Rakon 2012 Financial Year Results

Rakon Limited

R E S U L T S

FY12

FY12 Financial Summary

› Revenue of NZ$178m down 5% on the prior year• Underlying revenue in US$144m up 4% on prior year.• SWD & High Reliability up. Telco lower due to slowdown in operator spend.

› Look through EBITDA of NZ$13.1m down on NZ$24.8m achieved in prior year

• Significant impact of stronger NZ$. On a constant currency basis EBITDA is down ~NZ$2.5m on FY11.

• Underlying product margins generally improved throughout FY12.• Operating costs increased due to the ramp up of Rakon’s Chengdu JV and the

full year impact of the former Temex business.• Inclusive of NZ$2.2m amortisation of Temex IFRS FV inventory adjustment• EBITDA from Associates & Joint Ventures down NZ$2.7m on prior year.

– Reduction in spending by Telco operators– Softer demand for consumer products (except SWD market)

› Operating cash flow of NZ$7.9m up $12m on prior year• Improvement in working capital in the second half of FY12 through reduced

inventory levels and improved terms of trade.• Resultant reduction in net debt.

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Financial Overview

NZD Millions FY12 FY11 FY10 FY09

Volumes (millions) 86.9 75.3 54.8 45.3

Revenue 178.3 189.3 144.5 139.5

EBITDA (look through) 13.1 24.8 5.9 18.5

Depreciation & Amortisation 10.1 9.1 8.7 8.3

Profit After Tax (0.4) 8.5 (5.4) 4.5

Earnings (cents per share) (0.1) 4.7 (3.4) 3.6

Operating Cash Flow 7.9 (4.1) 1.0 16.6

Capital Expenditure 22.4 47.7 8.5 15.3

Cash Reserves 12.4 22.0 45.9 2.0

Debt 33.5 20.0 4.2 15.4

Shares on issue at balance date (millions)

191.0 191.0 189.7 126.9

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20%

21%

6%19%

34%

14%

14%

9%

25%

38%

High Reliability

SWD

Other

Positioning

Telecom

Revenue Mix

FY2011 FY2012

More diverse revenue base due to growth in sales into SWD and High Reliability markets

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Rakon Market Revenue Index

SWD: Revenue up due to market growth and wining new business with Tier 1 and Tier 2 manufacturers.

Telecom: Revenue lower from deferral in spending of telecoms operators. Improvement after quiet period to continue as CAPEX required to support massive data demands from sales of smartphones.

High Reliability: Revenue up and in line with expectations driven by good performance from Temex business acquired in August 2010.

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2010 2011 20120

200

400

600

800

Smart Wireless Devices

2010 2011 20120

50

100

150

200

Telecom Infrastructure

2010 2011 20120

100

200

300

400

High Reliability

FX

› FY12• Hedge gain of NZ$1.9 million

• Revaluation loss of NZ$0.4 million

› FY13/FY14 Hedging

• US$/NZ$: 64% of next 24 months

covered with mix of FEC

(~0.78)/Collars (0.82/0.75)

• US$/GBP: 34% of next 24 months

covered with mix of FEC

(~1.57)/Collars (1.57/1.53)

Spot FX Rates

FY12 FY11 Var %

NZ$/US$ 0.807 0.734 0.073 10%

NZ$/GBP 0.505 0.471 0.034 7%

NZ$/EUR 0.586 0.555 0.033 6%

NZ$/JPY 63.89 62.79 1.10 2%

GBP/US$ 1.597 1.557 0.040 3%

EUR/US$ 1.377 1.322 0.055 4%

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Revenue Bridge

› NZ: Volume gains in from increase in SWD sales exceed price/mix changes but more than offset by unfavourable FX impact

› UK: Volume down and unfavourable FX impact partially offset by favourable mix › France: Volume and mix favourable due to full year impact of former Temex

business but partially offset by unfavourable FX impact

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Reven

ue F

Y11

NZ sale

s vo

lume

NZ sale

s pr

ice/m

ix

NZ FX &

sale

s he

dging

UK sale

s vo

lume

UK sale

s pr

ice/m

ix

UK FX &

sale

s he

dging

FR sale

s vo

lume

& pric

e/m

ix

FR FX &

sale

s he

dging

Inte

rcoy

sale

s

Reven

ue F

Y12 160,000

170,000

180,000

190,000

200,000

210,000

220,000

192577180061

18,882

3,582 9,815 441

14083.6017658394

9438.74921269738

14202.7751559067 4807.6969259324

3

2704.41355867011

EBITDA Bridge

› NZ: Volume gains in from increase in SWD sales. Price/mix reductions largely offset by costs reductions and operational gains. Unfavourable FX impact.

› UK: Volume down and unfavourable FX impact partially offset by favourable mix.› France: Volume and mix favourable due to full year impact of former Temex business but

partially offset by unfavourable FX impact.› Indirect costs up. R&D and Government grants up. JV and associate earnings down.

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EB

IT...

NZ

Vo.

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NZ

sal

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NZ

FX

UK

V...

UK

sal

...

UK

FX

Fra

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Gov

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-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

24839.8039273561

13085.8689979458

4,269

1,4802,459

2,070

3,0971,092

1,732

1804.68970116807

5120.23839768449

8742.96859127746

3159.36933949635

6361.7942342763.3335439302

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9

Market Update

Rakon enabling connectivity everywhere

Wireless to Base station

OCXOVCXO

TCXOXTAL

Copper to switch

TCXO+VCXO

Undersea to repeater and switch

HiRelXTAL+

TCXO+VCXO

TCXO+VCXO

TCXO+ OCXOVCXO

TCXOXTAL

TCXO+VCXO

HiRel OCXO+XTAL+

TCXO+VCXO

Fibre switch & microwave Microwave link

TCXO+

Wireless to handsetCopper

Sate

llite

link

Rakon has never been better positioned!

