Welcome to Rakon Limited's 2025 Annual Shareholders Meeting. My name is Nick Laurent. I am the Investor and Corporate Communications Manager here at Rakon. Just before we begin, a few points of housekeeping. This is a hybrid meeting with attendees joining in person and online, and it is being recorded by Rakon for transcription purposes. We do ask that anybody recording the meeting online does so for note-taking purposes only and not for publication or distribution of the video or audio. Taking photos and recording video or audio in the room is not permitted. I'm sure you are all now familiar with hybrid meetings, but as a quick reminder, for those of you online, you can submit questions using the Q&A tab on the right half of your screen at any time throughout the meeting.
We will address your questions after the Chair and CEO address, where we have time for Q&A. Please note that questions may be moderated or aggregated. If we get multiple questions on a similar topic, we also reserve the right not to address questions that, in the opinion of the Chair of the meeting, are not reasonable in the context of an annual meeting of shareholders. If we run short of time, unanswered questions may be addressed after the meeting, and you can also email us at investors@rakon.com with any questions after the meeting. Voting today will be conducted by way of a poll. For shareholders online, you can cast your vote under the Vote tab. Should you require any assistance, you can type your query into the chat function on screen, and one of the Computershare staff will assist you.
Finally, a quick reminder that during today's presentation, we will make forward-looking statements about Rakon Limited and the environment in which the company operates. Because these statements are forward-looking, Rakon Limited's actual results could differ materially. I encourage you to read the disclaimer slide in our presentation for more detail. Thank you for your patience. I'll now hand over to Rakon Chair, Dr. Mark Bregman, to formally begin the meeting.
Thank you, Nick. [Foreign language] . Good morning. Welcome. It's great to see we have a good turnout today from shareholders both here and online. I'm Mark Bregman. I'm the Chair of the Rakon Board, and I'm pleased to confirm we have a quorum of shareholders, and therefore I declare the 2025 Annual Shareholders Meeting is open. I also advise that online voting is now open on all items of business. Today you'll hear from myself and also from Sinan, our Chief Executive, before we open the meeting for shareholder questions. Following that, we'll cover the resolutions. There'll be an opportunity after that for other general business the shareholders would like to discuss before the meeting closes. Finally, all of you are invited to join the Board and the Rakon team for refreshments at the end of the meeting.
I'm relatively new to Rakon. I'm happy to be joined today by our current board members and also sitting with us, as I mentioned, Sinan here and Mark Dunwoodie, our CTO. I'd also like to welcome our representatives from the auditors, PwC, and our solicitors. As shareholders will be aware, there have been a number of changes to the board, both in the last year and in the last weeks. I think it's important for shareholders to understand these, so please bear with me. Since the last annual meeting, three independent directors have stepped down: Sinead Horgan, Keith Oliver, and Keith Watson. The company would like to thank all of them for their contributions and for their efforts on behalf of Rakon.
To fill these vacancies, the board undertook a professional, considered, and in-depth recruitment process to ensure we had the right directors with the right skills to lead Rakon into the future and to deliver value for shareholders. I joined the board last year in October, and we're also privileged to welcome Jon Raby, who is here, and Dr. Elizabeth Jacobs, who is not here today as she had a commitment elsewhere. Both of them joined earlier this year. They're both highly qualified, industry-fluent, and internationally experienced. Their appointments, as well as mine, were unanimously supported by the full board, including the non-independent directors and shareholders, Brent Robinson, and the Siward Crystal Technology Limited. I note that this support only changed after Brent was advised that he had not been selected for the Chair role.
It's with regret that we received notice last week that Jon and Elizabeth have chosen not to stand for election at this meeting. It's a real loss for Rakon. During their time, they contributed valuable expertise and strategic oversight and demonstrated the highest standards of governance in the interests of all shareholders. Jon and Elizabeth agreed to remain as directors until the end of this meeting to ensure Rakon continued to meet the NZX obligations regarding director independence. Thank you both. Elizabeth, as I said, passed on her regrets that she cannot be with us today, but Jon is here, and he will be happy to take questions from the shareholders later. The rules require that the company have two independent directors on the Board at the end of this meeting, and one of those needs to be the Chair of the Audit and Risk Committee.
About one week ago, when it became clear that a compromise with the largest shareholders could not be reached, despite months of discussion, the independent shareholders concluded that we must, in the interests of the company and all shareholders, pursue a path to avoid breaching the listing rules. We therefore undertook a strategy to ensure that Rakon would remain in compliance with the NZX rules. Previously, Lorraine Witten had advised that she was going to step down. However, following discussions with the majority of the Board and ensuring that Rakon continues to comply with the NZX listing rules, she's agreed to stay on, and she'll remain on the Board and will be the Chair of the Audit and Risk Committee immediately after this meeting.
When Lorraine originally announced her intent to retire, the Nominating Committee undertook a search with the help of a leading recruiting firm to find a new Independent Director to fill her role. A number of candidates have been identified, and after a series of interviews, we identified a strong candidate whose background and skills help strengthen the Board. Yesterday, we announced the appointment of Peter Baines. Peter was recommended by the nominations committee following a thorough review process. Peter's qualifications and experience are extensive. He is a highly experienced technology executive and director with over 25 years of executive leadership experience spanning telecommunications, manufacturing, R&D, and commercialization, both in New Zealand and internationally. His expertise in global technology, high-technology manufacturing, investment, and commercialization of cutting-edge technologies are all considered to be of value to the Rakon Board.
He will join the Board effective at the end of this meeting and will stand for election at the 2026 ASM. In my introductory letter to shareholders a few weeks ago, I outlined my view, my vision for Rakon. Rakon's technologies underpin some of the most advanced and demanding systems in the world, and I believe the company is in an exciting and pivotal moment with significant opportunity ahead. Rakon has huge potential to lead in global tech sectors such as AI and space, and we're already making excellent progress with orders from some of the largest global players. The investment and work that's been undertaken in the past few years has positioned Rakon to capitalize on these opportunities, and we're ready to rise to the challenge. We're benefiting from the foresight shown in developing our India facility, which now gives us more resilience and flexibility.
The current expansion of manufacturing in France will also allow us to scale up quickly to meet escalating demand, especially with EU-based manufacturers benefiting from the recent NATO commitments to defense. Multiple new products have been developed, tested, and launched commercially, specifically targeted towards these major growth sectors such as space and AI. We have a strong and capable leadership team that brings years of international and sector experience to Rakon and a committed and expert workforce. Over the past year, there's been a priority focus on cost and efficiency, and Rakon has a strong balance sheet and funding headroom to execute our current initiatives. The downturn in telco and positioning that we experienced is now starting to turn, and the potential growth from space and AI is exponential. We need to make sure that we can stay on that wave.
The significant rebound we saw in the second half of fiscal 2025 has continued, and we're expecting a strong fiscal 2026 performance. Sinan will talk more about our strategy and progress shortly. When I look at Rakon, I see a company whose position is enviable. We're operating in markets that are expanding rapidly, as I mentioned, AI, aerospace, and defense. That, alongside our established strength in telecom infrastructure and positioning, creates that enviable position. These are sectors shaping the future of communications, navigation, and security. Our focus across space, defense, and AI lets us take more of a portfolio approach and reduces risk in the case of an individual sector slowing down. In the meantime, we should capture as much business as we can as we see this recovery.
The value is clear, and our task is to leverage it through the right capital, the right investment, and the right execution so that we can fast-track scaling up the business. We need to build our balance sheet and encourage investment from international technology investors who view Rakon as an attractive opportunity and understand the strategic relevance of our technology. This is an area that I have decades of experience. In fact, I was very recently in the U.S. on other business, talking with investors in the tech industry about a number of topics. First of all, they see the investment climate improving in the second half of this year with large investments, which you've probably seen, in AI and data centers, defense, and aerospace.
With the continuing focus on supply chain and the use of sovereign technologies produced under laws and control of trusted allies, such as New Zealand, it puts us in a very good position to be a good supplier and partner for companies in the U.S. and the European Union. I'm excited about what Rakon can achieve. By working together, we can ensure that Rakon not only meets these challenges but defines the standard for what a New Zealand technology company can achieve on the global stage. Thank you very much, and I'd like to hand over now to Sinan to talk about Rakon's progress and the steps we're taking.
Thank you, Mark. [Foreign language] and good morning, shareholders. Thank you for being here and online. I'd like to acknowledge our Chair, our Board, my leadership team, and our employees as well, in addition to shareholders. Maybe just to name a few of our employees: Arun Parasnath, our MD of India; Joli, no, I'm just joking; he's our auditor; Nick Padhi, our Chief Operating Officer; Adam Robinson, our MD of Commercial Business Unit; and Michael McIlroy , he's our Chief Innovation Officer. They will all be available to speak with you after the close of formal business.
