Rakon Half Year 2019/2020 Results Announcement

Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)



Results for announcement to the market
Name of issuer Rakon Limited
Reporting Period 6 months to 30 September 2019
Previous Reporting Period 6 months to 30 September 2018
Currency NZD

Amount (000s) Percentage change
Revenue from continuing
operations
$56,912 +7%
Total Revenue $56,912 +7%
Net profit/(loss) from
continuing operations
$1,342 -34%
Total net profit/(loss) $1,342 -34%
Interim/Final Dividend
Amount per Quoted Equity
Security
No dividend has been declared
Imputed amount per Quoted
Equity Security
Not Applicable
Record Date Not Applicable
Dividend Payment Date Not Applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.36 $0.34
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer comments following
Authority for this announcement
Name of person

authorised
to make this announcement
Maureen Shaddick, Company Secretary
Contact person for this
announcement
Anand Rambhai, Chief Financial Officer
Contact phone number +64 9 571 9225
Contact email address anand.rambhai@rakon.com
Date of release through MAP

19/11/2019

Unaudited financial statements accompany this announcement.

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COMMENTS

19 NOVEMBER 2019 (RAK)

Rakon announces its half year financial result to 30 September 2019





Rakon Limited (‘Rakon’) has achieved a net profit after tax of $1.3m
1
(HY2019: $2.0m) and Underlying EBITDA of
$6.9m (HY2019: $5.9m) for the six months to 30 September 2019. Underlying EBITDA includes a one-off gain of
$1.5m due to the adoption of NZ IFRS 16 Leases from 1 April 2019. When the one-off gain is excluded, like-for-like
EBITDA is $0.5m lower than for the equivalent six months to 30 September 2018.

The first six months has provided revenue growth compared to the same period last year.

Highlights include the Telecommunications segment which was higher in USD terms from both the India and NZ
businesses. This is an indication the 5G roll out is beginning but it is not as fast as anticipated. Rakon is well
positioned for 5G, being designed into all Tier 1 network providers’ 5G equipment and securing an increasing share
of their business. As these customers secure their contracts to roll out 5G, orders will flow to Rakon.

Offsetting the growth in Telecommunications is a decrease in Positioning business where Rakon has shed some
high volume, low margin GNSS business. The Defence market was also lower but expected to partially recover by
year end. Revenue in the Space segment is higher with encouraging growth in the low earth orbit satellite
business.

Operating costs are higher with increased costs from integrating Rakon India into the wider Group, increased
investment in R&D (new product development) and growth in headcount.

The comparative financial statements issued for the six months to 30 September 2018 have been restated to
exclude the $7.2m gain previously recognised in relation to Rakon’s investment in Thinxtra. The value of Rakon’s
investment in Thinxtra is $4.7m (30 September 2018: $5.0m). Further explanation is provided in notes B4 of the
unaudited consolidated interim financial statements issued with this announcement.

Inventory is $45m, $5.5m higher than 31 March 2019 due to: the launch of higher value longer lead-time new
products; anticipation of higher Telecommunications demand; increased consignment business; and the cyclical
increase in inventory for Rakon’s French Space and Defence business (which typically records two thirds of its
revenue in the second half of the year). Inventory has been targeted to reduce by 31 March 2020.

Net debt is $7.6m, which is in line with 31 March 2019 and $3.9m higher than 30 September 2018.

The Directors confirm that the HY2020 results announcement is based on unaudited results.

1
All amounts are in NZD unless otherwise indicated.



NZ$m
1
, unaudited
HY2020
HY2019
% Change
Revenue
56.9
53.3
7%
Underlying EBITDA
2
6.9
5.9
18%
Net profit after tax
1.3
2.0
-34%
Operating expenses
25.1
23.5
7%
Operating cash flow
3.4
(3.4)
-200%
Net debt
7.6
3.9
97%
1
All amounts are in NZ$ unless otherwise indicated.
2
Refer to note B1 of the HY2020 unaudited consolidated financial statements for an explanation of how ‘Non-GAAP Financial Information’
is used, including a definition of ‘Underlying EBITDA’ and reconciliation to NPAT

3 | P a g e

The Directors have declared that no dividend is to be paid for the interim period to 30 September 2019. Rakon
maintains a dividend policy such that it will pay a dividend of up to 50% of the after tax profit, if considered fiscally
appropriate. The payment of dividends is subject to the approval of Rakon’s bank, ASB Bank, under its facility
arrangement.

The Directors declare that the unaudited consolidated interim financial statements on pages 4 to 19 have been
prepared in compliance with applicable Financial Reporting Standards. 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.

