1,256 10,347
Balance at 31 March 2018
181,024 (73,219) (20,754)
87,051
Net profit after tax for the half year ended 30 September
2018
-
9,199 - 9,199
Currency translation differences
- - 2,125 2,125
Cash flow hedges, net of tax
- - (2,333) (2,333)
Total comprehensive income for the half year
- 9,199 (208) 8,991
Balance at 30 September 2018
181,024 (64,020) (20,962) 96,042

4
4
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
Asse ts
Curre nt asse ts
Cash and cash equivalents2,6293,56610,364
Trade and other receivables34,97322,82428,395
Financial asset at fair value through profit and loss1165211
Derivative 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 receivables2,9592,1662,716
Property, plant and equipment17,24311,11313,481
Intangible assets10,27610,7809,115
Derivative financial instruments278673334
Financial asset at fair value 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 asse ts137,041101,857113,433
Liabilities
Current liabilities
Bank overdraft6,2011,3622,824
Borrowings2942,52698
Trade and other payables26,16915,65219,107
Derivative financial instruments1,550168235
Provisions354464961
Deferred considerationB4 a)1,832--
Deferred revenue1011,847101
Total current liabilities36,50122,01923,326
Non-current liabilities
Derivative financial instruments1,15415978
Borrowings-19-
Provisions3,1002,9222,734
Deferred tax liabilities24434244
Total non-current liabilities4,4983,1343,056
Total liabilities40,99925,15326,382
Ne t asse ts96,04276,70487,051
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

5
5
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 sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
Note$000s$000s$000s
Operating activities
Cash provided from
Receipts from customers54,75452,124101,691
Income tax refund29--
R&D grants received3051,4051,726
Other income received9-3
55,09753,529103,420
Cash was applied to
Payment to suppliers and others(34,598)(29,622)(57,998)
Payment to employees(23,680)(18,668)(36,735)
Interest paid(140)(248)(536)
Income tax paid(107)(62)(247)
(58,525)(48,600)(95,516)
Net cash flow from operating activities(3,428)4,9297,904
Investing activities
Cash was provided from
Net proceeds from sale of Thinxtra shares--3,178
Sale of property, plant and equipment16-4,754
16-7,932
Cash was applied to
Purchase of property, plant and equipment(2,115)(255)(3,236)
Purchase of intangibles(223)(688)(840)
Investment in shares and associates(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 issuance cost-(11)(11)
Repayment of principal on borrowings-(2,016)(4,500)
Finance lease payments(13)-(31)
Cash was applied to financing activities(13)(2,027)(4,542)
Net cash flow from financing activities(13)(2,027)(4,542)
Net (decrease)/increase in cash and cash equivalents(11,611)1,9597,218
Effects of exchange rate changes on cash and cash equivalents499169246
Cash and cash equivalents at the beginning of the year7,5407676
Cash and cash equivalents at the end of the period(3,572)2,2047,540
Composition of cash and cash equivalents
Cash and cash equivalents2,6293,56610,364
Bank overdraft(6,201)(1,362)(2,824)
Total cash and cash equivalents(3,572)2,2047,540

6
6
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 sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
Note201820172018
Reconciliation of net profit to net cash flows from operating activities
Reported net profit after tax9,1999089,999
Following adjustments
Depreciation expense1,7161,3362,504
Amortisation expense1,0659711,838
Impairment--120
Increase in estimated doubtful debts-77
Provision for restructure--159
Employee share based expense-88
Movement in foreign currency(32)(16)(590)
Monetised cash flow hedge, net of tax-(941)(1,096)
Deferred revenue ̶ Siward technology license agreement-(687)(2,351)
Share of net (profits)/losses of associates and joint ventureB5 b)(570)5431,915
Deferred tax--382
(Gain)/loss on disposal of property, plant and equipment(16)12(2,155)
Thinxtra shares – fair value adjustmentB5 c)(7,172)-(1,852)
Net dilution gain on Thinxtra shares--(4,815)
Net loss from business combinationB4 b)69--
Total items cash flow adjusted for(4,940)1,233(5,926)
Impact of changes in working capital items
Trade and other receivables(2,268)5,424(146)
Provision for restructure(252)(420)(645)
Inventories(7,404)(1,995)115
Trade and other payables2,278(307)4,557
Tax provisions(41)86(50)
Total impact of changes in working capital items(7,687)2,7883,831
Net cash flow from operating activities(3,428)4,9297,904

7
7
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 venture’s 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 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

NZUKFranc eIndia
7
China ̶
T'make r
1
India ̶
Centum
Rakon
2
A ustralia ̶
Thinxtra
6
Othe r
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
amortisation
1,138258900484---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
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

8
8

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).

