Enabling Connectivity - 2016 Review
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2016 Review
Enabling
Connectivity
R AKON RE VIE W F Y 2016
Performance Snapshot Financial Year 2016 Advanced Timing for Our
Connected World Contents
GROSS PROFIT NZ$
$47.9m
$41.8m
$28.7m All communication and location systems require precise electronic ‘heart beats’. Rakon Chairman’s Report 4
EBITDA1
▼ 14.2% ▼ 41.4% ▼ >100% >100%
NET PROFIT /
OPERATING
REVENUE
UNDERLYING
CASHFLOW
▼
makes advanced clocking solutions. Its products provide extremely accurate clocking signals, which
(LOSS)
Why Customers Choose Rakon 5
NZ$112.7m NZ$9.0m NZ$(1.7m) NZ$7.3m
are then used to generate precise electrical, radio or optical signals in networks and systems around
2014 2015 2016
the globe. Rakon products enable the accurate and efficient transfer of data, time and frequency, at Managing Director’s Report 6
ever increasing speeds. Whether it be within wired, wireless and fibre telecommunications networks,
Board of Directors 8
Continued focus on New investment opening up opportunities navigation devices, or satellites in space – Rakon’s products enable connectivity.
Research & Development (R&D). within the Internet of Things (IoT). A Focus on Innovation 9
Global Executives 10
Strategies and Achievements 11
Financial Summary 12
Rakon’s Core Markets 14
The Internet of Things 16
Glossary 18
North America Europe
Directory 20
Asia
Rakon People & Global Locations
479 Rakon 5 5 10 New Zealand
308 Centum Rakon Joint Ventures Manufacturing R&D Centres Customer
437 Timemaker & Associates Locations Support Offices
(Includes two joint venture sites).
1224 Global Headcount Total (as at 31 March 2016).
1. Rakon has used Underlying EBITDA as a measure of non-GAAP financial The Directors present Underlying EBITDA as a useful non-GAAP measure EBITDA internally, to assess the underlying operating performance of the
information in this 2016 Review document. Underlying EBITDA is defined as to investors, in order to understand the underlying operating performance Group and each operating segment. The use of Underlying EBITDA for
“earnings before interest, tax, depreciation, amortisation, impairment, loss of the Group and each operating segment, before the adjustment of specific FY2015 and FY2016 has been extracted from audited financial statements.
on disposal of assets, employee share schemes, non-controlling interests, non-cash charges and before cash impacts relating to the capital structure This document should be read in conjunction with the Rakon Limited Annual
adjustments for associates and joint ventures share of interest, tax & and tax position. Underlying EBITDA is considered by the Directors to be Report 2016. A detailed reconciliation of Underlying EBITDA to Net (Loss)/
depreciation, and other non-cash items.” Underlying EBITDA is a non-GAAP the closest measure of how each operating segment within the Group Profit for the year is contained at Note B1 c) of the financial statements.
2 measure, with its presentation not being in accordance with GAAP. is performing. Management uses the non-GAAP measure of Underlying 3
R AKON RE VIE W F Y 2016
Chairman’s Report Core Strengths
Why Customers Choose Rakon
Dear Shareholders, Underlying EBITDA NZ$000 4. Despite making an after tax loss of NZ$1.7 million for Besides gaining a return from the investment in the Australia and New Zealand Designer
Welcome to this, the 11th Annual Report of your company,
FY2016 FY2015 Change
the 2016 fiscal year the group made a positive Thinxtra network, Rakon also has plans to develop products and components to use Almost 50 of oscillator
Rakon Limited. comprehensive income of NZ$3.9 million compared in the IoT networks for itself and for other participants. These developments will be
New Zealand 9,526 4,351 5,175 to NZ$0.4 million in the prior year. The increase results regularly updated to shareholders during our usual rounds of communication.
years of Application
The result for this financial year under review is a net
1,873 3,646 (1,773) from valuation differences in Rakon’s foreign In closing, I would like to thank the Rakon team for their efforts during the past year. innovating in a Specific
loss after tax of NZ$1.7 million – a big disappointment United Kingdom
to Rakon’s Board and management team. Significant
subsidiaries from changing currencies and had the The market hasn’t delivered the rewards I know they would have all liked. dynamic Integrated
NZ + UK 11,399 7997 3,402
restructuring over the past two years has brought
impact of increasing Rakon’s total equity from NZ$79.4
To you as shareholders I realise that technology Circuits
(4,481) 560 (5,041) million at 31 March 2015 to NZ$83.4 million at 31
much improved margins from New Zealand (NZ)
France
March 2016
owning a Rakon share has not been industry. (ASICs)
1,026 5,923 (4,897)
manufacturing and controls, but unfortunately the large India
5. Growing business opportunities within both the global
as financially rewarding in recent and test
global telecommunications companies chose to invest
France + India (3,455) 6,483 (9,938) positioning and space & defence market segments
years as other opportunities, and I Manufacturer equipment
in spectrum for their new 5G networks rather than build thank you for your patience.
6. Rakon’s investment in Thinxtra to build a low power, of world — a unique
the infrastructure. This decision had a large impact on our
customers’ markets and hence their requirements to buy The importance of more control resting with New Zealand low data, wireless telecommunication network As you will be aware, six of Rakon’s leading, high combination
across Australia and New Zealand.
sufficient components from us; this led to a 25% reduction has not escaped the Board’s notice and it has been part of seven Directors own substantial performance and advantage
holdings in Rakon and we all are
in revenue in our telecommunications market segment. a plan over the past two years to strengthen that position The Thinxtra Investment
very keen to enhance that value
timing solutions. in the
Most of the products supplying this market come from during the next 12 months over both France and India. Our investment into Thinxtra is a decision to be part of the
coming tsunami of Machine-to-Machine (M2M) connections and see Rakon pay a dividend Frequency
Rakon France with manufacturing occurring at our joint While the NZ$1.7m net loss is very disappointing, there when it is fiscally prudent. Renowned
venture, Centum Rakon India (CRI). and the so called Internet of Things (IoT). The overall Control
have been a lot of positive developments at Rakon over
opportunity of this sea change is estimated by McKinsey expertise and
the past year worthy of mention. I look forward to meeting you at Products
In the following table, you can see the impact of this Global Institute to be a market worth between US$3.9 application
market slowdown on the combined Rakon France and India 1. Enhanced gross margins from manufacturing,
the Annual Shareholders’ Meeting (FCP) domain.