Today, I'd like to speak about three themes that actually run through everything that we do. These are progress, performance, and potential. Progress is the base that we built in the last three years. Performance is what you will see in the slides, in our numbers, and potential is where we will take Rakon next. We will recap strategy and what we delivered in FY 2025, a year of two halves. We're going to talk about our strategy moving forward in the coming three years in front of us. We're going to talk about our current momentum, our guidance, and our aspirations for the future as well. Before we go any further, a quick word. Obviously, a lot of you have been seeing items related to the Board, the Board composition. There has been a lot of news. I just want to say that regardless of the Board composition, the company is focusing on running the business, executing, and getting Rakon to the potential that we deserve. From our side, I can speak for myself, my management team, and all of our employees.
We are just focusing on the business itself. I just wanted to make that statement because of the fact that I have been approached even here by a lot of people and elsewhere. Please be assured that we are actually focusing on the business first and foremost as Rakon. Our strategy is our operating system, and it's quite simple. Our strategy is quite simple. We operate where growth is. We have AI hardware, aerospace, and defense alongside our foundational segments of telecom infrastructure and precision positioning. We keep customers at the center. We invest in the right talent and right technology to deliver the right products. We scale and execute with discipline through our global operations. We win by scaling our product platforms and our technology for the world stage.
We have put in a lot of energy in some of the technologies that you have heard me talk about before: our semiconductor chip technology, our XMEMS NanoQuartz technology. We have quite a few more in our quiver that we are actually using towards building products that are world-leading. Moving forward, we have and we run through a global operation for the purpose of speed, resilience, scale, and cost. I'll talk a little bit more about our organizational transformation that we have gone through that actually is putting more coal under some of these areas moving forward. We have changed our organizational structure effectively to match our strategy. Moving forward, we have refreshed our strategy. I'll talk about that in a moment as well. Our travel direction is the same. It has not changed.
What we have added is speed, discipline, and some guardrails that will allow us to scale, but with control. Now, talking about the last three years, in the last three years, we created some fundamental building blocks and diversified and enhanced our markets. We added new growth drivers, and we developed new technologies. We have also aligned our global structure with strategy, as I mentioned. In aerospace and defense, FY 2025 revenue reached NZD 42.4 million. That was a 15% year on year growth, a new high, and that was a record high third time in a row. That business has been growing quite steadily. We launched a number of next-generation subsystems, and we've won multiple space contracts. Those wins are important because they have set us as a leading supplier in space globally. In AI and cloud, we said that we aspire this to become a core market for Rakon.
We are very much on that path to do so. We will achieve meaningful revenue from AI in FY 2026, and we are already investing to expand our production in New Zealand in anticipation of the demand ramp for AI. For telecom, as you know, the last two years tested us in telecom in terms of demand. As you have seen, the second half of FY 2025, we had a substantial recovery, and that momentum is continuing. I'm pleased to say that we are seeing substantial signs of recovery, stabilization first, and recovery now. I'll talk about that momentum in a moment as well. We released also within the last three years, and two of them being in the last year, three new semiconductor chip platforms, including Vulcan, which is going to be a leading-edge product globally that will serve us well in a multitude of market segments.
We have mostly completed our New Zealand to India manufacturing transfers, reorganized into market-focused business units, as I mentioned, and realigned our leadership to sharpen our execution. These streams of work set the foundations for growth that started in the second half of last year that we expect to scale in the coming three years as well. Now, talking about FY 2025, a year of two halves for us. There was, as you know, a substantial difference between the first half and the second half. The second half revenue was up 49% with respect to the first half of the year, and our gross margin was up 9%. Our underlying EBITDA ended at NZD 9.5 million. That was around the midpoint of our guidance, but that was after a substantial second half swing of NZD 16.8 million.
Aerospace and defense strength and telecom stabilizing, actually, with 2/3 of the revenue in the year coming from the second half contributed to this second half ramp. That set the launchpad for us for FY 2026. We tightened also our cost base while protecting our long-term investments and growth. The normalized OpEx reduced by 10% while we kept our R&D investments steady, and the inventory reduced by 16%, releasing about NZD 8.5 million of cash. Some transfer and transition costs remain as we complete transfers to India, but they unlock substantial structural cost benefits for the company as well. Rakon retains a very strong balance sheet, relatively speaking. We have net assets of NZD 155 million. That facilities include significant capacity for investment into capital initiatives as well as growth opportunities.
Our organizational realignment and global systems work have alleviated the global inefficiencies in our organization, lifted our accountability, and will substantially improve our customer focus. We matched highest value roles to our best people. We continue to do so. We unleashed significant structural cost benefits as well. The important outcome of all these steps is that our operating leverage substantially improved as volumes also recovered. We sustained R&D at about NZD 22 million last year in FY 2025, and approximately NZD 10 million of that was capitalized. These were capitalized for programs moving into revenue. That's an important point that ties our R&D to actual return on investment. The main areas that we put R&D dollars in were aerospace and defense, AI. As I said, we released three semiconductor chips and a portfolio of subsystems.
We have consistently, as you can see on this chart, invested into R&D, even when our revenue was going down. The reason for that is very clear, and we'll continue to do so. I said this last year. I said that the year before. For the company, these are the dollars that actually count most for us because it keeps us at the cutting edge of technology and ahead of competition. We have been funding what wins and not inertia. We have put in guardrails, stage gates, and quarterly reviews into R&D programs to make sure that we actually have R&D today leading to revenue tomorrow. Now, talking about the coming three years, you can think of FY 2026 - 2028 as an execution upgrade of our previous strategy. We have more growth drivers, faster resource allocation, and well-defined guardrails, so we secure growth and accelerate.
AI and cloud, our plan is to convert orders into meaningful FY 2026 revenue within this year and scale capacity. Broaden our product portfolio with more qualifications next year, and by FY 2028, we want to become the default global supplier in that space. Aerospace and defense, we will execute the awarded programs with expanded capacity. We'll ramp subsystems. We'll extend our MercuryR space chip-based portfolio. We will broaden our U.S. penetration as well. Telecom and positioning, the cycle, as I said, has stabilized. Our customers are focusing on growth through densification and fixed wireless access pockets. While they do that, we put our focus on upgrading our installed product base with our new products that utilize our next-generation semiconductor chips and our latest XMEMS NanoQuartz technology. Operations and systems, we continue additional New Zealand to India transfers, and we will shortly start France to India transfers as well.
We will harmonize core processes. We have quite a lot of work that is ongoing in this area. We will also embed quarterly reviews, as I mentioned, that will go through every project, and we will make a decision to keep, accelerate, or cut. Our long-term potential rests on disciplined investments in technology and elsewhere, all parts of the company. We budget to strategy and allocate dollars accordingly. Our portfolio guardrails, as you can see on the slide, are well-defined. We spread 60%, 30%, 10% across core, next-generation, and optional business, which also corresponds to horizon one, two, and three, which effectively means that these guardrails allow us to keep a balance between our efforts to lead the core, develop our next generation, and also look at further down the horizon to optional moonshot business, which we always do.
We have adopted capital discipline and are releasing capital through the stage gate process that I mentioned and with a review every quarter. The bar is simple. We are looking for clear paths to having return about the weighted average cost of capital and with measurable impact on cash, margin, and our share in the market as well, which is an important factor. This is how we convert opportunity to returns. Alongside the risk and mitigation matrix, this approach creates transparency and speed in what we do. It makes capital discipline and operating cadence tighter by making the approach systematic. Now, moving on to guidance, we released our guidance just this morning. For FY 2026, we guide an underlying EBITDA of NZD 15 million - NZD 24 million for the fiscal year 2026.
What underpins this range is the continued aerospace to defense growth, stabilization, and recovery of telecom and the start of AI revenue within FY 2026. Add to that a tighter cost base and the cost measures that we have taken that have changed our cost base substantially. Sensitivities remain: timing, mix, inventory, effects, and supply chain disruptions. Overall, the momentum is real. There are two numbers there. I just wanted to put those out there as a FY 2026 year to date snapshot compared to this time last year. It's a year on year comparison, the numbers at the bottom. We are doing substantially better. Revenue is up by 28% year on year, and our gross margin is up by 7% to 50%. Now, moving forward to our aspirations. For FY 2026, again, we project to scale toward NZD 120 million -NZD 130 million revenue, although our EBITDA guidance is what you see here.
It's NZD 15 million -NZD 24 million. Please don't take what's on this slide as guidance, but it's aspiration. Our only guidance is for our underlying EBITDA for NZD 15 million - NZD 24 million. That corresponds to roughly a revenue of NZD 120 million - NZD 130 million this year. What we are aspiring to do is to scale toward the NZD 250 million revenue by FY 2030 with upwards of NZD 75 million EBITDA. This is an organic growth plan. This is based on our strategy, and it is based on also our sound strategic execution in the last three years. Actually, our current trajectory is based on our existing strategic plan that I mentioned for the coming years. Once again, these are aspirations and not guidance. They depend on a number of factors, as always.
