Telit Communications Plc
AIM : TCM

Telit Communications Plc

August 18, 2006 02:02 ET

Telit Communications PLC: Interim Results for Six Months Ended 30 June 2006

LONDON, UNITED KINGDOM--(CCNMatthews - Aug. 18, 2006) - Telit Communications PLC ("Telit" or "the Company") (AIM:TCM), the global wireless communications developer and distributor, today announces its interim results for the six months ended 30 June 2006.



Highlights

Net Current Assets as of 30 June 2006 (in EUR million)

Cash and cash equivalents 11.8 Short Term Borrowings (i) 10.2
Trade Receivables 20.8 Trade Payables 9.9
Other Current Assets 14.3 Other Current Liabilities 3.2
------ -------
Total Current Assets 46.9 Total Current Liabilities 23.3
Net Current Assets 23.6

Net Current Assets Less Long Term Loan as of 30 June 2006
(in EUR million)

Net Current Assets 23.6
Long Term Loan from main Shareholder (3.1)
--------
--------
Total 20.5

(i) Mainly to finance Trade Receivables


- Telit's IPO was based on the balance sheet as at 31 December 2004 and raised EUR 30 million net. Telit's Net Current Assets Less Long Term Loan (pre IPO) was EUR 1.7 million, compared with EUR 20.5 million at 30 June 2006. Since the IPO until to 30 June 2006 the Company invested more than EUR 7 million in capital investments and acquisitions.

- Telit has increased its lines of credit from financial institutions by EUR 16 million during July and August 2006. These facilities exclude lines of credit in Israel that are secured by the Company's trade receivables.

- Available lines of credit currently total EUR 32.7 million, of which EUR 4.8 million had been drawn as at 30 June 2006.

- Turnover increased 10.5% to EUR 40.5 million (H1 2005: EUR 36.6 million).

- Gross profit increased 7.2% to EUR 7.1 million (H1 2005: EUR 6.6 million).

- Operating loss: EUR 3.0 million (H1 2005: EUR 0.6 million).

- Loss for the period: EUR 3.5 million (H1 2005: EUR 1.9 million).

- Significant growth in the Wireless Solutions Business Unit, which achieved a 132% increase in turnover to EUR 10.5 million (H1 2005: EUR 4.5 million).

- Turnover for the Wireless Products Business Unit has declined to EUR 30 million (H1 2005: EUR 32 million).

- Net current assets of EUR 23.6 million, including cash and cash equivalents of EUR 11.8 million.

- Major expansion of the Wireless Solutions Business Unit, with particular emphasis on the development of a global sales network. The Company now has distribution agreements in 45 countries.

Commenting on the results, Oozi Cats, Chief Executive Officer of Telit Communications, said: "Over the past six months, Telit has taken advantage of some opportunities which presented themselves in the market to make significant progress in establishing its position as a global player in the m2m market. The Board has taken the decision to accelerate this expansion. Although in the short term this has, and will continue to impact the Company's earnings, I am confident that the current investment in the development of a global sales network will deliver strong results in the future. We have also extended our m2m product offering to CDMA technologies, in addition to our existing GSM/GPRS product line, and are making solid advances with UMTS and short-range products.

"I am encouraged by the willingness of financial institutions in Italy to extend Telit lines of credit. I believe that companies in our industry must achieve three important building blocks to become one of the world's leading companies in the m2m marketplace: global presence, a set of products supporting a wide range of technologies and sufficient financial resources to support the company's growth. We currently believe that we have a solid platform in these three areas and we look to the future with optimism."

Outlook

Telit will continue to focus on the Wireless Solutions Business Unit, aimed at driving future growth, with the objective of creating value for its shareholders. This strategy is being fulfilled thanks to Telit's global strategy, innovative products and continued commitment to R&D. Telit's ambition is to grow faster than the global m2m market that has now developed and is demonstrating continuous growth. The consolidation of this market is progressing and management estimates that the Company is currently the fourth largest provider in the m2m market, and third largest provider in Europe.

Telit will continue to manage and develop its profitable Wireless Products Business Unit to continue to generate cash to support its strategy in the Wireless Solutions Business Unit. The Company intends to present its customers, with further sets of products both in Israel as well as in Europe, who could benefit from the extensive knowledge that Telit has gained via its Wireless Products Business Unit.



