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UPDATE - Telit Communications revenues surge as M2M traction builds

Published: 20:25 10 Jul 2014 AEST

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M2M specialist Telit Communications (LON:TCM) has reported more strong growth with revenues more than 27% higher in its latest half year.

Revenues to June will come in around US$138mln (2013: US$108.5 mln), driven by a surge in demand for at service business m2mair, where revenue rose by almost three-fold to US$9.2mln, and a first contribution from April’s telematics acquisition ATOP.

Oozi Cats, Telit’s chief executive, said Telit has had a good first six months.

“I think it important to note that we are now seeing two additional growth engines coming through - the automotive product line (including ATOP) and the Platform as a Service (PaaS).

Both these offerings are making good progress and I expect they will widen our addressable market and increase our opportunities for growth in future years".

Net debt at 30 June 2014 is expected to be approximately $15.9 mln (US$11.7mln at end December). The rise reflect the ATOP deal and the growth in working capital supporting the increase in revenues, it said.

Trading for the full year 2014 should be in line with market expectations, Telit added.

Broker Canaccord Genuity said the indicated first half revenue of US$138mln is 3% ahead of its forecast of US$134mln. It won’t be making any significant changes to its full-year estimates, but it has significantly raised long-term revenue and earnings estimates, largely as a result of including “upside from the automotive initiative following the successful integration of the ATOP acquisition”.

Canaccord’s revenue estimate for fiscal 2015 is raised by 6% while its estimate for the following year has been lifted 13%.

“This upgrade has a leveraged effect on EBITDA [underlying earnings], which we upgrade by 9% and 38%, respectively. We now expect EBITDA to almost double over the next two years,” the broker revealed.

Canaccord Genuity’s target price has been raised to 305p from 290p.

Shares in Telit were up 0.9% to 220.5p in late morning trading.

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