Table of Content
Introduction
Chairman's Statement
Chief Executive's Statement
Principle Risks and Uncertainties
Board of Directors
Corporate Governance
Report on Directors' Remuneration
Directors' Report
Statement of Directors' Responsibilities
Independent Auditor's Report
Financial Statements
Company Information
1
5
7
11
14
15
17
22
25
26
27
83
Introduction
Telit Communications PLC
Telit Communications PLC is a leading global wireless technology company (hereinafter "the Company" or
"Telit"). It develops, manufactures and markets GSM/GPRS, CDMA, UMTS/HSPA, short range RF
(including ZigBee) and GPS communication modules for machine-to-machine (m2m) applications. The
Company’s technology and products enable other electronic devices and equipment manufacturers to utilise
cellular infrastructure to relay and accept information without human intervention. m2m applications therefore
enable machines, devices and vehicles to communicate via wireless networks.
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 intellectual property and boasts strong in-house technology and research
and development expertise.
Telit is listed on AIM (Ticker: TCM).
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.
The m2m market
The international market for m2m wireless communications is rapidly growing, as wireless communications
are now a must-have rather than a luxury technology. Businesses that were not interested in m2m wireless
solutions in the past are now looking to incorporate this technology in their business as their operations
expand and modernise.
1
Financial highlights1
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Revenue increased by 34.7% to $177.4 million (2010: $131.7 million).
Gross profit increased by 28.2% to $67.8 million (2010: $52.9 million)
Operating profit for the year of $3.5 million (2010: $6.6 million)
Adjusted EBIT of $6.9 million (2010: $7.2 million)
Adjusted EBITDA for the year of $13.1 million (2010: $12.5 million)
Profit before tax of $2.2 million (2010: $6.4 million)
Adjusted PBT of $5.7 million (2010: $7.1 million)
Profit for the year of $1.4 million (2010: $8.4 million)
Adjusted profit for the year of $4.4 million (2010: $5.6 million)
Strong net cash flow from operations of $15.4 million (2010: $9.3 million)
Shareholders' equity of $60.8 million, 50.2% equity ratio (2010: $29.0 million, 32.7% equity ratio)
Operational highlights
•
•
•
•
During 2011 Telit accomplished the first phase of its strategy of becoming a global leader of m2m
communications and set in motion the second phase of its strategy which includes becoming a leading
global value added service provider in the m2m arena.
2011 results have been affected by significant investment in the cost of integrating the businesses
purchased in 2011, recruitment of staff and putting in place an operational infrastructure which will
provide a base to support the growth expectations of the Company in the coming years. This investment
has led to a major increase in operational costs over 2010 but it will give the Company a broad base for
additional growth in the coming years.
Continued successful expansion of the product portfolio, including the development of new 3G product
series.
Launch of 4G LTE program, for the development of future Telit products complying with next-
generation technologies.
Acquisitions
•
•
•
Successful Integration of the Motorola m2m business (acquired in March 2011), strengthening Telit's
position in the global m2m market.
Acquisition of GlobalConect Ltd (acquired in July 2011), a company which provides value added
services in the m2m industry including cellular connectivity. This acquisition forms the cornerstone for
Telit's value added services global business.
Acquisition of Navman Wireless OEM Solutions LP, a leading designer and manufacturer of world-
class GPS modules and solutions, completed in January 2012. This acquisition will enhance our location
product portfolio.
1
For reconciliation from IFRS financial results to adjusted financial results please refer to the table on page 7.
2
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:
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Automated Meter Reading
Car Telematics
Fleet Management and Tracking/Logistics
Point of Sale Terminals/Handhelds
Security Systems and Personal Tracking Devices
Public Transportation and Road Tolling
Vending Machines
Mobile Computing (Mobile Workforce Automation)
Industrial Processes
Information Displays
Healthcare
Emergency Communication Systems
Telit Worldwide
Telit sells its products through a network of value added resellers to more than 5,000 communications solution
providers and systems integrators in more than 60 countries around the world. Our customers are served both
directly or through a global network of more than 50 distributors.
Telit's headquarters are in Rome, Italy, with regional headquarters in Raleigh NC, USA and Seoul, Korea. Its
R&D centres are in Trieste and Cagliari, Italy, Seoul, Korea, Sofia Antipolis, France, Tel-Aviv and Jordan
Valley, Israel and Foothill Range, California, with regional sales offices in Brazil, China, Denmark, France,
Germany, Great Britain, India, Israel, Italy, Korea, Poland, Russia, Spain, the Republic of South Africa,
Taiwan, Turkey and the USA. At the end of 2011, Telit employed approximately 436 (2010: 366) employees
worldwide.
Telit provides global support to its international customers covering substantially all of the m2m market
verticals. Its vast experience doing business across the globe has helped Telit establish strong channels and
excellent access to key suppliers, customers and distributors in all major world markets. Telit's diverse
worldwide customer base includes cellular operators and cellular distributors, as well as designers,
manufacturers and system integrators of cellular m2m module-based applications.
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 Group to offer
customers solutions ranging from complete devices to embedded products, including fitting its platform into
its customers’ products. Underpinning its rapid growth rate since it entered the m2m business in 2003, Telit
has four major advantages:
1. Flexibility: Telit 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 substantial: all modules in a
product 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 its competition, which often
changes the size and shape of its modules with new models. Customers, however, need modules that
can be used for many years in their applications.
3
2. Scalability: Telit’s modules are tailored for various applications and different production lot sizes: for
quantities of a few thousand units, Telit 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 was 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/HSPA 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.
4. Focus: Telit’s clear focus is on the m2m market. Upon closing its handset business in 2007, Telit
became a pure-play m2m business, allowing it to focus on the needs of its m2m customers and the
m2m products which provide such customers with the solutions necessary for them to effectively run
and grow their businesses.
Telit's Strategy
Our strategy for 2012 is to continue to leverage our position as a leading vendor 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. Through the acquisition of Motorola m2m we acquired relationships
with strong global customers, mainly in the US, and the addition of Motorola m2m's line of products will
enable us to service these customers and to offer our existing and acquired customers an even broader range of
products. The acquisition of GlobalConect will allow Telit to offer its customers important valued added
services, including wireless connectivity. Telit’s management believe that this will become a significant
building block of its product offering and further improve Telit’s customer proposition as it offers
connectivity and other value added services to its m2m solutions, addressing customers’ needs more
comprehensively. The acquisition of Navman Wireless Solutions OEM in January 2012 will enable Telit to
become a major contender in the GPS market while providing both an enhanced product portfolio for its m2m
customers as well as access to new GPS customers and products beyond the traditional m2m industry, thereby
strengthening Telit’s global market position.
4
CHAIRMAN’S STATEMENT
Enrico Testa, Chairman of the Board
I am pleased to deliver the 2011 results. Growth in the m2m market slowed down in 2011 after a strong
recovery in 2010 from the economic downturn, but still provided numerous commercial opportunities for
Telit. Our strong competitive position has allowed us to capitalise on these opportunities and we have again
made good progress in increasing our market share.
Financial highlights
• Revenue for the year increased by 34.7% to $177.4 million (2010: $131.7 million). In the second half of
the year revenues increased by 18.7% to $96.3 million compared to revenues of $81.1 million in the first
half and up 33.6% compared to $72.1 million in the second half of 2010. Increases in revenue were seen
across all geographic segments, but most notably in the US. The Motorola product line, acquired on 1
March 2011, has contributed approximately 26% of total revenue in 2011(including sales to Telit's
customers).
• Gross profit for the year increased by 28.2% to $67.8 million (2010: $52.9 million) while gross margin
decreased to 38.2% (2010: 40.2%). The gross margin achieved by sales of the Motorola m2m products,
was lower compared to Telit’s own products. The Board expects gross margin to return to around 40.0%
in the coming years.
• Telit has continued to invest in its product portfolio, increasing R&D investment by $3.5 million to $21.1
million (11.9% of revenues) compared to $17.6 million in 2010 (13.4% of revenues). The increase is
largely due to the Motorola business being acquired.
• Sales & marketing expenses increased by $8.0 million to $25.3 million (14.3% of revenues) compared to
$17.3 million in 2010 (13.1% of revenues). The increase is mainly due to investment in headcount and
marketing following the business acquisitions made during the year. In addition, $1.0 million is
attributable to a bad debt expense recorded in 2011.
• General & administrative expenses increased to $17.5 million (9.9% of revenues) compared to $12.5
million in 2010 (9.5% of revenues). The increase is due to higher directors remuneration, increase in
expenses relating to acquisitions and increase in IT expenses.
• Adjusted EBIT decreased from $7.2 million in 2010 to $6.9 million this year. Adjusted EBITDA
increased to $13.1 million which reflects an EBITDA margin of 7.4% (2010: $12.5 million; 9.5%). The
decrease in adjusted EBITDA margin is mainly due to the costs related to the purchase of the businesses
acquired in 2011 and their integration into Telit as necessary to support future growth. Telit’s investment
in sales and marketing and other costs, while affecting EBITDA for 2011, positions the Company for
future growth in the m2m market in the coming years without any further significant increase in its cost
basis.
• Basic earnings per share for the year were 1.6 cents compared to 11.3 cents per share in 2010.
• Adjusted basic earnings per share for the year were 4.5 cents compared to 7.4 cents in 2010
5
Acquisitions:
•
In March 2011 we completed the acquisition of Motorola m2m, funded by an issue of equity to new and
existing shareholders. The integration of the business was completed successfully during 2011 and the
former Motorola m2m business has become an integral part of the Telit's organisation.
• The acquisition of GlobalConect Ltd, completed in July 2011, will allow Telit to offer its customers value
added services including wireless connectivity. We believe that this will become a significant building
block of the Company’s services business and further improve Telit’s customer proposition as it includes
services with its m2m solutions. This will address customers’ needs more comprehensively in a "one stop
shop" solution.
• The acquisition of Navman Wireless OEM Solutions LP, completed in January 2012, will allow Telit to
offer its customers world-class Global Positioning System (GPS) modules and solutions, and to further
diversify its product offering.
Board changes
• On 21 April 2011 Ram Zeevi was appointed to the Board of Telit.
• On 23 May 2011, the terms of office of Amir Scharf and Andrea Mandel-Mantello, independent non-
executive directors, serving on the Board since September 2007 and May 2005, respectively, ended. They
were replaced on the same date by Nicola Miglietta and Davidi Gilo.
• On 21 June 2011, Mr. Yosi Fait was appointed to the Board as Finance Director replacing Mr. Yariv
Dafna, who stepped down from the Board but remains the CFO of the Group.
Dividend
The Company is not proposing to pay a dividend in respect of the period (2010: $ nil).
People
During 2011 we have made significant progress and this is a reflection of the excellent team we are proud to
have at Telit. The Board believes that our skilled staff is, and will continue to be, the cornerstone of Telit’s
success. I would like to personally thank all of the Company’s employees for their hard work and to welcome
all the new employees that have joined the Telit family, including those joining us from Motorola m2m,
GlobalConect Ltd and Navman Wireless OEM Solutions LP.
Outlook
The outlook for 2012 and beyond looks positive for the industry as a whole and for Telit in particular.
Notwithstanding the fact we are operating in a competitive environment, we believe we are well positioned to
take advantage of the opportunities ahead and believe that the acquisitions we have made will help to further
improve our strong position within our industry. We look forward to continued organic business expansion
and are constantly seeking further expansion opportunities through new technologies or by gaining access to
new territories and new market segments.
We look to 2012 and beyond with excitement, as we continue to gain market share and strive to constantly
improve our profitability while continuing to provide the market with first rate products as well as value added
services.
Enrico Testa
Chairman of the Board
23 March 2012
6
CHIEF EXECUTIVE'S STATEMENT
Oozi Cats, Chief Executive
Introduction
2011 was a year of moderate growth after 2010, in which we enjoyed strong growth reflecting the recovery of
the global economy generally and the m2m market in particular. In this moderately growing market, we
continued to focus on expanding our market share and managed to increase it to 22% over the prior year
according to a Beecham Research report published in June 2011. At the same time, we are looking to diversify
our offering by adding GPS products to our offering through the acquisition of Navman Wireless OEM
Solutions LP in January 2012.
Financial Results
Revenue
Gross profit
Gross margin
Other income
Research & Development
Selling & Marketing
General & Administrative
Other Expenses
Operating profit
Adjusted EBIT
Adjusted EBITDA
Profit before tax
Adjusted PBT
Profit for the year
Adjusted profit for the year*
2011
$'000
177,365
67,807
38.2%
778
(21,114)
(25,257)
(17,486)
(1,258)
3,470
6,904
13,116
2,226
5,660
1,448
4,427
2010
$'000
131,678
52,924
40.2%
1,942
(17,606)
(17,300)
(12,500)
(904)
6,556
7,158
12,471
6,448
7,050
8,449
5,577
Reconciliation of operating profit and profit before tax to the adjusted figures:
2011
$'000
2010
$'000
Operating profit
Share-based payments
Non-recurring income
Non-recurring expenses
Amortization - intangibles acquired
Adjusted EBIT
Depreciation & amortization**
Adjusted EBITDA
Profit before tax
Share-based payments
Non-recurring income
Non-recurring expenses
Amortization - intangibles acquired
Adjusted PBT
3,470
1,356
(83)
1,126
1,035
6,904
6,212
13,116
2,226
1,356
(83)
1,126
1,035
5,660
6,556
377
(1,161)
694
692
7,158
5,313
12,471
6,448
377
(1,161)
694
692
7,050
* See note 11 for reconciliation of profit for the year to adjusted profit for the year.
**Excluding intangibles acquired.
7
Basic and diluted earnings per share for 2011 were 1.6 cents and 1.4 cents respectively for the period
compared to 11.3 and 10.1 cents per share in 2010.
Inventory levels as at 31 December 2011 were $13.7 million, compared to $17.1 million as at 31 December
2010. The decrease is mainly due to the efficiency increase in our inventory management and another step in
achieving a 45 day target. The 2011 inventory level represents 51 days (2010: 75 days).
The consolidated financial statements are prepared in accordance with IFRS on a basis consistent for all
periods presented. In addition we use adjusted financial measures as supplemental indicators of our operating
performance. We disclose adjusted amounts as we believe that these measures provide better information on
actual operating results and assist in comparisons from one period to another.
Net cash position
The Group continues to use cash in its operating activities, investing heavily in research and development as
well as sales and marketing. The table below presents the net cash position at the year end.
Cash and cash equivalents
Restricted cash deposits
Working capital borrowing (1)
Governmental loan (2)
Mortgage loan (3)
Net Cash/(Debt)
2011
$’000
19,781
185
(8,539)
(6,781)
(4,097)
549
2010
$’000
13,521
1,546
(14,311)
(7,971)
-
(7,215)
(1) Drawn letters of credit and borrowings arising from invoice advances used for working capital financing
(2) Representing the preferential rate loan supported by the Ministry of Trade and Commerce in Italy
provided in connection with the Group’s business development program in Sardinia. The loan is
denominated in Euro, attracts interest at a rate of 0.75% and is repayable in ten annual instalments that
commenced on 20 March 2009.
(3) Representing a preferential rate loan from a regional fund in Italy provided in connection with the
Group’s acquisition of the campus used for the Company's main R&D facility in Italy. The mortgage
loan is denominated in Euro, attracts interest at a rate of Euribor 6 months less 20% and is repayable in
15 semi-annual instalments that will commence in June 2012.
Regional Information
The split of revenue on a geographical basis for the years ended 31 December 2011 and 2010 is as follows:
EMEA
APAC
Americas
Total Revenue
2011
($'000)
88,861
31,187
57,317
177,365
% of Total
Revenue
2010
($'000)
50.1%
76,529
17.6%
21,167
33,982
32.3%
100% 131,678
% of Total
Revenue
58.1%
16.1%
25.8%
100%
We expect that the APAC region will increase its weighting of total revenue in 2012 and beyond.
8
Employees
The number of employees of the Group on a geographical basis in 2011 and 2010 is as follows:
EMEA
APAC
Americas
Total Employees
2011
2010
313
93
30
436
268
76
22
366
Effects of Foreign Exchange
26.3% of Telit's revenue in the period ended 31 December 2011 was generated in Euro (2010: 38%), with the
remaining generated in, or linked to other currencies but mainly to the US dollar. However, a substantial part
of the Group's purchased materials cost was denominated in US dollar during the period.