For further information:

Telit Communications PLC
Oozi Cats, Chief Executive Officer Tel: + 39 040 419 2491
www.telit.com

Avi Israel, Deputy CEO & Financial Director Tel: + 972 54 8188 841
www.telit.com

Merav Zimerman, Chief Marketing Officer Tel: + 972 54 5230 140
www.telit.com

Media enquiries:
Abchurch
Chris Lane / Laura Riascos de Castro Tel: + 44 (0) 20 7398 7700
chris.lane@abchurch-group.com www.abchurch-group.com


CHIEF EXECUTIVE'S STATEMENT AND REVIEW

As I reported in the trading update released on 27 July 2006, the Company had made good progress during the first six months of 2006 with regard to the Wireless Solutions Business Unit. However, due to changes in the Israeli cellular market that have led to a reduction in sales to the Company's major customer, as announced in July 2006, the Wireless Products Business Unit has not achieved the same level of operating profit as in the prior period. The encouraging strong growth from our Wireless Solutions Business Unit in the last six months justifies the strategy adopted by Telit prior to its IPO. As a result we plan to continue our investment in this business unit.

Total sales reached EUR 40.5 million in the first half of this year, an increase of 10.5% over H1 2005, with the gross profit margin reaching a level of 17.5% (H1 2005: 18.0%).

Wireless Solutions Business Unit

The Wireless Solutions Business Unit has performed well during the first six months of 2006, a period in which the Company has introduced five new products to the market. Turnover for this division for the six months ended 30 June 2006 has increased by 132% at approximately EUR 10.5 million compared to EUR 4.5 million for the six month period to 30 June 2005. Operating losses in this business unit decreased by 2% in the first half of 2006 from the first half of 2005. The potential growth of the Wireless Solutions Business Unit depends on the continued successful development of state-of-the-art products as well as on securing the necessary distribution agreements. At this point, our team of engineers is supporting up to 1,000 new customer designs in progress.

The development of the Wireless Solutions Business Unit is the key to the Company's success and we believe it will be the business unit that will play a significant role in value creation for our shareholders. In order to fulfill Telit's ambitious goals, a global market presence is essential. Particular emphasis has been placed on the development of a global sales network, as demonstrated by the announcement made by the Company on 30 May 2006 concerning the acquisition of Bellwave M2M Co Ltd and the establishment of "Telit APAC," our gateway to expansion in the Asia Pacific region.

Telit APAC (formerly Bellwave M2M) generated revenues of US$21 million in 2005 and benefits from having a dominant market share of approximately 50% in the South Korean m2m market. Bellwave Co Ltd will retain the remaining 25% of Bellwave M2M, but Telit holds a call option to purchase the remaining 25% for approximately US$2 million. This call option is exercisable until December 2006.

Telit APAC currently has 43 employees, the majority of whom are engineers. Telit AP AC will focus on the development of CDMA 1X and EVDO products for the Asian and American markets as well as the development of WCDMA/UMTS products for global distribution. Telit APAC will also serve as Telit's sales gateway to the emerging Asia Pacific markets for both CDMA and GSM/GPRS product lines.

To further drive the Company's international growth, we have formed a new company called Telit Wireless Solutions Inc. (Telit USA). Telit USA, established on 1 July 2006, is based in Raleigh, North Carolina and has nine employees, most of whom are salesmen and product marketing experts. As previously indicated, the main objective of the new subsidiary is to focus on the telematics and fleet management sectors. These are two of the largest industry segments for the application of machine-to-machine technology in the United States. According to ABI research, the m2m market in North America is expected to generate sales of between 6 and 7 million units in 2007 and experience average annual growth of 24% to 28% to 2010.

Telit has been investing continuously in R&D for many years. In June 2006, we officially opened our new research and development centre in Cagliari, Sardinia. This new centre was opened after Telit was declared eligible to receive EUR 25.5 million from the Italian government, comprising a grant and a long-term preferential rate loan. These arrangements are available to the Company until the end of the first quarter of 2008. We intend to use these available resources in a diligent and careful manner to develop Telit's product portfolio. The new centre will serve both business units in developing future products and integrating complementary technologies such as GPS and short-range connectivity (Wi-Fi, Wi-Max, Bluetooth, ZigBee, RFID) and will employ approximately 100 engineers by 2008.

