Telit Communications Share Discussion Threads

[eagle eye] 20/11/2015 08:22

Level 2 : A 1.5m buyer on the bid this morning @ 200p.
This should underpin the downside today providing it doesn't get filled or removed.

[mmelody] 20/11/2015 07:53

Oxford slightly increased their short

Ennismore Fund Management Limited 1.12% 2015-11-13
JPMorgan Asset Management (UK) Ltd 1.48% ↑ 0.09% 2015-10-28
Oxford Asset Management 0.80% ↑ 0.09% 2015-11-18

Total 3.40%

[youcancallmeal] 20/11/2015 01:28

I see why you did what you did but I think the end of year statement makes more sense to use. The reason for that is the same long-term loans are in place the year and the short-term loans are within $0.5m between this year and last FY. Seeing as the value and type of loans are almost identical (short-term actually slightly higher this year) it makes sense to assume interest will be similar for the full FY 2015 as with 2014.

Either way, having working capital loans of any kind, let alone $10m worth, doesn't make any sense when there's $36m cash. That is the crux of the matter and there is no disputing the anomaly. I've read countless financial statements over the years (as have most on this board, I expect) and in this respect the Telit accounts are unique in my experience. Everyone, try googling working capital loans if you haven't already and are unfamiliar with them.

I'm going to leave it here. People will have made up their minds either way by now and me repeating this anymore isn't going to help anyone. I won't be replying on this board unless something is posted to irrefutably (or close to that) clear up this matter. Time to move on.

[staverly] 20/11/2015 00:54

Al: TTM interest payment cash outflow is around $1.1m thereby I suspect something lost in translation in the the AR verbiage .... not uncommon me thinks.

[staverly] 20/11/2015 00:35

Al, taken in isolation, the interest figure from FY14 looks anomalous, as you correctly point out. But combining both interest & finance figures from either year end or TTM respective cashflow statements, the amounts are not as alarming as I first feared. I'll revert shortly with specifics in case I'm wrong again.

[youcancallmeal] 20/11/2015 00:26

hxxp://www.telit.com/fileadmin/public_downloads/Telit_Annual_Report_2014.pdf

Page 36 of the above document: interest payments $1.941m

Deduct the interest payments for long-term loans as per my earlier post and you are left with about $1.6m for the working capital / short-term loans. Not sure how you came to $600k.

[youcancallmeal] 20/11/2015 00:14

Happy to be proved wrong but it would be good to see your calculations. I have broken mine down so where do yours differ?

[staverly] 19/11/2015 23:22

WITH APOLOGIES TO ANYONE WHO READ MY POST THIS MORNING

Stupidly I did not account for the capital repayments. Having done so I estimate an interest figure for the working capital debt ~ $600k for the past twelve months reported. That equates to an uneventful ~6% interest per annum. I retract any suggestion of book-cooking and once again apologise.

As ever DYOR.

[youcancallmeal] 19/11/2015 21:53

Hello soft t, I'm sorry but I don't know a huge amount about Cryptosoft.

My major general concern would be that they asked for £300,000 for 95% of the equity. If someone only wants to keep 5% that's not very encouraging for the long term. Personally I would never invest in a business where the founders were looking to get rid of that much of their share.

[youcancallmeal] 19/11/2015 21:44

Thanks very much, BernieBoy, and seans66.

[pj 1] 19/11/2015 20:54

No position but the penultimate post has caused another red flag on my summary.

[pyemckay] 19/11/2015 20:48

A director sold £1.7m worth then he bought 80 grands worth.

[joestraughan] 19/11/2015 13:54

I agree to some extent. Invoice discounting is used by companies where cash is tight and they are dependent on the banks - basically they have little choice from the banks but to accept and pay for it in interest costs.

Tcm needs to clarify at the general meeting and get a proper credit facility in place like novatel (mifi) did yesterday. It may have to go down the convertible bonds route like novatel rather than issue stock.

PS the share price seems happy!

[youcancallmeal] 19/11/2015 13:28

To all the sceptics, try finding another company with millions of dollars of cash that is using working capital loans. I say again, working capital loans are normally used by small companies with cashflow problems. I have never seen anything like this before.

[youcancallmeal] 19/11/2015 13:22

Hi all, I will respond to everyone who replied to me later but am rather busy today so will just add my thoughts to staverly's very interesting last post.

In the 2014 final statement there were short-term working capital borrowings of just under $10m despite $26m cash being listed in the accounts. Total interest payments were just over $2m. Here are the interest payments for long-term loans:
$6.2m at ~3.25% = ~$200,000
$1.3m at ~5.5% = ~$70,000
$7.7m at 0.5% = ~$40,000
$6.1m at 0.75% = ~$50,000
The $3.6m mortgage is currently interest-free

TOTAL = ~$360,000 per annum

That leaves about $1.6m interest in 2014 for the $10m working capital loans, which comes out at about 15% interest per annum!

So a company that has $26m cash is throwing away $1.6m a year on high interest loans that it's using to run its business on a day to day basis. Doesn't sound right, does it?

But I'm afraid it actually gets worse. In the 6 months to June 2015 the company's cash has apparently increased by $10m to $36m, yet these high-interest working capital loans have also INCREASED to $10.4m.

This just doesn't add up at all. It may work out fine, and good luck to you if you're holding, but if something goes badly wrong you can't say that nobody warned you.

Staverly, if you read back through all my posts you'll see I've been focusing on this element of the debt for most of the time I've been posting, although it was a great idea by you to talk about calculating the interest.

[someuwin] 19/11/2015 11:49

Is it safe to get back in the water?

[staverly] 19/11/2015 08:36

Post withdrawn - see 2863

[bernieboy] 19/11/2015 07:43

Thanks for the thoughts blah blah..... I never really thought it was as sinister as many are making out. Still given the rate of decline in the share price - I genuinely think that the company could have put out an RNS to calm investor fears. So in the absence of such an RNS it makes one speculate.

[blah blah] 19/11/2015 07:08

I don't know a lot specifically about Telit but I'm seeing a lot of comments generally about why a company would run debt while it has cash and thought I would give my view, fwiw.

Cash gives companies a combination of flexibility if they want to invest/acquire and comfort that if anything slips they have a safety net. Also, in many businesses there may be a regulatory need to hold cash or they may have overseas subsidiaries that need their own cash balances or where it is difficult to remit cash back to the group for tax reasons, for instance.

But the biggest reason is this: most debt facilities have set up fees that get amortised over the life of the loan. So if you repay the debt you are not going to substantially cut your cash costs and probably barely make any difference to your P&L debt charge. If you still decide to repay the debt and then subsequently have a need to borrow, say for another acquisition, you are going to have to jump through all the hoops to borrow the money and another set up fee. So to me early debt repayment makes no sense.

In Globos case the red flag was that it had high cash (allegedly) but also debt - but crucially it was trying to borrow significantly more at junk rates for unspecified acquisitions. I think that is different to the situation here, which seems much more explainable.

[soft t] 18/11/2015 22:10

al would you know anything about TERN re CRYPTOSOFT your experience in the industry might help with the debate re its position(if any) inthe industry.?

[seans66] 18/11/2015 21:56

Agree this bb has been a valuable source of info & opinion over the last 2 days. Quite rare on advfn.

[bernieboy] 18/11/2015 21:49

Just to even it up a little - buffy your posts are good too! To be honest there is some really good discussion going on on this board at long last. Good to have some balanced positive and negative comments!

[bernieboy] 18/11/2015 21:46

Al - your posts are good and valid sir. Let's hope we can get some clarification soon.......