Ladies and gentlemen, thank you for standing by and welcome to Rakon's FY 2022 results and business update presentation. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you wish to queue for a verbal question, you will need to press zero followed by one on your telephone keypad. That's for those dialed into the teleconference only. If you wish to ask a written question, please type your message into the question and answer box on the webcast. For anyone listening to the presentation on the telephone and watching the slides online, we recommend that you open the slides from the handouts panel to avoid the streaming delay, and you can follow along independently. Please note that this conference is being recorded today, Thursday the 26th of May, 2022.
I would now like to hand the conference over to the speakers today, Sinan Altug, CEO, and Anand Rambhai, CFO. Please go ahead.
Hi, everyone. Welcome. Thanks for joining the call. I'm delighted to address you in my first financial year-end results presentation as Rakon's chief executive. First, I will go through key highlights and achievements, then move on to operating performance and market update. Then Anand will walk you through the financial overview, and I will conclude with the summary and outlook before we move on to the Q&A. I'm really pleased to announce to you today a record earnings performance, which I believe has come from many years of hard work. As Brent said, over the past year, FY 2022 was about execution and delivery. Our business in core markets continued to grow strongly, and we have also been able to rapidly innovate to capture additional market growth opportunities. A critical focus was to lift our operating capacity and output in a time of real volatility and disruption.
I'm very proud that we have achieved this and turned opportunities into real, tangible earnings for the company. I'm particularly pleased in the way we proactively managed our risks and kept our operations going around the world through both Delta and Omicron. This has been at the heart of this year's performance. These are very strong headline numbers that I'm proud to present. Revenue up 34% to NZD 172 million, and EBITDA more than doubled to an unprecedented NZD 54.4 million, representing over 130% year-on-year growth. This EBITDA result puts us slightly over the top end of our most recent guidance of NZD 49 million-NZD 53 million, which was provided in February. To note, the EBITDA margin percentage is 32%, which is also a record for Rakon.
The gray blocks on revenue and EBITDA refer to the additional opportunities that we captured as a result of the worldwide TCXO chip shortage, which we were able to successfully convert into substantial additional earnings for the company within the FY . I also want to highlight that our underlying core business growth looks very strong, excluding the TCXO chip shortage super profits as well. The EBITDA year-on-year growth of our underlying core business is over 50%, up to NZD 36 million from NZD 23.5 million. This corresponds to 25% EBITDA margin from our core business, which is very substantial. Throughout the year, we actively managed our costs and our pricing to keep stable margins, and in the case of some products, we actually improved our margins. Importantly, we stabilized our overheads this year.
Hence, margin increases flowed straight to the bottom line, resulting in a very strong operating cash of NZD 30 million. This strong operating cash position allows us to pay down debt and self-fund and invest into our growth strategy. With these profits, we are taking substantial steps to invest and build a sustainable platform for long-term growth and strong operating leverage. Slide five. Here are the key achievements for Rakon for FY 2022. Again, record earnings performance, which was primarily driven out of New Zealand. Significant revenue growth that came from a combination of growth across our core segments, plus additional revenue achieved from our TCXO chip shortages. Increased market share in key growth markets of telecommunications and positioning. A significant lift in output, mainly driven by a record New Zealand manufacturing performance. This uplift is also reflective of our manufacturing innovation and ability to scale rapidly when required.
I'm really proud of our supply chain and risk management efforts. Our teams worked around the clock on a daily basis extremely hard to manage these risks, and I believe we have done this exceptionally well. Finally, we have continued our relentless pursuit of technology innovation and product development. We hit some major milestones and prepared Rakon for the next wave of technology advancements. Now moving on to operating performance and market updates. Slide six. I'll provide a performance update for each of our strategic priority areas, sorry. Note there is quite a lot of information on these slides. I'll take these as read and focus only on the salient points really. Slide seven. We're going to start with this slide to recap the work we did throughout the year to articulate our strategy to our internal and external stakeholders.
