Final Results

Telit Communications PLC

("Telit" or "the Company")

Preliminary results for the year ended 31 December 2011

Telit Communications PLC (AIM: TCM), a global leader in machine-to-machine (m2m) communications, announces its preliminary results for the year ended 31 December 2011.

Financial highlights

·; Revenue increased by 34.7% to $177.4 million (2010: $131.7 million).

·; Revenue in H2-2011 increased by 33.6% over H2-2010 to $96.3 million (H2-2010: $72.1 million) and by 18.7% over H1-2011 (H1-2011: $81.1 million).

·; Gross profit increased by 28.2% to $67.8 million (2010: $52.9 million)

·; Operating profit for the year of $3.5 million (2010: $6.6 million)

·; Adjusted EBIT1 for the year of $6.9 million (2010: $7.2 million)

·; Adjusted EBITDA2 for the year of $13.1 million (2010: $12.5 million)

·; Profit before tax of $2.2 million (2010: $6.4 million)

·; Adjusted Profit before tax of $5.7 million (2010: $7.1 million)

·; Profit for the year of $1.4 million (2010: $8.4 million)

·; Adjusted profit for the year of $4.4 million (2010: $5.6 million)

·; Strong net cash flow from operations of $15.4 million (2010: $9.2 million)

·; Shareholders' equity of $60.8 million reflecting 50.2% ratio (2010: $29 million reflecting 32.7% ratio)

Operational highlights for 2011

·; During 2011 Telit accomplished the first phase of its strategy of becoming a global leader of m2m communications and set in motion the second phase of its strategy which includes becoming a leading global value added service provider in the m2m arena.

·; 2011 results have been affected by significant investment in the cost of integrating the businesses purchased, recruitment of staff and putting in place an operational infrastructure which will provide a base to support the growth expectations of the Company in the coming years. This investment has led to a major increase in operational costs over 2010 but it will give the Company a broad base for additional growth in the coming years.

·; Continued successful expansion of Telit's product portfolio, including the development of new 3G product series.

·; Launch of 4G LTE program, for the development of future Telit products complying with next-generation technologies.

Acquisitions

·; Successful integration of the Motorola m2m business (acquired in March 2011), strengthening Telit's position in the global m2m market.

·; Acquisition of GlobalConect Ltd. (acquired in July 2011), a company which provides value added services in the m2m industry including cellular connectivity. This acquisition forms the cornerstone for Telit's value added services global business.

·; Acquisition of Navman Wireless OEM Solutions LP, a leading designer and manufacturer of world-class GPS modules and solutions, completed in January 2012. This acquisition will enhance our location product portfolio.

Commenting on the results, Oozi Cats, Chief Executive, said: "2011 was an important year for Telit, a year in which we achieved strong growth, successfully capitalising on the Motorola m2m acquisition and on the quality of our product portfolio, our customer relationships and the strength of our sales and distribution network. The acquisition of GlobalConect is an additional building block in Telit's strategy to provide its customers with a full service portfolio, including value added services such as connectivity. The achievements of 2011 also include the Navman acquisition, which will provide Telit access to new customers and products beyond the traditional m2m industry, thus strengthening our position as the premier product and consultative partner in the m2m industry.

Our hard work and significant investments over the past few years have created a market leading platform through which we are capitalizing on the exciting opportunities within the m2m market and continuing to increase our market share. We are very excited about the opportunities the acquisitions of 2011 will deliver and we are confident that Telit is now even better placed to achieve its objective of becoming the leading provider of m2m solutions worldwide".

For further information:

Notes to readers

Telit sells its products through a network of value added resellers to more than 5,000 communications solution providers and systems integrators in more than 60 countries around the world. Our customers are served both directly or through a global network of more than 50 distributors.

Telit's headquarters are in Rome, Italy, with regional headquarters in Raleigh NC, USA and Seoul, Korea. Its R&D centres are in Trieste and Cagliari, Italy, Seoul, Korea Sofia Antipolis, France, Tel-Aviv and Jordan Valley, Israel and Foothill Range, California, with regional sales offices in Brazil, China, Denmark, France, Germany, Great Britain, India, Israel, Italy, Korea, Poland, Russia, Spain, the Republic of South Africa, Taiwan, Turkey and the USA. At the end of 2011, Telit employed approximately 436 (2010: 366) employees worldwide.

