Rakon Half Year 2019/2020 Results Announcement

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 $1.3m1 (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. 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 End CA:00344519 For:RAK Type:HALFYR Time:2019-11-19 09:09:30