These represent the four pillars of our strategy, which are the key drivers of our success and value creation. These also determine where we allocate our capital. This has been our proven winning recipe, and when we execute it well, it also allows us to remain resilient during downturns. Our strategy is built on choosing to play in high-growth, high-tech markets, rapidly develop technologies and products that allow us to deliver ahead of competitors, form strong and enduring customer relationships, and invest in flexible and scalable operations to deliver what we need when we need and be able to compete through extended product life cycles. We have also just recently undertaken a thorough review of our growth strategy with our board of directors covering the next 3-5 years. They'll provide you more detail about the key elements of our plan in the coming few months. Slide eight.
Moving into core markets, starting with telecommunications. The highlight here is sustained underlying growth. Telecom market segment represents 50% of our revenue, and if you look at the graphs on the right, the 5-year trend is quite clear. Revenue has doubled in 5 years with a compound annual growth rate of 21%. More importantly, we have also seen a steady improvement in the gross margin over the same time period, now up to 44%. This is primarily due to our ability to command higher margins for our newer and more advanced products. Now, we're also pleased about the increased market share in 5G in some crucial product areas where we weren't as prominent before, such as remote radio heads and small cells.
As we signaled last year, the emergence of O-RAN has brought new players into the market, into the ecosystem, and we have formed some key new relationships. We already have some exciting new platform design wins. Looking forward, we have a very strong growth outlook for telecom segment and especially for 5G with a very strong order book as well. We expect the global rollout of 5G to continue for a good part of this decade before transitioning into 6G. The deployments are expected to expand as 5G millimeter wave networks pave the way for more data-heavy applications and as data centers further enter the ecosystem. Overall, we're extremely well placed in the telecom market segment, and we will put forth energy to maintain our leadership position. Slide nine, space and defense.
Space and defense is a big driver of innovation and also our highest gross margin percentage market segment. While the revenue from this market segment looks lukewarm, as you can see on the graph, the space business has been going through a transformation from traditional space applications towards low Earth orbit new space applications. These low Earth orbit satellites require space reliability at telecom pricing, and we're uniquely positioned to deliver this based on our heritage in both traditional space and telecom markets. We have announced a new product suite for LEO satellites, which we believe is the broadest new space product portfolio out there. While our space business increased, our defense business declined due to the delayed investment, especially in U.S. defense spending from the previous year that translates with a delay into delayed revenue for Rakon in FY 2022.
Moving forward, our space order book is strong, so we will focus on execution and delivery. Another focus is going to be new space business development. There are several mega satellite constellation contracts at RFI and RFQ stage that we're strongly involved in. We also aim to continue to establish rapport with our move from a component supplier to a higher value add subsystem equipment supplier in the space ecosystem. Remember, this is a horizon to medium-term growth strategy for which we are very well positioned. We have been investing into it for a number of years actually. We are also watching the defense development closely with our U.S. and European partners. Obviously we'll continue to work within Rakon policy and export code requirements. Slide nine. Slide 10. I'm sorry, positioning. Well, this is a slide I'm particularly excited to share with you.
As most of you know, in the recent years, we have focused on a strategic shift from traditional low margin consumer business to the higher value industrial segments. We did this pivot, and we have transformed our customer base in accordance. These graphs clearly show why we made that pivot and the results of it. Before this year, the revenue has been trending down as we exited commoditized markets and focused on supplying high-value products to a new customer base. Starting with this year, pleasingly, our revenue in this core market has finally turned around with a huge 35% revenue increase this year. We have also seen an associated uplift in margin at 56%, which is substantial. The gray block on the plots is a portion of the TCXO chip shortage, where we leveraged a long-standing customer relationship to help them through the chip shortage.
This was a big boost. While that was business that was for short term, we are continuing to work with this customer in other areas. I specifically want to note on here that the core business gross margin, as you can see, was NZD 11 million out of NZD 19 million of revenue. We are talking about 58% of gross margin on our core business. The core business in effect was more profitable than the one-off that we had. Looking ahead, we are very pleased with our pivot and transformation in the positioning market. We expect to stay on a growing profitability path, and this segment will continue to present solid growth for Rakon. We are also quite active in the emerging autonomous vehicles markets.
