TIDMTCM
RNS Number : 3667G
Telit Communications PLC
17 March 2020
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
Telit Communications PLC
Full year results
London, 17 March 2020 - Telit Communications PLC ("Telit", "the
Group", AIM: TCM), a global enabler of the Internet of Things
(IoT), has published its financial results for the full year ending
31 December 2019.
Paolo Dal Pino, Chief Executive Officer of Telit , commented: "
2019 saw significant improvement in our results thanks to Telit's
positive transformation in recent years. We continued to refocus
our business towards industrial IoT products and solutions as well
as to optimise our operations and cost base. The benefits of these
initiatives are visible in our 2019 performance and will bear
further fruit in the future. The sale of our automotive business in
February was an important milestone in this strategy and following
the disposal we are now in a strong financial position to address
any extraordinary challenges.
Our progress in transforming Telit has also helped prepare the
business for addressing the COVID-19 situation. Our number one
priority is the safety of our employees and we have implemented
remote working initiatives to allow our team to maintain service
levels while minimising risks. Our year to date trading has not
been materially affected in terms of customer demand, while supply
chain constraints experienced early in the quarter at our
electronics manufacturing partner in China are being resolved
rapidly. Demand from customers is in line with our expectations at
this stage, but we cannot estimate how long the crisis around
Covid-19 will last or what impact it will have on the market. This
could affect future demand from customers. We are monitoring the
situation closely and are taking all necessary actions to minimise
the impact on our full year targets of any supply chain pressures
or changes in customer demand.
Our drive to become a leading end-to-end IoT provider has been
and will continue to be powered by key developments such as our
award-winning software suite oneEDGE, which enables enterprises to
successfully execute their digital transformation. We will continue
to build on the momentum of recent years with the help of our
employees around the world. We remain confident in our ability to
continue to deliver improved operational and financial performance.
"
Financial Highlights(1)
-- Group revenues, excluding automotive business revenues, (sold
in February 2019), up by 8. 3 % to $382.8 million (2018: $35 3.4
million)
o Total Group revenues, including two months' contribution from
the automotive business, were $392.5 million (2018: $427.5 million,
including full year revenue from automotive business)
o IoT Cloud and connectivity revenues up by 20.2% to $41.0
million (2018: $34.1 million), driven by a strong performance of
both the connectivity and the IoT platforms businesses
-- Adjusted EBITDA up 26.9% to $38.2 million (2018: $30.1
million), with $15.3 million of R&D capitalisation (2018: $25.3
million)
-- Operating profit (EBIT) of $63. 6 million includes $54.5
million related to the capital gain from the sale of the automotive
business(2) (2018: operating loss $33.4 million). Adjusted EBIT of
$16 . 9 million (2018: $2.3 million).
-- Profit before tax of $59 . 9 million (2018: loss $39.8
million). Adjusted profit before tax $ 13 . 2 million (2018: loss
$4.1 million).
-- Basic earnings per share of 3 6 . 0 cents (2018: loss per
share 27.9 cents). Adjusted earnings per share
of 12.5 cents (2018: loss per share 3.8 cents).
-- Profit in cash(3) of $11.7 million (2018: loss $3.6 million),
substantial improvement of $15.3 million in 2019 reflecting the
focus on cash generation
-- Net cash at 31 December 2019 of $48.2 million (31 December 2018: Net debt of $34.0 million)
-- Cash flow generated from operating activities, before
movement in working capital of $34.6 million (2018: $14.8
million)
Operational Highlights
-- Successful completion of the sale of the automotive business,
including finalisation of the working capital adjustment
-- Implementation of cost optimisation plan with full effect to be realised in 2020
-- Execution of first live 5G testing for industrial grade 5G product
-- Further investment in OneEdge, integrated hardware and
services offering designed to enable enterprises to manage IoT
integration and scalability
-- Introduction of new Low Power Wide Area (LPWA) cellular
modules based on Qualcomm(R) 9205, ME910G1 and ME310G1
-- Extension of SimWISE, embedded sim technology into Telit's 2G, LTE-M and NB-IoT modules
-- New production agreement with a tier 1 contract manufacturer
in Vietnam with mass production expected to start in the second
quarter of 2020
1 For the definition of 'Adjusted' figures and reconciliation
from IFRS financial results to adjusted
financial results please refer to Note 4
2 Please refer to Note 6
3 Profit (loss) in cash defined as Adj. EBITDA less
capitalisation of internally generated assets and less acquisition
of tangible and intangible assets net of proceeds from disposal of
assets .
Enquiries:
Telit Communications PLC Tel: +44 203 289
Paolo Dal Pino, Chief Executive Officer 3831
Yariv Dafna, Finance Director & President
finnCap (Nomad and Broker) Tel: +44 20 7220
Henrik Persson/Giles Rolls (corporate finance) 0500
Tim Redfern / Richard Chambers (ECM)
FinElk Tel: +44 20 7631
8618
Robin Haddrill/ Cornelia Schnepf
About Telit
Telit (AIM: TCM), is a global leader in Internet of Things (IoT)
enablement, with an extensive portfolio of wireless connectivity
modules, platforms and virtual cellular IoT operator services,
empowering hundreds of millions of connected 'things' to date, and
trusted by thousands of direct and indirect customers, globally.
With nearly two decades of IoT innovation experience, Telit
continues to redefine the boundaries of digital business, by
delivering secure, integrated end-to-end IoT solutions for many of
the world's largest brands, including enterprises, OEMs, system
integrators and service providers across all industries, enabling
their pursuit of enterprise digital transformation.
# # #
Copyright (c) 2020 Telit Communications PLC. All rights
reserved. Telit, Telit OneEdge and all associated logos are
trademarks of Telit Communications PLC in the United States and
other countries. Other names used herein may be trademarks of their
respective owners.
Chairman's statement
I am delighted to report on behalf of Telit's Board of Directors
that 2019 was a good year for the Group, in which we delivered a
strong financial and operational performance. Telit's management is
continuing to optimise the Group's strategy and to pursue further
cost reductions. We are confident that we can create long-term
value by exploiting the numerous opportunities we face as a global
leader in the IoT market.
In February 2019, Telit completed the sale of its automotive
business for $105 million, subject to working capital adjustment.
The sale has provided the Group with the financial flexibility to
accelerate the integration of its IoT products and services
businesses. Following the sale, the Group is now focused solely on
the industrial IoT market, the main driver of digital
transformation for enterprises. Telit is committed to maintaining
and growing its leading position in the IoT products market,
increasing the value and differentiation of its products by
leveraging the combination of modules and IoT services and ensuring
the better utilisation of its sales force.
Telit's end-to-end model allows connected devices to become more
efficient and user friendly, with software playing a key role in
simplifying an enterprise's approach to IoT. This integrated
business model enables Telit to leverage its combined offering of
modules, connectivity and IoT platform and portal.