-ends-

Brent Robinson
Chief Executive Officer & Managing Director

Contact:
Anand Rambhai (CFO)
09 571 9225

Media Liaison:
Louise Howe
021 206 0985


About Rakon

Rakon is a global high technology company and a world leader in its field. The company designs and manufactures
advanced frequency control and timing solutions. Its three core markets are Telecommunications, Global Positioning
and Space and Defence. Rakon products are found at the forefront of communications where speed and reliability
are paramount. The company’s products create extremely accurate electric signals which are used to generate radio
waves and synchronise time in the most demanding communication applications. Rakon has three manufacturing
plants, and has six research and development centres. Customer support personnel are located in fifteen offices
worldwide. 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, NZX, ticker code RAK.
www.rakon.com

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Unaudited Consolidated Interim Statement of Comprehensive Income
For the period ended 30 September 2019


The accompanying notes form an integral part of these financial statements.
Restated
Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201920182019
Note $000s$000s$000s
Continuing operations
RevenueB1 d)56,91253,309113,985
Cost of sales(30,652)(28,715)(62,317)
Gross profit26,26024,59451,668
Other operating income81121
Other gains – net29645718
Re-measurement on change in treatment – Thinxtra sharesB4 c)---
Net loss from business combination-(69)-
Operating expensesB2(25,099)(23,492)(47,338)
Operating profit1,1981,6795,169
Finance income8937
Finance costs(532)(186)(571)
Share of net profits of associates and joint venture753570839
Profit before income tax1,4272,0725,474
Income tax expense (8 5 )(45)(2,110)
Net profit for the period1,3422,0273,364
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Decrease in fair va lue cash flow hedges(3,465)(3,454)(1,812)
Cost of hedging17315431
Increase in fair va lue currency translation differences2,5472,1251,329
Income tax credit relating to components of other comprehensive
income
970967507
Item that will not be reclassified subsequently to profit or loss
Changes in fair va lue of equity investments at fair va lue through other
comprehensive income - Thinxtra
B4 c)133-(454)
Other comprehensive income/(losses) for the period, net of tax 358(208)(399)
Total comprehensive income for the period1,7001,8192,965
Profit attributable to equity holders of the Company1,3422,0273,364
Total comprehensive profit attributable to equity holders of the Company1,7001,8192,965
Earnings per share for profit attributable to the equity holders of the
Company from continuing operations
CentsCentsCents
Basic earnings per share0.6 0.9 1.5
Diluted earnings per share0.6 0.9 1.5

5 | P a g e

Unaudited Consolidated Interim Statement of Changes in Equity
For the period ended 30 September 2019

The accompanying notes form an integral part of these financial statements.
Share capital
Retained
earnings
Other reserves
Total equity
Note
$000s
$000s
$000s
$000s
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
Restated net profit after tax for the half year ended 30
September 2018
B4
-
2 ,0 2 7
-
2 ,0 2 7
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
-
2 ,0 2 7
(2 0 8 )
1 ,8 1 9
Balance at 30 September 2018 restated
1 8 1 ,0 2 4
(7 1 ,1 9 2 )
(2 0 ,9 6 2 )
8 8 ,8 7 0
Net profit after tax for the half year ended 31 March 2019
-
1 ,3 3 7
-
1 ,3 3 7
Currency translation differences
-
-
(7 9 6 )
(7 9 6 )
Cash flow hedges, net of tax
-
-
1 ,0 5 9
1 ,0 5 9
Changes in fair value of equity investments at fair value
through other comprehensive income - Thinxtra
-
-
(4 5 4 )
(4 5 4 )
Total comprehensive income for the half year
-
1 ,3 3 7
(1 9 1 )
1 ,1 4 6
Balance at 31 March 2019
1 8 1 ,0 2 4
(6 9 ,8 5 5 )
(2 1 ,1 5 3 )
9 0 ,0 1 6
Net profit after tax for the half year ended 30 September
2019
-
1 ,3 4 2
-
1 ,3 4 2
Currency translation differences
-
-
2 ,5 4 7
2 ,5 4 7
Cash flow hedges, net of tax
-
-
(2 ,3 2 2 )
(2 ,3 2 2 )
Changes in fair value of equity investments at fair value
through other comprehensive income - Thinxtra
-
-
1 3 3
1 3 3
Total comprehensive income for the half year
-
1 ,3 4 2
3 5 8
1 ,7 0 0
Balance at 30 September 2019
1 8 1 ,0 2 4
(6 8 ,5 1 3 )
(2 0 ,7 9 5 )
9 1 ,7 1 6

