2
Table of Content
Telit Communications PLC
Highlights
We live M2M
Chairman’s & Chief Executive’s Statement
Telit’s Board of Directors
Corporate Governance
Report on Directors’ Remuneration
Directors’ Report
Statement of Directors Responsibilities
Independent Auditor’s Report to the
Members of Telit Communications PLC
Financials
Company Information
Telit Offices world wide
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Telit Communications PLC
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Telit is a leading global wireless technology company. It develops
manufactures and markets GSM/GPRS, UMTS/HSDPA, CDMA/EVDO
and short range RF (including WiFi and ZigBee) communication
modules
(M2M) applications which
streamline business processes by enabling machines, devices and
vehicles to communicate via mobile networks.
for machine-to-machine
As both a producer and marketer of advanced cellular technology
and products, Telit is uniquely positioned in the M2M market. Telit
has attained a strong market position and its management believes
it is ranked third in the world. Telit is one of the few companies in
the industry with full control over the underlying technologies in its
products. Telit owns valuable patents and boasts especially strong
in-house technology and development expertise.
Telit is listed on AIM (Ticker: TCM)
The M2M Market
The international market for machine-to-machine (M2M) wireless
communications is rapidly growing as wireless communications have
become 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 into their business as their
operations expand and modernize.
What is M2M?
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.
4
Highlights
Financial
Revenue increased by 10.7% to €63.8 million (2008: €57.6 million, excluding non-
recurring royalties of €1.5 million).
Revenue in H2-2009 increased by 30% to €36.0 million (H1-2009: €27.8 million).
Gross profit increased by 11% to €30.6 million (2008: €27.6 million, excluding non-
recurring royalties of €1.5 million)
Adjusted operating profit2 for the year (excluding one time compensation charges of
€2.75 million) of €0.6 million (2008: €0.6 million)
Adjusted EBITDA1 for the year €4.2 million (2008: €3.7 million)
Loss before tax of €2.9 million (2008: profit of €1.2 million)
Loss for the year of €3.0 million (2008: loss of €3.2 million)
Operational
Accelerated growth of Telit’s Americas and APAC regions increases Telit’s
diversification.
The transfer of the manufacturing of Telit’s products to China was substantially
completed at the end of the year.
The Company continued its penetration of the automotive sector by entering into
agreements with Magneti Marelli (Italy), a leading global supplier in the sector; with
MetaSystem (Italy) and with Positron (Brazil), a PST Electronics company.
The Company entered into a strategic collaboration agreement with Deutsche
Telekom and T-Mobile which will see the three companies working closely together,
worldwide, on sales and marketing in their target markets and to jointly develop
innovative M2M products and services in the future.
Services and Products
Launched INFINITA Services offering with Premium FOTA and extended Hardware
warranty
Presented new Short-Range product series and the smallest GSM/GPRS M2M module
in the world
Presented extremely powerful and cost-effective GPS module SE867-AGPS
1. Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization and share based payments from
continuing operations and, for 2009 only, expenses related to manufacture restructuring costs.
2. Adjusted operating profit is defined as operating profit with other expenses added back.
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6 We live M2M
At the heart of Telit M2M solutions lies a proprietary software platform including a
comprehensive AT-command interface for communication between applications and
modules. Telit’s wireless modules can be easily applied to vertical application areas such as:
• Automated Meter Reading
• Vending Machines
• Car Telematics
• Fleet Management and Tracking/Logistics
• Mobile Computing (Mobile Workforce
Automation)
• Point of Sale Terminals/Handhelds
• Security Systems and Personal Tracking
Devices
• Industrial Processes
• Information Displays
• Healthcare
• Public Transportation and Road Tolling
• Emergency Communication Systems
Telit Worldwide
Telit sells
its products
through a network of
resellers to more than
3,000
communications
solution providers and
systems
in
more than 50 countries
around the world. Our
customers are served
directly by us or through
a global network of more
than 30 distributors.
integrators
AMERICAS
Telit Wireless Solutions Inc.
(Americas)
•
Regional headquarters for
the Americas region
Center of competency for
Automotive products
Sales and Marketing for
the Americas
•
•
EMEA
Telit Communications
S.p.A (EMEA)
•
•
Global headquarters
Product Development,
Product Management,
Production of GSM/GPRS
products out of the main
locations Trieste and
Cagliari, Italy
Sales and Marketing for
EMEA
•
APAC
Telit Wireless Solutions
Co.Ltd (APAC)
•
Regional headquarters for
the APAC region
Product Development,
Product Management,
Production of CDMA and
UMTS products
Sales and Marketing for the
APAC region
•
•
Telit’s headquarters is in
Rome, Italy, with regional
headquarters in Raleigh
NC, USA and Seoul, Korea. Its R&D centers are in Trieste and Cagliari, Italy, Seoul, Korea
and Sofia Antipolis, France, with regional sales offices in Brazil, China, Denmark, France,
Germany, Great Britain, Israel, Italy, Korea, Spain, the Republic of South Africa, Taiwan,
and the USA. On average during the year ended 31 December 2009, Telit employed 362
employees worldwide.
Telit provides global support to its international customers covering the entire spectrum
of the M2M market. Its vast experience doing business across the globe has helped the
Company establish strong channels and excellent access to key players 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.
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Telit’s Strategy
Our strategy for 2010 is to continue to leverage our position as a leading player in the M2M
market, offering customers a competitive edge by reducing their total cost of ownership
and optimizing the performance of their products. We plan on doing this through continued
investment in R&D and building on the foundations laid by our regional operations to date.
This will be supported by the transfer of the manufacturing of the vast majority of our
products to a lower cost manufacturer in China.
Competitive Advantage
Based on its extensive R&D experience, gained through hundreds of engineering man-years,
Telit has developed its own protocol stack as the technological basis of its solutions. This
enables the Company to offer customers solutions ranging from complete devices to embedded
products, including fitting its platform into its customers’ products. Underpinning its superior
growth rate, Telit has three major advantages:
1. Flexibility
Telit is the first and only M2M manufacturer that offers customers a form factor and family
concept. All modules in a family have the same form factors and full software compatibility,
but offer different functionality to meet the requirements of different vertical application
segments - the same size, the same shape, the same connectors and the same software
interface. The advantage for users is self-evident: all modules in a family are interchangeable.
Above all, customers can easily replace the modules with successive products without
changing the application. This reduces effort, time and costs associated with development.
As a result, Telit is able to set itself apart from the competition, which often changes the size
and shape of its modules with new models. Customers, however, need modules that can be
used for years in their applications.
2. Scalability
Telit’s modules are tailored for various applications and different production lot sizes: for
quantities of a few thousand units, the Company developed the GM family, which offers
low outlay and costs for integration. For applications that are produced in the tens of
thousands, low production costs are the prime concern. In this case customers can turn
to the GE product range with its Ball Grid Array (BGA) assembly concept. Telit is the first
company offering BGA modules, which can be assembled like electronic components and
integrated easily into the production line - no connectors or cables are needed.
3. Innovation
Controlling its own intellectual property enables Telit to remain on the cutting edge of
product innovation. Integrating GSM/GPRS, CDMA and UMTS technologies into its product
family concept enables customers to choose between various technologies for each
module - depending on the market in which their application is being used. The main
advantage is that no changes are required to the application. Consequently, Telit supplies
modules that can be used worldwide without restriction. As communication technologies,
such as RFID and Zigbee enter the market, Telit will build on them to ensure its customers
are at the cutting edge of M2M solutions.
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Chairman’s & Chief Executive’s Statement
Chairman’s Statement
Enrico Testa, Chairman of the Board
2009 has been a very challenging year for the global economy, and
the M2M market was no exception. We focused this year on continued
revenue growth, while trying to minimize operating costs. In 2009
we did incur substantial costs in connection with the transfer of the
manufacturing of our products to our new manufacturing partner in
China, resulting in termination costs that are reflected in our results
for the year. These expenses were an investment facilitating the achievement of our goal of
decreasing manufacturing costs and we believe that the long term return on this investment
will be substantial and will cement Telit’s position as a market leader in the M2M arena.
Board changes
In February 2009 Boostt B.V. nominated Mr. Massimo Testa to the Board of Telit as a
replacement of Mr. Stella. Mr. Testa, has established a group that today works alongside
manufacturers of raw materials for international real estate development companies. Mr.
is currently a director and shareholder of Techvisory S.A. and Wireless Solution
Testa
Management S.L., which are corporate parents of Boostt B.V., a significant shareholder of
the Company. Mr. Testa is the brother of Mr. Enrico (Chicco) Testa, Chairman of the Board of
Directors of the Company.
Also in February 2009, Mr. Maurizio Gasparri, an independent non-executive director,
resigned from the Board due to an increased workload from his other commitments.
Enrico Testa
Chairman of the Board
4 May 2010
Chief Executive’s Statement
And Review
Oozi Catz, Chief Executive Officer
Introduction
2009 has been another year of growth for Telit, in spite of the global
economic slowdown which severely affected our industry and main
competitors. During this very difficult year we still managed to achieve
a revenue growth of 10.7%, an adjusted operating profit of €0.6 million (excluding one-time
items) and an increase of the adjusted EBITDA to €4.2 million (2008: €3.7 million). Naturally,
the global recession has taken its toll on Telit as sales did not achieve the growth rates of
previous years, although the results were above expectations. We continued to adjust, react
and prepare during the year for the immense challenges and opportunities that the recession
presents to us (including the transfer of the manufacturing of our products to China), while
continuing to win new business, gain market share and retain our existing customer base.
Although the first half of the year was a very difficult one and a direct continuation of the last
quarter of 2008, the second half of the year saw a dramatic increase of 30% in revenues (€36.0
million) over the first half (€27.8 million).We view 2010 as the recovery year for the M2M industry
and believe that the future of this industry, and Telit’s positioning at its forefront, is bright.
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Below are the key financial performance measures for continuing operations for 2009
and 2008:
Revenue1
Gross profit
Gross margin
Other income
Research & Development
Selling & Marketing
General & Administrative
Other Expenses2
Operating (loss) / profit
Adjusted EBITDA
2009
€’000
63,761
30,632
48%
49
(10,866)
(11,137)
(8,105)
(2,750)
(2,177)
4,234
2008
€’000
59,083
29,096
49.2%
1,002
(9,647)
(10,829)
(9,058)
-
564
3,673
1 2008- Including licence and royalty income
2 One-off payments in connection with the termination of the exclusivity manufacture by SEM.
Financial Results
Following the indications we provided in our trading update on 9 February 2010, the results for
the year are above market expectations and underline the strength of the Company’s position
in the global M2M market, supported by the geographical expansion that began in 2006 and
strengthened during 2007 and 2008. In spite of the global recession, the Company’s results
for 2009 show substantial growth in revenue with a continued improvement in the adjusted
EBITDA.
The results for the year ended on 31 December 2009 reflect substantial growth (especially
taking the global economic environment into account) when excluding one-time items, strong
margins and underlying sales momentum.
Revenues for the year increased by 10.7% to €63.8 million (2008: €57.6 million, excluding
non-recurring royalties of €1.5 million received in 2008). After a slow start to the year, H2
revenues increased 30% to €36.0 million over the €27.8 million revenues in H1.
Gross profit increased by 11% to €30.6 million (2008: €27.6 million excluding non-recurring
royalties of €1.5 million).
Other income decreased to €0.05 million (2008: €1.0 million). This is due to a delay in
obtaining the necessary approvals for the recognition of €0.8 million in relation to
governmental grants in Italy. The grants had initially been expected to be recognised in 2009
but this was delayed due to external reasons which are not under the Company’s control.
Research & Development expenses (€10.9 million during the year), as a percentage of
revenues, increased slightly to 17.0% (2008: 16.3%, €9.6 million).
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Chief Executive’s Statement
Sales & Marketing expenses (€11.1 million during the year), as a percentage of revenues,
decreased to 17.4% (2008: 18.3%, €10.8 million).
General & Administrative expenses (€8.1 million during the year), as a percentage of
revenues, decreased to 12.7% (2008: 15.3%, €9.0 million).
Adjusted EBITDA increased to €4.2 million (2008: €3.7 million).
Share based compensation charges were €0.4 million in 2009 and in 2008.
This resulted in an operating profit for 2009 of €0.6 million (excluding certain one-time items),
compared to a profit of €0.6 million in 2008 and a loss before tax (excluding one-time items) of
€0.2 million, compared to a profit before tax of €1.2 million in 2008.
Certain one-time items in 2009 relates to compensation payment agreed during July 2009
with BAMES in order to convert the agreement with SEM, a leading global electronics service
provider, to be non-exclusive. As a result of the cancellation of the exclusivity, SEM is entitled to
a compensation of €2.75 million to be settled by set-off against the receivable balance Telit has
from the license agreement entered into by the parties in December 2008.
Basic and diluted loss per share from continuing operations were 7.6 Euro cents for the period
compared to a loss of 7.0 Euro cents loss per share in 2008.
Cash
The Group continues to use cash in its operating activities, investing heavily in R&D and
S&M. Despite this, the Group’s net debt position at the end of 2009 improved to €7.2 million
(2008: net debt of €11.9 million) due the successful placing of 28 million shares in August
and December 2009 for a gross consideration of £5.7 million.
Net Debt position
Current borrowings (1)
Non-current borrowings (2)
Cash and cash equivalents
Restricted cash deposits
Total
2009
€ ’000
15,425
3,150
(7,898)
(3,456)
7,221
2008
€’000
13,417
3,531
(4,619)
(391)
11,938
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1. Included within current borrowings are:
The short-term element of the preferential rate loan from the Ministry of Trade and
Commerce in Italy, amounting to €0.4 million.
A drawn amount of €5.2 million on a loan with a maturity date of 15 October 2010. The
interest rate on this short-term bank loan is Euribor plus 2.325% per annum. The short-
term bank loan is a bridging loan in advance of funds to be received from a grant from the
Italian government to Telit Italy to support a development project in Sardinia which was
successfully completed on December 31, 2009.
Drawn letters of credit and borrowings arising from invoice advances totaling €8.2 million
Factoring facilities against qualifying receivables totaling €1.6 million. These borrowings
are secured against the factored receivables and are with recourse to the Company in the
event that the receivables are not collected.
2. The €3.15 million represents the long-term element of a preferential rate loan from the
Ministry of Trade and Commerce in Italy of €3.9 million provided in connection with the
Group’s business development program in Sardinia. The loan attracts interest at a rate of
0.75% and is repayable in ten annual installments commenced on 20 March 2009.
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.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which could have a material impact
on the Group’s long-term performance.
Competitor risks
The Group operates in a highly competitive market with significant product innovations. If
competitors introduce new products that employ new technologies, or if new industry or new
government standards and practices emerge, the Group’s existing technology and systems
may become obsolete.
We are subject to competition from domestic and overseas competitors who have greater
capital and other resources and superior brand recognition than the Group. Consolidation
between competitors may take place in the industry, which may further intensify competition
by creating stronger competitors.
Competitors may launch new products in our markets, including the updating of their existing
product lines, and may adopt more aggressive pricing policies. This may manifest itself in
price pressures which create downward pressure on gross margins.
To manage these risks, the Group invests in the development of new products using different
communication technologies in order to expand the Group’s product portfolio aimed at
attracting new customers and increasing revenue from existing customers. The Group also
monitors market prices on an ongoing basis.
12
Chief Executive’s Statement
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Product development
The Group’s future performance depends upon its ability to develop and introduce new
products, services or enhancements which meet the needs of its customers. The Group
incurs substantial product development expenditure designed to meet customers’ evolving
needs and to ensure compatibility with new technology in its target markets. Significant
delays in product development or introduction could have a material adverse effect on the
Group’s business, financial condition and results of operations. Developing the Group’s
technology and product range entails significant technical and business risks.
The Group manages these risks through investment in its research and development
capabilities, including the recruitment of experienced industry professionals. Our R&D
centres are based in Trieste and Cagliari, Italy and in Seoul, South Korea. Our R&D team
is responsible for managing all aspects of product development and progress reports are
routinely provided to our Chief Operating Officer.
Commercial relationships
The Group has significant contracts with a limited number of suppliers, distributors and other
business partners some of which may be terminated without cause or on written notice at the
expiry of their term. Damage to or loss of any of these relationships, or renewal on less favourable
terms, could have a direct and detrimental effect on the Group’s results, the impact of which
could be material to the trading position and future profitability of the Group.
To manage this risk, the Group meets with individual management from such strategic partners
on a regular basis, as well as seeking to diversify, where appropriate, sources of supply. In addition
the Group has a representative on the board of its principal supplier, SEM, providing insight into
that Company’s activities and operations.
Impact of Government Regulation on the Demand in the M2M Market
Government regulations are a significant driver of the growth of the global M2M market,
as such regulations require certain businesses to convert to wireless communications for
a variety of reasons. A cancellation or postponement of the due date of such regulations
could materially decrease demand for our products, as well as those of our competitors,
thus adversely affecting our results of operations.
Manufacturing
The Group’s products are manufactured by third parties, including outsourced manufacturers.
The Group’s supply of products could be disrupted for reasons beyond the Group’s control
such as the closure of outsourced facilities, work force actions or other issues. In addition, the
Group’s quality assurance over its products may be negatively affected by these outsourced
relationships.
The Group manages these risks by monitoring quality assurance at outsourced manufacturers
using its own test equipment on production lines.
Impact of Global Economic Conditions on Demand in the M2M Market
The worldwide recession has adversely affected demand for our products, as well as those
of our competitors and our suppliers. A deepening recession and/or a slower than expected
global economic recovery may continue to adversely affect the demand for our products
and services or affect our ability to procure components used in the manufacture of our
modules.
Effects of Foreign Exchange
40% of Telit’s revenue in the period ended 31 December 2009 was generated in Euro (49.0%
in 2008), with the remaining 60% (2008:51%) generated in, or linked to, U.S. dollars, Brazilian
Real and South Korean Won. However, a substantial part of the Group’s purchased materials
cost was denominated in U.S. dollars during the period.
This situation become more substantial since the production has moved to China (purchasing
in USD). In response to this change, the Group has opted to change the presentational
currency of the consolidated financial statements from Euro to USD with effect from 1
January 2010. Nevertheless, despite the negative impact of the depreciation in the value of
the U.S. dollar against the Euro on Telit’s revenue in 2009, there is limited impact on the
gross profit in the period
The decision will help management to better manage the Company’s currency exposure. The
management will continue to follow and monitor the currency risk on a quarterly basis and
will take the necessary actions to limit these risks
Regional Information
In spite of the global economic crisis, Telit continued to increase its revenues. This was achieved
in a period when the M2M market did not grow at all, with certain segments even contracting.
The weakness in the European market was more than compensated for by the strong growth in
the Americas and APAC regions, resulting in an increasingly diversified geographical split of our
revenues. The split of revenue on a geographical basis for the years ended 31 December 2009
and 2008 is as follows:
2009 (€M)
% of Total
Revenue
2008 (€M)
% of Total Revenue
EMEA
APAC
Americas
Total Revenue
38.5
15.1
10.2
63.8
60.3%
23.7%
16.0%
100%
44.2
9.6
5.3
59.1
74.8%
16.2%
9.0%
100%
We expect that the Americas and APAC regions will continue to increase their weighting of its contribution to total
revenue in 2010 and beyond.
Employees
The number of employees in the continuing operations of the Group on a geographical basis
as at 31 December 2009 and 2008 is as follows:
31 Dec. 2009
31 Dec. 2008
EMEA
APAC
Americas
Total Employees
266
74
22
362
244
73
22
339
14
Chief Executive’s Statement
Business Performance & sales
During 2009 the following major developments took place that contributed to the overall
performance of the Company and will contribute to the Company’s future results:
Products and Services
Telit presented its new short-range product series and the smallest GSM/GPRS module in
the world.