Update on the Integration of Motorola m2m
On 1 March 2011 Telit completed the acquisition of Motorola m2m from Motorola Israel Ltd., a subsidiary of
Motorola Solutions Inc. A detailed description of the transaction was provided to our shareholders in the
circular that was posted on 28 January 2011, ahead of the shareholders meeting that took place on 16 February
2011 and in our annual report for 2010 published later in the year.
The integration of Motorola m2m into the existing Telit business, mainly in Israel but also in the US, England
and APAC, was fully and successfully completed during 2011 and the management is very happy with the
results of the integration.
Update on the acquisition of GlobalConect Ltd. and the strategic relationship with Telefonica
The acquisition of GlobalConect on 11 July 2011 is one of the steps the Company has taken to establish its
services business, with the goal of having recurring revenues form a substantial portion of our business. Telit
aims to leverage its long-standing customer relationships to provide its customers with end-to-end solutions
which will allow customers to bundle connectivity and other value added services provided by Telit with m2m
modules, providing the customers with a more seamless m2m system, including technical support, enhanced
monitoring capabilities, real time budget management, competitive tariffs for fixed and mobile applications
and streamlined logistics, operations and deployments. As announced on February 22, 2012, Telit entered into
an agreement with Telefonica Espana S.A.U. The strategic relationship with Telefonica constitutes a major
step in facilitating Telit’s provision of value added services to its customers.
Further Detail on the Acquisition of Navman Wireless OEM Solutions LP
The acquisition of Navman Wireless OEM Solutions LP on 3 January 2012 strengthens our position as the
premier product and consultative partner in the m2m industry, by leveraging the synergies of both companies
to better serve our global customers. The acquisition of Navman's technology and the engagement of its US
based executive engineering and sales staff will make Telit a major contender in the GNSS (Global
Navigation Satellite System) market while providing an enhanced product portfolio for its m2m customers
and providing Telit access to new GPS customers and products beyond the traditional m2m industry.
Navman's reputation for delivering state-of-the-art GPS technology and the global reach of Telit's sales and
marketing organization put us in a strong position of growth in the GPS sector. In particular, the Navman
acquisition provides us with access to new GPS customers beyond the traditional m2m industry and rights to
the “Jupiter” product line which dates back over 20 years to the development of GPS systems at Rockwell
International and which has become almost synonymous with GPS.
9
Strategy
Our strategy for 2012 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 offering value added
services and through the integration of GNSS and short range technologies into a complete m2m offering.
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 that deliver 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.
• Diversification of technology and increasing requirements for combined solutions based on cellular
and short range technologies.
To execute our strategy, Telit relies on three core competencies that differentiate us from our competitors:
• 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 2012 and the future looks positive for the m2m industry as a whole and for Telit in
particular. Notwithstanding the fact we are operating in a competitive environment, we believe we are well
positioned to take advantage of the opportunities ahead and believe that our acquisitions in 2011 will
strengthen our already strong position within our industry. We look forward to continued business expansion
and we are constantly seeking further expansion opportunities through new technologies or by gaining access
to new territories and new market segments.
The hard work and dedication of Telit's staff across the globe is and will continue to be crucial to Telit's
success. I would like to thank the Company's management team and all employees for their continued
commitment to the Company and its success. Their dedication is an invaluable asset, indeed the core asset of
the Company. I would also like to welcome the employees of Navman Wireless OEM Solutions LP into the
Telit family.
Telit intends to continue to take advantage of the considerable opportunities arising in this growing global
market. I look forward to providing further news of the Group’s progress over the coming months.
____________________________
Oozi Cats
Chief Executive
23 March 2012
10
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.
Market growth
Telit’s future success is dependent in a large part on the continued growth in the overall size of the m2m
market which is, in turn, a product of the number of m2m modules sold and the average selling price of an
m2m module. A decline in either the average selling price or the number of units sold which is not matched by
a proportionate increase in the other, or a decline in both the average selling price and the number of units
sold, would decrease Telit’s addressable market and its growth opportunities.
Competition
Telit has experienced, and expects to continue to experience, strong competition from a number of companies.
Telit’s competitors may announce or develop new products, services or enhancements that better meet the
needs of customers or changing industry standards. Further new competitors or alliances among competitors
could emerge. Increased competition may cause price reductions, reduced gross margins and loss of market
share, any of which could have a material adverse effect on Telit's business, financial condition and results of
operations. Some of Telit's competitors and potential competitors have significantly greater financial
resources than Telit. Telit's competitors may be able to respond more quickly than Telit to changes in
customer requirements and devote greater resources to the enhancement, promotion and sale of its products.
Key management
Telit depends on the services of its key technical, sales, marketing and management personnel. The loss of the
services of any of these persons could have a material adverse effect on Telit's business, results of operations
and financial condition. Telit's success is also highly dependent on its continuing ability to identify, hire, train,
motivate and retain highly qualified technical, sales, marketing and management personnel in its various
geographical locations. Competition for such personnel can be intense, and Telit cannot give assurances that it
will be able to attract or retain highly qualified technical, sales, marketing and management personnel in the
future. In order to retain its key staff and to attract new personnel, Telit works to ensure that its staff is
sufficiently incentivised and offers key potential personnel sufficiently attractive terms of employment.
Financing
Telit relies on credit lines mainly in the form of trade receivable financing to finance its working capital
needs. There is a risk that this financing will cease to be available to the Group in the future, potentially at
short notice. Should such finance cease to be available there is a risk that the Group may not be able to secure
alternative financing. The lack of availability of such financing, without having alternative financing source,
could have a material adverse effect on Telit's business, financial condition or results of operations.
The management maintains close relationship with several banks and has obtained secured credit lines beyond
the current needs of the business to address this risk.
11
Product lifespan, changes in standards and technology and product development
The Group is in a market that sees continuous technological development and therefore future success of the
Company depends, inter alia, on Telit’s ability to:
• Enhance its existing products and services.
• Address the increasingly sophisticated and varied needs of its customers.
• Respond to technological advances and emerging industry or government standards and practices on a
cost-effective and timely basis.
Developing Telit’s technology and product range entails significant technical and business risks. The Group
may use or procure new technologies ineffectively or fail to adapt its systems to customer requirements or
emerging industry standards. If Telit faces material delays in introducing new products, services or
enhancements, it may be at a significant competitive disadvantage.
The markets for Telit's products and services are characterised by rapidly changing technology, evolving
industry standards and increasingly sophisticated customer requirements. Changing customer requirements
and the introduction of products embodying new technology and the emergence of new industry standards can
render Telit's existing products obsolete and unmarketable and can exert downward pressure on the pricing of
existing products. Telit’s success depends on its ability to anticipate changes in technology and in industry
standards and to successfully develop and introduce new, enhanced and competitive products on a timely
basis. Telit cannot give assurances that it will successfully develop new products or enhance and improve its
existing products, that new products and enhanced and improved existing products will achieve market
acceptance or that the introduction of new products or enhancing existing products by others will not render
Telit's products obsolete. Telit's inability to develop products that are competitive in technology and price and
meet customer needs could have a material adverse effect on Telit's business, financial condition or results of
operations.
In order to address the concerns above, Telit is constantly monitoring the market, its customers’ current and
potential needs and technological advances and changes in standards in the m2m field. Telit continuously
invests in R&D in order to remain an m2m market leader.
Dependence upon key intellectual property and risk of infringement
Telit's success depends in part on its ability to protect its rights in its intellectual property. Telit relies upon
various intellectual property protections, including patents, copyright, trade-marks, trade secrets and
contractual provisions to preserve its intellectual property rights. Despite these precautions, it may be possible
for third parties to obtain and use Telit's intellectual property without its authorisation.
The industry in which Telit operates has many participants that own, or claim to own, proprietary intellectual
property. In the past Telit has received, and in the future may receive assertions or claims from third parties
alleging that Telit’s products violate or infringe their intellectual property rights. Telit may be subject to these
claims directly or through indemnities against these claims which Telit has provided to certain customers.
Rights to intellectual property can be difficult to verify and litigation may be necessary to establish whether or
not we have infringed the intellectual property rights of others. In many cases, these third parties may be
companies with substantially greater resources than Telit, and they may be able to, and may choose to, pursue
complex litigation to a greater degree than Telit could.
In the event of an unfavourable outcome in such a claim and Telit's inability to either obtain a license from the
third party or develop a non-infringing alternative, then Telit’s business, operating results and financial
condition may be materially adversely affected and Telit may have to restructure its business.
12
Strategic partnerships
Part of Telit’s strategy is to leverage its relationships with strategic and manufacturing partners. There can be
no guarantee that Telit will be able to enter into further strategic alliances or partnership arrangements, or that
existing and potential partners will not enter into relationships with competitors. Telit’s failure to establish
further strategic alliances or the loss of relationships with existing or future material partners could have a
material adverse effect on its business and financial condition. In order to mitigate this risk, in certain cases
Telit maintains relationships with secondary manufacturing partners to provide backup manufacturing in the
event of inability to manufacture via Telit’s primary partner.
System failures and breaches of security
The successful operation of Telit's business depends upon maintaining the integrity of Telit's computer,
communication and information technology systems. However, these systems and operations are vulnerable to
damage, breakdown or interruption from events which are beyond Telit's control. Any such damage or
interruption could cause significant disruption to the operations of Telit. This could be harmful to Telit's
business, financial condition and reputation and could deter current or potential customers from using its
services. There can be no guarantee that Telit's security measures in relation to its computer, communication
and information systems will protect it from all potential breaches of security, and any such breach of security
could have an adverse effect on Telit's business, results of operations or financial condition. In order to
mitigate this risk Telit continuously invests in the improvement and strengthening of the relevant systems in
order to minimize the risk of system failures.
13
Telit’s Board of Directors
Enrico Testa, Executive Chairman of the Board, aged 60
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 building 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.
Oozi Cats, Chief Executive, aged 51
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.
Yosi Fait, Finance Director, aged 51
Mr. Fait is a Certified Public Accountant and has held a number of executive positions with private and public
companies. Mr. Fait's previous roles with listed companies have included CEO of both Alony Group and
H&O. Mr. Fait also served as CFO of Pelephone Communications Ltd, the first cellular operator in Israel. Mr.
Fait began his professional career as an accountant with Ernst & Young Israel.
Alexander P. Sator, Non-Executive Director, aged 41
Mr. Sator was a co-founder of one of the first software companies in Germany in 1983, while still in his teens.
After a short career in the scientific industry he founded Sator Laser in 1996, which focused on the
development of lasers and laser systems for industrial applications, soon becoming market leader for its
specific field. In 2001 Domino Printing Services took a stake in this business and in 2005 Mr. Sator sold his
remaining shares. Over the last two years Mr. Sator has been Strategy Advisor to Deutsche Telekom AG for
the mobile business.
Davidi Gilo, Independent Non-Executive Director and Chairman of the Remuneration Committee of
the Board, aged 55
Davidi Gilo has more than 25 years of technology and business expertise and a proven track record of
innovation and execution in identifying and fostering the growth of emerging trends and technologies
including DSP chips, cell phones, medical information technology and broadband networks. Mr. Gilo was the
founder of DSP Group (which was sold to Intel for $1.6 billion), Ceva, Nogatech, Audiocodes and Zen
Research, among others. He is currently the Managing partner of GiloVentures II LP.
Nicola Miglietta, Independent Non-Executive Director and Chairman of the Audit Committee of Telit,
aged 44
Mr. Miglietta is a Professor of Capital Markets and Corporate Finance (Advanced Degree) at the University of
Torino. Between 1992 and 1994 he was Auditor in PriceWaterhouseCoopers. Mr. Miglietta sits on the board
of several companies and currently is a member of the Board of Directors at Milano Assicurazioni S.p.A. and
a member of the Board of statutory auditors at Impregilo S.p.A. (Italy's leading General Contractor and one of
the world's top-ranking construction groups), both listed on the Italian Stock Exchange.
14
Ram Zeevi, Independent Non-Executive Director, aged 49
For the past four years, Mr. Zeevi has been a private investor successfully investing in a number of high
growth companies, largely in the technology sector. From 2001 to 2008, Mr. Zeevi was managing director of
Caribbean Petroleum Corporation ("CPC"). CPC had several interests including ownership of the only private
dock in Puerto Rico, a pipeline system servicing CPC, the country's electric power company and the airport
along with a chain of over 200 petrol stations and a refinery. During Mr. Zeevi's tenure, CPC expanded its
interests in Puerto Rico and attained sales of $400 million annually. Mr. Zeevi remains a Non-Executive
Director of CPC. From 1998 to 2001, Mr. Zeevi was CEO of Zeevi Computers and Technology Ltd., a
technology investment company which was listed on the Tel Aviv stock exchange, with investments in over
30 companies and during this period Zeevi held a number of chairmanships, largely in high growth technology
businesses. From 1992 to 1998, Zeevi was CEO of Oil Investment Consolidated, Inc. which he sold and prior
to this he was CEO of Property Investment Inc., a real estate company, which was also sold. Mr. Zeevi is also
a Non-Executive Director of R Inc Green and DoNanza.
Corporate Governance
Directors
The Board of Directors comprises three executive directors, three independent non-executive directors, and
one non-executive director. The Company's Articles of Association require that at each Annual General
Meeting (“AGM”): (i) any directors who have been appointed by the board since the last AGM shall offer
themselves for re-election; and (ii) any director who was elected or last re-elected as a director at or before
the AGM held in the third calendar year before that AGM shall retire by rotation and, if required, such further
directors shall retire by rotation as would bring the number retiring by rotation up to one-third of the number
of directors in office at the date of the notice of AGM. Any directors retiring by rotation at an AGM may
offer themselves for re-election.
The Board generally 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 to formulate, review and approve the Telit group’s strategy, budgets,
major items of expenditure and acquisitions.
Audit Committee
The Audit Committee consists of Nicola Miglietta, (Chairman), Davidi Gilo and Ram Zeevi, who are the
independent non-executive directors and Yosi Fait, the Finance Director, and meets at least four times a year.
The, CFO and General Counsel attend each meeting by invitation. The Audit Committee is primarily
responsible for considering reports from the CFO 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 Davidi Gilo, (Chairman), Nicola Miglietta and Alexander Sator, 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.
15
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 website (www.telit.com).
Financial performance
A budgeting process is completed once a year and is reviewed and approved by the Board. The results of the
Telit group, as compared against budget, are reported to the Board on a quarterly basis and discussed at each
meeting of the Board.
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.
Non-applicability of the City Code
The Company is not subject to the City Code as the place of central management and control of the Company
is currently located outside of the UK, the Channel Islands and the Isle of Man. The Panel on Takeovers and
Mergers does not regard the Company as resident in the UK, the Channel Islands of the Isle of Man and
therefore, Rule 9 of the City Code (which requires a shareholder acquiring shares which (taken together with
shares held or acquired by persons acting in concert with him) carry 30 percent or more of the voting rights of
a company to make a mandatory offer for all remaining equity capital of the company) does not apply.
Accordingly, a takeover of the Company would not be regulated by The Panel on Takeovers and Mergers.
By order of the Board,
___________________
Yosi Fait
Finance Director
23 March 2012
16
Report on Directors' Remuneration
This Report has been approved by the Board together with the financial statements for 2011.
The remuneration committee is chaired by Davidi Gilo and also comprises Nicola Miglietta and Alexander
Sator.
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: directors and senior managers' salaries are reviewed and determined by the committee,
taking into account their additional incentives and to align their interests within the Telit 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 Oozi Cats and
Yariv Dafna, who are entitled to post-employment benefits including pension fund benefits according to
their employment agreements, as is customary in Italy.
• Share options: The executive directors have been granted share options as described 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-based vesting 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
shorter notice can be given by the Company. In addition, since 1 October 2007 Mr. Cats has been employed
by Telit Italy in an executive position. Mr. Cats' remuneration from Telit Italy includes his remuneration under
the service agreement with the Company. In addition to his salary, Mr. Cats is entitled to an annual bonus
equal to 3% of the Group's consolidated annual profit before tax.