Substantial progress has been achieved within the Wireless Solutions Business Unit since the Company's flotation on AiM last year. We have successfully opened satellite offices in eleven countries worldwide, signed new substantial distribution agreements and opened two more R&D centres in Seoul and Sardinia in addition to the one in Trieste. Telit's cost-optimised products are tailored to the demands of various markets and applications. Telit is now set to serve all m2m market demands and offers a full range of products, including GSM/GPRS and CDMA. We have started the development process of future technologies such as UMTS earlier than expected, using the funds we have received from the Italian government.

In the first half of 2006, we commenced production of five new products based on the new chipset from Infineon (e-gold lite), including GM862-GPS, GM862-Quad, Ge863-GPS, GE864-Quad, and GC864-Quad. We have also completed PTCRB (certification for the US market) for products based on e-gold lite. Additionally, we have finished development and started mass production of GP863-AMR, which is the AMR (Automated Meter Reading) application that we have designed for the large IBM/Oxxio project in the Netherlands. With Telit's set of products, we believe we have our finger on the market's pulse.

Wireless Products Business Unit

The Wireless Products Business Unit (previously named the Enhanced Value Added Reseller ("EVAR") Business Unit) has experienced mixed fortunes over the past six months. This business unit generated revenue of EUR 30 million for the six month period, in comparison to EUR 32 million for the six months ended 30 June 2005. During the first half, we launched four new handsets in the Italian market and two new handsets in the Israeli market.

Despite the changes in the Israeli cellular market, as mentioned above, we expect to be able to sustain the Company's performance in this profitable and cash generative business unit. Customer satisfaction with the Company's products is encouraging, and we expect it to increase as customers experience Telit's product quality.

People

To continue the Company's growth, we have made several important new hires over the period. During the past few months we have announced the major changes at the Company directorship level. We have also strengthened our capabilities at the Company executive level. These executives understand the market and have a clear vision to create a winning strategy with respect to products definition and development as well as customer support. We believe that our management team provides us with a tremendous market advantage.



CONSOLIDATED INCOME STATEMENT

Six months ended Year ended
30 June 31 December
2006 2005 2005
Unaudited Unaudited(i) Audited(i)
EUR '000 EUR '000 EUR '000
-------------------------------------------------

Continuing operations

Revenue 40,479 36,624 85,914
Cost of sales (33,396) (30,018) (71,331)
-------------------------------------------------
Gross profit 7,083 6,606 14,583

Other income 807 604 1,134
Research and
development expenses (2,973) (1,843) (3,914)
Selling and marketing
expenses (4,106) (2,193) (5,293)
General and
administrative
expenses (3,810) (3,760) (7,372)
Other expenses (13) (21) (215)
-------------------------------------------------
Operating loss (3,012) (607) (1,077)

Investment income 180 137 656
Finance costs (485) (475) (938)
Share in results of
associate (23) (87) (164)
-------------------------------------------------
Loss before income
taxes (3,340) (1,032) (1,523)

Income taxes (158) (494) (1,338)
-------------------------------------------------
Loss for the period
from continuing
operations (3,498) (1,526) (2,861)
Discontinued
operations
Loss for the period
from discontinued
operations - (391) (1,306)
-------------------------------------------------
Loss for the period (3,498) (1,917) (4,167)
-------------------------------------------------
-------------------------------------------------
Attributable to:
Equity holders of the
parent (3,510) (1,917) (4,167)
Minority interest 12 - -
-------------------------------------------------
(3,498) (1,917) (4,167)
-------------------------------------------------
-------------------------------------------------
Loss per share
(in pence)
From continuing
operations
Basic (8.12) (4.99) (7.76)
-------------------------------------------------
-------------------------------------------------
Diluted (8.12) (4.99) (7.76)
-------------------------------------------------
-------------------------------------------------
From continuing and
discontinued
operations
Basic (8.12) (6.27) (11.30)
-------------------------------------------------
-------------------------------------------------
Diluted (8.12) (6.27) (11.30)
-------------------------------------------------
-------------------------------------------------
Weighted average
number of equity
shares in issue 43,214,281 30,558,033 36,886,157
-------------------------------------------------
-------------------------------------------------
(i) See note 9.

The accompanying notes are an integral part of the financial statements.