We want to ensure we are plugged strongly into the ecosystem as the industry standards and specifications continue to develop, especially if the vehicle-to-vehicle synchronization requirements evolve in a manner similar to the telecom market requirements. This will turn autonomous vehicles into a very high growth horizon two market for Rakon. Next slide, 11. Right. As we previously signaled, a large one-off from a tier one tech company driven by chip shortages drove a big jump in revenue and margin for the year, FY 2022 in this segment. This tier one is actually one of the largest firms in the world. It's one of the largest tech firms in the world as well. Capturing this opportunity and turning it into revenue and earnings within our FY has been a real demonstration of Rakon's innovation and agility. We had a three-month turnaround from concept to delivery.
Looking ahead, while this was a one-off order, it demonstrates the opportunities available to Rakon with potential customers who are looking to multi-source, and we will continue to pursue these. Slide 12. Moving on to customer partnerships. This was a year that tested customer relationships, and I can say we did exceptionally well. COVID has reinforced the criticality of staying close to our customers, and our localized support with 16 worldwide sales and application support locations has turned into a substantial competitive advantage for Rakon. We have also established through the year 3 major new strategic relationships. We will continue to do what we have been doing very well and engage deeply with customers on their next generation designs in all markets we participate in. We will also continue to actively price manage our products, taking into consideration ongoing cost pressures and inflationary pressures as well. Slide 13.
In technology and product development, we are charging full force ahead. We expanded our semiconductor chip design capability. We established a New Zealand team also in addition and as an extension to our UK team of experts. This will allow us to further accelerate our core IP growth in this crucial area. You will see on the graph that our R&D investments have remained relatively stable over the past years. This is partially because, especially in the last couple years, some projects were delayed with COVID. Still, I'm very pleased with our progress as we hit some critical milestones in our XMEMS nanotechnology as well as next generation semiconductor chip designs. These are key technologies that ensure our products remain at the cutting edge and ahead of our competitors, and we have strong interest from the market in both.
Looking ahead, we intend to substantially increase our R&D investments in line with our strategy to ensure we bring our crucial new technologies into the market with speed. This again includes mass production of XMEMS nanotechnology-based products, as well as a new suite of products using our next generation semiconductor chips. Slide 14. An outstanding operations performance was pivotal to the year and the result we delivered. We have navigated many supply chain issues and capacity constraints throughout the year. We were able to increase the output of our New Zealand operation by 60%. Like New Zealand, France and India teams showed tremendous resilience throughout COVID outbreaks. We also grew volumes from our Siward OEM partnership substantially. In the coming year, we are making a significant investment in building our manufacturing capacity, flexibility and redundancy.
Our new India factory is well underway and planned for completion by the end of the FY . We will leverage this facility not only to expand capacity for the products currently manufactured there, but also we will transfer higher labor content products from New Zealand and from France to India to our new facility. This is a vital part of our global manufacturing facility moving forward. We will continue to focus on supply chain as we expect the risks to maintain and to remain throughout FY 23. Over to you, Anand.
Thanks, Sinan. I'll now run through some financial information, starting with slide number 16. This slide shows revenue, margin, EBITDA and net profit over the last five years. The graphs in their entirety demonstrate four things, really. The first one, the trend in all the graphs show that the business has been steadily growing, a key contributor being the growth in telecommunications segment from 5G rolling out. The gray sections on each graph show the impact of the chip shortage. Business delivered in FY 2022. If you focus on the blue bars, you can see that the underlying core business has grown steadily over the last five years. There's been an improvement in product mix towards newer, higher margin products, as shown by the green line on the gross margin graph.
The earnings graphs on the right, particularly for the last two years, show that the business is able to achieve operating leverage. This means that as revenue increases and costs are relatively fixed, more of the incremental revenue and gross margin ends up in earnings. I'll now move to slide 17. This year we've enhanced our segmentation reporting in note 5 of our financial statements to provide more clarity. This first table on the top shows revenue broken down by business units along the top and markets down the side. For example, in the first column, you can see that the New Zealand business generated 70% of the total revenue, and most of that is provided into the telecommunications market.