Yosi Fait was appointed as the Finance Director on 21 June 2011, subject to such terms as provided in an
agreement between him and the Company dated July 7, 2011. Pursuant to such agreement, Mr. Fait was also
appointed as a director of Telit Wireless Solutions Ltd., an Israeli subsidiary of the Company and Mr. Fait
agreed to provide up to 100 hours per month to the business of the Company and its subsidiaries. Mr. Fait’s
engagement is terminable by either Mr. Fait or Telit on three months' notice (to be provided no less than three
months prior to the expiry of an initial 12 month term), except in certain special circumstances where shorter
notice can be given by the Company.
17
The audited emoluments in respect of the year ended 31 December 2011 for the directors who held office
during the year were as follows:
Salary
and fees
$’000
Benefit in
kind
$’000
Annual
bonus
$’000
Post-
employment
benefits
$’000
Executive directors
Enrico Testa3
Oozi Cats
Yosi Fait 1,4
Michael Galai 2
Yariv Dafna 1,2
Non-executive directors
Andrea Mandel-Mantello 2,5
Amir Scharf 2
Massimo Testa 2
Alexander P. Sator 6
Nicola Miglietta 1
Davidi Gilo 1
Ram Zeevi1,7
Total - 2011
Total - 2010
237
1,146
162
-
118
22
22
-
56
34
34
39
1,870
1,370
57
119
-
-
17
-
-
-
-
-
-
-
193
100
278
1,961
-
-
70
-
-
-
-
-
-
-
2,309
655
-
131
-
-
76
-
-
-
-
-
-
-
207
162
Total
2011
$’000
572
3,357
162
-
281
22
22
-
56
34
34
39
4,579
Total
2010
$’000
149
1,684
-
149
158
49
49
41
8
-
-
-
-
-
2,287
1 From date of appointment
2 Up to the date of resignation.
3 Amounts in respect of the services of Mr. Testa are paid directly to Testa Sallusto & Partners, a partnership of which he
is the general partner.
4 Amounts in respect of the services of Mr. Fait are paid directly to Jeopal Ltd., a company under his control.
5 Amounts in respect of the services of Mr. Mandel-Mantello were paid directly to Advicorp plc, a company under his
joint control.
6 Amounts in respect of the services of Mr. Sator are paid directly to Sapfi Kapital Management GmbH, a company under
his control.
7 Amounts in respect of the services of Mr. Zeevi are paid directly to Zuri Inc, a company under his control.
18
Directors' Interests in Shares
The directors' interests in shares in the Company are detailed in the table below:
Directors
Oozi Cats1
Enrico Testa2
Yosi Fait
Alexander P. Sator3
Nicola Miglietta
Davidi Gilo
Ram Zeevi
At 31 December 2011
At 31 December 2010
Number of
ordinary
shares
20,280,357
20,280,357
165,000
4,704,742
20,000
nil
nil
Percentage of
ordinary
share capital
19.75
Number of
ordinary
shares
19,960,357
Percentage of
ordinary
share capital
25.87
19.75
19,960,357
0.16
4.58
0.02
-
-
-
5,555,742
-
nil
nil
25.87
-
7.20
-
-
-
1 Mr. Cats directly holds 3,430,357 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. Enrico 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’ holdings.
3 Mr. Sator is the controlling shareholder of Sapfi Kapital Management GmbH, which holds 4,704,742 shares and is
therefore considered as having an interest in these shares.
Details of directors’ share options are provided below:
Grant date
Number
Exercise
price (pence)
Vested
Unvested
Executive directors
Enrico Testa
Total
Oozi Cats
Total
Yosi Fait
Total
29 January 2009
30 June 2010
1 April 2011
29 January 2009
30 June 2010
1 April 2011
29 January 20091
25 May 20101
19 September 20112
0.20
0.32
0.81
0.20
0.32
0.81
0.20
0.25
0.80
1,000,000
166,667
-
1,166,667
2,000,000
366,667
-
2,366,667
33,333
16,667
-
50,000
-
333,333
520,000
853,333
-
733,333
1,952,000
2,685,333
16,667
33,333
150,000
200,000
1,000,000
500,000
520,000
2,020,000
2,000,000
1,100,000
1,952,000
5,052,000
50,000
50,000
150,000
250,000
19
1 Mr Fait was not a director on this date.
2 On 19 September 2011 Mr. Fait was granted 150,000 options to purchase approximately 0.15 percent of the Company's
issued and outstanding shares at the time, at an exercise price of £0.80 per share. The options vest in three equal annual
instalments starting from 19 September 2012 and expire five years from the date of grant. In addition, since the
Company has nearly reached the overall limit on the granting of options over newly issued shares contained in the rules
of its unapproved option scheme, the remuneration committee resolved that, as the overall limit under the scheme
increases, Mr. Fait will from time to time be formally granted additional options (either in one tranche or in a series of
separate grants) at the same exercise price and on the same terms as the options set out above, in the total amount of
150,000 further options being granted within this framework. Further, the remuneration committee resolved that,
should the Company successfully complete a public fundraising on a major stock exchange, then Mr. Fait will
immediately thereafter be granted further options over a total of 600,000 shares at an exercise price of £0.80 per share,
with all other terms being equal to the options mentioned above.
All options typically vest in 3 equal instalments beginning one year following the date of grant and
expired 5 years from the date of grant. No options have been exercised or expired in respect of all
grants.
The compensation attributable to the directors in 2011 is $717,000 (2010: $251,000) and is calculated
as the incremental fair value of the options to be expensed over the period of vesting.
The highest and lowest closing prices of the Company's shares on AIM during 2011 were 103.5p (27 April
2011) and 44.5p (21 October 2011).The Company's share price as at 31 December 2011 was 46.5p.
Arrangements relating to shares held by Boostt B.V.
Boostt is currently interested in 20,280,357 ordinary shares in the Company, representing approximately 19.75
per cent of the Company's issued share capital. The Company has been informed that the following changes
have occurred in the liens held over ordinary shares (“Shares”) of the Company owned by Boostt:
•
•
•
•
•
On 15 February 2011, Boostt completed the payment to Polar of the remaining consideration under the
16 April 2007 agreement pursuant to which it purchased 12 million ordinary shares in the Company
from Polar (the “Share Purchase Agreement”). The payments were made as a result of funds lent to
Boostt (the “Loan”) by Mr. Enrico Testa (Chairman of Telit’s Board of Directors and a Director of
Boostt). As a result of such payment, the charges in favour of Polar on Shares purchased under the
Share Purchase Agreement were released and such Shares were released from escrow and provided to
Boostt.
On 9 March 2011, those 6 million Shares held by Boostt against which the shareholders of Boostt had
registered a charge were released from the charge by Boostt’s shareholders, for no consideration.
On 10 March 2011, following receipt of the Loan, Boostt charged 6 million Shares in favour of Mr.
Enrico Testa.
On 27 April 2011 1,500,000 Shares that had been placed in escrow as a result of a loan granted to
Boostt by related parties (the “Related Party Loan”) for the repayment by Boostt of a loan by a third
party lender (the “Third Party Lender”), were released from such escrow, following partial repayment of
the Related Party Loan.
On 3 June 2011, the remaining 1,500,000 Shares that had been placed in escrow as a result of the
Related Party Loan were released from escrow following the additional repayment of the Related Party
Loan.
20
As at the report date and as a consequence of the actions described above, of the 20,280,357 Shares in which
Boostt is interested, the following charges are in place:
•
•
6.6 million Shares are charged in favour of the Third Party Lender; and
6.0 million Shares are charged in favour of Mr. Enrico Testa (collectively, the “Pledged Shares”).
Under the terms of the charges, title to the Pledged Shares can be transferred to the third party lender and to
Mr. Testa (each, according to the number of shares pledged) following the occurrence of certain events
including, but not limited to, a default event on the financing provided by such parties.
The Pledged Shares represent approximately 12.3 per cent of the Company's issued share capital.
By order of the Remuneration Committee
___________________
Davidi Gilo
Chairman of the Remuneration Committee
23 March 2012
21
Directors' Report
The directors present their annual report and the financial statements of the Group for the year ended 31
December 2011.
Principal Activities
Telit is a leading global company in the field of m2m communications.
Telit develops, manufactures and markets communication modules which enable machines, devices and
vehicles to communicate via cellular wireless networks. It is a market leader and the third largest company in
the m2m module business worldwide in terms of market share.
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.
Going concern
After making enquiries at the time of approving the accounts, the directors are confident that the Company
and the Telit Group have 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.
Review of Business and Future Developments
A review of business, financial position, liquidity and future developments is given within the Chief
Executive’s statement on pages 7 to 10, together with a review of the Group’s principal risks and uncertainties
on pages 11 to 13.
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 $21.1 million were expensed in the year, compared to $17.6
million in 2010. Internally-generated intangible assets arising from development costs capitalized amounted to
$3.7 million compared with $3.0 million in 2010. For additional details please see the Chief Executive’s
statement and note 1(aa) 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 28 to the financial statements.
Donations
The Group made $0.1 million charitable donations during the year ended 31 December 2011 (2010: $nil).
Dividends
The Company is unable to pay a dividend in respect of the period (2010: $nil).
22
Significant shareholders
Algebris Investments (UK)
Boostt1
Techvisory SA2
Oozi Cats3
Idea Capital
Herald Investment Management
Sapfi Kapital Management GmbH4
Greylock Partners
Sherman Capital Group
Rathbones
BAMES
360 Capital One
At 31 December 2011
At 31 December 2010
Number
of ordinary
shares
Percentage of
ordinary
share capital
Number
of ordinary
shares
Percentage of
ordinary
share capital
20,662,500
15,600,000
20.12
15.19
1,250,000
3,430,357
9,375,000
5,381,250
4,704,742
4,375,000
4,153,578
3,000,000
-
3,607,500
14,812,500
15,600,000
1,250,000
3,110,357
-
3,750,000
5,555,742
-
4,153,578
3,900,000
2,700,000
-
2,834,847
19.19
20.22
1.62
4.03
-
4.86
7.20
-
5.38
5.05
3.5
-
3.67
1.22
3.34
9.13
5.24
4.58
4.26
4.05
2.92
-
3.51
-
BND Paribas Asset Management
-
1 Mr. Cats and Mr. Testa are deemed to be interested in all holdings of Boostt.
2 Techvisory's shares listed in this chart include shares held by Wireless Solutions Management SL. Mr. Cats and Mr.
Testa are deemed to be interested in all holdings of Techvisory SA and Wireless Solutions Management SL.
3 Mr. Testa is deemed to be interested in all holdings of Mr. Cats. See notes 1 and 2 to this chart for additional holdings
in which Mr. Cats is deemed to be interested.
4 Mr. Sator is deemed to be interested in all holdings of this company.
Directors
The following directors have held office during the year and subsequently:
Enrico Testa
Oozi Cats
Yosi Fait
Yariv Dafna
Alexander P. Sator
Amir Scharf
Andrea Mandel-Mantello
Ram Zeevi
Davidi Gilo
Nicola Miglietta
Directors' Indemnities
(appointed on 21 June 2011)
(resigned on 21 June 2011)
(resigned on 23 May 2011)
(resigned on 23 May 2011)
(appointed on 21 April 2011)
(appointed on 23 May 2011)
(appointed on 23 May 2011)
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.
23
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.
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 2011, calculated in accordance with the requirements of the Companies Act 2006, were 66 days
(2010: 76 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 auditor
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 auditor is
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 auditor is 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 auditor of the Company is to be proposed at the forthcoming Annual General Meeting.
By order of the Board,
___________________
Yosi Fait
Finance Director
23 March 2012
24
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 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 judgements 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.
25
Telit Communications PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2011
Revenue
Cost of sales
Gross profit
Other operating income
Research and development expenses
Selling and marketing expenses
Administrative expenses
Other operating expenses
Operating profit
Investment income
Finance costs
Profit before income taxes
Tax (expense)/ income
Profit for the year
Other comprehensive loss
Foreign currency translation differences
Total comprehensive (loss)/income for the year
Profit/(loss) attributable to:
Owners of the Company
Non-controlling interest
Profit for the year
Total comprehensive (loss)/income attributable to:
Owners of the Company
Non-controlling interest
Total comprehensive (loss)/income for the year
Basic profit per share (in USD cents)
Diluted profit per share (in USD cents)
Basic weighted average number of equity shares
Diluted weighted average number of equity shares
Note
2,3
4
5
10
6
7
8
2011
$’000
2010
$’000
177,365
(109,558)
131,678
(78,754)
67,807
52,924
778
(21,114)
(25,257)
(17,486)
(1,258)
3,470
507
(1,751)
2,226
(778)
1,448
(1,802)
(354)
1,564
(116)
1,448
(244)
(110)
(354)
1,942
(17,606)
(17,300)
(12,500)
(904)
6,556
47
(155)
6,448
2,001
8,449
(893)
7,556
8,173
276
8,449
7,447
109
7,556
11
11
11
11
1.6
1.4
98,294,356
108,356,180
11.3
10.1
74,855,355
83,704,528
27
Telit Communications PLC
STATEMENT OF FINANCIAL POSITION
At 31 December 2011
Group
Company
Note
2011
$’000
2010
$’000
2011
$’000
2010
$’000
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments in subsidiaries
Other long term assets
Deferred tax asset
Current assets
Inventories
Trade receivables
Other current assets
Deposits – restricted cash
Cash and cash equivalents
Assets classified as held for sale
Total assets
12
13
15
17
8
16
17
17
18
18
14
19
19
LIABILITIES AND SHAREHOLDERS'
EQUITY
Shareholders’ equity
Share capital
Share premium account
Other reserve
Merger reserve
Capital contribution
Translation reserve
Retained earnings
Equity attributable to
owners of the Company
Non- controlling interest
Total equity
Non-current liabilities
Other loans
Post-employment benefits
Deferred tax liabilities
Provisions
Other long-term liabilities
27
20
8
24
25
Current liabilities
Short-term borrowings from
banks and other lenders
Trade payables
Provisions
Other current liabilities
Total equity and liabilities
27
21
24
21
22,588
12,557
-
732
4,190
40,067
13,688
39,834
7,488
185
19,781
-
80,976
121,043
1,772
78,198
(2,993)
1,235
-
(5,477)
(12,416)
60,319
487
60,806
10,311
2,828
45
2,134
478
15,796
9,106
25,496
1,329
8,510
44,441
121,043
12,294
4,210
-
610
3,574
20,688
17,127
29,560
5,728
1,546
13,521
479
67,961
88,649
1,361
47,800
(2,993)
1,235
-
(3,669)
(15,336)
28,398
617
29,015
7,365
2,906
-
2,138
295
12,704
14,917
22,199
2,317
7,497
46,930
88,649
6,760
21
63,052
11
-
69,844
-
652
6,655
83
5,646
-
13,036
82,880
1,772
78,198
8,052
1,235
336
1,830
(15,332)
76,091
-
76,091
518
-
-
-
200
718
129
173
-
5,769
6,071
82,880
7,799
8
44,213
14
-
52,034
-
776
3,604
-
499
-
4,879
56,913
1,361
47,800
8,052
1,235
-
2,805
(11,974)
49,279
-
49,279
-
-
-
-
-
-
-
257
-
7,377
7,634
56,913
The financial statements on pages 27 to 82 were approved by the board and authorized for issuance on 23 March
2012 and are signed on its behalf by: Oozi Cats, Director
Company number: 05300693
28
Telit Communications PLC
STATEMENT OF CASH FLOWS
For the year ended 31 December 2011
CASH FLOWS - OPERATING ACTIVITIES
Profit/(loss) for the year
Adjustments for:
Depreciation of property, plant and equipment
Amortization of intangible assets
Gain on disposal of associated undertaking
Gain on sale of property, plant and equipment
Impairment losses on intangible assets
Impairment of investments in subsidiaries
Impairment loss on asset classified as held for sale
Change in deferred taxes, net (1)
(Decrease)/increase in provision for post-employment
benefits
Interest on loan provided to subsidiary
Fair value of preferential mortgage rate loan
Share-based payment charge
Operating cash flows before movements in working
capital:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in other current assets (1)
Decrease/(Increase) in inventories
Increase/(decrease) in trade payables
Increase/(decrease) in other current liabilities
(Increase in provisions and other long term liabilities
Cash from/(used in) operations
Income tax paid (1)
Interest received
Interest paid
Net cash from/(used in) operating activities
CASH FLOWS - INVESTING ACTIVITIES
Acquisition of property, plant and equipment
Acquisition of intangible assets
Proceeds from disposal of property, plant and equipment
Capitalized development expenditure
Acquisition of other investments from subsidiary
Acquisition of business
Additional investment in subsidiary
Settlement of financial assets
Gain from reduction of non-controlling interest
Proceeds from sale of associated undertaking
Additional loans made to subsidiaries
Repayment of loans from subsidiaries
Decrease/(increase) in restricted cash deposits
Net cash (used in)/from investing activities
29
Group
Company
2011
$’000
2010
$’000
2011
$’000
2010
$’000
1,448
8,449
(4,378)
(1,113)
2,211
5,036
(83)
(10)
132
-
-
(673)
(17)
-
(528)
1,356
8,872
(998)
(1,995)
5,997
4,066
888
55
16,885
(1,035)
469
(954)
15,365
(10,067)
(1,604)
101
(3,669)
-
(23,423)
-
(20)
528
-
856
(37,298)
1,900
4,105
-
-
-
-
437
(3,255)
106
-
-
377
12,119
793
1,170
(8,482)
(2,706)
7,297
1,025
11,216
(1,798)
47
(155)
9,310
(1,679)
(703)
65
(2,951)
-
-
-
-
-
-
3,072
(2,196)
6
1,177
-
-
-
1,821
-
-
-
-
-
1,020
(354)
86
(3,646)
-
(83)
(1,549)
-
(5,546)
-
56
-
(5,490)
(19)
(119)
-
-
-
(712)
(1,103)
597
-
-
(28,035)
10,685
(83)
(18,789)
3
1,082
(245)
-
-
1,596
-
-
-
(77)
-
226
1,472
(158)
(3,260)
40
(313)
(2,310)
-
(4,529)
-
-
-
(4,529)
(8)
-
-
-
(1,936)
(33)
(6)
-
-
-
(4,059)
254
6,893
1,105
Telit Communications PLC
STATEMENT OF CASH FLOWS (continued)
For the year ended 31 December 2011
CASH FLOWS - FINANCING ACTIVITIES
Proceeds from the issuance of share capital
Proceeds from exercise of options
Short-term borrowings from banks and others
Proceeds from preferential rate loan
Proceeds from other loans
Repayment of other loans
Net cash from/(used in) financing activities
Group
2011
$’000
2010
$’000
Company
2011
$’000
2010
$’000
29,292
317
(4,329)
-
5,354
(1,504)
29,130
-
64
(6,821)
4,341
-
(524)
(2,940)
29,292
317
-
-
680
-
30,289
-
64
-
-
-
64
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
7,197
4,174
6,010
(3,360)
13,521
(937)
19,781
11,378
(2,031)
13,521
499
(863)
5,646
4,571
(712)
499
(1) The Company has re-presented the tax expenses costs in the 2010 cash flow statement so it provides
better information on the cash flow involved in income tax as presented in the income statement. In the
revised presentation, movement in deferred taxes and tax paid in cash has been presented in separate
lines, while the other non-cash tax expenses have been reflected within the movement in other current
liabilities balance.
