Rakon 2012 Financial Year Results Presentation

1. Rakon Limited
R E S U LT S
FY12

2. 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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3. 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 191.0 191.0 189.7 126.9
(millions)
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4. Revenue Mix
FY2011 FY2012
High Reliability 14% 20%
SWD
14% 34%
38%
Other
9% 21%
Positioning
Telecom 19%
25% 6%
More diverse revenue base due to growth in sales
into SWD and High Reliability markets
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5. Rakon Market Revenue Index
Smart Wireless Devices SWD: Revenue up due to market growth and wining
new business with Tier 1 and Tier 2 manufacturers.
800
600 Telecom: Revenue lower from deferral in spending of
telecoms operators. Improvement after quiet period to
400 continue as CAPEX required to support massive data
demands from sales of smartphones.
200
0 High Reliability: Revenue up and in line with
expectations driven by good performance from Temex
2010 2011 2012 business acquired in August 2010.
Telecom Infrastructure High Reliability
200 400
150 300
100 200
50 100
0 0
2010 2011 2012 2010 2011 2012
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6. FX
› FY12 Spot FX Rates
• Hedge gain of NZ$1.9 million
• Revaluation loss of NZ$0.4 million FY12 FY11 Var %
NZ$/US$ 0.807 0.734 0.073 10%
› FY13/FY14 Hedging
NZ$/GBP 0.505 0.471 0.034 7%
• US$/NZ$: 64% of next 24 months
covered with mix of FEC NZ$/EUR 0.586 0.555 0.033 6%
(~0.78)/Collars (0.82/0.75)
NZ$/JPY 63.89 62.79 1.10 2%
• US$/GBP: 34% of next 24 months
covered with mix of FEC GBP/US$ 1.597 1.557 0.040 3%
(~1.57)/Collars (1.57/1.53)
EUR/US$ 1.377 1.322 0.055 4%
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7. Revenue Bridge
250
NZ$ Million
200 19 14
9 14 4 5 10 3 0
150
100 193 180
50
-
Revenue NZ sales NZ sales NZ FX & UK sales UK sales UK FX & FR sales FR FX & Intercoy Revenue
FY11 volume price/mix sales volume price/mix sales volume & sales sales FY12
hedging hedging price/mix hedging
› 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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8. EBITDA Bridge
35
NZ$ Million
30
2
4
25 5
20 1
9 3 6
15 2 2 3
1 3
25 2
10
13
5
-
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FY11
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EBITD
FY12
Franc
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Volum
Volum
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NZ FX
UK FX
Other
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Selling
of
of
› 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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9. Market Update
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10. Rakon enabling connectivity everywhere
Rakon’s frequency control product range synchronises global telecoms
networks end-to-end:
TCXO+ HiRel TCXO+ OCXO TCXO
TCXO+ VCXO XTAL+ VCXO VCXO XTAL
VCXO
Undersea to repeater and switch Copper to switch Wireless to Base station
Satellite link
HiRel
OCXO+
XTAL+
Fibre switch & microwave Microwave link Copper Wireless to handset
TCXO+ TCXO+ TCXO+ TCXO+ OCXO TCXO
VCXO VCXO VCXO XTAL
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11. Smart Wireless Devices
DRIVING GLOBAL DEMAND
2012 Achievements & Highlights
• 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
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
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12. Increasing number of products per device
Worldwide Smart Connected Device Shipments, 2010-
GPS Camera
2016 (Unit Millions)
Modem FM Tuner
2000
1800
1600
1400
Millions
1200
BT/WiFi/NFC
1000
800
600
400
200
0
Smartphones PC Tablets
Source: IDC
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13. Rakon Crystal Chengdu
STAGE ONE COMPLETE
Now operating at 80% of Stage One capacity
RCC team now at 200
Planning next stage
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14. Telecom Infrastructure
STRONGER MARKET POSITIONING FROM DESIGN WINS
DRIVING FUTURE REVENUE
Mobile Data Exabytes per
2012 Achievements & Highlights Month
• Acquired new tier one customers and increased share allocations 7
from existing customers
• Major design wins in key technology to support massive mobile data 6
growth
• Rakon’s new VCXO/XO product range now delivering in volume and
expanding our market share 5
4
Industry Outlook
• Operator infrastructure spending constrained 3
• Telco investment in Het-Nets and Small Cells a solution to meet
massive mobile data demand and coverage issues
2
• Major Telco infrastructure upgrades to 4G/LTE will support Rakon
growth strategy
1
Strengths & Opportunities
0
• Strengthened market positioning from design wins 2010 2011 2012 2013 2014 2015
• 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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15. Mobile Base Stations Forecast
(1000s)
Mobile Base Stations shipment forecast from 2011
3,000
2,500
2,000
1,500
1,000
500
Source:
- Credit Suisse Estimates 2011
2010 2011 2012 2013 2014 2015
Global Population Mobile Coverage by Technology Estimates Rapid Smartphone growth is
Forecast (CY) GSM WCDMA LTE CDMA Growth driving both, demand for mobile
data coverage and new
2010 85% 35% 3% 80% technologies to increase data
2011 86% 38% 4% 81% 6% speed
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
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16. Heterogeneous Networks (LTE/3G/2G)
› The Het-Net is a combination of mobile base stations
› In high density areas, there will be up to 10-20 Smalls Macro Cells provide general coverage
Cells per Macro Cell footprint Operator deployed indoor and
outdoor Small Cells
› Every cell uses a high stability frequency product
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
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17. Hi Reliability
DIVERSIFIED PRODUCT RANGE, MARKET SHARE AND CUSTOMER BASE
2012 Achievements & Highlights
• 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
Strengths & Opportunities
• 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
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18. Overview:
SCALING GLOBALLY TO CAPITALISE ON TECHNOLOGY AND MARKET LEADERSHIP
World Leader
Market leader in many
markets, including
consumer, automotive, telecom, defen
ce and space
Complete Range
Full range of frequency control
solutions:
OCXO, VCXO, TCXO, XO, Cryst
al, SAW, Module, Tuning Fork
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
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19. 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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