6 | P a g e

Unaudited Consolidated Interim Balance Sheet
As at 30 September 2019

The accompanying notes form an integral part of these financial statements.
Restated
Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201920182019
Note$000s$000s$000s
Assets
Current assets
Cash and cash equiva lents5,3502,6294,719
Trade and other receiva bles35,53134,97338,220
Inventories44,79637,44439,310
Deriva tive financial instruments5869307
Financial asset at fair va lue through profit and loss191119
Current income tax asset726820561
Total current assets86,48075,94683,136
Non-current assets
Property, plant and equipment19,52817,24319,394
Intangible assets8,70110,2769,149
Investment in associates 11,3569,95410,399
Right-of-use assetsB98,917--
Trade and other receiva bles2,1862,9592,267
Financial asset at fair va lue through other comprehensive income -
Thinxtra
B44,6825,0044,549
Deriva tive financial instruments75278258
Deferred tax asset7,3248,2097,352
Total non-current assets62,76953,92353,368
Total assets149,249129,869136,504
Liabilities
Current liabilities
Bank overdraftB312,7046,20111,501
BorrowingsB3280294474
Lease liabilitiesB92,530--
Trade and other payables25,35726,16926,398
Provisions257354471
Deriva tive financial instruments3,3811,550945
Deferred consideration on acquisition - Ra kon India1,9381,8321,885
Deferred revenue - Siward-101-
Total current liabilities46,44736,50141,674
Non-current liabilities
Borrowings--412
Lease liabilitiesB96,151--
Provisions3,4153,1002,990
Deriva tive financial instruments1,3181,154343
Deferred tax liabilities2022441,069
Total non-current liabilities11,0864,4984,814
Total liabilities57,53340,99946,488
Net assets91,71688,87090,016
Equity
Share capital181,024181,024181,024
Other reserves(20,795)(20,962)(21,153)
Accumulated losses(68,513)(71,192)(69,855)
Total equity91,71688,87090,016

7 | P a g e

Unaudited Consolidated Interim Statement of Cash Flows
For the period ended 30 September 2019

The accompanying notes form an integral part of these financial statements.
Restated
Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2019
2018
2019
$000s
$000s
$000s
Operating activities
Cash provided from
Receipts from customers
61,816
54,754
114,974
R&D grants received
1,219
305
1,894
Other income received
(5)
38
58
63,030
55,097
116,926
Cash was applied to
Payment to suppliers and others
(34,515)
(34,598)
(71,695)
Payment to employees
(24,633)
(23,680)
(46,286)
Interest paid
(453)
(140)
(459)
Income tax paid
-
(107)
(254)
(59,601)
(58,525)
(118,694)
Net cash flow from operating activities
3,429
(3,428)
(1,768)
Investing activities
Cash was provided from
Sale of property, plant and equipment
42
16
82
42
16
82
Cash was applied to
Purchase of property, plant and equipment
(2,404)
(2,115)
(6,188)
Purchase of intangibles
(678)
(223)
(720)
Purchase of shares in CRI
-
(5,848)
(5,848)
(3,082)
(8,186)
(12,756)
Net cash flow from investing activities
(3,040)
(8,170)
(12,674)
Financing activities
Cash was applied to
Lease liabilities payments
(1,531)
-
-
Finance lease payments
-
(13)
(24)
Cash was applied to financing activities
(1,531)
(13)
(24)
Net cash flow from financing activities
(1,531)
(13)
(24)
Net decrease in cash and cash equivalents
(1,142)
(11,611)
(14,466)
Effects of exchange rate changes on cash and cash equiva lents
570
499
144
Cash and cash equiva lents at the beginning of the year
(6,782)
7,540
7,540
Cash and cash equivalents at the end of the year
(7,354)
(3,572)
(6,782)
Composition of cash and cash equivalents
Cash and cash equiva lents
5,350
2,629
4,719
Bank overdraft
(12,704)
(6,201)
(11,501)
Total cash and cash equivalents
(7,354)
(3,572)
(6,782)

8 | P a g e

Unaudited Consolidated Interim Statement of Cash Flows
For the period ended 30 September 2019

The accompanying notes form an integral part of these financial statements.
Restated
Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201920192019
Note$000s$000s$000s
Reconciliation of net profit to net cash flows from operating activities
Reported net profit after tax1,3422,0273,364
Adjustments for
Depreciation and amortisation expense4,3262,7815,802
Increase in estimated doubtful debts--475
Provisions provided(26)-342
Movement in foreign currency450(32)439
Deferred revenue - Siward technology licence agreement--(101)
Share of net profits of associates and joint venture(753)(570)(839)
Deferred tax movement66-231
Gain on disposal of property, plant and equipment(42)(16)(82)
Thinxtra shares – fair value adjustmentB4---
Net loss from business combination-69-
4,0212,2326,267
Change in operating assets and liabilities
Decrease/ (increase) in trade and other receivables3,265(2,268)(5,007)
Decrease in provisions(212)(252)(246)
Increase in inventories(3,986)(7,404)(9,145)
(Decrease)/ increase in trade and other payables(836)2,2782,781
(Decrease)/ increase in tax provisions(165)(41)218
Total impact of changes in working capital items(1,934)(7,687)(11,399)
Net cash flow from operating activities3,429(3,428)(1,768)

9 | P a g e

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.
Certain items in the comparative period to 30 September 2018 have been restated. These relate to the valuation of Rakon’s investment in
Thinxtra Pty Limited. Further details are in note B4 b).
The financial statements have been approved for issue by Rakon’s Board of Directors (‘the Board’) on 19 November 2019.
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.

