Telit maintains bullish outlook as profit slips

Module maker Telit (London, UK) has witnessed a dip in first-half profit despite reporting impressive gains in revenues as it capitalizes on the growing demand for M2M products and services.

A rise in expenses linked to takeover activity, the launch of a new business venture and the opening of new sales offices in the Czech Republic and Australia pushed net profit down to $2.3 million from $2.6 million in the first half of 2011.

Revenues at the company rose by 21.6% over the same period, to $98.6 million, with Telit in the vanguard of new M2M offerings.

Module maker Telit (London, UK) has witnessed a dip in first-half profit despite reporting impressive gains in revenues as it capitalizes on the growing demand for M2M products and services.

A rise in expenses linked to takeover activity, the launch of a new business venture and the opening of new sales offices in the Czech Republic and Australia pushed net profit down to $2.3 million from $2.6 million in the first half of 2011.

Revenues at the company rose by 21.6% over the same period, to $98.6 million, with Telit in the vanguard of new M2M offerings.

The company has established itself as one of the prime developers of the modules that facilitate communications among connected devices and machines.

According to Beecham Research, a market-research company, it is now one of the three largest module suppliers in the world, with a 22% share of the global market.

Telit’s top-line growth over the past six months has been fuelled by a number of developments, including the recent establishment of its m2mAIR business unit and its January takeover of Navman, a designer and manufacturer of location-based technologies.

m2mAIR was set up to offer connectivity and value-added services to module customers, and Telit is hopeful that it will provide a source of recurring revenues in future.

It has received a boost from a roaming deal with tier-one telecoms operator Telefonica (Madrid, Spain), which maintains networks globally.

“The launch of our m2mAIR business unit is a significant development,” said Oozi Cats,Telit’s chief executive, in a statement. “It opens new horizons for the company and will change the revenue model of the company to include a layer of recurring revenues.”

Telit maintains a bullish outlook for m2mAIR, citing research from Berg Insight predicting that revenues generated by markets in which it operates will grow from $5.6 billion this year to $15.5 billion in 2016.

It is also optimistic about raising overall profitability in the future.

Although its gross profit margin shrank to 37.8% this half from 39% a year ago, Telit says the figure will improve when it moves some of its manufacturing operations from the EMEA region to China in the first quarter of 2013.

Telit generates slightly more than half of its revenues in EMEA markets, with the Americas contributing about a third of the total and APAC countries the remainder.

Managers say that dependency on major customers continues to be low, with the ten largest contributing about 30% of Telit’s revenues over the first half of 2012.