Telit provides global support to its international customers covering substantially all of the m2m market verticals. Its vast experience doing business across the globe has helped Telit establish strong channels and excellent access to key suppliers, customers and distributors in all major world markets. Telit's diverse worldwide customer base includes cellular operators and cellular distributors, as well as designers, manufacturers and system integrators of cellular m2m module-based applications.

Brief introduction to the machine to machine (m2m) market

Machine to machine (m2m) technology establishes wireless communication between machines and the information centre of a business. The goal of m2m is to enable applications that allow businesses to increase productivity and competitiveness. At the heart of each m2m implementation is a communication module which receives processes and transmits information.

The international market for machine-to-machine (m2m) wireless communications is rapidly growing as wireless communications are now a must-have rather than a luxury technology. Businesses that were not interested in m2m wireless solutions in the past are now looking to incorporate this technology in their business as their operations expand and modernise.

The Beecham Research report on the m2m sector, released in June 2011, analyses the latest market developments in all regions around the world and forecasts that the market will enjoy high growth over the coming years. Beecham Research believes that the number of units to be shipped will reach 95.5 million by 2015 representing a 2011-15 CAGR of 27.2%. Beecham Research also projects an average selling price decline of 11.6% p.a. resulting in a CAGR of 12.5 % growth in monetary value of the sector through to 2015 with a total value of m2m market of $1.5bn.

Chairman's statement

I am pleased to deliver the 2011 results. Growth in the m2m market slowed down in 2011 after a strong recovery in 2010 from the economic downturn, but still provided numerous commercial opportunities for Telit. Our strong competitive position has allowed us to capitalise on these opportunities and we have again made good progress in increasing our market share.

Financial highlights

·; Revenue for the year increased by 34.7% to $177.4m (2010: $131.7 million). In the second half of the year revenues increased by 18.7% to $96.3 million compared to revenues of $81.1 million in the first half and up 33.6% compared to $72.1 million in the second half of 2010. Increases in revenue were seen across all geographic segments, but most notably in the US. The Motorola product line, acquired on 1 March 2011, has contributed approximately 26% of total revenue in 2011(including sales to Telit's customers).

·; Gross profit for the year increased by 28.2% to $67.8 million (2010: $52.9 million) while gross margin decreased to 38.2% (2010: 40.2%). The gross margin achieved by sales of the Motorola m2m products was lower than Telit's own portfolio products. The Board expects Telit's gross margin to return to around 40.0% in the coming years.

·; Telit has continued to invest in its product portfolio, increasing R&D investment by $3.5 million to $21.1 million (11.9% of revenues) compared to $17.6 million in 2010 (13.4% of revenues). The increase is largely due to the Motorola m2m business being acquired.

·; Sales & marketing expenses increased by $8.0 million to $25.3 million (14.3% of revenues) compared to $17.3 million in 2010 (13.1% of revenues). The increase is mainly due to investment in headcount and marketing following the business acquisitions made during the year. In addition, $1.4 million is attributable to a bad debt expense recorded in 2011.

·; General & administrative expenses increased to $17.5 million (9.9% of revenues) compared to $12.5 million in 2010 (9.5% of revenues). The increase is due to higher directors' remuneration, increases in expenses relating to acquisitions and in IT expenses.

·; Adjusted EBIT decreased from $7.2 million in 2010 to $6.9 million this year. Adjusted EBITDA increased to $13.1 million which reflects an EBITDA margin of 7.4% (2010: $12.5 million; 9.5%); the decrease in adjusted EBITDA margin is mainly due to the costs related to the purchase of the businesses acquired in 2011 and their integration into Telit as necessary to support future growth. Telit's investment in sales and marketing and other costs, while affecting EBITDA for 2011, positions the Company for future growth in the m2m market in the coming years without any further significant increase in its cost basis.

·; Basic earnings per share for the year were 1.6 cents compared to 11.3 cents in 2010.

·; Adjusted basic earnings per share for the year were 4.5 cents compared to 7.4 cents in 2010.

Acquisitions:

·; In March 2011 we completed the acquisition of Motorola m2m, funded by an issue of equity to new and existing shareholders. The integration of the business was completed successfully during 2011 and the former Motorola m2m business has become an integral part of the Telit's organisation.

·; The acquisition of GlobalConect Ltd, completed in July 2011, will allow Telit to offer its customers value added services including wireless connectivity. We believe that this will become a significant building block of the Company's services business and further improve Telit's customer proposition as it includes services with its m2m solutions. This will address customers' needs more comprehensively through a "one stop shop" solution.

