Interim Results

Telit Communications PLC

 ("Telit" or "the Company")

Interim Results for the six months ended 30 June 2011

REVENUE INCREASED BY 36% TO $81.1 MILLION, OPERATING PROFIT INCREASED BY 123% TO $4.1 MILLION AND ADJUSTED EBITDA INCREASED BY 50% TO $8.1 MILLION

Telit Communications PLC (AIM: TCM), a global leader in machine-to-machine (m2m) communications, is pleased to announce its interim results for the six months ended 30 June 2011.

Financial highlights:

·; Revenue increased by 36% to $81.1 million (H1 2010: $59.6 million)

·; Operating profit increased by 123% to $4.1 million (H1 2010: $1.9 million)

·; Adjusted EBITDA* increased by 50% to $8.1 million (H1 2010: $5.4 million)

·; Profit before tax increased by 89% to $2.8 million (H1 2010: $1.5 million)

·; Net profit for the period increased by 89% to $2.6 million (H1 2010: $1.4 million)

·; Basic earnings per share of 2.7 cents (H1 2010: 1.5 cents)

·; Net cash of $2.5 million at 30 June 2011 (Net debt of $15.5 million and $7.2 million at 30 June 2010 and 31 December 2010, respectively)

* Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortisation, share based payments and other non- recurring expenses.

Operational highlights during the period:

·; Integration of the Motorola m2m business (acquired in March 2011) substantially completed; strengthening our position in the global m2m market

·; Continued successful 3G products development with new Evolved High-Speed Packet Access (HSPA+) products family

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

Post-period end highlights:

·; Acquired GlobalConect Ltd ("GlobalConect"), which will enable Telit to offer connectivity services to customers

Commenting on the results, Oozi Cats, Chief Executive of Telit, said: "During the period, the momentum achieved in 2010 continued and together with the successful integration of Motorola m2m, revenue growth was sustained with a positive impact on profitability. The gross margin decreased slightly due to the lower margin on the Motorola products, which we are taking steps to improve. We expect our gross margin to remain stable in the near term and we are constantly working on improving our cost base, logistics and purchasing, to achieve and maintain a higher level of profitability in the long-term.

We are pleased that we have quickly completed the integration of the Motorola business, with minimal disruption. The acquisition of GlobalConect is an additional building block in Telit's strategy to provide its customers with a full service portfolio, including connectivity and value added services."

Below are the key financial figures for H1 2011 compared to H1 2010 and FY 2010:

* Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization, share based payments and other non-recurring expenses.

For further information:

CHIEF EXECUTIVE'S STATEMENT AND REVIEW

Introduction

I am pleased to announce the Company's consolidated unaudited interim results for the first half of 2011 (also referred to as the group's results, or "the Group") and I am happy to report continued growth and improvement of the profitability compared to the first half of 2010. This has helped Telit to strengthen its position as one of the three largest m2m module suppliers worldwide, with an estimated market share of 22% according to the Beecham Research report published in June 2011.

Many of the wireless m2m module vendors differentiate themselves by focusing on specific technology standards. Telit is one of the very few vendors that support many different cellular technologies, including GSM/GPRS, CDMA and UMTS/HSPA, while catering to the arena of short range RF technologies such as Wi-Fi, ZigBee, Bluetooth and GPS Technology. Telit has delivered organic growth as well as growth through the acquisition of the Motorola business during the period.

Financial Review

The results for the first six months include revenue of approximately $16 million and gross profit of approximately $5 million from the acquired Motorola m2m business which has been consolidated from 1 March 2011. The Group achieved significant growth in the number of units shipped and, although this growth was partially offset by the decrease in the average selling price during the period, we nonetheless are reporting higher gross profit, EBITDA, EBIT, and Profit before tax margins compared with those achieved in the first half of 2010.

Whilst the majority of revenues continued to come from Telit's existing customers, a number of new customers, including the acquired Motorola m2m customer base, also contributed to the revenue growth achieved in the period. Due to the continued revenue growth from a broader group of customers, Telit's dependency on major customers continues to decrease and the top 10 customers contributed approximately 28% of total revenues in the period (2010 - 39%).

The split of revenue on a geographical basis for the six months ended 30 June 2011 and 2010 and for the full year 2010 is as follows:

The continued development of Telit's global footprint is seen by the geographical division of revenues for H1 2011. For the first time the EMEA region is down to 50% of the overall revenue even though revenues from the region increased.

