Table of contents Table of contents
1
Unaudited Consolidated Interim Statement of Comprehensive Income
2
Unaudited Consolidated Interim Statement of Changes in Equity
3
Unaudited Consolidated Interim Balance Sheet
4
Unaudited Consolidated Interim Statement of Cash Flows Notes to the Unaudited Consolidated Interim Financial Statements
5–6 7 – 14
Accountants Report
15
Directory
16
1
Unaudited Consolidated Interim Statement of Comprehensive Income
Note
Unaudited Unaudited Six Months ended Six Months ended 30 September 2009 30 September 2008 ($000s) ($000s)
Audited Year ended 31 March 2009 ($000s)
Continuing operations Revenue
3
72,212
79,372
139,472
Cost of sales
(49,317)
(49,536)
(86,292)
Gross profit
22,895
29,836
53,180
Other operating income
536
8
63
(26,256)
(28,266)
(55,670)
5
(4,763) (7,588)
4,210 5,788
12,140 9,713
6
(755)
(784)
(2,140)
724
255
250
(7,619)
5,259
7,823
1,463
(3,281)
(3,354)
(6,156)
1,978
4,469
3,776
(1,762)
(2,251)
Operating expenses Other gains/(losses) – net Operating (loss) profit Net finance (costs) Share of profit of associates and joint venture (Loss)/profit before income tax Income tax credit/(expense)
4
Net (loss)/profit after tax Other comprehensive income: Cash flow hedges Net investment hedge
3,365
-
(3,846)
(12,463)
3,864
5,527
Income tax relating to components of other comprehensive income
(2,143)
529
1,828
Other comprehensive (losses)/income for the period, net of tax
(7,465)
2,631
1,258
Total comprehensive (losses)/income for the period
(13,621)
4,609
5,727
(6,031)
1,995
4,520
(125)
(17)
(51)
(6,156)
1,978
4,469
(13,500)
4,634
5,783
(121)
(25)
(56)
(13,621)
4,609
5,727
Basic earnings per share (from continuing operations)
(4.7)
1.6
3.6
Diluted earnings per share (from continuing operations)
(4.7)
1.5
3.6
Currency translation differences
(Losses)/Profit Attributable to: Equity holders of the company Minority interests Total comprehensive (loss)/income attributable to: Equity holders of the company Minority interest
Earnings per share for (loss)/profit attributable to the equity holders of the Company:
The accompanying notes form an integral part of these interim financial statements.
2
Unaudited Consolidated Interim Statement of Changes in Equity Share Capital
Retained Earnings
Other
Equity
Minority Interests
Total Equity
Note
($000s)
($000s)
($000s)
($000s)
($000s)
($000s)
7
103,161
32,212
(3,536)
131,837
-
131,837
-
1,995
-
1,995
(17)
1,978
Currency translation differences
-
-
3,872
3,872
(8)
3,864
Cash flow hedges, net of tax
-
-
(1,233)
(1,233)
-
(1,233)
Total comprehensive income for the half
-
1,995
2,639
4,634
(25)
4,609
-
-
-
-
57
57
Balance at 1 April 2008 Net profit after tax for the half year ended 30 September 2008
year Minority interest – newly acquired in subsidiary Employee share schemes - value of employee services
-
-
233
233
-
233
17
-
-
17
-
17
103,178
34,207
(664)
136,721
32
136,753
-
2,525
-
2,525
(34)
2,491
Currency translation differences
-
-
1,660
1,660
3
1,663
Cash flow hedges, net of tax
-
-
(343)
(343)
-
(343)
Net Investment hedge
-
-
(2,693)
(2,693)
-
(2,693)
Total comprehensive income for the half
-
2,525
(1,376)
1,149
(31)
1,118
- proceeds from shares issued Balance at 30 September 2008
7
Net profit after tax for the half year ended 31 March 2009
year Employee share schemes - value of employee services
-
-
292
292
-
292
123
-
-
123
-
123
103,301
36,732
(1,748)
138,285
1
138,286
-
(6,031)
-
(6,031)
(125)
(6,156)
Currency translation differences
-
-
(12,467)
(12,467)
4
(12,463)
Cash flow hedges, net of tax
-
-
2,643
2,643
-
2,643
Net Investment hedge
-
-
2,355
2,355
-
2,355
Total comprehensive income for the half
-
(6,031)
(7,469)
(13,500)
(121)
(13,621)
- proceeds from shares issued Balance at 31 March 2009
7
Net (loss) after tax for the half year ended 30 September 2009
year Employee share schemes - value of employee services Issue of ordinary shares
13
Share issuance cost Balance at 30 September 2009
7
-
-
115
115
-
115
29,426
-
-
29,426
-
29,426
(532)
-
-
(532)
-
(532)
132,195
30,701
(9,102)
153,794
(120)
153,674
The accompanying notes form an integral part of these interim financial statements.