·; The acquisition of Navman Wireless Solutions OEM LP, completed in January 2012, will allow Telit to offer its customers world-class Global Positioning System (GPS) modules and solutions, and to further diversify its product offering.

Board changes

·; On 21 April 2011 Ram Zeevi was appointed to the Board of Telit.

·; On 23 May 2011, the terms of office of Amir Scharf and Andrea Mandel-Mantello, independent non-executive directors, serving on the Board since September 2007 and May 2005, respectively, ended. They were replaced on the same date by Nicola Miglietta and Davidi Gilo.

·; On 21 June 2011, Mr. Yosi Fait was appointed to the Board as Finance Director replacing Mr. Yariv Dafna, who stepped down from the Board but remains the CFO of the Group.

People

During 2011 we have made significant progress and this is a reflection of the excellent team we are proud to have at Telit. The Board believes that our skilled staff is, and will continue to be, the cornerstone of Telit's success. I would like to personally thank all of the Company's employees for their hard work and to welcome all the new employees that have joined the Telit family, including those joining us from Motorola m2m, GlobalConect Ltd and Navman Wireless OEM Solutions LP.

Dividend

The Company is not proposing to pay a dividend in respect of the period (2010: $ nil).

Outlook

The outlook for the rest of 2012 and the future looks positive for the m2m industry as a whole and for Telit in particular. Notwithstanding the fact we are operating in a competitive environment, we believe we are well positioned to take advantage of the opportunities ahead and believe that our acquisitions in 2011 will strengthen our already strong position within our industry. We look forward to continued organic business expansion and are constantly seeking further expansion opportunities through new technologies or by gaining access to new territories and new market segments.

We look to 2012 and beyond with excitement, as we continue to gain market share and strive to constantly improve our profitability while continuing to provide the market with first rate products as well as value added services.

Enrico Testa

Chairmanof the Board 

Chief Executive's statement

2011 was a year of moderate growth after 2010, in which we enjoyed strong growth reflecting the recovery of the global economy generally and the m2m market in particular. In this moderately growing market, we continued to focus on expanding our market share and managed to increase it to 22% over the prior year according to a Beecham Research report published in June 2011. At the same time, we are looking to diversify our offering by adding GPS products to our offering through the acquisition of Navman Wireless OEM Solutions LP in January 2012.

Financial results

See note 7 for reconciliation of profit before tax to adjusted PBT and of profit for the year to adjusted profit for the year

Regional information

The split of revenue on a geographical basis for the years ended 31 December 2011 and 2010 is as follows:

26% of Telit's revenue in the period ended 31 December 2011 was generated in Euro (2010: 38%), with the remaining generated in, or linked to other currencies but mainly to the US dollar. However, a substantial part of the Group's purchased materials cost was denominated in US dollar during the period.

EMEA

During 2011 Telit EMEA continued to grow while successfully integrating Motorola's m2mbusiness and incorporating its product lines into Telit brands. We absorbed Motorola employees into Telit Israel and we successfully merged the Motorola sales team into Telit's sales channels. We also integrated the entire Motorola m2mbusiness into Telit while maintaining high levels of customer support and service with no downtime and no impact on users, customers or partners. We also reinforced our presence in Central Eastern Europe and saw outstanding growth in Russia & CIS.

In light of our target to keep growing ahead of the overall market, we focused our efforts in EMEA during 2011 in several key areas intended to provide growth in 2012 and beyond.

In the Automatic Vehicle Location (AVL) some of the projects we worked on in 2011 were:

·; With Technokom for a system, based on GL865QUAD and GL868DUAL, that will optimize transportation processes, control location and fuel consumption, prevent non-authorized transport usage and ensure that safety standards are met.

·; In the United Kingdom we won a design with our HE910 modules for an application that features a small sized, highly integrated vehicle tracking device for the fleet operator and stolen vehicle sectors.

In the Security segment we won a design project in the Czech Republic that is based on the latest HE910 modules and which will ramp up in the next year.