Underlying EBITDA2: a downturn of NZ$9.938 million over controlled 100% by Rakon, grew from 32% of
trillion to US$11.1 trillion by 2025. Gartner, Inc. predicts the
in September and answering your knowledge,
number of connected devices worldwide will be 20.8 billion
last year. Also highlighted in the table is the positive impact revenue in Financial Year (FY)2015 to 43% of revenue by 2020, compared to 6.4 billion in 2016. By having a close
questions. giving customers
from the decision to consolidate the United Kingdom (UK) in FY2016 association with SIGFOX – the global market leader in this a competitive Established relationships
manufacturing to New Zealand, with Underlying EBITDA 2. Operating cash flow for FY2016 was NZ$7.3 million, new network space and the provider of the infrastructure for edge. with key ecosystem
rising by NZ$3.4 million over last year. This is due to a solid up from NZ$ - 3.6 million in FY2015 the Thinxtra network being deployed in Australia and New
increase in the gross margin of products made in New 3. Net debt for the group stood at NZ$12.6 million at 31 Zealand – Rakon will gain access to technology and market
partners globally.
Zealand resulting from reduced overheads, on a consolidated March 2016 compared to NZ$13.4 million at 31 opportunities that it wouldn’t get by sitting on the sidelines,
NZ/UK basis, closer controls and some currency gains. March 2015 watching this market’s inevitable growth. Bryan Mogridge Chairman
4 2
See the footnote on page 2 for the definition of ‘Underlying EBITDA’ as a measure of non-GAAP financial information, referred to in this document. 5
R AKON RE VIE W F Y2016
Y 2016
Managing Director’s Report
The Financial Year 2016 in Review
Brent Robinson While Rakon continues to pursue as do expectations around connectivity reliability to effectively deliver the many from analogue to digital or from cellphone in infrastructure by major network Operating expenses of NZ$47.8 million the same time, we will ensure resources
Chief Executive Officer / opportunities to expand and diversify our and speed: demand for greater network new applications – and applications still to smartphone: in the same way, our operators around the world was also were up 3 percent on the previous year are directed to support the operations that
Managing Director business, just under half of our revenue is capacity and performance is essential. being developed, such as driverless involvement with Thinxtra, and through reflected in reduced sales volumes, which due to currency translation, meaning we generate the highest margins, and that
still generated by our telecommunications Speed and quality will prove the key to cars – is likely to drive demand for higher them with a global network of potential were down 32 percent. have maintained the significant reductions costs are aligned with returns.
market segment. network operators’ ability to differentiate specification components, which in turn customers, is a potential game changer achieved in FY2015.
Revenue from our New Zealand We will also maintain the strong focus on
themselves, and Rakon components will allows Rakon to generate increased for our business.
Consequently, the decision by major operations increased 22 percent to Net debt was reduced by 6 percent continuous improvement in operational
provide the means for them to do so. margins. The trend towards higher
network operators around the world As the operator of the global SIGFOX NZ$74.7 million, in line with the transfer to NZ$12.6 million (including an initial excellence and efficiency that has seen
performance solutions is also apparent
to delay capital expenditure on base Our global positioning and space network in Australia and New Zealand, of production and sales from our former NZ$1.7 million investment in Thinxtra), us reduce defect rate targets by 50
among customers designing products for
stations and other infrastructure during & defence market segments both Thinxtra is well positioned to become UK manufacturing facility to New Zealand. and our bank facility has been renewed percent across the board, and build on
industrial applications operating in harsh
the past year and instead invest in 5G posted increased revenue, and further the IoT network of choice across both and extended to include a new facility to our standardised global quality systems to
environments. Underlying EBITDA 3 of NZ$9 million
spectrum and in mergers and acquisitions opportunities exist in both sectors. countries. support growth initiatives. ensure ongoing best-in-class quality.
significantly affected our total earnings, Activity in the space and defence sectors (down from NZ$15.4 million in FY2015)
The increasing range of potential As we near our 50 year anniversary, was in line with the forecast issued Looking Ahead As noted above, this year’s result has
and led to our recording what was a has been flat in recent years; however,
applications for global positioning, which Rakon has consistently been at the in January this year. Reduced sales in The technology shift away from legacy been a disappointment for Rakon’s
disappointing result. the successful development of new
include meteorology (guiding drones forefront of technological change; our the telecommunications segment are components is set to continue, and Rakon management team, particularly given
product platforms has seen an increase in
The impact was particularly hard on our into the middle of storms to collect data involvement with the IoT revolution reflected in decreased Underlying EBITDA is well placed to benefit from that. the progress the company made last
orders during the past six months, and an
joint venture in India and our business unit that can be used to improve weather continues that tradition. in our Indian joint venture, Centum Rakon year, and we recognise that you, our
increased average revenue across our top In the past year, we have successfully
in France. We have begun restructuring forecasting), conservation (tracking and India, (NZ$1 million, down from NZ$5.9 shareholders, will also be disappointed.