3
Unaudited Consolidated Interim Balance Sheet Unaudited as at 30 September 2009 ($000s)
Unaudited as at 30 September 2008 ($000s)
Audited Year as at 31 March 2009 ($000s)
Assets Current assets Cash and cash equivalents Trade and other receivables Derivatives – held for trading Derivatives – cash flow hedges Inventories Current income tax asset
13,781 30,580 2,971 36,438 1,819
5,285 39,115 101 626 44,870 -
8,907 30,603 959 41,221 1,727
Total current assets
85,589
89,997
83,417
Non-current assets Trade and other receivables Investment in shares Property, plant and equipment Intangible assets Investment in associate Interest in joint venture
3,202 743 43,639 34,314 16,679 3,959
707 743 42,807 39,859 16,130 4,379
3,306 743 44,535 37,831 19,996 4,854
Total non-current assets
102,536
104,625
111,265
Total assets
188,125
194,622
194,682
Liabilities Current liabilities Bank overdraft Borrowings Trade and other payables Derivatives – held for trading Derivatives – cash flow hedges Provisions Current income tax liabilities Other liabilities
189 24,287 151 78 152 5,910
6,177 786 20,909 1,524 4,437 -
6,913 2,171 19,437 1,831 174 -
Total current liabilities
30,767
33,833
30,526
Non-current liabilities Bank borrowings Other liabilities Provisions Deferred tax liabilities
2,339 1,345
8,000 12,855 2,201 980
7,864 15,351 2,256 399
3,684
24,036
25,870
Note
9 10
4
Total non-current liabilities Total liabilities
34,451
57,869
56,396
153,674
136,753
138,286
Minority interest
132,195 (9,102) 30,701 153,794 (120)
103,178 (664) 34,207 136,721 32
103,301 (1,748) 36,732 138,285 1
Total equity
153,674
136,753
138,286
Net assets Equity Share capital Reserves Retained earnings
7
The accompanying notes form an integral part of these interim financial statements.
4
Unaudited Consolidated Interim Statement of Cash Flows
Note
Unaudited Six Months ended 30 September 2009 ($000s)
Operating activities Cash was provided from Receipts from customers Interest received Other income received R&D tax refund
84,136 129 8 84,273
146,007 188 310 146,505
(41,985) (23,678) (897) (544) (67,104) 3,670
(50,942) (22,269) (651) (1,354) (75,216) 9,057
(80,731) (40,630) (2,123) (6,390) (129,874) 16,631
313 313
665 921 1,586
519 921 1,440
9
(4,027) (467) (4,494) (4,181)
(9,146) (658) (743) (2,672) (2,466) (15,685) (14,099)
(14,126) (1,149) (743) (2,672) (2,927) (21,617) (20,177)
13
23,351 218 23,569
17 17
140 214 354
(9,847) (532) (10,379) 13,190 12,679
(2,477) (2,477) (2,460) (7,502)
(1,252) (1,252) (898) (4,444)
(892) 1,994
115 6,495
(57) 6,495
13,781
(892)
(1,994)
13,781 13,781
5,285 (6,177) (892)
8,907 (6,913) (1,994)
Net cash flow from operating activities Investing activities Cash was provided from Sale of property, plant and equipment Sale of net assets
Net cash flow from investing activities Financing activities Cash was provided from Issue of ordinary shares Proceeds from borrowings Cash was applied to Repayment of principal on borrowings Share issuance costs Net cash flow from financing activities Net increase (decrease) in cash and cash equivalents Foreign currency translation adjustment Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Composition of cash and cash equivalents Cash and cash equivalents Bank overdraft
Audited Year ended 31 March 2009 ($000s)
68,250 93 703 1,728 70,774
Cash was applied to Payments to suppliers and others Payments to employees Interest paid Income tax paid
Cash was applied to Purchase of property, plant and equipment Purchase of intangibles Investment in shares Investment in associate Issuance of loan to joint venture
Unaudited Six Months ended 30 September 2008 ($000s)
The accompanying notes form an integral part of these interim financial statements.