In the AMR/M (Automated Meter Reading/Management) market, which is one of the most important developing markets in EMEA, we had success with Elgas with a gas metering system based on our GL865-QUAD modules. In Italy we won a tender issued by that country's largest electricity utility to substitute a significant part of its existing GSM concentrators with new GPRS systems. Additionally, Telit actively participated in the relevant working groups to define the relevant communication protocols and has released a wireless M-bus 169 MHz module that supports all required features to comply with law ARG 155/08 which regulates the gas smart grid system. Furthermore, our ME50-169 module, together with our GSM/GPRS Atex certified module GE864-ATEX, has been selected by many of the key players in the industry in EMEA, both for industrial and residential meters.

Americas

2011 was a year of transition year for the m2m industry in North America as we began to see the impact of the decision by mobile network operators (MNOs) to expedite the migration from 2G to 3G for m2mapplications. For Telit, 2011 was also a year of transition as we integrated the North American business of the Motorola m2m business into Telit and introduced new technologies to our module line-up.

During 2011 Telit was involved in several projects including the following:

·; We provided Pomdevices with our GE865-QUAD modules for its mHealth solution to connect seniors to caregivers.

·; Redtail Telematics tapped Telit for automotive asset tracking for its fleet management solution.

·; SemaConnect selected Telit's CC864-DUAL and GC864-QUAD V2 m2m modules to provide cellular capabilities for a safe, reliable and convenient charging solution for a new generation of electric vehicles.

·; Additionally, Telit's modules (GE865-QUAD, GM862-GPS GE863-GPS and GE864-GPS) were incorporated into the devices of GrounLab, a company that creates technological solutions that successfully address environmental, social and humanitarian challenges worldwide.

Moreover, Telit hosted leading m2m stakeholders and innovators at an inaugural Developers Conference in San Diego, the Telit DevCon 2011, to connect industry experts with embedded application developers.

Telit's acquisition in January 2012 of Navman Wireless OEM Solutions LP, a leading designer and manufacturer of world-class GPS modules and solutions enhanced Telit's opportunities in the GPS arena. The integration of Navman's technology and its U.S. based executive, engineering, and sales staff will make Telit a major contender in the Global Positioning System (GPS) market while providing an enhanced product portfolio for our m2mcustomers. At the end of 2011, Telit introduced two GPS modules, the JF2 and JN3, either of which when coupled with a Telit GSM/GPRS module represent an appealing solution in total cost effectiveness and time-to-market readiness for location aware applications.

2011 saw continued growth in Brazil and new opportunities in other parts of Latin America. Telit's growth in Brazil combined with the fact that modules are manufactured in Brazil, as well as Telit's flexibility in the deployment of new production lines and the factory direct support in the development and testing of the modules helped Telit win several projects in Latin America, such as with Leucotron for a new interface for connection to mobile devices to provide a strong telephony solution for enterprises. We see continued opportunity in Latin America as the m2m industry grows stronger there. Opportunities from Argentina are generating new solutions in vehicle tracking and remote blocking. Colombia, as well as presenting opportunities in solutions for vehicle tracking systems, is also generating opportunities regarding the development and use of metering solutions. Other countries in the region such as Peru and Chile seem to be focusing on ready-made m2msolutions and countries such as Venezuela and Ecuador are also showing stronger demand for m2m solutions.

APAC

For Telit APAC, 2011 was a year of consolidation and growth. Telit achieved a remarkable growth rate of over 40% in the Asian market, maintaining a leading position in the industry while generating superior operational results.

In Korea, Telit remained a market leader with growth of around 20% in 2011 compared to 2010. SK Telecom, the nation's largest network operator, has accelerated cooperation with m2m players, especially Telit. It opened a Special Purpose Terminal Test Centre for small and medium sized businesses. Telit has, so far, used the centre to test functions of various communications equipment such as remote meter reading, navigation systems for taxis, electronic anklets, PDAs for parcel services, and wireless credit card payment devices.

In China, Telit has expended great effort to achieve further success in one of the world's fastest growing markets. The Customer Seminar held in Hang Zhou, east China Zhejiang province, which gathered dozens of key customers and business partners, has successfully enhanced our reputation among China's top industry players.

It is almost one year since Telit opened its Indian operations. The Indian market shows signs of being receptive to m2mdevices and solutions and the adoption of solutions by a wide variety of customers in India has been very encouraging. Furthermore the AMR market is growing and we have noticed a significant push in governmental and private initiatives that are creating a demand for innovative m2m applications.