We are counting on continuing space and defense momentum, AI and cloud scaling, telecom acceleration, as well as the structural cost benefits that I mentioned from organizational efficiencies that we have unlocked and we will continue to unlock, economies of scale, improved margins, and overall execution. In summary: progress, performance, and potential. We rebuilt the base, we reset the performance, and we're positioned to convert potential into scaled results moving forward. Before I close, I wanted to put in yet another personal word. I just want to say that regardless of how our board composition evolves, my focus is and will be on running the business, as I mentioned. My job is to get Rakon to where the company deserves, and that is my focus. That's the management team's focus. That's all of our employees' focus moving forward.
With the Board, we will always work very closely, regardless of the composition, with regards to our strategy, our talent, our technology, and our risk. We will seek our Board's help to help us accelerate our plan and put the priorities in the right areas. As always, I really believe in this company, and I really believe in our team. I really believe in our potential. I am very excited about the path forward, as I have always been. Moving forward, I want to thank our shareholders once again for your support. A lot of you have voiced support for the company overall, and I thank you very much for that on behalf of our management team. Thank you. I'll pass it back on to Mark for Q&A.
Thank you, Sinan. Stay here. Thank you, Sinan. I now want to invite any questions on the annual report or the performance and business of the company. We will then shortly move on to the resolutions, and I'll invite discussion on those at that time. For now, please focus on the presentations and any questions about the company. A reminder, only shareholders or their validly appointed proxies or corporate representatives have the right to speak or ask questions here. For those of you who are here in person, please raise your hand, and we'll bring over a microphone to you when it is your turn. Please remember to say your name and speak up so that those joining virtually can hear you as well. Questions may be moderated online. If we receive multiple questions on one topic, they might be amalgamated together.
Any questions not answered in time will receive an email response after the meeting. I propose we start with questions for management on the annual report, the results, and the company performance, and then we'll move on to questions for the Board. I'll start with any questions in the room. Over here. There's a microphone coming to you.
Thank you, Graham Wakefield. My question is to you, Sinan. I believe that I'm right that you were on the Prime Minister's delegation to India recently, and of course, you've opened and commissioned the manufacturing facility there. My first question relates to the potential impact of tariffs on India from the United States of America, and what impact do you anticipate that will have or any workarounds that the company has in place to mitigate that impact?
Sure, thank you. Yes, I was on that trip, and the tariff question is a very valid one. The short answer is that it's still fluid. From our side, I guess maybe just to put it in context, where the tariffs apply is the business that crosses the US border. While we have quite a lot of US customers as well, the business that we do with them for manufacturing in the U.S. is a small portion of our business. We quantified that when the first tariff situation started unfolding. In addition to that, when you look at the tariffs, especially for electronics and especially for what we do, frequency control products, there are different categories of it. From our side, what I can say so far is that we have not been substantially impacted by it.
I can say that the impact has been minimal to none from our side. There are parts of it that actually are still fluid, but we are working quite closely with people that are experts in the field to ensure that our products are categorized properly. Those that go into the U.S., they get categorized in a certain way that we are not going to be exposed to more tariffs than we need to. Let me put it that way. It is still fluid. I am sorry, I don't have an exact answer to you in terms of, hey, this is the exact impact. If you ask me, what is the impact now? I could tell you that it's minimal to none.
Thank you. Can I just also ask?
Please.
The amount of revenue that you've generated in India from your products in the current year, and how you see that penetration in India increasing as a result of having established the manufacturing facility there?
Thank you for that question as well. Maybe just to also put it in context, we had a manufacturing presence in India going all the way back to 2008, actually. That's when we first formed the joint venture, but it was a joint venture. In 2018, we actually fully acquired the joint venture partner's stake to make it Rakon India. What we opened is our new factory, which is now our manufacturing center of excellence. Your question is still nonetheless valid in the sense that our local presence there is actually received extremely positively by this growing Indian market as well. We have traditionally been a participant in the local market in India, but now there are customers there that are actually playing for the world stage. Someone like Reliance, for instance, it's an over $ 100 billion US company. I'm giving that as an example.
Us manufacturing in India is a huge advantage for us because the Indian government has a Make in India initiative that actually we are almost the only game in town in our own technology domain that actually is manufacturing in India. Yes, your question is very valid, and it is impacting us very positively, and it has a lot more potential to go. In the trade mission, yes, I think I was there. Rakon is one of the few, I guess one of the first and one of the few real operations in India. People have call centers and such or some remote team. Some other companies do, but I think our insights and experience that we had in India was quite welcomed by that mission.
Go ahead. Do you have a microphone down front here?
Thank you. Oliver Mander from the New Zealand Shareholders Association. Sinan, you talked extensively about Rakon's strategy and that pathway to unlocking the potential in the future. Can you just explain a little in terms of how the Board has worked with you to create and leverage that strategy in a very practical sense so that shareholders can understand that relationship?
Sure. I think, of course, Oliver, I can't speak to the exact details of what is discussed with the Board at any given meeting. In general, as I mentioned, with all members of the Board, I can say that I have always sought very close collaboration. I can categorically state that. We have had discussions with our Board about our strategy, and the Board has contributed to our strategy as it has always been. This is not new. It has been in the past, and that is what I will strive for in the future as well because I always believe part of my job is helping the directors help the business, actually. I seek quite close relationships with every Board member, past, present, and future.
Thank you. Thanks.
I think we have one here.
Hi, my name is Amit Shah. Am I clear?
Yes.
Sorry about my accent. My question is.
Oh, I'm sorry about mine as well.
Yours is much better than mine. You were talking about, you know, NZD 75 million EBITDA by FY 2030. Could you please say something about the R&D cost in the next five years, and are you going to capitalize that?
Sure. Once again, that is an aspirational number. It's not a guidance. I repeat that. For us, we have a continuum of R&D projects because that's how we actually survive and thrive. We have to stay ahead of our competition. That does necessitate us to put a lot of energy onto R&D. If your question is, hey, this capitalization that you had this year, is it going to just go to zero? It's not the case. As we scale the business, as we scale our technology, we will expect our R&D capitalization to scale as well. As I mentioned, we are tying our R&D investment very closely to the return on that investment, not immediately, but for the future. Many things that we are doing now, many things that we started a few years ago, actually will contribute to that.
In our business, it's a very long cycle, and it requires very careful thought process as to where we go, where we play, how we win, what technology we need to make that possible, and do R&D to create technology that doesn't exist. Innovation is a systematic part of our cycle, and it is not very defined. From our side, we try to ensure that we think very carefully long into the horizon. Many things that will result in revenue all the way in FY 2030, I can say that at the minimum, the thought process has already started. It will continue. Sure.
Sorry, I have a follow-up question. EBITDA is good, but if the R&D cost is too high, the cash flow won't be that good, right? It will affect dividends.
It depends on what you expect, where we get the company. Our target is to lead by technology. For that, again, when we scale our organization, when we align all stars, we have seen in our past, and we will see this year that it actually creates earnings for the shareholders as well. That's what we are targeting at the end of the day. I can't speak to a dividend at this point, of course, but I can talk about the fact that R&D is mandatory in our cycle to make sure that we scale the revenue. Otherwise, we would not be able to lead the world. I just want to put this in context. I repeat this every year, I guess. We are here in Auckland, New Zealand. You are looking at a company that is a global technology leader in its own field.
A true tech leader, a Kiwi pioneer in its own field. How many such companies do we have in New Zealand? Our focus will always be on technology and making sure that we are on the forefront of it.
It looks like we have a question from the remote or the virtual audience. It's from James Christopher Cone, and the question is, how does year to date revenue compare to the last few months of fiscal 2025 after the resumption of hopeful trading?
After the resumption of hopeful trading? I don't know how to answer that. I have always hoped, but I don't know. I'm not sure how to answer that. James, can you please contact me separately because I cannot put it in context to really answer it accurately for you? I'm hoping that you are hearing this, Mr. James Cone. Please contact me directly. I'll be very happy to answer your question.
Do we have further questions here in the room? We have one back here.
Hi, thank you, Chair and CEO. My name is Xiao Chen. I'm the shareholder. I do find that Rakon recently is one of my few best performances in the last three months. I could manage to buy below NZD 0.60 and then sell recently at the peak over NZD 0.90. At that point, I've been thinking one thing. There are some fundamental concerns, especially after the presentation. Several of my concerns, for example, in terms of the comparative advantage, I've been thinking, right, internationally, why, like, that's what I'm thinking. Why should consumers buy Rakon products instead of, for example, Taiwan Semiconductors and then those ones, very competitive ones from Asia? That's the one thing. In your presentation, it seems to be some kind of undermined utilization in the field of medical and health sector.
Also, lastly, your presentation has quite a lot of focus on the EBITDA, so the earnings before tax. I do find the more meaningful term and measure is actually the net profit after tax, which is not mentioned. I'm looking forward maybe one day I'm getting back to buy more Rakon if I see it fit. Thank you very much.
