Rakon turns to annual loss as telcos pull back infrastructure spending

See also: Call for Rakon board refresh

High-tech components manufacturer Rakon [NZX: RAK] turned to an annual loss after telecommunications companies pulled back infrastructure spending, hurting sales at its largest unit.

Shares were down 9.09% to 25c in early afternoon trading. The stock is down 25.97% over the past year.

The company posted a loss of $1.7 million, or 0.9c a share, in the 12 months ended March 31, from a profit of $3.2 million, or 1.6c, a year earlier.

Underlying earnings before interest, tax, depreciation and amortisation fell to $9 million, within its $9-10 million forecast range, from $15.4 million a year earlier, it says.  Revenue fell 14% to $112.7 million.

Shares in Rakon dropped 9.1% to 25c and have slid 9.8% this year.

Rakon says earnings have been hurt as major network operators around the world favour investment in 5G bandwidth and merger and acquisition activities over spending on base stations and other infrastructure.

That's seen revenue from telecommunications, the company's largest unit, slump by a quarter to $53.4 million, outweighing gains in sales of its global positioning and space and defence units.

The move to 5G will create a need for increased infrastructure investment to cope with growing demand for an ever-expanding range of applications and faster network speeds, managing director Brent Robinson says.

Rakon has strong relationships with both network equipment and original design manufacturers, meaning it is well-placed to benefit from an upturn in infrastructure investment but Mr Robinson remained cautious about forecasting exactly when demand will rebound.

The company's global positioning unit boosted revenue 3.7% to $31.5 million.

Mr Robinson says the increasing usage of GPS technology in a range of industries is generating significant opportunities for Rakon.

Changing technologies, including the decline of the personal navigation device in favour of other solutions, is helping to drive increased margins in Rakon's global positioning business while the company's automotive customers are looking beyond GPS to address advanced connectivity applications for smart cars, he says.

Revenue at its space and defence unit increased 9.6 % to $25.3 million. The unit expected increased sales in the coming year, with the introduction of new products following the completion of several key long-term development projects during the 2016 financial year, Mr Robinson says.

A breakdown of revenue by region shows the biggest decline came from Asian customers, with sales dropping by a quarter to $48.7 million. Sales to North American customers increased 35% to $23.9 million while European revenue slid 18% to $37.2 million.

The company didn't declare a dividend.

(BusinessDesk)

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