Connecting the World from the Inside Out
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Connecting the world from the inside out 2020 Annual Report Highlights Overview Telit Communications PLC, together with its Financial Highlights1 subsidiaries (the “Group”, “Telit”) is a global leader in Internet of Things (IoT) enablement. The Group has an extensive portfolio of IoT products $343.6m $343.6m $44.0m $40.6m report Strategic -10.2% Total Group revenues +7.3% +6.3% and services including wireless connectivity 20+ Group revenues (2019: $392.5 million, IoT Cloud and connectivity Adjusted EBITDA Year’s including two months revenues Experience in IoT (2019: $382.8 million (2019: $38.2 million), modules (from 2G to 5G technologies), Global excluding automotive revenue from automotive (2019: $41.0 million), driven with $15.0 million of R&D revenue). business). by a strong performance of capitalisation Navigation Satellite System (GNSS) modules, both the connectivity and the (2019: $15.3 million). short-range wireless modules including low IoT platforms businesses. 20+ Top 10 customers Year’s comprise 31.6% power Wi-Fi and Bluetooth, IoT softwareExperience in IoT of revenues $ m ¢ $ m 13.2 $7.9m 4.7 63.7 governance Corporate platforms, and globally Managed IoT Connectivity Operating profit (EBIT) Profit before tax Basic earnings per share Net cash at (2019: operating profit (2019: profit $59.9 million). (2019: earnings per share 31 December 2020 services, all of which empower hundreds of $63.6 million includes Adjusted profit before tax 36.0 cents). Adjusted (31 December 2019: millions of connected “things”. Top 10 customers $54.5 million related to the $12.5 million earnings per share of Net cash of $48.2 million). comprise 31.6% 550+ gain on disposal of the (2019: $13.2 million). 7.4 cents (2019: earnings of revenues Module types automotive business2). per share 12.5 cents). Adjusted EBIT of $17.8 million The Group sells its products and services directly and (2019: $16.9 million). indirectly via a network of distributors, to thousands of 550+ Financial statements customers, worldwide. With nearly two decadesModule of types 820 Employees $16.0m $42.6m experience in IoT , Telit continues to redefine the Worldwide Profit in cash3 Cash flow generated from boundaries of digital transformation, by delivering 20+ (2019: profit $11.7 million), operating activities, secure, integrated end-to-end IoT solutions for many of 20+ Year’s substantial improvement before movement in working Experience in IoT capital (2019: $34.6 million). the world’s largest brands, including enterprises, original of $4.3 million in 2020 820 reflecting the focus on Employees equipment manufacturers (OEMs), system integrators Sales offices cash generation. and service providers across all industries. Worldwide 20+ Top 10 customers Year’s 1. For the definition of “Adjusted” figures and reconciliation from IFRS financial results to adjusted financial results please refer to Note 10 to the attached financial statements. 20+ Experience in IoT comprise 31.6% Telit is listed on the AIM market of the of revenues 2. Please refer to Note 4C to the attached financial statements. London Stock Exchange (AIM: TCM). 3. Profit (loss) in cash see Note 10. At the end of 2020, the Group employed Sales offices 820 people worldwide. Top 10 customers Operational Highlights comprise 31.6% 350 of revenues Salesforce 550+ (including Module types distributors) Telit 5G data cards receive extensive global certifications Received certifications for: Telit modules joined Microsoft Azure certified for IoT – CAT-M Modules from Verizon 4 catalogue – LTE-M NB-IoT from Telstra 350 Telit wins 2020 IoT evolution 5G leadership award – LTE-M NB-IoT from Radio equipment directive Salesforce 550+ New partnership with Sequans to launch CBRS Modules – LTE-M for SK Telecom Global footprint (including Module types 820 Telit 5G data card series for the world’s first American distributors) R&D Centers Employees Worldwide football helmet with 360° video cameras 4 3 20+ Contents 20+ 820+ Overview Corporate Governance Financial Statements Year’s Employees Manufacturing Experience in IoT R&D Centers Worldwide Sites (EMS) Sales offices Financial and Operational Highlights 01 Board of Directors 24 Independent Auditor’s Report 44 Telit and the Internet of Things 02 Chairman’s introduction to Financial Statements 55 3 30+ Corporate Governance report 28 400+ Strategic Report Report on Directors’ Remuneration 34 Chairman’s Statement 05 Report of the Audit Committee 39 Other Information Top 10 customers Our Business Model 06 Directors’ Report 41 Glossary 110 Manufacturing comprise 31.6% Sales offices Engineers of revenues Sites (EMS) Chief Executive Officer’s Statement 08 Statement of Directors’ Company Information 111 Chief Financial Officer’s