NZUKFranc eIndia
7
China ̶
T'make r
1
India ̶
Centum
Rakon
2
Australia ̶
Thinxtra
6
Othe r
3
Total
$000s$000s$000s$000s$000s$000s$000s$000s$000s
Sales to external customers32,072-16,206-----48,278
Inter-segment sales90------19109
Segment revenue32,162-16,206----1948,387
Underlying EBITDA3,953815(1,327)
-
1,389
371(1,272)(129)3,800
Depreciation and
amortisation
1,297251675----842,307
Income tax (expense)/credit-(91)14----(76)(153)
Total assets
4
48,2753,16429,828
-
8,7983,4515,6082,733101,857
Investment in associates----8,798--2,80411,602
Investment in joint venture-----3,451--3,451
Additions of property, plant,
equipment and intangibles
690164198-----1,052
Total liabilities
5
13,00448211,197----47025,153
NZUKFranc eIndia
7
China ̶
T'make r
1
India ̶
Centum
Rakon
2
A ustralia -
Thinxtra
6
Othe r
3
Total
$000s$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 EBITDA7,6111,591
1,334-2,115(9)(430)(118)12,094
Depreciation and
amortisation
2,5175081,408----(91)4,342
Impairment
120-------120
Income tax (expense)/credit
(623)(129)29----(275)(998)
Total assets
4
51,8193,25537,326-9,3502,8765,2903,517113,433
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----4
4,163
Total liabilities
5
11,98746213,459----47426,382
Unaudited six months ended 30 September 2017
Audited year ended 31 March 2018

9
9
B1 c) Reconciliation of Underlying EBITDA to net profit for the period


B1 d) Breakdown of revenue by goods and services

B1 e) Breakdown of revenue by market segment





Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
Continuing operations
$000s$000s$000s
Underlying EBITDA
5,8793,80012,094
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)
Re-measurement 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 sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
$000s$000s$000s
Sales of goods52,78347,86899,916
Revenue from services5264101,211
Total revenue53,30948,278101,127
Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
$000s$000s$000s
Telecommunications24,28921,38440,457
Global Positioning11,42413,06525,999
Space and Defence14,20410,67727,984
Othe r3,3923,1526,687
Total revenue by market segment53,30948,278101,127

10
10
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.

B2. Operating expenses


B3. 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%.





Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
$000s$000s$000s
As i a25,25920,39041,330
North America
12,70410,80923,940
Europe14,030
15,98933,069
Othe rs
1,3161,0902,788
Total revenue by region
53,30948,278101,127
Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201820172018
$000s$000s$000s
Operating expense by function
Selling and marketing costs4,9454,4399,905
Research and development5,5565,2929,712
General and administration12,9919,75922,009
Total operating expenses23,49219,49041,626
Unaudited sixUnaudited sixAudited year
months ended
months endedended
30 September30 September31 March
201820172018
$000s$000s$000s
Dividend income
-
11
Other income1
-
69
Income from technology license agreement with Siward
-
6872,351
Total other operating income16882,421

11
11
B4 b) Details of the purchase consideration, the provisional fair value of net assets acquired and goodwill are as
follows


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 the profit and loss component of the
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 a 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.
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
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 equivalents1,500
Property, plant and equipment3,750
Inventories5,869
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
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-measurement1,944
Re-measured previously held equity interest4,938
Net loss in business combination on previously held equity interest
Gain on re-measurement of previously held equity interest1,944
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 fair value of previously held 49% equity interest
(4,938)
Goodwill on acquisition
1,248
Total purchase consideration
6,388

12
12
Acquisition related costs
Acquisition related costs of $205,000 are included in administrative expenses in the profit and loss component of the Statement of
Comprehensive Income.
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
AssociateChina
40%40%40%
AssociateAustralia-33%21.4%
Joint
venture
India - 49%49%
Name of entity
% of ownership interest
Country of
incorporation
Nature of
relationship
Centum Rakon India Private Ltd (ceased being a
joint venture May 2018)
2
Thinxtra Pty Limited (ceased being an associate
June 2018)
3

13
13

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' (‘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 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 an 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.

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 c arrying amount of assoc iate s9,95411,60214,640494(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)
Net investment
Equity accounted profits/(losses)

14
14
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.
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
Class ification
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, 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 the profit and loss
component of the Statement of Comprehensive Income. Dividends from such investments continue to be recognised as other income in
the profit and loss component of the Statement of Comprehensive Income when the Group’s right to receive payments are established.
Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the profit and loss component of the Statement
of Comprehensive Income. 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’)

15
15
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 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. The full impact of this standard has not yet been
determined. However, this will result in additional assets and liabilities when the current operating leases are recognised on to the balance
sheet. Interest and depreciation expenses will replace the current operating lease expenses in the profit and loss component of the
Statement of Comprehensive Income.
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.