10 | P a g e

B1 b) Segment results



NZ
UK
France
India
2
China
̶
T
'
maker
1
A
u
s
t
r
a
l
i
a


̶

Thinxtra
6
Other
3
Total
$000s
$000s
$000s
$000s
$000s
$000s
$000s
$000s
Sales to external customers
35,626
-
20,589
697
-
-
-
56,912
Inter-segment sales
354
-
-
11,696
-
-
(23)
12,027
Segment revenue
35,980
-
20,589
12,393
-
-
(23)
68,939
Underlying EBITDA
6,505
857
(2,331)
849
1,387
-
(331)
6,935
Depreciation and amortisation
1,878
321
1,255
837
-
-
35
4,326
Income tax (expense)/credit
67
(107)
16
-
-
-
(61)
(85)
Total assets
4
72,120
3,182
33,456
27,103
11,356
-
2,033
149,249
Investment in associates
-
-
-
-
11,356
-
-
11,356
Additions of property, plant,
equipment and intangibles
1,644
248
188
952
-
-
-
3,032
Total liabilities
5
35,832
1,396
11,512
7,754
-
-
1,040
57,533
Unaudited six months ended 30 September 2019
NZ
UK
France
India
2
C
h
i
n
a


̶
T
'
maker
1
A
u
s
t
r
a
l
i
a


̶

Thinxtra
6
Other
3
Total
Note
$000s
$000s
$000s
$000s
$000s
$000s
$000s
$000s
Sales to external customers
32,726
-
18,603
1,980
-
-
-
53,309
Inter-segment sales
174
-
104
8,288
-
-
-
8,566
Segment revenue
32,900
-
18,707
10,268
-
-
-
61,875
Underlying EBITDA
6,186
848
(3,457)
1,418
1,355
(289)
(182)
5,879
Depreciation and amortisation
1,138
258
900
484
-
-
1
2,781
Income tax (expense)/credit
-
43
16
-
-
-
(104)
(45)
Total assets restated
4
B4
61,327
3,373
32,591
21,177
9,954
-
1,447
129,869
Investment in associates
-
-
-
-
9,954
-
-
9,954
Additions of property, plant,
equipment and intangibles
1,130
271
547
109
-
-
-
2,057
Total liabilities
5
19,631
471
12,743
8,019
-
-
135
40,999
Restated Unaudited six months ended 30 September 2018
NZUKFranceIndia
7
China ̶
T'maker
1
Australia ̶
Thinxtra
6
Other
3
Total
$000s$000s$000s$000s$000s$000s$000s$000s
Sales to external customers64,376-45,0584,551---113,985
Inter-segment sales285-33---(323)(5)
Segment revenue64,661-45,0914,551--(323)113,980
Underlying EBITDA7,8571,691(1,312)2,6052,136-29313,270
Depreciation and amortisation2,4265151,7751,099--(13)5,802
Income tax (expense)/credit(858)(214)31(420)--(649)(2,110)
Total assets
4
65,7662,14132,12923,08510,399-2,984136,504
Investment in associates----10,399--10,399
Additions of property, plant,
equipment and intangibles
3,1914821,3951,986---7,054
Total liabilities
5
27,3735919,7987,497468-76146,488
Audited year ended 31 March 2019

11 | P a g e

1
Includes Rakon Limited’s 40% share of investment in Chengdu Timemaker Crystal Technology Co. Limited and Shenzhen Taixiang Wafer
Co. Limited.
2
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. Subsequent to acquisition, the name
was changed to Rakon India Private Limited.
3
Includes investments in subsidiaries, Rakon Financial Services Limited, Rakon UK Holdings Limited, Rakon Investment HK Limited, and
Rakon HK Limited.
4
The measure of assets has been disclosed for each reportable segment as it is regularly provided to the chief operating decision maker
and excludes intercompany balances eliminated on consolidation.
5
The measure of liabilities has been disclosed for each reportable segment as it is regularly provided to the chief operating decision maker
and excludes intercompany balances eliminated on consolidation.
6
Rakon Limited holds a 17.8% interest in Thinxtra Limited, refer note B4.
B1 c) Reconciliation of Underlying EBITDA to net profit for the period

B1 d) Breakdown of revenue by market segment


Restated
Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2019
2018
2019
Continuing operations
$000s
$000s
$000s
Underlying EBITDA
6,935
5,879
13,270
Depreciation and amortisation
(4,326)
(2,781)
(5,802)
Finance costs – net
(525)
(177)
(534)
Adjustment for associates and joint venture share of interest, tax and
depreciation
(649)
(648)
(1,120)
Loss on asset sales/disposal
(7)
(20)
(6)
Other non-cash items
(1)
(181)
(334)
Profit before income tax
1,427
2,072
5,474