CONSOLIDATED BALANCE SHEET

30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
EUR '000 EUR '000 EUR '000

ASSETS

Non-current assets
Investment in associate 670 716 649
Deferred expenses 94 56 73
Property, plant and
equipment 1,806 1,353 1,414
Goodwill and intangible
assets 4,808 574 616
Deferred income tax asset 3,676 3,678 3,696

11,054 6,377 6,448

Current assets
Cash and cash equivalents 11,769 24,871 17,207
Trade receivables 20,781 22,431 33,286
Other current assets 5,094 5,820 4,357
Inventory 9,284 9,615 12,030
46,928 62,737 66,880

57,982 69,114 73,328

LIABILITIES AND
SHAREHOLDERS' EQUITY

Shareholders' equity
Share capital 627 627 627
Other reserve (260) (260) (260)
Share premium 29,651 29,602 29,651
Translation adjustments (521) (128) (284)
Retained earnings 504 5,417 3,432
30,001 35,258 33,166

Minority interest 424 - -

Total shareholders' equity 30,425 35,258 33,166

Non - current liabilities
Loan from parent company 3,055 4,073 3,054
Post employment benefits 1,034 1,762 856
Other long-term liabilities 106 73 106

4,195 5,908 4,016

Current liabilities
Short-term borrowings
from banks and other lenders 10,230 18,824 22,823
Trade payables 9,922 5,134 8,955
Other current liabilities 3,210 3,990 4,368

23,362 27,948 36,146

57,982 69,114 73,328

The accompanying notes are an integral part of the financial statements.



CONSOLIDATED CASH FLOW STATEMENT

Six Months ended Year ended
June 30 31 December
2006 2005 2005
Unaudited Unaudited Audited
EUR '000 EUR '000 EUR '000
-------------------------------------------------
CASH FLOWS -- OPERATING
ACTIVITIES

Net cash provided by
(used in) operating
activities (Appendix 1) 13,026 4,989 (5,025)
-------------------------------------------------

CASH FLOWS - INVESTING
ACTIVITIES
Purchase of property,
plant and equipment (434) (65) (431)
Proceeds from disposal
of property, plant
and equipment 25 15 41
Additions to
financial assets - (190) (190)
Purchase of intangible
assets (7) (542) (622)
Other (10) - (27)
Sales of financial
assets - - 211
Acquisition of
subsidiary (6,027) - -
-------------------------------------------------
Net cash used in
investing activities (6,453) (782) (1,018)
-------------------------------------------------

CASH FLOWS - FINANCING
ACTIVITIES
Short-term borrowings
from banks and others (12,012) (10,258) (7,772)
Proceeds from issuance
of share capital - 29,969 30,019
-------------------------------------------------
Net cash (used in)
provided by financing
activities (12,012) 19,711 22,247
-------------------------------------------------

-------------------------------------------------
(Decrease) increase in
cash and cash
equivalents (5,439) 23,918 16,204

Cash and cash
equivalents-balance
at beginning of
period 17,207 582 582
Effect of exchange rate
differences 1 371 421
-------------------------------------------------
Cash and cash
equivalents-balance
at end of
period 11,769 24,871 17,207
-------------------------------------------------
-------------------------------------------------

The accompanying notes are an integral part of the financial statements.



CONSOLIDATED CASH FLOW STATEMENT

Appendix 1 - Adjustments to reconcile net income to net cash flows
provided by (used in) operating activities

Six months ended Year ended
30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
EUR '000 EUR '000 EUR '000
-------------------------------------------------

Loss for the period
from continuing
operations (3,498) (1,526) (2,861)
Loss for the period
from discontinued
operations - (391) (1,306)
-------------------------------------------------
Loss for the period (3,498) (1,917) (4,167)
-------------------------------------------------
Adjustment for:
Depreciation and
amortization 377 333 661
Income tax expense 158 494 1,338
Investment income (180) (137) (656)
Finance costs 485 475 938
Increase (decrease)
in provision for
post employment
benefits 179 170 (735)
Share-based payment
charge 582 267 532
Share in results of
associate 23 87 164

Operating cash flows
before movements
in working capital:
Decrease in trade
receivables 11,786 13,593 3,808
(Increase) decrease in
other current assets (791) 2,815 4,039
Decrease (increase) in
inventory 3,426 (3,463) (5,952)
Increase (decrease) in
trade payables 1,678 (1,047) 2,681
(Decrease) in other
current liabilities (1,202) (6,103) (5,743)
-------------------------------------------------
Cash generated by
(used in) the
operations 13,023 5,567 (3,092)

Income tax received 266 - -
Income tax paid (324) (352) (1,240)
Interest received 252 137 336
Interest paid (191) (363) (1,029)
-------------------------------------------------
Net cash provided by
(used in)
operating activities 13,026 4,989 (5,025)
-------------------------------------------------
-------------------------------------------------

The accompanying notes are an integral part of the financial statements.