Return of Capital
Following the sale of the automotive business and subsequent
repayment of most of the Company's borrowings and reflecting the
strong financial performance of the business during the year, at 31
December 2019 the Company had net cash of $48.2 million. While
seasonal fluctuations mean the cash position can vary materially
during the course of the year, the Board nevertheless is
considering the possibility of returning cash to shareholders if
market circumstances mean that it is prudent to do so. To give the
Board flexibility in this regard, the Board proposes to seek
approval at the forthcoming Annual General Meeting to be given
authority to make market purchases of the Company's shares for up
to 10% of the outstanding shares or up to $20 million. Subject to
any unforeseen material events, and in particular to the potential
impact Covid-19 may have on Telit's business, the Board intends and
expects to execute the repurchase programme during the balance of
2020. Further details will be announced in due course.
Board
In May 2019, Paolo Dal Pino and I were appointed as the Group's
Chief Executive Officer and Chairman respectively. At the AGM in
June 2019, one director was not re-elected to the Board and in July
another director resigned after moving to Australia. Following
these changes, we strengthened the Board with two new appointments.
In August 2019 Marco Patuano was appointed as an independent
non-executive director and chairman of the Audit Committee and in
October 2019 Anthony Dixon was appointed as an independent
non-executive director. Additionally, Gil Sharon assumed the role
of senior independent non-executive director in August 2019. The
Board now comprises five independent non-executive directors
(including the chairman) and two executive directors.
I am confident the Board as currently constituted has the skills
and experience to strengthen further Telit's corporate governance
and to reinforce its leading position in the global industrial IoT
market.
FCA Investigation
In December 2018, we informed shareholders that the FCA had
expanded the scope of the investigation originally announced on 27
March 2018. The expanded scope is focused on the accuracy of both
Telit's trading update of 25 April 2017 and the reasons given for
the placing announced on 4 May 2017 and completed on 5 May 2017.
The Group has cooperated fully with the FCA in its enquiries to
date and will continue to do so with the objective of bringing this
matter to a conclusion as swiftly as possible.
The Board of Directors of Telit has changed entirely since the
events in question.
People
Most importantly, on behalf of both the Board and our
shareholders, I would like to thank all our employees and managers
worldwide for the commitment and dedication they have continually
demonstrated throughout the year. Their efforts, particularly in a
time of significant change for the Company, are reflected in
Telit's strong performance in 2019 and in our confident outlook for
the future, despite current market uncertainties.
Simon Duffy
Chairman
Chief Executive Officer's statement
I am pleased to report that in 2019 Telit made great progress
towards our strategy of:
-- refocusing the business on industrial IoT products and solutions;
-- investing further in OneEdge, our integrated hardware and
services offering, which was launched this year;
-- appointment of new contract manufacturer outside China to
increase scalability and reduce operational risks;
-- optimising our structure to be more focused on growth,
improved profitability and cash generation;
-- delivering healthy growth with double digit revenue growth for IoT services.
For the full year 2019, we reported significant progress in the
Group's financial performance, with revenue and profitability
growing across segments.
W e saw a slight improvement in our overall gross margin, which
was an important objective, growing to 32.9% in 2019 compared to
2018 (32.6%). Whilst this improvement is mainly due to the
automotive sale, we are focussed on improving this further.
Following the move to a profit in cash in the second half of 2018,
we saw further improvement in the profit in cash in 2019, from a
loss for the full year 2018 of $3.6 million to a profit of $11.7
million.
Since I took on the role of CEO, I further aligned the
management team to the fundamentals of our core business. This
included optimisation of our operational structure, better
integration of our products and services, reshaping our
go-to-market strategy and a focus on improved profitability and
cash generation.
Our renewed emphasis on the core business of industrial IoT
products and services was the main reason for the disposal of the
automotive division. The transaction closed at the end of February
2019 and is an important milestone in executing our strategy. It
frees up considerable internal resources, provides significant cash
inflow and the financial flexibility to accelerate the integration
of our hardware products and IoT services and provides additional
financial resources to expand our supply chain and direct
purchasing plans.
Strategy
Telit is a key player in the industrial IoT market and has
already become a leading end-to-end IoT provider enabling
enterprises to successfully execute their digital
transformation.
We are focused on products and connected devices that help us
develop and maintain our leading position in the IoT market and are
increasingly expanding into integrated and value-added software and
services.
We believe in end-to-end solutions: connected devices must
become more efficient and user friendly, with software playing a
key role in simplifying an enterprise's approach to IoT. Our
integrated business approach enables us to focus on synergies,
leveraging our combined offering of modules (cellular and short
range), the IoT connectivity and the IoT platform and portal.
We have identified the industrial IoT market as the main driver
of the digital transformation for enterprises. We are committed to
maintaining and growing our leading position in the IoT products
market and increasing the value and differentiation of our
products.
The digital transformation of public and private enterprises
globally, in which everything becomes connected, presents a
significant opportunity to us. Enterprises are increasingly
realising the benefits of collecting the right information and
processing it into actionable data that can be transmitted and
acted upon. Efficient and intelligent data processing allows
companies to solve both legacy issues and ones they may not have
thought of before.
Telit is at the forefront of this digital transformation,
providing the critical ingredients to fulfil the need for real time
data from the physical world. These include the following
components:
-- IoT Products . A diversified portfolio of modules that allow
"things" to be connected using the best available and most suitable
technology (Cellular, GNSS, Wi-Fi and BT/BLE) for the applications
being developed. Our products provide a significant reduction in
time-to-market and total cost of ownership for customers. The Group
markets its IoT products to a broad range of market segments
including asset tracking, health care, security, telematics, point
of sale, wearables, telemetry, industry, energy and smart metering.
In order to cater to such diverse industries, Telit continues to
develop a wide range of cellular products from low bandwidth 2G and
NB-IoT to high category LTE and 5G modules.
-- IoT Connectivity services . These allow scaling and global
deployments of customers' IoT solutions with a single point of
contact. We deliver the ease of a single bill and dedicated 24/7
IoT support services at competitive rates, without the need for
in-house experts, mapping and contracting separately with multiple
global MNOs. The Group continues to invest in and develop its IoT
connectivity business, which covers all customer connectivity needs
and provides a recurring revenue stream for Telit. We expect an
increase in the number of customers adding connectivity services
with the integration of SimWISE into more of our products.
-- IoT Platform services. Telit's IoT platform is an industrial
grade suite of software that provides device management,
connectivity management, and application enablement, which allows
for the creation and management of IoT applications, from
standalone applications such as metering and asset tracking to more
robust Industry 4.0 / Industrial IoT (IIoT) and factory automation
solutions. The platform is designed to enable customers to manage
their IoT deployments through a single IoT portal which facilitates
interaction with MNOs, dash boarding tools, security and
administration as well as tying in with our modules in the field.
The portal is a significant tool to manage any IoT deployment
efficiently, save costs, be flexible and solve issues remotely. We
expect to increase the attach rate of services sold to our
product's customer with our OneEdge solutions.
These three components allow Telit to enable fast deployment of
IoT solutions with complete life cycle management (long and
short-range connectivity devices, global data plans and IoT
platform), both in the traditional IoT verticals such as asset
tracking, logistics, remote industrial monitoring, automated
utility meter reading, telematics, mobile health devices, and for
the fast-growing enterprise market.
Operational overview
I n February 2019 we completed the sale of our automotive
business, including finalising the working capital adjustment upon
completion and as previously described. Following the closing of
the sale, Telit's financial debts mainly consists of governmental
loans provided to the Group's Italian subsidiary.