16
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 (ceased 7 August 2018)
Keith Oliver
Brent Robinson
Roger Yao
Yin Tang Tseng
Lorraine Witten
Keith Watson (appointed 21 September 2018)
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
and to 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
16
16
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 (ceased 7 August 2018)
Keith Oliver
Brent Robinson
Roger Yao
Yin Tang Tseng
Lorraine Witten
Keith Watson (appointed 21 September 2018)
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
and to 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

---

Half Year Review (HY2019)
Enabling the
Connected Future
April – September 2018

2019 Half Year Statement of Results
HY2019 Financial Overview
For the six months to 30 September 2018 (HY2019), Rakon
reported an unaudited net profit after tax of $9.2m
1
– an
increase of $ 8.3m compared to the same period last
year. Included in net profit after tax is a one-off gain of
$7.2m from a change in classification of the company’s
investment in Thinxtra Pty Limited (‘Thinxtra’).
Rakon also reported Underlying EBITDA
2
of $5.9m – an
increase of $2.1m from HY2018.
Revenue of $53.3m was $5m higher than for the same
period last year, with growth in the Telecommunications
and Space & Defence market segments offset by a decline
in the Global Positioning market segment.
Gross margin was $4.5m higher at $24.6m and gross
margin percentage 4% higher at 46% compared to the
same period last year. This was due to a change in product
mix, higher revenue from the core business and the gross
margin contribution from Rakon India.
Operating expenses were $4.0m higher than for the same
period last year. The increase reflects the absorption
of Rakon India’s operating costs, one-off Rakon India
integration costs, a small increase in total headcount and
a move by one of Rakon’s French facilities from owned to
leased premises.
Net debt was $3.9m at 30 September 2018 and operating
cash flow was - $3.4m. There was an increase in spend on
inventory and capital expenditure because of the following
reasons:
•
higher forecast demand from the Telecommunications
market
•
the launch of key new products for the
Telecommunications market
•
establishment of core infrastructure to allow Rakon India
to operate independently from Rakon’s previous joint
venture partner
•
purchase of electronic components (capacitors,
resistors and integrated circuits) to mitigate supply risk
due to industry shortages.
Operational Overview
The acquisition of the remaining 51% of Centum Rakon
India Private Limited (‘CRI’) was completed in May 2018
in line with the Group’s manufacturing strategy to have
a low-cost operating platform suitable for future growth.
CRI manufactures predominantly OCXO
3
products for the
Telecommunications market and was renamed Rakon India
Private Limited (‘Rakon India’) in November 2018.
Rakon India experienced significantly higher forecast
demand while the project to integrate it into the global
business, including establishing a local management team
and supporting functions, continued. As a result there
was investment in headcount, new equipment, inventory
and expanding the premises. It is also pleasing to note the
turnaround in profit performance of Rakon India compared
to the same period last year.
From a global perspective, new executive positions
(Global Head of Engineering and Company Secretary) have
been established and provide enhanced capability along
with a refreshed Board in place (new Director and Chair
appointed).
Market Update
Telecommunications The Telecommunications market
continues its march towards 5G. New technologies and
applications drive the need for precise timing requirements
and 5G offers much more than the current technologies
available, including better reliability, faster speeds and
wider bandwidth. 4G and 4.5G infrastructure is starting this
evolution and will initially provide some of the infrastructure
required for 5G to operate. Most of the world’s existing
networks will in time need to be upgraded to receive the full
benefits of 5G. Rakon has a product offering that can meet
the requirements for 5G infrastructure in terms of design,
cost and performance.
Forecast demand for the remainder of FY2019 is strong
for 4G and 4.5G base stations and network equipment.
Rakon is supplying into the early 5G deployments in the US
and Asia. Pressure remains tight from component supply
and capacity and the challenge for Rakon is to capture the
demand and deliver to customers’ requirements.
Global Positioning We are continuing to see higher
margins in the industrial sub-market which has grown for
Rakon. Our volumes and revenue in Global Positioning have
been lower overall due to the further contraction in the
personal navigation devices business.
Space and Defence In the Space market, billings had been
slightly down compared to HY2018, with the geostationary
satellite market trending down. Second half billings are
forecast to improve similarly to previous years’ phasing
and we have seen increased enquiries for Low Earth Orbit
(LEO/ ‘New Space’) satellite requirements.
In the Defence market, the US delivered strong growth
generated mainly from New Zealand manufactured
products. US demand is expected to drive further growth
in the New Zealand business in the second half, and the
fulfilment of open orders is expected to drive second half
growth in the French business.
Emerging and Other Markets
Internet of Things (IoT) There are many new applications
for the IoT – including pet tracking, leak detection, smoke
detection alarms and shopping trolley locators – which
have driven higher demand for Thinxtra’s Sigfox modules.
Volumes in HY2019 are expected to almost double vs.
HY2018. These TCXOs
4
are supplied to Rakon by its
manufacturing partner Siward Crystal Technology Co.
Limited (‘Siward’), where Rakon has transferred the
technology. As this high volume, lower margin business
grows, Rakon is realising value through its partnership with
Siward and through its designs and customer relationships.
Closing Comments and Outlook
In the first half of FY2019 Rakon has delivered a good profit
performance, completed the acquisition of Rakon India and
started to realise immediate benefits from having control of
the India business.
4G and 4.5G demand continues to grow to support 5G
deployment. This is earlier than was expected. Rakon’s
near term focus is on capacity and on delivery to meet
this forecast customer demand. In addition, production
is expected to ramp up in New Zealand for new products
used in new generation telecommunication networks.
Bruce Irvine
Chair
Brent Robinson
CEO / Managing Director
Half Year 2019
Performance Key Points
• Net profit after tax of $9.2m vs. net profit after tax
of $0.9m in HY2018
• Rakon’s investment in Thinxtra re-measured to fair
value resulting in a one-off $7.2m gain
• Underlying EBITDA
2
of $5.9m vs. $3.8m in HY2018
• Revenue of $53.3m vs. $48.3m in HY2018
RAKON HALF YEAR REVIEW (HY2019)
APRIL – SEPTEMBER 2018
2 3
1
All amounts in this document are in NZ $ unless otherwise specified.
2
Disclosure of Non-GA AP Financial Information. Rakon has used ‘Underlying EBITDA’ as
a measure of non-GA AP financial information in this 2019 Half Year Review document and it is
defined as: ‘Earnings before interest, tax, depreciation, amortisation, impairment, employee
share schemes, non-controlling interests, adjustments for associates and joint venture’s share of
interest, tax & depreciation, loss on disposal of assets and other cash and non-cash items.’
Underlying EBITDA is a non-GA AP measure that has not been presented in accordance with
GA AP. The Directors present Underlying EBITDA as a useful non-GA AP 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-GA AP measure of Underlying EBITDA internally, to
assess the underlying operating performance of the Group and each operating segment.
This document should be read in conjunction with the Rakon Limited Interim Report September
2018. A detailed reconciliation of Underlying EBITDA to net profit after tax is contained at note
B1 c) (Segment information) of the financial statements.
3
OCXO Oven Controlled Crystal Oscillator.
4
TCXO Temperature Compensated Crystal Oscillator.