Any more questions? Starting from your first one, we don't have any consumer products, so we don't have any consumers as our customers. Your question is still valid. Again, maybe just to recap for people who forgot your first question, why do people buy from Rakon, not from Taiwan or someone more competitive? That is a good question in the sense that because we globally compete, although not in the consumer market, we do have competitors from Taiwan. We do have competitors from China. We do have competitors from lower cost-based environments, for sure. We need to have all the stars aligned for that. Once again, technology, we must lead by technology. That is something that puts us ahead.
We also need to ensure that from the cost base, our costs are globally competitive because there is an important match between price and performance that we always have to hit the right spot. There is no situation where you have a great technology, but it costs so much that people still buy it. They pay 10 x. In very few areas where there is no competition, there is, but we always need to make sure that we have a sweet spot when it comes to price performance, and that's how we approach it. That's your first question. Let me go to the third one first. My presentation is not a financial statement. That is what we guided today. You're absolutely right. Of course, net profit after tax is extremely important.
For that, there is a direct relationship between EBITDA and the net profit after tax, and that would be on our financial statements. Is there any other thing that I can answer with regards to that question? I can't tell you what our net profit after tax estimate is for the year because that's not what we are giving guidance on, although I have that number. Your second question was?
Medical.
Yes, absolutely. That is probably a very valid question. That is still a market that we have some level of penetration, but it's not big enough for us to have it as a core market segment. We do have some penetration. There is still potential there that can be harvested. As you can imagine, we have to make some strategic choices because we don't have infinite resources. We look at where we get the highest value for our dollars. That is a market that is definitely high potential for us still.
Just.
Still more.
Yeah.
Go ahead.
No, no, no. It's related to what you mentioned.
Okay.
Because you mentioned about the price, because you mentioned about the price versus performance ratio, and then you also, I mean, I understand the sweet spot in terms of some kinds of constrained optimization. In this case, do you have a comparison, for example, a global comparison of how your product price performance ratio and then those products compared to the other competitors around the globe? Do you have those statistics and data?
Would you like me to share those with you? If you want those, the answer is no, because that actually plays to our competitive advantage. Yes, of course, we do quite heavy competitive analysis. Unless we actually fare well compared to our competitors, no matter what we think we are doing, it has no value. Absolutely, we do competitive analysis quite at length.
We have another question here from Kevin Arscott. Can you please give shareholders a feel for the AI hardware business currently? How will it grow in revenue percent terms? How will it gain as a share of revenue?
I guess Kevin is asking for over time, how is that going to grow? I will go back, Kevin, to the response that I had on this. We are aspiring for the AI hardware market to be as big as our telecom infrastructure market moving forward. That is the type of potential that we are seeing in that market for us. I can't give exact revenue growth terms, although we have it in our plan. I am not in a position to provide that at this point, but what we are aspiring is for it to be as big as our telecom infrastructure market.
Do we have any more questions here in the room? I don't think we have any more online.
We have one more.
We have one more here.
Two more.
Three more.
Three more.
Okay, it's like an auction at the end.
Yeah, I just wonder if you could share the revenue, you know, how much, what's the percentage of the revenue come from different countries, like U.S., Europe, Australia, New Zealand? Can you share that information?
Yes, I can. There are two ways to look at it. One is to look at the origin of the customer. If you look at the customer, regardless of where they buy it from, then it would be almost evenly divided between U.S., Europe, and Asia. However, if you were to look at where it's manufactured, a big chunk of it is manufactured in, when we say Asia, I should say perhaps Far East. That would be the biggest chunk for us, followed by Europe and U.S. being about similar. That is the extent of percentages that I could give at this point. I can, I'm happy to discuss that at the half-year mark, but not at this point.
Do you have a question over here? Do we have a question here? Yes.
Don Howard, small shareholder. I'd like to ask what percentage of your after-tax profit you spend on R&D, and has that changed much over the last, say, 10 years? I've been quite a long-term investor, only a small one, mind you, but I haven't seen a great trajectory of growth over that time. I'm wondering whether you've moderated the amount of spending on R&D or whether you have grown it. For contrast, I attended Fisher & Paykel Healthcare's annual general shareholders meeting yesterday, and they spend a very big percentage of their after-tax profit. Look at their growth. It's wonderful. Comments, please.
Thank you for being a long-time shareholder, first of all. I had a slide there that did show our R&D spend that shows its trajectory over time. It's funny because a moment ago, I was perhaps defending when that gentleman asked, "Hey, are you not spending too much on R&D?" I said, "No, that is our future." The answer to, "Are we moderating it?" The answer to that is, "No, we are not moderating it." It is growing year on year. It will grow again this year. It is at its highest ever numbers at the moment. We have grown it regardless of what the revenue trajectory has been in these past years. I'm very happy to walk you through the numbers again. Yes, and I think F&P's path, that is extremely respectworthy for us. Similarly, technology and R&D dollars are extremely important.
With regards to the share price trajectory, you said it. From our side, that is not something that we set, but I can refer to a couple of years ago where we had, where we printed NZD 54 million of EBITDA. Our share price did not go back to where it was. Back 13 years ago, it was at NZD 5.60. Or you said 10, 11 years, I don't know, maybe NZD $3. It didn't go there. It only went up to NZD 2.21, although we printed an EBITDA of NZD 54 million, reconciled ever. That is something that the shareholders and the share market, the capital market, sets. We are trying to do our best to actually put the company back on the growth trajectory, and I'm again happy to report that we are back on that.
What was the percentage spend that you're spending now that went after tax profit?
After tax profit, that is in, yeah, I was going to say infinity. If you look at our revenue, this FY 2025, I can quote our FY 2025 numbers. Our revenue was NZD 103.7 million, and we spent NZD 22 million on R&D. It's quite high. It's actually higher than F&P. Every business is different, and I very much respect their business and how it has grown.
We have another question here online from Jurgen Martin Kristowski, I hope I pronounced that correctly, and Michelle Elaine Kristowski. They're asking, with regard to the fiscal 2030 aspirational targets, you mentioned that Rakon would get there with just organic growth. This doesn't sound very aspirational. How much can we rely on any moonshot products emerging by then that would really change the outlook?
I guess there are two, maybe three questions in that. I will start with just organic growth. I think being able to get to that number with just organic growth is actually a bigger feat than organic and inorganic growth combined. When I refer to this aspirational number, this is based on, we have a multitude of strategies, layers to our strategy. What I have put out there is our strategy.
You might want to define organic versus inorganic for people.
Sure. I think people probably know it, but inorganic is through acquisition, effectively. Organic is through our business that we have, that we actually generate the revenue based on what Rakon's business is today and its growth organically. Yes, I think at the end of the day, we have, when we look at an aspirational target, I think doubling the revenue in about four years, I would not call that lukewarm, effectively, what the gentleman is saying. We do have, also to answer the second part of the question, moonshot products, absolutely. We always have moonshot products. That's why I specifically mentioned that. That is true, this systematic innovation that we actually spend time and energy on. This has been the Rakon DNA. I'm not referring to this year, last year. It has always been the case for decades.
Yes, though that 10% energy that we look at for the long term actually sometimes results in maybe our highest growth driver. We will always have that as well.
Okay.
Jurgen, if you have any other questions, please contact me also.
Do we have any other questions here in the room? We will in a moment. Do we have any questions online? It doesn't look like we do. In that case, let us shift to questions for the Board. A reminder that we'll answer questions on individual resolutions when they're put to the meeting. We have questions for the Board members that are here with us.
Firstly, Sinan and Brent, what a great report. I'm a long, long, long, long-time investor, and I'd just like to congratulate you both and the rest of the management. Fantastic. Last year, at the then Chair of Rakon requested that a group of shareholders, including myself, meet immediately before the ASM to discuss a number of questions for the 2024 ASM we intended to promote. The group agreed to hold fire due to Ms. Witten's input, as a tenor of the questions could have been unhelpful due to the ongoing negotiations with an outside party. In addition, we were assured by Ms. Witten that she would resign at the 2025 ASM, a decision seen as being in the best interest of all shareholders.
Important question for the Independent Directors Committee set up to consider potential acquisition proposals has become even more relevant a year on. The company reported in its annual reports acquisition proposal costs of NZD 2.2 million for 2024 and NZD 2.3 million for the following year. That's NZD 4.5 million, which is quite a lot of money to struggling shareholders like myself. These were for binding indicative offers. For those unaware, one of the key differences between an NBIO and an offer made under the Takeovers Code is that there is no provision for cost reimbursement of expenses incurred by the recipient of an NBIO. However, directors should have been aware of the generally agreed practice for directors to negotiate cost reimbursement of an NBIO. Now the question, can Ms. Witten confirm that the independent directors did not negotiate cost reimbursement for any of the non-binding indicative offers, and we don't know how many we had, and that they agreed at the time that this action was in the best interests of the company?