The disposal of the automotive business saw the Group's
subsidiary in Belgium and its wholly owned subsidiary in France,
being sold, together with three newly incorporated subsidiaries in
Germany, Israel and Korea as part of the reorganisation. The
automotive business represented approximately 17% of Telit's
revenue in 2018. For further information see Note 6.
In 2019, we also continued our reorganisation and optimisation
programme in order to stabilise our gross margin and improve
overall profitability and cash generation. Our achievements in this
regard include:
-- We further focused on our 4G portfolio, including low
category as well as high category, including a 5G development
programme to complete the high category portfolio. Our first 5G
product which will address the demand for high bandwidth products
including applications like gateway and routers is expected to be
certified in the first quarter of 2020.
-- Our IoT connectivity business continued to grow and improved
profitability highlighting the growing demand for dedicated IoT
connectivity services, and the scalability achieved in this
business. The Group continues to develop more flexible and
cost-effective solutions including investment in MVNO licence and
core network as well as further investment in IoT modules with
iSIM. These investments will allow us to bring to market in 2020,
new connectivity solutions which will enable us to better compete
on global projects with large scale.
-- We completed the reorganisation of our non-cellular business
and closed R&D centres in high cost areas transferring the
knowledge to lower-cost sites such as India, Italy and Korea.
-- The integration of the hardware and services businesses is
progressing well: the launch of OneEdge in 2019 has been a success,
winning five awards to date.
-- We signed an agreement with a tier 1 contract manufacturer in
Vietnam in order to reduce supply chain risks and increase the
overall competitiveness of our product cost.
We are pleased to see the benefits of our cost saving
initiatives coming through in 2019 and future years.
R&D and investment
We continue to invest across our range of products and services,
including the development of our software suite - "oneEDGE" - which
enables solutions for a new generation of Telit cellular LPWA IoT
modules. With integrated, secure, easy-to-use tools, it
dramatically simplifies design, deployment and management of IoT
products and solutions, enabling a leap ahead into the new 5G
super-connected world. Combined with Telit's iSIM solution SimWISE,
these technologies solve long-standing challenges related to
integration, scalability, security and management.
We have developed best in class products for our customers and
will continue to be an innovative global leader for IoT
solutions.
Telit's investments in the last few years include not only the
development of each of the solutions mentioned above but also,
increasingly, the integration of the different components in order
to transform our products and services into a cohesive solution
which is ready to connect and send data. Telit integration is
designed to simplify all aspects of IoT implementation for
customers and save them time and money, reducing risks and speeding
up time to market by simplifying deployment.
Impact of Covid-19 coronavirus
Telit's supply chain includes a several contract manufacturers
that support its production requirements. One of the Group's
suppliers in China resumed partial operations in early February
2020, following the government mandated extended closure for the
Chinese New Year holiday period. The remainder of the Group's
suppliers restarted production fully during February 2020.
Consequently, the Group is currently facing minimal impact to its
production plan but will continue to work with its suppliers and
customers closely to avoid any disruption.
Demand from customers is in line with expectation at this stage,
but we cannot estimate how long the crisis around the Covid-19 will
last and the impact on the market, which could also affect future
demand from customers.
Due to the ongoing Covid-19 situation, Telit has asked some of
its employees work from home as a safety precaution. In the last 2
years, Telit already certified core business operations under the
international standards of ISO 22301 and ISO 27001. As part of the
implementation of these standards, we created and adjusted
technological solutions to support seamless business operations and
allow business as usual. Telit continuously invests in its business
processes and guidelines to minimise risks and maintain service
levels for our customers. To that end, Telit maintains a robust
remote access network architecture to support our staff for remote
working. Telit confirms that these processes worked as intended,
verifying our infrastructure and business continuity standards.
Outlook
The IoT market remains fast growing and dynamic and Telit
remains well positioned to capitalise on growth opportunities in
this market. The Board is fully committed to delivering value and
growth for the business as a leading enabler in the industrial IoT
space.
Building on the progress made over the last two years, and
subject to the wider market disruptions cause by Covid-19, we are
confident that our operational and financial performance in 2020
will continue to improve and we are well positioned to deliver
another year of growing profit and cash. We are clearly mindful of
risks to our business, including those related to COVID-19 that
might affect us in the short term, but our business will benefit
both from the addition of OneEdge and from new offerings within the
cloud & connectivity business. In view of this and seeing the
benefits of the hard work of recent years, the Board is confident
in the Group's prospects for the future.
Paolo Dal Pino
Chief Executive Officer
FINANCE DIRECTOR'S STATEMENT
I am pleased to report that in 2019 Telit achieved significant
improvement in its financial results based on revenue growth, a
reduction in operating costs and the sale of the automotive
business. In 2019 we improved the Group's overall profitability and
efficiency while maintaining our future potential development and
growth.
Financial results 1F
2019 2018 Change Change
%
$M $M $M
Revenues 392.5 427.5 (35.0) (8.2%)
------- ------- ------- --------
Gross profit 129.3 139.2 (9.9) (7.1%)
------- ------- ------- --------
Gross margin 32.9% 32.6%
------- ------- ------- --------
Other operating incomes 3.4 1.9 1.5 78.9%
------- ------- ------- --------
Research and development expenses (46.7) (73.0) (26.3) (36.0%)
------- ------- ------- --------
Selling and marketing expenses (48.2) (59.1) (10.9) (18.4%)
------- ------- ------- --------
General and administrative expenses (25.9) (26.0) (0.1) (0.4%)
------- ------- ------- --------
Exceptional expenses related
to restructuring (1.0) (10.8) (9.8) (90.7%)
------- ------- ------- --------
Other exceptional items 52.7 (5.5) 58.2
------- ------- ------- --------
Adjusted EBITDA 38.2 30.1 8.1 26.9%
------- ------- ------- --------
Profit (Loss) in cash 11.7 (3.6) 15.3
------- ------- ------- --------
Operating income (EBIT) 63.6 (33.4) 97.0
------- ------- ------- --------
Adjusted EBIT 16.9 2.3 14.6 634.8%
------- ------- ------- --------
Profit (Loss) before tax 59.9 (39.8) 99.7
------- ------- ------- --------
Adjusted Profit (loss) before
tax 13.2 (4.1) 17.2
------- ------- ------- --------
Basic earnings (loss) per share
(cents) 36.0 (27.9)
------- ------- ------- --------
Diluted earnings (loss) per
share 35.7 (27.9)
------- ------- ------- --------
Adjusted basic earnings per
share (cents) 12.5 (3.8)
------- ------- ------- --------
Adjusted diluted earnings per
share (cents) 12.4 (3.8)
------- ------- ------- --------
Adjusted EBIT is defined as Earnings Before Interest, Tax, share
based payment expenses, amortisation of acquired intangibles,
impairment of internally generated development assets, other
exceptional items, exceptional expenses related to restructuring
and the profit on disposal of the automotive business. Adjusted
EBITDA is defined as Adjusted EBIT plus depreciation and other
amortisation. Profit/loss in cash is defined as Adjusted EBITDA
less capitalisation of internally generated development assets less
acquisition of tangible and intangible assets net of proceeds from
disposal of assets, less lease payments. Adjusted profit / (loss)
before tax is defined as Profit / (loss) before tax plus share
based payment expenses, amortisation of acquired intangibles, other
exceptional items, exceptional expenses relating to restructuring,
impairment of internally generated assets and the profit on
disposal of the automotive business.