ten customers, which we are confident of Financial Summary developed various new proprietary, high
these businesses in response to the surveying at-risk animal populations), million) and our business in France I remain confident we have the people
maintaining. performance technologies as outlined
shifting demand from legacy products to agriculture (enabling spot applications For the year to 31 March 2016, Rakon and the products to translate our technical
(NZ$4.5 million loss, down from NZ$0.5 under ‘Strategies and Achievements’
the new, higher specification products, of fertiliser or other soil supplements), As well as new products, the space recorded a net loss after tax of NZ$1.7 capabilities into improved financial results
million). This also resulted in a greater on page 11. Products which are built
which are largely manufactured in New surveying and construction, are driving & defence market segment is also million, on revenue of NZ$112.7 million. in the coming year, and thank you for your
proportion of sales volumes being made around these technologies are now
Zealand. significant growth opportunities for the expanding into new markets, with a As noted on page 6, the 14.2 percent continued support.
up of higher value products, which is moving into production. These new
many Global Navigation Satellite System particular focus on Asia and the U.S. reduction in revenue compared to the technology developments will ensure
We expect telecommunications reflected in our improved gross profit
(GNSS) module manufacturers who are previous financial year is attributable to Rakon continues to lead the way within all
network operators and Original Design Rakon’s entry into the Internet of Things (up 15 percent from FY2015 to NZ$47.9
our customers. Our involvement with the performance of our telecomunications of our market segments, now and in the
Manufacturers (ODMs) will remain business, via a cornerstone shareholding million) and positive operating cashflow of
China’s BeiDou Navigation Satellite segment, which recorded a 25 percent future. Continued investment in research
significant customers for Rakon in the in Thinxtra, is covered in more detail on NZ$7.3 million, (an increase of NZ$10.9
System has also been a notable success. and development to develop new
years to come. Demand for voice, video, pages 16 and 17. The IoT is a potential drop in revenue from FY2015 to NZ$53.4 million on FY2015).
and data services continues to grow, The need for greater precision and game changer comparable to the switch million. Lower than expected investment technologies remains a core strategy; at Brent Robinson CEO / Managing Director
6 3
See the footnote on page 2 for the definition of ‘Underlying EBITDA’ as a measure of non-GAAP financial information, referred to in this document. 7
R AKON RE VIE W F Y 2016
A product display case used
to promote Rakon products.
The full range of Rakon
Board of Directors A Focus on Innovation
products can be viewed at:
www.rakon.com.
Enabling Next Generation
Technologies
Innovating Since 1967
Bryan Mogridge onzm, fnziod Brent Robinson Bruce Irvine Sir Peter Maire knzm Darren Robinson Warren Robinson Herb Hunt Rakon has a proud history of delivering industry ‘firsts’,
Independent Chairman Executive Director Independent Director Non-Executive Director Executive Director Non-Executive Director and Founder Independent Director including: miniature GNSS Temperature Compensated
Age 70 Age 57 Age 60 Age 64 Age 55 Age 81 Age 68 Crystal Oscillator (TCXO), stratum 3 TCXO, high g-shock High Performance and Competitive Pricing
Appointed Chairman in 2005. Appointed to Board in 2005. Appointed to Board in 2005. Appointed to Board in 2005. Appointed to Board in 2005. Appointed to Board in 2005. Appointed to Board in 2012. TCXO and lowest g-sensitivity Surface Mount Device Rakon has five R&D centres worldwide. Rakon’s
Bryan has been a public 37 years at Rakon which includes Managing Partner of Deloitte Co-Founder and former 26 years at Rakon as Sales and Founded Rakon in 1967 and spent Over 40 years experience in (SMD) TCXO, emergency beacon TCXO, Long Term
company Director since 1984. establishing a global business. Christchurch from 1995 to 2007. President of Navman NZ Limited. Marketing Director. senior global operational and
experience and in-depth knowledge of system
19 years as Managing Director. Evolution (LTE) small cell TCXO, ASIC based Oven
Chairman until November 2005. strategic roles in the technology requirements enables the development of innovative
Formerly Chief Executive Officer 30 years as CEO / Managing Has chaired Canterbury Business Honorary Fellow of the Darren has driven sales for Rakon
industry with leading companies
Controlled Crystal Oscillator (OCXO), high stability OCXO,
(CEO) of Corporate Investments Director. Recovery Group Limited, House Institution of Professional through exploring new markets, A member of the Institute solutions, tailored to suit its customers’ ecosystems.
including IBM, Siebel Systems ultra low phase noise Oven Controlled Surface Acoustic
and Montana Wines. of Travel Limited and Pyne Gould Engineers New Zealand. applications and establishing of Electrical and Electronics Manufacturing operations in India and China deliver
Under Brent’s leadership Rakon
Corporation Limited among many business with many of the
and Symphony Group. Wave Oscillator (OCSO) and Digital Pulse Compression
Has chaired BUPA Care Services has grown into a global and Made a Knight Companion of Engineers. competitiveness.
other companies. world’s largest companies. 32 year career with IBM including Sub-Systems (DPCSS) for radars.
NZ Limited, Yealands Wine Group diversified business with the New Zealand Order of Merit A senior member of the New
12 years at IBM New Zealand,
Limited, Momentum Energy PTY revenues increasing from Formerly involved in a voluntary (KNZM) in 2008. Under Darren’s sales and Zealand Electronics Institute. Winner of Prestigious Industry Awards
culminating as Chairman and CEO In-House ASIC and Test Equipment Teams Rakon has a
Limited, Waitakere City Holdings NZ$1 million to in excess of capacity as a trustee of marketing leadership, Rakon
Limited, Enterprise Waitakere, NZ$100 million. Canterbury Business Recovery
Formerly a Director of Orion
now has sales revenue in excess
A member of The Royal Society before rising to more senior roles Rakon designs its own oscillator integrated circuits Awards include the coveted Queen’s Award for complete suite
Health Limited, Fusion of New Zealand. in Australia, Asia, Europe and the Enterprise – International Trade, New Zealand’s ‘Hi-Tech
Lantern Hotel Group PTY Limited, Trust. of NZ$100 million and a full (ASICs) and develops its own production test equipment. of timing and
Honorary Fellow of the Institution Electronics Limited, Callaghan United States of America.