STATEMENT OF CHANGES IN EQUITY

Six months ended 30 June 2006 (Unaudited)


Translat-
Share Other Share ion Retained Minority Total
capital reserve premium adjustment earnings Total interest Equity
EUR '000
Balance
- 1 627 (260) 29,651 (284) 3,432 33,166 - 33,166
January
2006

Arising
a
acquisit- - - - - - - 412 412
ion
Translat-
ion
adjustme-
nts - - - (237) - (237) - (237)
Share
based
payment
charge - - - - 582 582 - 582
Net loss
for
the
period - - - - (3,510)(3,510) 12 (3,498)
---------------------------------------------------------------

Balance
-30
June
2006 627 (260) 29,651 (521) 504 30,001 424 30,425
---------------------------------------------------------------
---------------------------------------------------------------



Six months ended 30 June 2005 (Unaudited)

Share Other Share Translation Retained
capital reserve premium adjustment earnings Total
EUR '000

Balance- 1
January 2005 - - - (915) 7,067 6,152

Reverse
acquisition
capital
adjustment - (260) - - - (260)
Issue of
share
capital 627 29,602 - - 30,229
Translation
adjustments - - - 787 - 787
Share based
payment
charge - - - - 267 267
Net loss for
the period - - - - (1,917)(1,917)
---------------------------------------------------------------

Balance
-30
June 2005 627 (260) 29,602 (128) 5,417 35,258
---------------------------------------------------------------
---------------------------------------------------------------

Year ended 31 December 2005 (Audited)

Share Other Share Translation Retained
capital reserve premium adjustment earnings Total
EUR '000
---------------------------------------------------------------

Balance
- 1
January,
2005 - - - (915) 7,067 6,152

Reverse
acquisition
capital
adjustment - (260) - - - (260)
Issue of
share
capital 627 - 29,651 - - 30,278
Translation
adjustments - - - 631 - 631
Share based
payment
charge - - - - 532 532
Net loss for
the period - - - - (4,167)(4,167)
---------------------------------------------------------------

Balance
-31
December
2005 627 (260) 29,651 (284) 3,432 33,166
---------------------------------------------------------------
---------------------------------------------------------------

The accompanying notes are an integral part of the financial statements.


NOTES TO THE INTERIM FINANCIAL STATEMENT
AT 30 JUNE 2006 (UNAUDITED)


1. Telit Communications PLC ("the Company") was incorporated and registered in England and Wales as a public limited company on 30 November 2004 under the Companies Act 1985. On 4 April 2005, the Company completed an Initial Public Offering on the AIM Market, for the issue of 16,428,571 ordinary shares, at a price of 140 pence per share, for aggregate proceeds of Pounds Sterling 20.5 million (approximately EUR 30 million), net of certain issuance costs and expenses.

2. In June 2006 the Company acquired 75% of Bellwave m2m Co. Ltd ("Bellwave"), the machine to machine ("m2m") division of Bellwave Co. Ltd, a South Korean wireless communications developer, in a cash transaction totalling US $6.18 million, excluding directly attributable costs. Bellwave Co. Ltd retains the remaining 25% of Bellwave m2m; however, the company holds a call option to purchase the remaining 25% for approximately US$2 million, exercisable until 31 December 2006. Due to the proximity of the acquisition to the Telit's interim reporting date, the acquisition accounting for Bellwave has been determined on a provisional basis. Telit expects to complete its purchase price allocation, including the identification and valuation of intangible assets, in the second half of the year.

Bellwave, which developed and marketed the world's smallest CDMA data communications module, currently has 40 employees the majority of whom are engineers. The company will focus on the development of CDMA 1X and EVDO products for the Asian and American markets and the development of WCDMA/UMTS products for global distribution. The company will also serve as the Group's sales gateway to the emerging Asia Pacific markets for both CDMA and GSM/GPRS product lines.