Non – cash transactions:
a. On 1 January 2010 the Company sold its direct holding in Dai Telecom Ltd to its subsidiary Dai
Telecom Holdings (2000) Ltd for a consideration of $927,000. The Company provided Dai Telecom
Holdings (2000) Ltd with a loan to fund this acquisition. See also note 15.
b. On 20 May 2010 the Company settled a loan in the amount of $720,000 by assigning the loan to a
third party in consideration for the allotment of 1,703,578 ordinary shares of 1 pence each.
c. On 1 July 2010 the Company acquired its non-controlling interests in the Company's subsidiary,
Telit Wireless Solutions Srl. In consideration, the non-controlling interests acquired from Telit
Wireless Solutions Srl its holdings in the subsidiary of the non-controlling interest and received
2,700,000 ordinary shares of the Company. See also note 19.
d. On 31 December 2010 the Company purchased from Dai Telecom Holdings (2000) Ltd 100% of its
holding in Telit Wireless Solutions Ltd. for a consideration of $700,000 and that was paid by offset
from the shareholders loan. On December 31, 2010 the Company converted $173,000 of the loan
balance owed by Dai Telecom Holdings (2000) Ltd into 188 ordinary shares of Dai Telecom
Holdings (2000) Ltd.
e. On 11 July 2011 The Company completed the acquisition of 100% of the shares of GlobalConect
Ltd for a consideration of $0.7 million in cash and 800,000 newly issued ordinary shares with a
value of $1.2 million at the closing date.
30
Telit Communications PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2011
Year ended 31 December 2011
Share
capital
$’000
Share
premium
Account
$’000
Merger
reserve
$’000
Other
reserve
$’000
Translation
reserve
$’000
Retained
earnings
$’000
Total
$’000
Non-
controlling
interest
$’000
Total
$’000
1,361
47,800
1,235
(2,993)
(3,669)
(15,336)
28,398
617
29,015
-
-
-
-
-
-
396
15
30,096
302
-
-
-
-
411
30,398
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,564
1,564
(116)
1,448
(1,808)
-
(1,808)
6
(1,802)
(1,808)
1,564
(244)
(110)
(354)
-
-
-
-
-
-
-
30,492
317
1,356
1,356
-
-
-
30,492
317
1,356
-
-
(20)
(20)
1,356
32,165
(20)
32,145
1,772
78,198
1,235
(2,993)
(5,477)
(12,416)
60,319
487
60,806
Balance at 1 January
2011
Total comprehensive
income/(loss) for the year
Profit /(loss) for the year
Foreign currency
translation differences
Total comprehensive
income/(loss)
Transactions with
owners:
Issuance of shares
Exercise of options
Share-based payment
charge
Arising on acquisition of
non-controlling interests in
Telit APAC
Total transactions with
owners
Balance at 31 December
2011
Year ended 31 December 2010
Share
capital
$’000
Share
premium
Account
$’000
Merger
reserve
$’000
Other
reserve
$’000
Translation
reserve
$’000
Retained
earnings
$’000
Total
$’000
Non-
controlling
interest
$’000
Total
$’000
1,293
47,145
-
(354)
(2,943)
(23,886)
21,255
1,654
22,909
-
-
-
25
3
-
40
68
-
-
-
594
61
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,235
(2,639)
655
1,235
(2,639)
-
8,173
8,173
276
8,449
(726)
-
(726)
(167)
(893)
(726)
8,173
7,447
109
7,556
-
-
-
-
-
-
-
377
619
64
377
-
-
-
619
64
377
-
(1,364)
(1,146)
(2,510)
377
(304)
(1,146)
(1,450)
1,361
47,800
1,235
(2,993)
(3,669)
(15,336)
28,398
617
29,015
Balance at 1 January
2010
Total comprehensive
income for the year
Profit for the year
Foreign currency
translation differences
Total comprehensive
income/(loss)
Transactions with
owners:
Issuance of shares
Exercise of options
Share-based payment
charge
Arising on acquisition of
non-controlling interests in
Telit Wireless Solutions Srl
Total transactions with
owners
Balance at 31 December
2010
31
Telit Communications PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2011
Year ended 31 December 2011
Share
capital
$’000
Share
premium
account
$’000
Merger
reserve
$’000
Other
reserve
$’000
Translation
reserve
$’000
Retained
earnings
$’000
Total
$’000
Balance at 1 January 2011
1,361
47,800
1,235
8,052
2,805
(11,974)
49,279
Total comprehensive loss for the
year
Loss for the year
Foreign currency translation
differences
Total comprehensive loss
Transactions with owners
Issuance of shares
Exercise of options
Share-based payment charge
Capital contribution
Total transactions with owners
-
-
-
396
15
-
-
411
-
-
-
30,096
302
-
-
30,398
-
-
-
-
-
-
-
-
-
-
-
-
-
-
336
336
-
(4,378)
(4,378)
(975)
(975)
-
(4,378)
(975)
(5,353)
-
-
-
-
-
-
-
1,020
-
1,020
30,492
317
1,020
336
32,165
Balance at 31 December 2011
1,772
78,198
1,235
8,388
1,830
(15,332)
76,091
Year ended 31 December 2010
Share
capital
$’000
Share
premium
account
$’000
Merger
reserve
$’000
Other
reserve
$’000
Translation
reserve
$’000
Retained
earnings
$’000
Total
$’000
Balance at 1 January 2010
1,293
47,145
Total comprehensive loss for the
year
Loss for the year
Foreign currency translation
differences
Total comprehensive loss
Transactions with owners
Issuance of shares
Exercise of options
Share-based payment charge
Arising on acquisition of non-
controlling interests in Telit
Wireless Solutions Srl
Total transactions with owners
-
-
-
25
3
-
40
68
-
-
-
594
61
-
-
655
-
-
-
-
-
-
-
1,235
1,235
8,052
3,824
(11,087)
49,227
-
-
-
-
-
-
-
-
-
(1,113)
(1,113)
(1,019)
(1,019)
-
(1,113)
(1,019)
(2,132)
-
-
-
-
-
-
-
226
-
226
619
64
226
1,275
2,184
Balance at 31 December 2010
1,361
47,800
1,235
8,052
2,805
(11,974)
49,279
32
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2011
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 as well as the financial position of the Group, its cash flows, liquidity position and borrowing
facilities are set out in the Chief Executive’s Statement on pages 7 to 10. In addition notes 17, 25, 27 and 28 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. Some of these facilities are cancellable on demand or have renewal dates within one
year of the date of approval of the financial statements. In addition, the Group has received a long-term
preferential rate loan supported by the Ministry of Trade and Commerce in Italy. Further information is
provided within note 27. The management considers the uncertainty over (a) the level of demand for the
Group’s products which may also affect the possibility of utilizing some of these facilities since they depend
upon the level of sales in specific markets and in some instances to specific customers; (b) the exchange rate
between Euro and US dollars and thus the consequence for the cost of the Group’s raw materials; (c) the
availability of bank finance in the foreseeable future; (d) the continuity of supply from key suppliers; and (e) the
forecasts in current market environments.
The Group’s forecasts and projections taking into account the Group's history of successfully renewing its
facilities in the past and the fact that there are actions available to the Group to address these risks, show that the
Group should be able to operate within the level of its current facilities. The Group maintains constant
negotiations with the banks for renewing and increasing the credit facilities to meet the required working capital
for the Group's future growth.
After making enquiries, the directors are confident that the 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.
33
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(c) Functional and presentational currency
The consolidated financial statements are presented in US dollars, which differs from the functional currency of
the Company and those subsidiaries that are not located in the dollar zone. The Company functional currency is
the GBP.
The Group and Company report in US dollars to fully reflect the Group’s global operations, while increasing
management’s ability to react to the effects of foreign exchange fluctuations as a result of the following: 1) the
production of its products in China resulting in manufacturing costs denominated in US dollars; and 2) revenues
in US dollars, or linked to the US dollar, comprise the biggest share of the Group's overall revenues.
The assets and liabilities of the Company’s subsidiaries that have a functional currency other than the US dollar
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 in other comprehensive income as a separate
component called "translation differences". 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.
Foreign exchange rates of the US dollar:
At 31 December :
2011
2010
2009
Average for the year ended 31 December:
2011
2010
(d) Basis of consolidation
Exchange rate
(Euro/US dollar)
1.2939
1.3362
1.4406
1.3920
1.3268
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.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s
equity therein. Non-controlling interests consist of the amount of those interests at the date of the original
business combination and the non-controlling’s share of changes in equity since the date of the combination.
Losses applicable to the non-controlling interests in excess of the non-controlling interests in the subsidiary’s
equity are allocated against the interests of the Group.
34
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(e) Business combination
From 1 January 2010 the Group has applied IFRS 3 Business Combinations (2008). The change in accounting
policy was applied prospectively and has had no material impact on earnings per share. Business combinations
are accounted for using the acquisition method as at the acquisition date, which is the date on which control
transferred to the Group.
Acquisitions on or after 1 January 2010
For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. Costs related to
the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not re-measured and settlement is accounted for within equity.
Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests either at its fair
value or at its proportionate interest in the recognised amount of the identifiable net assets of the acquiree at the
acquisition date.
(f) Acquisition of non - controlling interests
From 1 January 2010 the Group has applied IAS 27 Consolidated and Separate Financial Statements (2008) in
accounting for acquisitions of non-controlling interest. The change in accounting policy has been applied
prospectively and has no impact on earnings per share.
Under the new accounting policy, acquisitions of non-controlling interests are accounted for as transactions with
owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The
adjustments to non-controlling interest are based on the proportionate amount of the net assets of the subsidiary.
Any difference between the price paid or received and the amount by which non-controlling interests are
adjusted is recognised directly in equity and attributed to the owners of the parent.
(g) Trade receivables
Trade receivables classified as current assets are recognised and carried at original invoice amount, which the
directors consider to be equal to fair value. Approximate allowances for estimated uncollectible amounts are
recognised in profit or loss when there is objective evidence that the asset is impaired.
Trade receivables classified as non-current assets are recognised at the original invoice amount, discounted to
present value where the effect is material.
35
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(h) Inventories
Produced finished goods are stated at the lower of cost or net realisable 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.
Raw materials are presented at the lower of cost or net realisable value, with cost calculated using the weighted
average method.
(i) Investments
Investments in subsidiaries are stated at the lower of cost or fair value.
A gain or loss on partial disposal of investments in subsidiary that do not result in a loss of control are
recognised in the statement of comprehensive income.
(j) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised 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. Land is not depreciated.
Depreciation rates are as follows:
Buildings
Office furniture and equipment
Computers and software
Vehicles
Leasehold improvements
Machines and equipment
%
3
6-15
33
15-25
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 recognised in the statement of comprehensive income.
(k) 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 licenses
Customer relationships
Acquired technology
Trademark
%
15-33
20-22
20-40
12.5
36
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(l) Goodwill
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.
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 process);
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 3-5
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) 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
(excluding goodwill) 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.
37
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(n) Impairment of tangible and intangible assets excluding goodwill (continued)
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.
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 recognised as an
expense immediately.
(o) 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 recognised for all taxable temporary differences and deferred tax assets are
recognised 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 recognised 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 enacted or substantially enacted by the reporting date. 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.
(p) Trade payables
Trade payables are non-interest bearing and are stated at their fair value.
38
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(q) Retirement benefit costs
For defined benefit retirement 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 Projected Unit Credit Method is
applied. Actuarial gains and losses are recognised 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 recognised in the statement
of comprehensive income when the curtailment or settlement occurs.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined
benefit obligation as adjusted for unrecognised 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.
(r) 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.
Revenue from the sales of goods is recognised when the significant risks and rewards of ownership have been
passed to the buyer, which is usually on delivery of the goods.
Revenues from services are recognised by reference to stage of completion of the transaction when the amount
of revenue can be measured reliably, it is probable that economic benefits will be received and the costs
incurred and costs to complete the transaction can be measured reliably.
Services or royalty income is recognised in accordance with the terms of the relevant agreement unless there has
been an assignment of rights for a fixed or non-refundable fee and the Company has no remaining obligations to
perform; in such circumstances, revenue is recognised when collection of the income is reasonably assured.
(s) Leases
Rentals payable under operating leases are charged to statement of comprehensive 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.
(t) Borrowing costs
Borrowing costs are recognised 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.
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 according to IAS 23 Borrowing Costs (2007).
39
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(u) Government grants
Government grants are recognised 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 recognised in other income over the periods necessary to match them
with the related cost.
(v) 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.
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.
(w) Financial instruments
Financial assets and financial liabilities are recognised 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. Subsequent to initial recognition, investments in subsidiaries
are accounted for under the equity method in the consolidated financial statements and the cost method in the
Company’s financial statements less provision for impairment.
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.
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 recognised by applying the effective rate, except for short-term receivables when the recognition of
interest would be immaterial.
40
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(w) Financial instruments (continued)
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.
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 recognised 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 recognised, the previously recognised 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 recognised.
De-recognition of financial assets
The Group derecognises 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 recognises 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 recognise the financial asset and also
recognises collateralized borrowings for the proceeds received.
41
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(w) Financial instruments (continued)
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.
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 recognised 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-recognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or expired.
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 25 to the financial statements.
Derivatives are initially recognised 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
recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial
liability. The resulting gain or loss is recognised 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.