Pyne Gould Corporation Limited, portfolio of frequency control Warren has a First Class This is a unique capability in the Frequency Control Company of the Year’ and ‘Hi-Tech Company of the
of Professional Engineers New Other Current Directorships: Innovation Research Limited and frequency control
The New Zealand Food and solutions. Certificate in Radio Currently heads his own
Beverage Exporters Council, The
Zealand. Christchurch City Holdings a board member of New Zealand Products (FCP) domain – enabling next generation Decade’, ‘Supreme Award’ and ‘Hi-Tech Exporter of the products.
Technology. company, Transformation
50
Limited (Chairman), Heartland Trade and Enterprise. technologies. Year Award’ as well as a number of supplier awards.
New Zealand Wine Institute and Awarded the New Zealand Services, in the United States
Bank Limited (Chairman), Godfrey
The New Zealand Tourism Board, Hi-Tech Trust – Flying Kiwi Award Other Current Directorships: which focuses on improving
Hirst Limited (Director), House
among many other companies. in 2011. Invenco Group Limited (Director). performance in sales, services
Almost Fifty Years of Innovation 1967–2016
of Travel Holdings Limited
and product development
Was also Vice Chairman of (Director), Market Gardeners
for international technology
UBS New Zealand and a former Limited (Director), PGG Since the 1960s Rakon has continually developed product solutions, helping to enable the next wave of technology.
companies.
Director of Heartland Building Wrightson Limited (Director),
Society Limited. Scenic Hotels Limited (Director), Formerly a Director of Wynyard
and Skope Industries Limited Group Limited. GPS NAVIGATION and
Other Current Directorships: SMARTPHONES and INTERNET OF THINGS
(Director). SSB RADIO PAGERS CELLULAR PHONES PRECISION SATELLITE INTERNET BOOM
BUPA Australia PTY Limited Other Current Directorships: 3G/4G NETWORKS (IoT) and 5G
POSITIONING
(Director), Mainfreight (Director) Involved in a voluntary capacity Project Manager Holdings
and Adherium (NZ) Limited as a trustee of Christchurch Limited (Director).
(Director). Symphony Trust.
Bryan is also Chairman of
the Starship Foundation. Image: CNES
8 1960s 1970s 1980s 1990s 2000s 2010s 2016+ 9
R AKON RE VIE W F Y 2016
Global Executives Strategies and Achievements
FY2016
Inside the photolithography
facility at Rakon NZ.
Brent Robinson Darren Robinson Simon Bosley Dr. Sinan Altug Nick Maire Margo Thomas Andrew McCraith Scott Stemper
CEO / Managing Director Sales and Marketing Director Chief Financial Officer Managing Director, General Manager, General Manager, General Manager, Global Quality Manager OBJECTIVE beyond GNSS to address advanced • Next generation ultra stable oscillator
& Chief Technology Officer Europe New Zealand People and Capability Global Marketing Grow market share in core connectivity applications for smart cars. ASIC project commenced. (UK)
markets and emerging
Brent joined Rakon Darren has been Simon joined Rakon in Sinan joined Rakon Nick has over 19 Margo joined Rakon in Andrew joined Rakon Scott joined Rakon in Space and Defence New Products
markets.
in the 1970s as a Marketing Director November 2012 and in 2002. In his role years of experience January 2016. In her in 2010. He was January 2015 as Global • Expanded initiatives outside Europe • Mini ultra stable oscillator (OCXO) for
radio and electronics since 1990, having was appointed Chief as the Managing within New Zealand role, she is responsible appointed General Quality Manager. into the U.S. and Asia resulting in new orderssatellite space applications at qualification
Achievements FY2016
apprentice. earlier held various Financial Officer in Director of Europe, founded high-tech, for all facets of the Manager of Global and new customers. stage (as at 31 March with full qualification Above: Gregor Sedlmeier, Senior Process
He leads the Telecommunications
roles with the February 2013. he is responsible global manufacturing people function at Marketing in March
Subsequently, as a development and • Maintained Tier One customers through • Increased average revenue per account with by July 2016). First revenue for this product Engineer (Quartz Micro-machined Resonators)
company both in New for all aspects of businesses including Rakon. 2015.
member of Rakon’s Simon has had a lead improvement of top ten defence customers through targeted received in January 2016 for Non-Recurring and leader of the photolithography project.
Zealand and overseas. Rakon’s European Navman, Invenco and volatile market conditions.
engineering team, he role in the structural Prior to joining In this role, Andrew quality processes and
business units, which Fusion Electronics. • Strengthened relationships with key sales initiatives and strategic customer Engineering (NRE). (France)
developed various key He leads the sales and changes undertaken Rakon, Margo is responsible for systems to enhance
include manufacturing collaborations. • Released three new products with high
product and production marketing activities by Rakon in FY2014 Nick was appointed as worked in a variety directing the following Rakon’s drive to be Original Design Manufacturers (ODMs) positioned the company well for increased
operations, R&D sites
technologies and in for Rakon globally and and FY2015. New Zealand General of human resources three core global the leading provider of as the Business to Business (B2B) model output frequencies (3.2 GHz, 4.8 GHz and
and sales contributing Other Markets business with key Tier One customers
1986 was appointed has been instrumental Manager in 2013 and is management positions marketing functions: world class products. 5 GHz) within the ultra low noise
In his current role, significantly to Rakon’s transfers from Original Equipment • Investment in emerging IoT market in FY2017.