Telit began offering extended warranty periods with the Infinita Services.
Telit´s CDMA M2M cellular module earned certification on Sprint’s Wireless Network.
The CC864-DUAL module certified on Crossbridge solution’s wireless CDMA data
network.
The CC864-DUAL module certified on Aeris Communications’ CDMA Network in North
America.
Partnerships
Signed Memorandum of Understanding with Magneti Marelli in the Field of Telematic
Devices for Automotive.
Meta System (Italy) chose Telit’s GE863–SIM module for its MetaSat RC06 MBK telematics device.
Developed a wireless communication system for Eurocopter.
Isabella Products selects Telit’s M2M module to enable two-way cellular communication
on digital frame vizit digital photo frame.
Strategy
Our strategy for 2010 is to continue to leverage our position as a leading player in the M2M
market, offering customers a competitive edge by reducing their total cost of ownership
and optimizing the performance of their products. We plan on doing this through continued
investment in R&D, through our Infinita Services and the integration of cellular and short
range technologies into a complete M2M offering. The strengthening of our competitive edge
and continued acquisition of market share will be supported, to a large degree, by the cost
reduction achieved by the move of manufacturing to China in the second half of 2009.
This strategy takes advantage of key trends in the M2M market:
The performance trajectory offered by many of the M2M module manufacturers overshoots
the needs of the average customer, resulting in feature-rich, expensive products thatdeliver
inferior returns on investment;
The inability of many module manufacturers to meet the demands of early adopters due
to the fact that they do not control the protocol stack required for customized product
modifications; and
Diversification of technology and increasing requirements for combined solutions based
on cellular and short range technologies.
15
To execute our strategy, Telit relies on three core competencies that differentiate it from the
competition:
Complete control of the protocol stack: Telit owns and develops the protocol stack in its
modules. The protocol stack controls all connectivity and communication with the GSM
network and is a critical success factor in being able to offer customers the flexibility
required for rolling out cost-effective M2M solutions.
Commitment to customer-driven innovation: Telit’s comprehensive expertise in R&D
enables it to help its customers win new business by working with them to develop the
most innovative, cost-effective M2M applications.
Multinational organization staffed with industry experts: Telit’s R&D and sales and
marketing units are a team of dynamic experts with proven industry experience in the
M2M and semiconductor industry.
Outlook
The outlook for the rest of 2010 and the future looks positive for Telit. While our marketplace
becomes more challenging we believe we are well positioned to take advantage of the
opportunities ahead. We are confident in our strong position within our industry and look
forward to continued business expansion. We are constantly seeking further expansion
opportunities through new technologies or by gaining access to new territories and new
market segments.
Management’s main focus is and will continue to be to expand and strengthen our position
as one of the world’s premier M2M technology providers, while striving to anticipate and
respond to market conditions that are beyond our control, such as the effects of the global
downturn and the effect of fluctuating exchange rates on our financial results.
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 employees for
their commitment to the Company and its success. Their dedication is an invaluable asset,
indeed the core asset of the Company.
At the end of this period I very much hope that it is apparent that all the efforts we have
invested and are still investing have created a solid business platform, the benefits of which
our customers, shareholders and other stakeholders can enjoy.
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.
Oozi Cats
Chief Executive Officer
4 May 2010
16 Telit’s Board of Directors
17
Enrico Testa, Executive Chairman of the Board, aged 59
Between 1996 and 2002 Enrico Testa was Chairman of the Board at ENEL
S.p.A. (the Italian provider of power and gas) and founder and member of the
Board of Directors at WIND S.p.A. Mr. Testa is currently a managing director of
Rothschild S.p.A., Between 2004 and 2009 Mr. Testa was Executive President
at Roma Metropolitane S.p.A. (the company realizing the new underground
lines in Rome), Chairman of the Organizing Committee of the 20th World Energy Congress
and Senior Partner at Franco Bernabè Group, which owns several companies in the IT sector.
Mr. Testa is the brother of Mr. Massimo Testa, a non executive director of the Company.
Oozi Cats, Chief Executive Officer of Telit Communications, aged 50
An experienced CEO and entrepreneur, Oozi Cats, in 2000, was the founder
of a communications engineering and distribution company (Dai Telecom
Ltd) in Israel. In 2002 he led the takeover of Telit in Italy and its subsequent
transformation into a global player in the M2M market. The complex
turnaround program included strategic redefinition, financial restructuring,
and human resource reorganization. Headed by Mr. Cats as CEO, Telit was
listed on the London Stock Exchange in April 2005. Prior to his role at Telit, Mr. Cats was the
founder and CEO of Auto Depot Ltd, an Israeli mass merchandising chain for vehicle supplies
and services.
Michael Galai, Finance Director & General Counsel Telit Communications
PLC, aged 44
Michael Galai joined Telit Communications PLC in 2006 as VP Legal &
General Counsel. He was previously General Counsel at Lipman Electronic
Engineering Ltd. (Nasdaq, TASE: LPMA) where he took an active part in a
secondary offer to the public and the company’s sale to VeriFone Holdings,
Inc. (NYSE: PAY). Before joining Lipman, Mr. Galai was an associate with Goldfarb, Levy,
Eran and Co., an Israeli full-service general business practice that serves a wide range of
Israeli and foreign clients, with special emphasis on international transactions, financing,
securities, mergers and acquisitions and related activities. Mr. Galai also spent six years in
the Israel Securities Authority, holding a variety of positions, including spokesperson. He has
an MBA (Major in Finance), and an L.L.B from the Tel Aviv University School of Law and is a
member of the Israeli Bar.
Andrea Mandel-Mantello, Independent Non Executive Director, aged 52
Andrea Giorgio Mandel-Mantello is the founding partner of AdviCorp PLC, a
UK investment bank regulated by the UK Financial Services Authority. Prior
to his work at AdviCorp, Mr. Mandel-Martello spent 9 years at SBC Warburg
(“SBCW” now known as UBS) in London in various management positions
including Executive Director of SBC Warburg, member of the Board of SBC
Warburg Italia SIM S.p.A., and Country Head for Israel. Prior to working at SBCW, Mr. Mandel-
Martello spent two years at Chemical Bank International Limited in London and three years
at Banca Nazionale dell’Agricoltura in Rome. Mr. Mandel-Martello is a director of Coraline
S.p.A., a company which has recently acquired the business of Frette S.p.A., Italy’s leading
producer and retailer of home wear; he is a director of MOTO S.p.A. a joint venture in the
motorway restaurants business between Compass Group PLC and Cremonini S.p.A.; he is a
director of B.O.S. Better On Line systems, a Nasdaq listed Israeli company involved in VoIP
and enterprise solutions. He holds a Bachelor degree in Economics and Political Science
from Yale University.
Amir Scharf, Independent Non-Executive Director and Chairman of the
Audit Committee of Telit, aged 44
Amir Scharf is a Partner and Head of Securities Law practice at Tadmor & Co.,
Attorneys at Law, in Tel Aviv. Before joining Tadmor & Co. he was the General
Counsel and Corporate Secretary of El Al Israel Airlines Ltd., and before that
he served as Deputy Director of the Legal Department of the Israeli Securities
Authority. In 2004 - 2006 he served as a member of The “Goshen Committee”, the public
committee for setting an Israeli Corporate Governance code. Mr. Scharf was also a director
of Superstar Holidays Limited in the UK between 2005 and 2006.
Massimo Testa, Non-Executive Director, aged 52
Mr. Testa established his first company in 1984, which provided construction,
transportation and auxiliary services to the real estate sector. Over 25 years
operating in the field, Mr. Testa has established a group that today works
alongside manufacturers of raw materials for international real estate
development companies. Mr. Testa is the brother of Mr. Enrico Testa, Chairman
of the Board of Directors of the Company
18 Corporate Governance
19
Directors
The Board of Directors comprises three Executive Directors, two independent Non-executive
Directors, and one Non-executive Director.
The Board meets a minimum of once every quarter and receives a Board pack comprising a
report from senior management together with any other material deemed necessary for the
Board to discharge its duties. It is the Board’s responsibility for formulating, reviewing and
approving the Group’s strategy, budgets, major items of expenditure and acquisitions.
Audit Committee
The Audit Committee consists of Amir Scharf, Chairman, and Andrea Mandel-Mantello, the
independent non-executive directors, and meets at least once every quarter. Michael Galai,
the Finance Director and Yariv Dafna, the CFO, attend each meeting by invitation. The Audit
Committee is primarily responsible for considering reports from the Finance Director on the
half year and annual financial statements, and for reviewing reports from the auditors on the
scope and outcome of the annual audit. The financial statements are reviewed in the light of
these reports and the results of the review reported to the Board.
Remuneration Committee
The Remuneration Committee consists of Andrea Mandel-Mantello, Chairman, Amir Scharf
and Enrico Testa, and meets at least once a year. The Remuneration Committee has a
primary responsibility to review the performance of the Company’s Executive Directors and
to set their remuneration and other terms of employment. The Remuneration Committee is
also responsible for administering the employee share option scheme.
Shareholder relations
The Company meets with its institutional shareholders and analysts from time to time and
uses the Annual General Meeting to encourage communication with private shareholders. In
addition, the Company intends to facilitate communication with shareholders via the annual
report and accounts, interim statement, press releases as required during the ordinary
course of business and the Company web site (www.telit.com).
Financial performance
A budgeting process is completed once a year and is reviewed and approved by the Board.
The Group’s results, as compared against budget, are reported to the Board on a quarterly
basis and discussed at each meeting of the Board.
Going concern
After making enquiries at the time of approving the accounts, the directors have satisfied
themselves that there is a reasonable expectation that the Company and Group has adequate
resources to continue in operational existence for the foreseeable future. For this reason, the
financial statements are prepared on a going concern basis. Further information in respect
of the Directors’ consideration of going concern is included in note 1(b) to the financial
statements.
Directors share dealings
The Company has adopted a code for dealings in its shares by Directors and senior employees
which is appropriate for an AIM-quoted company.
On behalf of the Board
Michael Galai
Finance Director
4 May 2010
20 Report on Directors’
Remuneration
21
The remuneration committee is chaired by Andrea Mandel-Mantello and also comprises
Enrico Testa and Amir Scharf.
Remuneration policy
The remuneration packages of directors and senior managers are structured so as to reward
them on the basis of their responsibilities and achievements, and to encourage them to
remain with the Company for the long-term benefit of shareholders. The main components
of these remuneration packages are:
Basic salary: An individual’s salary is reviewed and determined by the committee, taking
into account his additional incentives and to align their interests within the Group.
Service contracts: No service contracts have notice periods of more than six months.
Bonus arrangements: The Company operates a discretionary bonus scheme and the
directors have a right to participate in any bonus arrangement. The Remuneration
Committee will determine bonuses for Executive Directors.
Pension arrangements: None of the directors receive any pension benefits, except for
Michael Galai, who is entitled to post employment benefits including pension fund benefits
according to his employment agreements, as is customary in Israel.
Share options: Certain of the Executive Directors have been granted share options
as described in the Directors’ Report below. The share options are subject to time-based
vesting conditions to incentivise medium-term performance and assist in retention. None
of the Group’s share option schemes are subject to performance conditions.
The services of the directors are provided to the Group as follows:
Enrico Testa was appointed as a director and Chairman of the Board on 4 May 2007.
Oozi Cats is engaged pursuant to a letter of appointment with the Company dated 29 March
2005, terminable by either the Company or the director on six months’ notice except in certain
specific circumstances where short notice can be given by the Company. In addition, since
1 October 2007 Mr. Cats has been employed by Telit Wireless Solutions Srl. in an executive
position. Mr. Cats’ remuneration from Telit Wireless Solutions Srl. includes his remuneration
under the service agreement with the Company.
Andrea Mandel Mantello was appointed pursuant to a letter of appointment with the
Company dated 29 March 2005, terminable on 6 months rolling notice.
Michael Galai was appointed as the Finance Director on 13 September 2007. Mr. Galai is
entitled to post employment benefits, as is customary for executives in Israel.
Amir Scharf was appointed as a director on 22 August 2007.
Massimo Testa was appointed as a director on 13 February 2009.
Maurizio Gasparri was appointed as a director on 17 July 2006 and resigned on 13 February 2009
Salary and
fees
Benefit in
kind
Annual
bonus
Post employment
benefits
Total
2009
-Total
2008
€’000
€’000
€’000
€’000
€’000
€’000
88
693
92
35
-
-
35
31
67
44
7
-
-
-
-
-
974
1,145
118
100
-
-
-
-
-
-
-
-
-
319
-
51
25
-
-
-
-
-
76
124
155
788
124
35
-
-
35
31
1,168
150
1,195
162
40
60
41
40
-
-
1,688
Executive Directors
Enrico Testa
Oozi Cats
Michael Galai
Non-Executive
Directors
Andrea Mandel-
Mantello1
Maurizio Gasparri 2
Giovanni Stella 2
Amir Scharf
Massimo Testa 3
Total – 2009
Total – 2008
1. Amounts in respect of the services of Andrea Mandel-Mantello are paid directly to Advicorp plc, a company
under his joint control.
2.Up to the date of resignation.
3.Since date of appointment.
Andrea Mandel-Mantello
Chairman of the Remuneration Committee
4 May 2010
22 Directors’ Report
23
The directors present their annual report and the financial statements of the Group for the
year ended 31 December 2009.
Principal Activities
Telit is a leading global company in the field of machine-to-machine (M2M) communications.
Telit develops, manufactures and markets communication modules which enable machines,
devices and vehicles to communicate via cellular wireless networks. It is the market leader
in CDMA M2M modules in South Korea and the third largest company in the GSM/GPRS M2M
modules’ business in Europe, Middle East and Africa (EMEA).
Telit’s core strengths are innovative products, complete control over its intellectual property
and its flexible, customised solutions, which enable it to offer customers the lowest cost of
ownership and a future-proof product roadmap.
Review of Business and Future Developments
A review of business, financial position, liquidity and future developments is given within the
Chief Executive Officer’s statement on pages 8 to 15, together with a review of the Group’s
principal risks and uncertainties.
Share Options
On 2 April 2007 executives of the Company were granted 1,300,000 options to purchase
approximately 3% of the Company’s issued and outstanding shares at an exercise price of
£0.43 per share. The options vest in two equal installments on 1 January 2008 and 2009 and
expire five years from the date of grant.
On 10 July 2007 employees of Telit Italy, Telit Wireless Solutions Co., Ltd. (“Telit APAC”)
Telit Wireless Solutions Inc. (“Telit Americas”), Telit Wireless Solutions Ltd. and Telit
Communications Spain S.L. were granted options to purchase approximately 3.4% of the
Company’s issued and outstanding shares at an exercise price of £0.60 per share. 100,000
options vest in two equal installments on 9 July 2008 and 2009 and 1,363,000 vest in three
equal installments on 9 July 2008, 2009 and 2010. All options expire five years from the date
of grant.
On 11 July 2007 Non-Executive Directors of the Company and consultants to Telit Italy were
granted options to purchase approximately 3% of the Company’s issued and outstanding
shares at an exercise price of £0.60 per share. 1,100,000 options vest in two equal installments
on 10 July 2008 and 2009 and 195,000 options vest in three equal installments on 10 July
2008, 2009 and 2010. All options expire five years from the date of grant.
On 2 April 2008, a grant of 35,000 options was made to an employee of the Group at an exercise
price of £0.70 per share. The options vest over three years in equal annual installments.
On 29 January 2009 the majority of the options outstanding as at that date were cancelled
by their holders, for no consideration. On the same date, executives, employees and
consultants of the Company and its subsidiaries were granted 6,407,000 options to purchase
approximately 14.4% of the Company’s issued shares at the time, at an exercise price of
£0.20 per share. The options vest in two or three equal annual installments starting from 29
January 2009 and expire five years from the date of grant.
The number of outstanding options as at 31 December 2009 was 6,286,667, equal to
approximately 8.7% of the outstanding share capital of the Company.
Research and Development Activities
The Group has made, and expects to continue making in the future, significant investments in
research and development (“R&D”) in order to invest in products aimed at achieving a steady
pipeline of orders from customers in the coming years. R&D costs of €10.9 million were
expensed in the year, compared to €9.6 million in 2008. Cumulative internally-generated
intangible assets arising from development costs capitalized amounted to €4.4 million,
after setting off grant contributions received of €5.2 million. Telit’s R&D centres are based
in Trieste and Cagliari, Italy, Seoul, South Korea and Sofia Antipolis, France. For additional
details please see the Chief Executive Officer’s statement and note 1(ab) to the financial
statements.
Use of Financial Instruments
The financial risk management objectives and policies of the Group and the exposure of the
Group to financial risks are disclosed within note 32 to the financial statements.
Donations
The Group made no charitable or political donations during the year ended 31 December
2009 (2008 - €nil).
Dividends
The Company is unable to pay a dividend in respect of the period (2008: nil).
Directors
The following directors have held office during the year and subsequently:
Enrico Testa
Oozi Cats
Michael Galai
Amir Scharf
Andrea Mandel-Mantello
Maurizio Gasparri
resigned 13 February 2009
Massimo Testa
appointed 13 February 2009
24 Directors’ Report
25
Directors’ Indemnities
The Company has made qualifying third party indemnity provisions for the benefit of its
directors in respect of their roles as directors of the Company and, where applicable, as
directors or senior employees of subsidiary undertakings, which were made during 2007 and
remain in force at the date of this report.
Directors’ Interests in Shares and Share Options
The directors’ interests in shares in the Company are detailed in the table below:
At 31 December 2009
At 31 December 2008
Directors
Number of
ordinary
shares
Percentage of
ordinary share
capital
Number of
ordinary
shares
Percentage
of ordinary
share capital
Oozi Cats1
20,283,357
27.97
16,460,357
36.98
Massimo Testa2
20,283,357
27.97
-
-
Enrico Testa3
20,283,357
27.97
16,460,357
36.98
Amir Scharf
Andrea Mandel-
Mantello
Michael Galai
nil
nil
nil
-
-
-
nil
nil
nil
-
-
-
1. Mr. Cats directly holds 3,110,357 shares. In addition, Mr. Cats owns 50% of Boostt B.V. (“Boostt”), which holds 15,600,000
shares. Boostt’s corporate parents, Techvisory S.A. and Wireless Solutions Management SL (together: “Techvisory”)
hold an additional 1,250,000 shares. Mr. Cats and Techvisory have subscribed to certain voting understandings.
Therefore, Mr. Cats is deemed to be interested in all of Boostt’s holdings, as well as all of Techvisory’s holdings.
2. Mr. Massimo Testa is a shareholder of Techvisory and therefore the Company considers him to be interested in the
same amount of shares as Messers Oozi Cats and Enrico Testa. Mr Massimo Testa also personally holds 323,000 share
of the Company and Messers. Oozi Cats and Enrico Testa are considered as having an interest in these shares as well.
3. Mr. Testa is an interested party in Techvisory and Boostt, by virtue of his holding office therein. Therefore, Mr. Testa is
deemed to be interested in all of Boostt’s and Techvisory’s holdings, as well as all of Mr. Cats’ and Mr. Massimo Testa’s
holdings.