42
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(x) Share-based payments
The Group has applied the requirements of IFRS 2 Share-based payment.
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 behavioural considerations.
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 recognises immediately in the statement of comprehensive income
the amount that otherwise would have been recognised 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 recognised as an expense in the
statement of comprehensive income.
(y) Profit per share
Basic and diluted profit 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.
(z) Provisions
A provision for warranty costs is recognised 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 recognise in accordance with IAS 37 at
the best estimate of the expenditure required to settle the Group's liability.
(aa) 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 recognised in the financial statements.
Grant receivable
Income relating to government grants is recognised 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.
43
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(aa) Critical accounting judgments and key sources of estimation uncertainty (continued)
Allocating fair values in a business combination
Acquisitions of shares in subsidiaries are accounted for using the acquisition 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.
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.
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.
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.
Recoverability of deferred tax assets
Under IFRS, a deferred tax asset arising on trading losses or deductible temporary differences is only recognised
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.
44
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(aa) Critical accounting judgments and key sources of estimation uncertainty (continued)
Recoverability of internally developed intangible assets
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.
Impairment of goodwill
Determining whether goodwill is impaired, requires an estimation of the value in use of the cash-generating unit
to which goodwill has been allocated. The value in use calculation requires estimating 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.
(ab) New Accounting Standards, interpretations and amendments to existing standards that are adopted for
the first time in these financial statements
The Group adopted the following standards as from January 1, 2011:
IAS 24 'Related Party Disclosures' (revised 2009)
The changes introduced by IAS 24 (2009) relate mainly to the definition of a related party and modifies certain
disclosure requirements for government-related entities.
IFRS 7 Financial Instruments
Disclosures – Amendments to Disclosures has been amended to add an explicit statement that the interaction
between qualitative and quantitative disclosures better enables users to evaluate an entity’s exposure to risks
arising from financial instruments.
The Amendments to Disclosures - Transfers of Financial Assets require additional disclosures about transfers of
financial assets, e.g., securitisations and should enable users to understand the possible effects of any risks that
may remain with the transferor. The amendments also require additional disclosures if a disproportionate
amount of transfer transactions are undertaken around the end of a reporting period.
These changes have been applied in the current year and they do not have a material impact on the financial
statements of the Group.
45
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
1.
ACCOUNTING POLICIES (continued)
(ac) 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 but are not expected to
have a material impact on the Group. Other than the standards mentioned above there are no other endorsed
standards relevant to the Group.
2.
REVENUE
Sales of goods
Services income
3.
SEGMENTAL ANALYSIS
The Group
Group
2011
$’000
175,275
2,090
177,365
2010
$’000
131,678
-
131,678
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.
The Group is organized on a worldwide basis into three geographical segments: EMEA, APAC and Americas.
There are no other segments. All segments offer similar product lines. In the year ended 31 December 2011 and
31 December 2010 no single customer accounted for more than 10% of the Group's revenue.
Segmental information for each geographical region in which Telit operates is presented below:
2011
Revenue
External sales
Inter-segment sales (1)
Total revenue
EMEA
$’000
APAC
$’000
Americas
$’000
Total
$’000
Eliminations Consolidated
$’000
$’000
88,861
47,178
136,039
31,187
2,527
33,714
57,317
-
57,317
177,365
49,705
227,070
-
(49,705)
(49,705)
177,365
-
177,365
269
Result
Segment result
Unallocated corporate expenses (2)
Operating profit
Investment income
Finance costs
Profit before income taxes
Income taxes
Profit for the year
443
(1,725)
(345)
5,169
3,069
8,507
2
(13)
62
(13)
507
-
(399)
(34)
(778)
46
-
-
-
-
8,507
(5,037)
3,470
507
(1,751)
2,226
(778)
1,448
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
3. SEGMENTAL ANALYSIS (continued)
2010
Revenue
External sales
Inter-segment sales (1)
Total revenue
EMEA
$’000
APAC
$’000
Americas
$’000
Total
$’000
Eliminations Consolidated
$’000
$’000
76,529
34,929
111,458
21,167
3,151
24,318
33,982
-
33,982
131,678
38,080
169,758
-
(38,080)
(38,080)
131,678
-
131,678
2,307
Result
Segment result
Unallocated corporate expenses (2)
Operating profit
Investment income
Finance costs
Profit before income taxes
Income taxes
Profit for the year
28
(46)
1,489
2,358
4,179
8,844
9
(56)
523
10
(53)
(11)
47
-
2,001
-
-
-
-
8,844
(2,288)
6,556
47
(155)
6,448
2,001
8,449
(1) Transactions between geographic segments are charged at market prices.
(2) Unallocated corporate expenses principally comprise expenses arising from corporate activity on the Company level,
including directors compensation (other than such compensation specifically allocated to one of the traded companies)
salaries of certain senior executives, professional fees (e.g. audit fees) and other expenses which cannot be directly
allocated to one of the segments.
Total assets:
EMEA
APAC
Americas
Unallocated assets
Total assets
Total liabilities:
EMEA
APAC
Americas
Unallocated liabilities
Total liabilities
Unallocated assets comprise:
Other debtors in respect of general entity and head office purposes
Deposits - restricted cash
Cash and cash equivalents
Unallocated assets
47
2011
$’000
2010
$’000
71,824
11,714
17,372
20,133
121,043
32,653
5,056
2,519
20,009
60,237
52,554
11,105
9,218
15,772
88,649
30,561
4,008
2,213
22,852
59,634
2011
$’000
2010
$’000
167
185
19,781
20,133
705
1,546
13,521
15,772
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
3. SEGMENTAL ANALYSIS (continued)
Unallocated liabilities comprise:
2011
$’000
2010
$’000
Other loans
Short-term borrowings from banks and other lenders
Other current liabilities in respect of general entity and head office
purposes
Unallocated liabilities
10,311
9,106
592
20,009
7,365
14,917
570
22,852
2011
Other segment items:
Capitalized tangible and intangible
asset additions
Non-cash items:
EMEA
$’000
APAC
$’000
Americas
$’000
Consolidated
$’000
25,854
572
575
27,001
Depreciation and amortization
Bad debt expense
Share-based payments
6,016
1,348
1,241
1,125
6
45
106
10
70
7,247
1,364
1,356
2010
Other segment items:
Capitalized tangible and intangible
asset additions
Non-cash items:
EMEA
$’000
APAC
$’000
Americas
$’000
Consolidated
$’000
4,828
475
30
97
4
26
5,333
6,005
609
377
Depreciation and amortization
Bad debt expense
Share-based payments
4,035
570
329
1,873
35
22
48
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
4. OTHER OPERATING INCOME
Change in fair value of contingent consideration (a)
Gain from increase of investment value
Governmental grants (b)
Other
2011
$’000
2010
$’000
-
83
628
67
778
1,161
-
726
55
1,942
(a) Represent the change in the fair value of the contingent consideration related with the unwinding of the
cross holdings between the Company and BAMES that took place in July 2010.
(b) The Group’s eligibility for the annual programs for 2011 and 2010 was approved by the relevant grant
making body during the year. The Group only recognises 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 recognised amounts expected to be received
in respect of the regional grant within other income in the year ended 31 December 2011 as all the
conditions for qualification, which relate to the level of eligible expenditure incurred, have been satisfied.
5. OTHER OPERATING EXPENSES
Impairment loss
Transactions costs
Integration costs
Others
6.
INVESTMENT INCOME
Interest income from bank deposits
7. FINANCE COSTS
Interest expense on factoring arrangements
Interest expense on bank loans and overdrafts
Exchange rate differences
Other bank expenses
49
2011
$’000
2010
$’000
-
393
703
162
1,258
437
257
-
210
904
2011
$’000
2010
$’000
507
47
2011
$’000
2010
$’000
89
699
428
535
1,751
107
1,043
(
1,341
)
346
155
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
8.
INCOME TAXES
A. Tax recognised in statement of comprehensive income
Current year taxes
Prior year taxes
Deferred taxes
Tax expense (Income)
2011
$’000
2010
$’000
851
600
(673)
778
196
1,058
(3,255)
(2,001)
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
B. Factors affecting the tax expense for the year
The table below explains the differences between the expected tax charge, at the UK statutory rate of 26.5% for
2011 and 28% for 2010, and the Group’s total tax expense for the year:
Profit before income tax from continuing operations
Tax charge computed at 26.5% (2010: 28%)
Tax adjustments arising from:
Non-deductible expenses (tax exempt income)
Deferred tax assets not provided for losses
and other timing differences, net (Tax losses not utilised)
Utilization of deferred tax asset previously recognised
Recognition of previously unrecognised tax losses
Effect of tax rates in foreign jurisdictions
Utilization of carry forward losses for which no deferred tax was
recorded
Tax for previous years
Tax (expense)/income
2011
$’000
2010
$’000
2,226
(590)
(199)
(1,224)
(392)
547
(273)
1,953
(600)
(778)
6,448
(1,805)
(222)
(726)
91
3,293
(342)
2,770
(1,058)
2,001
The UK statutory tax rate used is not materially differ from the average tax rates applicable in the Group’s main
foreign jurisdictions in which it operates.
C. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon
during the current and prior year, after offset of balances within countries:
At 1 January 2010
Translation adjustments
Credit to the statement of comprehensive income
At 1 January 2011
Translation adjustments
Reclassified from other current assets
Arising on acquisition
Credit to the statement of comprehensive income
At 31 December 2011
50
Net
operating
loss
$’000
Other
timing
differences
$’000
Total
$’000
432
(37)
2,941
3,336
(127)
26
-
550
3,785
(76)
-
314
238
50
-
(51)
123
360
356
(37)
3,255
3,574
(77)
26
(51)
673
4,145
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
8.
INCOME TAXES (continued)
In the year ended 31 December 2011, the Group has recognised deferred tax assets of $3,235,000, $386,000,
$35,000 and $534,000 in respect of Telit EMEA, Telit APAC, Telit Spain and Telit Israel, respectively.
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(aa), 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 recognised deferred tax assets.
The gross amounts of losses available for carry forward are as follows:
Losses for which a deferred tax asset is recognised
Losses for which no deferred tax asset is recognised
2011
$’000
2010
$’000
11,763
39,495
51,258
10,259
50,794
61,053
On 23 March 2011 the Chancellor announced the reduction in the main rate of UK corporation tax to 26% with
effect from 1 April 2011. A further reduction to 25% was substantively enacted on 5 July 2011 and received
Royal Assent on 19 July 2011. The effect of the rate reduction creates a reduction in the deferred tax asset, which
has been included in the figures above.
The Chancellor proposed changes to further reduce the main rate of corporation tax by 1% per annum to 23% by
1 April 2014, but these changes have not yet been substantively enacted and therefore are not included in the
figures above.
9. EMPLOYEES
The average number of persons (including executive directors) during
the year was:
Research and development
Sales, marketing and operation
General and administration
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
2011
2010
212
150
50
412
193
116
57
366
2011
$’000
28,084
5,062
1,899
35,045
2010
$’000
20,377
3,308
1,586
25,271
51
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
10. PROFIT FOR THE YEAR AND GROUP AUDIT FEE
Profit for the year is stated after charging / (crediting)
Net foreign exchange gain
Depreciation of owned fixed assets (note 13)
Amortization of intangible assets (note 12):
Amortization of purchased customer list – included in selling and
marketing expenses
Amortization of acquired technology – included in R&D expenses
Amortization of software – included mainly in R&D expenses
Amortization of Internally generated development costs – included
mainly in R&D expenses
Impairment loss (recovery) on investment classified as held for sale
Research and development expenditure
Costs of inventories recognised as an expense
Write-downs of inventories recognised as an expense
Audit fee
2011
$’000
2010
$’000
428
2,211
478
284
1,557
2,717
(83)
21,114
107,536
73
(1,341)
1,900
692
-
1,242
2,171
437
17,606
76,440
(196)
Group
2011
$’000
2010
$’000
Company
2011
$’000
2010
$’000
153
190
153
129
-
209
42
533
103
636
66
46
-
-
256
13
269
-
-
199
13
212
Fees payable to the Company’s
auditors for the audit of the
Company’s annual accounts
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
Other services relating to taxation
Total fees
190
80
10
310
-
590
67
657
52
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
11. PROFIT PER SHARE
Basic profit per share
The calculations of basic and diluted earnings per ordinary share are
based on the following results and numbers of shares:
Profit for the year attributable to the owners of the Company
1,564
8,173
2011
$’000
2010
$’000
Basic weighted average number of equity shares(1)
Diluted weighted average number of equity shares (2)
Basic profit per share (in US dollar cents)
Diluted profit per share (in US dollar cents)
Adjusted basic profit per share (in USD cents)
Adjusted diluted profit per share (in USD cents)
(1) Basic weighted average number of equity shares:
Issued ordinary shares at 1 January
Effect of share options exercised
Effect of shares issued related to a business acquired
Effect of private placement of shares
Effect of shares issued in February 2011
Basic weighted average number of equity shares at 31 December
(2) Diluted weighted average number of equity shares:
No. of Shares No. of Shares
98,294,356
108,356,180
1.6
1.4
4.5
4.1
74,855,355
83,704,528
11.3
10.1
7.4
6.6
2011
No. of Shares
2010
No. of Shares
77,169,734
602,242
379,178
-
20,143,202
98,294,356
72,514,281
38,849
-
2,302,225
-
74,855,355
2011
No. of Shares
2010
No. of Shares
Basic weighted average number of equity shares
Effect of share options on issue
Diluted weighted average number of equity shares at 31 December
98,294,356
10,061,824
108,356,180
74,855,355
8,849,173
83,704,528
At 31 December 2011 4,247,334 options were excluded from the diluted weighted average number of ordinary
shares calculation as their effect would have been anti-dilutive.
The average market value of the Company's shares for purposes of calculating the dilutive effect of shares was
based on quoted market prices for the period during which the options were outstanding.
53
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
11. PROFIT PER SHARE (continued)
Adjusted profit per share
A reconciliation of the profit attributable to the equity shareholders for the year to the adjusted profit for the
year attributable to the equity shareholders is presented below:
Profit for the year
Loss /(profit) attributable to non-controlling interest
Profit for the year attributable to the owners of the Company
Share-based payments
Amortization of intangibles acquired
Other non-recurring expenses
Other non-recurring income
Change in deferred taxes, net
Adjusted profit for the year attributable to the equity shareholders
2011
$’000
2010
$’000
1,448
116
1,564
1,356
1,035
1,126
(83)
(571)
4,427
8,449
(276)
8,173
377
692
694
(1,161)
(3,218)
5,557
54
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
12.
INTANGIBLE FIXED ASSETS
Intangible assets with finite life
Internally
generated
development
costs
$’000
Software and
licenses
$’000
Customer
relationships
$’000
Acquired
technology
$’000
Goodwill
$’000
Total
$’000
5,672
703
88
(347)
6,116
1,604
-
1,000
(266)
8,454
(3,350)
(1,242)
198
(4,394)
(1,284)
-
(273)
209
(5,742)
2,712
1,722
7,717
2,951
-
(29)
10,639
3,669
(369)
-
(565)
13,374
(1,341)
(2,171)
(89)
(3,601)
(2,717)
237
-
293
(5,788)
7,586
7,038
1,648
-
-
(35)
1,613
-
-
2,894
(20)
4,487
(1,136)
(692)
215
(1,613)
-
-
(478)
20
(2,071)
2,416
-
1,036
-
-
(11)
1,025
-
-
1,494
(20)
2,499
(1,036)
-
11
(1,025)
-
-
(284)
20
(1,289)
1,210
-
3,495
-
-
39
3,534
-
-
5,181
(51)
8,664
-
-
-
-
-
-
-
-
8,664
3,534
19,568
3,654
88
(383)
22,927
5,273
(369)
10,569
(922)
37,478
(6,863)
(4,105)
335
(10,633)
(4,001)
237
(1,035)
542
(14,890)
22,588
12,294
GROUP
COST
1 January 2010
Additions
Transfer of assets
Translation adjustments
31 December 2010
Additions
Impairment
Arising from acquisitions
Translation adjustments
31 December 2011
AMORTIZATION
1 January 2010
Charge for the year
Translation adjustments
31 December 2010
Charge for the year
Impairment
Arising from acquisitions
Translation adjustments
31 December 2011
Net book value
31 December 2011
31 December 2010
The impairment charge of internally generated development costs in the amount of $132,000 is included in
R&D expenses.
