It wasn’t exactly Telit Communications’ (TCM) best year. While revenue was flat, the 'internet of things' enabler plunged into the red, albeit as a result of a marked step-up in research and development and restructuring costs. Then there was the untimely departure of former chief executive Oozi Cats, after evidence emerged of an historic indictment against him in the US – a management overhaul quickly ensued.
Various factors beset the top line, including North American mobile network operators taking longer to certify Telit’s Category 1 voice-over long-term evolution modules. Sales for the Americas rose by 7.5 per cent to $160m (£117m), but this was well below management’s expectations, while existing projects also faced delays. Meanwhile, the gross margin fell from 40.3 per cent to 35.1 per cent, after a faster-than-expected shift from mature 2G and 3G technologies to lower-margin 4G technology, while two lossmaking acquisitions (GainSpan and Stollmann) from 2016-17 lifted operating costs.
What’s being done to rectify this situation? Telit aims to cut around 10 per cent of annualised cash operating expenses over 18 months. It is also considering proposals for the potential sale of its automotive division, which grew strongly last year. And, having sought waivers of bank covenant breaches, the company now has new, more appropriate covenants in place.
TELIT COMMUNICATIONS (TCM) | ||||
ORD PRICE: | 161p | MARKET VALUE: | £210m | |
TOUCH: | 160-161p | 12-MONTH HIGH: | 379p | LOW: 100p |
DIVIDEND YIELD: | nil | PE RATIO: | na | |
NET ASSET VALUE: | 95ȼ* | NET DEBT: | 24% |
Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
2013 | 243 | 12.0 | 10.5 | nil |
2014 | 294 | 13.9 | 10.6 | nil |
2015 | 333 | 15.9 | 12.3 | 6.0 |
2016 (restated) | 370 | 17.9 | 13.4 | 7.4 |
2017 | 375 | -56.8 | -41.9 | nil |
% change | +1 | -417 | -413 | - |
Ex-div: | na | |||
Payment: | na | |||
*Includes intangible assets of $110m, or 84ȼ a share. £1 = $1.37 |