5
Unaudited Consolidated Interim Statement of Cash Flows
Unaudited Six Months ended 30 September 2009 ($000s)
Unaudited Six Months ended 30 September 2008 ($000s)
Audited Year ended 31 March 2009 ($000s)
(6,156)
1,978
4,469
Depreciation expense
3,295
3,012
6,350
Amortisation expense
516
1,098
1,691
(108)
(130)
131
115
250
525
Reconciliation of net (loss)/profit to net cash flows from operating activities Reported net (loss)/profit after tax Items not involving cash flow
(Decrease)/increase in estimated doubtful debts Employee share based payments Movement in foreign currency
75
(1,915)
(74)
Deferred tax
-
-
(70)
(Gain)/loss on disposal of property, plant and equipment
-
48
26
Goodwill impairment
-
292
292
(724)
(255)
(250)
3,169
2,400
8,621
(2,320)
3,332
5,601
Inventories
2,349
(1,690)
2,203
Trade and other payables
6,907
1,110
(820)
Tax provisions
(279)
1,927
(3,443)
6,657
4,679
3,541
3,670
9,057
16,631
Share of profit of associate and joint venture Impact of changes in working capital items Trade and other receivables
Net cash flow from operating activities
6
Notes to the Unaudited Consolidated Interim Financial Statements 1.
General information Rakon Limited (“the Company”) and its subsidiaries (together “the Group”) is a world leader in the development of frequency control solutions for a wide range of applications. Rakon has leading market positions in the supply of crystal oscillators to the GPS, telecommunications network timing/synchronisation, and aerospace markets. The Company is a limited liability company incorporated and domiciled in New Zealand. It is registered under the Companies Act 1993 and is an issuer in terms of the Securities Act 1978. The Company is listed on the New Zealand Stock Exchange. These consolidated interim financial statements have been approved for issue by the Board of Directors on 12 November 2009.
2.
Summary of significant accounting policies 2.1. Basis of preparation This condensed consolidated interim financial information for the six months ended 30 September 2009 has been prepared in accordance with NZ IAS 34, Interim Financial Statements (“NZ IAS 34”). The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2009, which have been prepared in accordance with NZ IFRS. 2.2. Accounting policies The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2009, as described in those annual financial statements with the addition of the following: Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director, Marketing Director and the Chief Operating Officer. The Group has adopted the following new and amended IFRSs as of 1 April 2009:
NZ IFRS 8 ‘Operating Segments’ (effective from 1 January 2009) The Group has applied NZ IFRS 8 Operating Segments from 1 April 2009. NZ IFRS 8 replaces NZ IAS 14 Segment Reporting. NZ IFRS 8 requires ‘a management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. Operating segments are now reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. Comparatives have been restated. IAS 1 (Revised) ‘Presentation of Financial Statements’ (effective from 1 January 2009) The revised standard requires some changes to the disclosure of income statement and movements in equity as income and expense items currently shown in equity will need to be disclosed separately. The Group has elected to present this information in the statement on comprehensive income. 3.