Managing Director and in Rakon’s expansion responsible for leading where she undertook strategic marketing,
he is responsible turnover. Scott’s background Manufacturers (OEMs) to ODMs. OCSO range for radar and instrumentation
Chief Executive Officer. into new markets, the R&D, engineering, large scale change and applications marketing through investment in Thinxtra, enabling * Manufacturing process optimisation
for Rakon’s finance, includes ten years applications. (France)
its commercialising Prior to his current product and project cultural transformation and corporate • Design wins through technology future business opportunities for Rakon. initiatives undertaken at Centum Rakon
Under Brent’s information systems as Global Quality
of new applications role, Sinan was Global management, programmes. marketing. transition. • Next generation microprocessor
leadership Rakon has and investor relations Manager with India.
and its developing Business Development manufacturing controlled OCXO platforms launched.
grown into a global
business relationships,
functions.
and Applications and supply chain
Previous employers Andrew’s prior roles at Raltron Electronics ° Macrocell requirements transitioning OBJECTIVE • Centralised employment performance
business with revenues include Westpac Rakon include Global Corporation and to small cell requirements. (France)
with many of the Simon is also Rakon’s Director, driving operations along with Invest in R&D management into a cloud based system.
increasing from NZ$1 New Zealand, Spark Director – Strategic 20 years with CTS
million to in excess of
world’s largest Company Secretary. Rakon’s entry and the development and
New Zealand and Marketing & Business Frequency Controls ° High speed optical network to develop new technologies. OBJECTIVE (NZ and Asia)
companies. He previously spent growth in multiple execution of the New requirements – demand for faster
NZ$100 million. most recently Crowe Development and in oscillator product Continuous improvement in • Implemented Human Resource Information
ten years with strategic business Zealand business's networks, resulting in new business
Darren is also a strong Horwath New Zealand Product Manager engineering and quality Achievements FY2016 operational excellence and System (HRIS). (NZ, Asia and U.S.)
Brent also acts Sony in executive segments. redefined strategic
advocate for fostering
management positions
where she held the Crystal Oscillators management roles. for Rakon. Technology Developments efficiency. • On-going evaluation of processes, capacities
as Rakon’s Chief direction.
local application Before joining Rakon, position of National (XOs) and Voltage
Technology Officer, in New Zealand and He has also held senior • Next generation strip crystal technology and capabilities at New Zealand operation
engineering and Sinan held various Head of Human Controlled Crystal Global Positioning
driving the business’s Australia. quality management developed for ultra stable TCXOs. (NZ) Achievements FY2016 has increased ‘Delivery In Full On Time’
business development management positions Resources. Oscillators (VCXOs). • Identified new opportunities within harsh
technology and positions with L-3 • Standardised Rakon’s global quality
talent. Simon is a member of in the frequency environmental industrial applications • Photolithography crystal technology (DIFOT) to ~94.5% in March 2016.
innovation. Before joining Rakon Communications and
Chartered Accountants control products developed for high frequency oscillator systems to ensure best-in-class quality.
he co-founded Silicon D&S Consultants driving demand for higher performance
Australia and New industry.
Zealand (CAANZ).
Clocks, a Micro- Incorporated (DSCI). solutions. products. (NZ) ° Focused efforts to enhance and
Sinan holds M.S. EE, Electro-Mechanical • An oscillator generating high frequencies standardise key areas of design,
• Dedicated tactical initiatives drove
Ph.D. EE and MBA Systems (MEMS) qualification, production monitoring
new design wins in China’s BeiDou (GHz) developed to support new products for
degrees. timing company,
higher data rate applications. (NZ) and control of discrete OCXO products,
acquired by Silicon navigational satellite ecosystem.
Labs. • Transferred new ASIC technology into enabled Rakon to reduce defect rate
• Expanded automotive customer base
miniature OCXO product platforms. (NZ) targets by an average of 50% and
10 11
11
R AKON RE VIE W F Y 2016
Financial Summary
Telecommunications
Summary of Revenue and Profit/(Loss) 2016 2015 Balance Sheet 2016 2015 2016 2015
For the year ended 31 March 2016 $000s $000s As at 31 March 2016 $000s $000s As at 31 March 2016 $000s $000s
Revenue 112,737 131,417 Assets Liabilities
Current assets Current liabilities
Underlying EBITDA4 9,008 15,369
Cash and cash equivalents 3,370 4,858 Bank overdraft 3,931 6,088
Depreciation and amortisation (6,620) (7,938)
Borrowings 15 139
Trade and other receivables 28,812 34,430
Interest (1,125) (1,272) Trade and other payables 17,526 21,759
Derivatives – held for trading 227 52
Adjustment for associates and joint venture share of interest, Derivatives – held for trading 3 103
tax and depreciation (2,118) (3,600) Derivatives – cash flow hedges 459 281
Derivatives – cash flow hedges 813 911
Inventories 29,830 28,716
Other non cash items (2) (1,015) Derivatives – interest rate swaps 330 112
Current income tax asset 212 27 Provisions 414 1,071
Income tax (expense)/credit (874) 1,646
Total current assets 62,910 68,364 Total current liabilities 23,032 30,183
Net (loss)/profit after tax (1,731) 3,190
Non-current liabilities
2016 2015
As at 31 March 2016 $000s $000s Derivatives – cash flow hedges 421 752
Summary of Statement of Cash Flow 2016 2015
For the year ended 31 March 2016 $000s $000s Non-current assets Borrowings 12,000 12,013
Net cash flow Derivatives – cash flow hedges 1,466 634 Provisions 2,361 2,098
Deferred tax liabilities 34 399
– Operating activities 7,285 (3,573) Trade and other receivables 1,165 1,260
Total non-current liabilities 14,816 15,262
– Investing activities (6,994) (3,601) Property, plant and equipment 17,234 16,912
Total liabilities 37,848 45,445
Intangible assets 14,850 14,547
– Financing activities – 711
Net assets 83,428 79,409
Investment in associates 10,315 8,697
Net increase/(decrease) in cash and cash equivalents 291 (6,463) Equity
Interest in joint venture 6,798 7,015
Effect of exchange rate changes on cash and cash equivalents 378 433 Share capital 173,881 173,881 This financial summary provides partially
Deferred tax asset 6,538 7,425 summarised financial information only, regarding
Other reserves (20,793) (26,543)
Cash and cash equivalents at the beginning of the period (1,230) 4,800 the financial performance of Rakon Limited for the
Total non-current assets 58,366 56,490 Accumulated losses (69,660) (67,929) year ended 31 March 2016. Please refer to Rakon
Cash and cash equivalents at the end of the period (561) (1,230) Limited’s 2016 Annual Report for the full financial
Total assets 121,276 124,854 Total equity 83,428 79,409
statements and accompanying notes.
