Presentation FY2019 Financial Results & Businesss Update

©2015 Rakon Limited
FY2019 Financial Results
& Business Update
© Rakon Limited 16 May 2019
Enabling the
Connected Future

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Agenda FY2019
AgendaItemPresenter
FY2019 Financial Key PointsAnand Rambhai (CFO)
FY2019 Key AchievementsBrent Robinson (CEO, Managing Director)
MarketUpdateBrent Robinson
Q&A Session
Closing Comments and OutlookBrent Robinson
Brent
Robinson
Anand
Rambhai

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FY2019 Financial Key Points

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FY2019Key Points
NZ$-13.6m
NZ$4.0m
▼55%
Revenue of $114m vs. $101m in FY2018
Rakon India contribution of $4.5m
Like for like revenue up $8.3m on a NZ$ basis, with
growth coming from Telecommunications, up $13m,
and Space & Defence up $1.2m, offset by a decline
in Global Positioning (down $4.7m)
Strong earnings result
Net profit after tax of $3.4m vs. $10.0m in FY2018
Core earnings up
Underlying EBITDA
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of $13.3m vs. $12.1m in FY2018
NZ$9.2m
+55%
NZ$5.9m
Notes:
All figures are presented in New Zealand dollars unless otherwise indicated
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Refer to note B1 of the FY2019 audited consolidated financial statements for an explanation of how ‘Non-GAAP Financial Information’ is used, including a definition of
‘Underlying EBITDA’ and reconciliation to NPAT
Revenue
Net profit
Underlying
EBITDA
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Up $13m
Down
$6.6m
Up $1.2m

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FY2019 Key Points
Contributing factors to the movement in net
profit
FY2018 one-off gains
Gross Margin (GM) improves with flow
through of growth in core business. Improved
mix also contributes and results in higher
GM% (45% vs. 43% in FY2018)
India costs –non-recurring and recurring
Other costs up –R&D projects, government
funding, tax expense and facilities
Year-on-year $6.6m movement in net profit
FY2018

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▼>100%
NZ$-13.6mNZ$4.0m
▼55%
Depreciation higher with
Rakon India now included
Operating cash flow & net
debt are impacted by growth
in inventory and higher capital
expenditure, predominantly
due to:
Support higher demand from
the Telecommunications
market
Enable the launch of key new
Telecommunications products
Implement core infrastructure
and capacity expansion in
Rakon India
FY2019 Key Points
Notes
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Refer to Note B1 of the FY2019 audited consolidated financial statements for an explanation of how ‘Non-GAAP Financial
Information’ is used, including a definition of ‘Underlying EBITDA’ and reconciliation to NPAT
NZ$mFY2019FY2018variance
Revenue114.0101.1+12.9
Gross profit51.743.3+8.4
Operating expenses47.341.6+5.7
Underlying EBITDA
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13.312.1+1.2
Depreciation & amortisation5.84.3+1.5
Net profit/(loss) after tax3.410.0-6.6
Earnings (cents per share)1.54.4-2.9
Operating cash flow(1.8)7.9-9.7
Capital expenditure7.14.2+2.9
Net (debt)/cash position(7.7)7.4-15.1
Shares on issue at balance date
(millions)
229.1229.1-

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FY2019 Key Achievements

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FY2019 Key Achievements
5G and its impact on Rakon
Existing 4G networks being upgraded to deliver 5G to
end users
Demand expected to continue for a number of years as
spectrum is released, technology developed and end-use
cases enabled
From fixed wireless access to home, through to the
eventual widespread machine to machine applications
including autonomous vehicles
Impact on Rakon during FY2019
Significant revenue and volume increase for products out
of NZ and India with Rakon designed into many Tier One
customers
Continued investment in the development of new products
to meet future 5G applications
Capacity constraints at Rakon India caused delivery issues
although monthly output has more than doubled during
the year
Higher revenue and market shortages of material impacted
working capital

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FY2019 Key Achievements
Rakon India
100% owned and controlled since May 2018
Rakon India expanded to cope with growing demand
76% year-on-year growth in OCXO volumes
New design wins and increased share of Tier One
customers’ business
Additional floor area leased within the existing building
and layout streamlined
Investment in new manufacturing equipment
Growth in domestic Space and Defence business
Increased collaboration with India based engineers for new
product developments
Integration into the wider Rakon Group
New management structure in place enabling Rakon to
operate independently from previous JV partner Centum
Electronics
Investment in infrastructure and implementation of
enterprise resource planning software (SAP)

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FY2019 Key Achievements
Siward: leveraging low cost manufacturing base
Siward has been successfully qualified by a
Telecommunications Tier One customer enabling
more Rakon products to be manufactured at
Siward
Rakon’slargest Global Positioning customer has
now fully qualified Siward as a supplier. Rakon is
now well placed to grow market share in this
segment

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Market Update

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Update
Strong growth this year with 25% USD growth in revenue
Rakon India delivering a lot of the growth, with Rakon increasing its share in Tier One
Original Equipment Manufacturers (OEMs) for 4G & 4.5G mobile base stations
Rakon NZ also hadgood Telecommunications growth, andis now starting to generate
revenue from new products designed into the beginning of the 5G roll-out. Early
deployments have begun in Korea, China and the US
Outlook
Rakon expects to maintain and grow market share as 5G deployment gathers momentum
globally with the industry predicting at least a five year roll-out as the technology is
released in various phases
Core network equipment will need to be upgraded to support the 5G synchronisation standards
4G & 4.5G equipment demand is expected to remain firm in the coming years as 5G
transitions
Telecommunications

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Update
Overall the Global Positioning revenue was down 15%
Our high volume Global Navigation Satellite System (GNSS) business is down due to
transfers of production into the Siward factory and inventory adjustments
Industrial high precision GNSS was down, particularly from the US agricultural and mining
equipment sector, due to global uncertainty
The emergency locator beacon market returned to long term average levels after the
bubble in FY2018 due to frequency changes
China GNSS revenue grew 50%
Outlook
A key design win achieved with an autonomous electric car maker requiring high
specification Rakon product
Competitive pressure from GNSS module makers in Asia which is expected to increase
price pressure in this high volume market
Siward enables more competitive pricing for the future
Global Positioning

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Update
Defence USD revenue maintained the higher revenue levels of FY2018that grew 35%
Overall Rakon’s Space revenue grew USD 15%, due to the inclusion of Rakon India’s
domestic Space business
The European Space business was down as part of the market transitions to the new Low
Earth Orbit (LEO) satellite technology (New Space)
Key design win in New Space deployment achieved
Outlook
Rakon India is positioned well to continue growth, with localised supply into the Indian
Space and Defence markets
As the market continues to transition towardLEO satelliterequirements, we expect
demand to be down on traditional Geostationary (GEO) satellites. It will take some time for
revenue from LEO to replace GEO, however the potential from New Space is much larger
Defence spending remains strong
Space & Defence

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Q&A

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Closing Comments and Outlook

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Closing Comments and Outlook
FY2019
Good performance in core business
with EBITDA growth
Rakon India acquisition completed
integration on track and good
contribution to the Group result
Revenue growth from 4.5/5G demand
and the Defence segment
Closing Comments
Roll-out of 5G to provide growth with
Rakon already designed into many
Tier One customers
Key focus is on:
Delivery to meet existing demand
The development and release of
new products with higher
specifications to meet the ever
increasing requirements for
higher speed dataand New
Space applications

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