Segment Information The chief operating decision maker assesses the performance of the operating segments based on a measure of adjusted earnings before interest, tax, depreciation and amortisation (EBITDA). Interest income and expenditure are not included in the result for each operating segment that is reviewed by the chief operating decision maker. Except as noted below, other information provided to the chief operating decision maker is measured in a manner consistent with that in the financial statements. The segment information provided to the chief operating decision maker for the reportable segments for the half year ended 30 September 2009 is as follows:
7
NZ (000’s)
Segment revenue EBITDA excluding FX & associates & joint venture Foreign exchange 2 gains/(losses) Share of profit/ (loss) from associates & joint venture EBITDA Depreciation and amortisation Income tax credit/(expense)
Unaudited Six Months ended 30 September 2009 1 UK France China Other (000’s) (000’s) (000’s) (000’s)
Total (000’s)
40,149
18,643
12,323
-
1,097
72,212
(558)
4,846
(2,893)
-
(333)
1,062
(3,032)
(1,495)
(413)
-
216
(4,724)
-
-
-
994
(270)
724
(3,590) (3,060)
3,351 (217)
(3,306) (292)
994 -
(387) (242)
(2,938) (3,811)
1,371
(745)
(18)
-
855
1,463
96,364 15,283
36,229 4,752
22,770 7,572
16,679 5,910
16,083 934
188,125 34,451
NZ
UK
(000’s)
(000’s)
(000’s)
Segment revenue EBITDA excluding FX & associates & joint venture Foreign exchange 2 gains/(losses) Share of profit/ (loss) from associates & joint venture
80,260 127
32,661 8,399
6,578
EBITDA Depreciation and amortisation Income tax credit/(expense) 3 Total assets
3
Total assets 4 Total liabilities
Total liabilities
4
1
Total
(000’s)
(000’s)
(000’s)
21,360 5 (4,177)
-
5,191 1,420
139,472 5,769
4,173
1,195
-
564
12,510
-
-
-
678
(428)
250
6,705 (5,584)
12,572 (710)
(2,982) (709)
5
678 -
1,556 (1,038)
18,529 (8,041)
(424) 88,255
(1,221) 40,381
(61) 29,208
19,996
(1,648) 16,842
(3,354) 194,682
23,291
9,022
7,234
15,351
1,498
56,396
Unaudited Six Months ended 30 September 2008 1 UK France China Other (000’s) (000’s) (000’s) (000’s)
(000’s)
NZ (000’s)
Segment revenue EBITDA excluding FX & associates & joint venture Foreign exchange 2 gains/(losses) Share of profit/ (loss) from associates & joint venture EBITDA Depreciation and amortisation Income tax credit/(expense) 3
Total assets 4 Total liabilities 1
Audited year ended 31 March 2009 France China
50,699
Other
Total
15,899
8,823
-
3,951
79,372
5,179
4,650
5
-
(1,599)
5,893
2,755
678
412
-
410
4,255
-
-
-
372
(117)
255
7,934
5,328
5
372
(1,306)
10,403
(2,652)
(335)
(401)
-
(722)
(4,110)
(1,800)
(1,377)
(16)
-
(88)
(3,281)
97,649 29,976
36,996 8,610
25,037 3,700
16,130 12,855
18,810 2,728
194,622 57,869
(2,337)
(1,925)
Includes Investments in subsidiaries, Rakon Financial Services Ltd, Rakon UK Holdings Ltd, Rakon Europe Limited, Rakon Mauritius Ltd (including investment in Centum Rakon India Private Ltd) and Rakon HK Ltd. 2 Does not include foreign exchange gains or losses recognised directly in sales and costs of sales. 3 Excludes intercompany receivable balances eliminated on consolidation. 4 The measure of liabilities has been disclosed for each reportable segment as it is regularly provided to the chief operating decision-maker and excludes intercompany payable balances eliminated on consolidation. 5 Includes non-recurring gain on sale of equipment and intellectual property to Centum Rakon India Private Limited.
