Rakon shares drop as major network operators delay spending, prompting profit warning

Friday 29th January 2016

Rakon shares fell 6.7 percent after the high-tech components maker warned annual earnings will miss forecast because major network operators have delayed their spending on new equipment.

Underlying earnings before interest, tax, depreciation and amortisation is expected to be between $9 million and $10 million in the year ending March 31, down from a previous forecast of $15.4 million, the Auckland-based company said in a statement. Rakon reported underlying ebitda of $15.4 million in 2015. The shares fell 2 cents to 28 cents.

"Previously it was expected that investment in infrastructure would resume in the second half of the current financial year, however latest forecasts from the market now indicate this is likely to be delayed further," Rakon said. The company "remains confident that the continued growth in data usage and internet connectivity will force network operators to upgrade their infrastructure in order to maintain network service levels and market share."

The company has been exiting the smart wireless device market, which didn't deliver big enough margins, to focus on the burgeoning telecommunications sector, and has shifted manufacturing from the UK and France to New Zealand and India as part of restructuring to reduce its global workforce by 45 percent and slash its operating costs.

Chief executive Brent Robinson said Rakon was still improving its operational efficiencies, and reiterated his optimism about the Internet of Things - shorthand for machine-to-machine connectivity - and the opportunities it will provide the company.

"We expect to be able to provide a further update of our plans in this area during the first quarter of the year," he said.

BusinessDesk.co.nz

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