Goodwill, customer relationships and acquired technology relate to the acquisition of Telit APAC in 2006
(included within the APAC geographical segment); the acquisition of One RF Technologies (subsequently
renamed Telit RF) in 2008; the acquisition of Motorola m2m and of GlobalConect Ltd. in 2011 (included within
the EMEA geographical segment).
The amount of goodwill attributable to the APAC segment is $3,161,000 (2010: $3,202,000) and to the EMEA
segment is $5,503,000 (2010: $332,000). The amount of customer relationships and acquired technology
attributable to the EMEA segment is $3,626,000 (2010: $nil)
Capitalized development costs related mainly to the HSPA, CDMA and EVDO product lines and are being
amortized over a three to five year period.
The Group tests goodwill for impairment annually or more frequently if there are indications that they might be
impaired. Management has not identified any indications for impairment of goodwill recognised in the current
year in respect of the acquisition of Motorola m2m and GlobalConect.
55
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
12.
INTANGIBLE FIXED ASSETS (continued)
Other than the goodwill arising on acquisitions made during the year, management considers Telit APAC and
Telit RF to be the cash generating units for goodwill allocated to them. The cash generating units have been
identified based on the lowest levels 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
discounted 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 11.7% (2010: 17.5%)
per year.
The discount pre tax rate applied of 14.2% (2010: 15%) is based on the long term bond yield, issued by the
government in Korea, adjusted for a country and industry 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 discounted
cash flow projections based on financial budgets for a period of five years. The cash generating unit'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 43.5% (2010: 43%).
The discount pre tax rate applied of 15% (2010: 15%) is based on the long term bond yield, adjusted for a
country and industry 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 considering external forecasts of growth in the m2m industry. An
average growth rate of 12.5% per year over the next four years has been assumed for the entire m2m market.
Management has also forecast changes in the average sales price based on past experience and external forecasts
of changes in the selling price in the m2m industry.
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 4%-19% over the five year period covered by the forecasts.
Sensitivity analysis on the carrying value of goodwill
If the estimated growth rate applied to the revenue forecasts of Telit APAC had been limited to only 75%, i.e.
8.775% and not 11.7%, the Group would still not recognise any impairment charge.
If the estimated growth rate applied to the revenue forecasts of Telit RF had been limited to only 75%, i.e.
32.6% and not 43.5%, the Group would still not recognise any impairment charge.
The directors consider it unlikely that there will be any changes in key assumptions that would lead to an
impairment loss.
56
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
12.
INTANGIBLE FIXED ASSETS (continued)
COMPANY
COST
1 January 2010
Translation adjustments
31 December 2010
Additions
Translation adjustments
31 December 2011
AMORTIZATION
1 January 2010
Charge for the year
Translation adjustments
31 December 2010
Charge for the year
Translation adjustments
31 December 2011
Net book value
31 December 2011
31 December 2010
Trademark
$’000
Software
$’000
Total
$’000
9,579
(412)
9,167
-
(20)
9,147
(295)
(1,082)
9
(1,368)
(1,177)
43
(2,502)
6,645
7,799
-
-
-
119
(4)
115
-
-
-
-
-
-
-
115
-
9,579
(412)
9,167
119
(24)
9,262
(295)
(1,082)
9
(1,368)
(1,177)
43
(2,502)
6,760
7,799
57
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
13. PROPERTY, PLANT AND EQUIPMENT
GROUP
COST
1 January 2010
Additions
Reclassifications
Disposals
Translation adjustments
31 December 2010
Additions
Arising from acquisition
Disposals
Translation adjustments
31 December 2011
DEPRECIATION
1 January 2010
Charge for the year
Disposals
Translation adjustments
31 December 2010
Charge for the year
Disposals
Translation adjustments
31 December 2011
Net book value
Land and
Buildings(1)
$’000
Computers
$’000
Office
equipment
$’000
Vehicles
$’000
Leasehold
Improvements
$’000
Total
$’000
-
-
-
-
-
-
7,400
-
-
(522)
6,878
-
-
-
-
-
(32)
-
2
(30)
2,155
429
(79)
)102(
(56)
2,347
1,328
304
(451)
(152)
3,376
(1,411)
(367)
99
(5)
(1,684)
(563)
447
73
(1,727)
10,146
1,060
(28)
(245)
(341)
10,592
1,204
988
(115)
(425)
12,244
(6,641)
(1,420)
202
224
(7,635)
(1,497)
52
336
(8,744)
3,500
2,957
132
77
-
(90)
2
121
94
-
(46)
1
170
(72)
(18)
71
(4)
(23)
(26)
25
-
(24)
146
98
838
113
20
(68)
39
942
41
-
(52)
(53)
878
(402)
(95)
68
(21)
(450)
(93)
49
30
(464)
13,271
1,679
(87)
(505)
(356)
14,002
10,067
1,292
(664)
(1,151)
23,546
(8,526)
(1,900)
440
194
(9,792)
(2,211)
573
441
(10,989)
414
492
12,557
4,210
31 December 2011
6,848
1,649
31 December 2010
-
663
(1) In October 2011 Telit Communications S.p.A., the Company's Italian subsidiary completed the
acquisition of the premises where its business is located, for a total purchase price of $7.9 million. The
building acquisition presented at 31 December 2011 net of the fair value measurement impact of the
preferential loan obtained to fund the acquisition. The Company has pledged the buildings as collateral
for the mortgage loan received to fund the acquisition. See also note 27.
At 31 December 2011 properties and equipment with a carrying amount of $2,214,000 (2010: $976,000)
are subject to a floating charge to secure credit lines provided to subsidiaries.
58
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
14. ASSETS CLASSIFIED AS HELD FOR SALE
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
Balance at 1 January
Impairment loss
Gain on subsequent increase in fair value less cost of sale
Translation adjustments
Consideration from sale of investment
Balance at 31 December
Group
2011
$’000
Group
2010
$’000
479
-
83
(34)
(528)
-
669
(437)
-
247
-
479
In December 2010, the Company's Israeli subsidiary which previously held 29.33% of the shares in Cell-time
Ltd., entered into a letter of intent, for the sale of 100% of the holdings in Cell-time's shares to a third party, at
an aggregate consideration of $1.63 million. The Company's part in the expected consideration was $479,000. In
accordance with that, an impairment of $437,000 was recognised in 2010 and the investment was included in
assets classified as held for sale.
On 17 August 2011, the Company's Israeli subsidiary, signed together with the other shareholders in Cell-time
Ltd. an agreement to sell 100% of the shares held in Cell-time for an aggregate consideration of $1.65 million.
The transaction was completed in September 2011. The Company’s part in the consideration was $528,000. In
accordance with this a gain of $83,000 was recognised for subsequent increase in fair value less costs to sell this
investment.
59
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
15. INVESTMENTS IN SUBSIDIARIES
COMPANY
Investment in subsidiaries
1 January 2010
Additions
Repayments/Disposals
Interest added to loan principal
Translation adjustments
Conversion of loan to equity
Provision for impairment (4)
1 January 2011
Additions (1,2)
Additions - subsidiaries share-based payment charge (1)
Repayments (3)
Translation adjustments
Provision for Impairment(4)
31 December 2011
Loans to
subsidiaries
$’000
Investments
in
subsidiaries
$’000
3,042
4,986
(954)
77
(111)
(173)
-
6,867
28,035
-
(10,685)
(241)
-
23,976
34,927
4,524
(682)
-
-
173
(1,596)
37,346
3,215
336
-
-
(1,821)
39,076
Total
$’000
37,969
9,510
(1,636)
77
(111)
-
(1,596)
44,213
31,250
336
(10,685)
(241)
(1,821)
63,052
(1) On 30 November 2011 the Company increased its interest in Telit Wireless Solutions Co Ltd (Telit APAC)
from 90% to 92% of the issued ordinary share capital by way of a further share subscription for cash amounting
to $1,103,000. The Company accounted for this deemed acquisition on the book values of the net assets of Telit
APAC at the date of the injection. As a result of this transaction, non-controlling interests have been reduced
by $20,000. The amount of $20,000 arising was recorded as a credit to the statement of comprehensive income
in the year ended 31 December 2011. In addition, on 11 July 2011 the Company acquired 100% of the shares
of GlobalConect for total consideration of $1,912,000 which it paid in cash and shares and contingent
consideration of $200,000. See also note 15(A). For further information in respect of share-based payment see
note 26.
(2) During 2011 the Company made additional loans to its subsidiaries as follows: a $24,085,000 loan was made
available to Telit Wireless Solutions Israel to fund the acquisition of Motorola m2m.; a $2,500,000 loan was
made available to Telit Communications Spain SL; a $720,000 loan was made available to m2mapps GmbH; a
$500,000 loan was made available to Telit Wireless Solutions Co Ltd; a $130,000 loan was made available to
Telit RF Technology S.A.S. and a $100,000 loan was made available to GlobalConect Ltd.
(3) The repayments in 2011 include a partial repayment of the loan balance payable by Telit Wireless Solutions
Israel in the amount of $7,085,000; $2,500,000 repayment of the loan made in 2010 to Telit Wireless
Solutions Inc; $1,000,000 repayment of the loan made to Telit APAC, and repayment of $100,000 out of the
loan balance made to Telit Communications Spain SL.
(4) At 31 December 2011 the Company’s investments in subsidiaries were assessed for indicators of impairment
using the discounted future cash flow method. Due to the continued decline in the performance of Dai
Telecom Holdings (2000) Ltd the recoverable amount of this subsidiary was estimated based on its value in
use. Based on assessment in 2010, the carrying amount of the investment was determined to be higher than its
recoverable amount and an impairment loss of $1,596,000 was recognised in the Company's accounts for
2010. In 2011, the Company reassessed its estimates and recorded additional impairment loss of $1,821,000 in
2011 accounts. The impairment loss is included in other operating expenses in the Company's accounts and
had no impact on the consolidated accounts.
The estimate of value in use was determined using a pre-tax discount rate of 11.7% (2010:10%).
60
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
15. INVESTMENTS IN SUBSIDIARIES (continued)
ACQUISITIONS
A. On 1 March 2011 the Company's subsidiary Telit Wireless Solutions Ltd ("Telit Israel") completed the
acquisition of Motorola Solutions' m2m modules business ("Motorola m2m") from Motorola Israel Ltd., a
subsidiary of Motorola Solutions Inc for a sum of $22.7 million paid in cash. The Group incurred related
transaction costs of $393,000 and these costs have been recognised in other operating expenses in the Group's
consolidated statement of comprehensive income. Motorola m2m specialised in the design, development,
integration, evaluation and deployment of m2m applications worldwide and offered a variety of m2m
modules for wireless technologies. The Company's directors believe that the acquisition of Motorola m2m
will strengthen Telit's already strong position within the industry. Under the terms of the Asset Purchase
Agreement, the assets and liabilities in the transaction include:
• all rights relating to the existing product portfolio and customer database of the business;
• other assets related to the business including equipment, inventory and trade account receivables;
• warranty liability in relation to products already sold by the business (such warranties typically having a
duration of 15 months);
• a perpetual license of a certain Motorola software (known as P2K) used across some of the product portfolio
(entered into with Motorola Mobility, Inc.); and
• 33 employees. A majority of the employees are located in Israel, with the remaining employees located in the
US, UK, Germany, Brazil and Singapore.
The assessment of the fair values of the assets and liabilities acquired has been completed:
Accounts receivable
Inventory
Property, plant and equipment
License
Customer relationship
Technology
Liability for employees retention
Provision for warranty
Total identifiable assets
Cash consideration paid
Excess of cost - goodwill
Fair value
$’000
10,331
3,144
1,292
1,000
2,661
1,494
(300)
(166)
19,456
22,711
3,255
The goodwill of $3,255,000 arising from the acquisition consists largely of the synergies and economies of scale
expected from combining the operations of Motorola m2m with that of the Company.
The goodwill is expected to be deductible for income tax purposes over a period of 10 years.
At 31 December 2011 the receivables were substantially collected and the inventory was substantially used or
sold. Based on this the Company’s management does not expect any material amount of the acquired receivables
to be uncollectable.
As the tax base of the intangibles acquired is the same as the fair value there is no timing difference for which a
deferred tax liability needs to be recognised.
The Company consolidated Motorola m2m for 10 months from March 1, 2011. If the acquisition had occurred on
1 January 2011, management estimates that consolidated statement of comprehensive income would have
included revenue of $185,865 million and profit of $1,898 million.
61
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
15. INVESTMENTS IN SUBSIDIARIES (continued)
B. On 11 July 2011 the Company completed the acquisition of 100% of the shares of GlobalConect Ltd, a
company which provides cellular connectivity services to customers of m2m applications and solutions. As
consideration for the acquired shares, the Company paid $0.7 million in cash and 800,000 newly issued
ordinary shares with a value of $1.2 million at the closing date. The Group did not incur material transaction
costs in this acquisition. The share purchase agreement was based on an assumed value of £1.7 per share and
includes an adjustment mechanism according to which, in the event that within 3 years from the completion of
the acquisition conditions related to the performance of GlobalConect are met, and the Company's share price
does not reach at least £1.7, the Company will issue to the sellers additional shares up to a maximum of
360,000 shares. The Company's directors believe this acquisition forms the cornerstone for Telit's value added
services global business.
The assessment of the fair values of the assets and liabilities acquired has been completed:
Cash
Other receivables
Other payables
Customer relationship
Deferred taxes
Total identifiable assets
Consideration paid
Contingent consideration
Excess of cost - goodwill
Fair value
$’000
2
4
(2)
233
(51)
(186)
1,912
200
1,926
The contingent consideration of $200,000 represents the fair value at the acquisition date.
The goodwill is attributable mainly to the skills and experience in the connectivity market of GlobalConect's
founders, and the synergies expected to be achieved from developing the value added services business.
The goodwill recognised is not deductible for income tax purposes
In the six months from the acquisition date to 31 December 2011, the impact of GlobalConect on the consolidated
results was immaterial.
62
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
15. INVESTMENTS IN SUBSIDIARIES (continued)
Details of the subsidiary undertakings of the Company at 31 December 2011 are as follows:
Name of company
Telit RF Technology S.A.S.1
Telit Wireless Solutions Srl1
("TWS")
Telit Communications SpA2
("Telit EMEA")
Country of
incorporation
and operation
France
Type of
shares
Ordinary
Effective
ownership
interest and
voting rights Principal activity
100%
Development, manufacturing
and selling short-range data
products
Sardinia, Italy
Ordinary
100%
Intermediate holding
company
Italy
Ordinary
100%
Development, manufacturing
and selling data products and
distributing cellular products
Selling and marketing data
products
m2mapps GmbH1
Germany
Ordinary
100%
(Previously Telit Wireless Solutions
GmbH)
Telit Wireless Solutions Inc. 1 ("Telit
Americas")
United States of
America
Ordinary
100%
Selling and marketing data
products
Telit Communications Spain SL1
Spain
Ordinary
100%
Telit Wireless Solutions Tecnologia E
Servicos Ltda2
Brazil
Ordinary
100%
Selling and marketing data
products
Selling and marketing data
products
Telit Wireless Solutions Co Ltd1
("Telit APAC")
Republic of
Korea
Ordinary
92%
Development, manufacturing
and selling data products
Dai Telecom Holdings (2000) Ltd.1
Israel
Ordinary
100%
Telit Wireless Solutions Ltd. ("Telit
Israel IL")1
Israel
Ordinary
100%
Dai Telecom Ltd. ("Dai Telecom")2
Israel
Ordinary
100%
GlobalConect Ltd1
Israel
Ordinary
100%
Telit Wireless Solutions (Pty) Ltd. 2
("Telit RSA")
Republic of
South Africa
Ordinary
100%
Intermediate holding
company
Selling and marketing data
products
Selling and marketing data
products
Provides cellular connectivity
services
Selling and marketing data
products
Telit Wireless Solutions Hong Kong
Limited2
Hong Kong
Ordinary
100%
Dormant
1 indicates that the entity is held directly by the Company.
2 indicates that the subsidiary is indirectly held;
63
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
16. INVENTORIES
Finished goods
Raw materials and work in progress
Group
2011
$’000
2010
$’000
9,190
4,498
13,688
12,697
4,430
17,127
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 $757,000 (2010:
$830,000).
