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Rakon Announces 200% Improvement At Half Year

15 December 2006

Rakon Announces 200% Improvement At Half Year

Rakon reports an unaudited net surplus after tax of $5.6 million for the six months ended 30 September 2006, a 200% improvement on the same six month period in 2005.

Growth in revenue was the major factor driving the growth in earnings. Revenue of $50.5 million was recorded for the first six months, a 48% increase on the same six month period in 2005.

Eliminating for the impact of currency movement, underlying revenue growth was up 33% on the corresponding period in 2005.

Rakon chairman Bryan Mogridge said an increase in competition between the major GPS manufacturers has driven retail prices for personal navigation devices to new lows.

These new price points have had the net effect of expanding the overall market and further fuelled already strong consumer demand for navigation products. From Rakon's perspective the demand for these portable navigation devices has more than offset slower than expected sales of GPS (global positioning system) enabled phones.

Design activity for GPS in mobile phones is however significant and points to this slower demand being merely a delay in this market development.

In the past six months Rakon has opened a European office and expanded its marketing team in the fast growing Asian market.

"These changes have us well placed to develop a stronger position in Europe and ensure we service and enhance our position in the rapidly growing Asian region. Our customers move to the contract design and manufacturing model in Asia meant that this region accounted for more than 60% of our sales in the first six months of the 2007 financial year," he said.
New Products

Rakon's focus on new product development for its already diverse customer base of more than 400 businesses is ongoing.

Early in 2006 Rakon announced the successful development of a GPS Receiver Module (GRM).

"Customer interest in this module is strong: we are currently sampling a number of units and we anticipate solid growth in sales of this product in the next financial year," Mr Mogridge said.

Rakon remains the leader in the supply of high stability TCXO's for GPS, which enable very weak GPS signals to be received. This is critical in an industry that demands products that will function in urban environments with very high interference.

The company will continue to build on this market position with products in smaller packages and lower costs, as well as products that offer even higher stability.

Mr Mogridge said Rakon's development of new crystal construction techniques has enabled the company to produce a crystal that is several times more resistant to shock and vibration than anything currently available on the world market.
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" Customers in the demanding surveying market have already released products based on this G-tolerant design. We are now focussing on developing aerospace customers who have stringent requirements for shock and vibration performance."

Other product developments are underway which will enable Rakon to better address the expanding telecommunications infrastructure market.

Manufacturing

Rakon operates an international manufacturing model, combining the engineering strength and product development expertise in New Zealand with highly efficient manufacturing processes and excellent sub assembly arrangements.

Maintenance of this high quality, secure and cost competitive manufacturing process is imperative to Rakon's current and future success.

" The $4.5 million expansion of Rakon's crystal manufacturing facility is nearing completion. This will increase our crystal manufacturing capacity by 40%, reduce manufacturing cost and better balance the mix of manufactured and sub-contracted crystals used in the manufacture of our TCXOs.," says Mr Mogridge.

"Rakon's product quality and market position leave us well placed to benefit from the forecast continued growth of GPS particularly in consumer products. This growing exposure to consumer demand brings with it greater potential for seasonal demand variations making the second half of the 2007 financial year more difficult to predict, as we move from the high volume sales months of October and November to a seasonal dip in December and January.

Mr Mogridge says the Directors remain comfortable with the 2007 financial year forecast EBIT of $14.8 million.

ENDS

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