I guess you're putting that question to me, Mike, and a bit of commentary in there too. One comment about my intended retirement. Today was supposed to be my retirement day, but we were facing breaching NZX listing rules by not having two independent directors on the Board. That would have had impact on our company's insurances, on our banking arrangements. I've agreed to stay on temporarily to help build the new Board back up. At the same time, we needed to appoint a second independent director or we would still be in breach. I'm also going to chair the Risk and Audit Committee, which is another requirement of the listing rules. You're welcome, Mike.
In terms of the costs, I think we have talked about this a number of times before, and you rightly say that there is a time in the NBIO process when it is agreed that there is a point when you actually sign an agreement. It is an agreement, not just an offer. At that point, it is a normal practice to negotiate the costs. I think that's what you were saying. Yes?
I suggested we should demand them and give to the cost vendors before you even judging go-by. If the offer was said no, they're not genuine.
Yes, I understand what you're saying. You're saying that, just so I'll repeat it because he's not on microphone, that the company should have, or the director should have, negotiated cost reimbursement from the point that an offer was put to the company. It's actually not normal practice to do it then. I understand that. These are very large US companies that do require us to follow usual practice. The cost base, if you look at, I don't know if any of you followed the recent Manawa takeover. Both of those companies, this is just a New Zealand transaction, had costs in excess of NZD 4 million each for a New Zealand negotiated takeover. The costs that you're talking about involved, I don't think I can say the number, but there were a number of interested parties.
As you know, those bidders withdrew, and we've covered this quite extensively in the media so that you can understand why those bids didn't go ahead. They were interested in us. We were interested in engaging with them. We negotiated with them and got a long way down the track. It ended with the geopolitical issues and the risks that US companies see with the different customers, etc., that we have. Those things have been in play for a long time. We've now worked it out.
Do you agree that you should have tried to cover yourself before you proceeded with the negotiation?
No, I don't believe that's in the best interests of shareholders to make a bidder go away if we weren't to agree that. The best interests of shareholders is actually to negotiate.
If he was an interested bidder, why would he go away? Because you asked for reimbursement and costs in the event of a failure, especially a massive one like that was looking at us.
Because it's not normal practice for them either. They invest in...
Why can't we be abnormal and look after the shareholders?
I believe I've answered your question, Mike.
Thank you.
Thank you.
Do we have additional questions for any of the Board members? Yes, right here in the middle. We have a mic there.
Thank you. Winston Marsh, shareholder. The dissension in the Board, which has emerged, has troubled many shareholders. It seems very clouded as to what lay behind it. In terms of the major minor shareholder, I have a question for Mr. Chen. I hope I've pronounced your name correctly. Please excuse if I have not. You say that you were not prepared to support the candidates of Mark Bregman and the two others. You were not clear as to why. Could you indicate whether you are opposed to independent directors? If you are in support of independent directors, what reasons did you have against the three candidates that were put forward?
[Foreign language].
My name is Roger Yao. I'm going to speak for Mr. Chen on behalf of him regarding the questions that you have. I think some of those questions that you asked are still quite sensitive at this time. It's a boardroom issue. I'm not sure if it's suitable for me to comment here. As far as your first question, I'm not quite sure what you said about unclear of... If you could please repeat that question, the first question, what do you mean unclear about our...
Like in any specificity of the reasons why Mr. Chen was not prepared to support the candidacy, I point out that we have still one candidate standing, if I can put it that way. I think the shareholders should be entitled to know the reasons why he is not prepared to support even that one candidate, let alone the other two that the company has taken time to put forward initially.
First of all, we believe in supporting Brent as the Chair. I don't know if that answers part of your questions. As far as not supporting the three independents, we have some reasons, but we believe Brent has more suitable capability in terms of supporting him as the Chair. That's the reason.
Are you in support of independent directors? That was...
Yes, we are in support of qualified independent directors.
I don't know whether my mic's live, but I'd love to comment as an Independent D irector who's been on the Board for just under five months. I've taken my responsibilities of looking after all shareholders, large and small, incredibly seriously. In that time, I've received feedback from both Siward and Brent about the positive impact I was having in my time on the Board. I think shareholders, and particularly smaller shareholders who aren't in this aligned group who are trying to affect Board changes here, need to be very clear that these Board changes have no substance in the performance of individual Board members. I'll comment on my other two independent colleagues, one of whom Dr. Elizabeth Jacobs announced her withdrawal with me, and Dr. Mark Bregman here. Rakon will very much struggle to find better qualified commercial directors who understand the industry than those two candidates.
From where I'm sitting, it's very clear there's no performance basis to these changes, and there's no capability substance to these changes. This is entirely due to the fact that Independent Directors felt sometime in May that they were unable to support a request to directly appoint Brent Robinson as Chair of the Board. We have good reasons for that. We can't elaborate on all those reasons, but we're confident that we've done the right professional thing in the circumstances. I just want that to be very clear to all small shareholders in the room today.
Let us go back to what Brent Robinson has said, and would you agree or disagree with it when he says it needs to have a mix of people prepared to work together to advance the overall strategic direction of the company, and he has lost confidence in the current independent directors? Can you throw any further light on that? Because I am vexed as to...
As I mentioned before, I am completely confident, and I'd stake my professional reputation on the fact there is no material misalignment around company strategy. There are no serious disputes about company performance. Independent directors have always appropriately factored in Brent's view. We're very respectful of Brent's legacy position in this company and the role that he has played in building up the technology of this company. Some of us are very focused on the fact that I think a lot of shareholders would be focused on, which is the ability of this company to continue to deliver world-leading tech has never translated into appropriate value for shareholders. That's what some of your departing directors around the table here were very focused on trying to change and trying to lean into. This is purely about the chair decision, nothing else in my view.
Any other hypothesis that it is, you know, I think is mischievous.
I would also add that I think that throughout my tenure and the other independents, all of us have been on the Board. I came in October, so it's also not that long. I think we've had vigorous debate within the Board, which is the purpose of having diverse views in the Board. I don't think it's ever been something where we couldn't reach some consensus agreement or come to some overall agreement. Sometimes we didn't all agree with every decision. We reached the right direction. I would agree completely with what Jon said, which is everything was going along in the right direction until the chairmanship came up, became open because with the announcement that Lorraine made that she was going to retire. At that point, I became a candidate. Brent wanted to be a candidate. Both were considered.
We put a rigorous process in place, which I went through with external insights as well. Brent refused to participate in that process, but still wanted to be considered. He was still considered by a committee, which I did not participate in. At the end, that committee concluded that I was the best candidate. That's when all of this started to open up to take us out of the Board.
Thank you both, you two gentlemen, for your candidacy. I now have a further question for Mr. Chen. That is, having heard those two gentlemen and your knowledge of the performance of the Board in its discussions, is your reason really for not supporting these candidates being a favor called in by the Robinsons?
[Foreign language]
Thank you for the question. Mr. Chen would like to say that no, the answer is no. It's not a favor. It's a professional decision. We know the industry quite well, and the two gentlemen there, I'm not saying that they're not fit, but we have our reasons making our decisions. Just as Jon earlier said, there are things that probably better not discuss here, but we want to answer your question. We feel that Brent is the right fit to lead this company. The decision is not because Brent made any kind of influence on us. It's our decision. Thank you.
You have some questions down front here on this side?
Thank you. I am a small shareholder, Peter Johns. I'm in support of Brent. I'm in support of the current Board. All this niggling from behind me should stop. The presentation has told the story. Let the Board get on and fulfill the story and carry on and stop this niggling from behind.
Thank you for your comment. Do we have a question here in the front?
Continue.
Yeah.
I guess I'm curious as to the previous question in terms of which Board should get on with it because I think that is the issue that we've got here. Roger, you mentioned on behalf of James Chen that you didn't think it was right to be transparent about your reasons for not supporting the three independent directors. If we consider independence as a key factor for smaller shareholders, minority shareholders who still own 60% of this company approximately, and if we consider Board capability as a key driver in setting the governance culture at Rakon to create that future growth and leverage that strategic platform that has been created, what are the directors and what capabilities does Brent have as an individual that in combination Dr. Mark Bregman, Dr. Elizabeth Jacobs, and Jon Raby don't have?
Why is Brent as an individual so much better than the three people who have got some incredible background experience and functional knowledge of the various sectors that Rakon is involved with?
[Foreign language]
Thank you. That's a lot of good questions. Let me first answer. I don't think I know Mark or Jon well enough, but we have been working with Brent for quite a long time, and he has been the expert in this industry. I don't know how you want me to benchmark or compare for you. I don't think this is the right place. Brent is the expert, and I think that's just a very given fact. It is our professional opinion because we have been in the industry long enough. Yes.
Your professional opinion, you've just said it, is based on your extensive knowledge of Brent and his capabilities, yes, and no knowledge of the other three. You've just said that.
They are not the expert in this industry.
I'm sorry. How can that be a professional opinion when it comes to assessing the right governance that should be in play at Rakon?
