In the future, houses, offices and vehicles may be able to communicate via the globally connected 'Internet of Things' (IoT). Telit Communications (TCN) is making this future a reality. In 2016 it connected many everyday objects via the sale of over 22m IoT modules, helping send revenues in its products business up 9 per cent to $335m (£276m). A 100 basis point improvement in margins then boosted operating profit by 12 per cent.
But management believes the second division - IoT services - is where the company's true potential lies. From an investor's point of view that's good news, as revenues from this division are recurring by nature. Telit's IoT Portal provides subscriptions and rate plans, among other services, to everyday objects embedded with IoT hardware. Revenue in this division rose more than a third to $35m in the reported period. But ongoing investment caused operating losses to widen to $10.2m.
The group continues to use its strong balance sheet to acquire new businesses and spent $8m on complimentary company GainSpan in February this year. But broker Canaccord Genuity has trimmed its forecasts assuming the inclusion of the loss-making business, and now expects earnings per share for the year to December 2017 of 23ȼ, flat on last year.
TELIT COMMUNICATIONS (TCM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 328p | MARKET VALUE: | £380m | |
| TOUCH: | 327-329p | 12-MONTH HIGH: | 360p | LOW: 180p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 104ȼ* | NET DEBT: | 15% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
|---|---|---|---|---|
| 2012 | 207 | 4.9 | 3.8 | nil |
| 2013 | 243 | 12.0 | 10.5 | nil |
| 2014 | 294 | 13.9 | 10.6 | nil |
| 2015 | 333 | 15.9 | 12.3 | 6.0 |
| 2016 | 370 | 19.1 | 14.4 | 7.4 |
| % change | +11 | +20 | +17 | +23 |
Ex-div: 6 Apr Payment: 5 May *Includes intangible assets of $105m, or 90ȼ a share £1=$1.21 | ||||