Technology & products

Technological innovation is still Telit's core capability. Thanks to its six R&D centers the Company was again able, in 2011, to provide outstanding module quality ranging from cellular, to short-range RF and location technologies. The modules are currently integrated in a wide range of applications, including asset tracking, remote industrial monitoring, automated utility meter reading, insurance telematics, consumer electronics, mobile health devices and many more.

Amongst the new modules announced in 2011 was the HE910 family of modules. These cellular modules feature high-throughput penta-band variants and are the basis for the new unified form factor that provides m2m application developers and consumer electronics manufacturers unprecedented connectivity options and investment protection for their core designs. Another new module family, the Telit (X)E910 family features a series of wireless modules based on the Land-Grid-Array (LGA) form factor to ensure software & hardware, forward & backward compatibility across technologies, while maintaining the application design and guaranteeing its industrial lifetime with the same form factor and the same software interface through all cellular technologies.

Another 2011 highlight is the ME50-169 module family which is ideally suited for smart metering solutions. The ME50-169 modules are the latest generation of wireless M-Bus products at 169 MHz for meters for gas, water, heating or electricity and concentrators. The ME50 modules increase the accuracy and transparency of bills, offer better customer service, help to improve energy efficiency and can be easily integrated into various systems, reducing the time and money spent on development.

Furthermore, during 2011 we launched the AppZone, a C-based platform that allows companies and their development teams to design their application on Telit's G30 series, thereby reducing the costs and time to market of customer applications. The Telit AppZone platform provides a high level m2m-oriented interface that is convenient to use.

End user market trends

2011 was a solid year for the m2m market and provided a significant amount of new opportunities. Beside the traditional markets, consumer applications are becoming increasingly important. Currently, there are a large numbers of companies that are launching new applications in this segment, or increasing their current usage of m2m products. This growth in the m2m market increased both the demand for modules as well as the expectations with respect to the modules themselves. Modules are no longer viewed as mere commodities, but rather as parts of complex solutions to help address business problems.

Telit has the business platform and infrastructure to meet this increasing demand as the Company is focused solely on m2m providing all services needed for new applications: modules that range from cellular and satellite positioning to short range technology, design and certification support, value added services as well as technical support like Telit's technical support forum. The success of this forum, which connects the global Telit developer community both with each other and with our global support team, is highlighted by the continuous growth of subscribers and active users. In 2011 we had over 1,200 new registered users, which underlines the increasing level of interest in this communication and support platform.

Update on the integration of Motorola m2m

On 1 March 2011 Telit completed the acquisition of Motorola m2m from Motorola Israel Ltd., a subsidiary of Motorola Solutions Inc. A detailed description of the transaction was provided to our shareholders in the circular that was posted on 28 January 2011, ahead of the shareholders meeting that took place on 16 February 2011 and in our annual report for 2010 published later in the year. The integration of Motorola m2m into the existing Telit business, mainly in Israel but also in the US, England and APAC, was fully and successfully completed during 2011 and management is very happy with the results of the integration.

Update on the acquisition of GlobalConect Ltd and the strategic relationship with Telefonica

The acquisition of GlobalConect Ltd on 11 July 2011 is one of the steps the Company has taken to establish its services business, with the goal of having recurring revenues form a substantial portion of our business. Telit aims to leverage its long-standing customer relationships to provide its customers with end-to-end solutions which will allow customers to bundle connectivity and other value added services provided by Telit with m2m modules, providing the customers with a more seamless m2m system, including technical support, enhanced monitoring capabilities, real time budget management, competitive tariffs for fixed and mobile applications and streamlined logistics, operations and deployments. As announced on February 22, 2012, Telit entered into an agreement with Telefonica Espana S.A.U. The strategic relationship with Telefonica constitutes a major step in facilitating Telit's provision of value added services to its customers.

Further detail on the acquisition of Navman Wireless OEM Solutions LP

The acquisition of Navman Wireless OEM Solutions LP on 3 January 2012 strengthens our position as the premier product and consultative partner in the m2m industry, by leveraging the synergies of both companies to better serve our global customers.

The acquisition of Navman's technology and the engagement of its US based executive engineering and sales staff will make Telit a major contender in the GNSS (Global Navigation Satellite System) market while providing an enhanced product portfolio for its m2m customers and providing Telit access to new GPS customers and products beyond the traditional m2m industry. Navman's reputation for delivering state-of-the-art GPS technology and the global reach of Telit's sales and marketing organization put us in a strong position of growth in the GPS sector. In particular, the Navman acquisition provides us with access to new GPS customers beyond the traditional m2m industry and rights to the "Jupiter" product line which dates back over 20 years to the development of GPS systems at Rockwell International and which has become almost synonymous with GPS.