Details of directors’ share options are provided below:
Existing
on 1 Jan
2009
Expired Exercised Granted
Existing
on 31 Dec
2009
Exercise
Price
Date from
which
exercisable
Expiry
date
Oozi Cats 925,000
925,000
Enrico
Testa
Michael
Galai
700,000
700,000
100,000
100,000
-
-
-
2,000,000 2,000,000
20p
29/01/09 29/01/14
1,000,000 1,000,000
20p
29/01/09 29/01/14
200,000
200,000
20p
29/01/09 29/01/14
The highest and lowest closing prices of the Company’s shares on AIM during 2009 were 35p
(8-12 June 2009) and 12p (4, 5, 6 & 9 March and 2 April 2009).
On 29 January 2009, after having waived their existing options, Messers Cats, Testa and
Galai were granted 2,000,000, 1,000,000 and 200,000 options, respectively, at an exercise
price of £0.20 per options. The options vest over a 2 years period, as follows: 925,000 (Mr.
Cats), 700,000 (Mr. Testa) and 100,000 (Mr. Galai) of the options, respectively, were vested on
the date of the grant with the remaining options vesting in 2 equal annual installments on
January 29 2010 and 2011.
The aggregate amount of gains made by directors on the exercise of share options in the year
ended 31 December 2009 was €nil (2008: €nil).
Employees
In considering applications for employment from disabled people, the Group seeks to
ensure that full and fair consideration is given to the abilities and aptitudes of the applicant
against the requirements of the job for which he or she has applied. Employees who become
temporarily or permanently disabled are given individual consideration, and where possible
equal opportunities for training, career development and promotions are given to disabled
persons.
Within the bounds of commercial confidentiality, information is disseminated to all levels of
staff about matters that affect the progress of the Group and are of interest and concern to
them as employees. The Group also encourages employees, where relevant, to meet on a
regular basis to discuss matters affecting them.
26 Directors’ Report
Supplier payment policy
The Group does not operate a standard code in respect of payments to suppliers. It has due
regard to the payment terms of suppliers and generally settles all undisputed accounts
within 90 days of the date of invoice, except where different arrangements have been
agreed with suppliers. Trade creditor days of the Group at 31 December 2009, calculated in
accordance with the requirements of the Companies Act 2006, were 94 days (2008: 83 days).
This represents the ratio, expressed in days, between the amounts invoiced to the Group in
the year by its suppliers and the amounts due, at the year end, to trade creditors falling due
for payment within one year.
Provision of information to auditors
Each of the directors at the date of approval of this report confirms that:
so far as the director is aware, there is no relevant audit information of which the Company’s
auditors are unaware; and
the director has taken all the steps that he ought to have taken as a director to make
himself aware of any relevant audit information and to establish that the Company’s
auditors are aware of that information.
In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment
of KPMG Audit Plc as auditors of the Company is to be proposed at the forthcoming Annual
General Meeting.
By order of the Board
Michael Galai
Finance Director
4 May 2010
Statement of Directors
Responsibilities
27
Statement of Directors Responsibilities in respect of the
annual report and the financial statements
The directors are responsible for preparing the Annual Report and the group and parent
company financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare group and parent company financial statements
for each financial year. As required by the AIM Rules of the London Stock Exchange they are
required to prepare the group financial statements in accordance with IFRSs as adopted by the
EU and applicable law and have elected to prepare the parent company financial statements on
the same basis.
Under company law the directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of affairs of the group and parent
company and of their profit or loss for that period. In preparing each of the group and parent
company financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the group and the parent company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the parent company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent company and enable them to ensure that its
financial statements comply with the Companies Act 2006. They have general responsibility
for taking such steps as are reasonably open to them to safeguard the assets of the group
and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and
financial information included on the Company’s website. Legislation in the UK governing
the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
28 Independent Auditor’s Report to the
Members of Telit Communications PLC
We have audited the financial statements of Telit Communications PLC for the year ended 31
December 2009 set out on pages 30 to 89. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the EU and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we
might state to the Company’s members those matters we are required to state to them in
an auditors’ report, and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company and the Company’s
members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 27, the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s
web-site at www.frc.org.uk/apb/scope/UKNP.
29
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group’s and of the
parent company’s affairs as at 31 December 2009 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the EU;
the parent company financial statements have been properly prepared in accordance
with IFRSs as adopted by the EU and as applied in accordance with the provisions of the
Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records
and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
David Neale
(Senior Statutory Auditor)
for and on behalf of
KPMG Audit Plc,
Statutory Auditor
Chartered Accountants
20 Farringdon Street
London
EC4A 4PP
4 May 2010
Telit Communications PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2009
Revenue
Cost of sales
Gross profit
Other income
Research and development expenses
Selling and marketing expenses
Administrative expenses
Other expenses
Note
2009
€’000
2008
€’000
2
4
5
63,761
(33,129)
59,083
(29,987)
30,632
29,096
49
(10,866)
(11,137)
(8,105)
(2,750)
1,002
(9,647)
(10,829)
(9,058)
-
Operating (loss)/profit
10,11
(2,177)
564
Investment income
Finance costs
Share of results of associated undertakings
Gain on deemed partial disposal of subsidiary
(Loss)/profit before income taxes
Income tax expense
Loss for the year from continuing operations
Loss for the year from discontinued operations
Loss for the year
Total comprehensive income
Foreign currency translation differences (net of tax)
Other comprehensive income for the year
Loss attributable to:
Owners of the Company
Minority interest
Loss for the year
Total comprehensive income attributable to:
Owners of the Company
Minority interest
Loss for the year
6
7
16
8
9
12
85
(857)
-
-
192
(1,171)
18
1,614
(2,949)
1,217
(81)
(2,586)
(3,030)
(1,369)
-
(3,030)
(1,864)
(3,233)
43
(2,987)
(3,466)
436
(3,030)
(3,606)
619
(2,987)
(1,904)
(5,137)
(3,052)
(181)
(3,233)
(4,782)
(355)
(5,137)
Total comprehensive income for the year
(2,987)
(5,137)
Basic loss per share (in euro cents)
From continuing operations
From discontinued operations
Total continuing and discontinued
Diluted loss per share (in euro cents)
From continuing operations
From discontinued operations
Total continuing and discontinued
(7.6)
-
(7.6)
(7.6)
-
(7.6)
(2.7)
(4.3)
(7.0)
(2.7)
(4.3)
(7.0)
13
13
32
34
33
Group
2009
€’000
2008
€’000
Company
2009
€’000
2008
€’000
Telit Communications PLC
STATEMENT OF CASH FLOWS (continued)
For the year ended 31 December 2009
(3,030)
(1,369)
(5,153)
(1,010)
Group
2009
€’000
2008
€’000
Company
2009
€’000
2008
€’000
6,167
2,555
-
(381)
8,341
3,166
4,619
113
7,898
-
(813)
3,909
-
3,096
6,167
-
-
-
6,167
-
-
-
-
-
(493)
2,533
(1,769)
5,212
(100)
4,619
633
-
3,166
2,402
-
633
CASH FLOWS - FINANCING ACTIVITIES
Issuance of shares
Short-term borrowings from banks and others
Proceeds from preferential rate loan (note 31)
Repayment of other loans
Net cash from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents - balance at beginning of
year
Effect of exchange rate differences
Cash and cash equivalents - balance at end of year
Non – cash transactions:
1) On January 1, 2009 the Company sold its investments in Cell time Ltd to Dai Telecom Holdings
(2000) Ltd for a consideration of €632 thousand. The Company provided Dai Telecom Holdings
(2000) Ltd with a new loan to fund this acquisition. See also note 18.
2) On June 30, 2009 The Company converted a loan in the amount of € 1 million in consideration for
1,865 ordinary shares of Dai Telecom (2000) Ltd.
Telit Communications PLC
STATEMENT OF CASH FLOWS
For the year ended 31 December 2009
CASH FLOWS - OPERATING ACTIVITIES
Loss for the period from continuing operations
Adjustments for:
Depreciation and amortization
Impairment of investments in subsidiaries
Gain on disposal of associated undertaking
Income tax expense
Investment income
Finance costs
Increase in provision for post-employment benefits
Share-based payment charge
Gain on deemed partial disposal of subsidiary
Share in result of associated undertaking
Operating cash flows before movements in working
capital:
Increase in trade receivables
Decrease/(increase) in other current assets
Decrease/(increase) in inventories
Increase /(decrease) in trade payables
(Decrease)/increase in other current liabilities
Increase in provisions and other long term
liabilities
Cash from (used in) operations
Income tax paid
Interest received
Interest paid
Net cash from (used in) continuing operations
Net cash from ( used in) continuing operations
Net cash used in discontinued operations (Note 12)
Net cash from/(used in) operating activities
CASH FLOWS - INVESTING ACTIVITIES
Purchase of property, plant and equipment
Proceeds from disposal of assets
Purchase of intangible assets
Proceeds from grant contribution
Acquisition of subsidiaries (Group: net of cash
acquired)
Loan to subsidiary
Net proceeds from issuance of share capital in a
subsidiary to third party
Decrease/(increase) in restricted cash deposits
Net cash (used in) from investing activities
3,259
-
-
81
(85)
857
203
402
-
-
1,687
(4,059)
1,871
4,846
6,832
(8,649)
186
2,714
(29)
85
(857)
1,913
1,913
-
1,913
(940)
99
(3,182)
-
-
-
-
(3,065)
(7,088)
2,674
-
-
2,586
(192)
1,171
302
436
(1,614)
(18)
3,976
(1,785)
284
(2,638)
(1,853)
(4,370)
554
(5,832)
(92)
177
(988)
(6,735)
(6,735)
(1,441)
(8,176)
(1,732)
46
(4,888)
2,606
(15)
-
7,000
1,570
4,587
205
3,000
(50)
-
(85)
-
-
219
-
-
(1,864)
(210)
166
(29)
335
5,076
-
3,474
-
85
-
3,559
3,559
-
3,559
-
-
(6,533)
-
(25)
(1,635)
-
1,000
(7,193)
-
-
-
-
(139)
-
-
-
-
-
(1,149)
(176)
(21)
-
74
(459)
-
(1,731)
-
139
-
(1,592)
(1,592)
-
(1,592)
(4)
-
-
-
(23)
(150)
-
-
(177)
34
36
35
37
Telit Communications PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2009
Year ended 31 December 2009
Share
capital
€’000
Share
premium
Account
€’000
Other
reserve
€’000
Translation
reserve
€’000
Retained
earnings
€’000
Total
€’000
Minority
interest
€’000
Total
€’000
644
30,188
(260)
(3,464)
(15,143)
11,965
77
12,042
-
-
-
-
-
-
-
-
(3,466)
(3,466)
(140)
-
(140)
436
183
(3,030)
43
(140)
(3,466)
(3,606)
619
(2,987)
-
-
-
-
-
6,167
402
402
-
-
402
6,569
-
-
419
419
6,167
402
419
6,988
Share
capital
€’000
Share
premium
Account
€’000
Other
reserve
€’000
Translation
reserve
€’000
Retained
earnings
€’000
Total
€’000
Minority
interest
€’000
Total
€’000
627
29,651
(260)
(1,734)
(12,512)
15,772
605
16,377
-
-
-
-
-
-
-
(3,052)
(3,052)
(1,730)
-
(1,730)
(181)
(174)
(3,233)
(1,904)
(1,730)
(3,052)
(4,782)
(355)
(5,137)
-
-
-
-
-
421
421
554
-
554
-
(188)
(188)
421
975
15
(173)
436
802
Balance at 1 January
2009
Total Comprehensive
Income for the year
Loss for the year
Foreign currency
translation differences
Total comprehensive
income
Transactions with owners
Issuance of shares
Share-based payment
charge
Arising on deemed
disposal -minority in Telit
Wireless Solutions Srl
Total transactions with
owners
Balance at
31 December 2009
Year ended 31 December 2008
-
-
-
-
-
-
312
5,855
-
-
5,855
-
-
312
956
Balance as 1 January
2008
Total Comprehensive
Income for the year
Loss for the year
Foreign currency
translation differences
Total comprehensive
income
Transactions with owners
Issuance of shares
Arising on deemed
disposal -minority in
Telit Wireless Solutions
Srl
Share-based payment
charge
Total transactions with
owners
Balance at 31 December
2008
-
-
-
-
-
-
17
537
-
-
537
17
644
Telit Communications PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2009
Year ended 31 December 2009
Share
capital
€’000
Share
premium
account
€’000
Other
reserve
€’000
Retained
earnings
€’000
Total
€’000
1 January 2009
Issuance of shares
Share based payment charge
Loss for the year
Total comprehensive income
644
312
-
-
-
30,188
5,894
(2,498)
34,228
5,855
-
-
-
-
-
-
-
-
6,167
219
219
(5,153)
(5,153)
(5,153)
(5,153)
31 December 2009
956
36,043
5,894
(7,432)
35,461
Share
capital
€’000
Share
premium
account
€’000
Other
reserve
€’000
Retained
earnings
€’000
Total
€’000
1 January 2008
Issuance of shares
Loss for the year
Total comprehensive income
627
17
-
-
29,651
5,894
(1,488)
34,684
537
-
-
-
-
-
-
554
(1,010)
(1,010)
(1,010)
(1,010)
31 December 2008
644
30,188
5,894
(2,498)
34,228
The other reserve arose on the issue of 1,790,785 shares to Polar Investments Ltd. (“Polar”) in 2005 in
consideration for the transfer to the Company of Polar’s investment in Dai Telecom Holdings (2000) Ltd.
and Dai Telecom Ltd. ("Dai Telecom"), the assets and liabilities of which were recorded at their previous
carrying value.
36,043
(260)
(3,604)
(18,207)
14,928
1,115
16,043
Year ended 31 December 2008
30,188
(260)
(3,464)
(15,143)
11,965
77
12,042
38
36
37
39
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES
(a) General information
Telit Communications PLC (the “Company”) is a company incorporated and domiciled in the UK.
The group financial statements consolidate those of the Company and its subsidiaries (together referred
to as the “Group”) and equity account the Group’s interest in associates and jointly controlled entities.
The parent company financial statements present information about the Company as a separate entity and
not about its Group.
Both the parent company financial statements and the Group financial statements have been prepared
and approved by the directors in accordance with International Financial Reporting Standards as adopted
by the EU (“Adopted IFRSs”). On publishing the parent company financial statements here together
with the Group financial statements, the Company is taking advantage of the exemption in s408 of the
Companies Act 2006 not to present its individual statement of comprehensive income and related notes
that form a part of these approved financial statements.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all
periods presented in these consolidated financial statements.
(b) Basis of preparation - Going Concern
The Group’s business activities, together with the factors likely to affect its future development,
performance and position are set out in the Chief Executive’s Statement and Review on pages 11 to 14.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are
described in the Chief Executive’s Statement and Review on pages 9 to 11. In addition notes 20, 29, 31
and 32 to the financial statements include the Group’s objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk.
The Group meets its day to day working capital requirements through overdraft facilities, invoice
advance facilities and factoring. In the main, 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 from the Ministry of Trade and Commerce in Italy. Further
information is provided within note 31. The current economic conditions create uncertainty particularly
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 U.S. 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 uncertainty over forecasts
in current market environments.
The Group’s forecasts and projections taking account of the loss after taxation for the year from
continuing operations, the general economic environment and impact on specific markets supplied,
possible changes in trading performance, 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 will open renewal
negotiations with the banks in due course and has at this stage not sought any written commitment that
the facilities will be renewed. However, the management has held discussion with its bankers about its
future borrowing needs and no matters have been drawn to its attention to suggest that renewal may not
be forthcoming on acceptable terms. In addition, during 2009 the Company raised additional funds of
£5.7 million through a share issue in the stock market and management believe that further funds can be
raised, if will be needed, to support its growth.
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(b) Basis of preparation - Going Concern (continued)
After making enquiries, the directors have a reasonable expectation that the Company and 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.
(c) Functional and presentational currency
The consolidated financial statements are presented in Euros as this is the primary economic
environment of the of the Group, which differs from the functional currency of those subsidiaries that are
not located in the Euro zone.
The assets and liabilities of the Company’s subsidiaries that have a functional currency other than the
Euro are translated at the closing exchange rates prevailing at the balance sheet date. Income and
expense items and cash flows are translated at the average exchange rates for the period. Exchange rate
differences arising, from the translation of the above mentioned items, are recorded directly to the other
comprehensive income as a separate component called "translation adjustment". Goodwill and intangible
assets arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity.
In preparing the financial statements of the individual companies, transactions in currencies other than
the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing at the balance sheet date.
Commencing on 1 January, 2010 the consolidated financial statements will be presented in US dollar.
(d) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries) made up to 31 December, each year. Control is achieved
where the Company has the power to govern the financial and operating policies of an investee entity so
as to obtain benefits from its activities.
The results of subsidiaries acquired during the year are included in the consolidated statement of
comprehensive income from the effective date of acquisition.
All intra-group transactions and balances between the Group’s companies are eliminated on
consolidation.
Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s
equity therein. Minority interests consist of the amount of those interests at the date of the original
business combination and the minority’s share of changes in equity since the date of the combination.
Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are
allocated against the interests of the Group except to the extent that the minority has a binding obligation
and is able to make an additional investment to cover the losses.
(e) Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is
measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred
or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any
costs directly attributable to the business combination.
38
40
39
41
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(e) Business combinations (continued)
The acquiree’s identifiable assets and liabilities that meet the conditions for recognition under IFRS 3
Business Combinations are recognized at their fair values at the acquisition date.
Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess
of the cost of the business combination over the Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities recognized.
The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of
the net fair value of the assets, liabilities and contingent liabilities recognized.
Where the Company increase its stake in existing subsidiaries, the Company accounts for such
transactions based on the book values of the net assets of the subsidiary at the date of the injection.
Where the cost of acquisition is less than the net book value of the recognized net assets of the acquiree,
the excess, representing negative goodwill, is recognized immediately in profit or loss.
(f) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short term deposits with maturity of
three months or less that are readily convertible to cash and are subject to an insignificant risk of changes
in value.
(g) Trade receivables
Trade receivables classified as current assets are recognized and carried at original invoice amount,
which the Directors consider to be equal to fair value. Approximate allowances for estimated
uncollectible amounts are recognized in profit or loss when there is objective evidence that the asset is
impaired.
Trade receivables classified as non-current assets are recognized at the original invoice amount,
discounted to present value where the effect is material.
(h)
Inventories
Produced finished goods are stated at the lower of cost or net realizable value. Cost comprises direct
materials and, where applicable, direct labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition. Cost is calculated using the weighted
average method. Net realizable value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and distribution.
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(i)
Investments (continued)
Losses of the associate in excess of the Group’s or Company’s interest in those associates are not
recognized.
Any excess of the cost of acquisition over the Group’s or Company’s share of the fair value of the
identifiable net assets of the associate at the date of acquisition is recognized as goodwill.
Company - Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
A gain or loss on partial disposals of investments in subsidiary that do not result in a loss of control are
recognized in the statement of comprehensive income.
(j)
Impairment of investments in associated undertakings
The Company considers at each balance sheet date whether there are any indications of impairment in
the value of its investment in associated undertakings. If the book value of an investment in a non-
subsidiary investee exceeds its recoverable value, the Company recognizes an impairment loss.
(k) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognized
impairment loss.
Depreciation is charged so as to write off the cost over the estimated useful life of the assets, using the
straight -line method.
Depreciation rates are as follows:
Office furniture and equipment
Computers and software
Vehicles
Leasehold improvements
Machines and equipment
%
6-15
33
15
10-14
10-25
The gain or loss arising on the disposal of an asset is determined as the difference between the sale
proceeds and the carrying amount of the asset and is recognized in the statement of comprehensive
income.