Statement 12 Responsibilities 43 350 Principal Risks and Uncertainties 19 400+ Salesforce Corporate Social Responsibility 23 (including distributors) Telit Communications PLC Annual Report 2020 01 550+ Engineers Module types 4 350 Salesforce (including distributors) R&D Centers 820 Employees 6 3 Worldwide 20+ R&D Centers Manufacturing Sites (EMS) 2 Sales offices 400+ Manufacturing Sites (EMS) Engineers 400+ 350 Engineers Salesforce (including distributors) 4 R&D Centers 3 Manufacturing Sites (EMS) 400+ Engineers Telit and the internet of things Overview Manufacturing in transition 5G poised to remove all but power The report Covid-19 created an inflection point for the cabling from factories and more manufacturing industry. According to the 5G is here. As of December 2020, 140 mobile Products & services report Strategic expects that across World Economic Forum (WEF), “Covid-19 operators across 59 countries were in full showed the limits of globalised manufacturing commercial operation8. With 5G, factory for end-to-end all applications, processes to meet people’s needs. Localised floors can become uncluttered and easy to production could allow for greater resilience reconfigure with autonomous vehicles and including robotics, and opportunity as the globe struggles with robots. Deloitte states “robotics is expected IoT solutions the coronavirus.”6 Deloitte also noted that to make up a sizable fraction of the enterprise there will be “Covid-19 may be the catalyst for companies IoT market, which in turn is predicted to be to revisit their global supply chain strategy one of 5G’s major beneficiaries”. The report THINGS 4.1 billion 5G IoT and accelerate the adoption of Digital Supply expects that across all applications, including Network models and capabilities.”7 Below we robotics, there will be 4.1 billion 5G IoT connections review how Telit is strongly positioned as a connections by 2024. The market for private governance Corporate vendor and partner to Industry 4.0 system 5G networks was estimated by Deloitte at a by 2024. integrators and solution providers, to take few hundred million dollars in 2020 and is set advantage of opportunities as the digital to reach billions of dollars in spending by transformation of the manufacturing industry enterprises in 20239. IOT enters the democratization process predicted COVID and IoT markets by the WEF, expanding into small and medium manufacturers across all industries and The Covid-19 global pandemic crisis had a geographies. multifaceted impact on IoT markets with stalling growth for the year across all regions except China. However, IoT adoption The “first mile of the IoT” goes Financial statements sentiment remained positive. In its October private 2020 Quarterly IoT Buyer’s Index4, the IoT In 2019, we introduced the concept of the “first IoT Products IoT Services IoT Services M2M Council (IMC) reported that the mile of the IoT”, laying out the solution stack IoT Modules IoT Connectivity IoT Software “perspective of adopters hasn’t been greatly that starts at the edge of the data path, where affected by the pandemic.” The report also sensors and actuators generate or consume Plans & Platforms highlighted that healthcare and energy data to and from orchestration, travelling adopters surveyed were planning on making across secure but public wide area networks. major IoT investments throughout 2021. OneEdge, Telit’s pillar first mile product has Another factor impacted was the disruption collected industry accolades including eleven of global supply chains, impacting our own awards from media and analysts. and our customers’ ability to source components to deliver finished goods, even Comprised of module-embedded and cloud- in the case of confirmed orders. native software elements, OneEdge is set to evolve, utilising components from strategic We estimate that the global cellular module ecosystem partners, to support on-premises market excluding China contracted from 140 instances and other refinements making it million units in 2019 to about 127 million in more aligned with private LTE and private 2020, or a 10% drop year-on-year. Despite an 5G network architectures. estimated annual growth of 15% in non- China shipments in 2021, we project annual levels to reach pre-COVID levels no sooner than 20245. 4. IoT Buyer’s Index, Quarter 3 2020 Survey, IMC – IoT M2M Council. Simplifying digital transformation 5. Telit assessment based on the following industry reports: TSR 2020 Cellular MBB and Module Market Data; M2M Embedded Cellular Modules - 4Q 2019 (MD-M2MM-167) & M2M Embedded Cellular Modules - 3Q 2020 (MD-M2MM-168); Cellular IoT Market Tracker - Q2 2020, Cellular IoT Market Tracker – Q1 2020. 6. Small, independent manufacturers could be crucial to reshaping industry post-COVID- Here’s why; George Juraj Global presence