Reconciliation between operational and adjusted operational
results:
2019 reported Exceptional Impairment Share Amortisation 2019
$M items of internally based of intangibles adjusted
$M generated payment acquired $M
assets expenses $M
$M $M
Revenues 392.5 - - - - 392.5
-------------- ------------ --------------- ---------- ---------------- ----------
Gross profit 129.3 - - - - 129.3
-------------- ------------ --------------- ---------- ---------------- ----------
Gross margin 32.9% 32.9%
-------------- ------------ --------------- ---------- ---------------- ----------
Other operating
income 3.4 - - - - 3.4
-------------- ------------ --------------- ---------- ---------------- ----------
Operating ( 115.5
expenses (120.8) - 1.3 2.0 2.0 )
-------------- ------------ --------------- ---------- ---------------- ----------
Exceptional (51. 7
items 51. 7 ) - (0.3) - (0.3)
-------------- ------------ --------------- ---------- ---------------- ----------
Operating
income (EBIT) 63.6 (51.7) 1.3 1.7 2.0 16.9
-------------- ------------ --------------- ---------- ---------------- ----------
Profit before
tax 59.9 (51.7) 1.3 1.7 2.0 13.2
-------------- ------------ --------------- ---------- ---------------- ----------
Revenues
Group revenues, excluding the automotive business sold in
February 2019, increased by 8. 3 % to $382.8 million (2018: $353.4
million), of which cloud and connectivity revenues were $41.0
million (2018: $34.1 million), an increase of 20.2%.
IoT products - revenue growth was driven by double digit growth
in the America and APAC, while EMEA saw a smaller increase in
revenue. We are well positioned to improve revenue growth in EMEA
compared with the last few years based on the growing demand for
LTE products in this region.
IoT services - The 20.2% increase in Cloud and connectivity
revenues is encouraging, and we believe this trend will continue in
the coming years. In the IoT connectivity business, we enjoyed
another year of fast growth boosted by a strong performance in the
US. We also saw faster than expected for revenue growth from IoT
Platforms, resulting from the ramp up of certain projects and
growth of several running projects.
Telit's activities in the IoT services business unit have grown
in recent years and, although revenue results from this business
unit still comprise about 10% of the Group's revenue, it
contributed 19.3% of the gross profit and represents an important
growth engine for the future.
2019 2018
$m $m Change
Americas (1) 194.1 176.1 10. 2 %
------ ------- --------
EMEA (2) 114.2 112. 8 1. 2 %
------ ------- --------
15 . 5
APAC (3) 74. 5 64.5 %
------ ------- --------
Total (excluding automotive) 382.8 35 3.4 8. 3 %
------ ------- --------
Automotive (4) 9.7 74.1 (86.9%)
------ ------- --------
(1) Americas - remains our biggest region with revenues growing
in line with our expectation. The overall demand for LTE products
continued to grow, driven by additional certifications of our CAT-1
and CAT-M1 products and the major US carriers plans to focus
exclusively on LTE. We believe Telit is in a good position to
continue to grow revenue in this market at a higher rate than the
overall growth of the Group.
(2) EMEA- revenues increased slightly and below our
expectations. EMEA continues to be impacted by cellular technology
stagnation but we have started to see growing low category LTE
deployment ramping up and we expect this to improve growth in this
region.
(3) APAC- revenues increased significantly and slightly above
our expectation mainly as a result of a faster deployment of
several projects in the region.
(4) Automotive- In 2019 reflect from 1 January to 27 February
2019.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker
in the Group. The chief operation decision-maker, who is
responsible for allocating resources and assessing performance of
the operating segments and makes strategic decisions, has been
identified as the CEO. Segment performance is evaluated based on
operating profit or loss, as presented below:
2019 Cloud &
Connectivity
IoT Products services Consolidated
------------- -------------- -------------
$M $M $M
------------- -------------- -------------
Revenue
External sales: 351.5 41.0 392.5
============= ============== =============
Result
Gross profit 104.3 25.0 129.3
Gross margin 29.7% 60.9% 32.9%
Segment EBIT 27.2 0.6 27.8
7.7% 1.4%
============= ==============
Unallocated expenses
(1) (18.7)
-------------
Capital Gain (automotive
disposal) 54.5
-------------
Operating profit 63.6
2018 Cloud &
Connectivity
IoT Products services Consolidated
------------- -------------- -------------
$M $M $M
------------- -------------- -------------
Revenue
External sales 393.4 34.1 427.5
============= ============== =============
Result
Gross profit 118.5 20.7 139.2
Gross margin 30.1% 60.6% 32. 6 %
Segment EBIT 7.4 ( 13.9 ) ( 6.5 )
1. 9 % (40.8%)
============= ==============
Unallocated expenses
(1) ( 26.9 )
-------------
( 33.4
Operating loss )
(1) Unallocated expenses principally including general and
administrative expenses such as directors' compensation, salaries
of certain senior executives, professional fees and other expenses
which cannot be directly allocated to one of the segments.
Gross profit and gross margin
Gross profit was $129.3 million (2018: $139.2 million), a
decline of 7.1%, due to the decline in revenue related to the
automotive business. Excluding the automotive business, gross
profit increased by 3.0%.
The Group's gross margin improved slightly to 32.9% (2018:
32.6%). The improvement from 2018 was below our expectations caused
by an increase in the cost of goods sold due to shortage of certain
components which contributed to extra costs, and by an additional
write off of inventory, following the discontinuation of a product
line. Whilst we are expecting LTE product margins to further
improve and cloud and connectivity to grow faster and thereby
improve the overall margin, we expect the future gross margins to
remain in the low thirties.
Operating expenses
-- Gross R&D expenses were as follows:
2019 2018
$m $m
Gross research & development expenses
(1) 50.5 70.9
------- -------
Less -- capitalisation (2) (15.3) (25.3)
------- -------
Add -- amortisation 10.2 17.2
------- -------
Add -- impairment 1.3 10.2
------- -------
Research and development, net 46.7 73.0
------- -------
(1) Gross research and development expenses declined by $20.4
million mainly due to the reduction of R&D resources that
supported the automotive business that left at the completion date
(approximately 50% of the saving) and the remainder is due to the
impact of the implementation of our cost reduction plan.
(2) The amount capitalised in respect of internally generated
development assets decreased by 39.5%. As a percentage of gross
R&D expenses, it decreased from 35.7% in 2018 to 30.3% in 2019.
The amount capitalised declined mainly due to the automotive
divestment which had a higher capitalization rate for the
automotive products. The capitalisation amounts in 2019 related
mainly to the development of high category LTE products (including
5G) and to a new family of CAT-M1 and NB-IoT and the development of
SimWISE and OneEDGE.
-- Selling and marketing expenses decreased by 18.5% to $48.2
million (2018: $59.1 million). The decrease derived from the
divestment of the automotive business (approximately 40% of the
saving) and the realisation of our cost saving plan.
-- General and administrative expenses decreased slightly to
$25.9 million (2018: $26.0 million).
-- Exceptional expenses related to restructuring:
Following the review of the Group's activities, a restructuring
plan was adopted in late 2017, implemented in 2018 and has been
substantially completed in 2019 explaining the decrease in
exceptional expenses related to restructuring from $10.8 million in
2018 to $1.0 million in 2019. In 2019 the costs related mainly to
the closure of a R&D centre in the US and moving of the
knowledge and activities to a lower cost centre.