Raw materials are presented at the lower of cost or net realisable value, with cost calculated using the
weighted average method.
(l) Goodwill
(i)
Investments
Investments in associated undertakings
An associate is an entity over which the Group or Comapny is in a position to exercise significant
influence, but not control, through participation in the financial and operating policy decisions of the
associate.
The results, and assets and liabilities of the associate are incorporated in the financial statements using
the equity method of accounting. The investment in the associate is carried in the balance sheet at cost as
adjusted by post-acquisition changes in the Group’s or Company’s share of the net assets of the
associate, less any impairment in the value of individual investments.
Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the
Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the
entity or business recognised at the date of acquisition.
Goodwill is initially recognised as an asset held at cost and is subsequently measured at cost less any
accumulated impairment losses. Goodwill is held in the currency of the acquired entity and re-valued to
the closing rate at each balance sheet date. Goodwill is not subject to amortisation, but is subject to
testing for impairment.
For the purposes of impairment testing, goodwill is allocated to the cash-generating unit to which it
relates. Cash generating units to which goodwill has been allocated are tested for impairment annually,
or more frequently when there is an indication that the unit may be impaired.
40
42
41
43
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(l) Goodwill (continued)
If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and
then to other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An
impairment loss recognised for goodwill is not reversed in a subsequent period.
On full or partial disposal of a subsidiary, the attributable amount of goodwill is included in the
determination of the profit or loss recognised in the statement of comprehensive income on disposal.
(m)
Internally developed intangible assets – development costs
The cost of research activities is recognised as an expense in the period in which it is incurred.
An internally generated intangible asset arising from the Group's expenditure on development is
recognised only if all of the following conditions are met:
an asset is created that can be identified (such as hardware, software or a new processes);
it is probable that the asset created will generate future economic benefits; and
the development cost of the asset can be measured reliably.
Internally generated intangible assets are amortised on a straight-line basis over their useful lives,
typically 5 years, from the date at which such assets are available for use. Where the internally generated
intangible asset is not yet available for use, it is tested for impairment annually by comparing its carrying
amount with its recoverable amount.
Where no internally-generated intangible asset can be recognised, development costs are recognised as
an expense in the period in which they are incurred.
(n) Other intangible assets
Other intangible assets with finite lives are stated at cost less accumulated amortisation and impairment
losses. Amortisation is charged to the statement of comprehensive income on a straight-line basis over
the estimated useful lives of intangible assets from the date they are available for use.
Amortisation rates are as follows:
Software and license
Customer relationships
Acquired technology
Trademark
%
15-33
15
20-40
12.5
(o)
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss. Where the asset does not generate cash flows that are independent from other assets,
the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(o)
Impairment of tangible and intangible assets excluding goodwill (continued)
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognized as an expense immediately.
(p)
Income taxes
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the statement of comprehensive income because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates that have been enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax
assets are recognized to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the
temporary difference arises from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the assets to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is
settled or the asset is realised. Deferred tax is charged or credited in the statement of comprehensive
income, except when it relates to items charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
(q) Trade payables
Trade payables are non interest bearing and are stated at their fair value.
(r) Retirement benefit costs
For defined benefit retirement benefit schemes, the cost of providing benefits is determined using the
Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date,
except where future service by current employees no longer qualifies for benefits in which case a
Traditional Unit Credit Method is applied. Actuarial gains and losses are recognized in full in the
statement of comprehensive income in the period in which they occur. Gains or losses on the curtailment
of a defined benefit plan are recognized in the statement of comprehensive income when the curtailment
or settlement occurs.
The retirement benefit obligation recognized in the balance sheet represents the present value of the
defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value
of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present
value of available refunds and reductions in future contributions to the plan.
The values attributed to plan liabilities that are material to the financial statements are assessed in
accordance with the advice of independent qualified actuaries.
42
44
43
45
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(s) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for goods and services provided in the normal course of business, net of discounts, VAT and
other sales related taxes.
Sales of goods are recognized when goods are delivered and title has passed.
Revenues from services are recognized as the services are provided.
Royalty income is recognized in accordance with the terms of the relevant royalty agreement unless,
there has been an assignment of rights for a fixed fee or non-refundable guarantee under a
non-cancellable contract which permits the licensee to exploit such rights freely and the Company has no
remaining obligations to perform; in such circumstances, revenue is recognized when collection of the
fee is reasonably assured.
(t) Leases
Rentals payable under operating leases are charged to statement of income on a straight-line basis over
the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating lease are also spread on a
straight line basis over the lease term.
(u) Borrowing costs
Borrowing costs are recognized in profit or loss in the period in which they are incurred. Finance
charges, including any premiums to be paid on settlement or redemption and direct issue costs and
discounts relating to borrowings, are accounted for on an accruals basis and charged to the statement of
comprehensive income using the effective interest method.
In respect of borrowing costs relating to qualifying assets for which the commencement date for
capitalisation is on or after 1 January 2009, the Group capitalises borrowing costs directly attributable to
the acquisition, construction or production of a qualifying asset as part of the cost of that asset.
Previously the Group immediately recognised all borrowing costs as an expense charged to the statement
of comprehensive income. This change in accounting policy was due to the adoption of IAS 23
Borrowing Costs (2007) in accordance with the transitional provisions of such standard; comparative
figures have not been restated. The change in accounting policy had no material impact on earnings per
share.
(v) Government grants
Government grants are recognized when it is reasonable to expect that the grants will be received and
that all related conditions will be met.
Government grants received in respect of costs which have been capitalized as development costs are
deducted from the carrying amount of the asset.
Government grants relating to income are recognized in other operating income over the periods
necessary to match them with the related cost.
(w) Non-current assets held for sale
Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying
amount and fair value less costs to sell.
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(w) Non-current assets held for sale (continued)
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be
recovered through the sale transaction rather than through continued use. This condition is regarded as
met only when the sale is highly probable and the asset (or disposal group) is available for immediate
sale in its present condition and the Company is committed to the sale which is expected to qualify for
recognition as a completed sale within one year from the date of classification.
(x) Financial instruments
Financial assets and financial liabilities are recognized on the Group's balance sheet when the Group
becomes a party to the contractual provisions of the instrument.
Financial assets
Financial assets are initially recorded at fair value, net of transaction costs. Subsequent to initial
recognition, investments in subsidiaries are measured at fair value less impairment. Subsequent to initial
recognition, investments in associates are accounted for under the equity method in the consolidated
financial statements and the cost method in the Company’s financial statements.
The Group classifies its other financial assets as either available for sale financial assets or loans and
receivables; no financial assets at fair value through profit or loss are held, except for derivative financial
instruments, which are set out below. The classification depends on the nature and purpose of the
financial assets and is determined at the time of initial recognition.
Available for sale financial assets
Certain shares held by the Group are classified as being available-for-sale since they are not held for
trading, have not been designated as at fair value through profit or loss and do not meet the accounting
requirements for classification as loans and receivables or held-to-maturity investments.
Such assets are stated at fair value or, where there is insufficient information to reliably determine fair
value at the measurement date, at deemed cost, less impairment. The determination of fair values is
described in note 17. Gains and losses arising from changes in fair value are recognized directly in
reserves. Where the investment is disposed of or is determined to be impaired, the cumulative gain or
loss previously recognized in reserves is included in profit or loss for the period.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not
quoted in an active market are classified as “loans and receivables”. Loans and receivables are measured
at amortized cost using the effective interest method less impairment.
Interest is recognized by applying the effective rate, except for short-term receivables when the
recognition of interest would be immaterial.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are
impaired where there is objective evidence that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future cash flows of the investment have been
impacted.
44
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47
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(x) Financial instruments (continued)
Objective evidence of impairment could include:
significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organization.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be
impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence
of impairment for a portfolio of receivables could include the Group’s past experience of collecting
payments, an increase in the number of delayed payments in the portfolio past the average credit period
of 90 days, as well as observable changes in national or local economic conditions that correlate with
default on receivables.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial
assets with the exception of trade receivables, where the carrying amount is reduced through the use of
an allowance account. When a trade receivable is considered uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the allowance account are recognized in profit or
loss.
With the exception of available for sale equity instruments, if, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognized, the previously recognized impairment loss is reversed through profit or loss
to the extent that the carrying amount of the investment at the date the impairment is reversed does not
exceed what the amortized cost would have been had the impairment not been recognized.
In respect of available for sale equity securities, impairment losses previously recognized through profit
or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment
loss is recognized directly in equity.
De-recognition of financial assets
The Group derecognizes a financial asset only when the contractual rights to the cash flows from the
asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of
the asset to another entity. If the Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred asset, the Group recognizes its retained
interest in the asset and an associated liability for amounts it may have to pay. If the Group retains
substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues
to recognize the financial asset and also recognizes collateralized borrowings for the proceeds received.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual
agreements.
An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds
received, net of direct issue costs.
All the Group’s financial liabilities are classified as other financial liabilities. It holds no financial
liabilities ‘at fair value through profit or loss’, except for derivative financial instruments, which are set
out below.
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(x) Financial instruments (continued)
Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs and are subsequently
measured at amortized cost using the effective interest method, with interest expense recognized on an
effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period.
De-recognition of financial liabilities
The Group de-recognizes financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or they expire.
Derivative financial instruments
The Group has entered into an interest rate swap to manage its exposure to interest rate risk. Further
details of derivative financial instruments are disclosed in note 29 to the financial statements.
Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are
subsequently re-measured to their fair value at each balance sheet date. A derivative with a positive fair
value is recognized as a financial asset whereas a derivative with a negative fair value is recognized as a
financial liability. The resulting gain or loss is recognized in profit or loss immediately as the Group has
not designated the derivative as a hedging instrument.
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the
instrument is more than 12 months and it is not expected to be realized or settled within 12 months. Other
derivatives are presented as current assets or current liabilities.
Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate
derivatives when their risks and characteristics are not closely related to those of the host contracts and
the host contracts are not measured at fair value through profit or loss.
(y) Share-based payments
The Group has applied the requirements of IFRS 2 Share-based payment. In accordance with the
transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November
2002 that had not vested as of 1 January 2005.
The Group issues equity-settled share-based payments to certain employees and directors. Equity-settled
share-based payments are measured at fair value at the date of grant. The fair value determined at the
grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest.
Fair value is measured using an appropriate valuation model, for example the Black-Scholes model. The
expected life used in the model has been adjusted, based on management's best estimate, for the effects
of non-transferability, exercise restrictions, and behavioral considerations.
46
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Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(y)
Share-based payments (continued)
Where the Group has settled a grant of equity instruments during the vesting period, the Group accounts
for the settlement as an acceleration of vesting, and recognizes immediately in the statement of
comprehensive income the amount that otherwise would have been recognized for services received over
the remainder of the vesting period. Payments made to the employee on settlement of the grant are
accounted for as the repurchase of equity interest and deducted from equity, except to the extent that the
payment exceeds the fair value of the equity instruments granted, measured at the repurchase date. Any
such excess is recognized as an expense in the statement of comprehensive income.
(z)
Loss per share
Basic and diluted loss per share is computed on the basis of the weighted average of paid up capital
shares during the year in accordance with IAS 33 (Revised) Earnings per share.
(aa) Provisions
A provision for warranty costs is recognized at the date of sale of the relevant products, at the best
estimate of the expenditure required to settle the Group's liability. Other provisions are recognize in
accordance with IAS 37 at the best estimate of the expenditure required to settle the Group's liability
(ab) Critical accounting judgments and key sources of estimation uncertainty
Critical accounting judgments
In the process of applying the Group’s accounting policies, management consider the following
judgments, apart from those involving estimates on future uncertain events, which are discussed further
below, to have the most significant effect on the amounts recognized in the financial statements.
Grant income
Income relating to government grants is recognized when there is reasonable assurance that the
Company has complied with the conditions attaching to them and the grant will be received.
Management is required to exercise judgment in determining when compliance with the terms of the
grant and receipt of the grant are probable. The amount of regional grant income recognized in the
statement of comprehensive income for the year ended 31 December 2009 was €49,000 (2008:
€1,002,000).
As at 31 December 2009 an amount of €3,715,000 (2008: €2,908,000) is recorded in other current assets.
The amount of grant income offset against capitalized intangible assets for the year ended 31 December
2009 was €2,594,000 (2008: €2,606,000).
Allocating fair values in a business combination
Acquisitions of shares in subsidiaries are accounted for using the purchase method whereby their
aggregate consideration is allocated to the fair value of the assets acquired and liabilities assumed based
on management’s best estimates. Management is required to exercise judgment in the determination of
the fair value of identified assets and liabilities, and particularly intangible assets.
As at 31 December 2009, the carrying value of intangible assets other than the goodwill acquired in
business combinations was €355,000 (2008: €842,000). For applicable amortization rates, see note 1(n)
above.
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
(ab) Critical accounting judgments and key sources of estimation uncertainty (continued)
Investments in unlisted entity
The Group holds equity instruments in an unlisted entity for which no active market exists and hence a
quoted market price does not exist. These are accounted for as available-for-sale investments by the
Group, requiring them to be measured at fair value at inception and at each balance sheet date, unless
such fair values cannot be reliably determined at the measurement date, in which case they are recorded
at deemed cost less any impairment.
Determination of fair value requires the use of valuation techniques which make use of certain
assumptions including historic and forecast revenues and earnings, debt levels, multiples observed for
comparator companies and discounts to such multiples to take account of entity specific factors such as
illiquidity. As at 31 December 2009, the Group is not able to make such a determination on the basis of
reliable assumptions in respect of its available for sale investment. However, the value of such
investments as of 31 December 2009 represents the Group's equity share in the unlisted entity. The
determination of the fair value of available for sale investment would impact the amount recorded on the
balance sheet. Changes in these assumptions would impact on the amount recorded in the balance sheet.
As at 31 December 2009, the total value of such investments was €1,570,000 (2008: €1,570,000).
Share-based payments
The Group has granted equity-settled share-based payments to certain directors and employees. Such
options are required to be fair valued in accordance with the requirements of IFRS 2 Share-based
payment. Determination of fair value requires the exercise of judgment regarding the applicable
assumptions to be used as inputs into the fair value model, including the expected volatility, risk-free rate
and expected option life. Changes in these assumptions would affect the fair value of options and hence
the amount recorded in the statement of comprehensive income. For the year ended 31 December 2009,
the total amount recorded in the statement of comprehensive income for continuing operations was
€402,000 (31 December 2008: €436,000).
Accounting for transactions with Bartolini After Market Electronic Services Srl (“BAMES”)
As disclosed further in note 8, on 20 June 2007, the Group entered into a series of related transactions
with BAMES in which BAMES subscribed for 5.625% of the share capital of Telit Wireless Solutions
Srl for €9.0 million, and the Group acquired a 19.9% interest in BAMES’s subsidiary, Services for
Electronic Manufacturing Srl (“SEM”) for €1. Additionally, the Group entered into a manufacturing
agreement for the manufacture by SEM of machine-to-machine modules, with certain exceptions, for a
period of at least five years, together with minimum purchase quantities.
In December 2008, BAMES subscribed for an additional 4.375% of the share capital of Telit Wireless
Solutions Srl for €7.0 million, thus completing the agreed investment and increasing BAMES' holdings
to a total of 10% of the share capital of Telit Wireless Solutions Srl.
Accounting for these transactions has required the Group to determine the fair value of the acquired
interest in SEM and the fair value of the interest in Telit Wireless Solutions Srl disposed, in order to
determine the gain on deemed disposal of the interest in Telit Wireless Solutions Srl after attributable
costs. The Group has recognized the premium received in excess of the fair value of Telit Wireless
Solutions Srl given up as deferred income, representing the premium received for minimum purchase
commitments given by the Group. This is being amortized to the statement of comprehensive income
within cost of sales in accordance with the minimum purchase commitments made by the Group. The
total amount amortized to the statement of comprehensive income for the year ended 31 December 2009
was €7,667,000 (2008: €5,134,000).
48
50
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51
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
1.
ACCOUNTING POLICIES (continued)
(ab) Critical accounting judgments and key sources of estimation uncertainty (continued)
(ab) Critical accounting judgments and key sources of estimation uncertainty (continued)
As disclosed further in note 2, in 2008 the Group entered into a transaction with SEM in which SEM:
Recoverability of internally developed intangible assets
purchased from the Group a perpetual worldwide license for the "Telit" nominative trade
name and the “Telit by SEM Wimax” trade name and trademark to use within the “Telit
by SEM WiMax” tradename and trademark in the worldwide marketing and sale of base
stations (“BTS”) and customer premises equipment (“CPE”) for commercial networks
running the WiMax technology; and
agreed a price reduction in respect of the Group’s purchases made to 30 September 2009
under the manufacturing agreement with SEM.
The consideration receivable by the Group in respect of these agreements is €3,500,000 payable in three
installments from March 2010 to March 2012 (€3.1 million net present value). In addition, the credit
terms made available to the Group by SEM have been extended with effect from 1 November 2008. A
further price reduction has been agreed starting from 1 October 2009.
Accounting for this transaction has required the Group to estimate the fair value of the components of
the transaction. The fair values allocated have been determined at present value to reflect the time value
of money. The fair value allocated to the license is €1,500,000, which has been determined by reference
to a comparable transaction entered into by the Group in 2007. The Group has recognized €0.7 million in
respect of the price reduction for 2009 (2008: €0.9 million). See also note 5.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the
balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year, are discussed below.
Recoverability of deferred tax assets
Under IFRS, a deferred tax asset arising on trading losses or deductible temporary differences is only
recognized where it is probable that future taxable profits will be available to utilize the losses. The key
judgments in assessing the recognition of a deferred tax asset are:
the probability of taxable profits being available in the future; and
the quantum of taxable profits that are forecast to arise.
This requires management to exercise judgment in forecasting future results. There are a number of
assumptions and estimates involved in estimating the future results of the relevant entity in which the
trading losses arose, including:
management’s expectations of growth in revenue;
changes in operating margins;
uncertainty of future technological developments; and
uncertainty over global and regional economic conditions and demand for the Group’s services.
Changing the assumptions selected by management could significantly affect the Group’s results.
As at 31 December 2009,
(2008: €548,000). See note 9 for further information.
the Group had recognized a deferred
tax asset of €316,000
Capitalization of development costs requires the exercise of management judgment in determining
whether it is probable that future economic benefits to the Company arising will exceed the amount
capitalized. This requires management to estimate anticipated revenues and profits from the related
products to which such development costs relate. As at 31 December 2009, the amount of development
costs capitalized (net of amortization and grants) included in the Group balance sheet was €4,426,000
(2008: €4,356,000).
Recoverability of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-
generating units to which goodwill has been allocated. The value in use calculation requires the Group to
estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate
in order to calculate present value.
There are a number of assumptions and estimates involved in calculating the net present value of future
cash flows from the Group’s cash-generating units, including:
management’s expectations of growth in revenue;
changes in operating margins;
uncertainty of future technological developments;
uncertainty over global and regional economic conditions and demand for the Group’s products;
long-term growth rates; and
selection of discount rates to reflect the risks involved.
Changing the assumptions selected by management, in particular the discount rate and growth rate
assumptions used in the cash flow projections could significantly affect the Group’s results. As at 31
December 2009, the amount of goodwill included in the consolidated balance sheet was €2,426,000
(2008: €2,301,000).
Recoverability of investments in associated undertaking
Asset recoverability is an area involving management judgment, requiring assessment as to whether the
carrying value of assets can be supported by the net present value of future cash flows derived from such
assets using cash flow projections which have been discounted at an appropriate rate. In calculating the
net present value of the future cash flows, certain assumptions are required to be made in respect of
highly uncertain matters, as noted below.