The table at the bottom shows that most of the EBITDA in FY 2022 has been generated by the New Zealand business unit. I'll now move to slide 18. Focusing on the green bars on this slide. This slide explains the movement from last year's NZD 10 million net profit on the left to this year's NZD 33 million net profit, and then how that ends up in the NZD 54 million EBITDA achieved. The key things this graphic shows are the increase in net profit was generated by both growth in the core business and the chip shortage business delivered during the year. Overall, operating expenses were flat and higher spend from increased headcount, COVID-19 protection measures and corporate costs were offset by lower R&D expense. The R&D expense was lower because additional costs were capitalized in the balance sheet this year based on the status of R&D projects.
Income tax expense is higher this year due to increased profits in New Zealand and with New Zealand's historic tax losses being used up. The section on the right of the graph shows the adjustments made to net profit to arrive at the reported underlying EBITDA of NZD 54 million, the major items being depreciation and tax. I'll now move to slide 19. Again, focusing initially on the green bars, this slide explains how the NZD 33 million net profit achieved translates into NZD 30 million of operating cash, then how that ends up in the NZD 17 million of overall cash movement for the year. The first half of the graph shows that there was significant cash invested in working capital to support the revenue growth and specifically in inventory to help mitigate supply chain risks.
The second part of the graph shows the other areas where cash was spent, including the purchase of land for the new India facility, CapEx and lease payments. CapEx this year included higher spend in the New Zealand business for increased capacity and on equipment to further develop the XMEMS nanotechnology manufacturing process. The result of all of this means net cash of NZD 17 million was generated during the year. At March 2022, our net cash position, including borrowings, was NZD 23 million. I'll now move to slide 20. The three graphs on this slide show strong growth in operating cash flow over recent years, increasing shareholders funds through higher profits and an improved net debt position ending in NZD 23 million.
In the short and medium term, cash generated in FY 2022 will be used to fund a reduction in high interest bearing debt, the new India facility, which will provide additional capacity, the scaling up of our XMEMS capacity as demand starts to grow, R&D to further develop products for the new LEO satellite market, and the continued development of our own semiconductor chips, which deliver competitive advantage. I'll now move to slide 21. This slide is for reference, and I'll pick up on the items not already mentioned, starting with the table on the left. Firstly, other operating income, about halfway down the page, is NZD 1 million lower than last year, mainly because last year included the one-off COVID related assistance received in New Zealand, UK and France.
Three lines further down, the capital expenditure for the period was NZD 5 million higher than last year, with the purchase of land in India, capacity expansion in New Zealand to deliver higher revenue and investment into XMEMS equipment. Moving to the right, we have a comprehensive hedging program in place which provides a level of protection against adverse movements in key exchange rates. With the majority of our receipts in U.S. dollars, our most important exposure is the New Zealand dollar against the U.S. dollar. In terms of hedging protection, at the end of March, we had over 80% of net exposures for FY 2023 and 50% of net exposures for FY 2024 covered by hedging at rates around 0.679. I'll now move to slide 22.
A new dividend policy was announced today which supports Rakon's aspirations to be a growth company, to maintain a strong balance sheet, and to take advantage of the compelling growth opportunities in front of it. The growth opportunities include completing the new India facility, investing into XMEMS and R&D to capture the new Leo satellite opportunity, as well as the continued development of our own semiconductor chips. In order to support the business's aspirations, the directors have determined that there is no current intention to pay a dividend, as surplus funds are expected to be required for existing capital projects, new growth opportunities and debt reduction. The board will regularly review whether to declare a dividend, with consideration given to the company's ability to achieve an acceptable long-term return on capital. I'll now hand back to Sinan.
Thank you, Anand. Slide 23. This slide is to give you an update on our ESG framework progress. We are committed to meeting our responsibilities in all parts of ESG. I believe we already do this well. However, we haven't had a formal framework for reporting, and this is what we have been working on over the past year. We appointed Ernst & Young to assist us develop the framework, and together we have made good progress on a materiality assessment, a materiality matrix, and identification of key topics. You can find more detail on our annual report that came out today. This year, we'll be articulating our strategy and targets and develop a reporting structure to bring greater visibility to internal and external stakeholders. Another part of the project with EY is to get us ready for TCFD reporting in 2023, which is also underway.