-- Other exceptional items:
2019 2018
$m $m
------- ------
Integration and transaction costs (1) 1.0 2.8
-------------------------------------------- ------- ------
Legal and other expenses related to FCA
investigation and related matters (2) 0.7 0.9
-------------------------------------------- ------- ------
Legal expenses related to BAMES (3) 0.1 1.3
-------------------------------------------- ------- ------
Other ) 0.1( 0.5
-------------------------------------------- ------- ------
Sub- total 1.7 5.5
-------------------------------------------- ------- ------
Profit on disposal automotive business (4) (54.5) -
-------------------------------------------- ------- ------
Total (52.8) 5.5
-------------------------------------------- ------- ------
(1) Mainly legal and other costs related to the automotive
reorganisation and sale which was signed in 2018 and completed in
February 2019.
(2) Costs related mainly to the ongoing FCA investigation and
related matters the circumstances giving rise to which began in
2017.
(3) Costs related to defending the Group's position in the BAMES
case (in 2018, including the settlement fees of approximately $1
million) .
(4) Profit on disposal of the automotive businesses, see note 6
Finance costs, net
2019 2018
$m $m
Non-cash expenses related to effective rate
interest on preferred loan 1.1 1.2
------ ------
Interest expense on bank loans and overdrafts
(1) 0.8 3.1
------ ------
Bank fees and other bank expenses 1.1 1.2
------ ------
Exchange rate differences, net 0.8 0.4
------ ------
Loss from forward currency contracts (2) 0.4 0.6
------ ------
Interest related to IFRS16 liabilities (3) 0.8 -
------ ------
Interest income (1.2) (0.1)
------ ------
Total 3.8 6.4
------ ------
(1) Interest expenses related to loans and overdrafts decreased
by $2.3 million, due to repayment of HSBC and BHI loans in February
2019.
(2) Due to the uncertainty around the Euro currency, the company
entered into a hedging arrangement to protect the operating costs
denominated in Euro - as the Euro currency against the USD was
lower than expected, the hedging arrangement resulted in a
loss.
(3) According to IFRS 16, the finance cost is charged to profit
or loss over the lease term so as to produce a constant period rate
of interest on the remaining balance of the liability.
Profitability
We measure our profitability based on adjusted figures to
eliminate exceptional items and share based payment charges. The
adjusted EBIT and PBT exclude:
-- a share-based payment charge of $1.7 million (2018: $5.7 million);
-- restructuring costs of $1.0 million (2018: $10.8 million);
-- capital gain of $54.5 million related to the sale of the automotive business;
-- other exceptional expenses of $ 1.7 million (2018: $5.5 million);
-- impairment of capitalised development assets of $1.3 million (2018: $10.2 million); and
-- amortisation of acquired intangible assets of $2.0 million (2018: $3.4 million).
The profit in cash is defined as Adjusted EBITDA less R&D
capitalisation less capital expenditures net of proceeds on
disposal. In 2019 profit in cash was $11.7 million, a significant
improvement over the $3.6 million loss in cash of 2018.
Adjusted EBIT was $16.9 million (2018: $2.3 million). The
operating profit was $63. 6 million (2018: loss of $33.4 million).
Excluding the profit on disposal automotive business, the
improvement in operating profit was $42.5 million mainly driven by
the decrease of $ 37 . 3 million in the operating expenses.
Adjusted EBITDA increased to $38.2 million (2018: $30.1 million)
- considering similar level of R&D capitalisation, the
improvement in adjusted EBITDA would be $18.1 million.
Adjusted profit before tax increased to $13.2 million (2018:
loss of $4.1 million). Net profit for the year was $47.4 million
(2018: loss of $36.4 million). Adjusted net profit for the year was
$16.4 million (2018: loss of $4.9 million).
Adjusted basic earnings per share were 12.5 cents and diluted
earnings per share were 12.4 cents (2018: loss per share 3.8
cents). Basic earnings per share were 36.0 cents and diluted
earnings per share were 35.7 cents (2018: basic and diluted loss
per share was 27.9 cents).
Net cash (debt) and cash flow
The net cash (debt) was comprised as the following:
2019 2018
$m $m
Cash and cash equivalent and deposits 81.9 35.3
------- -------
Less -- working capital borrowing (3.9) (39.2)
------- -------
Less -- preferred and governmental
loans (28.0) (28.1)
------- -------
Less -- Mortgage loan (1.8) (2.0)
------- -------
Net Cash (Debt) 48.2 (34.0)
------- -------
Following the improvement in the overall financial performance,
cash flow provided from operating activities before movements in
working capital was $34.6 million (2018: $14.8 million). The total
cash provided from operating activities was $14.0 million (2018:
$25.8 million), reflecting increased working capital employed in
the TSA and for the set-up of the new manufacturing site, the
impact of direct purchasing of materials which will contribute to
improvement in gross margin.
Cash flow provided from investing activity was $73.4 million
(2018: cash used $33.7 million). The positive cash flow is due to
the cash received from the divestment of the automotive business in
2019, offset by the capital and capitalised development
expenditure.
Cash flow used in financing activity was $39.6 million (2018:
cash from $2.2 million). This is mainly related to the repayment of
the HSBC and Bank Hapoalim loans in February 2019, utilising the
funds received from the sale of the automotive business.
Internally generated development assets, net
As at 31 December 2019, the net amount of internally generated
development assets decreased by $30.3 million to $37.0 million
(2018: $67.3 million). The split of the net assets by technology is
as follows:
Technology Internally generated Internally generated Change (*)
development assets, development assets, year over year
net as at 31 December net as at 31 December
2019 2018
$'m % $'m % $'m %
------------ ----------- ------------ ----------- --------- -------
LTE (4G & ( 48
5G) 25.1 68% 47.9 71% (22.8) %)
------------ ----------- ------------ ----------- --------- -------
( 6.2
3 G 0.4 1% 6.6 10% ) (94%)
------------ ----------- ------------ ----------- --------- -------
Other IoT
Modules 8.5 23% 8.1 12% 0.4 5 %
------------ ----------- ------------ ----------- --------- -------
IoT Services 3.0 8% 4.7 7% (1.7) (36%)
------------ ----------- ------------ ----------- --------- -------
31 December 37.0 100% 67.3 100% (30.3) (45%)
------------ ----------- ------------ ----------- --------- -------
(*) during 2019, we divested as part of the automotive sale
approximately $33.1 million of capitalised R&D assets
The net assets that are in the development phase, before being
amortised, are 35% of the total R&D assets (2018 37%) and
consist of the following products:
Technology Net assets Weighted Net assets Internally generated
started to average in development development
be amortised of remaining process (not assets, net
years to amortised yet) as at 31 December
be amortised 2019
$'m % $'m % $'m %
------- ------- -------------- -------- -------- ----------- ----------
LTE (4G &
5G) 16.6 69% 3.7 8.5 67% 25.1 68%
------- ------- -------------- -------- -------- ----------- ----------
3 G 0.1 0% 3.2 0.3 2% 0.4 1%
------- ------- -------------- -------- -------- ----------- ----------
Other IoT
Modules 4.5 19% 3.8 4.0 31% 8.5 23%
------- ------- -------------- -------- -------- ----------- ----------
IoT Services 3.0 12% 1.4 0.0 0% 3.0 8%
------- ------- -------------- -------- -------- ----------- ----------
31 December
2019 24.2 100% 3.1 12.8 100% 37.0 100%
------- ------- -------------- -------- -------- ----------- ----------
Total equity
The increase in net shareholders' equity from $86.5 million as
at 31 December 2018 to $134.3 million as at 31 December 2019 is
mainly attributed to the improved net profit that include in 2019 a
substantial capital gain from the sale of the automotive
business.
