Rakon PBT collapsed 99% on a 29% revenue fall as chip-shortage tailwind unwound

What changed

Revenue fell 29.0% to NZ$128.0m as one-off FY23 chip-shortage contracts annualised out and customer inventory normalisation ran slower than expected. Gross margin compressed 400bps to 45% on workforce restructuring costs, and the operating leverage worked the wrong way: PBT collapsed 98.9% to NZ$0.3m (FY23: NZ$31.4m) and Underlying EBITDA fell to NZ$13.5m from NZ$42.2m. NPAT of NZ$4.5m was down 80.6% but sits above PBT because of a tax benefit (see Quality of result).

Cash flow moved the other way. Operating cash inflow rose 60.5% to NZ$17.8m as inventory and receivables drained working capital. Capex held at NZ$17.0m (FY23: NZ$17.3m), so pre-lease free cash flow flipped positive to NZ$0.8m from –NZ$6.2m. Closing cash slipped to NZ$17.8m and borrowings rose to NZ$6.6m, narrowing the net cash buffer to NZ$11.2m from NZ$16.5m. No final dividend was declared (FY23 final: 1.5 cps).

Within the mix, Space and Defence revenue was disclosed as up more than 27%, partially offsetting weakness in the larger Telecommunications book that drove around 55.8% of FY23 revenue.

What matters

• Profit base has effectively reset. Stripping the tax benefit, the underlying earnings engine produced NZ$0.3m of PBT on NZ$128.0m of revenue. Underlying EBITDA at NZ$13.5m is one-third of FY23, and ROE fell to 2.8% from 14.8%. The question is whether NZ$13.5m is the new floor or a transition year.
• Cash improved despite earnings collapsing. OCF/EBITDA jumped to 132% from 26%, almost entirely from inventory destocking (–NZ$7.7m) and receivables (–NZ$7.7m). That is balance-sheet release, not earnings quality, and is not repeatable indefinitely.
• Strategic mix is shifting in the right direction but slowly. Space and Defence growth >27% supports the stated NewSpace/AI focus, but the segment was only ~16% of FY23 revenue, so it cannot yet offset Telecommunications softness at the group level.

Expectations

No quantified forward work, order book or earnings guidance was disclosed in the supplied excerpts, and there are no stated medium-term targets to test against. What can be observed is shape: HY24 delivered 47.9% of FY24 revenue but only 11.1% of FY24 NPAT, implying a sharply second-half-weighted profit profile (implied H2 NPAT of NZ$4.0m on NZ$66.8m revenue). That suggests some sequential improvement through the year, but it is anchored on a very low H1 base rather than a demonstrably stronger run-rate.

Quality of result

Earnings quality is weak on multiple fronts:

• Tax-flattered NPAT. PBT of NZ$0.3m became NPAT of NZ$4.5m, implying a tax benefit of roughly NZ$4.2m against an ETR of 26% in the prior year. PBT (–98.9%) is the cleaner read; NPAT (–80.6%) understates the operating decline by ~18pp.
• Cash gain is working-capital driven. The NZ$6.7m OCF improvement is more than fully explained by combined inventory and receivables release of ~NZ$15.4m. Pre-lease FCF of NZ$0.8m is positive but thin against NZ$17.0m of capex (13.3% of revenue, up from 9.6%).
• Working-capital efficiency actually deteriorated. Receivable days rose to ~97 from ~84.5 and inventory days to ~285 from ~249. The dollar release came from a shrinking sales base, not faster turns.
• Non-recurring noise on both sides. FY24 carries restructuring costs in COGS; FY23 carried one-off chip-shortage contract revenue. No statutory-to-underlying EBITDA bridge was supplied.

Unresolved

• Current-year segment revenue for Telecommunications, Positioning and Space and Defence in dollar terms, and segment-level profitability.
• The size and nature of the FY24 tax benefit, and whether it is recurring (e.g. R&D credits) or one-off (e.g. deferred tax recognition).
• A reconciliation from Underlying EBITDA of NZ$13.5m to statutory PBT of NZ$0.3m, including the quantum of restructuring costs.
• Customer-inventory normalisation timing — when management expects Telecommunications volumes to rebase — and any forward order-book disclosure not in the supplied excerpts.
• Capital-allocation intent given the suspended final dividend and continuing ~NZ$17m capex run-rate against a thin FCF base.

This briefing cannot assess valuation, share-price reaction, or management commentary beyond the supplied release excerpts.

Key metrics

Segment breakdown

Analytical metrics

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This analysis was generated using Annolyse, an AI-powered tool that analyses NZX company announcements. The analysis is based on available company filings and standard Annolyse calculations. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.