IFRS requires management to test for impairment if events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Group management currently undertakes an annual
impairment test for investments in associated undertakings at least annually to consider whether a full
impairment review is required.
If the book value of an investment in a non-subsidiary investee exceeds its recoverable value, the
Company recognizes an impairment loss. As at 31 December 2009, the book value of the investment in
associated undertakings was €605,000 (2008: €629,000).
50
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Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
1.
ACCOUNTING POLICIES (continued)
(ab) Critical accounting judgments and key sources of estimation uncertainty (continued)
(ac) New Accounting Standards, interpretations and amendments to existing standards that are
adopted for the first time in these financial statements (continued)
Recoverability of investments in unlisted entity
The Group’s balance sheet includes an investment in unlisted securities which is carried at deemed cost
of €1,570,000 (2008: €1,570,000). The Directors have undertaken an evaluation of whether there are any
indicators of impairment associated with this investment. In doing so, the Directors have considered
observable data about the investee and the outlook for the market in which it operates. This requires the
Directors to form an assessment of the expected future economic benefit that may be realized from its
investment holding, either through disposal or dividend income.
Provisions
The Group is currently the subject of ongoing tax audits in respect of tax returns made in certain
jurisdictions. The calculation of the Group’s charges to taxation, including income tax, employment tax,
sales taxes and other taxes involves the exercise of judgment in respect of certain items whose tax
treatment cannot be finally determined until resolution has been reached with the relevant tax authority
or, as appropriate, through a formal legal process. The probable outcome of the tax audits has been
considered in determining the appropriate level of provision for such taxes. The final resolution of some
of these items may give rise to material profit and loss and/or cash flow variances.
• improving disclosures over liquidity risk to address current diversity in practice in how such
disclosure requirements are being interpreted and applied, proposing quantitative disclosures
based on how liquidity risk is managed and strengthening the relationship between quantitative
and qualitative liquidity risk disclosures.
As a result of this change, further disclosures have been added to the financial statements this
year.
International Financial Reporting Standard No. 8 – "Operating Segments" – (hereafter IFRS8).
IFRS 8 replaces IAS 14 "Segment Reporting". The new standard requires the application of a
'management approach', whereby segment information is presented on the same basis as that used
for internal reporting purposes.
The application of the standard did not have any effect on the Group's segment reporting.
Goodwill is allocated by management to groups of cash-generating units based on segments
levels.
(ac) New Accounting Standards, interpretations and amendments to existing standards that are
adopted for the first time in these financial statements
Amendment to International Accounting Standard No. 38 – "Intangible Assets" (hereafter – the
amendment to IAS 38).
The Group adopted the following standards as from January 1, 2009:
Revised IAS 1 - "Presentation of Financial Statements" (hereinafter- IAS1R)
IAS1R set comprehensive requirements for presenting financial statements, guidelines for the
structure of financial statements and minimum requirements on content. Among other things,
IAS1R mandates to present income and expense items recognized in equity and that do not stem
from transactions with shareholders (hereinafter – other comprehensive income items) separately
from owner-related equity transactions. All comprehensive income items need to be presented in
the statement of comprehensive income. However, entities may elect whether to present all
income and expense items recognized in the period in one or two statements: a statement that
presents income or loss components (income statement) and a second statement that starts with
income or
income components (statement of
comprehensive income). The Group elected to present all income and expense items recognized in
the period in one statement - statement of comprehensive income. According to IAS1R,
comparative information was restated. This change in presentation does not affect the results of
the Group and earnings per share.
loss and presents other comprehensive
The Group presents in the consolidated statement of changes in shareholders equity all owner
changes in equity, whereas all non – owner changes in equity are presented in the consolidated
statement of comprehensive income.
IFRS 7 ‘Financial instruments – disclosures’ (amendment), (effective 1 January 2009)
As part of the IFRS improvement project, two aspects of IFRS 7 disclosure requirements have
been made:
• enhancing disclosures over fair value measurements relating to financial instruments,
specifically in relation to disclosures over the inputs used in valuations techniques and the
uncertainty associated with such valuations; and
The said amendment is part of the annual improvements project of the IASB published in May
2008 and relates to advertising and promotional activities. Under the Amendment to IAS 38, it is
allowed to recognize a prepayment as an asset to the extent that the prepayment was made prior to
the point at which the entity had the right to access the goods purchased or up to the point of
receipt of services. As a result, the Group applies the said amendment to IAS 38 commencing 1
January 2009 with retroactive effect.
IAS 23 (revised) Accounting for borrowing costs
In respect of borrowing costs relating to qualifying assets for which the commencement date for
capitalisation is on or after 1 January 2009, the Group capitalises borrowing costs directly
attributable to the acquisition, construction or production of a qualifying asset as part of the cost of
that asset. Previously the Group immediately recognised all borrowing costs as an expense. This
change in accounting policy was due to the adoption of IAS 23 Borrowing Costs (2007) in
accordance with the transitional provisions of such standard; comparative figures have not been
restated. The change in accounting policy had no material impact on earnings per share.
IFRS 2 (amendment), ‘Share-based payment’ (effective 1 January 2009)
IFRS 2 deals with vesting conditions and cancellations. It clarifies that vesting conditions are
service conditions and performance conditions only. Other features of a share-based payment are
not vesting conditions. These features would need to be included in the grant date fair value for
share-based payments; they would not impact the number of awards expected to vest or valuation
there of subsequent to grant date. All cancellations, whether by the entity or by other parties,
should receive the same accounting treatment. The Group applies IFRS 2 (amendment) as from 1
January 2009. The amendment did not have a material impact on the Group or Group’s financial
statements for the reported years.
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Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
1.
ACCOUNTING POLICIES (continued)
2.
REVENUE
(ad) New standards and interpretations not yet applied
During the year, the IASB and IFRIC have issued a number of new standards, interpretations and
amendments to existing standards which will be effective for the Group in future accounting periods,
including:
Amendments to IFRS 1 and IAS 27 Cost of an Investment in a Subsidiary, Jointly-controlled entity or
Associate
Amendment to IFRS 2 Group Cash-settled share-based payment transactions
Business Combinations
IFRS 3 (Revised)
Amendment to IFRS 7
Improving disclosures about financial instruments
IAS 27 (Revised 2008) Consolidated and separate financial statements
Amendment to IFRIC 9 and IAS 39 Embedded derivatives
IFRIC 16
IFRIC 17
IFRIC 18 Transfers of assets from customers
Amendment to IAS 36
Amendment to IAS 39 Reclassification of financial assets: Effective date and transition
Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged items
Hedges of a Net Investment in a Foreign Operation
Distribution of non-cash assets to owners
Impairment of Assets
The directors anticipate that the adoption of these Standards and Interpretations in future periods will
have no material impact on the financial statements of the Group.
Sales of goods
Royalties*
Revenue
Investment income
Continuing operations
Discontinued operations
Group
2009
€’000
63,761
-
63,761
85
63,846
-
63,846
2008
€’000
57,426
1,657
59,083
192
59,275
1,288
60,563
* In December 2008 Telit entered into a perpetual license agreement with SEM, granting SEM the right to
use the Telit trade name, within the “Telit by SEM WiMax” trade name and trademark, in the worldwide
marketing and sale of Base Stations (BTS) and Customer Premises Equipment (CPE) for communication
networks running the WiMax technology and agreed a price reduction in respect of the Group’s
purchases made to 30 September 2009 under the existing manufacturing agreement with SEM. The
consideration of €3.5 million is payable in three installments between 2010-2012. Of this amount, €1.5
million were recognized as royalties and recorded in the statement of comprehensive income as revenue.
This transaction is discussed further in note 1(ab).
3.
SEGMENTAL ANALYSIS
The Group
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 Chief Executive Officer.
The Group is organized on a worldwide basis into three geographical segments: EMEA, APAC and
Americas. There are no other segments.
Segmental information for each geographical region in which Telit operates is presented below:
54
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Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
3.
SEGMENTAL ANALYSIS (continued)
3.
SEGMENTAL ANALYSIS (continued)
EMEA
€’000
APAC
€’000
Americas
€’000
Total
€’000
Eliminations Consolidated
€’000
€’000
2009
Revenue
External sales
Inter-segment sales (1)
Total revenue
38,430
26,014
64,444
15,098
627
15,725
10,233
222
10,455
63,761
26,863
90,624
-
(26,863)
(26,863)
330
(1,589)
1,430
-
2,689
Result
Segment result
Unallocated corporate expenses (2)
Operating profit
Investment income
Finance costs
Profit before income taxes
Income taxes
Loss for the year
63,761
-
63,761
1,430
(3,607)
(2,177)
85
(857)
(2,949)
(81)
(3,030)
Total assets:
EMEA
APAC
Americas
Unallocated assets
Total assets
Total liabilities:
EMEA
APAC
Americas
Unallocated liabilities
Total liabilities
Unallocated assets comprise:
2009
€’000
2008
€’000
29,889
9,317
3,266
17,130
59,602
19,578
1,664
660
21,657
43,559
36,405
8,240
3,293
7,042
54,980
23,655
909
475
17,899
42,938
2009
€’000
2008
€’000
2008
EMEA APAC
€’000
€’000
Americas
€’000
Discontinued
operations (3)
€’000
Total
€’000
Eliminat-
ions
€’000
Consolid
-ated
€’000
Revenue
External sales
Inter-segment sales (1)
Total revenue
45,541
10,662
56,203
9,553
5,109
,662
5,277
-
5,277
(1,288)
-
(1,288)
59,083
15,771
74,854
-
(15,771)
(15,771)
59,083
-
59,083
(240)
Result
4,271
Segment result
Unallocated corporate expenses (2)
Operating profit
Investment income
Finance costs
Share of results of associated undertakings(4)
Gain on deemed partial disposal of subsidiary
Profit before income taxes
Income taxes
Loss for the year from discontinued operations
Loss for the year
(2,531)
1,850
3,350
-
3,350
(2,786)
564
192
(1,171)
18
1,614
1,217
(2,586)
(1,864)
(3,233)
Transactions between geographic segments are charged at market prices.
(1)
(2) Unallocated corporate expenses principally comprise salary, professional fees and other expenses which cannot be
directly allocated to one of the segments.
The segment result for discontinued operations is reported in note 12.
The share of results of associated undertakings arises from activities in Israel.
(3)
(4)
Other long term assets
Deferred tax asset
Other debtors in respect of general entity and head office purposes
Deposits - restricted cash
Cash and cash equivalents
Unallocated assets
393
316
5,067
3,456
7,898
17,130
337
548
1,147
391
4,619
7,042
Unallocated liabilities comprise:
2009
€’000
2008
€’000
Other loans
Short-term borrowings from banks and other lenders
Other current liabilities in respect of general entity and head office
purposes
Other long term liabilities
Deferred tax liabilities
Unallocated liabilities
3,150
15,425
2,792
221
69
21,657
3,531
13,417
587
119
245
17,899
56
58
57
59
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
3.
SEGMENTAL ANALYSIS (continued)
5.
OTHER EXPENSES (continued)
2009
Other segment items:
Capitalized tangible and
intangible asset additions
Non-cash items:
Depreciation and
amortization
Bad debt expense
Share-based payments
2008
Other segment items:
Capitalized tangible and
intangible asset additions
Non-cash items:
Depreciation and
amortization
Bad debt expense
Share-based payments
4.
OTHER INCOME
Government grants
EMEA
€’000
APAC
€’000
Americas
€’000
Consolidated
€’000
2,953
1,081
88
4,122
(2,513)
244
(692)
23
(54)
33
(3,259)
300
EMEA
€’000
APAC
€’000
Americas
€’000
Discontinued
operations
€’000
Consolidated
€’000
5,535
1,028
57
-
6,620
(1,984)
688
415
(629)
-
17
(61)
79
26
-
(688)
(22)
(2,674)
79
436
2009
€’000
2008
€’000
49
1,002
The Group’s eligibility for the annual programs for 2008 and 2009 were approved by the relevant grant
making body during the year. The Group only recognizes such income from the regional grant-making
body once it has received confirmation of eligibility and once the qualifying conditions have been
satisfied and the Group is reasonably assured of receipt. The Group has recognized amounts expected to
be received in respect of the regional grant within other income in the year ended 31 December 2009 as
all the conditions for qualification, which relate to the level of eligible expenditure incurred, have been
satisfied. As at 31 December 2009, the total amount receivable from the regional grant body was
€1,121,000 (31 December 2008: €2,778,800).
5.
OTHER EXPENSES
Other expense relates to compensation payment agreed during July 2009 with BAMES in order to
convert the agreement with SEM, a leading global electronics service provider, (the Vimercate, Milan
based manufacturing arm of BAMES), to be non-exclusive. The agreement provided for SEM to produce
all of Telit’s M2M modules (with some exceptions) for a five year period starting from March 12, 2007.
As a result of the cancellation of the exclusivity, SEM is entitled to a compensation of €2.75 million to
be settled by set-off against the receivable balance Telit has from the license agreement entered into by
the parties in December 2008.
6.
INVESTMENT INCOME
Interest income from bank deposits
7.
FINANCE COSTS
Interest expense on factoring arrangements
Interest expense on bank loans and overdrafts
Fair value movement on derivative financial instrument
Exchange rates and other differences
2009
€’000
2008
€’000
85
192
2009
€’000
2008
€’000
78
748
102
(71)
857
370
1,138
119
(456)
1,171
8.
GAIN ON DEEMED PARTIAL DISPOSAL OF SUBSIDIARY UNDERTAKING
The Group’s subsidiary, Telit Wireless Solutions Srl (“TWS”), received in June 2007 a capital injection
of €9.0 million (before costs of €1.4 million) in exchange for new shares issued equal to 5.625% of its
enlarged share capital, with a further capital injection to take place for €7.0 million in December 2008 in
exchange for new shares to be issued equal to 4.375% of the enlarged share capital of TWS. The Group
accounted for this transaction as a deemed disposal. As part of the same transaction, the Group acquired
a 19.9 % interest in BAMES’s subsidiary, Services for Electronic Manufacturing Srl (“SEM”) for €1. As
set out in note 17, the fair value of this investment at the date of acquisition was determined to be
€1,570,000. Additionally, the Group entered into a manufacturing agreement for the manufacture by
SEM of machine-to-machine modules, with certain exceptions, for a period of at least five years,
together with minimum purchase quantities.
The gain on deemed disposal was calculated as the difference between the estimated fair value of the
5.625% stake in TWS, net of costs, and the book value as at the date of deemed disposal. Minority
interests of €275,000 were recognized on this transaction.
In December 2008, TWS received a further capital injection of €7.0 million in exchange for new shares
issued equal to 4.375% of its enlarged share capital. The Group has accounted for this transaction as a
deemed disposal.
Fair value of net assets disposed
Book value of net liabilities disposed to minorities
Gain on deemed partial disposal of subsidiary undertaking
2008
€’000
1,426
188
1,614
58
60
59
61
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
8.
GAIN ON DEEMED PARTIAL DISPOSAL OF SUBSIDIARY UNDERTAKING (continued)
9.
INCOME TAXES (continued)
TWS holds most of the Group’s investments in its Telit Wireless Solutions division. In estimating the fair
value of net assets disposed, the Directors had regard to the market value of the Telit Communications
PLC group as at the date of the original transaction.
In the year ended 31 December 2007 the Group recognized the net premium received in excess of the fair
value of the stake in TWS given up, amounting to €7,693,000, as deferred income, representing the
premium received for minimum purchase commitments given by the Group. In the year ended 31
December 2008 the Group recognized the net premium received in excess of the fair value of the
additional 4.375% stake in TWS given up, amounting to additional €5,574,000, as deferred income,
representing the premium received for minimum purchase commitments given by the Group. The total net
premium received under the transaction is €13,267,000.
The net premium is being amortized to the statement of comprehensive income within cost of sales in
accordance with the minimum purchase commitments made by the Group. During 2009 the group
recognized the remaining balance of the deferred income and recorded amount of €7,667,000 (2008:
€5,134,000) in the statement of comprehensive incomes.
During July 2009 the Group signed an agreement with BAMES in order to convert the agreement with
SEM to be non-exclusive. See also note 5.
9.
INCOME TAXES
A.
Overseas corporate tax:
Current year taxes
Deferred taxes:
Overseas deferred taxes
2009
€’000
2008
€’000
36
45
81
(13)
2,599
2,586
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
B.
Factors affecting the tax expense for the year
C.
Deferred tax
The following are the major deferred tax liabilities and assets recognized by the Group and
movements thereon during the current and prior year, after offset of balances within countries:
Net
operating
loss
€’000
Other
timing
differences
€’000
At 1 January 2009
Translation adjustments
(Charge) / credit to the statement of comprehensive
income
At 31 December 2009
431
15
(146)
300
(128)
(26)
101
(53)
Total
€’000
303
(11)
(45)
247
The Group has recognized deferred tax assets in respect of Telit APAC of €0.3 million in the year
ended 31 December 2009. Telit APAC has generated taxable losses in the year ended 31 December
2009 but have a recent history of taxable profits and the Directors consider that this business will
return to profitability within 12 months.
D.
Factors affecting the tax charge in future years
Factors that may affect the Group’s future tax charge include the finalization and acceptance of tax
returns with relevant tax authorities, the resolution of inquiries from tax authorities (discussed
further in note 1(ab), corporate acquisitions and disposals, changes in tax legislation and rates, the
availability and use of brought forward tax losses, and the realization or otherwise of recognized
deferred tax assets.
The gross amount and expiry dates of losses available for carry forward are as follows:
2009
€’000
1,364
44,358
45,722
2008
€’000
1,599
42,499
44,098
The table below explains the differences between the expected tax credit on continuing operations,
at the UK statutory rate of 28% for 2009 and 28.5% for 2008, and the Group’s total tax expense
for the year:
Losses for which a deferred tax asset is recognized
Losses for which no deferred tax asset is recognized
(Loss)/profit before income tax from continuing operations
Tax credit/ (charge) computed at 28% (2008:28.5%)
Tax adjustments arising from:
(Income exempted) /expenses which are not deductible in
determining taxable profit
Impairment of deferred tax asset
(Increase)/decrease in taxes resulting from a different tax
rate of subsidiaries operating in other jurisdictions
Tax losses not utilised
Other differences
Tax charge for continuing operations
60
62
2009
€’000
(2,949)
826
(2,049)
(124)
(15)
1,598
(317)
(81)
2008
€’000
1,217
(347)
114
(3,000)
197
450
-
(2,586)
61
63
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
10.
(LOSS)/PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS AND GROUP AUDIT
FEE
11. EMPLOYEES
(Loss)/Profit for the year from continuing operations is stated after charging / (crediting)
The average monthly number of persons (including executive
directors) during the year was:
Net foreign exchange gain
Depreciation of owned fixed assets (note 15)
Amortization of intangible assets (note 14):
Amortization of purchased customer list – included in
selling and marketing expenses
Amortization of acquired technology – included in
research and development expenses
Amortization of software – included in research and
development expenses
Research and development expenditure
Costs of inventories recognized as an expense
Write-downs of inventories recognized as an expense
Audit fee
2009
€’000
2008
€’000
(71)
1,379
286
238
1,356
10,866
32,772
(22)
(456)
1,154
199
171
1,150
9,647
28,239
474
Group
2009
€’000
2008
€’000
Company
2009
€’000
2008
€’000
Fees payable to the Company’s
auditors for the audit of the
Company’s annual accounts:
Current auditors
Preceding auditors
Fees payable to the Company’s
auditors and their associates for
other services to the Group:
Current auditors
Preceding auditors
The audit of the Company’s
subsidiaries pursuant to
legislation:
Current auditors
Preceding auditors
Total audit fees
Tax services:
Current auditors
Preceding auditors
Total fees
-
126
-
24
-
171
321
-
4
325
123
-
6
-
-
-
129
5
-
134
-
126
-
13
-
-
139
-
-
139
123
-
12
19
124
20
298
19
-
317
62
64
Sales and marketing
Research and development
General and administration
Operations
Discontinued operations
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
2009
2008
64
186
58
54
-
362
2009
€’000
12,524
2,691
552
15,767
54
182
50
43
10
339
2008
€’000
12,695
2,256
1,093
16,044
Directors’ remuneration disclosures described within the Directors’ Remuneration Report as audited
form part of these financial statements on page 20.