4
Refer to the footnote on page 2 for explanation of Underlying EBITDA.
12 13
R AKON RE VIE W F Y 2016
Rakon Everywhere Space Product Range and Heritage
Global Positioning
Precision Frequency Control on the
Rakon on board HTV5
Rakon has a long history of providing high-
reliability products, with some customers having
Ground, in the Air and in Space
an association with Rakon for 30 years or more.
Its high-reliability solutions are found in
applications which require the most stringent
performance criteria. Many government
and commercial programmes use Rakon
The Global Navigation Satellite System Rakon is a preferred supplier to nearly all for Rakon technology. supply the sophisticated semiconductors
oscillators across the globe, in systems where
(GNSS) module inside a drone might the major providers: Rakon components that will be required to manage the
The need for greater frequency control high performance is required under the most
very well have a Rakon crystal oscillator can be found in the stand alone base volume of data generated by the IoT.
than could be provided by the tuned demanding conditions.
at its heart. World-leading GNSS module stations that are at the core of traditional
manufacturers are Rakon customers, and Radio Access Networks (RAN), as well as circuits originally used by radio stations Precision is also the defining advantage
their products go into everything from in the Distributed Antenna Systems (DAS) was the starting point for Rakon. Today, of Rakon’s space & defence business.
Kounotori 5 also known as HTV5, was an uncrewed
drones to vehicle fleet management deployed in facilities such as university precise frequency control lies at the Rakon’s range of crystal and oscillator
Japanese cargo spacecraft launched to resupply the
systems. These and other new uses campuses or shopping centres, and in the heart of SIGFOX’s Low Power, Wide solutions can be found on the ground, in
International Space Station (ISS). It berthed at the ISS
create significant opportunities for Rakon’s latest Centralised Radio Access Network Area Network (LPWAN), the only global calibration and meteorology laboratories,
on 25 August 2015. Rakon’s customised space OCXOs
global positioning business. solutions (C-RAN). network dedicated to the IoT. Rakon is a in the air, in airborne radar applications,
were in the S-band transponder of the transfer vehicle.
cornerstone shareholder in the SIGFOX and in space. SENTINEL KOMPSAT GALILEO ROSETTA ATV
Telecommunications infrastructure relies As the volume of data and the need for Network Operator (SNO) for Australia
on precise timing and synchronisation. speed continues to grow, so will demand and New Zealand, and well positioned to Images: European Space Agency (ESA), International Ocean Rakon Products Can be Found in Many International Programmes
Colour Coordinating Group (IOCCG), Japan Aerospace Exploration Alphabus, AMOS, ATV, BepiColombo, CBERS, Chandrayaan, Cryosat, DORIS, EarthCARE, EgyptSat,
Agency (JAXA), Korea Aerospace Research Institute (KARI), and ELISA, ENVISAT, Galileo, Globalstar, Herschel-Planck, Himawari, HTV, Iridium, Jason, JUNO,
National Aeronautics & Space Administration (NASA). KOMPSAT, LEOStar, Mars Express, METOP, MTG, O3B, PARASOL, PLEIADES, PRISMA, Rosetta,
SARAL, SAR-Lupe, SATCOM, Sentinel, SeoSar, Spacebus, SPOT, SWARM, Syracuse, TanDEM-X,
Rakon’s Core Markets 28
THEOS and Venus Express.
Global GNSS Chipset and Module Market Size
%
Source: European GNSS Agency (GSA) 2015
23
www.gsa.europa.eu. GNSS Market Report 2015, Issue 4.
125
Telecommunications Global Positioning Space & Defence Other Share of Revenue
Rakon’s precision 100
The equipment which enables Includes all GNSS equipment and Applications where reliability as There are many applications Telecommunications Market
TCXO (HT700) communications networks to other location and positioning well as precision and performance including the following: wireless Size 75
Global Positioning (€bln)
for an agricultural operate. Includes base stations, systems. Applications include are critical. This market also control, test and measurement, 50
GNSS application.
Space and Defence
microwave transmission, Personal Navigation Devices includes aviation and other high smart grids and metering, 25
Newer designs use fibre-optics, small cells and (PNDs), high precision positioning reliability applications. DPCSSs, Machine-to-Machine (M2M), Other
0
47
Rakon’s ultra stable network timing. OCXOs, TCXOs, (surveying, mining, and agriculture), OCSOs, OCXOs, TCXOs, VCXOs, and IoT, as well as other new 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
TCXOs featuring
patented Pluto+TM
VCXOs and XOs. rescue beacons, automotive and
sport and recreation products.