Our operations in the Americas continued to show significant growth during the period, both organically and due to the integration of the Motorola m2m customer base. We expect that increased weighting of the APAC and Americas region will continue into the future.

Gross profit in the period increased to $31.6 million, compared to $25.2 million in H1 2010, resulting in an overall margin of 39.0% compared to 42.2% in H1 2010, reflecting the lower gross margin typically achieved by sales of the Motorola m2m products, relative to Telit's own products. The Board expects gross margin to be maintained at around 40.0% in the long term.

Research and development expenses were $10.7 million and 13.2% of total revenues, compared to $8.7 million and 14.6% of revenue in H1 2010. Sales & marketing expenses were $10.1 million and 12.4% of revenue, compared to $8.3 million and 13.9% of revenue in H1 2010. General and administrative expenses were $7.6 million and 9.3% of the revenue, compared to $6.2 million and 10.3% of revenue in H1 2010.

The other expenses are related mainly to the deal costs of the acquisition of Motorola m2m and integration costs following the completion of the transaction.

The overall operating expenses were $28.4 million compared to $23.2 million in H1 2010 reflecting the increase in the Group's revenue and the integration of the Motorola business which resulted in an operating profit for the period of $4.1 million, a significant improvement from an operating profit of $1.9 million in H1 2010.

Profit before tax was $2.8 million, compared to $1.5 million in H1 2010 and the net profit for the period was $2.6 million compared to $1.4 million in H1 2010. Basic and diluted earnings per share from continuing operations for the period were 2.7 and 2.4 cents, respectively, compared to basic and diluted earnings per share of 1.5 and 1.4 cents respectively in H1 2010.

Shares outstanding

In February 2011 the Company issued 23,793,750 new ordinary shares of 1 pence each at 80 pence per share to new and existing investors for a consideration of $29.3 million (£18.2 million) net of issuance expenses of $1.3 million (£0.8 million). $22.7 million of the funds raised was used to fund the acquisition of Motorola m2m and the remaining proceeds are being used by the Company for its working capital needs which has led to a net cash position as at 30 June, 2011 of $2.5 million compared with net debt of $15.5 million on 30 June 2010 ($7.2 million at 31 December 2010).

During the period, the Company issued 801,091 new ordinary shares of 1 pence each, due to an exercise of options under the Company's share option plan and 17,667 options lapsed.

Following the completion of the above mentioned transactions, the Company's total issued share capital on 30 June 2011 consisted of 101,764,575 ordinary shares of 1 pence each with one voting right per share and no shares held in treasury. The number of outstanding options, as at 30 June 2011 was 14,069,700, comprising 12.15% of the Company's share capital on a fully-diluted basis.

Business Review

During H1 2011 and immediately following the end of the period, the following major developments took place that contributed to the overall performance of the Company and/or will contribute to the Company's future results:

1. Acquisitions

Following the completion of the acquisition of Motorola m2m earlier in the period integration of the business is now substantially completed. The major milestones of the integration included:

·; Telit hired 33 employees, the majority of which were based in Israel. An additional 8 employees were hired during the period in order to sufficiently staff the positions required to operate the enhanced Telit's operations in Israel, principally in the areas of logistics, R&D and finance where staff were previously predominantly sales-focused;

·; The Company began the process of strengthening the new R&D centre by hiring a number of engineers and aligning its targets with the goals of the group as a whole; this centre will not only handle the Motorola product line but is also assigned to projects related to future products;

·; By 30 June 2011, substantially all of the agreements to which Motorola m2m was a party (reseller, distribution, manufacture and purchase) were either assigned to the Company or renegotiated and signed directly between Telit and the customer; and,

·; The collection of more than 90% of the $10.3 million account receivables and sold or consumed more than 80% from the inventory that were acquired as part of the deal.

The acquisition of GlobalConect 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 intimate and long-term customer relationships to provide its customers with end-to-end solutions which include:

·; Connectivity, including products which are comprised of hardware and/or software modules which are already connected to a cellular network, allowing our customers to focus on servicing their own customers without network connection concerns;

·; Backend server provision, allowing Telit's customers to build their own service offerings. This backend server will be configured to a wide common denominator of services, leaving only the "last mile" of the server to be programmed by the customer; and;

·; Value added services, such as upgrading Firmware-Over-The-Air, (FOTA), extended hardware warranty, remote network management and related services.