TCFD stands for Task Force on Climate-related Financial Disclosures. Moving on to slide 24. Our board has been quite busy this year. We have had CEO transition, chair transition, and appointed two new directors. High on our board's priority list were risks around COVID-19 and supply chain, as well as staff health and safety. These remain as high priority as we speak. The board, along with the management, as I mentioned, is putting substantial efforts to improve our stakeholder engagement. We have also reviewed our dividend policy as well as our trade compliance policy and processes this year. Now moving on to summary and outlook. Slide 26. To conclude, here's a summary of what we've covered today. A record earnings performance underpinned by strong core market growth and the opportunity created by global chip shortages.
Rakon's technology and product leadership has been instrumental in our core revenue growth and our increasing market share. We have exhibited an outstanding performance through our global operations, which enabled us to scale up and deliver on the growing demand and also to manage our risks around supply chain, material shortages, and COVID. We cannot underestimate the importance of our long-term customer relationships. This year, we worked exceptionally hard to manage these relationships and move forward. We have made great progress in technology and product development. Finally, we're in a strong financial position to self-fund our growth strategy and aspirations. The final slide, 27. In an exceptionally challenging year, Rakon has done extremely well. Now let's look at FY 23. Order book remains strong, reflecting demand for our high-performance products. We're expecting the solid growth momentum to continue in our core and emerging markets.
We continue to be very excited about product pipeline, and we are increasing our manufacturing capacity and capability. Finally, Rakon will continue to proactively manage and mitigate the risks of supply chain, COVID-19, skill shortages, and cost inflation. Well, that concludes my presentation. Thank you. I'll turn it over now to the operator who's opening the floor for questions.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. For anyone wishing to ask a verbal question on the teleconference, you may register a question by pressing zero one on your telephone keypad and wait for your name to be announced. For anyone wishing to ask a question on the web, please type your question into the question-and-answer box. There may be a slight delay while participants register for questions and names are collated. Our first question is from James Lindsay. James, your line is now open.
Yeah, thanks, and congratulations, gents, on a fantastic result. I just following up on the sort of LEO market, and the work that you've done there in providing that sort of new technology there. Can you just give us an update about how that competitive set is looking, and sort of how many companies on a global basis have the opportunity to sort of compete, as that market develops?
Sure, James. When you look at the competitive landscape in the LEO markets, it's quite scarce, I must say. Around the world so far, we have only a handful of competitors, and as I emphasized in the presentation, the product suite announcement that we made, I don't believe there are any competitors yet that match the full breadth of that product portfolio. Again, this is mainly because of the fact that it's not really. Although it looks easy, it's not that easy a market to address. You need to have the space reliability, but the price points are around the telecom price points. As I said, we have spent quite a bit of R&D and product development on this going back six years in effect. We're very well positioned in that market, is what I'd like to say.
Thanks very much. Just one more, if I may. Just on the obviously cost inflation is everywhere. Can you give us an update on sort of total capital costs and if there's been any stretch on the cost of the new Indian facility going down?
Yeah. We are. I mean, in all our business units, we are facing general cost inflation, just like any business really. The main areas are things like labor, rent, electricity, just the standard stuff. We have to deal with that internally. We also have to deal with cost inflation with raw materials from our suppliers. You know, we're actively managing that process. You know, this last year was one of the first years in which we were able to pass on price rises to our customers. And you know, they weren't all unsurprised at that happening, so we just need to be nimble and just do what we can in that respect. In terms of the India factory, that's well underway. We've acquired the land.
We expect it to be finished in the end of FY 23 financial year for us. While the overall budget is still valid, we are seeing some raw material price increases on things like steel, where we are exposed to market pricing. You know, the change isn't horrendous there, but we are seeing a little bit of cost inflation.
Maybe just one more, just following up on the Indian facility. If coming late in FY 2023, how long do you think it's gonna take the plant to sort of ramp up towards, first of all, meeting the current production facility out of India, and then sort of getting up to what you would perceive to be the level for the new plant?