8
A reconciliation of adjusted EBITDA to (loss)/profit before tax is provided as follows: Unaudited Six Months ended 30 September 2009
Unaudited Six Months ended 30 September 2008
Audited Year ended 31 March 2009
($000s)
($000s)
($000s)
(2,551)
11,709
16,973
EBITDA for reportable segments Other segments EBITDA
(387)
(1,306)
1,556
(3,811)
(4,110)
(8,041)
Employee share schemes
(115)
(250)
(525)
Finance costs – net
(755)
(784)
(2,140)
Income tax (credit)/expenses
1,463
(3,281)
(3,354)
(6,156)
1,978
4,469
Unaudited Six Months ended 30 September 2009
Unaudited Six Months ended 30 September 2008
Audited Year ended 31 March 2009
($000s)
($000s)
($000s)
71,708
79,372
133,604
504
-
5,868
72,212
79,372
139,472
Depreciation and amortisation
(Loss)/Profit before tax
Breakdown of the revenue from all sources is as follows:
Sales of goods Revenue from services
The Group’s trading revenue is derived in the following regions. Unaudited Six Months ended 30 September 2009 ($000s)
Unaudited Six Months ended 30 September 2008 ($000s)
Audited Year ended 31 March 2009 ($000s)
Asia
41,388
42,846
73,347
North America
14,448
16,266
31,449
Europe
13,943
18,564
31,769
Others
2,433
1,696
2,907
72,212
79,372
139,472
Total Revenues by destination Region
Revenue is allocated above based on the country in which the customer is located. 4.
Income Taxes Current tax Current tax expense for the interim periods presented is the expected tax payable on the taxable income for the period, calculated as the estimated average annual effective income tax rate applied to the pre-tax income of the interim period. Deferred tax The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amounts of the assets and liabilities, using the estimated average annual effective income tax rate for the interim periods presented.
9
5.
Other gains/(losses) – net
Gain on disposal of intangibles, plant and equipment Cost attributable to investment in joint venture and sale of intangibles, plant and equipment Cost attributable to investments in associates and subsidiaries Goodwill impairment loss
Unaudited Six Months ended 30 September 2009 ($000s)
Unaudited Six Months ended 30 September 2008 ($000s)
Audited Year ended 31 March 2009 ($000s)
47
1,662
3,118
(83)
(999)
(2,575)
(3)
(416)
(621)
-
(292)
(292)
(39)
(45)
(370)
(151)
101
146
Foreign exchange gains/(losses) - net Forward foreign exchange contracts - held for trading - net foreign exchange gains (Losses)/gains on revaluation of foreign denominated 1 monetary assets and liabilities Ineffectiveness on cash flow hedges
1
(391)
-
389
(4,182)
4,154
10,684
-
-
1,291
(4,724)
4,255
12,510
(4,763)
4,210
12,140
Includes realised and unrealised gains/(losses) arising from accounts receivable and accounts payable. Hedge accounting is sought on the initial sale of goods and purchase of inventory, subsequent movements are recognised in trading foreign exchange.
6.
Net Finance (costs)/income Unaudited Six Months ended 30 September 2009 ($000s)
Unaudited Six Months ended 30 September 2008 ($000s)
Audited Year ended 31 March 2009 ($000s)
142
126
175
Interest expense on bank borrowings
(371)
(651)
(1,383)
Interest expense on other borrowings
(526)
(259)
(932)
(755)
(784)
(2,140)
Financial income Interest income on current and short-term bank accounts Financial expenses
10
10
7.
Share Capital Number of shares
Ordinary Shares ($000s)
126,791,417
103,161
52,493
17
126,843,910
103,178
- redemption of redeemable ordinary shares to ordinary shares
58,944
94
- employee share option scheme
17,936
29
126,920,790
103,301
25,587,862
28,894
152,508,652
132,195
At 1 April 2008 Shares issued - employee share option scheme At 30 September 2008 Shares issued -
At 31 March 2009 Shares issued - ordinary shares (note 13) At 30 September 2009
At 30 September 2009, 1,018,519 redeemable ordinary shares were on issue and held in trust on behalf of participants in the Rakon Share Growth Plan: (31 March 2009: 1,018,519, 30 September 2008: 1,077,463). Partial payments received from Rakon Share Growth Plan participants of $153,000 at 30 September 2009 are recorded within trade and other payables (31 March 2009: $153,000 and 30 September 2008: $162,000). Subsequent to 30 September 2009 a further 37,179,939 shares were issued; refer to note 13 for further details. 8.
Dividends The Group’s current dividend policy is that no dividend will be paid as all profits are to be reinvested into the business.
9.
