27th Jul 2006 11:36
Telit Communications PLC27 July 2006 Press Release 27 July 2006 Telit Communications plc ("Telit" or "the Company") Update on current trading and strategy Telit Communications plc (AIM:TCM), the global wireless communications developerand distributor, is pleased to give the following update on current trading andstrategy. Wireless Solutions Business Unit Telit has further expanded the infrastructure of the Wireless Solutions BusinessUnit and particular emphasis has been placed on the development of a globalsales network. This focus is demonstrated by the announcement made by theCompany on 30 May 2006 concerning the acquisition of Bellwave M2M Co Ltd and theestablishment of "Telit APAC", the Company's gateway to expansion in the AsiaPacific region. In accordance with Telit's stated expansion strategy for the Wireless SolutionsBusiness Unit, the Company is pleased to announce the formation of a new companycalled Telit Wireless Solution Inc. (Telit Americas). Telit Americas,established on 1 July 2006, is based in Raleigh, North Carolina, and currentlyhas nine employees, most of whom are sales and product marketing experts. Themain objective of the new subsidiary is to focus on the telematics and fleetmanagement sectors, two of the largest industry segments for the application ofmachine-to-machine technology in the United States, in addition to the Company'sfocus on Automatic Meter Reading (AMR). According to ABI research, the m2mmarket in North America is expected to generate sales of between 6 to 7 millionunits in 2007 and experience an average annual growth of 24% to 28% until 2010. Mr Roger Dewey has been appointed as President of Telit Americas. He previouslyheld the position of Vice President of Global Sales at Sony Ericsson m2m. Theeight additional employees at Telit Americas are former employees of SonyEricsson Mobile Communication USA and Motorola. To further strengthen Telit's position in the global m2m marketplace, thefollowing organisational changes have also been made: • Mr Felix Marchal has been recruited to the position of Vice President of Global Sales. Mr Marchal was previously employed at Wavecom as Indirect Channel Sales Director EMEA. • Mr SG Kang has been appointed as President of Telit APAC. Mr Kang was previously Sales VP Motorola South Korea at Pantech. The Company is pleased to announce that, in late June 2006, Telit officiallyopened a new research and development centre in Cagliari, Sardinia. Telit wasawarded a grant/loan combination of €25.5 million by the Italian government forthis new centre which was opened inside the Tiscali facility and benefits fromtheir support. The new centre will serve both businesses in developing futureproducts such as short-range connectivity products (Wi-Fi, WiMax, Bluetooth,RFID) and will employ approximately 100 engineers by 2008. Over the first half of 2006, the management of the Company has investedsignificant resources in further enhancing the Company's infrastructure. Telithas opened satellite offices in 11 countries worldwide, signed new substantialdistribution agreements and opened two new R&D centres (Seoul, Korea andSardinia, Italy) in addition to the one in Trieste, Italy. Telit is now set upto serve all m2m market demands with a full range of products (GSM/GPRS andCDMA). In addition, Telit has started the development process for futuretechnologies such as UMTS earlier than originally planned using the fundsreceived from the Italian government and due to stronger than expected interesttowards WCDMA products. The recent trends in the m2m market place and thegrowth of Telit's m2m business have shown that the defined strategy of theCompany has been correct and the heavy investment in the Wireless SolutionsBusiness Unit will bring future revenues and an increase in gross margins. TheCompany has, however, recognised that it takes time for new customers togenerate significant orders. The Wireless Solutions Business Unit has performed well during the first sixmonths of the current financial year, a period in which the Company hasintroduced five new products to the market. Turnover for this division for thesix months ended 30 June 2006 is expected to reach approximately €11millioncompared to €4.5million for the 6 month period to 30 June 2005, an increase of150%. This business unit has shown growth in gross profits of approximately 180%compared to the 6-month period to 30 June 2005. Wireless Products Business Unit The Wireless Products Business Unit (previously named the Enhanced Value AddedReseller ("EVAR") Business Unit) has experienced mixed fortunes over the pastsix months. This deterioration in trading is a result of changes in the Israelicellular market that is attributable to severe pricing pressure from theCompany's main customer coupled with some structural difficulties at theCompany's CDMA supplier. This business unit will produce turnover ofapproximately €30million for the six month period, in comparison to €32 millionfor the six months ended 30 June 2005. Strategy The Company's strategy is that future value creation and profitability will comefrom the Wireless Solutions Business Unit, which has been financially supportedby the cash generated from the Wireless Products Business Unit. This strategyis being fulfilled with turnover generated by the Wireless Solutions BusinessUnit showing significantly higher growth. Also, as the Company has witnessedover the current six month period, revenues for this division are much morevisible than that of the Wireless Products Business Unit. As a result of the stronger growth available from the Wireless SolutionsBusiness Unit, the Board has taken the decision to accelerate the Company'sdevelopment in this area. The Company's increased focus on the Wireless Solutions Business Unit and thesubsequent requirement to channel additional capital towards it, together withdifficult trading for the handsets business in Israel, means the Company expectsto report turnover of approximately €41million, which represents a 13% increaseover the six months ended 30 June 2005, but short of market expectation byapproximately 18%. The net loss is expected to range from €3.5million to€4million. The interim results will be announced in mid August 2006. Commenting on the trading update, Oozi Cats, Chief Executive of TelitCommunications, said: "The long-term value creator within Telit has always beenthe Wireless Solutions Business Unit and I am pleased to report that growth inthis business unit has been strong. We have invested significantly in thisbusiness unit, which will continue to be our priority. The foundations for thisglobal organisation have been set and even though they are burdening ouroperating profits we feel these investments are critical for the future of theCompany and can be supported by our cash resources. We anticipate thatexpenditure levels will stay steady against a background of increasingprofitability. "The Board is determined to achieve the objective of making Telit one of theworld's leading companies in the m2m market. We now have in place theinfrastructure to achieve that goal and look forward to updating shareholders onprogress over the coming months." - Ends - For further information: Telit Communications plc Tel: 00 39 040 419 2491Oozi Cats, Chief ExecutiveMerav Zimerman, CMO Tel: +97 237 914 [email protected] www.telit.com Media enquiries: AbchurchHenry Harrison-Topham / Chris Lane Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com Notes to Editors Telit Communications plc is a global business specialising in innovativecustomised mass production solutions for cellular communications. The Companyhas two distinct business operating divisions leveraging on its coreintellectual property and know how: • The Wireless Solutions Business Unit which designs, develops,manufactures, markets and sells a range of data cellular communication productsfor the machine to machine ("m2m") market. The Company's technology and productsenable other electronic devices and equipment manufacturers to utilise thewidely deployed GSM/GPRS cellular infrastructure to relay and accept informationwithout human intervention. Telit owns its own protocol stack and supplies A-Zsolutions for the m2m market. • The Wireless Products Business Unit which customises and distributesto mobile operators and to independent retailers, under the recognised brand "Telit", ODM's and OEM's cellular products and other related products andaccessories, utilising its extensive in-house research and developmentresources. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
TCM.L