The Company directly employed 2 sales persons in the UK.
12. DISCONTINUED OPERATIONS
On 17 May 2007 the Company’s board of directors resolved to sell the Wireless Products division
(“TWP”) and to focus solely on the Wireless Solutions business unit.
On 28 June 2007 the Company executed a term sheet for the sale of 80.01% of TWP, to a group of third
party investors. This agreement was not consummated. During the second half of 2007 the Company
sold its Italian TWP business to a third party, thus marking the final disposal of Telit's European TWP
business. During the first half of 2008, following the termination of the transaction to sell the Israeli
TWP business, the Company converted this division into a wireless solutions centre as an integral part of
its ongoing wireless solutions business and abandoned its TWP activities.
The results of the discontinued operations which have been included in the consolidated statements of
operations for the year ended 31 December 2008 are as follows:
Revenue
Cost of sales
Gross profit
Other income
Operating expenses
Net finance costs
Loss before income taxes
Income taxes
Net loss attributable to discontinued operations
63
65
2008
€’000
1,288
(1,832)
(544)
43
(1,349)
(14)
(1,864)
-
(1,864)
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
12. DISCONTINUED OPERATIONS (continued)
14.
INTANGIBLE FIXED ASSETS
During the year, net cash used in operations in the Wireless Products Division was €nil (2008:
€1,441,000)
The loss from discontinued operations in 2008 includes a charge of €1,031,000 in respect of the Telit
EMEA TWP business arising from adjustments to the gain on disposal of discontinued operations
following resolution of uncertainties arising from the terms of the disposal transaction and arising from
and directly related to the operations of the TWP business before its disposal, including write-downs of
trade receivables not recovered and the resolution of certain legal matters related to the discontinued
activity. The resolution of these uncertainties has resulted in changes to the amounts recorded in respect
of these amounts based on their estimated effect as at 30 June 2008, leading to an increase in the charge
of €877,000.
13. LOSS PER SHARE
The calculations of basic and diluted earnings per ordinary share
are based on the following results and numbers of shares:
Loss for the year attributable to the equity shareholders of the
parent
(3,466)
(3,052)
2009
€’000
2008
€’000
Weighted average number of shares:
No. of Shares
No. of Shares
For basic and diluted earnings per share
45,608,802
43,430,948
Loss per share from continuing operations (euro cents)
Loss per share from discontinued operations (euro cents)
Loss per share (euro cents)
(7.6)
-
(7.6)
(2.7)
(4.3)
(7.0)
Number of options that are anti-dilutive:
6,286,667
3,524,834
Finite lived intangible assets
Internally
generated
development
costs
€’000
Customer
relationships
€’000
Software
and
licenses
€’000
Acquired
technology Goodwill
€’000
€’000
Total
€’000
3,099
831
-
-
-
(130)
3,800
174
-
(49)
12
3,937
(783)
(666)
33
(1,416)
(909)
-
(2,325)
1,612
2,384
2,917
4,057
(2,606)
-
523
(51)
4,840
3,008
(2,594)
-
103
5,357
-
(484)
-
(484)
(447)
-
(931)
4,426
4,356
1,324
-
-
-
-
(246)
1,078
-
-
-
66
1,144
(369)
(199)
94
(474)
(286)
(29)
(789)
355
604
571
-
-
248
-
(127)
692
-
-
-
27
719
(364)
(171)
81
(454)
(238)
(27)
(719)
2,655
-
-
249
-
(603)
2,301
-
-
-
125
2,426
-
-
-
-
-
-
-
10,566
4,888
(2,606)
497
523
(1,157)
12,711
3,182
(2,594)
(49)
333
13,583
(1,516)
(1,520)
208
(2,828)
(1,880)
(56)
(4,764)
-
2,426
8,819
238
2,301
9,883
GROUP
COST
1 January 2008
Additions
Grant contribution
Arising on acquisition
Reclassified from held
for sale
Translation adjustments
31 December 2008
Additions
Grant contribution
Disposals
Translation adjustments
31 December 2009
ACCUMULATED
AMORTIZATION
1 January 2008
Charge for the year
Translation adjustments
31 December 2008
Charge for the year
Translation adjustments
31 December 2009
Net book value
31 December 2009
31 December 2008
Goodwill, customer relationships and acquired technology relate to the acquisition of Telit APAC which
is included within the Asia Pacific geographical segment, and to the acquisition of One RF Technologies
(subsequently renamed Telit RF) which is included within the EMEA geographical segment. The amount
of goodwill attributable to the Asia Pacific segment is €2,177,000 (2008: €2,052,000) and €249,000 to
the EMEA segment (2008: €249,000). The amount of customer relationships and acquired technology
attributable to the Asia Pacific segment is €355,000 (2008: €604,000) and €nil to the EMEA segment
(2008: €238,000)
Capitalized development costs relates to the UMTS/WCDMA and CDMA product lines and will be
amortized over a three to five years period beginning in 2009. Of the capitalized development costs
amount, €0.5 million relates to the UMTS/WCDMA product line with the balance relating to the CDMA
product line.
64
66
65
67
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14.
INTANGIBLE FIXED ASSETS (continued)
14.
INTANGIBLE FIXED ASSETS (continued)
COMPANY
COST
31 December 2008
Additions
31 December 2009
ACCUMULATED AMORTIZATION
31 December 2008
Charge for the year
31 December 2009
Net book value
31 December 2009
31 December 2008
Trademark
€’000
-
6,533
6,533
-
(204)
(204)
6,329
-
On 30 September, 2009 the Company purchased from its subsidiary the entire subsidiary’s right, title and
interest in the IP Rights for a purchase price of €6,533,000 which is equal to the fair market value of the
IP Rights.
The Group tests goodwill and intangible assets not yet ready for use for impairment annually, or more
frequently if there are indications that they might be impaired.
Telit APAC and Telit RF are determined as the cash generating units for goodwill impairment testing
purposes, being the lowest levels within the Group at which goodwill is monitored for internal
management purposes.
The recoverable amount of Telit APAC has been determined based on a value in use calculation using
cash flow projections based on financial budgets for a period of five years. The Group’s five year cash
flow forecast has been derived from the most recent financial budget approved by management adjusted
for expected growth for the following 4 years, based on an average estimated growth rate of 15% (2008:
27%) per year.
The discount pre tax rate applied of 17% (2008: 17%) is based on the risk free rate for 30 year bonds,
issued by the government in Korea, adjusted for a risk premium to reflect both the increased risk of
investing in equities and the systematic risk of Telit APAC.
The recoverable amount of Telit RF has been determined based on a value in use calculation using cash
flow projections based on financial budgets for a period of five years. The Group’s five year cash flow
forecast has been derived from the most recent financial budget approved by management adjusted for
expected growth for the following 5 years, based on an average estimated growth rate of 51%.
The discount pre tax rate applied of 15% is based on the risk free rate for 30 year bonds, adjusted for a
risk premium to reflect both the increased risk of investing in equities and the systematic risk of Telit RF.
In developing its projections, management has had regard to its past experience and external forecasts of
growth in the M2M industry. The key assumptions used in determining value in use are:
Revenue
Management has forecast revenue mainly based on external forecasts of growth in the M2M industry for
the APAC region. A declining growth rate has been applied, decreasing from 16% per year to 14% per
year over the four year period beyond the most recent financial budget.
Management has forecast changes in the average sales price based on past experience and external
forecasts of changes in the selling price in the M2M industry for the APAC region.
Expected changes in operating costs
Management has forecast changes in operating costs based on the current and expected future
infrastructure required to execute the assumed revenues.
EBITDA margins
EBITDA margins are expected to be in the range of 16-21% over the four year period covered by the
forecasts.
The Directors do not consider there to be any reasonably possible changes in key assumptions that would
lead to an impairment loss and consequently no sensitivity analysis has been presented.
66
68
67
69
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
15. PROPERTY, PLANT AND EQUIPMENT
16.
INVESTMENT IN ASSOCIATED UNDERTAKING
GROUP
COST
1 January 2008
Arising on acquisition
Reclassified from held
for sale
Additions for the year
Disposals
Translation
adjustments
31 December 2008
Additions for the year
Disposals
Translation
adjustments
31 December 2009
DEPRECIATION
1 January 2008
Charge for the year
Disposals
Reclassified as held
for sale
Translation
adjustments
31 December 2008
Charge for the year
Disposals
Translation
adjustments
31 December 2009
Net book value
31 December 2009
31 December 2008
Computers
€’000
Office
equipment
€’000
Vehicles
€’000
Leasehold
Improvements
€’000
Total
€’000
846
5
340
207
(35)
16
1,379
125
(7)
1,496
(239)
(278)
(213)
(15)
(735)
(251)
6
(979)
517
644
4,611
42
298
1,502
(2)
(150)
6,301
765
27
7,043
(2,709)
(804)
-
(68)
46
(3,535)
(1,060)
-
(15)
(4,610)
2,433
2,766
-
-
72
22
(39)
5
60
33
(2)
91
-
(12)
(46)
(3)
(41)
(10)
-
1
(50)
41
19
115
-
430
1
-
31
577
17
(12)
582
(12)
(60)
-
(144)
(11)
(227)
(58)
-
6
(279)
5,572
47
1,140
1,732
(76)
(98)
8,317
940
6
9,212
(2,960)
(1,154)
(471)
17
(4,538)
(1,379)
(2)
(5,918)
303
350
3,294
3,779
Group
Company
2009
€’000
2008
€’000
2009
€’000
2008
€’000
Investment in associated undertaking,
Cell-Time Ltd.
Cost
Translation adjustments
Losses accumulated since acquisition
1,135
(60)
(470)
605
1,135
(36)
(470)
629
-
-
-
-
579
-
-
579
In January 2009 the Company entered into and executed agreement with its subsidiary - Dai Telecom
Holdings (2000) Ltd subject to which the subsidiary purchased from the Company its holding rights in its
associated company - Cell-Time Ltd for a consideration of €632,000, which reflected book value at that
time. To finance the purchase the Company provided its subsidiary with a vendor loan for the entire
amount.
The accounts of Cell-Time Ltd. are drawn up to 31 December 2009 for inclusion in the consolidated
financial statements. The summarized financial information of Cell-Time Ltd is as follows:
Balance sheet
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Long-term liabilities
Total liabilities
Income statement
Revenue
Cost of sales
Gross profit
Operating expenses
Financial expenses, net
Profit for the year
2009
€’000
2008
€’000
1,525
32
1,557
1,435
-
1,435
2009
€’000
12,385
(11,828)
557
(507)
(11)
39
1,905
42
1,947
1,849
13
1,862
2008
€’000
14,389
(13,773)
616
(539)
(15)
62
Details of the associated undertakings of the Group are as follows:
Name of company
Country of
incorporation
and operation
Type of
shares
Effective
ownership
interest and
voting rights Principal activity
Cell-Time Ltd
Israel
Ordinary
29.33%
Development, marketing
and operation of pre-
paid billing systems of
cellular phones
68
70
69
71
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
17. OTHER INVESTMENTS
GROUP
2009
€’000
2008
€’000
Available for sale investments carried at deemed cost:
Unlisted equity securities
1,570
1,570
The Group holds 19.9% of the ordinary share capital of SEM, a company providing integrated
technological and logistical services for the high-tech electronics manufacturing market. The Group has a
single representative on the board of SEM, with the remaining 5 directors appointed by the other
shareholder. The Group does not have any voting rights beyond those conveyed by its shareholding.
Fair value at the date of acquisition of €1,570,000 was estimated based on historic and projected
multiples in earnings, revenues and net assets by reference to a basket of comparable companies for
which information is publicly available. In doing so, assumptions were made that are not supported by
prices from observable prices or rates. Financial information on which a fair value determination may be
made is not fully available to the Group as the Group does not receive and does not have access to
financial forecasts or monthly management accounts information and consequently the Directors do not
consider there is sufficient information available to reliably determine the fair value at the balance sheet
date. The investment has therefore been recorded at deemed cost. In doing so, the Directors have
considered whether there have been any factors which may indicate that impairment has arisen, including
review of the annual financial statements of SEM, and are satisfied that no such factors exist.
18.
INVESTMENTS IN SUBSIDIARIES
COMPANY
Investment in subsidiaries
1 January 2009
Additions(a)
Repayments(b)
Provision for Impairment (c)
31 December 2009
Loans to
subsidiaries
€’000
Investments in
subsidiaries
€’000
Total
€’000
8,150
3,264
(9,350)
-
2,064
19,242
9,460
-
(3,000)
25,702
27,392
12,724
(9,350)
(3,000)
27,766
During 2009, the Group reorganized its legal entity structure to provide a more simplified operational
structure. This has led to an increase in the value of subsidiary investments held in respect of Telit
Communications Spain SL, Telit Wireless Solutions Co. Limited and Telit Wireless Solutions Inc. These
investments transferred from Telit Wireless Solutions Srl to Telit Communications PLC at an assessed
fair value based on discounted future cash flows.
(a) Additions to investment in subsidiaries in 2009 consist of the transferred value of the investments in
Telit Communications Spain SL; Telit Wireless Solutions Co. Limited and Telit Wireless Solutions
Inc from Telit Wireless Solutions Srl to the Company for total amount of €9,110,000. In addition the
Company converted a €350,000 loan made to Telit RF Technology S.A.S. into capital
During 2009 the company made additional loans to its subsidiaries as follows: €1,250,000 loan made
to Telit Communications Spain SL. From this amount €1,000,000 is a loan transferred from Telit
Wireless Solutions Srl; €629,000 loan made to DAI Telecom Holdings (2000) Ltd to fund the
acquisition of Cell time Ltd; €385,000 loan made to Telit RF Technology S.A.S.and €1,000,000 loan
made to Telit Wireless Solutions Srl.
70
72
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
18.
INVESTMENTS IN SUBSIDIARIES (continued)
(b) The repayments in 2009 related to the repayment of the € 9,000,000 loan balance by Telit Wireless
Solutions Srl to the Company and a repayment of €350,000 loan balance by Telit RF Technology
S.A.S. to the Company made through conversion into capital.
(c) At December 31, 2009 the Company’s Investments in subsidiaries were assessed for indicators of
impairment using the discounted future cash flow method. As a result the Company has recorded
provision for impairment on its investment in Dai Telecom Holdings (2000) Ltd in the amount of
€3,000,000.
Details of the subsidiary undertakings of the Company are as follows (1 indicates the entity is held
directly by the Company; 2 indicates that the subsidiary is indirectly held; 3 indicates that the Company
held 100%, partially directly and partially indirectly):
Name of company
Telit RF Technology S.A.S.1
Country of
incorporation
and
operation
France
Type of
shares
Ordinary
Effective
ownership
interest and
voting
rights
100%
Telit Wireless Solutions Srl1
("TWS")
Telit Communications SpA2
("Telit EMEA")
Sardinia, Italy Ordinary
Italy
Ordinary
90%
Telit Wireless Solutions GmbH2
Germany
Ordinary
90%
Telit Wireless Solutions Inc. 1
("Telit Americas")
United States
of America
Ordinary
100%
Telit Communications Spain SL3
Spain
Ordinary
100%
Telit Wireless Solutions
Tecnologia E Servicos Ltda2
Brazil
Ordinary
100%
Telit Wireless Solutions Co Ltd1
("Telit APAC")
Republic of
Korea
Ordinary
90%
Dai Telecom Holdings (2000) Ltd.1 Israel
Ordinary
100%
Telit Wireless Solutions Ltd.
("Telit IL")2
Israel
Ordinary
100%
71
73
Principal activity
Development,
manufacturing and
selling short-range
data products
Intermediate holding
company
Development,
manufacturing and
selling data products
and distributing
cellular products
Selling and marketing
data products
Selling and marketing
data products
Selling and marketing
data products
Selling and marketing
data products
Development,
manufacturing and
selling data products
Intermediate holding
company
Selling and marketing
data products
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
18.
INVESTMENTS IN SUBSIDIARIES (continued)
20. RECEIVABLES (continued)
Country of
incorporation
and
operation
Israel
Type of
shares
Ordinary
Effective
ownership
interest and
voting
rights
100%
Name of company
Dai Telecom Ltd. ("Dai
Telecom")3
Telit Labs Ltd
Israel
Ordinary
100%
Principal activity
Selling and marketing
data products
Providing after sale
support services
Telit Wireless Solutions (Pty) Ltd. 2
("Telit RSA")
Republic of
South Africa
Ordinary
100%
Selling and marketing
data products
19.
INVENTORIES
Finished goods
Raw materials
Group
2009
€’000
2008
€’000
Company
2009
€’000
2008
€’000
4,365
1,656
6,021
8,789
1,961
10,750
29
-
29
-
-
-
The Directors consider that there is no significant difference between the net book value and replacement
cost of stocks held. Inventories are stated net of provisions for slow moving and obsolete items of
€712,000 (2008: €734,000).
20. RECEIVABLES
Within current assets:
Trade receivables
Other receivables
Due from Group undertakings
Within non-current assets:
Long term receivables
Group
2009
€’000
2008
€’000
Company
2009
€’000
2008
€’000
21,676
5,554
-
27,230
393
393
14,575
4,799
-
19,374
3,437
3,437
453
20
659
1,132
4
4
247
25
820
1,092
-
-
The average credit period on trade receivables that are neither past due nor impaired is 81 days (2008: 77
days). No interest is charged on trade receivables. The Group has provided against receivables based on
estimates of irrecoverable amounts from the sale of goods, determined by reference to past default
experience.
Included in the Group’s trade debtors balance are debtors with a carrying amount of €4,517,000 (2008:
€3,494,000) which are past due at the reporting date against which the Group has not made a loss
provision as there has not been a significant change in credit quality and the Group believes that the
amounts are still recoverable. The Group does not hold any collateral over these balances. The average
age of these receivables is 104 days (2008: 105 days).
72
74
Ageing of past due but not impaired trade debtors
0-30 days
30-60 days
60-90 days
90-120 days
2009
€’000
2,280
944
514
779
4,517
2008
€’000
1,842
325
835
492
3,494
The Directors consider that the carrying amount of trade and other receivables approximates their fair
value.
The Group’s trade receivables are stated after allowances for bad and doubtful debts, an analysis of
which is as follows:
At 1 January
Arising from acquisition
Increase in allowance recognized in profit or loss
At 31 December
2009
€’000
811
-
300
1,111
2008
€’000
294
227
290
811
In determining the recoverability of trade receivables, the Group considers any change in the credit
quality of the trade receivable from the date credit was initially granted up to the reporting date. The
concentration of credit risk in the Group’s continuing activities is limited due to the customer base being
large and unrelated, but the management reviews carefully every past due amount in light of the global
economic situation. Accordingly, the directors believe that there is no further credit provision required in
excess of the allowance for doubtful debts. There are no allowances for credit losses recorded against
other financial assets.