Capital expenditure Unaudited Six Months Ended 30 September 2009 ($000s)
Unaudited Six Months Ended 30 September 2008 ($000s)
Audited Year Ended 31 March 2009 ($000s)
44,535
36,675
36,675
Additions
4,027
9,146
14,126
Disposals
(313)
(665)
(3,389)
Depreciation
(3,295)
(3,012)
(6,350)
Other movements
(1,315)
663
3,473
Closing net book value
43,639
42,807
44,535
Opening net book value
Amounts committed to capital expenditure subsequent to the end of the interim period total $802,000.
11
11
10. Intangible assets
At 1 April 2008 Cost Accumulated amortisation Net book value
Goodwill ($000s)
Trademarks ($000s)
Patents ($000s)
Order backlogs ($000s)
Software ($000s)
Product development ($000)
Assets under construction ($000)
Total ($000s)
31,734
653
4,152
1,186
3,865
1,587
565
43,742
-
(464)
(470)
(915)
(2,667)
-
-
(4,516)
31,734
189
3,682
271
1,198
1,587
565
39,226
189
3,682
271
1,198
1,587
565
39,226
5 (194)
238 (213)
7 (278)
7 199 (74) (413)
71 274 -
185 -
2,114 658 (753) (292) (1,098)
-
-
-
4
-
-
4
32,549
-
3,707
-
921
1,932
750
39,859
32,549
658
4,390
1,193
3,997
1,932
750
45,469
-
(658)
(683)
(1,193)
(3,076)
-
-
(5,610)
32,549
-
3,707
-
921
1,932
750
39,859
-
3,707
-
921
1,932
750
39,859
(2) 2
(245) (230)
(2) 2
(3) 558 (315)
(67) 7 (56)
-
(1,996) 565 (597)
-
-
-
-
-
-
-
-
-
-
193
180
(373)
-
30,872
-
3,232
-
1,354
1,996
377
37,831
30,872
656
4,145
1,191
4,745
2,052
377
44,038
-
(656)
(913)
(1,191)
(3,391)
(56)
-
(6,207)
30,872
-
3,232
-
1,354
1,996
377
37,831
-
3,232
-
1,354
1,996
377
37,831
-
(172) (167)
-
(4) (304)
(140) 282 (45)
185 -
(3,468) 467 (516)
27,720
-
2,893
-
1,046
2,093
562
34,314
27,720
656
3,973
1,191
4,741
2,194
562
41,037
-
(656)
(1,080)
(1,191)
(3,695)
(101)
-
(6,723)
27,720
-
2,893
-
1,046
2,093
562
34,314
Half year ended 30 September 2008 Opening net book value 31,734 Foreign exchange differences 1,786 Additions Disposals (679) Impairment charge (292) Amortisation charge Amortisation reversal on disposals Closing net book amounts At 30 September 2008 Cost Accumulated amortisation Net book value
Half year ended 31 March 2009 Opening net book value 32,549 Foreign exchange differences (1,677) Additions Disposals Impairment charge Amortisation charge Amortisation reversal on disposals Transfer of finished goods Closing net book amounts At 31 March 2009 Cost Accumulated amortisation Net book value
Half year ended 30 September 2009 Opening net book value 30,872 Foreign exchange differences (3,152) Additions Amortisation charge Closing net book amounts At 30 September 2009 Cost Accumulated amortisation Net book value
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11. Impairment tests for goodwill Goodwill is allocated to the Group's cash generating units (CGUs) identified according to country of operation. A geographical-level summary of the goodwill allocation is presented below:
New Zealand United Kingdom France India – OCXO products transferred from France Goodwill recognised in Intangible assets Goodwill recognised in Investment in associates – China Goodwill recognised in Investment in joint venture – India
Unaudited as at 30 September 2009 ($000s)
Unaudited as at 30 September 2008 ($000s)
Audited as at 31 March 2009 ($000s)
8,573 16,891 564 1,692 27,720 10,860 3,860
10,067 19,798 671 2,013 32,549 11,133 3,785
9,548 18,778 636 1,910 30,872 13,833 4,430
The recoverable amount of a CGU is determined based on value-in-use calculations. At 30 September 2009 goodwill was reviewed for indicators of impairment; the results for the period for New Zealand have been worse than predicted, due to the global recession and aggressive pricing by competitors. The New Zealand results are predicted to improve with significant recovery occurring during the remainder of the current financial year and the subsequent year returning to the basis which was previously used to test for goodwill impairment. The results of the business in France and India for the period have also been marginally worse than predicted due to slower than anticipated growth due to the global recession; however revenue growth is forecast to improve in line with prior expectations in the remainder of the current year and ensuing