For non-executive chairman Richard Kilsby, Telit Communications (TCM) faced a number of "unique challenges" in 2017. In fact, the group faced a series of disastrous events, starting with a decline into the red at the half-year stage and culminating with the departure of former chief executive Oozi Cats. Evidence emerged that an historic indictment had been issued against him in the US – something “knowingly withheld” from the board.
It hasn’t all been bad. Along with a few encouraging updates on product development, we learned in October that the group was considering selling its automotive division, in a process led by Rothschild. This came after a Financial Times report alleged various private equity buyers were considering making offers for a “large part of the business”, and Chinese investment house Run Liang Tai Management upped its stake to become the largest shareholder.
That said, Telit’s latest update was mixed. It has agreed new financial covenants with its main bank, noting these are “more appropriate” following the rationalisation of its product lines and costs. However, Telit also warned on profits for 2017– not wholly unsurprising, but a blow nonetheless.
Management says it has adopted a conservative approach regarding the capitalisation of research and development expenditure. Along with provisions, other adjustments and component shortage issues dampening sales at the end of 2017. That means revenue of $374-$376m is expected, with adjusted cash profits of $20-23m. That's a serious curtailment of the forecasts outlined last September, at $390-400m and $44-48m respectively.