21. OTHER FINANCIAL ASSETS
Group
Company
2009
€’000
2008
€’000
2009
€’000
2008
€’000
Loans and receivables:
Due from group undertakings
Other long term assets
Other debtors
investments
Available-for-sale
deemed cost:
Non-current
Shares in unlisted entities (note 17)
carried
at
Assets outside the scope of IFRS 7:
Current assets
Other debtors
-
393
4,740
5,133
-
3,437
4,235
7,672
659
-
-
659
1,570
1,570
-
814
564
20
820
-
-
820
-
25
73
75
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
21. OTHER FINANCIAL ASSETS (continued)
23. ALLOTTED SHARE CAPITAL
Group
Company
COMPANY AND GROUP
Non-current assets
Investments in subsidiaries (note 18)
Investments in associates (note 16)
Total
2009
€’000
2008
€’000
-
605
605
-
629
629
2009
€’000
27,766
-
27,766
2008
€’000
27,392
579
27,971
Included within other debtors are amounts receivable in respect of the Group's grant claims amounting to
€3,715,000 (2008: €2,908,000). These debtors do not have a specified date by which payment is due to
the Group and hence no ageing information is provided. The directors have assessed the credit quality of
such receivables and are satisfied that as such amounts are receivable from regional government bodies,
no provision for losses is required.
22. CASH
The Group’s cash resources are as follows:
Deposits – restricted cash
Cash and cash equivalents
Total
Group
Company
2009
€’000
3,456
7,898
11,354
2008
€’000
391
4,619
5,010
2009
€’000
5,000
3,166
8,166
2008
€’000
6,000
633
6,633
The Group’s cash resources are denominated in the following currencies:
Sterling
Dollar
Euro
KRW
Other
Total
Group
Company
2009
€’000
2,627
1,399
5,117
1,565
646
11,354
2008
€’000
332
1,390
2,716
550
22
5,010
2009
€’000
2,627
-
5,539
-
-
8,166
2008
€’000
332
-
6,301
-
-
6,633
Cash and cash equivalents comprise cash held by the Group and short term deposits with an average
period at inception until maturity of three months or less. The carrying amount of these assets
approximates their fair value.
Restricted cash deposits are provided as security for Telit EMEA's borrowings. These deposits attract
interest at 0.02% to 0.05% per annum, which accrues to the benefit of the Group. The deposits would
only become available to the Group on cancellation of the Group’s borrowing facilities (see note 31).
2009
€’000
2008
€’000
Allotted, issued and fully paid:
72,514,281 ordinary shares of 1 pence each (2008: 44,514,281
ordinary shares of 1 pence each).
956
644
1,300,000 ordinary shares were issued in November 2008 as consideration for the purchase of Telit RF
as discussed further in note 26.
1,500,000 and 26,500,000 ordinary shares were issued In August and December 2009, respectively, for a
gross consideration of £5.7 million.
The Company has one class of ordinary shares which carry no rights to fixed income.
Share options
The number of outstanding options as of 31 December 2009 and at the date of this report was 6,286,667,
equal to 8.7% of the outstanding share capital of the Company (8% of the outstanding share capital of
the Company, on a fully diluted basis).
24. POST-EMPLOYMENT BENEFITS
A. Until 1 January 2007, employees of Telit EMEA received defined benefit pension arrangements
under which employees were entitled to retirement benefits based on the accumulated
contributions upon attainment of the retirement age or when leaving the company. Due to changes
in applicable retirement and severance benefit legislation in Italy, existing entitlements at 1
January 2007 were frozen. For all new entitlements, employees can elect to have their entitlements
paid into a group defined contribution plan or alternatively, into an Italian government defined
contribution plan for private sector employees. The accrued benefit at 1 January 2007 is unfunded.
The actuarial present value of this frozen defined benefit obligation, the related current service
cost and curtailment loss were measured using the traditional unit credit method.
B.
The Group's liability for severance pay for Israeli resident employees is calculated pursuant to the
Israeli Severance Pay Law, based on the most recent salaries and term of employment, and is
covered by payments to insurance companies and pension funds. Amounts accumulated in the
insurance companies and pension funds are not included in the financial statements since they are
not under the control and management of the Group. The accrued severance pay liability included
in the balance sheet in respect of the Israeli resident employees represents the balance of the
liability not covered by the above-mentioned deposits and/or insurance policies for which a fund is
maintained (in the Group's name) as a recognized pension fund.
C.
The amount included in the balance sheet arising from the obligations in respect of the defined
benefit scheme of Telit EMEA and the accrued severance pay of Dai Telecom, Telit APAC are as
follows:
74
76
75
77
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
24. POST-EMPLOYMENT BENEFITS (continued)
25. CURRENT LIABILITIES
Movement in post employment benefit obligations
1 January
Discontinued operation
Expense recognised in the statement of
comprehensive income
Contributions
31 December
2009
€’000
2008
€’000
1,807
-
441
(218)
2,030
1,555
63
470
(281)
1,807
The liability in respect of accrued severance pay is €632,000 (2008: €498,000) and the charge to
the statement of comprehensive income in the year is €261,000. The IAS 19 disclosures in respect
of the Group’s unfunded defined benefit obligations in Italy are detailed further in D and E below.
D.
Amounts recognized in the statement of comprehensive income in respect of the defined benefit
scheme are as follows:
2009
€’000
2008
€’000
Interest cost
Expense recognized in the statement of comprehensive
income
Disposal
Total expense included in statement of comprehensive
income
69
144
(32)
181
68
(26)
-
42
E.
The amount included in the balance sheet arising from changes in the present value of the defined
benefit scheme obligation for Telit EMEA are set out below:
Present value of defined benefit scheme obligation
1 January 2009
Actuarial gain/(loss)
Interest cost
Benefits paid
Disposal
31 December 2009
F. Financial assumptions
Discount rate
Expected salary increase rate
Inflation
2009
€’000
2008
€’000
1,309
144
69
(92)
(32)
1,398
2009
%
4.60%
3.00%
2.00%
1,329
(26)
68
(62)
-
1,309
2008
%
5.90%
-
2.00%
G. The experience adjustments arising on the plan liabilities at the balance sheet date, totaled €142,899
(2008: €27,968).
H. The expected contributions to be paid in 2010 totaled €114,891.
76
78
Short-term bank loans and other borrowings
Advances on receivables factoring
Current maturities of long term loans
Total short-term borrowing from banks and other
lenders
Trade creditors (i)
Due to Group undertakings
Provisions
Deferred income
Other current liabilities
Total current liabilities
Group
Company
2009
€’000
13,480
1,564
381
15,425
18,026
-
151
-
3,655
2008
€’000
11,508
1,031
878
13,417
11,140
-
142
7,667
4,122
2009
€’000
-
-
-
-
409
6,934
-
-
625
2008
€’000
-
-
500
500
74
738
-
-
160
37,257
36,488
7,968
1,472
The directors consider that the carrying amount of short-term borrowings, trade payables and other
current financial liabilities approximates to their fair value.
(i)
The average credit period on purchases of certain goods is 94 days. No interest is charged on the
trade payables. The Group has financial risk management policies in place to ensure that all
payables are paid within the credit timeframe.
26. ACQUISITIONS
On 5 November 2008 Telit acquired 100% of the issued ordinary share capital of, and voting rights in,
One RF Technology S.A.S., a company incorporated in France, in return for consideration of 1,300,000
newly issued ordinary shares in the Company. The fair value of the shares issued at market price on 5
November 2008 was €554,000. The total cost of the business combination, including directly attributable
costs of €24,000, was €578,000.
The final fair value of the assets and liabilities of Telit RF recognised at the acquisition date is as follows:
Book value
(€’000)
Fair value
adjustments
(€’000)
Fair value
(€’000)
Assets:
Property, plant and equipment
Acquired technology
Cash
Trade and other receivables
Inventories
Current liabilities
Non-current liabilities
Deferred tax
Goodwill
Total purchase consideration (including directly
attributable costs of €24,000)
Net cash outflow arising on acquisition
77
79
47
-
9
218
316
(348)
(50)
-
192
-
248
-
-
(45)
-
-
(67)
136
47
248
9
218
271
(348)
(50)
(67)
328
249
577
15
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
26. ACQUISITIONS (continued)
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
27. COMMITMENTS AND CONTINGENCIES (continued)
The goodwill is attributable to the expected profitability of the acquired business and the synergies that
are expected to arise from the integration of Telit RF’s short-range technology products with the wider
Telit product portfolio and the additional revenue opportunities arising from offering these products to
Telit’s existing customer base.
27. COMMITMENTS AND CONTINGENCIES
Legal proceedings affecting continuing operations
A.
B.
C.
During the first half of 2008 the Company settled the outstanding legal claims which were pending
with Ixfin Magneti Marelli Eletronica Ltda, with no impact on the Company's statement of
comprehensive income.
In July 2007 Euroinvest S.r.l. ("Euroinvest") obtained an injunctive degree from the
Montepulciano Court for the sum of €611,945 against Telit EMEA in relation to a claim for a
success fee in connection with assistance allegedly provided to Telit EMEA in connection with the
filing of two grant applications from the Italian Ministero delle Attività Produttive.
In November 2008 Telit EMEA and Euroinvest entered into a settlement agreement and the claim
was withdrawn. According to the settlement, Telit EMEA paid Euroinvest the sum of €140,000,
VAT included and, upon receipt by Telit EMEA of the second installment of the grant from the
Ministry, an additional sum of €140,000, VAT included, will be paid to Euroinvest.
In 2009 the Israeli customs and sales tax authority (the "Authority") began assessment proceedings
regarding the value for the purpose of custom duties of products imported into Israel by the
Company’s Israeli subsidiary, Dai Telecom Ltd. (hereafter "Dai Telecom") while examining the
need to add to the declared value of the products certain additions, for the period from 2005.
Although at as the balance sheet date no formal assessment has been served on Dai Telecom, from
the Authority's requests for information from Dai Telecom and form testimonies collected by the
Authority from Dai Telecom's current and future employees, the assessment proceedings seem to
be focusing on two main issues:
1. An addition to the declared value of the imported products equal to the royalties paid
by Dai telecom to Telit Italy in connection with the use, by Dai Telecom, of the
trademark and the tradename "Telit".
2. An addition to the declared value of the imported products equal to development fees
paid to the Korean manufacturer of the products imported by Dai Telecom, while
some of the development was carried out outside of Israel.
The rate of import taxes that will be levied in case the value of the products will be increased is
15% from the additional value.
On 21 April 2010 an assessment (the "Assessment") was served on Dai Telecom by the Authority
demanding additional import taxes as follows:
Purchase tax: approximately € 827,000
Interest, linkage differentials to the CPI and penalties: approximately €1,329,000
The assessment also includes a VAT element in the amount of approximately €1,035,000 which,
if levied, could be deducted from ongoing VAT payments made by Dai Telecom.
Dai Telecom has the right and is appealing the Assessment.
The Assessment does not detail the calculation of additional taxes levied, and Company's
management estimates that the royalties issue forms the major part in the assessment of the
purchase tax, and subsequently of all other sums detailed in the Assessment.
In the opinion of Company's management, based, inter alia, on the opinion of its professional
advisors, Dai Telecom has valid and strong arguments regarding its claim that the royalties and
development fees should not have been added to the value of the products, and there is a strong
likelihood that Dai Telecom’s arguments will prevail. As such no provision was recorded.
Operating lease commitments
D.
The Group had total outstanding commitments for future minimum lease payments
under non-cancellable operating leases as set out below:
Operating leases which expire:
Within one year
In the second to fifth years inclusive
Land and buildings
Other
2009
€’000
2008
€’000
2009
€’000
2008
€’000
1,162
1,156
2,318
895
144
1,039
398
780
1,178
316
202
518
Minimum lease payments under operating
leases charged to the statement of
comprehensive income for the year
1,626
720
607
383
Operating lease payments represent rentals payable by the Group for certain of its office
properties.
Guarantees and liens
E.
The Company provides guarantees to certain banks in Italy, Israel and Korea, to sustain credit
lines granted by those banks to the Group's subsidiaries. The guarantees shall not exceed the
amount of €9.75 million.
At the balance sheet date the Company had deposited €5 million in Italian bank accounts, to act as
security in relation to the credit facility granted by those banks (see note 31).
F.
The Group has pledged in favor of BAMES, and to maintain such pledge in force until termination
of the strategic alliance with BAMES on a quota equal to 3% of Telit Wireless Solutions Srl
capital, it being understood that the rights to votes, dividends and/or other distributions will
remain with the Company in respect of such quotas.
Sardinia Grant
G.
Telit EMEA was previously declared eligible to receive a €5.3 million grant, and a €7.8 million
preferential rate loan facility, under a business development program sponsored by the Ministry of
Trade and Commerce in Italy. This program was awarded to Telit EMEA to invest in research and
development in a new R&D centre in preferred areas in Italy.
78
80
79
81
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
27. COMMITMENTS AND CONTINGENCIES (continued)
30. SHARE-BASED PAYMENTS
As of 31 December 2009 Telit Italy has invested approximately €13.5 million (2008:€10.5 million)
in this grant project. A bank loan of €8.0 million was obtained against the expected cash inflow
from the Ministry of Trade and Commerce and was outstanding at 31 December 2007. In
September 2008 the Company received the first installment of the grant and preferential rate loan
from the Italian Ministry of Trade and Commerce equal to €6.5 million, which was used to pay
down the bank loan. The terms of the bank loan have been revised to a €5.2 million facility
maturing on 15 October 2010, secured against the expected cash inflow from the second
installment of the grant. The €5.2 million facility has been fully drawn as at 31 December 2009
(see note 31). Of the €6.5 million received, €3.9 million represents a preferential rate long-term
loan (see note 31) and €2.6 million a grant. The grant has been recorded as a reduction in the
capitalized development costs in the consolidated balance sheet (see note 14).
28. PROVISIONS
1 January
Utilized in the year
Provided in the year
Reclassified from held for sale
31 December
Classified as:
Current liabilities
Non-current liabilities
31 December
2009
€’000
2008
€’000
890
(49)
142
-
983
151
832
983
144
(203)
600
349
890
142
748
890
The Group provides warranties on the sale of its M2M products for a period of 12 to 15 months. The
Group has provided for the estimated cost of replacement or repair of those products on which it
expects to receive warranty claims during that period. The actual cost of warranty repair is dependent
on the number of returns during the warranty period and the nature of the repairs to be undertaken or
the product replacement cost.
The Group is currently the subject of ongoing tax audits in respect of tax returns made in certain
jurisdictions. The calculation of the Group’s charges to taxation, including income tax, employment tax,
sales taxes and other taxes involves the exercise of judgment in respect of certain items whose tax
treatment cannot be finally determined until resolution has been reached with the relevant tax authority
or, as appropriate, through a formal legal process. The probable outcome of the tax audits has been
considered in determining the appropriate level of provision for such taxes. The final resolution of some
of these items may give rise to material profit and loss and/or cash flow variances.
On 2 April 2007 executives of the Company were granted 1,300,000 options to purchase approximately
3 % of the Company's issued and outstanding shares at an exercise price of £0.43 per share. The options
vest in two equal installments on 1 January 2008 and 2009 and expire five years from the date of grant.
On 10 July 2007 employees of Telit Italy, Telit Wireless Solutions Co., Ltd. ("Telit APAC") Telit
Wireless Solutions Inc. ("Telit Americas"), Telit Wireless Solutions Ltd. and Telit Communications
Spain S.L. were granted options to purchase approximately 3.4% of the Company's issued and
outstanding shares at an exercise price of £0.60 per share. 100,000 options vest in two equal installments
on 9 July 2008 and 2009 and 1,363,000 vest in three equal installments on 9 July 2008, 2009 and 2010.
All options expire five years from the date of grant.
On 11 July 2007 Non-Executive Directors of the Company and consultants to Telit Italy were granted
options to purchase approximately 3% of the Company's issued and outstanding shares at an exercise
price of £0.60 per share. 1,100,000 options vest in two equal installments on 10 July 2008 and 2009 and
195,000 options vest in three equal installments on 10 July 2008, 2009 and 2010. All options expire five
years from the date of grant.
On 2 April 2008, a grant of 35,000 options was made to an employee of the Group at an exercise price of
£0.70 per share. The options vest over three years in equal annual installments.
On 29 January 2009 the majority of the options were cancelled by their holders, for no consideration. On
the same date, executives, employees and consultants of the Company and its subsidiaries were granted
6,407,000 options to purchase approximately 14.4% of the Company's issued shares at the time, at an
exercise price of £0.20 per share. The options vest in two or three equal annual installments starting from
29 January 2009 and expire five years from the date of grant.
The number of outstanding options as at 31 December 2009 was 6,286,667, equal to approximately 8.7%
of the issued share capital of the Company.
The number and weighted average exercise prices of share options are as follows:
Number
2009
2008
Weighted average
exercise price
(pence)
2009
2008
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Outstanding at year end
3,524,834
6,407,000
(3,645,167)
6,286,667
4,062,000
35,000
(572,166)
3,524,834
0.54
0.20
(0.53)
0.20
0.55
0.70
(0.60)
0.54
29. OTHER LONG-TERM LIABILITIES
Exercisable at year end
2,647,333
1,689,667
0.20
0.53
As at 31 December 2009 the Group had outstanding a €3.0 million interest rate swap that started on 10
January 2008 and has an end date of 10 January 2011. The Group pays a fixed rate of interest and
receives floating. The fair value of the derivative has been determined to be €220,647 (2008: €119,179).
The fixed interest rate payable by the Group is Euribor + 1%.
The Group recognized a total expense of €402,000 in respect of equity settled share based payment
transactions for the year ended 31 December 2009 (2008: €436,000).
Due to the cancellation of the previous share options, an accelerated charge of €160,000 was recognised
and is included in this total. The remaining charge relates to the share options granted during the year.
The fair value of these options has been calculated using the parameters set out below:
The weighted average fair value of options granted during the period determined using the Black –
Scholes valuation model was £ 0.0725(2008: £0.15 and £0.24).
80
82
81
83
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
30. SHARE-BASED PAYMENTS (continued)
31. BORROWINGS (continued)
The significant inputs into the model were share price of £ 0.185 (2008: £0.385 and £0.575) at the grant
date, exercise price shown above, volatility of 60% (2008:60%), an expected vesting period of between
two to three years, and an five years risk-free interest rate of 2.043% (2008: 4.0%). Expected volatility is
estimated by considering historic average share price volatility.
31. BORROWINGS
Group
2009
€ ’000
2008
€’000
Company
2009
€’000
2008
€’000
Unsecured – at amortized cost
Short-term bank loans and other borrowings
Current maturities of long term loans
Total short-term borrowing from banks and other
lenders
Other long-term loans
Total
Secured – at amortized cost
Factoring companies
Short-term bank loans and other borrowings
Total
Disclosed in the financial statements as:
Current borrowings
Non-current borrowings
Total
42
381
423
55
878
933
3,150
3,573
3,531
4,464
1,564
13,438
15,002
1,031
11,453
12,484
15,425
3,150
18,575
13,417
3,531
16,948
-
-
-
-
-
-
-
-
-
-
-
-
500
500
-
500
-
-
-
500
-
500
The other long-term loan of €3.15 million represents the long-term element of a preferential rate loan
from the Ministry of Trade and Commerce in Italy of €3.9 million provided in connection with the
Group’s business development program in Sardinia (see note 27). The loan attracts interest at a rate of
0.75% and is repayable in ten annual installments commence on 20 March 2009 and ending on 20 March
2018. The fair value of the loan at the balance sheet date was €3.12 million.
Included within Current borrowings are:
The short-term element of the preferential rate loan from the Ministry of Trade and Commerce in
Italy, amounting to €381 thousands.