You're now asking about a governance issue, right? This is not a question about what we think of his capability.
No, this is very related to governance. What are the right skills to govern this company going forward? How does it intersect with the executive, with the leadership, and the management at Rakon?
We do believe Brent has the governance capability as well. He has been around for quite some time.
One person is better than the three.
No, I'm not saying that. You're asking a question, asking me to decide something that I can't just sit here and explain to you. How is Brent better than all three of them? I'm not saying that.
You're voting in that way, Roger?
No, that's how you asked me to give you our decision. That's our decision.
Right.
I'm giving you a decision, an answer to how we're voting and how we're supporting.
I'm just reiterating what you have said. You have answered that question by saying you have extensive knowledge of Brent 's capabilities, yes, and no knowledge of the other three.
Not enough knowledge.
Right. That hardly seems like the sound basis upon which to make a voting decision for the governance of a company like Rakon.
I'm not sure if that's...
One other point is it's not the three independents instead of Brent. It's in addition. We'd have to take away from Brent to reduce his capacity.
I think I'm reiterating a questioning theme that has already been raised by others in this room in the sense that independence does matter and Board capability and composition does matter. It's how the various components of the Board collaborate together for the best outcomes for all shareholders, not one shareholder, not three shareholders, but all 4,300 of them.
I'm probably a person who doesn't have skin in the game here. I was part of the Nominations Committee, which under the NZX guidance and what happens globally is you have what's called a Nominations Committee, and it's usually run by independent directors and those not involved in being up for election, etc. All of the directors that we had up for election today were all selected and interviewed by Brent and by Siward as well. They were part of that selection process of looking at the skills and capabilities and what do we need on this Board. There was a really collaborative engagement process, not just only the independents looking at who is appropriate, but both of the non-independents as well were fully involved. These people were selected and put on the Board with the endorsement of the entire Board.
Thank you, Lorraine. I think, like the other shareholder expressed previously, I guess we have a concern that what is going on will eventually form a distraction for the company and its management and the execution of its strategy. In a perfect world, we would love this to be resolved as quickly as possible. We'd love it to be resolved with regards to principles of director independence and Board capability and the best interests of all shareholders.
I'm going to be part of the new Board now. I'd just like to assure people that I will be trying to work really constructively with Brent and Siward and our new Director Peter Baines, to put together the next Board. They will choose who it's appropriate that that new Board chooses, who will be then the next Chair of Rakon Limited.
Thank you, Lorraine.
Thank you. Do we have further questions on the floor? I don't see any online. Okay, let's now move on to the resolutions before the meeting. These were notified in the Notice of Meeting dated August 4 and the addendum to the Notice of Meeting dated August 7th. Explanatory notes have been provided. Voting on each resolution will be by way of a poll. Only shareholders, proxy voters, or corporate representatives of a shareholder may vote in today's resolution. For online shareholders, please cast your vote under the vote tab of the meeting platform. For those in the room, please complete your voting form. Now, prior to the election, these resolutions being put before you, as you know, through the update on the 7th, we had some changes. Jon Raby and Dr. Elizabeth Jacobs had decided to withdraw from their election.
I stayed on because at the time I felt it was very important not to abandon the company and leave it in breach of the NZX rules at that moment. I have stayed on and worked with the Board. Since yesterday, we have made an appointment of an additional external Independent Director, Peter Baines, who Lorraine mentioned. We also heard from Lorraine that she was willing to extend her tenure as the Board Chair. She had served in that role before, so that was very natural. She is capable and has also offered to be the Chair of the RAC , another requirement to be in compliance with the NZX listing rules. With all of that in mind, I have decided to withdraw my standing for election. There is nothing to be gained by it, given that the large voting bloc has been very clear about their intent.
I am not going to stand, which means that while we had six ordinary resolutions, we now have five. The first resolution, number one, which was to be a voting on my election, is no longer relevant. We will move directly to resolution four in regard to the reelection of directors in accordance with the NZX listing rule 2.7.1. Please note that resolutions one, two, and three, as they appeared in the original Notice of Meeting, will not be put to a vote, as I mentioned. Directors Dr. Elizabeth Jacobs, Jon Raby, and I have decided not to stand for election. We will step down from the Board at the end of this meeting, which means until the end of this meeting, we are still actively on the Board and I will continue to Chair the meeting until the end.
Any votes cast for those resolutions, one, two, and three will not be counted. Resolution five relates to the fixing of the remuneration for auditors, and resolutions six, seven, and eight are resolutions of which you were notified in the addendum to the notice of meeting. They were proposed by a shareholder on behalf of the New Zealand Shareholders Association. As previously indicated, where the Chair or other individual directors hold discretionary proxies on behalf of the shareholders, their voting intentions are that all directors, including the Chair, intend to vote any of the discretionary proxies they have in favor of resolutions four and five and against resolution seven. The independent directors, including the Chair, intend to vote any discretionary proxies in favor of resolutions one, six, and seven.
The non-independent directors, Brent and Zhongmeng Tseng, intend to vote any discretionary proxies they hold against resolutions one, which is no longer relevant, six, and seven. We'll move directly to resolution four. As noted previously, Jon, Elizabeth, and now myself will not stand, and therefore, the first three resolutions will not be put to the meeting. Resolution four is for the reelection of Brent Robinson. Brent has been with Rakon for more than 44 years. He has extensive technical and industry knowledge. Brent has been a director of Rakon since its listing in the NZX in 2006. He was last reelected to the Board in August of 2022, and so he's up for reelection today. The Board believes that as a large and long-standing shareholder, it is appropriate for Brent to have a place on the Board and supports his reelection as a non-independent director.
I'll ask Brent to stand up and say a few words.
Thank you, Mark. Good morning, and thank you for all being here. For almost 40 years, I've helped build Rakon from a New Zealand innovator into a global technology leader. Our products aren't theory. They sit inside satellites, defense, and mission-critical systems where precision matters. Yesterday's wins won't buy tomorrow. The world is moving fast. Three growth waves are here: AI, space, and defense. These are not buzzwords. They're long-term cycles. Rakon is well positioned to seize them, but only if governance stops holding them back. Here's the hard truth. I believe this Board has slowed us down. Too many meetings, millions and millions of dollars wasted on consultants and lawyers. When I identified a serious buyer willing to pay nearly 3x the share price, an NBIO was met with unacceptable delays from our independent directors, causing huge frustration for all involved.
This prompted a letter from myself to independent directors that was endorsed by other major shareholders, requesting they engage in a timely manner. I was then almost completely sidelined and removed from the DD process, where the deal was eventually lost. Voting for me endorses a clear mandate to reset the Board and focus on execution. I support strong independence, but they must be shareholder-chosen, not parachuted in behind closed doors. Earlier this year, Lorraine announced she would retire. Yesterday, she reversed this decision and together with the independent directors appointed a new director with almost no directorship experience living in Queensland, Australia. This was done with virtually no discussion with the non-independent directors. That is not transparency. It is entrenchment. As shareholders, you deserve better. That is why I will call for an extraordinary meeting to be held within 30 days.
Shareholders, not insiders, should decide openly and fairly on the new independent directors. It is my hope that Lorraine and the Board members will respect this request and move promptly within this period to hold a meeting. It would be my intention to step up as interim Chair, to steady the ship, cut waste, free executives to focus on the business, and prepare the ground for a truly independent Board that is future-focused. Rakon has the technology. The markets are there. What's missing is governance that matches the opportunity. Let's reset the Board, seat directors who understand the company's unique position, and get back to building all shareholder value. Thank you.
Thank you, Brent. I'd like to clarify one factor, which is that the three independent directors, which they are not supporting, none of us were on the Board until or selected for the Board until after the NBIOs had been ended. Those ended in June 2024. I was appointed in October 2024. You were appointed in.
I was appointed in March.
End of March. All of the three independent directors have nothing to do with any possibility that we were delaying the processing of those. I just want to be clear about the facts.
The expenditure that was occurred at the time.
That expenditure.
All those objections. The other thing I would say to shareholders is I have spoken to people who have been involved in that process, including probably the most experienced legal professional in the New Zealand takeover arena, who was actively engaged in this process. He has never seen a counterparty, or one of the two NBIO counterparties that I think we're referring to, that has such a rigorous list of due diligence requirements. He has never in his entire career seen anything equivalent to it. Those are the things that add costs to these processes. It's not independent directors delaying processes. It's the very demanding requirements of these very large US-based counterparties that determine those outcomes and those very high costs.
Are there any questions regarding this resolution, Oliver?
Thank you, Brent. When you say you want independent directors who are future-focused in terms of unlocking the value of Rakon, do you actually mean independent directors that agree with you? Because you will have now burnt through, I've lost count, I'm sorry, six, seven, seven independent directors in the last 12 months. That doesn't really speak to a great track record in terms of encouraging diversity of thought, experience, people who have constructive challenges to Rakon's strategy and governance approach. What do you mean by independent directors who are future-focused? Do they need to agree with you 100% to be appointed as directors?