Strategy

Having successfully integrated the most recent businesses acquired by Telit (Motorola m2m, GlobalConect and Navman) into the Company's global organization, and with our significant market share, Telit is confident in its position as a leading global company in the m2m industry. Telit looks forward to implementing the next stage of its strategy which is to grow the Company through a three-pronged approach: - organically along with general growth in the m2m industry; - via recurring income through our valued added services unit which will leverage the long-standing relationships with our customers and - via appropriate acquisition opportunities to the extent that these become available.

Outlook

The outlook for the rest of 2012 and the future looks positive for the m2m industry as a whole and for Telit in particular. Notwithstanding the fact we are operating in a competitive environment, we believe we are well positioned to take advantage of the opportunities ahead and believe that our acquisitions in 2011 will strengthen our already strong position within our industry. We look forward to continued organic business expansion and are constantly seeking further expansion opportunities through new technologies or by gaining access to new territories and new market segments.

The hard work and dedication of Telit's staff across the globe is and will continue to be crucial to Telit's success. I would like to thank the Company's management team and all employees for their continued commitment to the Company and its success. Their dedication is an invaluable asset, indeed the core asset of the Company. I would also like to welcome the employees of Navman Wireless OEM Solutions LP into the Telit family.

Telit intends to continue to take advantage of the considerable opportunities arising in this growing global market. I look forward to providing further news of the Group's progress over the coming months.

Oozi Cats, Chief Executive

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASH FLOW

CONSOLIDATED STATEMENT OF CASH FLOW

(1) The Company has re-presented the tax expenses costs in the 2010 cash flow statement so it provides better information on the cash flow involved in income tax as presented in the income statement. In the revised presentation, movement in deferred taxes and tax paid in cash has been presented in separate lines, while the other non-cash tax expenses has been reflected within the movement in other current liabilities balance.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2011 (audited)

Year ended 31 December 2010 (audited)

NOTES TO THE PRELIMINARY ANNOUNCEMENT

1. The Group's accounts 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 the Company's statutory accounts for the years ended 31 December 2011 or 2010. Statutory accounts for 2010 have been delivered to the Registrar of Companies. The auditors have reported on the 2011 and 2010 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 (3) of the Companies Act 2006.

3. The Group meets its day to day working capital requirements through overdraft facilities, invoice advance facilities and factoring. Some of these facilities are cancellable on demand or have renewal dates within one year of the date of approval of the financial statements. In addition, the Group has received a long-term preferential rate loan supported by the Ministry of Trade and Commerce in Italy. Further information is provided within note 8.

The management considers the uncertainty over (a) the level of demand for the Group's products which may also affect the possibility of utilizing some of these facilities since they depend upon the level of sales in specific markets and in some instances to specific customers; (b) the exchange rate between Euro and US dollars and thus the consequence for the cost of the Group's raw materials; (c) the availability of bank finance in the foreseeable future; (d) the continuity of supply from key suppliers; and (e) the forecasts in current market environments.

The Group's forecasts and projections taking into account the Group's history of successfully renewing its facilities in the past and the fact that there are actions available to the Group to address these risks, show that the Group should be able to operate within the level of its current facilities. The Group maintains constant negotiations with its banks for renewing and increasing the credit facilities to meet the required working capital for the Group's future growth. After making enquiries, the directors are confident that the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

4. The Group is currently the subject of on-going tax audits. On 1 May 2011 a tax assessment received in late 2010 by the Company's subsidiary, Telit Communications S.p.A, in respect of the 2005 tax year was settled in full by the payment of $1.3 million (€0.9 million).

In addition, Telit Communications S.p.A. has received assessments and/or penalty notices for the years 2004 and 2006 in the approximate aggregate amount of $2.2 million. The Company is in various stages of attempting to settle or otherwise appeal such assessments and penalty notices. In addition, see also note 9b.

5. On 1 August 2011, the Company waived any and all claims it then had or in the future may have against its chief executive in relation to certain indemnification letters provided and to any other tax related claims in connection with the chief executive's service and employment agreements. Pursuant to the indemnification letters, the chief executive had personally undertaken to satisfy in full certain potential tax liabilities if applicable. The underlying potential liability stems from possible tax exposures relating to the chief executive's past and current employment and service arrangements. After due and careful consideration of the matters, the Board of directors authorized the release of the chief executive from any liability under those indemnification letters.