Right. We have a very aggressive transition plan, James. It's a challenging move because we currently have in India our factory at full capacity running. We're going to do a live move into the new site, which is only 20 kilometers from where we are. It is a challenging move, but we have done moves in the past, and I think we have a really good handle and experience on what is entailed in this. We do have quite a, as I said, quite an aggressive transition plan that should, I'm saying should, again, we need to execute this as we intend to, but that should put us in a position to ramp up without any major disruption to our customers.
That is our objective at this point, but again, it will come with its own challenges. Within the Q1 of the following year, we should even have extra capacity for us to be able to utilize in other product transfers, as I mentioned.
Thanks very much.
Once again, ladies and gentlemen, for those on the audio conference, you may register a question by pressing zero one on your telephone keypad. For those on the webcast, please type your questions into the question and answer box.
We are moving on to the questions on the web. Okay. Let's start. I guess what I'll do is that I'll read the question. This is not visible to everyone, is it? Okay. I'll read the question, then answer. The first question is, why are you reluctant to give any forecast for the year ahead, from Tony Morgan. Hi, Tony. From our side, as I mentioned, the supply chain related risks continue within this year. What we want to do is to have a few months into the year and see how we are doing before we provide a guidance for FY 23. I'm sorry, the question just disappeared, but that was the question, right? Yes.
Yes, we want to have a few months into the year to have a better handle on how we're executing our plans, then share it with the shareholders and the public. That is our intention. Moving on to question number two. When are we going to have a full investor day to define technology markets and people? Also from Tony. Tony, we have intentions to have quite soon an investor day. Immediately as we set the date, we will inform. We do have that plan. That is also where we intend to better articulate our future growth strategy as well. We'll keep you abreast, but it's coming. Question number three, Leon Chang. Can you explain the new XMEMS technology and why this is going to drive future growth?
Well, the reason that we call it XMEMS nanotechnology is because of the fact that, nanometer level resolution is needed to process the crevices in the quartz, and, that actually allows us to achieve performance significantly better than what is possible to achieve with traditional quartz. In a short recap, that is the main benefit. Now, why it is going to drive future growth? Because doing so, we are able to address significantly tougher specifications, I mean, that we normally would not have been able to address. This will allow us to move up on the performance with our XMEMS nanotechnology-based crystals, but have a significant cost advantage when we reach volumes. Next question from Scott. How can the business replace the windfall gain from the TCXO initiative?
Yes, Scott, as I mentioned, that was definitely a supporting factor and a tailwind for us, but we are very encouraged by the core market growth that we are seeing. As I said, I mean, if you were to just eliminate the whole addition that we had from what we call shortage super profits, if you take that out of our numbers, you're still looking at a business that has a very healthy core growth that is printing 25% EBITDA at this point. We actually are going to make up with our existing core market growth.
Yeah. What that business has also done for us has given us the opportunity to deleverage. You know, we're looking forward to paying down some debt. We're looking forward to self-funding this year's CapEx from the cash we've built up because of this TCXO business. You know, having said all that's good to deliver that, but we still need to, and we still have got a short- and medium-term focus on our core business. We don't wanna get distracted, and we are focused on continuing to grow our core business in the same quantums and straight line as we've done in the past.
A question from Leon Chang. Why is sales and marketing flat? Do you have plans to increase marketing? Well, as I said, we have a really good worldwide presence at the moment. Yes, I think an increase of headcount is good, but what we focus on is the depth and the qualification and the competence of our people in the field. That is what we focus on, and that has, again, been a part of our winning recipe for decades, frankly. That's what we are focusing on moving forward as well. No plans to have substantial increase in marketing or such in the short term.
Yeah. We have quite a wide sales and marketing team that are located very close to where our customers are globally. That's a real advantage for us 'cause those relationships are strong and have endured, particularly over the last couple of years, through the COVID times.