Income tax expense
(85)
(45)
(2,110)
Net profit for the period
1,342
2,027
3,364


Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2019
2018
2019
$000s
$000s
$000s
Telecommunications
32,176
24,335
53,599
Global Positioning
9,698
11,397
20,498
Space and Defence
12,258
13,354
31,583
Other
2,780
4,223
8,305
Total revenue by market segment
56,912
53,309
113,985

12 | P a g e

B1 e) 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. Borrowings

In July 2019, facilities with ASB were restructured and the overdraft limit increased from $15.5m to $18.5m until 30 April 2020 when the
limit reduces by $4.5m to $14m. Interest is payable at the ASB Corporate Indicator Rate plus applicable margin. The temporary increase is
for additional working capital to support the growth in the Telecommunications market segment.
The ASB facilities are secured by a general security deed over all the present and future assets and undertakings of the Group with the
exception of Rakon India Private Limited. The Company was in compliance with all financial covenants during the period.
B4. 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.
Rakon was one of the founding members of Thinxtra in 2016 and has a 17.8% ownership interest at 30 September 2019 (September 2018:
21.4%).

Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2019
2018
2019
$000s
$000s
$000s
Asia
30,470
25,154
53,799
North America
12,546
12,688
25,793
Europe
12,509
14,152
31,671
Others
1,387
1,315
2,722
Total revenue by region
56,912
53,309
113,985
Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201920182019
$000s$000s$000s
Operating expense by function
Selling and marketing costs5,2144,9459,809
Research and development6,3125,55611,029
General and administration13,57312,99126,500
Total operating expenses25,09923,49247,338
Unaudited sixUnaudited sixAudited year
months endedmonths endedended
30 September30 September31 March
201920182019
$000s$000s$000s
Current
Obligations under finance lease-19405
Other borrowings28027569
Bank overdrafts12,7046,20111,501
Current borrowings12,9846,49511,975
Non-current
Obligations under finance lease--412
Non-current borrowings--412

13 | P a g e

B4 a) Loss of significant influence and fair value re-measurement (1 June 2018)
On 1 June 2018 Rakon lost significant influence in Thinxtra and ceased equity accounting the investment. In accordance with NZ IAS 28
Investments in Associates and Joint Ventures at 1 June 2018, the investment held was initially measured at fair value of $12.2m and a gain
of $7.2m recognised in profit and loss. In determining the fair value at 1 June 2018, the Directors obtained an independent valuation report
and adopted the lowest valuation in the range given in that report. In determining a valuation range the independent valuation report relied
on the October 2017 capital raise which was oversubscribed and the subsequent sale of 199,763 shares by Rakon in November 2017 to
those who missed out on the capital raise. Further, effective 1 June 2018, the Group elected to present subsequent changes in fair value of
its investment in Thinxtra in other comprehensive income. These amounts were presented in the unaudited consolidated interim financial
statements of the Group for the six months ended 30 September 2018.
B4 b) Initial fair value at 1 June 2018, as disclosed in the unaudited 30 September 2018 interim financial
statements and subsequently restated in the 31 March 2019 Annual Report
Upon re-examining the information available, the Directors considered the 1 June 2018 valuation of $12.2m (which relied on the
independent valuation report which was based on a historical capital raise and limited external transactions dating back to October and
November 2017), was not appropriate and should be restated. Accordingly, this valuation was reassessed resulting in a revised valuation of
$5.0m of the investment at 1 June 2018 and the reversal of the previously recognised gain of $7.2m.
Valuation methodology and key inputs
In undertaking the restated fair value assessment as at 1 June 2018, it was considered that one single valuation method would not provide
an appropriate result. Accordingly, the Directors used a range of valuation techniques which provide different scenario outcomes. These
outcomes have then been assigned a probability based on the available information and Directors’ judgement.
The methodology, key inputs and overall outcome is summarised as follows:

The valuation was based on Rakon having a 14% shareholding which assumed all existing share options were exercised and all shares were
issued under the capital raise offer that was open at the time.
The valuation was between A$5.25 and A$6.52 per share with a value of A$5.89 per share resulting in a restated valuation of $5.0m at 1
June 2018. This is also consistent with the equity accounted value of the investment as at 1 June 2018.
Sensitivities on key input
The Directors recognise that the valuation outcomes under each technique are dependent on assumptions used. The following table
provides an analysis of the impact on the final valuation where key assumptions are changed as described in b) to c) below.

Sensitivities on probability weightings assigned
The Directors recognise that the final valuation is dependent on probabilities assigned to the scenario under each valuation technique used.
The following table provides an analysis of the impact on the final
valuation where the probability weightings are changed.
To provide an indication about the reliability of the inputs used in
determining fair value, the Directors classified the fair valuation of
Thinxtra investment as a level 3 investment. 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.

