KEY POINTS:
Technology stock Rakon has posted strong revenue growth on the back of its European acquisition, but the high New Zealand dollar kept profit growth at a modest 4 per cent.
The company, which designs crystal and oscillator products for use in items such as global positioning satellite systems, reported a 65 per cent increase in revenue to $174.3 million for the financial year ending March.
In line with other large scale exporters such as Fisher & Paykel Healthcare, the strong New Zealand dollar had affected the company with profit after tax up only $500,000 to $10.9 million.
But managing director Brent Robinson was bullish on the company's prospects, with strong growth expected in the GPS market and in new applications such as personal tracking devices and GPS-capable cameras.
The company also expected an earnings boost through the widely anticipated weakening of the kiwi. The average spot rate against the US greenback had been 10 cents higher for the 2008 financial year than in the previous year.
"We've seen the dollar come off already, and obviously it has significant effect on Rakon's earnings, with a 1 cent change [translating to] more than $1 million gain in profit."
Robinson said there was, however, a risk of weakness in the telecommunications segment of its market. In the past, telcos have reduced their spending in times of a slowdown, which in turn has a downward effect on infrastructure manufacturers who purchase from Rakon.
He said the New Zealand business had performed strongly despite the impact of the weak US dollar, attributing the revenue increase largely to the full year contribution of the Frequency Control Products business of UK-based C-Mac MicroTechnology, which the company acquired over a year ago.
The company's French manufacturing operations have been more problematic as it struggled with higher costs, but the company was expecting benefits from the transfer of volume manufacturing to India. The joint venture with Centum Electronics has been completed and the first three transfers of equipment have been shipped from France to India.
"With the movement of some of the French business into India, as well as an increased focus on the parts of their business at which they excel, we are confident of improving return," said Robinson.
The forecast weaker New Zealand dollar will also help their result, said Forsyth Barr analyst Jeremy Simpson.
No dividend was declared, in keeping with the company's growth strategy. Rakon shares closed at $3.27, down 3c.