Key Indicators
The Board and management have several indicators to measure
Telit's financial and operational performance . Among all
indicators which management defines, the following are the key
indicators used to measure growth and profitability.
Revenues
2019 $392.5 million ($382.8 excluding automotive)
2018 $427.5 million ($353.4 excluding automotive)
IoT Products Revenues
2019 $351.5 million ($341.8 excluding automotive)
2018 $393.4 million ($319.3 excluding automotive)
Cloud & Connectivity Revenues
2019 $41.0 million
2018 $34.1 million
Gross Profit
2019 $129.3 million
2018 $139.2 million
Adjusted EBITDA
2019 $38.2 million
2018 $30.1 million
Profit (loss) in cash(4)
2019 $11.7 million
2018 ($3.6) million
(4) Profit (loss) in cash defined as Adj. EBITDA less
capitalisation of internally generated assets and less acquisition
of tangible and intangible assets net of proceeds from disposal of
assets
Yariv Dafna
Finance Director & President
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2019 2018
----------
$'000 $'000
------------ ----------
Revenue 392,537 427,483
Cost of sales ( 263 ,277) (288,310)
------------ ----------
Gross profit 129,260 139,173
Other operating income 3,399 1,903
Research and development expenses (46,687) (72,985)
Selling and marketing expenses (48,194) (59,139)
General and administrative expenses (25,849) (25,973)
Exceptional expenses related to restructuring (1,051) (10,842)
Profit on disposal of the automotive business 54,472 -
Other exceptional items (1,728) (5,545)
------------ ----------
Operating profit (loss) 63,622 (33,408)
Operating profit (loss) 63,622 (33,408)
Profit on disposal of the automotive business (54,472) -
Exceptional expenses related to restructuring 1,051 10,842
Other exceptional items 1,728 5,545
Share based payment charges 1,688 5,715
Impairment of internally generated development
assets 1,316 10,238
Amortisation of intangible assets acquired 1,996 3,381
------------ ----------
Adjusted EBIT (*) 16,929 2,313
------------------------------------------------ ------------ ----------
Finance income 1,212 147
Finance costs (4,965) (6,552)
------------ ----------
Profit (loss) before income taxes 59,869 (39,813)
(12, 469
Tax (expense) credit ) 3,453
Net profit (loss) 47, 400 (36,360)
------------ ----------
* Adjusted EBIT is a Company specific non-GAAP measure which
excludes share based payment charges, exceptional expenses related
to restructuring, impairment of internally generated development
assets, other exceptional items amortisation of intangible assets
acquired and the profit on disposal of the automotive business. The
Group's management believes that non-GAAP measures provide useful
information to investors to evaluate operating results and
profitability for financial and operational decision-making
purposes and to provide comparability between the companies in this
sector, as they eliminate non-cash and other exceptional items.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued)
2019 2018
-------- ---------
$'000 $'000
-------- ---------
Net Profit (loss) 47, 400 (36,360)
Other comprehensive loss
Items to be reclassified in subsequent
periods to profit and loss:
Foreign currency translation differences (1,021) (5,352)
Items not to be reclassified in subsequent
periods to profit and loss:
Remeasurement loss on defined benefit
plan, net of tax (49) (4)
-------- ---------
Total other comprehensive loss (1,070) (5,356)
-------- ---------
Total comprehensive income (loss) for
the year 46,330 (41,716)
======== =========
Basic earnings (loss) per share (in USD
cents) 36.0 (27.9)
============ ============
Diluted earnings (loss) per share (in
USD cents) 35.7 (27.9)
============ ============
Basic weighted average number of equity
shares 131,507,097 130,446,810
============ ============
Diluted weighted average number of equity
shares 132,674,790 130,446,810
============ ============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2019 2018
----------- ---------
$'000 $'000
----------- ---------
ASSETS
Non-current assets
Intangible assets 64,052 97,012
Property, plant and
equipment 27,153 23,101
Other long-term assets 1,179 1,456
Deferred tax asset 2, 507 19,043
94, 891 140,612
----------- ---------
Current assets
Inventories 14,966 27,187
Trade receivables 83,351 99,550
Other trade receivables 23,309 -
Income tax receivables 1,494 759
Other current assets 15,332 15,531
Deposits - restricted
cash 646 345
Cash and cash equivalents 81,304 35,006
----------- ---------
220,402 178,378
Total assets 315,293 318,990
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Share capital 2,176 2,165
Share premium account 49,935 49,778
Other reserve (2,746) (2,727)
Translation reserve (19, 070 ) (18,049)
Retained earnings 104 , 054 55,319
Total equity 134,349 86,486
----------- ---------
Non-current liabilities
Long term borrowings 23,999 24,092
Post-employment benefits 2,230 2,771
Deferred tax liabilities 626 1,451
Long term lease liabilities 6,326 -
Provisions 1,952 1,373
35,133 29,687
----------- ---------
Current liabilities
Short-term borrowings 9,782 45,238
Trade payables 95 , 887 120,824
Provisions 1,239 2,254
Income tax payables 2,893 2,836
Short term lease liabilities 3,848 -
Accruals and other
current liabilities 32,162 31,665
----------- ---------
145,811 202,817
----------- ---------
Total equity and liabilities 315,293 318,990
=========== =========
CONSOLIDATED STATEMENT OF CASH FLOW
2019 2018
----------- ---------
$'000 $'000
----------- ---------
CASH FLOWS - OPERATING ACTIVITIES
Profit / (Loss) for the year 47, 400 (36,360)
----------- ---------
Adjustments for:
Depreciation of property, plant and equipment 9,546 8,905
Amortisation of intangible assets 13,720 23,428
Impairment of intangible assets 1,316 11,829
Profit on disposal of the automotive business (54,472) -
(Gain) Loss on sale of property, plant and
equipment (238) 294
Increase in provision for post-employment
benefits 231 (362)
Change in long term provisions, net (362) 501
Finance costs, net 3,523 6,405
Tax income / (expense) 12, 469 (3,453)
Share-based payment charge, net 1,467 3,659
----------- ---------
Operating cash flows before movements in
working capital: 34,600 14,846
Increase in trade and other receivables (13,702) (326)
Decrease / (Increase) in other current assets (453) 2,007
Decrease /(Increase) in inventories 11,426 (4,238)
( 17 , 211
(Decrease) / Increase in trade payables ) 16,744
Increase / (Decrease) in other current liabilities 2,416 481
----------- ---------
Cash from operations 17 ,076 29,514
Income tax paid (2,068) (10)
Interest received 1,212 142
( 2 , 247
Interest paid ) (3,880)
Net cash from operating activities 13,973 25,766
----------- ---------
CASH FLOWS - INVESTING ACTIVITIES
Acquisition of property, plant and equipment (4,642) (8,296)
Acquisition of intangible assets (2,824) (869)
Proceeds from sale of property, plant and
equipment 199 762
Capitalised development expenditure (15,289) (25,300)
Proceeds from sale of subsidiary, net of
cash deal costs 96,292 -
(Increase) / Decrease in restricted cash
deposits (311) 28