Valuation TechniqueIndicative ViewProbability Assigned
A: Discounted cash flow (discount rate 30.5%)Most likely75%
B: Last successful capital raise, October 2017 which raised A$20m at A$15.47 per sharePossible25%
Scenario
Assumptions changes
Valuation NZ$
change
a) Base case valuation
base case
5.0
b) DCF
Cash flow is 50% lower than forecast
3.7
(1.3)
c) DCF
Discount rate is 5% higher
4.2
(0.8)
An opposite change in assumptions would have the equal but opposite effect on the valuation.

14 | P a g e

Impact of restatement on 30 September 2018 financial statements





The correction further affected some amounts disclosed in note B1 b), where total assets for 30 September 2018 was decreased by
$7,172,000, and note B1 c) was restated as follows:



Unaudited Consolidated Interim Statement of Comprehensive Income
For the peri od ended 30 September 2018
Adjustment
As restated
$000s
$000s
$000s
Re-measurement on change in treatment – Thinxtra shares
7,172
(7,172)
-
Operating profit
8,851
(7,172)
1,679
Profit before income tax
9,244
(7,172)
2,072
Net profit for the period
9,199
(7,172)
2,027
Total comprehensive income for the period
8,991
(7,172)
1,819
Profit attributable to equity holders of the Company
9,199
(7,172)
2,027
Total comprehensive profit attributable to equity holders of the Company
8,991
(7,172)
1,819
Earnings per share for profit attributable to the equity holders of the Company from
continuing operations
Cents
Cents
Cents
Bas i c earni ngs per s hare
4.1
(3.2)
0.9
Di l uted earni ngs per s hare
4.0
(3.1)
0.9
As previously
stated
Unaudited Consolidated Interim Balance Sheet
As at 30 September 2018
Adjustment
As restated
$000s
$000s
$000s
Fi nanci al asset at fai r val ue through other comprehensi ve i ncome - Thi nxtra
12,176
(7,172)
5,004
Total non-current assets
61,095
(7,172)
53,923
Total assets
137,041
(7,172)
129,869
Net assets
96,042
(7,172)
88,870
Accumul ated l osses
(64,020)
(7,172)
(71,192)
Total equity
96,042
(7,172)
88,870
As previously
stated
Unaudited Consolidated Interim Statement of Cash Flows
For the peri od ended 30 September 2018
As previously
stated
Adjustment
As restated
$000s
$000s
$000s
Reconciliation of net profit to net cash flows from operating activities
Reported net profit after tax
9,199
(7,172)
2,027
Following adjustments
Thi nxtra shares - fai r val ue adjustment
(7,172)
7,172
-
Total items cash flow adjusted for
(4,940)
7,172
2,232
Reconciliation of Underlying EBITDA to net profit for the period
As at 30 September 2018
As previously
stated
Adjustment
As restated
Continuing operations
$000s
$000s
$000s
Underl yi ng EBITDA
5,879
-
5,879
Re-measurement on change i n treatment - Thi nxtra shares
7,172
(7,172)
-
Profit before income tax
9,244
(7,172)
2,072
Net profit for the period
9,199
(7,172)
2,027

15 | P a g e

B4 c) Subsequent capital raise offers by Thinxtra between September 2018 and March 2019
In September 2018 Thinxtra announced a new capital raise offer aimed at raising A$20m. This offer was not filled with the main impediments
being; the offer price was out of alignment with the maturity of the business; there were anti-dilution rights held by existing security holders
which were an impediment to any new investors; and Thinxtra’s two main shareholders elected not to participate in the capital raise
offering.
A revised limited special offer was announced in March 2019 to raise A$4m. This was expected to allow Thinxtra to sufficiently develop its
business in preparation for additional funding to be raised through equity, debt or merger & acquisition activity to allow it to achieve break-
even. The Directors determined that Rakon would not participate in the March 2019 special offer due to the requirement to prioritise spend
in its core business. This capital raise was successful and A$5m was raised. In the Directors’ view this was a special offer with a placement
discount and was not indicative of the fair value of the Company.
B4 d) Valuation of the investment in Thinxtra at 31 March 2019
As set out below, the Directors have determined the valuation range of Thinxtra at 31 March 2019, with a value recognised of $4.6m. In
forming this view, it was recognised that there is a high level of volatility and judgement required in valuing Thinxtra given its early stage of
business; the new and developing IoT market and ecosystem in which it operates; the volatility in prices achieved by historic capital raises,
it being a private company investment; and the track record of the Company achieving its forecast performance.
Valuation methodology and key inputs
Consistent with the revised valuation approach adopted at 1 June 2018, in undertaking the fair value assessment, and given the range of
potential outcomes, it was considered that one single valuation method would not provide an appropriate result. Accordingly, the Directors
used a range of valuation techniques which provide different scenario outcomes. These outcomes have then been assigned a probability
based on the available information and Directors’ judgement. The methodology, key inputs and overall outcome is summarised as follows:

