4RF sinks deeper into the red on R&D spend, switches banker
By Paul McBeth
Sept. 6 (BusinessDesk) - 4RF sank deeper into the red in the latest financial year as the Israeli-owned radio equipment maker continued a heavy research and development programme as it chases export markets for its smart radios.
The Wellington-based company's loss widened to $2.5 million in the year ended March 31 from $868,000 a year earlier on largely flat operating revenue of $23 million, financial statements lodged with the Companies Office show. 4RF's Aprisa product range of point-to-multipoint radios for smart monitoring and point-to-point microwave radio wireless connectivity increased sales to $21.9 million from $20.8 million in 2016, and is up from $13.8 million when Israel's Fortissimo Capital bought the company out of receivership for $8.2 million.
Research and development costs shrank to $3.5 million from $4 million a year earlier, of which $2.7 million was on wages, up from $2.5 million. A technology growth grant from the government's Callaghan Innovation helped offset that bill by $730,000. Under Fortissimo's watch, 4RF has spent $19.7 million on R&D.
"In the last four years, gross R&D expenditure as a percentage of revenue has been 24 percent - significantly above the industry average," chief executive Ian Troughton said in his report. "This continued investment in R&D is the reason the company has produced small net losses and represents the choice by the board to invest in long-term growth."
Troughton said group sales of its point-to-multipoint range rose 42 percent across all markets, and that its US subsidiary boosted sales 44 percent, without providing more detail.
The company's operating cash outflow shrank to $1.7 million from $4.2 million. It held $450,000 in cash and equivalents after $133,000 of investing purchases and an inflow of $1.9 million from financing activities.
4RF switched bankers after the balance date, replacing a $6.3 million facility with ANZ Bank New Zealand as at June 23 with credit lines of up to $8.1 million with Kiwibank. The company had drawn down $5.7 million of the ANZ facility as at March 31, up from $4.6 million a year earlier.
ANZ has been 4RF's banker since at least 2004, and started providing the manufacturer with short-term loans the following year. When convertible noteholders owed $5.5 million appointed receivers to the former 4RF holding company in 2012, ANZ was owed $4.1 million, of which it was paid $2 million from the sale to Fortissimo.
(BusinessDesk receives assistance from Callaghan Innovation to cover the commercialisation of innovation)