Summary of Revenue and Profit
Six months ended
30 September 2018
$000s
Six months ended
30 September 2017
$000s
Year ended
31 March 2018
$000s
Revenue53,30948,278101,127
Underlying EBITDA
1
5,8793,80012,094
Depreciation and amortisation(2,781)(2,307)(4,342)
One off cash gains realised on derivatives closed out–9411,09 6
Interest(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
Re-measurement on change in treatment – Thinxtra shares7,172––
Other non-cash items(201)( 114 )( 414 )
Income tax expense(45)(153 )(998)
Net profit for the period9,19 99089,999
1
Refer to page 2 for explanation of Underlying EBITDA.
Summary Statement of Cash Flows
Six months ended
30 September 2018
$000s
Six months ended
30 September 2017
$000s
Year ended
31 March 2018
$000s
Net cash flow
Operating activities(3,428)4,9297, 9 0 4
Investing activities( 8 ,170 )(943)3,856
Financing activities(13)(2,027)(4,542)
Net (decrease)/increase in cash and cash equivalents(11,611)1,9597, 218
Foreign currency translation adjustment499169246
Cash and cash equivalents at the beginning of the period7, 5 4 07676
Cash and cash equivalents at the end of the period(3,572)2,2047, 5 4 0
Balance Sheets
As at
30 September 2018
$000s
As at

30 September 2017
$000s
As at

31 March 2018
$000s
Current assets75,94655,51264,365
Non-current assets61,09546,34549,068
Total assets137, 0 41101,857113, 4 33
Current liabilities36,50122,01923,326
Non-current liabilities4,4983 ,13 43,056
Total liabilities40,9992 5,15 326,382
Net assets96,04276,7048 7, 0 51
Equity96,04276,7048 7, 0 51
Total equity96,04276,7048 7, 0 51
2019 Half Year Financial Summary
RAKON HALF YEAR REVIEW (HY2019)
APRIL – SEPTEMBER 2018
4