To start with the first accusation that I've burned through directors, those directors left for personal reasons that I won't disclose, but they were very serious personal reasons why they left. It had nothing to do with the Board. They were quite happy on the Board, but left for personal reasons. The directors that we replaced them with, yes, I initially was very happy to appoint them as directors, but it's not until you work with people that you actually get a better feeling for their mindset and how they worked. I believe that the amount of governance that has been put on the company has been boiling the ocean over procedural issues, so many meetings. My colleague Sinan here, who I've worked with for over 20 years, and I minted him to the position that he is, hasn't been able to get out and see customers.
In the last three years, he's seen one customer when he was visiting India. That is just not right. He's just bogged down with procedures and Board papers and white papers that they ask us to produce. My idea is to cut that down to a concise Board that can give oxygen to executives and get them out and building our company. That's why I'm doing this, and I'm very passionate about it, and I've been doing it for a long time.
Thanks, Brent. When you wrote the letter you talked about in your presentation to the Board, was that as a director or as a shareholder? I mean, are you at risk here of conflating your position as a Non-Independent Director with your position as a shareholder?
I'm a Non-Independent Director.
Yes, but in what capacity did you write that letter? As a shareholder or as a director?
As a director.
Okay. In terms of calling for a special general meeting, potentially we could yet see further action and resolutions proposing the removal of Lorraine Witten and Peter Baines. Does that again indicate your inability to work with a wide range of people and to only work with people who support your own interests?
I have not even met Peter Baines or had a discussion with him. He was parachuted in at the last minute to, I guess, get around what I proposed on the table yesterday as well to two very good directors that have impeccable records, that are completely independent, that would also have kept us from breaching any NZX rules that were voted down. I don't know how to answer that, Oliver, because I haven't worked with that director. I know Lorraine wants to retire, so I guess that will happen after she helps the other directors build a Board. Let's see how that goes. From what I've seen, I think it's in the shareholders' interests that we look for directors that are like-minded, that are going to be focused on the company, the scorecard of how we actually are running the company, what matters, what's moving the dial.
Those aren't the things that have been discussed in the Board meeting. I know that's the sort of thing that's upset our friends from Taiwan. They've said to me, "What sort of Board meetings are these? We don't discuss the company. It's things about ESG and just not looking at the right things that are actually going to move the dial." We haven't had a balanced scorecard come to the Board meeting until very recently after me pleading with the Board and the executives to give us something that actually shows us what's actually moving the dial that's going to give us the return that we're all looking for.
Right. You're reiterating that you want to run the Board your way. Thanks for that. Just in terms of those independent director nominations that you have made, are they supported solely by you or are they supported by... How will any future nominations be supported by an independent group of directors?
Yes, votes from shareholders.
He has just announced a special general meeting. I think it's absolutely the right place.
He has not announced one, so I think that's fair.
The shareholder outlet leaders of Board supports Brent. A guy like me just...
Yeah, no, I'm very happy to create trouble, mate. It's all good.
Excuse me, excuse me. Please sit down. Is that directed at me?
That's fine. Are you happy stopping now? Oliver, I think you've made your point, which is a good point. There was a mention by Brent that he wants to see how things time out, but have a special meeting in 30 days, which doesn't sound like the Board will be reconstructed in that time. There is some inconsistency I'm confused about. Maybe others are as well. It is true that he submitted a candidate list yesterday morning at 8:47 A.M. for our 9:00 A.M. Board meeting, which we've not seen at all.
The thing I will say about the candidate that we did elect, Peter Baines, is he went through a long and involved process of background review, interviews, met with each of us that are on the Board that are on the independent nominated committee, and was chosen among a group of other candidates that were brought forward through our selection process over a period of months. Now, it's true that Siward and Brent didn't have enough time to get to know him, but apparently six months is not enough time. I don't know how you can reset the Board in a short time if it takes Mr. Siward or Siward executives more than six months to get to know one of the Board members, let alone a candidate. I'll leave it at that, and we should move ahead.
Can I just make one? I'd like to make one more point because there's been a strong hypothesis put on the table that this company is overgoverned. I'll state my professional reputation on this. Rakon is not overgoverned. Brent and I agree, as does the Board, and the Board is already having conversations about reducing the number of meetings. We're completely in agreement that there are too many meetings. We need to reduce the number of meetings. From a governance perspective, this company is not overgoverned. In fact, as the departing Chair of the Audit and Risk Committee, I can tell shareholders the company has a lot of work to do in strengthening its risk and financial governance frameworks. Mark and his team have been working with them for the last five months to put in place exactly some of those remediating actions.
To the contrary of what's been presented to shareholders here, this company has further work to do strengthening governance in a couple of key areas.
I'd like to respond too, if I may. I'm the outgoing Chair, and obviously some of that criticism is pointed at my leadership. I've had 30 years in different governance roles, at least 30 different boards, private, public, small, large, and in my personal opinion as well, we are not overgoverned. In the last couple of years, we have had issues that the Board has definitely had to weigh into. A lot of them have been around export controls, and we've needed regulatory advice on that. Rather than leaving it only to management, there has been a role for the Board to be involved. With the multiple NBIOs that have come in, we've also had to have a lot of meetings. If you look at our annual report, there's been 48 meetings I have attended in this last year, not because of them driven by the Board or the governance.
It's been driven by the issues that are before the company. It's appropriate that we get involved when it's things like NBIOs or regulatory matters such as the one we're trying to get out of the way so that we can actually be available to be purchased. There's a number of issues there that we have had to weigh into.
I would also like to put on the table that I have only a desire to be Chairman to reset the Board, not to try and run the company, Oliver. That is the wrong assertion. I'm for independence. If successful in the special meeting, I may be interim Chairman, and I would be definitely appointing three independent directors to make a majority of independents, and one of them would be Chair. That is my intention. Your assertion that I'm trying to control the Board is utter rot.
This might be a good time to move on to the next, hopefully less controversial, resolution. This is resolution number five to authorize the directors to fix the fees.
What's that?
Do we have one more question here? I'm sorry. I apologize.
Sorry, Mr. Chair, do you need another shareholder? Has the Board ever considered flying our shareholders to the moon by taking this company off the NZX and privatizing it?
That's a good question. I haven't been on the Board to know whether the Board has ever considered that. We've not had a specific discussion of that since I've been on the Board. You've been on the Board longer, Lorraine. Is that?
I'm happy for Brent to answer that.
Brent has been here from the beginning, so.
Yes, I've been approached by private equity firms that would like to privatize Rakon, but it's a difficult thing. I think the path that we're on with the NZX has been very difficult. To me, it's a very difficult market for a company like Rakon to operate on because we are in a volatile market and we have to invest a lot into R&D. I think in the long game, we will win. We will grow this company and shareholders will get their value. I think the fact that we've been approached by global multi-billion dollar companies, corporations that want to buy Rakon for its technology and not shut it down and pull it out of New Zealand, but actually grow and invest in New Zealand speaks for itself that we do have value here. Unfortunately, it hasn't been recognized by the NZX.
I'm not sure that PEs is the right model either that come in and take us private. I've certainly looked at it and tried to work with various teams from Australia and the U.S. over the years. On balance, I thought it would be better to hold our line, grow our business, double down on R&D, come out with world-leading products, and visualize what's going to be next. Like these markets that we're in, AI, space, and defense, they are long cycles. You need to look out five years at least that far with your product offering and your portfolio. You need to invest for these long cycles. That means that there's not instant putting returns. It takes time. We're still working on that. We've had our ups and downs. We were the first ones to enable mobile phones to have GPS in it. We were the first.
We were getting NZD 5.50 a unit from Motorola when that happened. We thought we needed to go to China to compete in that market because we knew that we were up against the global giants that were the incumbents holding that cellular phone market. It was a big risk. We had a go. We built a world-class fab in China. I knew it was a big risk. I convinced the Board to raise further capital and buy a company, C-MAC, in Europe as a hedge against what we were doing in the cellular phone market. In fact, that's the business that we ended up with today. The Japanese competitors that we were up against used their balance sheet and sieged us out. We had to pull out. I'm sorry that we wasted shareholders' money having a go at that.
We did have a go, and we had a damn good go. We had a backup plan, and we're here today, and we're growing this business into what I saw as the next thing that's coming towards us. I know you've heard from Sinan today, and you can see what a quality CEO he is. I believe we're in a great position to capture that, but we're going to have to double down and keep the executives extremely focused. Michael here on the technology, we really need to stay really focused on that and have further investment, I'm sorry, into R&D that's going to give us the long-term returns that we're looking for.