Net cash from / (used in) investing activities 73,425 (33,675)
----------- ---------
CASH FLOWS - FINANCING ACTIVITIES
Proceeds from exercise of share options 168 -
Short-term borrowings, net (20,682) 6,895
Repayment of lease liabilities (3,924) -
Proceeds from long term borrowings 7,047 4,616
Repayment of long term borrowings (22,218) (9,326)
Net cash from / (used in) financing activities (39,609) 2,185
----------- -----------
Increase / (decrease) in cash and cash equivalents 47 ,789 (5,724)
Cash and cash equivalents - balance at beginning
of year 35,006 41,908
( 1,49 1
Effect of exchange rate differences ) (1,178)
----------- -----------
Cash and cash equivalents - balance at end
of year 81,304 35,006
=========== ===========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2019
Share
Share premium Other Translation Retained
capital Account reserve reserve earnings Total
-------- -------- -------- ----------- --------- --------
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- ----------- --------- --------
Balance at 1 January
2019 2,165 49,778 (2,727) (18,049) 55,319 86,486
Issue of shares 11 157 - - - 168
Total comprehensive
income/(loss) for the
year
Net profit for the year - - - - 4 7400, 47,400
Total other comprehensive (1, 070
income - - - (1,021) (49) )
-------- -------- -------- ----------- --------- --------
Total comprehensive
income/(loss) for the (1, 021
year - - - ) 47, 351 46, 330
-------- -------- -------- ----------- --------- --------
Disposal of the automotive ( 102
business - - (19) - ( 83 ) )
Transactions with owners
:
Share-based payment
charge - - - - 1,467 1,467
Balance at 31 December (19, 070 104 ,
2019 2,176 49,935 (2,746) ) 054 134, 349
======== ======== ======== =========== ========= ========
Year ended 31 December 2018
Share
Share premium Other Translation Retained
capital Account reserve reserve earnings Total
-------- -------- -------- ----------- --------- --------
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- ----------- --------- --------
Balance at 1 January
2018 2,165 49,778 (2,727) (12,697) 88,024 124,543
Total comprehensive
income/(loss) for the
year
Net loss for the year - - - - (36,360) (36,360)
Total other comprehensive
income - - - (5,352) (4) (5,356)
-------- -------- -------- ----------- --------- --------
Total comprehensive
income/(loss) for the
year - - - (5,352) (36,364) (41,716)
-------- -------- -------- ----------- --------- --------
Transactions with owners
:
Share-based payment
charge - - - - 3,659 3,659
Balance at 31 December
2018 2,165 49,778 (2,727) (18,049) 55,319 86,486
======== ======== ======== =========== ========= ========
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. This financial information is consistent with the
consolidated financial statements of the group, for the year ended
31 December 2019. The Group's consolidated financial statements
have been prepared in accordance with International Financial
Reporting Standards as adopted by the EU.
2. The financial information set out above does not constitute
Telit's statutory accounts for the years ended 31 December 2019 or
2018. Statutory accounts for 2019 will be delivered to the
Registrar of Companies. The auditors have reported on the 2019 and
2018 statutory accounts; their reports were (i) unqualified, (ii)
did not include references to any matters to which the auditors
drew attention by way of emphasis without qualifying their reports
and (iii) did not contain statements under section 498 (2) or 498
(3) of the Companies Act 2006.
3. Going concern
In assessing going concern, the Board has considered the risks
related to (a) the level of demand for the Group's products which
may also affect the possibility of utilising some of these
facilities since they depend upon the level of sales in specific
markets and in some instances to specific customers; (b) the
fluctuations in the exchange rate and thus the consequence for the
cost of the Group's raw materials; (c) the continuity of supply
from key suppliers; and (d) the company's budgets and forecasts in
current market environments.
The Board has also carefully reviewed the Group's budget for
2020 and its medium-term plans, including the new risk related to
the Covid 19 Virus. The Directors are mindful that the Group
operates in the IoT sector which remains a rapidly growing industry
subject to ongoing change in technological and competitive
landscape.
After making enquiries, the directors are confident that the
Company and the Group have adequate resources to continue in
operational existence for the foreseeable future and accordingly,
continue to adopt the going concern basis in preparing the
financial statements.
4. Reconciliation of operating profit, profit before tax and net
profit to the adjusted figures:
EBITDA is not a financial measure defined by IFRS as a
measurement of financial performance and may not be comparable to
other similarly-titled indicators used by other companies. Adjusted
EBIT, adjusted EBITDA, adjusted profit before tax and profit in
cash are provided as additional information only and should not be
considered as a substitute for operating profit/loss (EBIT) or net
cash provided by operating activities.
-- Adjusted EBIT is defined as Earnings Before Interest, Tax,
share based payment expenses, amortisation of acquired intangibles,
impairment of internally generated development assets, other
exceptional items, exceptional expenses related to restructuring
and the profit on disposal of the automotive business;
-- Adjusted EBITDA is defined as Adjusted EBIT plus depreciation
and other amortisation; Profit/loss in cash is defined as Adjusted
EBITDA less capitalisation of internally generated development
assets less acquisition of tangible and intangible assets net of
proceeds from disposal of assets, less lease payments;
-- Adjusted profit / (loss) before tax is defined as Profit /
(loss) before tax plus share based payment expenses, amortisation
of acquired intangibles, other exceptional items, exceptional
expenses relating to restructuring, impairment of internally
generated assets and the profit on disposal of the automotive
business;
-- Adjusted net profit / (loss) for the year is defined as net
profit / (loss) for the year plus share based payment expenses,
amortisation of acquired intangibles, other exceptional items,
exceptional expenses related to restructuring, impairment of
internally developed assets and the profit on disposal of the
automotive business less deferred tax (credit) / expense.
The Group's management believes that these non-GAAP measures
provide useful information to investors to evaluate operating
results and profitability for financial and operational
decision-making purposes and to provide comparability between the
companies in this sector, as they eliminate non-cash items and
other exceptional items, which are not inherent to the business.
Consequently, Adjusted EBIT, Adjusted EBITDA, profit / (loss) in
cash, Adjusted profit / (loss) before tax and Adjusted net profit /
(loss) for the year are presented in addition to the reported
results.
