Loss-making Rakon dangles dividends for ‘long-suffering’ shareholders

Rakon, the wireless device components maker, plans to start paying dividends in a bid to revive sagging investor confidence after successive years of an underperforming share price.

Chairman Bryan Mogridge told shareholders the board today resolved to pay up to 50 percent of net profit, provided it’s fiscally appropriate, after the year ended March 31, 2015. Rakon has previously steered clear of a cash return to shareholders, arguing it was creating more value by retaining earnings to let it capitalise on growth opportunities.

Mogridge said Rakon’s slump in share price in recent years has been “terrible.” The shares have plunged 37 percent this year, closing at 22 cents today, valuing the firm at $42 million and a 66 percent discount to its net tangible assets of 64 cents a share. The shares peaked at $5.80 in May 2007, having sold in the initial public offering a year earlier at $1.60 apiece.

“We are determined to have this situation reversed and we realise that only a track record of soundly based cash profits will build investor confidence,” Mogridge said, who faced a vote against his re-election to the board from New Zealand Shareholders’ Association at today’s annual meeting. “The changes we are making are extensive and focussed on ensuring that our company is consistently profitable and able to return a dividend to you, our long suffering shareholders, as soon as possible.”

Rakon expects to post a net loss of $54 million in the 2014 year after taking another writedown on its ill-fated Chinese joint venture and another trading loss. The company is targeting positive earnings before interest, tax, depreciation and amortisation of between $10 million and $15 million.

The board is pulling back on Rakon’s businesses, with shareholders voting on the sell-down of its stake in a Chinese factory at a special meeting today, and is also switching its French manufacturing to Bangalore.

Mogridge said some board members are so confident about the company’s future prospects that they have been buying shares on market and will continue to do so when trading windows allow.


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