Okay, now I see no more questions. Resolution number five is that the resolution to authorize the directors to fix the fees and expenses of PricewaterhouseCoopers as the company's auditor. Are there any questions on this? If not, we can move on to resolutions six and seven. There are actually three resolutions put to the meeting by a shareholder on behalf of the New Zealand Shareholders Association. An explanatory statement was included in the addendum sent to shareholders. Resolution six is for the Board to determine the constitutional settings required for Rakon to introduce a minority investor voting regime. Resolution seven is that a revised constitution be tabled for consideration by shareholders at the next annual meeting. I'll ask Oliver Mander, CEO of the NZSA, to speak on these resolutions. Oliver.
Thank you, Mark. Thank you to the shareholders today who are exhibiting great patience and listening to everyone involved in this. I'm speaking to all resolutions here, and I'm very happy to take questions as well. New Zealand has a relatively high proportion of companies with a shareholder or a shareholder bloc holding greater than 30% of the shares. It is a risk factor that NZSA encourages investors to be mindful of when considering their investment decisions. Over the past 18 months, there have been multiple situations where the rights of the thousands of minority shareholders have been threatened by the wishes of only a few. While that is relevant to today's discussion, today is about Rakon. Brent Robinson will probably agree with me when I say that this is a company with immense potential.
We've seen that validated in the presentations today from Sinan and in the announcement this morning that starts to show improvements in the company's performance, leveraging that strategy and leveraging the great platform that it has. He may be less willing to agree that the company is starting to show much of this potential under the independent leadership provided by a Board comprising a majority of independent directors and a non-Robinson CEO. Many small investors were likely encouraged by the move towards independence over the last few years. While directors all need to act in the best interests of the company, an independent director is able to ensure that decisions reflect a desirable outcome for all shareholders, regardless of their shareholding size or influence. In short, director independence matters. There is a holy trinity of corporate relationships defined by governance, shareholders, and management.
From what we see, the boundaries of accountability between those groups have become somewhat blurred here at Rakon. Our action is not taken lightly, particularly given the long association of the Robinson family with Rakon. Our proposal to Rakon shareholders reflects the importance that NZSA places on independent governance that benefits all shareholders, but also highlights our desire to encourage a constructive conversation around the governance and leadership culture required to support more effective collaboration between Robinson and minority holders. The minority interest voting regime proposed by NZSA in resolution six is not an attempt to silence the rights of shareholders, but rather an attempt to ensure that the voices of all shareholders are heard. Our proposal does not change how directors are nominated and appointed, nor does it change the primacy of the Board in determining whether a director is considered independent.
It does ensure that when it comes to independence, small shareholders have a voice and a meaningful vote. In practice, this means that the independent will no longer serve under the patronage of a controlling shareholder bloc, as we believe we have seen here at Rakon. Companies with controlling shareholders are more likely to manage a director nominations process carefully, ensuring nominees are acceptable to all shareholders before putting them forward. We believe that the credibility of all directors, whether independent or non-independent, will improve, with an opportunity for better collaboration and ensuring that the mix of capability represented on the Board is the absolute best that it can be. I cannot defend our proposal against the charge that it changes the principle of one share, one vote. Should Rakon choose to adopt a minority interest voting regime, it can rest assured that it is not alone.
Since July 29th, 2024, a minority interest voting regime similar to the NZSA proposal has become a feature of the UK listing rules applicable to all UK listed companies. That is despite the UK having proportionately fewer companies than New Zealand that would trigger the controlling shareholder voting requirement. Nonetheless, NZSA does not have a mortgage on a potential solution. It is why we want the Rakon Board to have the debate and to make the proposal to shareholders next year. If there are other ideas that are out there, let the Rakon Board debate them and put a recommendation to its shareholders. As shareholders, we need to have trust in the individuals representing us on the Board, both that they will act with independence in the interests of all shareholders and that they are truly the best people for the job.
Over the past 12 months, Rakon has lost five independent directors, including two in the last week who have unfortunately withdrawn their nominations. We've now heard, of course, that that has extended to a further independent director this morning. It is difficult to comprehend that every single one of those individuals lacked the skills or any skills to govern effectively at Rakon. I urge you to vote in favor of the NZSA resolutions, not only to enhance your voice, but to offer a clear signal to Brent Robinson that independence and capable governance matters. Thank you. I'll happily take questions.
Sorry.
No, go ahead. Sorry.
I have a question. I'm not sure about the politics that's going on there, but as an independent person I'm talking, I strongly believe that a major shareholder will have way more knowledge about the company than minority shareholders combined here. That's my opinion.
Thank you.
Thank you.
An other shareholder. Oliver, if NZSA feels so strongly about this, what have they done with the NZX to actually make some global changes to all NZX listed companies?
No, thank you, Jenny. That's a very good question. We've proposed this to the NZX as a submission back in 2022. It's as part of the director independence review settings and consultations that the exchange carried out at this time. That wasn't taken forward by the NZX as part of that review, but that doesn't mean that it isn't relevant today. Since then, we've seen about over a dozen companies where there have been issues related to minority shareholder issues. I stress though that today is actually about Rakon. It's not about, we're not trying to extend this as a wider conversation.
You will be following it up, though, won't you, back in 2022 if you feel so strongly about it?
We did. We have followed it up. Last year, there was a situation at PGG Wrightson, which was a Christchurch-based agricultural services company. In that example, a special meeting was proposed and resolutions were put to that meeting. We put a very similar set of proposals at that meeting. It didn't happen though. This is the first time that this has been put to a vote in any New Zealand company.
Other questions for Oliver? No? Do you want to address resolution eight?
No, look, I think we've discussed that already in terms of the resolution to elect Brent to the Board. I've nothing further to add.
Okay, thank you. Thank you very much.
Thank you.
As indicated in the letter that accompanied the notice of meeting, the Board by majority decision believes that strong representation by independent directors is in the best interest of Rakon and all its shareholders. The Board notes that resolution eight, proposing the removal of Brent Robinson, is inconsistent with the Board's continuing support of resolution four, re-electing him to the Board, endorsing our support for his re-election, and therefore the Board does not support Resolution 8 . This concludes our discussion of the resolutions. In a minute, we will close the online voting system. Please ensure you've cast your vote on all the resolutions that have been proposed today. I'll now pause for a couple of minutes just to make sure everyone has a chance to complete their voting. Okay, I think we have had enough time. Voting is now closed. The voting forms will now be collected.
Results of the voting will be posted to the NZX as soon as practicable. Now let's switch to the general business close of the meeting. Is there any other business that shareholders would like to raise? Are there any other questions online? I don't see any. Oh, pardon me. Go ahead. There is one more question here. Mike, there's your microphone. Hold on one second. That microphone is not on, I think.
Mr. Chairman, my name is Mike Daniel. My interests own more than 5% of Rakon 's shares. I wish to move a resolution from the floor relating directly to the election and appointment of directors. The resolution is that this meeting directs the Board to call an extraordinary general meeting of shareholders to be held within 30 days of today's date, for the purpose of considering and voting on the appointment of independent directors to the Board of Rakon Limited.
Thank you very much, Mr. Daniel. I'd just like to clarify whether that's.
One.
I think that's out of order to propose from the floor at this moment. Let me turn to our attorneys.
This is the only motion that has been closed by Mr. Chair.
Could you get a microphone, please, over here?
Told you.
There we go.
Mr. Daniel, thank you. This is not a motion that has been notified to shareholders prior to this meeting, and therefore, it's not business that can be considered at this meeting. You know that there's a process under the Companies Act and under the Rakon Constitution that can be followed for any business of this nature that you and/or your other colleagues intend to proceed with. Thank you.
However, this is advised as a solution for everybody to be able to vote at the same time for a pool of direction.
That can be brought forward through the normal process.
Could you explain the normal process, please, Mr. Chairman?
I'll pass it back to the attorneys to explain the process to bring forward a special meeting request.
If you refer to the Companies Act, I can't sort of just read it off the top of my head.
You're quoting the Companies Act to me. Now you can't tell me about the rest of it.
There is a process, and I'm sure you can, we could look at it after the meeting. In fact, if you want to look at the process, but I'm.
The problem is this matter is urgent. It is in disarray. All the shareholders in here would like it resolved. If we possibly can get it resolved so we can move on, let's do it now. Regardless of what you're saying about the Companies Act and all those silly excuses, we're worried about the shareholders and their investment in Rakon being properly governed.
There are many other shareholders on the Rakon register who are not able to comment or contribute to this decision on this motion that you've put today. Please take my advice and consider it post this meeting and follow the due process.
Thank you very much.
Thank you.
With that, I'd like to close the meeting. Thank all of the shareholders for your continued support and extreme patience with this meeting. We remain committed to moving forward. I think you've heard from our senior executives. They are working diligently to realize the potential of Rakon in delivering value on your investments. I continue, despite not being on the Board after this meeting, to view this as a very significant New Zealand technology company, which I hope can continue to be a global leader, despite the complexities we're going through today. Thank you for your attendance. We welcome those of you at the meeting to join us for refreshments. The management and the Board table is over here. Thank you again for your attendance and focus on the success of Rakon.