201 9 201 8
--------- ---------
$'000 $'000
--------- ---------
Operating profit (loss)- EBIT 63,622 (33,408)
Share-based payments 1,688 5,715
Exceptional expenses related to restructuring 1,051 10,842
Impairment of internally developed
assets 1,316 10,238
Other exceptional items (52,744) 5,545
Amortisation of intangibles assets
acquired 1,996 3,381
--------- ---------
Adjusted EBIT 16,929 2,313
Depreciation and other amortisation 21,270 27,770
--------- ---------
Adjusted EBITDA 38,199 30,083
Capitalisation of internally generated
development assets (15,289) (25,300)
IFRS 16 (Rental costs) (3,897) -
Acquisition of tangible and intangible
assets, net of proceeds from disposal
of assets (7,266) (8,402)
Profit (loss) in cash 11,747 (3,619)
========= =========
Profit (loss) before tax 59,869 (39,813)
Share-based payments 1,688 5,715
Exceptional expenses related to restructuring 1,051 10,842
Impairment of internally developed
assets 1,316 10,238
Other exceptional items (52,744) 5,545
Amortisation of intangibles acquired 1,996 3,381
--------- ---------
Adjusted profit (loss) before tax 13,176 (4,092)
========= =========
Net profit (loss) for the year 47,400 (36,360)
Share-based payments 1,688 5,715
Exceptional expenses related to restructuring 1,051 10,842
Impairment of internally developed
assets 1,316 10,238
Other exceptional items (52,744) 5,545
Amortisation of intangibles acquired 1,996 3,381
Deferred tax change 15,713 (4,268)
--------- ---------
Adjusted net profit (loss) for the
year 16,420 (4,907)
========= =========
5. Net cash (debt) position
2019 2018
--------- ---------
$ '000 $ '000
--------- ---------
Cash and cash equivalents 81,304 35,006
Restricted cash deposits 646 337
Working capital borrowing (1) (3,934) (24,442)
Long term loans (2) (3,352) (20,033)
Governmental loans (3) (24,676) (22,862)
Mortgage loan (4) (1,819) (1,993)
Net cash (debt) 48,169 (33,987)
========= =========
(1) Credit facilities used for working capital of up to EUR10,5
million bear average interest at a rate of 0.85%.
(2) Long term loans from banks in Italy (2018: $3.4 million)
with an interest rate of Euribor 6 months plus 5.50%, repayable in
6 semi-annual instalments that will commence in December 2020. The
2018 balance includes $16.6 million loans from HSBC which were
fully repaid in February 2019.
(3) Representing preferential long term loans (i) of $14.5
million with fixed-rate of 0.5% and repayable in 14 semi-annual
instalments that commenced in December 2016, supported by the
Italian MISE (Ministry of Economic Development) to develop an
innovative platform for the application of M2M technologies and,
(ii) $10.1 million with a fixed-rate of 0.80% and repayable in 16
semi-annual instalments that commenced in December 2019, supported
by the Ministry of Trade and Commerce in Italy, provided in
connection with the Group's business development program in Italy.
These loans are initially recognised at fair value and subsequently
measured at amortised cost.
(4) Representing a preferential rate loan of EUR3.5 million
received in 2011 from a regional fund in Italy provided in
connection with the Group's acquisition of the campus used for the
Company's main R&D facility in Trieste, Italy. The mortgage
loan is denominated in Euro, attracts interest at a rate of 80% of
Euribor 6 months, with a minimum interest rate of 0.85%, and is
repayable over 30 semi-annual instalments that commenced in July
2012. The loan is initially recognised at fair value and
subsequently measured at amortised cost.
The directors believe that the credit facilities and loans as at
year end will remain available to the Group for in the foreseeable
future and that therefore the Group will be able to continue to
fund its operations from these credit facilities.
6. Sale of automotive business
-- On 13 July 2018, Telit Communications PLC agreed to sell its
automotive business (Automotive transaction) to TUS International
Limited ("TUS") for a total consideration of $105.0 million subject
to working capital adjustments. On 27 February 2019 the sale was
completed with a cash payment of $67.5 million and a short-term
vendor loan of $38.5 million which was later repaid in full on 15
April 2019. The net amount received after the working capital
adjustment was $106.6 million.
-- As of 27 February 2019, the net book value of the net assets,
including working capital items, of the disposed business units was
$44.1 million including intangible assets of $34.7 million.
-- On 30 October 2019 Telit and TUS agreed on the final
adjustment to the net consideration which resulted in a total
adjustment of $1.6 million that was added to the purchase price of
$105 million and resulted in a final profit on disposal before tax
of $54.5 million.
$'000
---------
Consideration receivable 106,576
Carrying amount of net assets sold (43,985)
Transaction cost (8,119)
Profit from disposal before tax 54,472
-- Telit agreed to provide certain transitional services, mainly
for IT and production management services to Titan, pursuant to a
transition service agreement (TSA). At 31 December 2019, the
account receivable balance under the TSA was $23.5 million, out of
which $1.2 million was overdue. After ongoing discussions with TUS
and Titan, and after reducing the overdue amount, Telit agreed, in
early 2020 to extend the TSA beyond February 2020 and amend the
terms and conditions of the TSA to better secure the collection of
the outstanding amounts, including obtaining a guarantee from TUS
and its parent.
7. Tax
-- In May 2019, Telit Brazil received an infraction notice from
the Sao Paulo state tax authority regarding alleging failure to
collect and remit indirect taxes ICMS for FY 2016-2017 under the
ICMS-ST substitution rule. Telit timely filed its defence arguments
in the first level administrative process. In October, the
first-level Administrative Court ruled in favour of the state, as
expected, and upheld the assessments made by the tax authority.
Later that month, Telit Brazil filed an appeal to a second-level
Administrative Court and is awaiting judgement. Where appropriate,
decisions from Administrative Courts may be subject to review by a
Court of Law. The total potential liability for this claim is
approximately $4.2 million consisting of the underlying ICMS claim
(approximately $2.1 million), interest (approximately $432
thousands) and penalties (approximately $1.7 million). Based on
professional advice and the relevant facts, the Group believes,
that it has strong arguments in favour of the tax treatment
applied. Accordingly, no provision has been made for this
claim.
-- In December 2019, culminating the second stage of a tax
audit, the Group affiliates Telit Wireless Solutions Ltd. and Telit
Wireless Services Ltd. received tax assessments from the Israeli
Tax Authorities for FY 2013 and FY 2013-2016 respectively. These
assessments relate to the rate of amortization of certain
intangible assets and the treatment of the utilization losses to
offset taxable income. With respect to the amortization of
intangibles, the Group recognizes that this is an uncertain tax
position, and, as such, has provided for an adjustment of the rate
of amortization for the relevant tax years. With respect to the
utilization of losses, the potential additional tax charge to the
Group is approximately $3 million. The Group has timely filed an
appeal with the Tel Aviv Circuit Court, and considers, based on
professional advice and the particular facts, that it has strong
arguments against the disallowance of the losses. Accordingly, no
provision has been made for this amount.
8. Post balance sheet events
Following the disclosure in the 2018 annual report, in early
2020 the company managed to settle the following claims:
-- Claims filed by M2M Solutions LLC ("M2M") - In January 2020
the parties signed a settlement agreement for an immaterial amount
and the claim was dismissed.
-- Claim filed by Koninklijke KPN N.V., ("KPN") - In January
2020 the parties reached a settlement agreement according to which
Telit purchased a license until 31 December 2021 and the claim was
dismissed. The cost of the license has no material impact on Group
results.
-- Mutual claims between Telit Wireless Services Ltd. ("Telit
Ltd.") and Ingeniorsfirman Sjoberg AB, a foreign Swedish Company
("Ingeniorsfirman") - As part of the preliminary hearing took place
in January 2020, the parties reached a settlement approved by the
court according to which Telit LTD will receive certain immaterial
amounts and the mutual claims will be dismissed.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR MZGMFGVVGGZZ
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March 17, 2020 03:00 ET (07:00 GMT)
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