3. On 1 July 2006, the Company established a new company in the United States, Telit Wireless Solution Inc. (Telit USA). The main objective of the new subsidiary is to focus on the automotive and fleet management sectors, two of the largest industry segments for the application of m2m technology in the United States.

4. The interim financial statements include the results of operation and the financial position of the Company and its subsidiaries as at and for the six months ended 30 June 2006 (together "the Group"). The Group is currently engaged in the following two main activities:

- Wireless Solutions - Development manufacturing and sale of modules - cellular products for transmitting data designed for the m2m telecom market and services entailing the development and licensing of cellular technology to third parties based on the Company's technological property; and

- Wireless Products - Distribution of cellular products manufactured in the Far East on the Israeli, Italian and European markets and rendering warranty on this equipment.

The consolidated interim financial statements of the Company have been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules using the accounting policies set out in the Group's 31 December 2005 statutory accounts. The consolidated interim financial statements have not been audited or reviewed and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

5. The Directors have not declared an interim dividend.

6. For management purposes, the Group is currently organised into two operating divisions, Wireless Solutions and Wireless Products. These divisions are the basis on which the Group reports its segment information. Segment information of these businesses is presented below.



Six months ended June 30 Year ended
31 December
2006 2005 2005
Unaudited Unaudited(i) Audited(i)
EUR '000 EUR '000 EUR '000
------------------------------------------
Revenue

Wireless Products Business 29,986 32,105 70,677
Wireless Solutions Business 10,493 4,519 15,237
------------------------------------------
Total revenue 40,479 36,624 85,914
------------------------------------------

Operating profit (loss)
Wireless Products Business 489 2,684 4,318
Wireless Solutions Business (3,003) (3,074) (4,530)
------------------------------------------
(2,514) (390) (212)

Unallocated expenses (498) (217) (865)
------------------------------------------
Operating loss (3,012) (607) (1,077)

Investment income 180 137 656
Finance costs (485) (475) (938)
Share in results of associate (23) (87) (164)
------------------------------------------

Loss before income taxes (3,340) (1,032) (1,523)
Income taxes (158) (494) (1,338)
------------------------------------------
Loss for the period
from continuing operations (3,498) (1,526) (2,861)
------------------------------------------
------------------------------------------

(i) See note 9.


7. During the period the Company provided guarantees to certain suppliers of Telit Communications SpA ("Telit Italy"), to sustain a credit line to be granted by the suppliers in respect of purchases made. The guarantees shall not exceed the amount of EUR 5.5 million.

In addition the Company provides guarantees to certain banks in Italy, to sustain a credit line to be granted by those banks. The guarantees shall not exceed the amount of EUR 14 million.

At the balance sheet date the Company had deposited EUR 4 million in a bank account, to act as security in relation to the credit facility granted by this bank.

After the 30 June 2006 the Company deposited an addition amount of EUR 3 million, in another bank account, to act as security in relation to the credit facility granted by this bank.

8. On April 18, 2006, Telit Italy was declared eligible to receive a EUR 11.4 million grant, and has secured a EUR 14.1 million loan facility, from the Ministry of Attivita Produttive in Italy. The funds, totaling EUR 25.5 million, were awarded to Telit Italy to invest in a new research and development centre in preferred areas in Italy. In June 2006, the company opened a new research and development centre in Cagliari, Sardinia. The new centre will serve both businesses in developing future products such as short-range connectivity products (Wi-Fi, WiMax, Bluetooth, RFID). The grant receivable will reduce the cost to the Group of establishing this facility.

9. According to IAS 20 "Accounting for Government Grants and Disclosure of Government Assistance", the Group has presented grant income of EUR 683,000 within other income. Prior periods have been adjusted in order to conform with the current period presentation. This presentational change has no impact on the reported net loss.

10. In March 2006, Telit Italy received a claim from a supplier for an amount of EUR 506,000 alleging breach of contract. The Group intends to vigorously defend such claim, which is at an early stage. No provision for this amount has been recorded in the books of the Group, since, based on the opinion of the Group's legal consultants, it is not currently expected to lead to a significant loss for the Group.

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