Rakon shares rise as 5G, space business fuel profit jump

A Nasa illustration of the Perseverance rover touching down on Mars. Auckland-based Rakon designed and manufactured some of the guidance systems for the mission. Image / Nasa

Rakon shares jumped 4.3 per cent to 97 cents in early trading after the Auckland company reported a tripled full-year profit, driven in part by 5G.

The Auckland maker of frequency control products - used in everything from smartphones to mobile network gear to data centres to guidance systems and even Nasa's latest Mars rover and French and Indian space missions - has now seen its shares rise 264 per cent over the past year, even if it's still some way below its $5.60 high in its 3G-driven heyday in the 2000s.

Net profit increased 142 per cent - albeit off a low base - to $9.6m as revenue rose 8 per cent to $128.3m.

Increased demand from telecommunications operators, thanks to 5G mobile network upgrades made a "substantial" contribution to Rakon's improved numbers.

But an investor presentation also highlighted the contribution of "French and Indian space business" (without giving specific financials). The new business included supplying components for India's third moon mission, India's first solar mission; the design and manufacture of products about Nasa's Mars Perseverance Rover (which touched down on the red planet on February 19) and initial deliveries of components to NewSpace, a maker of low-Earth orbit satellites.

The company's cash position, net of debt, improved by $12.9m from -$7.9m last year to $5m.

Underlying ebitda increased 59 per cent to $23.5m, and Rakon reconfirmed operating profit guidance of $27m to $32m for FY2022.

Rakon said it had received pandemic assistance in the UK, France and NZ (where it received wage subsidies totaling $2m).

An investor briefing also noted the impact of the recent coronavirus spike in India, where Rakon employs 500 staff at a manufacturing site.

It said 18 Rakon staff in India had Covid but were in good health, but that one long-serving staffer had died from the disease.

Manufacturing continued, with physical distancing, bi-weekly testing and other safeguards. Higher-risk staff had been vaccinated.

It added that the Covid situation in India would not have a material effect on FY2022 earnings, and Rakon had "cautious optimism as total cases in India have been declining".

In the positioning market in FY2022, revenue fell by $4.9m to $14m, in part because of Covid negatively impacting the aeronautical and emergency beacon sectors.

Rakon said its FY2022 outlook was strong across with board with its 5G, data centre and aerospace businesses expanding in 2022, and said there was opportunity in the global chip shortage as companies diversified their supply chains and signed longer term contracts.