2. Innovation

Telit is committed to continued investment in R&D and new technologies which will enable it to offer a wide spectrum of mobile communications and assembly technologies to respond to the requirements of customers from all market segments. During H1 2011 the Company launched the Telit HE-863 and HE-910 modules, the new modules in the HE series.

HE-863 is a powerful, low-cost and fully equipped HSPA m2m module with embedded GPS receiver and it is very suitable for medium to high-volume applications such as mobile computing, in-car telematics, PDAs, e-readers, tablet PCs, and consumer electronics in general.

The HE-910 is the smallest module featuring 5-band HSPA+ and as with all Telit's modules, the HE series features Premium FOTA management for fast, secure, reliable and cost software updates.

People

Telit's focus is, and will continue to be, to expand and strengthen its position as one of the world's leading m2m technology providers. The hard work and dedication of Telit's staff across the globe remains crucial to Telit's success. I would like to thank the Company's employees, management team and directors for their commitment to the Company and its success. Their dedication is an invaluable asset to the Company.

The number of employees of the group is as follows:

* Including 33 employees hired from Motorola.

Board changes

On 21 April 2011 Mr Ram Zeevi was appointed as an independent Non-Executive Director to the Board of Directors.

On 23 May 2011 Messrs. Davidi Gilo and Nicola Miglietta were appointed to the Board as independent Non-Executive Directors replacing Mr Amir Scharf and Mr Andrea Mandel Mantello.

On 23 June 2011 Mr Yosi Fait was appointed as Finance Director. Mr Yariv Dafna stepped down from the Board, remains the group CFO, with responsibility for Telit's day-to-day financial activities and continues to serve as a director of Telit's subsidiaries worldwide.

Market Opportunity

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. The board, based on the past experience, believes that these forecasts represent the future trends in our market.

Strategy

We believe that Telit is well positioned to take advantage of the market opportunities ahead and look forward to continuing to grow our revenue and gain market share while maintaining existing margins. We are constantly seeking further expansion opportunities through new technologies or by gaining access to new territories and new market segments. We believe this will continue to have a positive effect on our results in the second half of the year and beyond. Moreover, following the acquisition of GlobalConect, Telit is ready to add a connectivity offering to its customers, which is expected to contribute to 2012 revenue and profit.

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 Company's progress over the coming months.

Outlook and update on current trading

The outlook for the rest of 2011 remains positive for Telit, and we expect to continue our robust growth. Trading has remained stable since the half-year end. We believe we are well-positioned to benefit from key trends in the technology market and will look to leverage the Motorola m2m integration to further increase market share in 2011 and beyond. We will continue to review expansion opportunities, both organic and through acquisitions, to maintain the momentum and continue to expand activities within the m2m value chain. The Board is pleased to report that it expects the Company's full year results for the year ending 31 December 2011 to meet the current Board expectations.

Oozi Cats

Chief Executive

19 September 2011

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION  

CONSOLIDATED STATEMENT OF CASH FLOWS  

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY  

Six months ended 30 June 2011 (Unaudited)

Six months ended 30 June 2010 (Unaudited)  

Year ended 31 December 2010 (Audited)  

NOTES TO THE INTERIM FINANCIAL STATEMENT AT 30 JUNE 2011 (UNAUDITED)

1. The Company was incorporated and registered in England and Wales as a public limited company on 30 November 2004 under the Companies Act 1985.

2. The interim financial statements include the results of operations and the financial position of the Company and its subsidiaries (together the "Group") as at and for the six months ended 30 June 2011.

The consolidated interim financial statements of the Company have been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the AIM Rules using the accounting policies set out in the Group's 31 December 2010 statutory accounts. The AIM Rules do not require compliance with the requirements of IAS 34 "Interim Financial Statements" and these consolidated interim financial statements have not been prepared in compliance with the disclosure requirements of that standard. The consolidated interim financial statements have not been audited or reviewed and do not constitute the Company's statutory accounts within the meaning of Section 435 of the Companies Act 2006. The financial information for the year ended 31 December 2010 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

3. The Directors have not declared an interim dividend.

4. On 16 February 2011 the general meeting of the Company's shareholders approved a placement of 23,793,750 new ordinary shares at 80 pence each, to raise approximately $30.6 million (£19.0 million) before issuance expenses of approximately $1.3 million (£0.8 million). The placing proceeds were used to fund the acquisition of Motorola Solutions Inc's m2m modules business ("Motorola m2m").