6. On 17 August 2011, the Company's Israeli subsidiary, signed together with the other shareholders in Cell-time Ltd. an agreement to sell 100% of the shares of Cell-time for an aggregate consideration of $1.65 million. The transaction was completed in September 2011. The Group's part in the consideration was $528,000. In accordance with this a gain of $83,000 was recognised for subsequent increase in fair value less costs to sell this investment.

7. Reconciliation of operating profit, profit before tax and net profit to the adjusted figures:

8. Net cash / (debt) position

The Group continues to use cash in its operating activities, investing heavily in research and development as well as sales and marketing.

The table below presents the net cash position at the year-end:

(1) Drawn letters of credit and borrowings arising from invoice advances use for working capital financing

(2) Representing the preferential rate loan supported by the Ministry of Trade and Commerce in Italy provided in connection with the Group's business development program in Sardinia. The loan is denominated in Euro, attracts interest at a rate of 0.75% and is repayable in ten annual instalments that commenced on 20 March 2009.

(3) Representing a preferential rate loan 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 Euribour 6 months less 20% and is repayable in 15 semi-annual instalments that will commence in June 2012.

The directors believe, based on the past performance of the relevant subsidiaries and the history of the relationships with the lending banks, that the credit facilities will remain available to the Group in the foreseeable future and that therefore the Group will be able to continue to fund its operations from these credit facilities.

9. Subsequent events

A. On 3 January 2012 the Company consummated the binding agreement it entered into on 20 December 2011 to purchase 100% of the shares of Navman Wireless OEM Solutions LP, a designer and manufacturer of world-class GPS modules and solutions, for $3.0 million in cash. The amount is subject to an additional earn-out amount of up to $750,000 subject to certain conditions. The acquisition of Navman's technology and its US based executive engineering and sales staff will make Telit a major contender in the GPS market while providing an enhanced product portfolio for its m2m customers. No assessment of the fair values of the assets and liabilities acquired has yet been completed due to the proximity of the transaction completed compared to the finalization of the Group's financial statements.

The book value of the assets purchased is as follows:

(1) the agreement provided a working capital adjustment for the difference between the actual working capital transferred and $650,000

B. Telit Wireless Solutions S.r.l received tax assessments from the Italian Tax Authority for the years 2006 and 2007 in the approximate aggregate amount of $0.85 million (€0.62 million). The Company paid a nominal amount in settlement of the 2006 tax assessment, and settled the 2007 tax assessment in February 2012 based on the opinion of its legal and tax advisors by payment of $0.3 million (€0.24 million).

C. On 13 January 2012, m2m Solutions LLC, a company allegedly incorporated under the laws of the State of Delaware, USA ("m2m Solutions"), filed a complaint in the United States District Court for the District of Delaware (the "Court") against Motorola Solutions Inc. ("Motorola"), Telit Communications PLC ("the Company") and Telit Wireless Solutions Inc. ("Wireless"), asserting that Motorola allegedly infringed one and the Telit defendants allegedly infringed two patents allegedly owned by m2m Solutions (the "Complaint").

m2m Solutions asserted that the Company and Wireless allegedly infringed, and continue to infringe, one or more of the claims covered by the asserted patents, and asked the Court to award: (i) damages for past infringement (i.e., on products sold by them since 2009, when the older of the two patents was issued), (ii) treble damages for alleged willful infringement, and (iii) m2m Solutions' attorneys' fees and costs. m2m Solutions also asked the Court to issue an injunction prohibiting the Company and Wireless from selling any allegedly infringing products in the future.

In connection with the complaint, on 2 February 2012, the Company received a letter from Motorola asserting that the Company is allegedly required to indemnify Motorola pursuant to provisions of the Asset Purchase Agreement pursuant to which Wireless purchased the assets of Motorola Israel Ltd.

The Company is still examining whether it is required to indemnify Motorola and/or to pay any damages, or counsel fees that Motorola may incur, and in the meantime, has, on 14 February 2012, together with Wireless, signed a Tolling Agreement with Motorola and Motorola Israel Ltd. agreeing, inter alia, that during the pendency of the lawsuit none of the parties will make claims against each other arising from the causes of action asserted by m2m Solutions or seek any cost recovery or indemnity.