Excuse me. Next question, also from Leon Chang: Do you have... Sorry. Are you dealing with new data centers, including Amazon in New Zealand? I'm just maybe reformatting the questions for better clarity, perhaps. I you know, obviously, we cannot touch on to individual data centers and individual customer names. Overall, as I mentioned, the data center market and cloud computing overall is still a fluid market. Yes, we are very well placed within the ecosystem. I'll leave it at that point. Next question is from Amal Levi. How do you mitigate costs of increasing inflation and hike in interest rates in interest rates in New Zealand and globally?
Yes. I think as we talked about previously, the way that we're dealing with, as most businesses are dealing with the increase in cost base that they're facing, is we need to pass on whatever we can to our customers where that makes sense. That's in, you know, making sure that we're taking the right actions with individual customers and given the long-standing relationships and our position within the markets. We're also looking at, you know, how we can be more efficient with what we've got. We're forced to do that because we've got, you know, a number of vacancies out there which we just can't fill, just like normal, other businesses in the industry.
It's a bit of a balancing act, but it, you know, we're not immune from cost pressures, and there's no silver bullet to be able to say the cost pressures are not gonna affect us. In terms of interest rates affecting the company. With our intentions with our debts, there'll be a minimal exposure going forward to interest rates. That'll be a good thing. That'll deleverage our balance sheet. That'll reduce our cash outflows to a degree in terms of interest costs. It shouldn't have a significant impact on Rakon internally.
Okay. Next question from Bill Parker. Has the Russia/Ukraine war impacted sales? What impact would resolution of the war mean to Rakon? The short answer is not much impact on our sales, because our sales into Russia were quite small. We took the deliberate decision to stop sales into Russia as the conflict started. Similarly, on our direct sales, a resolution would not really mean a direct increase. On the other hand, the world economy, its volatility, I think everything is connected. Yes, we would love for a resolution to happen soon. Next question from Amal. Again, NZD 7 million of the core positioning revenue is attributed to the global chip shortage. How does it translates to new customers or increase in market share? I wish I could. I'm just trying to understand the exact question.
Yeah. I think the core positioning revenue and part of that that came from the chip shortage was attributable to primarily to one specific customer, which I think we touched on on our slide. I would refer you back to that. I think the numbers were on there. In short, I think what we had was for this year one customer with additionally NZD 7 million-NZD 8 million of revenue for this year. You're right. We're actually working with the same customer on other new projects. By the way, this is a customer that we have had 20+ years of working relationship with. This situation only strengthened our relationship further. Next question.
I think the next question is around the India facility, so I'll just address that. The reasoning, you know, for the India facility move, was twofold, with a few things really. You know, currently in India, we're in two rented premises. Part of the production process happens at one, part of it happens at the other. You've got to walk between the two across a road, down a street. It's not ideal. The question is what is our long-term future in terms of our India position and India manufacturing strategy? We looked at whether we were going to lease another premises. We looked at whether we were gonna buy and build a new facility. The decision was made that it's better for the company longer term to buy and build.
There's a couple of reasons for that. It secures our future in India a bit longer. We've got to put in a clean room, for example, which takes a reasonable amount of capital expenditure. With that going in, into a leased premises, there's a bit more risk in terms of the land owner or the building owner longer term and the lease terms. It made sense for us to move from where we are currently into a new facility which is purpose-built and owned by us, and also in a better location, which will allow us to have a better presence in India with customers as well. The new facility will be substantially bigger than what we've got today, and it will enable the future transfer of labor-intensive products from other facilities.
This will elongate the product lives that we've currently got with some of our legacy products. It also provides a place where we can, you know, transfer technology and put in more products as they, you know, move up the product life cycle curve. It gives us that flexibility, and we've got a good base and a good operation in India with good people. That's the kind of reasoning why we've moved to India and, I think we've touched on the transition plan and when that's meant to go live.
Yeah. It's in effect future-proofing our manufacturing operations really. Okay. I don't see any more questions on the web. Do we have any other questions on the call? Yeah. Okay. Operator, do we have any more questions? Go on.
We do have a number of audio questions coming through. The first one is from James Lindsay. James, your line is open.