5. On 1 March 2011 the Company's subsidiary Telit Wireless Solutions Ltd ("Telit Israel") completed the acquisition of Motorola m2m for a consideration of $22.7 million. Motorola m2m specialises in the design, development, integration, evaluation and deployment of m2m applications worldwide and offers a variety of m2m modules for wireless technologies.

In the four months period to 30 June 2011, Motorola m2m contributed revenue of approximately $16 million and gross profit of approximately $5 million to the Company's results.

The provisional fair value of the assets and liabilities of Motorola m2m recognised at the acquisition date is as follows:

6. On 1 April 2011 the Company's remuneration committee and Board of Directors approved the grant of 1,952,000 and 520,000 options over ordinary shares in the capital of the Company, respectively, to Oozi Cats and Enrico Testa, Chief Executive and Chairman of the board of directors of the Company at an exercise price of 81 pence. This grant was authorised as part of a group-wide grant of new options to employees, managers and consultants of Telit. The total number of options granted is 4,124,000, vesting in three equal annual instalments until April 2014.

7. 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).

8. Reconciliation of operating profit to Adjusted EBITDA:

(1) Non-recurring expenses of $0.3 million in H1 2011 are related mainly to the deal costs of the acquisition of Motorola m2m and $0.3 million in H1 2010 represent the fees paid to third parties for the due diligence procedures and legal services related to the Company's participation in a bid to acquire Cinterion Wireless Modules Holdings GmbH.

(2) Non-recurring income in 2010 relates to a $1.2 million gain recorded by the Company in respect of the fair value of the shares allotted to BAMES as part of the agreement signed in July 2010.

9. Net cash/(debt) position:

(1) Included within current borrowings are:

·; The short-term element of the preferential rate loan of the Ministry of Trade and Commerce in Italy, amounting to $1.1 million.

·; Working capital credit lines and borrowings mainly in the form of invoice advances totalling $16.3 million. These borrowings are secured partially by letters of guarantee issued by the Company. The total additional lines of credit and invoice advance facilities available at 30 June 2011 were $14.6 million.

(2) Includes $6.5 million which represent the long-term element of a preferential rate loan from the Ministry of Trade and Commerce in Italy (total loan balance was $7.6 million at the balance sheet date). The loan, provided in connection with the Group's business development program in Sardinia, attracts interest at a rate of 0.75% per annum and is repayable in ten annual instalments that commenced in March 2009 until March 2018.

10. Subsequent events

1. On 6 July 2011, Telit Communications s.p.a., the Company's Italian subsidiary, entered into a preliminary agreement for the acquisition of the premises where its business is located, for a total purchase price of $7.9 million (€5.5 million), out of which $1.4 million (€1 million) was paid in July 2011. The completion of the deal is expected in October 2011.

2. On 11 July 2011 the Company completed the acquisition of GlobalConect Ltd, a company which provides cellular connectivity services to customers of m2m applications and solutions. As consideration for the acquired shares, the Company paid $2.9 million divided into $0.7 million in cash and 800,000 newly issued ordinary shares with an assumed value of GBP 1.7 per share. The share purchase agreement includes an adjustment mechanism according to which, in the event that within 3 years from the completion of the acquisition conditions related to the performance of GlobalConect are met, and the Company's share price does not reach at least GBP 1.7, the Company will issue to sellers additional shares up to a maximum of 360,000 shares.

3. On 1 August 2011, the Company waived any and all claims it may now or in the future have, against its chief executive, in connection with possible tax exposures relating to the chief executive's past and current employment and service arrangements.

4. On 17 August 2011, the Company's Israeli subsidiary which holds 29.33% of the shares in Cell-time Ltd, signed together with the other shareholders in Cell-time Ltd. an agreement to sell 100% of the shares of Cell-time at a valuation of $1.65 million. The agreement is subject to standard conditions being met, including receiving the approval of the Israeli antitrust authority. The transaction is expected to complete in September 2011.

5. In September 2011 Telit Wireless Solutions s.r.l., the Company's Italian subsidiary, received a tax assessment from the Italian Tax Authority of $0.85 million (€0.62 million) in respect of the 2006-2007 tax years. The Company, based on the opinion of its legal and tax advisors believes that no provision is required to be booked in connection with this assessment and will vigorously defend its position.