XOs and Crystals. and emerging markets. OCSOs,
OCXOs, TCXOs, VCXOs, XOs and 2 The graph above shows estimated global revenue generated from the GNSS chipset and module
market. Usage of GNSS technology in a whole range of industries is generating significant
ASIC technology. TCXOs, XOs and Crystals. Crystals. opportunities for Rakon. Changing technologies, including the decline of PNDs in favour of other
14 solutions, are helping to drive increased margins in Rakon’s global positioning business. 15
R AKON RE VIE W F Y 2016
Rakon will continue
The Internet of Things (IoT) to develop
Space & Defence
A Significant Opportunity for Rakon and expand an
innovative product
portfolio to meet
the demand for
What if your fridge could tell you the Beyond improving the way we currently very power hungry,” says Brent. Australia and New Zealand, Rakon will be
yoghurt on the back shelf was past its do things, the IoT will create new ways part of a worldwide network of potential
“The SIGFOX network is a dedicated Thinxtra’s revenue
use-by date? What if your clothes dryer of working. For Rakon, the opportunities customers for its innovative component
could text you that it was time to change
the lint filter?
lie in the new products and technologies
that will be required to bring it to life.
global network designed with the IoT
in mind. It has the lowest deployment
will be generated
from three
technology.
products and
services associated
and maintenance costs of any system workstreams, “Managing such massive amounts of data
Everyday examples, but they With smartphones and other mobile proposed, making it viable for a huge covering from such a wide variety of sources will Rakon’s product
demonstrate the value a fully realised devices to connect the individual user to number of applications,” he says. infrastructure, need new infrastructure. Rakon’s track solution on board
Internet of Things (IoT) will generate,
says Brent Robinson.
their IoT ecosystem and cloud computing
to translate the vast amount of data
“Based on current market forecasts,
applications and
services.
record as an innovator in semiconductors
puts us in an ideal position to be a
with connecting to an IoT transceiver.
the IoT.
we expect Thinxtra’s total number of
generated into useful information, what supplier of choice.”
“The IoT is about getting good data early, network connections to overtake total
else does the IoT need to flourish?
so you can anticipate a problem or an population in Australia and New Zealand Selling Subscriptions
opportunity,” he says. “The network technology currently by 2022.” Annual network connection
available is based on traditional and monthly usage fees.
Agriculture is one sector where the new As a cornerstone shareholder in Thinxtra, Forecast for LPWA connections, worldwide, 2015 – 2023
telecommunications technology. It works
technology could be a game changer. the SIGFOX Network Operator (SNO) for
– but it is expensive to connect to and 4.0
3.6 B
“A lot of animals are already ‘connected’, Selling & Distributing 3.5 Logistics Smart cities
via radio frequency identification Connected Hardware
3.0 Agriculture and environment Utilities
Connections (Billion)
technology, making it possible to follow Hardware may include Rakon
an individual animal along the entire SIGFOX and SIGFOX offers 2.5 Smart buildings Industrial
designed and manufactured
supply chain,” says Brent. Thinxtra unleash
components. the world’s Consumer
2.0
the full potential leading and most
“But imagine a tag that monitored the of the Internet mature Low 1.5
cow’s temperature – and was linked to of Things with Selling Services Power Wide
a sprinkler system in the dairy shed so a 1.0
long range, low Advising customers on the Area (LPWA)
farmer could minimise heat stress in the bandwidth, low right solution to adopt, and IoT connectivity 0.5
herd and improve milk yields.” LOW COST LOW POWER LONG RANGE RELIABLE & power devices, how to implement it. solution. 0.0
SECURE and low costs. 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Analysys Mason, 2015.
http://goo.gl/VNWzYU
16 17
R AKON RE VIE W F Y 2016
Glossary
Other Markets
Application Specific Integrated Circuit (ASIC) capability, enabling remarkable increases in the Fourth Generation (4G) well using ultra narrow band technology. This type Wave (SAW) technology. SAW technology and 4G networks. Mobile operators use small Temperature Compensated Crystal Oscillator
Non-standard integrated circuits that have been overall system performance of radars. Stands for Fourth Generation (4G) data of solution can be set up and operated for as little enables high frequency outputs (320 MHz up to cells to extend their wireless service coverage (TCXO)
designed for a specific use. Generally, they can be Distributed Antenna System (DAS) communications technologies. 4G provides for as one-tenth of the cost of using a 3G/4G device, 2 GHz) and ultra low phase noise performance. and increase network capacity. ‘Small cell’ is an A TCXO is a quartz crystal combined with
tailored to meet exact requirements for the product, DAS is a system of hubs and antennas, where mobile broadband internet access, and allows and because they are only ‘on’ when they are They are commonly used in test and umbrella term used by the industry, and covers electronic circuitry. The circuitry is used to generate
which can significantly reduce the number of a wireless signal is distributed to a series of for fast internet connections to smartphones, transmitting, power demand is negligible. measurement equipment, high speed converters, femtocells, picocells, metrocells and microcells. a stable frequency output, and to remove frequency
additional components used. connected radio units. The main hub takes the tablets and other wireless or mobile devices. 4G radar systems and other precise communication Smart Car variations due to temperature change.
Machine-to-Machine (M2M)
cellular signal from the service provider, digitises itself comprises of three standards: LTE (most applications. Generally, a car that has intelligent features High Stability Temperature Compensated
Base Station A broad label that can be used to describe any
and then distributes it to the other hubs and radio common), Ultra Mobile Broadband and Worldwide beyond a standard automobile. Using sensors, Crystal Oscillator
Fixed communications stations, which form technology that enables networked devices to Personal Navigation Device (PND)
units. This mobile signal can be carried at full interoperability for Microwave Access (WiMax). wireless connectivity and other technology, Used in high volume, high performance markets
vital nodes to relay information in a wireless exchange information and perform actions without Portable devices specifically made to run
telecommunications network. They transmit and strength to any remote antenna connected. These Global Navigation Satellite System (GNSS) the manual assistance of humans. navigation software, such as turn-by-turn road they are able to provide a much richer driving such as GNSS devices, where small oscillator
receive network data to and from users (e.g. mobile systems are advantageous in populous areas such A satellite navigation system with global coverage, directions. and safety experience than their standard size is important. High Stability TCXOs
as stadiums, office buildings and other venues. Macrocell counterparts. Examples include automatic have a typical performance of 0.5 parts
phone users). They are also known as cell towers that allows small electronic receivers to determine
A base station designed to cover a larger area and Photolithography parking, internet connectivity, and automatic per million (ppm) over wide temperature ranges.