17. RECEIVABLES
Within current assets:
Trade receivables
Other receivables
Due from Group undertakings
Within non-current assets:
Long term receivables
Group
2011
$’000
2010
$’000
Company
2011
$’000
2010
$’000
39,834
7,488
-
47,322
29,560
5,728
-
35,288
732
610
652
167
6,488
7,307
11
776
705
2,899
4,380
14
The average credit period on trade receivables is 79 days (2010: 78 days). No interest is charged on trade
receivables unless previously agreed with the customer. 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 $5,763,000 (2010:
$9,199,000) 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
117 days (2010: 110 days).
Ageing of past due but not impaired trade debtors
1-30 days
30-60 days
60-90 days
Above 90 days
2011
$’000
2010
$’000
2,139
1,033
1,273
1,318
5,763
4,626
1,078
687
2,808
9,199
The directors consider that the carrying amount of trade and other receivables approximates their fair value.
64
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
17. RECEIVABLES (continued)
The Group’s trade receivables are stated after allowances for doubtful debts, an analysis of which is as follows:
At 1 January
Increase/(decrease) in allowance for the year
Amounts written off
Translation adjustments
At 31 December
2011
$’000
2010
$’000
872
1,364
(1,870)
55
421
1,601
(334)
(275)
(120)
872
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.
Included within other receivables are amounts receivable in respect of the Group's grant claims amounting to
$2,746,000 (2010: $2,651,000). 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 body, no provision
for losses is required.
18. CASH
The Group’s cash resources are as follows:
Group
Company
2011
$’000
2010
$’000
2011
$’000
2010
$’000
Deposits – restricted cash
Cash and cash equivalents
Total
185
19,781
19,966
1,546
13,521
15,067
83
5,646
5,729
-
499
499
Restricted cash deposits are provided as security for borrowings and bank guarantees provided by banks in
EMEA.
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.
65
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
18. CASH (continued)
The Group’s cash resources are denominated in the following currencies:
Sterling
US dollar
Euro
KRW
Brazilian Real
Other
Total
Group
Company
2011
$’000
2010
$’000
2011
$’000
2010
$’000
1,965
11,698
3,376
1,753
840
334
19,966
87
9,413
3,411
1,772
219
165
15,067
1,959
2,948
822
-
-
-
5,729
87
181
231
-
-
-
499
19. ALLOTTED SHARE CAPITAL
COMPANY AND GROUP
Allotted, issued and fully paid:
102,678,769 ordinary shares of 1 pence each (2010: 77,169,734 ordinary
shares of 1 pence each).
2011
$’000
2010
$’000
1,772
1,361
The Company has one class of ordinary shares which carry no rights to fixed income.
On 16 February 2011 the general meeting of the Company's shareholders approved a placement of 23,793,750
new ordinary shares at 80 pence each, to raise approximately $30.6 million (£19.0 million) before issuance
expenses of approximately $1.3 million (£0.8 million). The placing proceeds were used to fund the acquisition
of Motorola Solutions Inc's m2m module business.
On 11 July 2011 the Company issued 800,000 new ordinary shares as part of the consideration paid in the
acquisition of GlobalConect.
During 2011 915,285 options were exercised by employees into ordinary shares.
Share options
The number of outstanding options as at 31 December 2011 and at the date of this report was 13,913,508 and
14,055,840 equal to 13.55% and 13.69% respectively, of the outstanding share capital of the Company (11.93%
and 12.04% ,respectively of the outstanding share capital of the Company, on a fully diluted basis).
Reserves
In July 2010 the Company and BAMES concluded the unwinding of the cross holdings between the groups,
whereby the Company acquired from BAMES its entire stake in Telit Wireless Solutions Srl giving the
Company 100% ownership of Telit Wireless Solutions Srl, in consideration for Telit Wireless Solutions Srl
19.9% stake in SEM and the allotment to BAMES by the Company of 2.7 million new ordinary shares. As of 1
February 2011, the value of the 2.7 million shares was greater than €1.5 million, and BAMES paid the
Company, according to the agreement, 50% of the amount between €1.5 million and the actual value.
This transaction resulted in changes in ownership interests while retaining control and is accounted for as a
transaction with equity holders in their capacity as equity holders.
66
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
19. ALLOTTED SHARE CAPITAL (continued)
As a result, the difference in the amount of $2,639,000 between the consideration which made up of
combination of the fair value of the shares issued and the contingent consideration plus the elimination of the
fair value of the investment held in SEM was included in other reserve as a component of equity. The fair value
of the shares issued determined based on the share price at the date of the transaction and was included in
merger reserve.
20. POST-EMPLOYMENT BENEFITS
A. Until 1 January 2007, employees of Telit’s Italian subsidiaries 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 as 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 as 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. The majority of the employees are still
paid under the Italian government defined contribution plan and the Company only accrues for the
future termination indemnity
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 the Group bears no material actuarial risk. 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 recognised pension fund.
C. The liability in respect of accrued severance pay for the Israeli resident employees is $43,000 (2010: $37,000)
and the charge to the statement of comprehensive income in the year is $7,000 (2010: credit $64,000).
D. The IAS 19 disclosures in respect of the Group’s unfunded defined benefit obligations in Italy and APAC are
detailed further below.
Expense recognised in the statement of comprehensive income
Interest cost
Current service costs
2011
$’000
2010
$’000
133
276
409
118
213
331
67
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
20. POST-EMPLOYMENT BENEFITS (continued)
The amount included in the balance sheet arising from changes in the present value of the defined benefit
scheme obligation for Telit EMEA and Telit APAC are set out below:
Present value of defined benefit scheme obligation
1 January
Current service costs and interest
Contributions paid by the Company
Actuarial gains (losses)
Translation adjustments
31 December
2011
$’000
2010
$’000
2,869
409
(406)
16
(103)
2,785
2,559
331
(115)
222
(128)
2,869
The financial assumptions used to determine the present value of the defined benefit scheme were as follows:
Discount rate
Expected salary increase rate
Inflation
2011
4.75% /4.80%
3.00% /5.00%
0.00% /2.00%
2010
4.40% /5.69%
0.00% /5.00%
2.00% /2.00%
The experience adjustments arising on the plan liabilities at the balance sheet date, totalled $162,799 (2010:
$241,041) and the expected contributions to be paid in 2012 total $253,126
Historical information
Present value of the defined benefit scheme obligation
Experience adjustments arising on the plan liabilities
2,785
163
2,869
241
2,014
206
1,822
29
1,956
15
2011
$’000
2010
$’000
2009
$’000
2008
$’000
2007
$’000
68
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
21. CURRENT LIABILITIES
Group
Company
2011
$’000
2010
$’000
2011
$’000
2010
$’000
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
Other current liabilities
7,850
-
1,256
9,106
25,496
-
1,329
8,510
12,413
1,421
1,083
14,917
22,199
-
2,317
7,497
Total current liabilities
44,441
46,930
-
-
129
129
173
5,177
-
592
6,071
-
-
-
-
257
6,807
-
570
7,634
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 in 2011 was 66 days (2010: 76 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.
22. CONTINGENT LIABILITIES
Legal proceedings
A. In October 2009, the Israeli customs authority began assessment proceedings regarding the value of
products imported into Israel by Dai Telecom for the purpose of custom duties for the period from 2005 to
2008. On April 21, 2010, an assessment was served on Dai Telecom demanding additional import taxes
relating to (1) 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” (the
“Royalties Issue”) and (2) 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 “Development Fees Issue”). In the aggregate, the assessment is for
approximately $3.2 million excluding $1.5 million deductible VAT, the Royalties Issue being the major
part of the assessments. Based on the opinions of our professional advisors, among other things, we
believe Dai Telecom has valid and strong arguments regarding its claim (1) that the royalties should not
have been added to the value of the trademark and the tradename “Telit” and that there is a strong
likelihood Dai Telecom’s arguments will prevail and (2) that the development fees should not have been
added to the value of the products and that it is more likely than not that Dai Telecom’s arguments will
prevail. It is likely that Dai Telecom will appeal the assessment with respect to the Royalties Issue and
will try and settle the assessment with respect to the Development Fees Issue.
69
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
22. CONTINGENT LIABILITIES (continued)
B. 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.
C. In February 2010 a former employee of Dai Telecom filed a claim with the Labour court in Tel-Aviv
against Dai Telecom, Telit Israel and Telit Labs, claiming, inter alia, for wrongful dismissal and
requesting a payment of approximately $155,000, later reduced to $118,000. The hearings in this case
have been concluded and the parties are awaiting the ruling of the Labour Court. In the opinion of
Company's management, based, inter alia, on the opinion of its professional advisors, it is not possible to
assess the chances of the claim.
D. There are three pending employment claims in Italy, each at different stages in the litigation process, being
brought against Telit Communications S.p.A. Two of such claims have been valued by the Company
based on the opinion of its legal advisors at approximately Euro 200,000 and Euro 250,000 respectively,
not including interest and other supplementary amounts. With respect to the third claim, the Company,
based on the opinion of its legal advisors is not able to assess a value. In the opinion of the Company’s
management, based, inter alia, on the opinion of its professional advisors, it is not possible to assess the
chances of the aforesaid claims.
E. On January 13, 2012 M2M Solutions LLC filed a claim against; inter alia, Telit and Telit Wireless
Solutions Inc. in the United States District Court for the District of Delaware. See note 31 for further
details.
23. COMMITMENTS AND GUARANTEES
Operating lease commitments
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
Above five years
Minimum lease payments under operating
leases charged to the statement of
comprehensive income for the year
Land and buildings
2010
2011
$’000
$’000
Other
2011
$’000
2010
$’000
1,703
3,844
119
5,666
1,598
1,179
-
2,777
772
1,002
-
1,774
571
436
-
1,007
1,313
1,710
1,045
820
Operating lease payments represent rentals payable by the Group for certain of its office properties.
70
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
23. COMMITMENTS AND GUARANTEES (continued)
Guarantees and liens
a. The Company provided guarantees of up to $22.3 million to a certain suppliers of the Group, to sustain
credit lines to be granted by the suppliers in respect of purchases made.
b. 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 are for total amount of $21.7 million but shall
not exceed the amount current borrowing from these banks.
c. The Company has provided unlimited guarantees to suppliers of Telit Brazil and Dai Telecom covering all
of their undertaking to said supplier according to the agreement between these parties.
24. PROVISIONS
A provision is recognised when the Group has a legal or constructive obligation as a result of a past event, it is
probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of
the amount can be made. The Company's management does not expect that certain legal matters for which
provision was recognised will be settled within 12 months and therefore the provision for such legal matters was
included in non-current liabilities.
Tax (A)
$’000
Warranties (B)
$’000
Legal (C)
$’000
Total
$’000
Balance at 1 January 2011
Utilized in the year
Provided/(reversed) in the year
Assumed in business acquisition
Exchange differences
Balance at 31 December 2011
Classified as:
Current liabilities
Non-current liabilities
2,223
(1,154)
(116)
-
22
975
881
94
975
284
(177)
186
166
(11)
448
448
-
448
1,948
(235)
397
-
(70)
2,040
-
2,040
2,040
4,455
(1,566)
467
166
(59)
3,463
1,329
2,134
3,463
A. The Group is currently subject to ongoing tax audits. On 1 May 2011 a tax assessment received in late
2010 by the Company's subsidiary, Telit Communications S.p.A, in respect of the 2005 tax year was
settled in full by the payment of $1.3 million (€0.9 million).
In addition, Telit Communications S.p.A. has received assessments and/or penalty notices for the years
2004 and 2006 in the approximate aggregate amount of $2.2 million. The Company is in various stages of
attempting to settle or otherwise appeal such assessments and penalty notices. In addition, see also note
31(C).
B. 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.
C. The Group is involved in various legal or other proceedings incidental to the ordinary course of its
business. Management believes, based on the opinions of the legal advisers handling the different claims,
that the provisions recorded in the financial statements in connection with said claims are sufficient under
the circumstances, and that none of these proceedings, individually or in the aggregate, will have a
material adverse effect on the Group's business, financial position or operating results.
71
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
25. OTHER LONG-TERM LIABILITIES
As at 31 December 2011 the Group had outstanding a €3.0 million (2010: €3.0 million) interest rate swap that
started on 10 January 2008 and has an end date of 12 January 2013. The Group pays a fixed rate of interest and
receives floating. The fair value of the derivative has been determined to be $177,835 (2010: $295,130). The
fixed interest rate payable by the Group is Euribor + 1%. For contingent consideration included in other long-term
liabilities related to GlobalConect acquisition see note 15(B).
26. SHARE-BASED PAYMENTS
The Group and Company operate share-based option plan for executive directors, senior managers and
employees.
On 25 May 2010 executives, employees and consultants of the Company and its subsidiaries were granted
2,201,000 options to purchase approximately 3% of the Company's issued and outstanding shares at the time, at
an exercise price of £0.25 per share. The options vest in three equal annual instalments starting from 25 May 2011
and expire five years from the date of grant.
On 30 June 2010 executives, employees and consultants of the Company and its subsidiaries were granted
2,704,000 options to purchase approximately 3.6% of the Company's issued and outstanding shares at the time, at
an exercise price of £0.32 per share. The options vest in three equal annual instalments starting from 30 June 2011
and expire five years from the date of grant.
On 1 April 2011 executives, employees and consultants of the Company and its subsidiaries were granted
3,959,000 options to purchase approximately 3.9 percent of the Company's issued and outstanding shares at the
time, at an exercise price of £0.81 per share (3,799,000) and £0.845 per share (160,000). The options vest in three
equal annual instalments starting from 1 April 2012 and expire five years from the date of grant.
On 6 April 2011 executives, employees and consultants of the Company and its subsidiaries were granted
175,000 options to purchase approximately 0.2 percent of the Company's issued and outstanding shares at the
time, at an exercise price of £0.81 per share (165,000 options) and £0.90 (10,000 options). The options vest in
three equal annual instalments starting from 1 April 2012 and expire five years from the date of grant, except for
10,000 options which vest over a 4-year period and 50,000 options which were granted as fully vested.
On 27 July 2011 a consultant of the Company and its subsidiaries was granted 100,000 options to purchase
approximately 0.10 percent of the Company's issued and outstanding shares at the time, at an exercise price of
£0.905 per share. The options vest in three equal annual instalments starting from 27 July 2012 and expire five
years from the date of grant.
On 19 September 2011 a director of the Company was granted 150,000 options to purchase approximately 0.15
percent of the Company's issued and outstanding shares at the time, at an exercise price of £0.80 per share. The
options vest in three equal annual instalments starting from 19 September 2012 and expire five years from the
date of grant. In addition, since the Company has nearly reached the overall limit on the granting of options over
newly issued shares contained in the rules of its unapproved option scheme, the remuneration committee resolved
that, as the overall limit under the scheme increases, the director will from time to time be formally granted
additional options (either in one tranche or in a series of separate grants) at the same exercise price and on the
same terms as the options set out above, in the total amount of 150,000 further options being granted within this
framework.
72
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
26. SHARE-BASED PAYMENTS (continued)
Further, the remuneration committee resolved that, should the Company successfully complete a public
fundraising on a major stock exchange, then the director will immediately thereafter be granted further options
over a total of 600,000 shares at an exercise price of £0.80 per share, with all other terms being equal to
the options mentioned above.
The number of outstanding options as at 31 December 2011 was 13,913,508, equal to approximately 13.55% of
the issued share capital of the Company.
The number and weighted average exercise prices of share options are as follows:
Outstanding at beginning of year
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at year end
Number
2011
2010
10,764,458
4,384,000
(915,285)
(319,665)
13,913,508
6,286,667
4,905,000
(251,875)
(175,334)
10,764,458
Exercisable at year end
6,393,556
4,019,312
Weighted average
exercise price
(pence)
2011
2010
0.24
0.81
0.21
0.50
0.42
0.23
0.2
0.29
0.20
0.21
0.24
0.20
The weighted average share price at the date of exercise for share options exercised in 2011 was £ 0.88.
The options outstanding at 31 December 2011 have an exercise price in the range of £0.20 to £0.905 (2010:
£0.20 to £0.32) and a weighted average contractual life of 3.2 years (2010: 3.7 years).
