Telit issues another profit warning amid major board changes

Telit Communications issued another profit warning on Thursday, reporting that pressure on gross profit margins stemming from the transition from 2G and CDMA products toward LTE products had been greater than expected.

The AIM-traded firm explained that 2G products were more mature technologies, and thus had a higher profit margin, while LTE products were a newer technology with smaller margins.

Its board said it remained committed to delivering a “significant rationalisation” of its product lines, and a reduction in its cost base, the benefits of which would be achieved in the coming financial year to 31 December 2018 and in following years.

The group now planned to publish a third quarter update in early December, which would also set out further information on the cost reduction plan.

Telit said early indications were that adjusted EBITDA for the year was to be “materially below” previous guidance.

Revenues and adjusted EBITDA for the second half would, as usual for the company, be greater than for the first.

In addition, Telit also reported a number of board changes, appointing Richard Kilsby as non-executive chairman with immediate effect.

Simon Duffy was appointed as senior independent non-executive director and chairman of the audit committee, also with immediate effect.

Yosi Fait, who has been interim chief executive since August, was appointed chief executive officer, while Yariv Dafna - currently chief operating officer - was joining the board as finance director, both with immediate effect.

Enrico Testa was stepping down as chairman, but would remain on the board as an executive director.

Davidi Gilo, non-executive director, would step down from the board on 31 December, with the board saying it was continuing to consider other candidates to strengthen it further.

“These board changes mark a new beginning for Telit,” said new chairman Richard Kilsby.

“Simon and I are committed to the board applying the highest standards of corporate governance and transparency across the group and ensuring the reporting and controls are appropriate for what is a very complex business.

“In particular, going forward we will ensure that the business is run in a prudent manner.”

Kilsby said that, having reviewed Telit and its business “in detail” ahead of accepting their respective roles, both he and Duffy were confident that Fait and Dafna were “the right people” to lead the business and drive it forward.

“We are aware of the concerns raised regarding share trading undertaken by Yosi Fait in July 2017.

“We have absolute confidence in his integrity and believe, having examined the share trading with the assistance of external legal advice, on this basis that it was lawful.”

Kilsby added that Telit was “very well positioned” in the fast growing space of the so-called ‘internet of things’.

“The team have developed a detailed bottom up plan to rationalise the cost base of the business and capitalise on its leading position in the fast moving end-to-end IoT solutions space.

“I look forward to working with Yosi and the team to implement their strategy to develop the business and maximise shareholder value.”