Rakon’s frequency control product range synchronises global telecoms networks end-to-end:

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Smart Wireless Devices

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DRIVING GLOBAL DEMAND

• RCC stage 1 complete and almost fully ramped to installed capacity• Expanding Tier 1 customer base• Leading supplier to Tier 2 Chinese SWD sector• Now delivering multiple frequency control parts per device

2012 Achievements & Highlights

Industry Outlook

• Massive global volume growth including rapid adoption in China• Recession proof market due to huge global demand• Demand moving ahead of supply for leading edge components

Strengths & Opportunities

• Leading edge competitive and of scale Chinese facility • Strengthened Chip-set partnerships driving opportunities with Tier 1 customers• Leveraging strong position with Telecom customers to penetrate their SWD

divisions

Increasing number of products per device

GPS

Modem

BT/WiFi/NFC

Camera

FM Tuner

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Smartphones PC Tablets

Mill

ion

s

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Source: IDC

Worldwide Smart Connected Device Shipments, 2010-2016 (Unit Millions)

Rakon Crystal Chengdu

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STAGE ONE COMPLETE

Now operating at 80% of Stage One capacity

RCC team now at 200

Planning next stage

Telecom Infrastructure

STRONGER MARKET POSITIONING FROM DESIGN WINSDRIVING FUTURE REVENUE

• Acquired new tier one customers and increased share allocations from existing customers

• Major design wins in key technology to support massive mobile data growth

• Rakon’s new VCXO/XO product range now delivering in volume and expanding our market share


Industry Outlook

• Operator infrastructure spending constrained• Telco investment in Het-Nets and Small Cells a solution to meet

massive mobile data demand and coverage issues• Major Telco infrastructure upgrades to 4G/LTE will support Rakon

growth strategy


• Strengthened market positioning from design wins• Supplier to all major manufacturers• Lower cost base with cutting edge technology improves and

controls margins• Long design-in cycles and roll-outs – but long revenue and product

life cycles

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2010 2011 2012 2013 2014 20150

1

2

3

4

5

6

7

Mobile Data Exabytes per Month

Mobile Base Stations Forecast

2010 2011 2012 2013 2014 2015 -

500

1,000

1,500

2,000

2,500

3,000

Global Population Mobile Coverage by Technology Estimates

Forecast (CY) GSM WCDMA LTE CDMA Growth

2010 85% 35% 3% 80%2011 86% 38% 4% 81% 6%2012 87% 40% 7% 82% 7%2013 89% 44% 12% 83% 11%2014 90% 52% 18% 83% 16%2015 91% 63% 22% 84% 17%

Source: Rakon estimates from customer survey

Rapid Smartphone growth is driving both, demand for mobile data coverage and new technologies to increase data speed

Source: Credit Suisse Estimates 2011

(1000s) Mobile Base Stations shipment forecast from 2011

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Heterogeneous Networks (LTE/3G/2G)

Macro Cells provide general coverage

Operator deployed indoor and outdoor Small Cells

Enterprise deployed Small Cells

User deployed Femto Cells

Het-Nets solutions manages congestion, greatly increases capacity and coverage – Small Cells are becoming a major technology solution to meet the mobile data explosion

› The Het-Net is a combination of mobile base stations› In high density areas, there will be up to 10-20 Smalls

Cells per Macro Cell footprint› Every cell uses a high stability frequency product

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Hi Reliability

DIVERSIFIED PRODUCT RANGE, MARKET SHARE AND CUSTOMER BASE

• Hi-Rel business meeting expectations but revenue flat until 2013• Temex acquisition embedded and rebranded Rakon• New product platforms developed also targeting lower cost for performance• Renewed customer confidence generating new opportunities


Industry Outlook

• Growth particularly with emerging countries (incl. BRIC)• Expanding radar applications• Aging radar system retrofits


• Established an enhanced position with existing customers• High barriers of entry to competition• Significant in-roads in commercial satellites • Cross-selling opportunities realised from the global sales force• Long term revenues expected but design-in life cycles also long• Additional space grade products getting ESA qualified

Global Presence

Over 2300 staff in 9 manufacturing plants and 14 sales offices

Innovation

Track record of technology leadership and first-to-market in the Frequency Control Products industry

Complete Range

Full range of frequency control solutions: OCXO, VCXO, TCXO, XO, Crystal, SAW, Module, Tuning Fork

World Leader

Market leader in many markets, including consumer, automotive, telecom, defence and space

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Overview:

SCALING GLOBALLY TO CAPITALISE ON TECHNOLOGY AND MARKET LEADERSHIP

Disclaimer

This presentation contains not only a review of operations, but also some

forward looking statements about Rakon Limited and the environment in which

the company operates. Because these statements are forward looking, Rakon

Limited's actual results could differ materially.

Although management and directors may indicate and believe that the

assumptions underlying the forward looking statements are reasonable, any of

the assumptions could prove inaccurate or incorrect and, therefore, there can

be no assurance that the results contemplated in the forward looking statements

will be realised.

Media releases, management commentary and investor presentations are all

available on the company's website and contain additional information about

matters which could cause Rakon Limited's performance to differ from any

forward looking statements in this presentations. Please read this presentation

in the wider context of material previously published by Rakon Limited.

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Rakon 2012 Financial Year Results

Business

Transcript of Rakon 2012 Financial Year Results