A drawn amount of €5.2 million on a loan with a maturity date at 15 October 2010. The interest rate
on this short-term bank loan is Euribor plus 2.325% per annum.
The short term bank loan is a bridging loan in advance of funds to be received from a grant from
the Italian government to Telit EMEA to support a development project in Sardinia. The Company
has provided a letter of guarantee of €5.2 million in favor of the lending bank, under which it has
guaranteed the prompt payment to the lending bank of all sums which may become due in
connection with the loan.
Drawn letters of credit and borrowings arising from invoice advances totaling €8.2 million. In Telit
EMEA, These borrowings and letters of guarantee issued by the Company of €3 million, under which the
Company has guaranteed the prompt payment to the lending bank of all sums which may become due. As
part of this guarantee, the Company has guaranteed not to dispose of any interest in subsidiaries
without the prior consent of the lending bank. The total available lines of credit and invoice advance
facilities at 31 December 2009 was €11.4 million, with the remainder cancellable on demand, but
without a fixed maturity date.
Factoring facilities against qualifying receivables totaling €1.6 million. These borrowings are secured
against the factored receivables and are with recourse to the company in the event that the
receivables are not collected.
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 Company in the
foreseeable future and that therefore the Company will be able to continue to fund its operations from
these credit facilities. The Company’s liquidity risks are discussed in note 32.
32. FINANCIAL RISK MANAGEMENT
Financial risk management is an integral part of the way the Group is managed. The Board establishes
the Group’s financial policies and the Chief Executive Officer establishes objectives in line with these
policies.
It is the Group's policy that no trading in financial instruments is undertaken.
In the course of its business the Group is exposed mainly to financial market risks and credit risks.
Financial market risks are essentially caused by exposure to foreign currencies and interest rates and
movements in the value of equity in unlisted securities held by the Group.
Foreign currency risk
The Group uses short-term borrowings from banks in the same foreign currency of those transactions to
reduce the Group’s exposure to foreign currency risk.
Foreign exchange exposure arises where the Group’s companies transact in a currency different from
their functional currency.
The carrying amount of the Group’s monetary assets and liabilities at the reporting date, denominated in
currency different to the functional currency of the entity in which such monetary assets and liabilities
are held is as follows:
Sterling
US Dollar
Assets
Liabilities
2009
€’000
2008
€’000
2009
€’000
2008
€’000
2,627
2,379
624
1,652
-
3,737
-
1,514
The following table details the Group’s sensitivity to a 10% change in euro against the respective
foreign currencies. 10% represents management’s assessment of the possible change in foreign exchange
rates. The sensitivity analysis of the Group’s exposure to foreign currency risk at the reporting date has
been determined based on the change taking place at the beginning of the financial year and held
constant throughout the reporting period. A positive number indicates an increase in profit or loss and
where euro strengthens against the respective currency.
82
84
83
85
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
32. FINANCIAL RISK MANAGEMENT (continued)
32. FINANCIAL RISK MANAGEMENT (continued)
Impact on profit or loss of a 10% change
Impact on profit or loss of a 20% change
Group
2009
€’000
127
254
2008
€’000
57
114
Credit risk associated with the Group’s cash and cash equivalents and restricted cash deposits is
managed by placing funds on deposit with internationally recognised banks with suitable credit ratings.
Except as detailed in the following table, the carrying amount of financial assets recorded in the financial
statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk:
The impact on equity would be equal and opposite to the impact on the profit or loss.
Maximum credit risk:
Interest rate risk
Interest rate risk comprises the interest cash flow risk resulting from short-term borrowings at variable
rates. As disclosed in note 31, the Group’s working capital is funded through short-term borrowings at
variable rates of interest. Cash at bank earns interest at floating rates based on daily bank deposit rates.
As a result, material fluctuations in the market interest rate can have an impact on the Group’s financial
results.
The sensitivity analysis below have been determined based on the exposure to interest rates at the
reporting date and the stipulated change taking place at the beginning of the financial year and held
constant throughout the reporting period. A 1% change is used when reporting interest rate risk internally
to key management personnel and represents management’s assessment of the possible change in interest
rates.
At the reporting date, if interest rates had been 1% higher/lower and all other variables were held
constant, the Group’s net loss would increase/decrease by €186,000 (2008: decrease/increase by
€202,000); there is no material impact upon equity. This is mainly attributable to the Group’s exposure
to interest rates on its variable rate borrowings.
The Group’s sensitivity to interest rates has increased during the current period due to the increase in
loan balances.
Other price risks - equity price sensitivity
The Group is exposed to equity price risks arising from the holding of equity investments in unlisted
securities. The equity investment in SEM is held for strategic rather than trading purposes. The Group
does not actively trade this investment which at 31 December 2009, is held at deemed cost of
€1,570,000. It is not practicable to provide sensitivity analysis since it is not possible to reasonably
determine fair value since this investment is an unquoted equity investment.
Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in
financial loss to the Group.
Financial assets that potentially subject the Company and its subsidiaries to concentration of credit risk
consist principally of trade receivables.
The Group’s trade receivables are principally derived from sales to customers in Israel, Italy, the
USA and Korea. The Group performs ongoing credit evaluations of its customers and to date has
not experienced any material losses. An allowance for doubtful accounts is determined with
respect to those amounts that the Company has determined to be doubtful from collection.
Group
Cash and cash equivalents
Deposits – restricted cash
Trade receivables
Due from Group undertakings
Other long term asset
Loan (or investment in) to subsidiaries
Guarantee provided to banks on subsidiary’s
borrowings
Group
2009
€’000
7,898
3,456
21,676
-
393
-
2008
€’000
4,619
391
14,575
-
3,437
-
Company
2009
€’000
2008
€’000
3,166
5,000
453
659
4
2,064
633
6,000
247
820
-
8,150
-
-
9,750
12,450
Activities that give rise to credit risk and the associated maximum exposure include, but are not limited
to:
making sales and extending credit terms to customers and placing cash deposits with other entities. In
these cases, the maximum exposure to credit risk is the carrying amount of the related financial
assets;
granting financial guarantees to lending banks which may be called in the event of failure by a
subsidiary to repay amounts due to the lending bank when due. In this case, the maximum exposure
to credit risk is the maximum amount the entity could have to pay if the guarantee is called on, which
may be greater than the amount recognised as a liability as at 31 December 2009 where such
guaranteed borrowings were not fully drawn at that date;
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board of directors. The Group
manages liquidity risk by maintaining adequate reserves and banking facilities, by monitoring forecast
and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in
note 31 are details of additional undrawn facilities that the Group has at its disposal to further reduce
liquidity risk.
The following table details the Company’s and the Group’s remaining contractual maturity for its non-
derivative financial liabilities. The tables below have been drawn up based on the undiscounted
contractual maturities of the financial liabilities including interest that will accrue to those liabilities.
84
86
85
87
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
32. FINANCIAL RISK MANAGEMENT (continued)
32. FINANCIAL RISK MANAGEMENT (continued)
Group
Fixed rate
preferential loan
Variable rate debt
Non- interest
bearing debt
Company
2009
2008
Weighted
average
effective
interest rate
%
Less than
1 year
€’000
More than
1 year
€’000
Weighted
average
effective
interest rate
%
Less than
1 year
€’000
More than 1
year
€’000
0.75%
2.77%
381
15,044
3,150
-
0.75%
4.58%
378
12,539
3,531
-
-
-
-
-
500
-
2009
2008
Weighted
average
effective
interest rate
%
Less than
1 year
€’000
More than
1 year
€’000
Weighted
average
effective
interest rate
%
Less than
1 year
€’000
More than 1
year
€’000
Non- interest
bearing debt
Guarantees
-
9,750
-
-
500
12,450
-
-
Fair value of financial instruments
The financial instruments held by the Group are primarily comprised of non-derivative assets and
liabilities (non-derivative assets include cash and cash equivalents, trade accounts receivable and other
receivables; non-derivative liabilities including bank loans, trade accounts payable, other payables and
other current liabilities). Due to the nature of these financial instruments, there are no material
differences between the fair value of the financial instruments and their carrying amount included in the
financial statements, other than as discussed in note 1(ab) in respect of the non-current receivable from
SEM and note 31 in respect of certain liabilities.
Fair value hierarchy
Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are
measured in the balance sheet at fair value, this requires disclosure of fair value measurements by level
of the following fair value measurement hierarchy:
Level 1 – Quoted prices (unadjusted)in active markets for identical assets or liabilities
Level 2 – Inputs other than Quoted prices included within level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable
inputs)
The following table presents the Group’s assets and liabilities that are measured at fair value at 31
December 2009:
Non-current financial liabilities
Derivative financial liabilities
Level 1
€’000
Level 2
€’000
Level 3
€’000
-
221
-
86
88
Categories of financial instruments
Current financial assets:
Cash and restricted cash
Trade receivables
Loans and receivables – other debtors
Loans and receivables – due from group
undertakings
Assets not meeting the definition of a financial
asset
Inventories
Other debtors
Total current assets
Group
2009
€’000
2008
€’000
Company
2009
€’000
2008
€’000
11,354
21,676
4,740
5,010
14,575
4,235
8,166
453
-
6,633
247
-
-
-
659
820
6,021
814
10,750
564
29
20
-
25
44,605
35,134
9,327
7,725
Group
2009
€’000
2008
€’000
Company
2009
€’000
2008
€’000
Non-current financial assets:
Available-for-sale investments
Loans and receivables
Assets not meeting the definition of a financial
asset / outside the scope of IFRS 7
Intangible assets
Property, plant and equipment
Investments in associated undertakings
Investments in subsidiaries
Deferred tax asset
1,570
393
1,570
3,437
-
4
-
-
8,819
3,294
605
-
316
9,883
3,779
629
-
548
6,329
3
-
27,766
-
-
4
579
27,392
-
Total Non-current assets
14,997
19,846
34,102
27,975
Investments in associated undertakings and investments in subsidiaries are accounted for in
accordance with IAS 27 Consolidated and Separate Financial Statements and hence are outside the
IFRS 7 Financial instruments: Disclosure.
87
89
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
32. FINANCIAL RISK MANAGEMENT (continued)
Financial liabilities at amortized cost
Short-term borrowings from banks and other
lenders
Trade payables
Due to group undertakings
Other current liabilities
Liabilities not meeting the definition of a
financial liability:
Provisions
Other current liabilities
Total current liabilities
Group
2009
€’000
2008
€’000
Company
2009
€’000
2008
€’000
15,425
18,026
-
13,417
11,140
-
3,262
1,256
151
393
142
10,533
-
409
6,934
500
-
125
500
74
738
-
-
160
37,257
36,488
7,968
1,472
Non-current financial liabilities at amortized
cost:
Other loans
3,150
3,531
Financial liabilities at fair value through profit
or loss
Derivative financial instruments
221
119
Liabilities not meeting the definition of a
financial liabilities / outside the scope of IFRS 7
Post-employment benefits
Deferred tax liabilities
Provisions
Total Non-current liabilities
2,030
1,807
69
832
245
748
6,302
6,450
-
-
-
-
-
-
-
-
-
-
-
-
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
32. FINANCIAL RISK MANAGEMENT (continued)
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going
concerns while maximising the return to stakeholders through the optimisation of the debt and equity
balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in
note 31, cash and cash equivalents and equity attributable to equity holders of the parent, comprising
issued capital, reserves and retained earnings as disclosed in the statement of changes in equity on page
34.
Gearing Ratio
The Group defines debt as both long and short term borrowings as detailed in note 31. Equity includes
all capital and reserves of the Group attributable to the equity holders of the parent. The Group’s gearing
ratio at the year-end is as follows:
Group
2009
€’000
2008
€’000
Debt
Cash and cash equivalents, including restricted
cash
Net debt
18,575
16,948
(11,354)
7,221
(5,010)
11,938
Shareholders’ equity
Net debt to equity ratio
14,928
48.4%
11,965
99.7%
The Company is not subject to any externally imposed capital requirement.
33. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
GROUP
Transactions between the Company and its subsidiaries and associates represent related party
transactions. Transactions with subsidiaries have been eliminated on consolidation.
Except as disclosed below, no material related party transactions have been entered into, during the year,
which might reasonably affect any decisions made by the users of these Consolidated Financial
Statements.
A. On 29 January 2009, after having waived their existing options, Messers Cats, Testa and Galai were
granted 2,000,000, 1,000,000 and 200,000 options, respectively, at an exercise price of £0.20 per
options. The options vest over a 2 years period, as follows: 925,000 (Mr. Cats), 700,000 (Mr. Testa)
and 100,000 (Mr. Galai) of the options, respectively, were vested on the date of the grant with the
remaining options vesting in 2 equal annual installments on January 29 2010 and 2011.
88
90
89
91
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
33. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued)
33. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued)
(d) Loans receivable – See note 18.
(e) Financing transactions
The Company has provided an unlimited guarantee to a supplier of Telit Brazil covering all of Telit
Brazil's undertaking to said supplier according to the agreement between these parties.
The Company provides guarantees to certain banks in Italy, Israel and Korea, amounting to €9.75
million (2008: €12.5 million).
At the balance sheet date the Company had deposited €5 million (2008: €6.0 million) in Italian bank
accounts, to act as security in relation to the credit facilities granted by those banks to Telit EMEA.
34.
INFORMATION ON THE COMPANY
As permitted by the Companies Act 2006, the profit and loss account of the Company is not presented in
this Annual Report. The loss for the year amounted to €5,153,000 (2008: loss of €1,010,000).
Vested
Unvested
Expired
Total
Chairman of the Board
CEO
Finance Director
Total
700,000
925,000
100,000
1,725,000
300,000
1,075,000
100,000
1,475,000
-
-
-
-
1,000,000
2,000,000
200,000
3,200,000
The compensation attributable to the key personnel, calculated as the incremental fair value of the
options to be expensed over the period of vesting, is €48,000 (2008: €71,000).
B. Remuneration of the directors :
Share based payments
Short-term employee benefits
Post employment benefits
Total
Group
2009
€’000
178
1,092
76
1,346
2008
€’000
71
1,564
124
1,759
C. Mr. Cats directly holds 3,110,357 Ordinary Shares, representing 4.3% of the issued share capital of
the Company. Mr. Cats also holds 50% of the issued share capital of Boostt B.V. (“Boostt”). Boostt
holds 15,600,000 Ordinary Shares, representing 21.5% of the issued share capital of the Company.
The other 50% of Boostt is held by Wireless Solutions Management S.L., formerly Franco Bernabe
& T SL and Techvisory S.A. (together, the “Techvisory Group”), which holds an additional
1,250,000 Ordinary Shares, representing 1.7% of the issued share capital of the Company. Mr.
Massimo Testa, a director of the Company and a shareholder in Techvisory S.A. and therefore an
interested party in the Techvisory Group, holds 323,000 Ordinary Shares, representing 0.4% of the
issued share capital of the Company. Mr. Enrico Testa, chairman of the board of the Company is also
a director of the Techvisory Group.
Mr. Cats has certain voting understandings with certain members of the Techvisory Group.
Therefore, the Techvisory Group, Mr. Cats, Mr. Massimo Testa and Mr. Enrico Testa are, in
aggregate, interested in 20,283,357 Ordinary Shares, representing 27.9% of the issued share capital
of the Company.
COMPANY
Related party transactions between the Company and its subsidiaries and associates are summarized
below:
(a) Accounts receivable - See note 20.
(b) Accounts payable - See note 25.
(c) Trading transactions
Cost of sale - purchases from subsidiary
819
438
2009
€’000
2008
€’000
90
92
91
93
90
Company Information
Telit Offices World Wide
91
Directors, Secretary and Advisers
Company Registration No. 05300693
Directors
Enrico Testa, Chairman
Oozi Cats, Chief Executive Officer
Michael Galai, Finance Director
Amir Scharf, Non-Executive Director
Andrea Mandel-Mantello, Non-Executive Director
Massimo Testa, Non-Executive Director
Company Secretary
Michael Galai
Registered Office
7th Floor, 90 High Holborn, London WC1V 6XX
Nominated Adviser and Broker
Astaire Securities
Solicitors
Olswang
7th Floor, 90 High Holborn London WC1V 6XX
Independent Auditors
KPMG Audit Plc
Chartered Accountants
20 Farringdon Street
London
EC4A 4PP
Registrar
Capita Registrars Limited
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
CORPORATE HEADQUARTERS
Via San Nicola da Tolentino n.1/5, Roma
Phone: +39 06 42046011
Fax: +39 06 42010930
EMEA
Via Stazione di Prosecco 5/B
34010 Sgonico, Trieste - Italy
Phone: +39 040 4192 491
Fax: +39 040 4192 383
ITALY
Via Lecco,61
20059 Vimercate, Milano - Italyֿ
Phone: + 39 040 41 92 200
UNITED KINGDOM
Lakeside House
1Furzeground Way
Stockley Park
Heathrow
UB11 1BD
United Kingdom
Phone: +44 784197 9110
ISRAEL
3 Nirim St.
Tel Aviv 67060, Israel
Phone: +972 3 791 4000
Fax: +972 3 791 4008
TURKEY
Turkiye Irtibat Ofisi
Armada Alisveris ve Is Merkezi
Eskisehir Yolu No:6 Kat:12
06520, Sogutozu, Ankara, Turkey
Phone: +90 312 295 6319
Fax: +90 312 295 6200
GERMANY
Hanns-Schwindt-Str.11
81829 München, Germany
Phone: +49 (0)89 4373 7902
Fax: +49 (0)89 4373 7902
NORDICS
Walgerholm 3, 3500 Vaerloese, Denmark
Mobile: +45 2345 7112
SPAIN
Paseo della Castellana 141
Planta 20
28046 Madrid, Spain
Phone: +34 91 789 3491
Fax: +34 91 570 7199
NORTH AMERICA
3131 RDU Center Drive
Suite 135
Morrisville, NC 27560
USA
Phone: +1 888 846 9773 or +1 919 439 7977
Fax: +1 888 846 9774 or +1 919 840 0337
LATIN AMERICA
Rua Cunha Gago, 700 - cj 81
Pinheiros
São Paulo - SP, 05421001
Brazil
Phone: +55 11 2679 4654
Fax: +55 11 2679 4654
APAC
for Asia Pacific, Australia, New Zealand, India
12th Floor Shinyoung Security Building
34-12 yoido-dong Youngdungpo-gu , Seoul
Korea
Phone:+82-23684605
Fax:+82-23684606
TAIWAN
Room 621, 6F, No.6, Sec.4, Kinyi Road
Taipei, Taiwan
Phone: +886 2 2703 6336
SOUTHERN CHINA
Rm.1315, East Bld. Of Coastal City
No.3, Hai De Avenue
Nanshan-Shenzhen, 518059 China
Phone: +86 755 8627 1622
Fax: +86 755 8627 0217
CENTRAL AND NORTHERN CHINA
Room 1407, 14F, Cimic Tower, 1090, Shiji Avenue
Shanghai, 200120 China
Phone: +86 21 5835 6895
Fax: +86 21 5835 2998
REPUBLIC OF SOUTH AFRICA
West Wing, Birchwood Court
Montrose Street, Vorna Valley
Midrand 1685
RSA, Republic of South Africa
Switchboard: +27 11 655 7190
Phone direct: +27 11 655 7251
Fax: +27 11 655 7011