The rapid proliferation of electronic devices, combined with the rise of wireless communication and industrial automation, is threatening to create something of an electronic Tower of Babel. That threat has fuelled demand for Telit Communications ’s (TCM) machine-to-machine technology, driving a 28 per cent increase in its first-half operating profit.
Telit’s core business is providing cellular, short-range and positioning products in over 80 countries. It has now expanded into broader, higher-margin connectivity and cloud services through its m2mAIR platform, where sales nearly quadrupled to $9.2m (£5.7m) last half. The strategic shift has helped Telit widen its gross margin by 2.4 percentage points since 2012, to 39.5 per cent.
The group continues to invest heavily. It ramped up R&D spending by nearly four-fifths, with a focus on superfast ‘LTE’ wireless technology, new products and its managed services platform. It also bought automotive specialist ATOP, which helps vehicle manufacturers implement ‘smart’ features such as eCall, letting stranded European motorists call for help.
Analysts at Canaccord Genuity expect the EU’s rollout of eCall next year to accelerate Telit’s European business, where sales have lagged behind those in the US. The broker expects full-year pre-tax profits of $23.6m, giving EPS of 18¢, up from $16.6m and 14¢ last year.
| TELIT COMMUNICATIONS (TCM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 270p | MARKET VALUE: | £ 307m | |
| TOUCH: | 270-272p | 12-MONTH HIGH: | 287p | LOW: 101p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 41 | |
| NET ASSET VALUE: | 87¢* | NET DEBT: | 15% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 109 | 5.6 | 5.6 | nil |
| 2014 | 138 | 7.3 | 5.7 | nil |
| % change | +27 | +30 | +2 | - |
*Includes intangible assets of $67m, or 59¢ a share £1=$1.62 | ||||