years. The Directors do not consider that these events indicate an impairment in the carrying value of goodwill at 30 September 2009. A full impairment test will be performed at the year end. During the year the Group adopted NZ IFRS 8 and changed its operating segments. As a result France is considered to be a separate cash generating unit. Goodwill has been reallocated based on a relative value approach. On 2 June 2008 the majority of Rakon Europe’s net assets were sold for $1.8 million including goodwill of $679,000 and deferred settlement of $888,000. The remaining goodwill of $292,000 was written off from the United Kingdom CGU. 12. Contingent liabilities The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business. It is not anticipated that any material liabilities will arise from the contingent liabilities. 13. Share issues and subsequent events On 22 September 2009 Rakon announced an equity raising to fund business expansion in particular the planned construction of a manufacturing facility in China. The equity raising comprised five elements:
A placement of 869,565 ordinary shares to Warren Robinson & Trusts Limited (trustees for Ahuareka Trust) for $1.15 per share which was completed and for which proceeds totalling $1,000,000 were received on 29 September 2009.
A placement of 5,282,452 ordinary shares for $1.15 per share in partial settlement of the deferred consideration payable by Rakon in respect of its acquisition of Etimes Holdings Limited (since renamed Rakon Investment HK Limited) in July 2008.
An unconditional placement of 19,435,844 ordinary shares to institutions for $1.15 per share which was completed and for which proceeds totalling $22,351,221 were received on 29 September 2009.
A conditional placement of 18,825,025 ordinary shares to institutions for $1.15 per share which was approved by shareholders in a special meeting on 12 October 2009. The shares were issued to shareholders and proceeds totalling $21,648,779 were received by Rakon on 16 October 2009. 13
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A Share Purchase Plan (SPP) under which eligible shareholders were entitled to apply for up to $15,000 worth of shares. The SPP opened on 1 October 2009 and closed on 19 October 2009. 18,354,914 ordinary shares at a price of $1.15 were issued to applicants and proceeds totalling $21,107,000 were received on 23 October 2009.
On 1 October 2009 Rakon requested the ASB Bank Limited to reduce facility arrangements agreed between Rakon and ASB. The equity raising summarised above enabled Rakon to settle the outstanding term loan of $7,864,418 on 28 September 2009 and reduced the overall facility limited by a further $24,950,000 with a consequent reduction in financing costs. No penalties were incurred in relation to the early settlement of the loan and the ASB agreed to the amended arrangement. As a consequence Rakon now has a combined facility included overdraft, committed cash advance, foreign exchange and trade lines totalling $24,725,000. The lines are substantially undrawn as at 12 November 2009. 14. Seasonality of business The development, manufacture and sale of electronic components for timing reference and frequency control products are subject to seasonal fluctuation pre-empting end use purchase demand. The peak period is generally in the September to November period.
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Directory Registered Office Rakon Limited One Pacific Rise Mt Wellington Auckland 1060 Telephone: +64 9 573 5554 Facsimile: +64 9 573 5559 Website: www.rakon.com
Mailing Address Rakon Limited Private Bag 99943 Newmarket Auckland 1149
Directors Bryan Mogridge Brent Robinson Bruce Irvine Peter Maire Darren Robinson Warren Robinson
Principal Lawyers Bell Gully PO Box 4199 Shortland Street Auckland 1140
Auditors PricewaterhouseCoopers Private Bag 92162 Auckland 1142
Share Registrar Computershare Investor Services Limited Private Bag 92119 Auckland 1142 Telephone: +64 9 488 8700 Facsimile: +64 9 488 8787 Website: www.computershare.co.nz
Bankers ASB Bank PO Box 35 Shortland Street Auckland 1140
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