The valuation was based on Rakon having an 11% shareholding which assumed all existing share options were exercised and all shares were
issued under the capital raise offer that was open at the time.
The resultant valuation was between A$4.83 and A$6.11 per share with a value of A$5.47 adopted in the 31 March 2019 financial
statements. This has resulted in fair value of $4.6m at 31 March 2019 with the reduction of $0.4m since 1 June 2018 being reflected in other
comprehensive income.
Sensitivities on key inputs
The Directors recognise that the valuation outcomes under each technique are dependent on assumptions used. The following table
provides an analysis of the impact on the final valuation where key assumptions are changed as described in b) to d) below:

Sensitivities on probability weightings assigned
The Directors recognise that the final valuation is dependent on probabilities assigned to the scenario under each valuation technique used.
The following table provides an analysis of the impact on the final valuation where the probability weightings are changed.
To provide an indication about the reliability of the inputs
used in determining fair value, the Directors classified the
fair valuation of Thinxtra investment as a level 3 investment.
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.

B4 e) Valuation of the investment in Thinxtra at 30 September 2019
As set out below, the Directors have determined the valuation range of Thinxtra at 30 September 2019, with a value recognised of $4.7m.
The methodology and overall outcome is consistent with what was adopted in the 31 March 2019 Annual Report. In forming this view, it
was recognised that there is a high level of volatility and judgement required in valuing Thinxtra given its early stage of business; the new
and developing IoT market and ecosystem in which it operates; the volatility in prices achieved by historic capital raises, it being a private
company investment; and the track record of the Company achieving its forecast performance. The Directors reviewed all the available
information to date including Thinxtra’s audited financial statements, current capital raise activity and other shareholder communications.
Valuation methodology and key inputs
Valuation Technique
Indicative View
Probability Assigned
A: Discounted cash flow (discount rate 20.5%)
Likely
40%
B: Last successful capital raise, March 2019 which raised A$5m at A$3 per share
Likely
30%
C: Replacement cost of assets
Likely
30%
ScenarioAssumptions changesValuation NZ$change
a) Base case valuationbase case4.6
b) Discounted cash flowCash flow is 50% lower than forecast3.4(1.1)
c) Discounted cash flowDiscount rate is 10% higher3.0(1.5)
d) Replacement costReplacement cost is 20% lower3.8(0.8)
Valuation TechniqueBase case
Alternate
case
change in
valn NZ$m
A: Discounted cash flow40%30%
B: Last capital raise April 201930%50%
C: Replacement cost30%20%
100%100%
Valuation NZ$4.64.0(0.6)

16 | P a g e

In undertaking the fair value assessment, given the range of potential outcomes, it was considered that one single valuation method would
not provide an appropriate result. Accordingly, the Directors have used a range of valuation techniques which provide different scenario
outcomes. These outcomes have then been assigned a probability based on the available information and Directors’ judgement. The
methodology, key inputs and overall outcome is summarised as follows:

The valuation was based on Rakon having an 11% shareholding which assumed all existing share options were exercised and all shares were
issued under the capital raise offer that was open.
The resultant valuation was between A$4.83 and A$6.11 per share with a value of A$5.47 adopted in the 30 September 2019 financial
statements. The NZD movement in carrying value between March 2019 and September 2019 is due to changes in the NZD/AUD exchange
rate.
Sensitivities on key inputs
The Directors recognise that the valuation outcomes under each technique are dependent on assumptions used. The following table
provides an analysis of the impact on the final valuation where key assumptions are changed as described in b) to d) below:

Sensitivities on probability weightings assigned
The Directors recognise that the final valuation is dependent on probabilities assigned to the scenario under each valuation technique used.
The following table provides an analysis of the impact on the final valuation where the probability weightings are changed.
To provide an indication about the reliability of the inputs used
in determining fair value, the Directors classified the fair
valuation of Thinxtra investment as a level 3 investment.
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.

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.
The carrying amounts of amount of the equity-accounted investments are reviewed at each balance date to determine whether there is
any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated being the higher of an asset’s fair
value less costs to sell and the asset’s value in use. An impairment loss is recognised whenever the carrying amount of an asset exceeds its
recoverable amount. Impairment losses are recognised in the statement of comprehensive income.