or cell sites, and come in a range of coverage sizes. Drone their location with high precision. Existing and
number of users than smaller base stations. The process of depositing material onto the headlights. They are available in sizes as small as 1.6 x
Centralised Radio Access Network (C-RAN) An unmanned vehicle that is automatically or upcoming systems include the United States
surface of another (usually a thin wafer of silicon). 1.2 mm.
remotely controlled. They are either ground- NAVSTAR Global Positioning System (GPS), Microprocessor Smart Grid
C-RAN is emerging as a way to arrange base There are a number of techniques and materials
based or airborne. Drones are often used in Russia’s GLONASS, China’s BeiDou Navigational Electronic chips that form the ‘brains’ of most A modernised electrical grid that can detect and Ultra Stable Temperature Compensated
stations, where the digital units (or baseband units) that can form different shapes and structures.
environments that are hazardous or challenging for Satellite System and the European Union’s Galileo modern electronic devices. Used to process intelligently respond to changes in power supply Crystal Oscillator
are placed in centralised locations. Remote radio
humans to operate in, including search and rescue, GNSS. information and perform key functions, they are Radio Access Network (RAN) and demand. Grid operators use smart grids to Using unique technology, Rakon’s
units (which host the antenna) are then placed
firefighting, surveillance, bomb detection and aerial found in computers, communications devices and Technologies that allow end-users to access improve the efficiency, reliability, economics and Ultra Stable TCXOs can achieve stabilities
up to several kilometres away. The baseband and Internet of Things (IoT)
photography. New commercial uses include goods other digital devices. the radio network, that is, they sit between user sustainability of power generation and distribution. better than 100 parts per billion (ppb, or
radio units can be connected via fibre-optic links, A connected network of physical objects with
delivery and traffic monitoring. devices and the core network. These are the Smart Meter 0.1 ppm) over temperature. They are used in
Ethernet or other technologies. This can enable embedded electronics, software and sensors. Network
Emergency Beacon base stations and antennas in a cellular network. Used to record and transmit household power telecommunications networks and other
significant cost savings and reduce wireless Examples are numerous and include home control A group or system of interconnected people or
interference in the network. Also known as Emergency Position-Indicating and security, heart monitoring implants, health things. Radio Detecting and Ranging (RADAR) usage information, usually every half hour or hour, high precision applications.
Radio Beacon (EPIRBs), these are tracking monitoring sensors for farm animals, cars with An object detection system that uses radio so that power companies can better plan the Voltage Controlled Crystal Oscillator (VCXO)
Crystal (Xtal) Network Timing supply of power. They normally transmit using
transmitters which aid in the detection and location built-in sensors, or devices that assist firefighters in waves to determine the range, altitude, direction, An oscillator that, by varying a control voltage, has
At the heart of XOs, VCXOs, TCXOs and OCXOs Refers to the systems and technologies that are put technology similar to that of older cell phones.
of boats, aircraft and people in distress. search and rescue. or speed of objects. its oscillation frequency adjusted. Commonly used
are quartz crystals. in place to ensure networks are running at the same
Fibre-Optic time around the world. Network timing synchronisation Semiconductor Surface Mount Device (SMD) in communications infrastructure, VCXOs can offer
Crystal Oscillator (XO) Long Term Evolution (LTE)
Also known as optical fibre. Instead of sending helps control various functions including email, banking A substance that can conduct electricity in some An electronic device that can be placed on much higher frequencies and very low phase noise
An XO is a quartz crystal combined with basic Refers to next generation telecommunications
electrical data signals with a voltage and current, transactions, and air traffic control. printed circuit boards flat and on both sides of the performance.
oscillation circuitry. XOs can offer high frequencies networks. conditions but not others, making it a good
fibre-optic technology transmits data using flashes board (in contrast to pins that go right through
with low noise performance. They are typically medium for the control of electrical current.
of light along a glass or plastic wire. Compared with Long Term Evolution Advanced (LTE-A) Oven Controlled Crystal Oscillator (OCXO) the board). This allows for denser and higher
used in telecommunications networks and other traditional copper wire, fibre-optics carries much LTE and LTE-Advanced (LTE-A) are standards for Crystal oscillators where the internal temperature is SIGFOX Network Operator (SNO) performing circuit boards.
communications applications. more information and is better for long distance wireless communication of high speed data for kept constant, using a miniature oven. They’re used Companies around the world who have partnered
Third Generation (3G) network
Digital Pulse Compression Sub-System data transmission. mobile phones and data terminals. in space and telecommunications applications where with SIGFOX to roll out the SIGFOX network in
An improvement over 2G networks, 3G cellular
(DPCSS) precision is paramount. Stabilities can be better than 1 their local country or region.
Fifth Generation (5G) Low Power Wide Area (LPWA) & Low Power networks were launched in the early 2000s.
A DPCSS is fully programmable and is used to part per billion (ppb).
5G is the soon to arrive fifth generation wireless Wide Area Network (LPWAN) Small Cell Drastically improving reliability and speed for voice
upgrade an existing radar and to extend its life. broadband technology, which will provide better speeds The majority of IoT-connected devices do not need Oven Controlled SAW Oscillator (OCSO) A smaller version of a base station. With a range and data, these networks allowed mobile users to
18 DPCSSs have high speed digital processing and bandwidth than current 3G and 4G networks. to send huge data loads; they can function perfectly An oven controlled oscillator using Surface Acoustic of 10 m to 2 km, they are integral parts of 3G access mobile broadband. 19
19R AKON RE VIE W F Y 2016
Directory
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