The Group recognised a total expense of $1,356,000 in respect of equity settled share based payment
transactions for the year ended 31 December 2011 (2010: $377,000).
The Company charge for the year was $1,020,000 (2010: $226,000).
The fair value of services received in return for share-based options is measured by reference to the fair value of
the share-based option granted. The estimate of the fair value of the services received is measured using the
Black-Scholes pricing model. The assumptions used in the measurement of the fair values at the grant date of
the options are as follows:
Grant date
29 January 2009
25 May 2010
30 June 2010
1 April 2011
1 April 2011
6 April 2011
27 July 2011
19 September 2011
Share
price
(pence)
Exercise
price
(pence)
Expected
volatility
(%)
Option
life
(years)
Risk free
rate (%)
Dividend
yield (%)
0.185
0.29
0.33
0.845
0.845
0.90
0.905
0.735
0.20
0.25
0.32
0.81
0.845
0.81
0.905
0.80
60
60
60
60
60
60
60
60
5
5
5
5
5
5
5
5
2.04
2.01
1.79
2.24
2.24
2.24
1.56
0.85
0
0
0
0
0
0
0
0
Expected volatility is estimated by considering historic average share price volatility.
73
Employee
turnover
before
vesting/non
-vesting
condition
(%)
25%
20%
20%
20%
20%
20%
20%
20%
Fair value
per option
(pence)
0.05
0.11
0.12
0.31
0.30
0.31
0.32
0.24
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
27. BORROWINGS
Group
2011
$ ’000
2010
$’000
Company
2011
$’000
2010
$’000
Unsecured – at amortized cost
Current maturities of long term loans
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
1,256
10,311
11,567
-
7,850
7,850
9,106
10,311
19,417
1,083
7,365
8,448
1,421
12,413
13,834
14,917
7,365
22,282
129
518
647
-
-
-
129
518
647
Borrowings breakdown
Working capital borrowing (1)
Governmental loan (2)
Mortgage loan (3)
Total
Group
2011
$ ’000
2010
$’000
Company
2011
$’000
2010
$’000
8,539
6,781
4,097
19,417
14,311
7,971
-
22,282
647
-
-
647
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Drawn letters of credit and borrowings arising from invoice advances use for working capital financing.
These borrowings secured partially by letters of guarantee issued by the Company, see note 23. Additional
available line of credit and invoice advance facilities at 31 December 2011 were $20.7 million.
(2) Representing the preferential rate loan supported by the Ministry of Trade and Commerce in Italy
provided in connection with the Group’s business development program in Sardinia. The loan is
denominated in Euro and attracts interest at a rate of 0.75% and is repayable in ten annual instalments that
commenced on 20 March 2009.
(3) Representing a preferential rate loan supported by a regional fund in Italy provided in connection with the
Group’s acquisition of the campus used for the Company's main R&D facility in Italy. The mortgage loan
is denominated in Euro and attracts interest at a rate of Euribour 6 months less 20% and is repayable in 15
semi-annual instalments that will commence in June 2012. The loan is presented at its discounted fair
value.
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 28.
74
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
28. 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 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.
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.
The Group operates in a wide number of geographic areas. While change in currency might affect our revenue
and gross profit, we estimate the impact on our operating profits not material. 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:
US Dollar
Euro
ILS
Other
Assets
2011
$’000
2010
$’000
Liabilities
2011
$’000
2010
$’000
10,941
1,951
3,787
34
12,982
231
-
76
13,961
717
92
12
13,433
-
-
-
The following table details the Group’s sensitivity to a 10% change in US dollar 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 US dollar strengthens
against the respective currency.
Impact on profit or loss of a 10% change
Group
2011
$’000
2010
$’000
193
(14)
The impact on equity would be equal and opposite of the impact on the profit or loss.
Interest rate risk
Interest rate risk comprises the interest cash flow risk resulting from short-term borrowings at variable rates.
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.
75
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
28. FINANCIAL RISK MANAGEMENT (continued)
The sensitivity analyses 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 $138,000 (2010: $204,000); 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 decreased during the current period due to the decrease in loan
balances.
Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss
to the Group, and arises principally from the Group's 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 until 2010 did not experience any material
losses. Following recognition of material bad debt during 2011, the Group began insuring part of its trade
receivables balance. Allowance for doubtful accounts is determined with respect to those amounts that the Group
has determined to be doubtful from collection.
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:
Maximum credit risk:
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
2011
$’000
2010
$’000
Company
2011
$’000
2010
$’000
19,781
185
39,834
-
732
-
-
13,521
1,546
29,560
-
610
-
-
5,646
83
652
6,488
11
23,976
21,727
499
-
776
2,899
14
6,867
17,353
Activities that give rise to credit risk and the associated maximum exposure include, but 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.
76
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
28. FINANCIAL RISK MANAGEMENT (continued)
In this case, the maximum exposure to credit risk is the maximum amount the entity would have to pay if the
guarantee is called on, which may be greater than the amount recognised as a liability as at 31 December 2011
where such guaranteed borrowings were not fully drawn at that date;
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. 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.
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 excluding interest that will accrue to those liabilities.
Group
Weighted
average
effective
interest rate
%
2011
Less than
1 year
$’000
More
than 1
year
$’000
Weighted
average
effective
interest rate
%
2010
Less than
1 year
$’000
More than 1
year
$’000
Fixed rate
1.56%
2,112
5,833
Variable rate
3.38%
6,994
4,478
1.69%
3.91%
3,665
11,252
7,003
362
Company
Weighted
average
effective
interest rate
%
2011
Less than
1 year
$’000
More
than 1
year
$’000
Weighted
average
effective
interest rate
%
2010
Less than
1 year
$’000
More than 1
year
$’000
Guarantees
-
21,727
-
-
17,353
-
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 include bank loans, trade accounts payable, other payables and other current liabilities). Due
to the nature of these financial instruments, there is no material differences between the fair value of the financial
instruments and their carrying amount included in the financial statements.
77
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
28. FINANCIAL RISK MANAGEMENT (continued)
Categories of financial instruments
Current financial assets
Assets classified as held for sale
Cash and restricted cash
Trade receivables
Loans and receivables – other debtors
Loans and receivables – due from
group undertakings
Current assets not meeting the
definition of a financial asset
Inventories
Other debtors
Total current assets
Non-current financial assets
Loans and receivables
Non-current assets not meeting the
definition of a financial asset
Intangible assets
Property, plant and equipment
Investments in subsidiaries
Deferred tax asset
Total Non-current assets
Group
Company
2011
$’000
2010
$’000
2011
$’000
2010
$’000
-
19,966
39,834
-
-
13,688
7,488
80,976
479
15,067
29,560
-
-
17,127
5,728
67,961
-
5,729
652
17
6,488
-
150
-
499
776
-
2,899
-
705
13,036
4,879
2011
$’000
2010
$’000
2011
$’000
2010
$’000
732
610
11
14
22,588
12,557
-
4,190
40,067
12,294
4,210
-
3,574
20,688
6,760
21
63,052
-
69,844
7,799
8
44,213
-
52,034
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.
78
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
28. FINANCIAL RISK MANAGEMENT (continued)
Current financial liabilities at
amortized cost
Short-term borrowings from banks and
other lenders
Trade payables
Due to group undertakings
Other current liabilities
Current liabilities not meeting the
definition of a financial liability
Provisions
Other current liabilities
Group
Company
2011
$’000
2010
$’000
2011
$’000
2010
$’000
9,106
25,496
-
6,709
1,329
1,801
14,917
22,199
-
6,540
2,317
957
129
173
5,177
-
-
592
-
257
6,807
-
-
570
Total current liabilities
44,441
46,930
6,071
7,634
Non-current financial liabilities at
amortized cost
Other loans
Non-current financial liabilities at fair
value through profit or loss
Derivative financial instruments
Non-current liabilities not meeting the
definition of a financial liabilities
Post-employment benefits
Deferred tax liabilities
Provisions
Other long term liabilities
10,311
7,365
518
177
295
2,828
45
2,134
301
2,906
-
2,138
-
-
-
-
-
200
718
-
-
-
-
-
-
-
Total Non-current liabilities
15,796
12,704
Fair value hierarchy
Effective from 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 related only to the derivative financial instruments. 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 (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
All derivative financial instruments for both accounting periods are measured applying level 2 of the fair value
hierarchy. During 2011 a loss of $108,352 (2010: $22,734) was recognised in the statement of comprehensive
income in relation to these financial instruments.
79
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
28. 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 27, 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 31.
Gearing Ratio
The Group defines debt as both long and short term borrowings as detailed in note 27. 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:
Cash and cash equivalent
Restricted cash deposits
Total cash
Current borrowings
Non-current borrowing
Total borrowings
Net cash / (debt)
Shareholders’ equity
Net cash/(debt) to equity ratio
The Company is not subject to any externally imposed capital requirement.
Group
2011
$’000
2010
$’000
19,781
185
19,966
(9,106)
(10,311)
(19,417)
549
60,319
0.91%
13,521
1,546
15,067
(14,917)
(7,365)
(22,282)
(7,215)
28,398
(25.4%)
80
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
29. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Transactions with subsidiaries
Transactions between the Company and its subsidiaries represent related party transactions. Transactions with
subsidiaries have been eliminated on consolidation.
Outstanding balances at the year-end are unsecured and settlement occurs in cash.
Related party transactions between the Company and its subsidiaries are summarized below:
(a) Accounts receivable - See note 17.
(b) Accounts payable - See note 21.
(c) Trading transactions:
Royalties *
Cost of sale
Interest income
2011
$’000
2010
$’000
3,302
754
891
2,381
501
289
* The Company signed a license agreement with some of its subsidiaries according to which the subsidiaries shall
pay royalties of a certain percentage of their revenues in consideration of their use of the Company's tradename
and trademarks.
In addition, the Company signed an agreement with certain of its subsidiaries for allocation of some shared costs.
Transactions with key management personnel
A. Key management personnel are determined as the directors of Telit Communications PLC. Details of
transactions with the directors and their compensation are detailed in the Report on Directors’ Remuneration
on pages 17 to 21. There are no outstanding balances as at the year end.
B. On August 1, 2011, the Company waived any and all claims it then had or in the future may have against the
Company's Chief Executive, Oozi Cats in relation to certain indemnification letters provided to the
Company by Mr. Cats and to any other tax related claims in connection with Mr. Cats’ service and
employment agreements. Pursuant to the indemnification letters, Mr. Cats had personally undertaken to
satisfy in full certain potential tax liabilities if applicable. The underlying potential liability stems from
possible tax exposures relating to Mr. Cats’ past and current employment and service arrangements. After
due and careful consideration of the matters, our Board of Directors authorized the release of Mr. Cats from
any liability under those indemnification letters.
30. 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 $4,378,000 (2010: loss of $1,113,000).
81
Telit Communications PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2011
31. SUBSEQUENT EVENTS
A. On 3 January 2012 the Company consummated the binding agreement it entered into on 20 December 2011
to purchase 100% of the shares of Navman Wireless OEM Solutions LP, a designer and manufacturer of
world-class GPS modules and solutions, for $3.0 million in cash. The amount is subject to an additional
earn-out amount of up to $750,000 subject to certain conditions. The acquisition of Navman’s technology
and its US based executive engineering and sales staff will make Telit a major contender in the GPS market
while providing an enhanced product portfolio for its m2m customers. No assessment of the fair values of
the assets and liabilities acquired has yet been completed due to the proximity of the transaction completed
compared to the finalization of these financial statements. The book value of the assets purchased is as
follows:
Working capital, Net (*)
Property, plant and equipment
Total identifiable assets
Book value
$’000
688
72
760
(*) the agreement provided for a working capital adjustment for the difference between the actual working
capital transferred and $650,000.
B. On 13 January 2012, M2M Solutions LLC, a company allegedly incorporated under the laws of the State of
Delaware, USA ("M2M Solutions"), filed a complaint in the United States District Court for the District of
Delaware (the "Court") against Motorola Solutions Inc. ("Motorola"), the Company and Telit Wireless
Solutions Inc. (“Wireless”), asserting that Motorola allegedly infringed one and the Telit defendants
allegedly infringed two patents allegedly owned by M2M Solutions (the "Complaint").
M2M Solutions asserted that the Company and Wireless allegedly infringed, and continue to infringe, one or
more of the claims covered by the asserted patents, and asked the Court to award: (i) damages for past
infringement (i.e., on products sold by them since 2009, when the older of the two patents was issued), (ii)
treble damages for alleged willful infringement, and (iii) M2M Solutions’ attorneys’ fees and costs. M2M
Solutions also asked the Court to issue an injunction prohibiting the Company and Wireless from selling any
allegedly infringing products in the future.
In connection with the complaint, on 2 February 2012, the Company received a letter from Motorola
asserting that the Company is allegedly required to indemnify Motorola pursuant to provisions of the Asset
Purchase Agreement pursuant to which Wireless purchased the assets of Motorola Israel Ltd.
The Company is still examining whether it is required to indemnify Motorola and/or to pay any damages, or
counsel fees that Motorola may incur, and in the meantime, has, on 14 February 2012, together with
Wireless, signed a Tolling Agreement with Motorola and Motorola Israel Ltd. agreeing, inter alia, that during
the pendency of the lawsuit none of the parties will make claims against each other arising from the causes of
action asserted by M2M Solutions or seek any cost recovery or indemnity.
C. Telit Wireless Solutions S.r.l received tax assessments from the Italian Tax Authority for the years 2006 and
2007 in the approximate aggregate amount of $0.85 million (€0.62 million). The Company paid a nominal
amount in settlement of the 2006 tax assessment, and settled the 2007 tax assessment in February 2012 based
on the opinion of its legal and tax advisors by payment of $0.3 million (€0.24 million).
82
Company Information
Directors, Secretary and Advisers
Company Registration No. 05300693
Directors
Enrico Testa, Chairman
Oozi Cats, Chief Executive
Yosi Fait, Finance director
Alexander P. Sator, Non-executive director
Davidi Gilo, Independent Non-executive director
Ram Zeevi, Independent Non-executive director
Nicola Miglietta, Independent Non-executive director
Company Secretary
Yossi Weinstock
Registered Office
7th Floor, 90 High Holborn,
London WC1V 6XX
Nominated Adviser
and Broker
Canaccord Genuity Plc
7th Floor, Cardinal Place
80 Victoria Street
London SW1E 5JL
Solicitors
Olswang
7th Floor, 90 High Holborn
London WC1V 6XX
Independent Auditors
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square,
London EC4Y 8BB
Registrar
Capita Registrars Limited
The Registry
34 Beckenham Road, Beckenham, Kent BR3 4TU
83
Telit Main Offices Worldwide
Telit Wireless Solutions EMEA
Telit Communications S.p.A.
Via Stazione di Prosecco 5/B
34010 Sgonico, Trieste - Italy
Phone: +39 040 4192 491
Fax: +39 040 4192 383
Via San Nicola da Tolentino n.1/5 , Rome
Phone: + 39 06 4204601
Fax: +39 06 42010930
Telit Wireless Solutions United Kingdom
Regus Building, Lakeside House
1 Furzeground Way
Stockley Park East
Uxbridge UB11 1BD
United Kingdom
Phone: +44 870351 7290
Fax: +44 870351 7291
Telit Wireless Solutions Israel
10 Habarzel Street
Tel Aviv 69710, Israel
Phone: +972 3 7914000
Fax: +972 3 791 4008
Telit Wireless Solutions 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
84
Telit Wireless Solutions Latin America
Rua Cunha Gago, 700 - cj 81 Pinheiros
São Paulo - SP, 05421001 Brazil
Phone: +55 11 2679 4654
Fax: +55 11 2679 4654
Telit Wireless Solutions APAC
Telit Wireless Solutions Co., Ltd.
12th Floor, Shinyoung Securities Bld., 34-12,
Yeouido-dong, Yeongdeungpo-gu, Seoul, Korea
Phone: +82 2 368 4600
Fax: +82 2 368 4606
Telit Wireless Solutions for China
Rm. 2106, East Bld. Of Coastal City
No.3, Hai De Avenue
Nanshan, Shenzhen, 518059, China
Phone: +86 755 8627 1598
Fax: +86 755 8627 0217
85
Telit Communications PLC
7th Floor, 90 High Holborn
LONDON, WC1V 6XX
United Kingdom