Valuation Technique
Indicative View
Probability Assigned
A: Discounted cash flow (discount rate 20.5%)
Likely
40%
B: Last successful capital raise, March 2019 which raised A$5m at A$3 per share
Likely
30%
C: Replacement cost of assets
Likely
30%
Scenario
Assumptions changes
Valuation NZ$
change
a) Base case valuation
base case
4.7
b) Discounted cash flow
Cash flow is 50% lower than forecast
3.5
(1.2)
c) Discounted cash flow
Discount rate is 10% higher
3.1
(1.6)
d) Replacement cost
Replacement cost is 50% lower
3.9
(0.8)
Valuation Technique
Base case
Alternate
case
change in
valn NZ$m
A: Discounted cash flow
40%
30%
B: Last capital raise April 2019
30%
50%
C: Replacement cost
30%
20%
100%
100%
Valuation NZ$
4.7
4.1
(0.6)

17 | P a g e

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.


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.
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. Prior to the acquisition, CRI, was a joint venture.
3
Due to loss of significant influence, on 1 June 2018, the investment in Thinxtra Pty Limited (‘Thinxtra') was reclassified as a financial asset
at fair value through other comprehensive income, refer note B4.
B6. Contingencies
It is not anticipated that any material liabilities will arise from the contingent liabilities.
B7. Events after reporting date
The final payment of US$1.375m in relation to the acquisition of the remaining 51% of Centum Rakon India Private Limited, a previously
held joint venture was made in October 2019. Refer note B6 in the 31 March 2019 audited consolidated financial statements.
There have been no other subsequent events after 30 September 2019.
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 Listing Rules.
These consolidated interim financial statements for the half-year reporting period ended 30 September 2019 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 available-for-sale financial assets, financial assets and
liabilities (including derivative instruments) – measured at fair value.
Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2019
2018
2019
Chengdu Timemaker Crystal Technology
Co. Ltd
1
Associate
China
40%
40%
40%
Shenzhen Taixiang Wafer Co. Ltd
1
Associate
China
40%
40%
40%
Name of entity
% of ownership interest
Country of
incorporation
Nature of
relationship
Unaudited six
Unaudited six
Audited year
Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
months ended
months ended
ended
30 September
30 September
31 March
30 September
30 September
31 March
2019
2018
2019
2019
2018
2019
$000s
$000s
$000s
$000s
$000s
$000s
Chengdu Timemaker Crystal Technology
Co. Limited
1
10,917
9,531
9,974
Shenzhen Taixiang Wafer Co. Limited
1
439
423
425
Total Timemaker Group
11,356
9,954
10,399
753
781
1,050
Thinxtra Pty Limited
3
-
-
-
-
(287)
(287)
Total carrying amount of associates
11,356
9,954
10,399
753
494
763
Centum Rakon India Private Limited
2
-
-
-
-
76
76
Total carrying amount of equity
accounted associates and joint venture
11,356
9,954
10,399
753
570
839
Net investment
Equity accounted profits/(losses)

18 | P a g e

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 2019 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 2019 except for the adoption of new and amended standards as set out below.
B8 a) New and amended standards adopted by the Group
NZ IFRS 16 Leases
The Group leases various properties, equipment and cars. Lease terms are negotiated on an individual basis and contain a wide range of
different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for
borrowing purposes. Until 31 March 2019, leases of property, plant and equipment were classified as either finance or operating leases.
The Group has adopted IFRS 16 retrospectively from 1 April 2019, but has not restated comparatives for the 31 March 2019 reporting
period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the
new leasing rules are therefore recognised in the opening balance sheet on 1 April 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as operating leases
under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate as of 1 April 2019, and which ranged between 4.32% and 6.88%. The Group has chosen the
option to measure the right-of-use asset at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease
payments recognized immediately before the date of initial application.
Lease liability recognised as at 1 April 2019



The change in accounting policy affected the following items in the balance sheet on 1 April 2019:

 Right-of-use assets: increase by $10,213,000
 Prepayments: decrease by $536,000
 Borrowings: decrease by $617,000
 Lease liabilities: increase by $10,213,000

The net impact on retained earnings on 1 April 2019 was an increase of $122,000.
Unaudited six
months ended
30 September
At 1 April 20192019
$000s$000s
Represented by
Current lease liability 2,4152,530
Non-current lease liability7,7986,151
Total lease liability10,2138,681
The recognised right-of-use assets relate to the following types of assets
Unaudited six
months ended
30 September
At 1 April 20192019
$000s$000s
Properties8,8297,819
Equipment1,073865
Motor vehicle311233
Total right-of-use assets10,2138,917

19 | P a g e

The Underlying EBITDA, segment assets and segment liabilities for September 2019 all increased as a result of the change in accounting
policy which are detailed below.

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
 the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
 reliance on previous assessments on whether leases are onerous
 the accounting for operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short-term leases
 the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
 the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts
entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an
Arrangement contains a Lease.
$000s$000s$000s
NZ8745,8265,617
UK77866860
France4531,8401,821
India85235234
Other57150149
1,5468,9178,681
Segment
liabilities
Adjusted
EBITDA
Segment
assets