Thanks. Yeah, just again, following up on the Indian facility, and I understand yeah, the flexibility in sort of providing a bit of redundancy on capacity as well. The Indian facility is mostly telecommunications as I believe, and I think for the also the information segmental stuff. Can you give us an indication about what other products would be manufactured out there to provide that redundancy for, say, New Zealand?
Sure. Yes, I think that maybe I should give two answers to that question. One, for New Zealand, at the moment, our own semiconductor chip-based products, we're exclusively manufacturing those in New Zealand. That is one big area. Some of those products, although it's semiconductor chip-based, they also do have labor content in them. That is going to give us significant uplift in terms of our capacity. When we transfer some of those products into India, we will choose to continue with our manufacturing also in New Zealand in the interim, and probably for the foreseeable future, to give that manufacturing sites redundancy that our customers so desire from us. That is the New Zealand aspect of it. The other aspect of it is for the new space, low Earth orbit products.
The modules, the subsystem, modules that we refer to, those are actually high value-add products that would be quite tough for us to build in volume at a reasonable cost in France. Although they are currently designed in France, and we're going to get to manufacturing in France, for the high volume manufacturing, we also envision transition of those products into our manufacturing in India as well.
Thanks very much.
Thank you. Our next question is from Fergus Brown. Fergus, your line is open.
Yeah. Hi. Well done on the result. What I'd like to know is, you're obviously not doing dividends, and I understand why. You're also on the other side saying, the money needs to go into investment, potential growth. What I wanna understand is the company currently on a P/E of 11, and it's obviously a high-growth business. When are you gonna give some vision to where it's gonna be in 3-4 or 5 years so that the valuation of the business actually reflects what it possibly is worth?
Right. Fergus, from our side, with the strategic review that we have embarked on, we have a vision for the coming three to five years from our side. We are intending to detail this in the investor day moving forward. That is the plan. I'm sorry, you're right. I think we don't give enough detail as to what we talk about our growth strategy. We need to put more in ink as to what that means and what our targets are. We're going to do that in the coming few months. That is our plan, as I mentioned. We are going to be also providing more detail with regards to our growth strategy along with the forecasts that we have as well. In a couple of months, in short.
Okay, thank you. That's great.
We have no further audio questions at this time.
Okay.
Apologies. We do have one more. It is from Kevin Arscott. Kevin, your line is open.
Yeah. Good morning, guys. Congratulations on the result. It is very disappointing from a shareholder perspective that no dividend has been declared, even though I think at the end of the week and last year, there was talk about a dividend, and a record result and no dividend to shareholders is very disappointing. I wanna also ask, is the NZD 23 million of net cash you talked about other opportunities. Are you looking at acquisitions in terms of adding on to your business or to retain that NZD 23 million of cash in your debt facilities? I can understand the CapEx and all that and R&D and everything else, but are you currently looking at acquisitions?
If you are, can you sort of outline as to where that may be and where that would lead to?
Right. Yeah, I think, maybe to start with, we are really focusing on long-term value creation for our shareholders. I can understand the disappointment that you alluded to. You're right. On the other hand, Kevin, we, when we look at where we are, we are very well-placed in these high-growth, high-tech markets at the moment. We need to continue to invest in our technology, into our products, and into our operations to ensure that we really get to that high growth, as we aspire to. Again, the long-term value creation has been where our focus is. I think if you look at our performance in the past year, I feel we have indeed made very good use of the shareholders' investments and created substantial value for the company.
Now it's time to invest that into future growth for us. I think that is where we would like to use the capital. Yes, paying down debt and investing into those four areas that you mentioned, we will absolutely do that. Coming to M&A activity, I think it's a bit early to talk in detail about this. Yes, I think along with our organic growth aspirations and growth in our core markets, we will consider what makes sense for the company's future and what makes sense for the shareholders as well. Let me leave it at that point because there isn't, you know, a tangible plan at this point that I can speak to.
Thank you very much.
Sure.
Thank you. We have no further audio questions at this time. I'll turn back to today's presenters for any closing remarks.
Well, thank you very much, everyone. Thanks for your time. It was a lengthy presentation. I apologize for that. Looking forward to answering any further questions that you may have in person as well. Please contact us. Thanks again.