After nearly a year of trying, Telit Communications (TCM) has finally announced the sale of its Automotive business. This is to Hong Kong-listed TUS International for $105 million (£80 million), a long way shy of the £100-150 million being bandied around by the FT back in October. TUS is less than half the size of Telit and the deal is subject to a number of conditions, not least its raising the money to pay for it, but let’s assume it does complete by the end of the year...
At the end of June, Telit had net debt of $25 million but, excluding cash, current liabilities exceeded current assets by around $24 million. So after the costs of the deal and assuming no operating cash outflows, it might end up with net cash of around $50 million to give the remaining business an enterprise value of £180 million. While the auto business comprised only 17% of group sales in 2017 and 30% of net assets it contributed a whopping 55% of EBITDA and seems to be about the only part of the company capable of generating a real profit.
The recent trading statement claims that margins had stabilised and that Telit is “making headway toward a return to being a sustainably cash generative business”. Telit has never been a sustainably cash generative business and to suggest otherwise suggests a continuing problem with addressing the truth, an issue which has always dogged the company since it was founded by fraudster Uzi Katz.
The recent surprise departure of recently appointed Chairman Richard Kilsby, the ongoing FCA investigation into CEO Yossi Fait and the attempts by the liquidators of BAMES to recover money from the aforementioned former CEO and fugitive Uzi Katz, via Telit, should also be of concern to shareholders. I remain short.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve and a new shorting piece from Lucian shortly click HERE
Filed under: Telit Communications, TCM, Julie Meyer, Barclays, Image Scan, TomWinnifrith.com, Nifty Fifty website
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