Rakon 1H earnings jump on one-off gain, improved margins
By Rebecca Howard
Nov. 15 (BusinessDesk) - High-tech components maker Rakon reported a lift in first-half earnings as revenue increased and its cost of sales remained stable.
Net profit was sharply higher, largely due to a one-off $7.2 million gain after it changed the way its investment in 'internet of things' start-up Thinxtra is accounted for.
Gross profit was $24.6 million in the six months to Sept. 30, up 22 percent versus the prior period, on a 10 percent lift in revenue to $53 million. Net profit climbed to $9.2 million versus $900,000 in the prior period.
In June the accounting treatment of Rakon’s investment in Thinxtra changed so that it is now recognised at fair value, calculated on the basis of an independent external valuation report. Rakon currently holds 21.4 percent of Thinxtra after it sold down part of its holding in 2017.
Excluding that impact, the firm's underlying earnings before interest, tax, depreciation and amortization rose to $5.9 million from $3.8 million a year earlier.
Stripping out the Thinxtra gain, managing director Brent Robinson said it was pleasing to see "growth in Rakon’s core business with higher sales and margin from the telecommunications and defence market segments."
He noted the increase in forecast demand from the telecommunications market with the continuing roll-out of 4/4.5G and 5G infrastructure. The challenge for Rakon is to capture a share that demand, he said.
Robinson also noted the completion of its acquisition of its Centum Rakon India joint venture in May.
"It was pleasing to see the turnaround in its profit performance under Rakon’s control."
Rakon's three core markets are telecommunications, global positioning, and space and defence. It has five manufacturing plants and six research and development centres.
The stock last traded at 28 cents, down 6.7 percent, but has gained 30 percent this year.